WEBVTT - Bloomberg Surveillance: Cathie Wood On Bitcoin 0:00:05.519 --> 0:00:08.640 This is the Bloomberg Surveillance Podcast. I'm Carol Masser, along 0:00:08.640 --> 0:00:11.559 with Manis Crowny and Katie Greifeld. Join us each day 0:00:11.560 --> 0:00:15.680 for insight from the best in economics, geopolitics, finance and investment. 0:00:16.040 --> 0:00:19.479 Subscribe to Bloomberg Surveillance on demand at Apple, Spotify and 0:00:19.560 --> 0:00:23.200 anywhere you get your podcasts, and always on Bloomberg dot com, 0:00:23.320 --> 0:00:26.120 the Bloomberg Terminal, and of course on the Bloomberg Business app. 0:00:26.480 --> 0:00:28.560 Bcorny's more than double this year on hopes that the 0:00:28.600 --> 0:00:33.160 SEC will approve that holy grail, the spot Bitcoin ETF 0:00:33.159 --> 0:00:33.840 in the coming weeks. 0:00:33.840 --> 0:00:35.240 We're waiting Beta breath. 0:00:35.280 --> 0:00:37.400 We are all waiting, and so is Kathy Wood and 0:00:37.440 --> 0:00:40.320 she joins us on this Thursday. Kathy Wood, of course, founder, 0:00:40.360 --> 0:00:43.760 CEO and CIO of ARC invest. I'm Kathy. Merry Christmas, 0:00:43.800 --> 0:00:47.920 Happy holidays, So great to have you here. Let's start 0:00:47.920 --> 0:00:49.680 there with the news because we do have this story 0:00:49.680 --> 0:00:51.400 on the Bloomberg tell tell us a little bit about 0:00:51.400 --> 0:00:54.480 this overhaul and your thinking when it comes to how 0:00:54.560 --> 0:00:58.120 you are thinking about the investment strategy for you guys, 0:00:58.160 --> 0:00:59.880 specifically when it comes to crypto. 0:01:01.480 --> 0:01:05.479 Sure, and Merry Christmas. Very happy to be here again Carol, 0:01:05.600 --> 0:01:13.000 Katie and Massive. So we're as optimistic about bitcoin as 0:01:13.080 --> 0:01:18.720 we ever have been, but there are a few regulatory 0:01:18.760 --> 0:01:24.000 and tax uncertainties, and we had been waiting for the 0:01:24.240 --> 0:01:31.160 discount between GBTC and NAV to narrow. It was as 0:01:31.240 --> 0:01:33.920 high as fifty percent at one point last year when 0:01:33.920 --> 0:01:36.840 there was great uncertainty around all of the turmoil in 0:01:36.920 --> 0:01:42.760 crypto generally, and now it's a single digit and there 0:01:42.800 --> 0:01:46.399 are now other products out there that we can use 0:01:46.440 --> 0:01:49.840 to gain exposure to bitcoin in this moment, and it's 0:01:49.960 --> 0:01:53.520 just a moment of uncertainty between now we think and 0:01:54.720 --> 0:01:58.200 January January eighth to tenth, somewhere in that range perhaps, 0:01:59.200 --> 0:02:02.000 but well out of an abundance of caution, didn't want 0:02:02.040 --> 0:02:02.920 to take any risk. 0:02:03.760 --> 0:02:05.880 And I mean, let's get a little bit specific here, 0:02:05.880 --> 0:02:09.280 because we're talking about the ARC Next Generation Internet ETF. 0:02:09.280 --> 0:02:11.959 The ticker there is ARC W and I think what 0:02:12.080 --> 0:02:15.160 caught a lot of people's attentions is that you completely 0:02:15.200 --> 0:02:18.799 sold down your remaining stake of the Grayscale Bitcoin Trust. 0:02:18.880 --> 0:02:21.680 Instead on the same day you bought into the pro 0:02:21.720 --> 0:02:26.399 Shares Bitcoin Strategy ETF. Of course, that tracks bitcoin futures, 0:02:26.400 --> 0:02:29.040 it doesn't actually hold the physical bitcoin. 0:02:29.080 --> 0:02:31.560 Can you explain that shuffle? What was the thinking there? 0:02:32.880 --> 0:02:34.880 Sure a couple of things. 0:02:34.919 --> 0:02:39.560 First of all, Biddo with pro shares is already approved. 0:02:39.680 --> 0:02:44.399 There's no regulatory uncertainty having to do with it, so 0:02:44.600 --> 0:02:49.040 we chose to maintain our exposure through biddo for the 0:02:49.080 --> 0:02:52.959 time being. And as I mentioned before, there are some 0:02:53.840 --> 0:02:58.280 tax and regulatory uncertainties still as part of this process. 