My new presentation on a powerful secret the elite use to enrich themselves; Implosion at Cathie Wood's ARK Invest; My friend's bull case for bitcoin; Value Investing Seminar in Italy this July

1) We're getting closer and closer to the general election in November...

Super Tuesday is behind us. And as the campaigning ramps up, the media will be all over it.

But while folks are getting riled up over their respective candidates, there's a major story playing out behind the scenes...

In short, it's a surprising way the rich and powerful are going to make millions of dollars from the panic around this year's election – no matter who ends up in the White House.

In a brand-new presentation, I'm sharing the story – including:

• The remarkable way our country's elite rigged the stock market in their own favor (without ever breaking a single law!)...

• How wealthy insiders have been using this secret to make money from market fads and the inevitable panics that follow (without short selling, using options, or anything complex)...

• And the simple thing you can do right now to start profiting from America's rigged system yourself.

Check out my new presentation right here.

2) Longtime readers may recall that I warned them more than a dozen times about Cathie Wood...

She's the CEO of ARK Invest. It's the firm best known for its ARK Innovation Fund (ARKK), which soared by nearly 5 times – and sucked in nearly $30 billion – during the tech/meme-stock rally in 2020 and early 2021. On March 8, 2021, I wrote:

I admire Wood's drive, smarts, and incredible accomplishments – but not her risk management, which is why... [I] recommend avoiding ARK funds...

The next day, I added:

If [Chamath] Palihapitiya is the king of hype and speculation, ARK Invest's Cathie Wood is the queen.

My warnings proved prescient, as ARKK – and every other ARK fund – collapsed. Though it has rallied 46% from its 52-week low amidst a rally in tech stocks, ARKK remains 68% below its all-time high from just over three years ago.

Such horrific performance has landed ARK as the No. 1 wealth-destroying fund family over the past 10 years, by far, according to this recent Morningstar report: 15 Funds That Have Destroyed the Most Wealth Over the Past Decade. Take a look at this table from the report:

As of the end of last year, Wood was responsible for investors losing $14.3 billion – wow...

Here's Chris Irons with further commentary from his Quoth the Raven Fringe Finance blog: Cathie Wood's $14.3 Billion Implosion. Excerpt:

For as long as this blog has been around, I've been critical of money manager Cathie Wood, not only suggesting her outsized gains and popularity were simply a fluke based on a one-time gamma squeeze in Tesla (also called the "Ross Gerber effect" or the "Elon Musk pay plan effect"), but also reminding my readers that her stock picking acumen seems, for lack of a better word, to be horrific. So, naturally, she's a great fit for a daily interview on financial media...

Wood has underperformed her benchmark, the Nasdaq QQQ, by about 95% in the last 3 years. Ex-Tesla, her results would be catastrophically worse over the last 5-10 years.

It would be easy to say that the lesson here is "don't chase performance," but it's not that simple...

For example, anyone who has chased Warren Buffett's performance over the past half century has been richly rewarded.

Instead, the lesson here is more nuanced...

Of course, you should look at the performance (or track record) of a company, CEO, or investment manager before making an investment. But you also need to keep in mind that (obviously) 1% of companies/CEOs/investment managers will have top 1% performance over any given time period, 10% will have top 10% performance, etc.

So how do you tell the difference between Wood and Buffett? These two investors are at such opposite extremes that the question appears laughable.

Wood is a pure speculator who was just riding (and, to some extent, contributing to the inflation of) a bubble... while Buffett has a sound, proven approach to investing that he has been implementing successfully for decades.

But what might seem obvious to you and me wasn't so obvious to the countless investors who poured $30 billion into ARK's funds right at the top – and got incinerated.

So the real lesson is: resist the urge to speculate and chase the hottest stocks and sectors. Instead, look for quality companies run by capable, honest people whose stocks are available for a reasonable price – and then hold on to them for the long run.

3) A friend of mine – a smart, rational, value-oriented guy who long ago retired from managing a hedge fund – put 1% of his capital into bitcoin long ago.

He has never sold it, and he currently sits on a gain of 350 times (not 350%... but 350 times his money).

To have a little fun with the value-oriented investors on my favorite stock-idea website, Value Investors Club, yesterday he posted his argument (under his anonymous handle, "Katana") for why bitcoin (even though it just recently hit an all-time high and is close to its all-time high today) is still a buy.

