As you may know, my family and I own a number of actively-managed, investment theme-oriented ETFs run by Ark Invest. I consider myself an aggressive investor, so I like the focus and the (relatively high, in my view) degree of concentration in what ARK considers its best ideas. My one hesitation–hesitation may be the wrong word, since I own a bunch of ARK products (a risk to keep in mind might be better)–is that a given name may be prominent in more than one ARK products. Square, for example, is a 6% position in both the Ark Innovation and Ark Next Generation Internet funds; it’s also a 12% position in the Ark Fintech fund.
The position sizes don’t bother me, both because I’m aware of them and my younger son has convinced me of SQ’s appeal. The potential worry I see is the interconnectedness of the fund holdings in a time of extreme stress. If say, the Fintech fund were to have heavy redemptions requiring it to sell holdings, that could put some downward pressure on the other two through SQ. Not a worry for today and not a high probability scenario, but it’s my main concern. How to respond? …either be prepared to do nothing or to buy more.
Anyway, ARK has just issued a white paper titled Bad Ideas Report that I think is interesting. I found the autonomous driving sections the most in-depth. My reaction to the physical bank branch part is that this issue has been around since the emergence of the ATM in the 1980s. The US is way behind the rest of the world in consumer banking, so we can see the future just by looking abroad. Yes, this is bad for banks, but how bad?
Re Ark Report on Rail vs. Truck: Autonomous trucks reduce railroad advantage. Electric trucks reduce rail advantage if cost of electricity goes down enough – cheap fission or fusion? In an electric future, there will need to be mileage/weight taxes to support road maintenance. I suppose autonomous driving, once widely adopted, has the potential to reduce congestion, an issue for trucks. Rail is also benefiting from technology.
Thanks for the link to Ark report.
Hi Alan, Thanks for your comment. I hadn’t thought at all about the disappearance of fuel taxation forcing governments to find an alternate means of paying for road maintenance.
For what it’s worth, the FT had a recent think-piece article suggesting that, given high costs and short distances driven in Europe, the pandemic is causing many people to question whether they really want to own a car. The article’s guess at a long-term resolution: autonomous cars with interiors like offices, so people can work while in transit. Who knows what will actually happen, but auto manufacturing companies tend to have relatively high operating leverage, so even a modest loss of unit volume could mean real trouble for them.