0:02:59.080 --> 0:03:02.120 We don't know exactly who's going to be approved and 0:03:03.639 --> 0:03:08.079 whether they've met all the criteria that the SEC has 0:03:08.160 --> 0:03:12.600 put before us. We know we have, but we don't 0:03:12.600 --> 0:03:17.080 know if others, including GBTC have We just don't know. 0:03:18.120 --> 0:03:21.839 So again, out of an abundance of caution and gbt's 0:03:22.440 --> 0:03:26.480 discount again it was as much as fifty percent relative 0:03:26.520 --> 0:03:29.040 to NAV. So not only have we enjoyed this year 0:03:29.639 --> 0:03:33.840 the run in bitcoin itself, but we've had the nice 0:03:33.919 --> 0:03:38.080 closing of that discount, so it's been double good news 0:03:38.080 --> 0:03:38.440 for us. 0:03:38.560 --> 0:03:40.720 But you've talked about January tenth, Kathy, I think in 0:03:40.760 --> 0:03:43.760 another report, is that possible, whether it's you or somebody else, 0:03:43.800 --> 0:03:47.800 in terms of the first spot Bitcoin ETF actually getting approval. 0:03:49.480 --> 0:03:53.320 Well, we think the probabilities have gone up because the 0:03:53.400 --> 0:03:58.720 SEC has been highly engaged compared to what was happening before. 0:03:58.800 --> 0:04:01.360 Before it was just denying. 0:04:00.920 --> 0:04:05.920 Approval, denying approval, and we just kept putting our filing 0:04:06.360 --> 0:04:09.800 in again, you know, try, try. 0:04:09.480 --> 0:04:14.000 Try, dogged and determined, and so here we are. 0:04:14.120 --> 0:04:16.800 We think we're first in line, and that's why there 0:04:16.880 --> 0:04:19.080 is this January tenth deadline. 0:04:19.839 --> 0:04:21.680 But we like the idea that the. 0:04:21.560 --> 0:04:24.840 SEC has been so engaged, and it's not just with us, 0:04:24.839 --> 0:04:28.760 it's others as well. We think a number of a 0:04:28.839 --> 0:04:31.200 number of funds could be approved at the same time. 0:04:32.080 --> 0:04:34.880 And they've been asking not only one set of questions, 0:04:34.920 --> 0:04:38.560 but follow up questions, and again that's a very good sign. 0:04:38.760 --> 0:04:41.240 Well, speaking of engaged, Oh go ahead, please, no, no, no, no. 0:04:41.440 --> 0:04:45.960 The last few questions have been very technical and so 0:04:46.279 --> 0:04:49.359 more dirriger and you know, you'd expect them to be 0:04:49.400 --> 0:04:52.960 asking these questions as we head toward an approval. Now 0:04:53.040 --> 0:04:56.160 it's not one certain and so we want to make 0:04:56.160 --> 0:05:00.320 that clear as well. This is the SEC, and we 0:05:00.400 --> 0:05:03.159 never know, you know, what might happen along the way. 0:05:03.240 --> 0:05:05.640 Regulators can be tricky, that's for sure. Hey, listen, you 0:05:05.680 --> 0:05:09.040 mentioned engagement. Let's talk about engagement with your funds overall, 0:05:09.080 --> 0:05:12.280 and especially the ARC Innovation Fund, up seventy two percent 0:05:12.400 --> 0:05:16.760 year to date, easily outperforming some of the major market benchmarks, 0:05:16.760 --> 0:05:19.360 still down sixty five percent from the high back in 0:05:19.360 --> 0:05:22.599 February of twenty twenty one. For you, though, a lot 0:05:22.640 --> 0:05:24.920 of critics, we bring up your name, we bring up ARC, 0:05:25.040 --> 0:05:26.640 and you have a lot of fans, and you have 0:05:26.680 --> 0:05:29.400 a lot of critics. There's a lot of discussion. Does 0:05:29.440 --> 0:05:32.080 it feel though a little bit like a victory lap 0:05:32.120 --> 0:05:32.520 this year? 0:05:34.400 --> 0:05:37.479 Well, you know, we are very happy that a couple 0:05:37.480 --> 0:05:42.080 of things have happened that this idea that interest rates 0:05:42.120 --> 0:05:47.240 we're going to continue moving higher has been proven incorrect. 