VALUE: After Hours (S08 E15): Inverse ETFs Explained (SARK & Shorting ARK)

During their recent episode, Taylor, Carlisle, and Matthew Tuttle discussed Inverse ETFs Explained (SARK & Shorting ARK). Here’s an excerpt from the episode:

[Matt] Yeah, we got the timing perfectly. So you know, what I find is, you know, a lot of people in my industry, you know, don’t really want to rock the boat. And that’s never really bothered me much.

And you know, one of the things that I’m able to kind of do with my platform is when I see something that bothers me, I can say something about it. So you know, if you remember kind of coming out of COVID, you know, all of a sudden, you know, ARK had an amazing parabolic return. I think they were up like, you know, 120% in a year.

And you know, then all this, you know, everyone is dragging Cathie Wood out, who I have great respect for as a marketer and what she’s built, but they’re all dragging her out saying she’s the next Warren Buffett. And I would argue, because of the way this market is now, there can never be another Warren Buffett. And you know, there’s one immutable rule of markets is that any parabolic move eventually gets retraced.

So I’m watching this, and I’m like, this is going to hurt people. And so I decided, you know, and it was really, it was a tweet, which I’ve never been able to find. I’d love to find that tweet.

So at the time, we were doing an inverse fund on D-SPACs, companies that had come public through SPAC mergers, all that stuff was toxic waste. We’re killing it on that. And someone tweets about it.

And then someone said, you should do an inverse on ARK. No one had ever done anything like that before. So we’re like, huh, that’s an interesting idea.

Call up the lawyers. They’re like, can we do this? Like, I don’t see why not.

Call up the swap providers. Can you get a swap on ARK? I don’t see why not.

So we did it. And we launched it right at the top of the market in 2021. In 2022, it was the number two top performing non-leveraged ETF in the country.

Number one was our inverse D-SPAC ETF. You know, unfortunately, I no longer have either one of them. I sold SARK because I don’t like that trade nearly as much as I did back then.

And I had some partners who shut down the D-SPAC. But you know, that’s what did it. You know, I wanted to call out the issue.

But I was also looking at the market at that point. If you remember, that was around the Fed saying inflation is transitory, like, I don’t think so. And, you know, what’s the one thing that would cause all those ARK returns to move back to the negative?

Inflation. All of those no revenue growth companies will get killed. So you know, I just said, you know, perfect timing.

Boom, we did it. And you know, we called out the issue. And I heard from a lot of retail investors thanking me, you know, because a lot of them lost a lot of money because they listened to CNBC and they’re buying it up 120%.

And yeah, I think we’re able to help some of them at least make some of it back. So you know, felt good about that project.

[Jake] What did the SEC say about that one?

[Matt] The SEC, their real only issue was they were worried we may, you know, we may move markets. And, you know, so they were worried, well, you know, you’re shorting an ETF. Like ETFs have an arbitrage mechanism, doesn’t matter.

Well, they own a lot of Tesla. Are you going to influence Tesla? Like we’re playing on a pimple’s butt when it compares to the volume of Tesla.

[Jake] Tesla’s, you know, millions of shares per day.

[Matt] We’re not going to influence Tesla. So you know, they were just trying to wrap their head around it because it was novel. They were fine.

The ARK guys weren’t.

[Jake] Yeah, did you hear about that?

[Matt] They were a little bit pissed off. And if Cathie Wood is watching, again, nothing against you. Great respect.

You know, it was really more of, I was mad at the media for portraying it as something that was like, you’re getting in early on the next Warren Buffett because I knew you weren’t. And I knew if you’re listening to that, you’re going to get your butt kicked.

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VALUE: After Hours (S08 E15): Inverse ETFs Explained (SARK & Shorting ARK)

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