It's a members-only site, so I can't share his entire write-up (if you're a member, you can read the whole thing right here).

But I'll share some excerpts below (note that I'm sharing this not because I have changed my views on avoiding bitcoin and other cryptocurrencies, but because I found it interesting, enlightening, and entertaining):

I endeavor herein to yet make you money by softly reminding you that it is not too late to buy now, at new all-time highs, because it is never too late...

It can't be overvalued if there's no intrinsic value.

Thus it was not too late during, or even at the peak of, the enormous run-ups I endured in 2013, or 2017, or 2021. No matter how high the price rises, there always remains >1,000% upside with only 100% downside. Or more realistically, probably, on a multi-year time-frame, 50% downside...

"No intrinsic value" + "price going up" does not = "bubble."

Bubbles involve very well known behaviors. Bitcoin experiences bubble behavior at the tops.

And as he goes on to say:

Today there is virtually no bubble behavior. I'll leave it at that, because I don't even see no-coiners arguing otherwise.

The difference between bitcoin and tulips, or any stock, is crucial. Those assets begin their run-ups with most buyers thinking that the asset does have an intrinsic value and should trade near that value. People then concoct a theory to delude themselves that the intrinsic value has grown 2x and then 3-5-20-100x to justify riding the price momentum. Then something breaks the spell – often merely a sudden price decline.

No one in the entire world has ever believed bitcoin was undervalued. There is no delusion to disabuse. When the price falls, ~85% of owners continue to HODL ["hold on for dear life"]. You, still-young-to-bitcoin grasshopper, are simply using the wrong mental model to think about bitcoin's price, a mental model not shared by the people who own it. They will never be shaken by events or the then-current price.

Turning to more fundamental reasons, Katana argues:

If you wish a "fundamental" reason for why to invest today, I submit that the most useful thesis statement for you is the simplest and most concise possible one. The thousands of words that you can find elsewhere, including those on this site, which I do not read, because why would I, may do more harm than good by obscuring the power of these forces:

1. It's goin up, innit?

He then shares this reason:

2. For years the long-term bitcoin thesis has been that most investors have hated or ignored bitcoin but a material number will change their minds, slowly over time, especially institutional ones.

That theory is now in overdrive due to the bitcoin [exchange-traded fund] approval. The approval is only step 1. Steps 2, 3, and 4 are more and more individuals and institutions getting around to buying, now that it's easy to do so, and more and more advisor-gatekeeper institutions allowing their advisees to buy and marketing bitcoin as part of their model portfolios, and then the advisees deciding to buy. It is going to take 2+ years for that piece to play out.

It has not remotely been front-run – in part because no matter what bitcoin's price is, it can't be overvalued, so the potential newcomers are less fearful that they've "missed it." Beyond the ETF wave lies buying from corporate treasuries, endowments, pension funds, and eventually, central banks.

And then, Katana continues with these:

3. The next halving is in a few months. Bitcoin always moons in the ~12 months before and after a halving. This process, too, always mechanically takes at least a year to play out and cannot be fully front-run. Miners, the key source of selling supply, suddenly have half as many coins to sell, day after day.

4. Put differently: It's always a 4-year price cycle, innit, and we're 18 months away from the usual peak. These cycles can keep repeating despite their obviousness, just like many other investing cycles.

5. Just as importantly: The entire crypto community of people like me expect the cycle to keep playing out as usual, and much more than in stocks, we all create a self-fulfilling prophecy...

6. I could be wrong that this cycle runs 4 years again. It could run 3. It could also run 5, or 6, or 7...

How many years do you have to be wrong about an investment opportunity before you conclude you're wrong and not merely early?

Katana's post has generated dozens of comments and questions, which he has gamely tried to answer.

I'll share some of these comments and his responses in tomorrow's e-mail, so stay tuned!

4) I'm delighted to let you know that my friend Ciccio Azzollini and I will once again be hosting – for the 20th time! – our Value Investing Seminar in Trani, Italy.

We'll be hosting it on July 4 and July 5 – just four months from now.

We limit it to 50 people (attendees fly into the nearby Bari Airport). Many of them share their latest thinking on where the best opportunities lie and outline their current favorite investment idea(s).

It's fun, educational, and a great addition to any European vacation! You can learn more and register here.

Here's a picture of Ciccio and me with the port of Trani in the background:

And this is what our friend Guy Spier of Aquamarine Capital posted about it a couple years ago:

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.