0:05:47.360 --> 0:05:48.960 And I think even the. 0:05:48.880 --> 0:05:52.440 FED, while there is that small possibility, even the FED 0:05:52.680 --> 0:05:55.240 is now starting to talk about the other side of 0:05:55.279 --> 0:05:57.680 the interest rate movement. So I do believe all we've 0:05:57.760 --> 0:06:02.440 seen so far is a reaction to that macro phenomenon 0:06:02.800 --> 0:06:08.000 or judgment call. We went through our flagship strategy, and 0:06:08.000 --> 0:06:10.960 all of our strategies went through a very difficult time 0:06:11.000 --> 0:06:14.800 from February twenty one through December of twenty two, as 0:06:15.240 --> 0:06:19.840 interest rates, first of all, were presumed to move up 0:06:19.960 --> 0:06:23.000 or forecasts move up, and then when they did move up, 0:06:23.080 --> 0:06:25.320 so it was almost like a double discounting. 0:06:25.760 --> 0:06:28.080 And so we've seen the first. 0:06:27.800 --> 0:06:29.960 Installment of the. 0:06:31.600 --> 0:06:32.000 Correction. 0:06:32.160 --> 0:06:35.880 There to the upside for our funds with this notion, 0:06:36.000 --> 0:06:40.320 and it's again the forecast that interest rates will come down, 0:06:40.400 --> 0:06:44.240 and we would presume that if they do come down 0:06:44.839 --> 0:06:47.320 for the reasons we think they're going to come down, 0:06:47.600 --> 0:06:51.800 the most important one being deflation, then our funds will 0:06:52.120 --> 0:06:56.440 be in good shape because we are very our companies 0:06:57.320 --> 0:07:03.000 thrive on deflation technologically and bold innovation is deflationary. 0:07:03.120 --> 0:07:04.960 So, Kathy, a very good morning too. It's Manus the 0:07:05.000 --> 0:07:07.680 first time we've met on So we're going to move 0:07:07.720 --> 0:07:09.600 to a deflationary environment. We'll come back to the big 0:07:09.600 --> 0:07:11.680 macrocoll in a moment. Just let's square it away before 0:07:11.720 --> 0:07:13.480 I talk to you about the flows in the funds, 0:07:13.840 --> 0:07:17.000 which is how much interest rate cuts do you presume? 0:07:17.480 --> 0:07:20.640 Are you forecasting? Leave the forecast of everybody else's side? Well, 0:07:20.920 --> 0:07:22.880 what do you what do you presume what happen next year? 0:07:23.800 --> 0:07:27.000 Well, we put up a chart in one of our 0:07:27.080 --> 0:07:30.280 in the in the Nose, which is a YouTube video 0:07:30.320 --> 0:07:34.960 that I do every every month Employment Friday, and in 0:07:35.000 --> 0:07:37.600 that chart you will find. 0:07:38.680 --> 0:07:39.320 A ratio. 0:07:39.360 --> 0:07:43.480 It's the metals to gold ratio, so metals price to 0:07:43.520 --> 0:07:48.360 goal price, and there has been an extremely tight correlation 0:07:48.520 --> 0:07:53.920 between that ratio and long term interest rates. In October 0:07:54.120 --> 0:07:58.280 we published it or early November, and what you will 0:07:58.480 --> 0:08:03.560 see is that was a very wide gap that had developed. 0:08:03.920 --> 0:08:07.560 The metals to gold ratio was near its low for 0:08:07.600 --> 0:08:12.240 the past twelve fifteen years, and interest rates were at 0:08:12.280 --> 0:08:14.640 their highs five percent. 0:08:15.280 --> 0:08:16.320 The correlation. 0:08:16.560 --> 0:08:19.880 If you just eyeballed that chart, the correlation suggested that 0:08:20.040 --> 0:08:23.480 rate should go to two percent. Now, maybe they won't 0:08:23.480 --> 0:08:25.520 go all the way to two percent, but we think 0:08:25.640 --> 0:08:29.320 that long term interest rates are way above where they're 0:08:29.360 --> 0:08:31.840 going to end because of deflation. 0:08:32.000 --> 0:08:33.439 Okay, well, let's we'll come back to that and see 0:08:33.440 --> 0:08:34.800 why that we get to the two percent level. I've 0:08:34.800 --> 0:08:36.560 got to ask you about the flows into the funds, 0:08:36.600 --> 0:08:39.440 which is obviously you know, as Kyl just said, you've 0:08:39.480 --> 0:08:41.120 got a bit of a victory lap going on at 0:08:41.160 --> 0:08:44.560 the moment. But this is the first year of outflows. 