Speaker 1: Welcome to Maren Talks Money, the after Show. This is
Speaker 1: where we unpack all the commentary or some of the
Speaker 1: commentary at least that you hear in our regular podcast.
Speaker 1: I'm Maren Sunset Web this week. John Seppek, senior reporter
Speaker 1: at Bloomberg, author of the Daily Money to Still the
Speaker 1: newsletter which you should be reading every day. Do so
Speaker 1: if you are not, joins me to discuss my conversation
Speaker 1: with our investment management founder, CEO and CIO Kathy would John,
Speaker 1: you'll have listened to the whole thing by.
Speaker 2: Now right, I have read the transcript. Yes, that's like
Speaker 2: listening to it.
Speaker 1: It is like listening to it. The fact is better
Speaker 1: than listening to it. And it was a longer conversation
Speaker 1: than a lot of the ones that we have on
Speaker 1: this podcast, And I thought I would let the conversation
Speaker 1: run because a lot of people are still very heavily
Speaker 1: invested in our innovation. A lot of people are incredibly
Speaker 1: loyal to Kathy and those people and other people really
Speaker 1: want to hear what she says. So did you enjoy it? Yeah?
Speaker 2: I mean she's a very engaging and entertaining storyteller, and
Speaker 2: I think that's basically the secret of her success. I
Speaker 2: think that that is Katy's edge. Kathy's edge has been
Speaker 2: able to sell a good story to investors and make
Speaker 2: money from it. That doesn't necessarily mean that the investments
Speaker 2: that she's in are going to make money, or certainly
Speaker 2: not necessarily from the prices at which she's been keen
Speaker 2: to pay for them.
Speaker 1: I think that's calling her are you are you? Are
Speaker 1: you calling her an asset gatherer the way stock picker
Speaker 1: because it's quite rd John Well, I.
Speaker 2: Know, I mean, I mean only within fund management circles,
Speaker 2: but I guess that's the ones that she moves in.
Speaker 2: I mean, yeah, I mean it's a it's it's ingenious marketing.
Speaker 2: And I actually think that you know, it's it's interesting
Speaker 2: because obviously, I know it's something you didn't touch on,
Speaker 2: but Kathy has has kind of discussed our kind of
Speaker 2: strong religious kind of views, and there is something evangelical
Speaker 2: about ARC I mean obviously even the name, and whenever
Speaker 2: it was going through the conversation, I just thought it
Speaker 2: was really interesting because it's like they're very convincing arguments,
Speaker 2: but they are also very much arguments that are kind
Speaker 2: of cherry picked tape so they're also macro based, you know,
Speaker 2: for somebody who's a stockpicker, they're all about themes and
Speaker 2: they're all about, you know, the big picture and talking
Speaker 2: about deflation. For example, I.
Speaker 1: Did ask her about that. To be fair, I did
Speaker 1: start with let's let's start with macro, I said, because
Speaker 1: she's known to be quite a good macro analyst, right,
Speaker 1: So so we started with that. I led her into
Speaker 1: the conversation about about deflation.
Speaker 3: And nothing like that. And I actually think, and I
Speaker 3: have been saying for quite some time, that we're going
Speaker 3: to see defleation before all of this is over, and
Speaker 3: we're beginning to say it already.
Speaker 2: Yeah, but isn't it a bit convenient deflation? You know,
Speaker 2: because basically all of the stuff that she owns in ARP,
Speaker 2: and the reason that the ARK has done badly over
Speaker 2: the last couple of years is because interest rates have
Speaker 2: gone up, and it's very much been associated as the
Speaker 2: most you know, the kind of long duration stocks, the
Speaker 2: ones that don't make any money yet, but as long
Speaker 2: as you hold them and believe then eventually they'll make
Speaker 2: lots of money. They kind of fairy tale stocks and
Speaker 2: the sort of things that's thrived in the low interest
Speaker 2: rate world, and I guess it's like it's a bit
Speaker 2: like soft Bank. So when you look at soft Bank,
Speaker 2: the big Japanese kind of investment fund that's owned by
Speaker 2: Massa y or She's sowing and he's got these kind
Speaker 2: of like almost comedy PowerPoint packs where he'll talk about
Speaker 2: all the private companies that he ones and you know
Speaker 2: that he's kind of found, and there'll be like he
Speaker 2: had one for we Work that somebody put up the
Speaker 2: other day and reminded us of them whenever they bought
Speaker 2: we Walk. The idea was that there was a kind
Speaker 2: of a graph and it showed the line going down
Speaker 2: and then bouncing back up to never before seeing hies
Speaker 2: and it was kind of like the commentary around it was,
Speaker 2: this is the the the theoretical turn around for this company.
