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Speaker 1: Kathy Wood came out of USC a long time ago,

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Speaker 1: put out a shingle with a Lovelace family, a Capitol group,

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Speaker 1: and then built an investment career quite different from others,

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Speaker 1: not so much based on the long term solidity of

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Speaker 1: a given portfolio, but capturing the trend, going up large

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Speaker 1: and sometimes going down large. She holds court on the Ark.

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Speaker 1: Noah's Arc is where she is right now. I want

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Speaker 1: to know, with all you've been through the last number

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Speaker 1: of years, are you going to shift to a more

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Speaker 1: long term strategy. I look at morning Star one year,

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Speaker 1: three year, five year, your bottom quartile, but your claim

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Speaker 1: is more short term. With your new ETF effort and

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Speaker 1: with what you're doing with ARC, are you going to

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Speaker 1: be still on trend or do you invest more for

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Speaker 1: long term.

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Speaker 2: We've always invested for the long term. And what interrupted

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Speaker 2: what was a very nice move up in innovation stocks,

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Speaker 2: especially disruptive innovation, was a massive increase in interest rates,

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Speaker 2: the likes of which we have never seen, of course,

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Speaker 2: twenty fourfold increase. So all long duration assets, especially in

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Speaker 2: twenty twenty two, were destroyed, including bonds, which are usually

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Speaker 2: a flight to safety. They had their worst year last

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Speaker 2: year since the seventeen hundreds. There's no way in that

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Speaker 2: environment that our strategy would have done well. But I

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Speaker 2: do think that what's happening this year is that the

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Speaker 2: market is starting to look over the Fed's moves, whether

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Speaker 2: there's one more or not into falling interest rates. You know,

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Speaker 2: we started underperforming in twenty one just with the anticipation

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Speaker 2: of rising rates, and even more so in twenty two.

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Speaker 1: How are you going to change? I want to know

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Speaker 1: how you're going to change the sobering quarters you've been through.

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Speaker 1: What is the new Kathy would approach to macroeconomics frankly,

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Speaker 1: pandemic economics intruding on your belief and.

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Speaker 2: Innovation anything innovation gains traction during tough times. And if

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Speaker 2: you look at how the reason our portfolios are out

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Speaker 2: performing this year is they are and they are is

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Speaker 2: it is because they are gaining share in what is

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Speaker 2: becoming a difficult environment, right, and so one by one

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Speaker 2: we're going to earn our way back, and it's all

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Speaker 2: about revenue growth, margin expansion.

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Speaker 1: In the Wall Street Journal, they do a fabulous thing

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Speaker 1: with old farts like me, and it's people with over

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Speaker 1: five million dollars and they believed in Kathy would to

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Speaker 1: a person, those retirees bought innovation, they bought tech, they

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Speaker 1: bought apple, Apple, Apple Apple, and they didn't listen to

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Speaker 1: financial TV or radio. Can you do the Kathy would

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Speaker 1: approach for one three five years. Given the volatility you've.

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Speaker 2: Seen, yes, I think we're on the other side of

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Speaker 2: that massive interest rate increase which did destroy a lot

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Speaker 2: of performance. That's the most important thing, and we are

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Speaker 2: ready for prime time. Many people are concerned about our

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Speaker 2: kind of strategy and the company we just acquired rises

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Speaker 2: because in Europe, in London here, for all of Europe

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Speaker 2: and UK, they're focused on global mega trends as well,

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Speaker 2: and you know, the interest rates hurt everyone in that space.

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Speaker 2: If we are right and rates are going to come

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Speaker 2: down at some point in the next year, you know,

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Speaker 2: the market is a discounting mechanism. Then I think that

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Speaker 2: the muscle memory that hurt our strategy, and it all

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Speaker 2: has everything to do with the tech and telecom bust

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Speaker 2: and people thinking, oh my gosh, are we here again.

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Speaker 2: Know what happened during the twenty years that ended in

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Speaker 2: the tech and telecom bubble is the seeds for what

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Speaker 2: is happening now.

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Speaker 1: We're planted in this job is really important that the

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Speaker 1: profitability is to and downing income. Statement of new tech

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Speaker 1: is very different than two thousand tech.