0:08:45.200 --> 0:08:47.920 Have those outflows stopped. You've had a great performance in 0:08:47.960 --> 0:08:51.080 the back part of this year. Have the outflows stopped 0:08:51.920 --> 0:08:53.240 and has that bleed stopped? 0:08:54.640 --> 0:08:58.560 Yes, Well, we were very gratified at our asset retention 0:08:58.920 --> 0:09:02.320 in twenty one and twenty In fact, we had net 0:09:02.400 --> 0:09:06.120 inflows if you combine both years of more than eighteen 0:09:06.320 --> 0:09:12.400 billion dollars and this year one, what might expect that 0:09:12.559 --> 0:09:17.719 those who average down into the very steep declines that 0:09:17.760 --> 0:09:19.600 we were seeing in twenty two. 0:09:19.520 --> 0:09:21.960 Especially might take some profits. 0:09:22.000 --> 0:09:26.160 So we have had I know, for our flagship strategy, 0:09:26.320 --> 0:09:31.120 it's roughly five hundred million dollars in outflows, maybe for 0:09:31.240 --> 0:09:35.320 all of our strategies one point eight million, so maybe 0:09:35.440 --> 0:09:39.120 ten percent of the inflows that we enjoyed during twenty 0:09:39.160 --> 0:09:42.199 one and twenty two. So again, we're very gratified and 0:09:42.760 --> 0:09:48.280 grateful to our clients for the support that we continue 0:09:48.280 --> 0:09:48.760 to receive. 0:09:49.480 --> 0:09:51.280 So has the iflow stopped. 0:09:52.800 --> 0:09:57.040 We have had days of on balance very recently, yes, 0:09:57.880 --> 0:10:01.080 And I think part of this is many people do 0:10:02.760 --> 0:10:05.760 tax management towards the end of the year, and so 0:10:05.840 --> 0:10:12.080 some of the outflows might have been associated with clients 0:10:12.080 --> 0:10:14.920 who got in at a high cost base and we're 0:10:14.960 --> 0:10:16.640 just harvesting some tax losses. 0:10:16.679 --> 0:10:17.640 But I think we're through that. 0:10:18.559 --> 0:10:20.719 Do you find a little surprising though, Kathy, considering the 0:10:20.800 --> 0:10:23.320 run up or do you I'm curious about the conversations 0:10:23.320 --> 0:10:25.720 you do have with investors considering the year that you're having, 0:10:25.760 --> 0:10:27.559 and then to see those flows, it's got to be 0:10:27.600 --> 0:10:28.320 a little disheartening. 0:10:28.600 --> 0:10:31.080 Yeah, oh no, no, no, no, not at all. 0:10:31.440 --> 0:10:35.480 Actually, we put out a piece for a resolute our 0:10:35.559 --> 0:10:42.520 distributor who and we basically showed them, if you rebalance 0:10:42.679 --> 0:10:45.640 our strategy when there have been big moves one way 0:10:45.800 --> 0:10:50.080 or the other, if you rebalance regularly or based on 0:10:50.160 --> 0:10:54.400 a rule, like when the fund's up fifteen percent relative 0:10:54.440 --> 0:10:56.400 to everything else, take some profits. 0:10:56.880 --> 0:10:58.199 And what it. 0:10:58.320 --> 0:11:01.920 Showed that study showed that if you are disciplined that 0:11:02.000 --> 0:11:08.560 way that over any rolling five year period, it is 0:11:08.760 --> 0:11:13.080 highly likely almost one hundred percent, I'm not quite sure 0:11:13.160 --> 0:11:17.280 if it's quite that high, but that you will beat 0:11:17.320 --> 0:11:20.319 the market, meaning as measured by the Nasdaq or the 0:11:20.360 --> 0:11:24.280 SMP over a rolling five year period. And so a 0:11:24.320 --> 0:11:27.200 lot of our funds are with advisors who are very 0:11:27.240 --> 0:11:33.400 sophisticated and responded somewhat perhaps in this tax management part 0:11:33.440 --> 0:11:35.200 of the year to that message. 