Speaker 2: And of course we worked, just went bust.
Speaker 1: This is the week we said goodbye to we worked.
Speaker 1: Maybe for that maybe for the last time, it can
Speaker 1: be reincarnated things like we worked, So let's not right
Speaker 1: it off John next year. This is the week we
Speaker 1: said everyone said say goodbye to the money, that's for sure,
Speaker 1: But I.
Speaker 2: Think it's this. We've lived in a bull market for storytelling,
Speaker 2: and that was created by low interest rates, so you
Speaker 2: could basically tell any story as long as it was
Speaker 2: a good one, somebody would give you money. And I
Speaker 2: think Kathy's still stuck in that world because.
Speaker 1: I thought the success is based on Yeah, the bit
Speaker 1: I thought you'd like best in the entire transcript or
Speaker 1: audio for people who are you know, the time to
Speaker 1: listen to the audio as opposed to skim the transcript.
Speaker 1: The best bit was when Kathy told me that her
Speaker 1: fund was a deep value fund and said, that'll that'll
Speaker 1: give John a bit of a spluttering into his coffee.
Speaker 1: You know, are but you're not really valuation driven, are you.
Speaker 3: We are if you give us five years, and if
Speaker 3: you give us five years, then we are a deep
Speaker 3: value manager. We're a deep value manager.
Speaker 2: That was brilliant. That was the idea that it's like
Speaker 2: Wardern buffet John his cigar, but these proper Ben Graham
Speaker 2: stuff and yeah, so it's deep value relative to kind
Speaker 2: of like I mean, you know, Becoin is deep value.
Speaker 2: Now if you believe I think Kathy does that, it's
Speaker 2: going to go to one point five million dollars before
Speaker 2: twenty thirty, I think was her most recent forecast for bitcoin.
Speaker 2: So yeah, it should if you buy it slightly grand
Speaker 2: and yes it's deep value, but only in the sense
Speaker 2: that if you believe the most outlined dish production is
Speaker 2: going to be correct, then it's cheap relative to that protection.
Speaker 1: Yeah, it was an interesting because she did say that
Speaker 1: there's a bit here. You know, most people when they
Speaker 1: when they look at their valuation, they're looking just at
Speaker 1: this year, maybe next year, and then say, well, we
Speaker 1: look at five years now. I listened to her saying that,
Speaker 1: and I thought, well, quite right, you should give up
Speaker 1: five years. And I think everybody does. Yeah, I mean
Speaker 1: fas kind of a trope of fund management to say,
Speaker 1: judge us over five years, not over one year or
Speaker 1: two years. Of course, we don't much to judgem over
Speaker 1: one year or two years. You know, we enjoyed that
Speaker 1: a lot more, don't we. But we should obviously judge
Speaker 1: everyone over five years. But I think the thing that
Speaker 1: I found interesting was that she knows and we discussed
Speaker 1: that very rising interest rates are horrible for long duration assets,
Speaker 1: but and high interest rates are horrible for long duration
Speaker 1: assets assets to the returns come far in the future.
Speaker 1: Jam tomorrow stocks as you like to call them, John,
Speaker 1: but she still feels that the stocks in her hopefully
Speaker 1: have been featured unfairly.
Speaker 2: Yeah, I mean, and I suppose that's the only thing
Speaker 2: you start from, that kin of you start from, like king,
Speaker 2: a top down approach. And also, like I said, the
Speaker 2: micro story that she's telling one about deflation, So she
Speaker 2: clearly realizes the falling interest rates would be bullish for
Speaker 2: her fund. But she said she's also got a hedge
Speaker 2: it by saying, yeah, but these stocks will do well anyway.
