When ARK Invest’s (ARKK) manager Cathie Wood tweeted on March 7, 2022, her bearish view on oil prices, it should raise alarm bells for her investors. Wood said that oil likely hit a secular peak in 2019. She blamed a supply shock in ESG mandates, U.S. policies, and Russia’s invasion of Ukraine for higher energy prices.
ARK’s bearishness for oil is self-serving. The ETF is betting that “disruptive innovation” will send stocks like Cloudflare (NET), Tesla (TSLA), and Roku (ROKU) back to old highs.
This view is unlikely.
Innovation will shift people toward electric transportation. It will not destroy oil consumption. The world does not have enough lithium and other raw materials to satisfy electric vehicles replacing gas-powered cars. Furthermore, countries do not have an electric grid that will replace “dirty” energy.
During the pandemic, stocks with an above-average allocation in ARKK stock traded at unsustainable prices. The demand slump will accelerate in a post-covid world. People will delay their purchases of EVs that replace their gas-powered automobiles.
Your Takeaway
ARK Invest ETFs are too dangerous to hold. Cathie Wood incorrectly called the top in oil at $70. After oil prices are traded as high as $130, it is unlikely to fall fast enough. By the time it does fall, investors will give up on disruptive innovation stocks. This will send ARKK stock sharply lower.