0:11:35.320 --> 0:11:38.439 Kathy would founder, CEO and CIO of ARC invest She's 0:11:38.520 --> 0:11:41.640 joining Manis, of course, and Katie and myself here on 0:11:41.640 --> 0:11:45.280 Bloomberg Surveillance Kathy, I feel like we can't talk. We 0:11:45.360 --> 0:11:47.520 have to talk about Tesla. An Elon Muska, I know 0:11:47.559 --> 0:11:50.960 you just had a conversation on Twitter X. This has 0:11:51.000 --> 0:11:54.720 been I think from day one right in terms of 0:11:54.760 --> 0:11:57.560 you starting out that you've had this investment in Tesla, 0:11:57.600 --> 0:11:59.679 and I remember when we first talked and you were 0:11:59.679 --> 0:12:01.880 getting started, you talked about him being the next Thomas 0:12:02.000 --> 0:12:04.680 Edison and how his vehicles would turn the US economy 0:12:05.000 --> 0:12:09.320 upside down. Having said that, there's an evolution and the 0:12:09.360 --> 0:12:11.880 eed world has changed, how are you thinking it's still 0:12:11.920 --> 0:12:14.640 a top holding? How are you thinking about the Teslas 0:12:14.640 --> 0:12:16.040 story right now? 0:12:16.600 --> 0:12:19.880 Well, first of all, Carol, thank you very much for 0:12:20.040 --> 0:12:22.000 letting me interview that time. 0:12:22.080 --> 0:12:23.839 That was nearly ten years ago. 0:12:24.160 --> 0:12:28.120 Arquet is about to celebrate his tenth year anniversary and 0:12:28.160 --> 0:12:32.440 you gave us that opportunity, so thank you. The world 0:12:32.520 --> 0:12:38.720 is evolving, actually, I think even more closely to what 0:12:38.800 --> 0:12:43.600 we expected, because we expected a lot of traditional auto 0:12:43.679 --> 0:12:47.000 manufacturers to see the writing on the wall and rush 0:12:47.160 --> 0:12:51.880 as quickly as they could into scaling big time into 0:12:52.000 --> 0:12:55.320 electric vehicles. And what has happened recently both GM and 0:12:55.360 --> 0:12:59.640 Ford have said we're stepping back. We're not going to 0:12:59.720 --> 0:13:04.840 do this until it's profitable. The problem with that is, 0:13:04.880 --> 0:13:07.840 in order to be profitable, they need to scale. 0:13:08.040 --> 0:13:09.160 That's how this works. 0:13:09.240 --> 0:13:12.760 These are learning curves that they are writing down, and 0:13:12.800 --> 0:13:15.840 those are expressed in cost toclines. So the fact that 0:13:15.880 --> 0:13:20.199 they're pulling back means there's more share for Tesla and 0:13:20.280 --> 0:13:23.400 others who choose to go for it and CAVI. 0:13:23.480 --> 0:13:25.680 I want to keep the conversation going on Elon Musk, 0:13:25.679 --> 0:13:28.360 but I want to bring it to the Arc Venture Fund. 0:13:28.400 --> 0:13:31.559 Of course, it's not an ETF. You invest in private 0:13:31.600 --> 0:13:34.000 companies etc. In there, and you take a look at 0:13:34.040 --> 0:13:36.760 the portfolio. You have SpaceX in there, and you also 0:13:37.000 --> 0:13:40.840 have X formerly known as Twitter. And in July you 0:13:40.880 --> 0:13:42.840 had told the Wall Street Journal that you had written 0:13:42.920 --> 0:13:46.720 down your Twitter steak by forty seven percent. Fill us 0:13:46.760 --> 0:13:49.160 in on the past couple of months. Have you written 0:13:49.200 --> 0:13:51.480 it down further or how has that changed? 0:13:52.720 --> 0:13:52.800 No? 0:13:52.920 --> 0:13:57.440 I think it's still there. You know, we have to 0:13:57.480 --> 0:14:00.360 be very careful. This is an interval fund. It is 0:14:00.400 --> 0:14:02.880 a forty act fund, and we have to mark to 0:14:02.960 --> 0:14:06.920 market every day. The good news is our clients can 0:14:06.960 --> 0:14:10.560 get in and have access to these amazing companies for 0:14:10.760 --> 0:14:13.719 just five hundred dollars and they get quarterly liquidity, so 0:14:14.520 --> 0:14:15.400 that's the good news. 0:14:15.720 --> 0:14:17.000 The markdowns are. 0:14:16.920 --> 0:14:20.240 Simply you know, if we see in the secondary market 0:14:20.440 --> 0:14:23.600 employee stock trading at a steep discount, we have to 0:14:23.640 --> 0:14:26.760 take that into account. If we see others in the 0:14:26.760 --> 0:14:31.440 more traditional asset management work world, like Fidelity and others 0:14:32.280 --> 0:14:35.720 marking their holdings down, we need to take that into 0:14:35.760 --> 0:14:39.000 consideration during our daily mark to market. So it's an 0:14:39.000 --> 0:14:42.400 abundance of caution. We have a five year investment time horizon. 