Speaker 1: I mean, again, have a period. She's had a previous
Speaker 1: period of performing well when rates arising, but obviously nothing
Speaker 1: like this when rates arising just a little bit in
Speaker 1: a rather different environment, there's a massive rise in interest rates.
Speaker 1: The constant rises a very different environment.
Speaker 2: Yeah, and also staying high is a different environment as well.
Speaker 2: And I just don't think that you can. Well, I
Speaker 2: suppose it's it makes sense that she wouldn't change her
Speaker 2: story now, because well, yeah, why why would you? I mean,
Speaker 2: that's not people people do buy fund managers on the
Speaker 2: basis of their style, and one of the kind of
Speaker 2: killer things for any fund manager is style drift. If
Speaker 2: you turn around and you know, if everyone's owning you
Speaker 2: for one reason and then you say, oh, so I'm
Speaker 2: going to change my mind, then that's that's going to
Speaker 2: destroy your career. And that's absolutely fair enough. And from
Speaker 2: that point of view, you know, I've got a lot
Speaker 2: of respect for it. I mean, in lots of ways,
Speaker 2: she's just a more kind of aggressive American AE style
Speaker 2: Scottish mortgage trust.
Speaker 1: And I was like, well, interestingly, one of when I
Speaker 1: was at an event the other day and talking to
Speaker 1: people about about oh and also about Scottish mortgage, and
Speaker 1: several people said to me that they used either our
Speaker 1: course Scottish mortgage interchangeably to balance out they're rougher and
Speaker 1: their personal assets.
Speaker 2: I think thats just.
Speaker 1: In case, just incaseion. And these are fascinating stories and
Speaker 1: incredibly compelling, and you know, so many of these things
Speaker 1: may well happen, will probably happen. You know, we're on
Speaker 1: the edge, we hope, you and I and everybody else,
Speaker 1: we're on the edge of the kind of technological revolution
Speaker 1: that will give us see the productivity revolution that we've
Speaker 1: been waiting for for decades. In decades some way we've
Speaker 1: been saying for ages, look at all this new tech.
Speaker 1: It's going to be a productivity revolution, revolution in healthcare revolution,
Speaker 1: and this revolution of that. It hasn't quite happened, but
Speaker 1: it feels like if you look at the kind of
Speaker 1: thing that things that Cafie says, I know she've been
Speaker 1: saying them for a few years, but nonetheless, the technology
Speaker 1: is ready, it's available. We may be on the edge
Speaker 1: of the explosion that we've been waiting for, but that
Speaker 1: won't necessarily translate into the prices of the stocks in
Speaker 1: portfolios like that going up another four hundred percent in
Speaker 1: a year.
Speaker 2: Yeah, that the difficulty. It's like, there's always timing with
Speaker 2: these kinds of things, and there's always the winners and
Speaker 2: the losers where any kind of tech thing, I mean,
Speaker 2: one of the interesting point is that obviously the biggest
Speaker 2: tech kind of hype this year has been around artificial intelligence,
Speaker 2: and the best stock, in fact, pretty much the only
Speaker 2: stock to play that as a picks and shovels play
Speaker 2: was Navidia, the big chip manufacturer, and of course Katy
Speaker 2: famously got rid of that, one of the few tech
Speaker 2: stocks that she kind of disposed of before it then
Speaker 2: kind of rocketed earlier this year.
Speaker 1: And that is an interesting one really.
Speaker 2: Now competition well it's not as much as getting no competed,
Speaker 2: but so yeah, you know what I mean. It's like
Speaker 2: it's very much the go to stock for that sector,
Speaker 2: and it was actually was the go to for the
Speaker 2: gaming boom and the bitcoin boom as well, because their
Speaker 2: chips are the key ones for all of those process
Speaker 2: and activities. And I just thought it was in the
Speaker 2: the same time as everybody else was jumping on that
Speaker 2: bind wagon, she actually kind of exited it and unfortunately
Speaker 2: the wrong tame. But it does she sure you that
Speaker 2: even I find this focused on this stuff is going
Speaker 2: to get it wrong sometimes sometimes.
