ARKK Stocks Sunk

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The better ARK performed, the more money flowed into its main ETF, ARKK. It used this money to buy more sci-fi ARKK stocks, pushing up the prices of its holdings. This created a vicious cycle that has now reversed.

Over the last few years, I killed a forest of good-looking trees writing about the insanity of what was going on in the stock market. These trees did not die in vain. Rising interest rates and inflation making multi-decade highs served as a bucket of cold water, waking investors up to the fact that a vivid imagination is not the only skill required to be an investor. Until recently, the investors who had the richest imaginations seemed to make the most money – until they lost years of gains in months.

Let’s take the ARK Innovation ETF (ARKK) – the poster child of the recent hysteria and until last year one of the best-performing funds in the market. It more than quadrupled from the pandemic lows to its peak in February 2021. Some companies it owned had business plans that looked like they were from sci-fi novels; many were going to revolutionize the world; most came with sci-fi-like (out of this world) valuations.