0:14:42.520 --> 0:14:44.000 Do we think that's. 0:14:43.760 --> 0:14:49.680 Where X belongs in terms of valuations? Absolutely not, absolutely not. 0:14:49.840 --> 0:14:54.840 A roughly twenty ish billion dollar valuation for what we 0:14:54.960 --> 0:15:00.440 believe truly will become the everything app think we chat pay. 0:15:01.360 --> 0:15:05.720 Elon started his entrepreneurial career in the payment's industry, and 0:15:05.760 --> 0:15:08.320 he's been thinking about this for a long time. He 0:15:08.360 --> 0:15:12.160 now has money transmitter licenses in more than half of 0:15:12.240 --> 0:15:16.080 all of the states, which we've learned on Twitter spaces 0:15:16.200 --> 0:15:19.400 or on x spaces, i should say the other day 0:15:19.440 --> 0:15:22.040 when we had our interview with him. So that's exciting. 0:15:22.080 --> 0:15:22.880 He's going for it. 0:15:23.200 --> 0:15:25.800 He's going for it. We'll see if that one lands. 0:15:25.800 --> 0:15:27.920 But let's talk a little bit more about the private markets, 0:15:27.960 --> 0:15:30.880 because obviously the private credit market has gotten a lot 0:15:30.880 --> 0:15:33.880 of attention. Right now, you're looking at the private markets 0:15:33.920 --> 0:15:36.000 through this interval fund that you have, when you think 0:15:36.000 --> 0:15:39.800 about the opportunities there on that five year horizon that 0:15:39.840 --> 0:15:42.480 you have, do you see more so in the public 0:15:42.520 --> 0:15:44.280 markets or in the private markets right now? 0:15:45.920 --> 0:15:49.960 Well, now that we've had this very nice run this year, 0:15:51.080 --> 0:15:53.520 we think the answer to that question is in the 0:15:53.600 --> 0:15:54.680 private markets. 0:15:54.720 --> 0:15:56.200 They're close. They're close. 0:15:56.600 --> 0:15:59.600 What's fascinating to us is that the public markets have 0:15:59.680 --> 0:16:03.320 been the private markets for the past three years. As 0:16:03.520 --> 0:16:11.320 our funds were were falling in twenty one, private evaluations 0:16:11.360 --> 0:16:14.440 were going to all time highs along with the Nasdaq. 0:16:14.480 --> 0:16:16.600 They were taking their cues, I suppose from the Nasdaq, 0:16:16.920 --> 0:16:21.720 but real innovation, if you looked at our portfolios, was 0:16:22.000 --> 0:16:26.320 starting to revalue to the downside, and even more so 0:16:26.400 --> 0:16:29.960 in twenty twenty two. We are still seeing major down 0:16:30.080 --> 0:16:33.960 rounds taking place in the private markets. And I'm always 0:16:34.000 --> 0:16:37.560 surprised at this sort of thing because you would think 0:16:37.560 --> 0:16:40.760 that the private markets lead the public markets. That has 0:16:40.840 --> 0:16:42.720 not been the case in the last few years. 0:16:42.960 --> 0:16:44.720 Hey, Kathy, I've got to be honest with you. I 0:16:44.760 --> 0:16:49.280 think whenever we think about Elon Musk brilliant but also erratic. 0:16:49.600 --> 0:16:52.920 And I'm curious how you think about Elon the individuals 0:16:53.000 --> 0:16:55.760 versus Elon the companies he's creating the things he's doing, 0:16:55.800 --> 0:16:58.560 because I think if there is time, any other CEO 0:16:58.640 --> 0:17:02.160 of a major publicly held company would I think it's 0:17:02.160 --> 0:17:03.560 safe to say not be able to get away with 0:17:03.600 --> 0:17:05.920 a lot of what he has done. So help us 0:17:06.080 --> 0:17:08.160 educate us how you make sense of it of someone 0:17:08.200 --> 0:17:10.919 you have followed, talked with for many years. 