Speaker 1: The thing one of the things that I thought was
Speaker 1: interesting was the discussion we had about chemical and nuclear
Speaker 1: and her firm belief that moving into uranium and bdefault
Speaker 1: obviously into nuclear energy is the only way forward for
Speaker 1: the energy transition, and she's very into the idea of
Speaker 1: the modular reactors, et cetera. I thought that was quite
Speaker 1: interesting because it's not the subject that I would have
Speaker 1: associated with her, And she tells me that, in fact,
Speaker 1: she's been looking at that since well for the last
Speaker 1: decade or so two.
Speaker 3: Decades about nuclear because they're looking at tax again, we
Speaker 3: believe it is the cleanest other other than hydro.
Speaker 1: It is the.
Speaker 3: Cleanest energy source out there. It is the safest when
Speaker 3: you're good. Accidents associated with exploring and developing for energy,
Speaker 3: and yes, we think that after years there is you know,
Speaker 3: ten twelve years are being denigrated that environmentalists and others
Speaker 3: are now looking at the facts when it comes to
Speaker 3: nuclear and deciding, you know what, we probably well, I.
Speaker 2: Mean, that's interesting. I think that was interesting. I'm quite
Speaker 2: bullih in nuclear as well. It is a very different
Speaker 2: area low and when you think about it, the nuclear
Speaker 2: story is pretty old one. Actually, it has come back
Speaker 2: over and over again in cycles, and what has tended
Speaker 2: to happen is unfortunately, if it's something you like. For
Speaker 2: Kushima was what put an end to the last uranium
Speaker 2: bull market, and hopefully this time it is different. And
Speaker 2: finally we're kind of outgrowing a fear of and nuclear,
Speaker 2: partly driven by even needn't you find the way you
Speaker 2: keep the lights in?
Speaker 1: Way?
Speaker 2: We decided this mindal look kind of force all fuel infrastructure.
Speaker 1: Well, it feels like now we're beginning to accept that
Speaker 1: wind and solar are not as cheap and effective as
Speaker 1: we thought they might because pretty much our any way
Speaker 1: out if we want an effective energy transition.
Speaker 2: Yeah, but it's interesting because, as you say, that's not
Speaker 2: really it's a bit different. And again it sort of
Speaker 2: feels like this is a booll market you've supported that
Speaker 2: you think you can get on board, rather than we
Speaker 2: can't be cause a very old companies have any old
Speaker 2: school company as well? Renovation there Well yeah, I mean
Speaker 2: I'm assuming to being in a manor the deploy have
Speaker 2: get slightly more innovation than we.
Speaker 1: No, you're right, but that's one of the things that
Speaker 1: Ed Conway kept telling us over and over and over.
Speaker 1: Don't underestimate or we need to recognize how incredibly productive
Speaker 1: these minds have become. The innovation in mining is massive.
Speaker 1: There's not as many people down minds as they used
Speaker 1: to be. Very innovative, very productive. So now you're right
Speaker 1: to take it back. It's an innovative coming is interesting.
Speaker 1: Love me if you get the bill.
Speaker 2: No, and I just pulled a chart of Camico up.
Speaker 2: So Camiico, as you would expect, kind of last peaked
Speaker 2: in twenty eleven when you know figures you my up.
Speaker 2: It then basically went down pretty much NonStop. We a
Speaker 2: little blip up in twenty fourteen, and it kind of
Speaker 2: came to its absolute bottom in the March twenty twenty,
Speaker 2: whenever obviously the pandemic was causing the amount of havoc.
Speaker 2: It's now almost back at that twenty eleven high. So
Speaker 2: I'm just wondering at which point in the billmarket between
Speaker 2: the bottom in twenty twenty and then reaching the old
Speaker 2: kind of twenty eleven high Kathy actually bought it, having
Speaker 2: you know, been thinking about it for a decade.
Speaker 1: I can't answer that, but we'll look it up later.
Speaker 2: I just wondering through it that way.
Speaker 1: Well, look at up leisure. Okay, anything else we want
Speaker 1: to talk about in there? Anything else? Grab your attention.
Speaker 2: I thought it was really interesting and I love hearing
Speaker 2: the body of these technologies. I love you a little bit. Crespos,
Speaker 2: fun conversations, robots boy, that sort of stuff. But as
Speaker 2: a classic casey, story drive an investment, and one of
Speaker 2: the things that we're always told to try and avoid
Speaker 2: doing this investors is being seduced by stories focusing on
Speaker 2: the numbers. Yeah, so yeah, absolutely bill market for storytelling.