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Speaker 3: Let's talk about EVAs and not just Tesla. Is it

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Speaker 3: good news for Tesla? What's happening in Detroit right now?

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Speaker 2: Yes, because if there's a strike, of course there will

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Speaker 2: be more production shortfalls. You know, I think that there's

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Speaker 2: just now the supply chain is freed up, so unfortunately,

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Speaker 2: we'll have all kinds of questions about that. But you know,

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Speaker 2: I don't think it has anything really to do with

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Speaker 2: the strike. It has everything to do with a consumer

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Speaker 2: preference shift towards better vehicles electric that are falling in price.

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Speaker 2: Tesla is leading that price decline simply by passing cost

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Speaker 2: declines onto its customers. So I think that's what's good

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Speaker 2: for Tesla.

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Speaker 3: The complaint we here is the people kind of fold

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Speaker 3: these vehicles. We see that is changing in the UKs.

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Speaker 3: You can see Richie Sunac is pushing back targets to

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Speaker 3: get rid of all of these in total combustion engines

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Speaker 3: to twenty thirty five from twenty thirty and we've being

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Speaker 3: on realistic about this transition.

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Speaker 2: We don't think so no, no, no, we do not

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Speaker 2: think so. We actually the total cost of ownership. Now

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Speaker 2: this is in the United States. It's a little bit

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Speaker 2: different here, but the total cost of ownership of an

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Speaker 2: electric vehicle fell below that of a gas powered vehicle

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Speaker 2: about two to three years ago. Soon sticker prices. Is

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Speaker 2: that incurred insurance, Yes, includes insurance. Yes, and as I said,

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Speaker 2: local differences, but yes, in the United States, that does

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Speaker 2: include insurance. And in fact, TESLA is so sure that

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Speaker 2: its cars will have fewer accidents and fewer fatalities that

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Speaker 2: it's well willing to provide insurance. So yes, that does

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Speaker 2: include everything.

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Speaker 1: All in you were a USC you didn't going to

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Speaker 1: be Laffer called up Robert Kirby a Capitol Group and

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Speaker 1: so just shut up and hire her. So you walk

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Speaker 1: into Capitol Group, which is the land of an R

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Speaker 1: Square to ninety eight Washington Mutual Fund Investment Company of America.

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Speaker 1: Everything is completely diversified. Out you're the polar extreme that

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Speaker 1: through y'ad you almost fell into the Pacific Ocean. They

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Speaker 1: were so upset with you. So you go out and

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Speaker 1: you say, I'm not going tight R Square to SPX,

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Speaker 1: I'm going out and do my own thing. Yes, people

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Speaker 1: have prospered off of innovation and technology. How does that

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Speaker 1: continue in America? Can you be less diversified and win

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Speaker 1: five years out?

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Speaker 2: Well, you mentioned Capitol Group, and that is where I

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Speaker 2: did start my career, and that is where I saw

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Speaker 2: tremendous research and a long term time horizon. So really

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Speaker 2: what we're doing with ARC is just going back to

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Speaker 2: the future my initial experience, which was in the late

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Speaker 2: seventies when I was in college, and we're doing deep research,

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Speaker 2: first principles based white sheet of paper.

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Speaker 1: But you're away from an R square like Washington, neutral

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Speaker 1: of the other funds. What's your R squared right now?

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Speaker 2: To be honest, the correlation of our performance to broad

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Speaker 2: based benchmarks is very low, for better or worse. What

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Speaker 2: it tells, what it tells our clients and perspective clients

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Speaker 2: is we have a very good diversification strategy our funds.

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Speaker 2: The active weight if you're comparing to MSCI World or

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Speaker 2: SMP or Nasdaq, the active weight is less than five percent.

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Speaker 2: So really good diversification strategy focused on companies that are

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Speaker 2: going to transform the way the world works. We look

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Speaker 2: at the broad based benchmarks and sure there are companies

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Speaker 2: that are sustaining innovation like an Apple, but they are

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Speaker 2: not going to transform the way the world works. From here,

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Speaker 2: our companies are Kathy.

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Speaker 3: Thank you Kathy Wood about convest