0:17:12.520 --> 0:17:15.919 Well, first of all, very often we just look at 0:17:15.920 --> 0:17:19.080 what he does, not exactly what he's saying, which can 0:17:19.119 --> 0:17:22.280 often be a distraction, or it can be an advertisement 0:17:22.320 --> 0:17:27.200 for his cars or for X or for SpaceX and 0:17:27.240 --> 0:17:32.520 so forth. But we have a scoring system as we 0:17:32.560 --> 0:17:37.520 are evaluating companies and their founders and their management teams. 0:17:38.640 --> 0:17:42.879 And there are six metrics and one of them is 0:17:43.119 --> 0:17:45.040 mote and barriers to entry. 0:17:45.680 --> 0:17:48.200 And I think Eylon is a. 0:17:48.240 --> 0:17:53.520 Maestro of raising barriers to entry with innovation, which that 0:17:53.680 --> 0:17:57.720 is so much faster than anyone else. Why Because he's 0:17:57.760 --> 0:18:04.680 so first principles physics driven in his analysis of how 0:18:04.720 --> 0:18:07.920 to approach a new idea, A big idea. 0:18:08.000 --> 0:18:09.240 So tell me this then, Kathy. 0:18:09.280 --> 0:18:11.320 I mean, if you look at the cohort of the 0:18:11.359 --> 0:18:14.560 CEOs that you back, Brian Armstrong, does he hit that bar? 0:18:14.840 --> 0:18:18.960 Is he above Elon? Or is he at the money? 0:18:18.960 --> 0:18:22.280 You've got Elon, You've got Brian, You've got Tony Wood 0:18:22.320 --> 0:18:22.800 at Rocco. 0:18:23.520 --> 0:18:26.080 Does anybody come close to Elon? 0:18:26.520 --> 0:18:29.359 Or is Brian Armstrong maybe even at the money with 0:18:30.119 --> 0:18:30.960 Elon or above? 0:18:32.280 --> 0:18:36.760 Well, we don't actually look at the world that way, 0:18:36.920 --> 0:18:38.280 one relative to the other. 0:18:38.320 --> 0:18:41.040 In terms of management teams, we do look. 0:18:40.960 --> 0:18:45.720 From our scoring system at the scores, which include mote management, 0:18:45.760 --> 0:18:51.159 people and culture, execution of valuation that might surprise people, 0:18:51.760 --> 0:18:54.160 and product and service. 0:18:53.880 --> 0:18:55.240 Leadership and thesis risk. 0:18:55.359 --> 0:18:59.520 Those are the six scores, and both well, all three 0:18:59.560 --> 0:19:03.080 of them score very highly. Which one scores the highest. 0:19:03.640 --> 0:19:06.120 They're actually very close to one another. 0:19:05.840 --> 0:19:09.000 To be honest, they're very close to one another. So, 0:19:09.280 --> 0:19:13.240 I mean, obviously Coinbase is one of your key holdings. 0:19:13.240 --> 0:19:16.719 We've talked a little bit about that. The other feature 0:19:16.760 --> 0:19:20.720 that we want to talk about is AI. I'm curious 0:19:20.760 --> 0:19:24.320 to know in open AI the valuations have ranged between 0:19:24.359 --> 0:19:27.000 eighty billion to one hundred billion. Will you take a 0:19:27.040 --> 0:19:30.440 position in open ai. Is that going to be part 0:19:31.040 --> 0:19:33.760 of your holdings as you explore the next development of 0:19:33.800 --> 0:19:36.399 AI and your holdings well. 0:19:37.080 --> 0:19:45.320 In our private portfolios, we are already exposed to Andthropic, 0:19:45.400 --> 0:19:50.040 which has been a major beneficiary of the drama around 0:19:50.119 --> 0:19:53.760 open ai that we all witnessed a few months ago. 0:19:54.680 --> 0:19:58.240 But if you look at GPT four, which is the 0:19:58.440 --> 0:20:02.920 latest large language model that open ai has published, it 0:20:03.000 --> 0:20:08.240 is way above others in terms of performance. So there 0:20:08.280 --> 0:20:12.080 you have it, the pros and the cons. So we 0:20:12.200 --> 0:20:15.920 can't tell you what we're going to do in that portfolio, 0:20:15.960 --> 0:20:20.720 but we are so impressed at how open ai has 0:20:20.800 --> 0:20:24.479 led the industry. We're also impressed, however, at the open 0:20:24.520 --> 0:20:27.919 source models, and we'd like to encourage. 