Speaker 2: And I don't think she should change because you know
Speaker 2: it's not I could wait be.
Speaker 1: People buy her for what she is. And the thing
Speaker 1: I didn't talk about with her, and if she ever
Speaker 1: comes on again, I'd really like to talk to about
Speaker 1: her is the building of the business, you know, because
Speaker 1: it is an extraordinary business. Billions and billions under management,
Speaker 1: pretty high management fees relative to some other fund manager
Speaker 1: managers working in the same area, so you know, it
Speaker 1: makes a fortune. It makes an absolute fortune based on
Speaker 1: the as on the management on the fleet. So she's
Speaker 1: running the performance of the assets aside, she's running a
Speaker 1: really fabulous business.
Speaker 2: Yeah, and I mean she's a very good entrepreneur. Great
Speaker 2: now absolutely have to handle that.
Speaker 1: Yeah, and I mean she she counts as her company
Speaker 1: is also an innovative company. She's an innovative disruptor in
Speaker 1: her own right, which is impressive. And when I ask
Speaker 1: you the question about gold and bitcoin, I guess I
Speaker 1: kind of knew the answer, I'm afraid. So if I'm
Speaker 1: going to give you a choice of three asset classes
Speaker 1: or three assets, should I say, and you have to
Speaker 1: choose one to hold for ten years, You're not going
Speaker 1: to have to think very hard. The three are gold,
Speaker 1: a deposit account, cash deposit account, or bitcoin.
Speaker 3: Bitcoin hands down, hands down, Bitcoin is a hedge against
Speaker 3: both inflation and deflation.
Speaker 1: So is gold. Yes, so is gold, but.
Speaker 3: Bitcoin is digital and if you look at the incremental demand,
Speaker 3: we're going to see gold already has its demand. You know,
Speaker 3: it's happened right. Bitcoin is new and institutions are barely involved,
Speaker 3: and young people would much prefer to hold bitcoin then
Speaker 3: to hold gold. So you know, it's interesting that both
Speaker 3: gold and bitcoin are hedges against deflation. But bitcoin's been
Speaker 3: doing better recently.
Speaker 1: Yeah.
Speaker 2: Yeah, But what I like's with us, it's like, to
Speaker 2: be fair, she's the one that's coming closest to anyone
Speaker 2: that we've talked to of sort of kevin the rationale
Speaker 2: for it, and uh, you know, in a clear way
Speaker 2: whether you agree with it or not, what you know,
Speaker 2: to be honest, that only the main reason that favorite
Speaker 2: gold is cause well it's been around for ags and
Speaker 2: onnlike most things, that's actually a benefit in this your circumstance.
Speaker 2: But absolutely I don't disagree be the argument. I think
Speaker 2: there's a valid argument. I mean, I'm not convinced that
Speaker 2: it's going to go over a million dollars, but then
Speaker 2: maybe one day I'll be kicking myself. Keep telling you
Speaker 2: about some and we'll just lose the password, please you.
Speaker 1: All right, all right, A lot of people keep telling
Speaker 1: you on Twitter, I'm just better. Well do you know
Speaker 1: what I am better? It's true, It's true, right, okay.
Speaker 1: So another one to add to our bitcoin lister, and
Speaker 1: the last thing I'm going to say on it. She
Speaker 1: is the first person who has told us that you
Speaker 1: should hold bitcoin because it's a hedge against deflation and inflation.
Speaker 1: No one's ever said that to us before, and obviously
Speaker 1: there is no evidence of that yet early days for bitcoin,
Speaker 1: but it'll be quite interesting if that turned out to
Speaker 1: be true, which I suspect it won't, but you never know.
Speaker 1: You never know, John, thank you so much for your
Speaker 1: criticisms and misery. Thanks film, thanks for listening this week's
Speaker 1: Maren Dog's Money The After Show. This episode was hosted
Speaker 1: by me Myren Subset Web alongside John Stepfak. It was
Speaker 1: produced by Summersaidi and additional editing by Blake Naples