ARK’s Cathie Wood issues open letter to the Fed, saying it is risking an economic ‘bust’

ARK’s Cathie Wood issues open letter to the Fed, saying it is risking an economic ‘bust’

From cnbc.com

The Federal Reserve likely is making a mistake in its hardline stance against inflation Ark Investment Management’s Cathie Wood said Monday in an open letter to the central bank. Instead of looking at employment and price indexes from previous months, Wood said the Fed should be taking lessons from commodity prices that indicate the biggest economic risk going forward is deflation, not inflation. “The Fed seems focused on two variables that, in our view, are lagging indicators –– downstream inflation and employment ––both of which have been sending conflicting signals and should be calling into question ... (full story)

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Oct 10, 2022 2:45pm

Dear Ms. Wood,

While I understand your concerns about the rise in interest rates I have to inform you that I really don't care about your stocks, in particular your ARK fund. You see when we at the FED held rates artificially low for YEARS and encouraged people to use that money to MAKE and MANUFACTURE items YOU used that "free money" to make money in the US stock market. You artifically inflated the markets and created a HUGE INFLATION BUBBLE that now we at the FED have to burst.

You must understand Ms. Wood that those indicators you mention are in fact lagging indicators - do you think we don't know that here at the FED? Our #1 job is to bring inflation back to it's 2% level and right now it will be very difficult. Why you ask?

Well, because you and your stock market friends inflated most assets during the past few years! Combine that with higher energy costs and then Covid-19 and the lockdowns and BAM inflation!

Energy is the easiest to control - just drill more and the rise in rates "should" dampen demand - we will let the market do that for us. The hardest part of inflation is the WAGE GROWTH. You see many firms like yours had so much free cash floating around that you gave people pay increases and once you give a person a pay raise you can never take it back. If you try they quit or their perform suffers so much you wind up firing them.

We here at the FED have determined that the easiest way to bring WAGE inflation under control is to raise rates so much and so high that it kills demand, especially overseas demand. We want the highest paying jobs to vanish - POOF! so that companies can re-hire at pre-pandemic levels - THAT will cure the wage inflation.

Finally there is RENT/HOUSING inflation. This is the trickiest one because we all remember what happened in 2008 don't we? Right now most renters are suffering sticker shock due to rent hikes. Higher rates will only be passed along and it will cause new housing starts to dry up as well resulting in fewer housing units causing a rush on existing housing so that rents continue to outpace inflation! How do we stop this?

We at the FED can't do this alone. It will have to be done in conjunction with the USA government in order to pass laws protecting renters from rate increases (i.e., price controls) and frankly your government doesn't have the balls to do what needs to be done. In fact your government wants to spend MORE MONEY and create MORE INFLATION!

So Ms. Wood, while I am sorry that your fund is suffering there is really nothing I can do about it because frankly madame it is NOT MY PROBLEM!

Sincerely,

What Jerome Powell would say to Kathy Woods from my head...