0:20:27.400 --> 0:20:28.720 More of that movement. 0:20:29.080 --> 0:20:33.360 We know that Meta Platforms has with Lamaitu and it's 0:20:33.400 --> 0:20:38.479 working on others, is moving very quickly and making great strides. 0:20:38.520 --> 0:20:44.600 So for much lower cost open sources, free companies can 0:20:44.640 --> 0:20:50.440 get close at GPT four, but close. So we want 0:20:50.440 --> 0:20:52.920 to see the open source movement in the venture fund. 0:20:52.920 --> 0:20:54.160 We also own. 0:20:54.400 --> 0:20:58.720 Kathy Oh sorry, no, no, no, We never have enough 0:20:58.760 --> 0:21:00.680 time with you. Can I ask you really quick question? 0:21:00.760 --> 0:21:04.240 Five seconds? An ATF's coming our way from you guys 0:21:04.280 --> 0:21:04.720 next year. 0:21:05.040 --> 0:21:08.359 Well real quickly, as you may know, we bought a 0:21:08.400 --> 0:21:10.040 company in London. 0:21:10.280 --> 0:21:13.000 Yeah, they have some very interesting funds. 0:21:13.000 --> 0:21:14.639 All right, Gonna leave it there. Like we said, we 0:21:14.680 --> 0:21:17.560 always leave our audience wanting more from you. But we 0:21:17.640 --> 0:21:19.760 so appreciate all the time you gave us. Happy New 0:21:19.840 --> 0:21:23.760 year of course. Kathy Wood, founder CEO CIO of ARC Investigator. 0:21:34.119 --> 0:21:35.800 Let's do what Lara Raim has to say. She's chief 0:21:35.880 --> 0:21:39.040 US economist at FS Investments, joining us on this Thursday. Lara, 0:21:39.080 --> 0:21:41.440 great to have you here with the team. So let's 0:21:41.440 --> 0:21:44.040 go to jobless claims. First of all, is that significant 0:21:44.080 --> 0:21:45.240 in terms of that uptick? 0:21:46.440 --> 0:21:49.600 So this one month of readings is not significant. But 0:21:49.680 --> 0:21:53.960 this indicator, to me is one of my most watched indicators. 0:21:53.960 --> 0:21:58.879 The fact that it's been low really Carol uninterruptedly for 0:21:59.320 --> 0:22:02.280 months and months now to me says that while their 0:22:02.359 --> 0:22:06.600 concerns about you know, the labor market renormalizing or people 0:22:06.640 --> 0:22:09.200 are starting to talk about tracks in the labor market, 0:22:09.560 --> 0:22:13.000 when I look at this indicator, I see companies still 0:22:13.440 --> 0:22:16.560 really eager to hold on to workers. They may be 0:22:16.640 --> 0:22:20.400 taking more time to rehire if somebody's lost. They may be, 0:22:20.920 --> 0:22:25.159 you know, a little more rational about job openings, but 0:22:25.240 --> 0:22:29.560 when it comes to layoffs, companies are very closely guarding 0:22:29.880 --> 0:22:32.560 their workers, and I think that has big implications. It 0:22:32.720 --> 0:22:35.520 has had throughout this last year and going into next 0:22:35.600 --> 0:22:38.080 year means that it's one of the reasons why the 0:22:38.119 --> 0:22:39.879 economy has been a lot stronger than and a lot 0:22:39.880 --> 0:22:40.479 of us expected. 0:22:40.600 --> 0:22:42.879 So the labor hoarding continues. I want to ask you 0:22:42.960 --> 0:22:46.919 about Joemo replacing Fomo, what exactly are we talking about. 0:22:49.160 --> 0:22:52.720 My idea for the coming year is that, you know, 0:22:52.720 --> 0:22:56.439 the business cycle lives and dies around the consumer, and 0:22:56.480 --> 0:23:02.120 the consumer has just been surprising with spending strength throughout 0:23:02.160 --> 0:23:06.000 this expansion that is still a very young expansion. The FOMO, 0:23:06.600 --> 0:23:08.919 you know, we have to now's the time to spend. 0:23:09.000 --> 0:23:12.320 We put it off, we have to go take the trip, 0:23:12.520 --> 0:23:15.680 buy the car, whatever it is. We're going to find 0:23:15.680 --> 0:23:17.560