Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: You are very pleased to have Kathy would for her
Speaker 2: first interview since the election of Donald Trump earlier this week.
Speaker 2: Kathy shares of your flagship fund, the Archannivation ETF, surch
Speaker 2: more than eight percent on Wednesday. It was the best
Speaker 2: day in more than a year. Part of the risk
Speaker 2: Entrade that we saw on optimism of a second term
Speaker 2: for Donald Trump in the White House. And that's where
Speaker 2: I want to start with you, because when you were
Speaker 2: back on with us in October, you indicated, without actually
Speaker 2: saying the former president's name, that you preferred a President
Speaker 2: Trump over President Harris strictly from the standpoint of the
Speaker 2: candidate who you saw would ease the regulatory environment. So
Speaker 2: here we are. What does another Trump administration mean for
Speaker 2: you and the companies that are convesting.
Speaker 3: Okay, well, thank you for having me on your show. Tim, Yes,
Speaker 3: regulation critical. I think the regulations that have been creeping
Speaker 3: into the system. Actually they started to creep in, they've
Speaker 3: just flooded the system and really gummed it up. So
Speaker 3: the first the biggest regulatory issues have been around the SEC,
Speaker 3: especially when it comes to digital assets or crypto legislation
Speaker 3: and the FTC as it relates to M and A activity.
Speaker 3: I think both there are going to be big changes there,
Speaker 3: and that is going to be the beginning. I think
Speaker 3: of a lot of regulatory changes. In his first administration,
Speaker 3: President Trump basically said for every regulation you want to
Speaker 3: introduce anyone in my administration, you must get rid of too.
Speaker 3: I think it's going to be maybe more dramatic than
Speaker 3: that this time around. And I also think having Elon Musk,
Speaker 3: who I think today announced that he'd like to name
Speaker 3: a new department, the Department of Government Efficiency. Get that,
Speaker 3: doge doje he. I think he's going to come into
Speaker 3: the administration. I don't think he'll be a formal part
Speaker 3: of the administration. He'll be more in an oversight role
Speaker 3: as as I understand.
Speaker 2: Yeah, well, hey, Kathy, I want to jump in here
Speaker 2: because you mentioned a few things that I want to
Speaker 2: follow up on. One is Elon Musk. Have you talked
Speaker 2: to Elon since the election?
Speaker 3: No, I have not talked to him since the election.
Speaker 3: I did see on X that he was part of
Speaker 3: the family as they were taking the picture around President
Speaker 3: Trump's acceptance speech, So you know, I know he's obviously
Speaker 3: had a tremendous impact on the election. I think he
Speaker 3: had X made a big difference and his ideas around
Speaker 3: government efficiency, which will revolve importantly around technology. Artificial intelligence
Speaker 3: is doing wonders for the most bureaucratic organizations out there.
Speaker 3: We know from Pallunteer that it is having a tremendous
Speaker 3: impact on insurance companies, underwriting process timelines dropping from two
Speaker 3: weeks to three hours. And even in the military Maven.
Speaker 3: Pallenteers working on Maven with the DoD for targeting the enemy.
Speaker 3: They have shrunk that department. They don't need as many people.
Speaker 3: They've gone from twenty to twenty people, which it's pretty
Speaker 3: amazing what's going on, and I think we'll see a
Speaker 3: lot of attrition. Any employee leaving the government probably will
Speaker 3: not be replaced. I don't think he'll yeah, I just
Speaker 3: pick up. I don't think he'll do two trillion dollars
Speaker 3: in government spending savings in one year that might be
Speaker 3: a five to ten year and I think between technology
Speaker 3: and attrition and lower regulations, maybe the abolition of certain
Speaker 3: departments that they'll go a long way.
Speaker 2: So you don't see him serving a formal role, but
Speaker 2: still overseeing some sort of department of government efficiency in
Speaker 2: an informal way. Help me understand what you see him
Speaker 2: doing and whether or not it could be some sort
Speaker 2: of threat to you know, he's a very busy man.
Speaker 3: Yes, he's an unbelievable He's the inventor of our age.
Speaker 3: I think I said that in two thousand and fifteen
Speaker 3: for the first time when I was on your show
Speaker 3: with Carol Masser. At the time, he is the inventor
Speaker 3: of our age, and he comes into a problem, assesses
Speaker 3: it with first principles thinking, doesn't care how things have
Speaker 3: been done, and comes back with, you know, ingenious solutions
Speaker 3: to big problems, whether it's autonomous mobility in the autonomous
Speaker 3: taxi space.
Speaker 1: Or in.
Speaker 3: The healthcare space, neuralink, in the social network space X
Speaker 3: in AI XAI, and a lot of people say and
Speaker 3: SpaceX of course, the entire exploration going to Mars. I
Speaker 3: think a lot of people are I can't believe he
Speaker 3: can do this. But again, he cuts to the quick
Speaker 3: first principles thinking and surrounds himself with brilliant people, people
Speaker 3: who really want to solve the hardest problems in the world.
Speaker 3: And that's part of the secret to his success. Very
Speaker 3: high standards and people who want to be held accountable
Speaker 3: to very high standards and want to really transform the world.
Speaker 2: Hey, we're going to get back to Elon and specifically
Speaker 2: Tesla in a few minutes, but I want to go
Speaker 2: back to something that you mentioned at the top of
Speaker 2: our interview, Kathy, and that's the idea of some of
Speaker 2: the regulatory challenges that you said have cropped up over
Speaker 2: the last couple of years and during the Biden administration,
Speaker 2: specifically with regard to the FTC and the SEC not
Speaker 2: being present. In a second Trump administration, how do you
Speaker 2: think the Trump regime will approach financial regulation given that
Speaker 2: he's vound to replace SEC chair Gary Gensler. What does
Speaker 2: that look like?
Speaker 3: Well, I think I think at first as as it
Speaker 3: relates to crypto or digital asset regulation, they're going to
Speaker 3: replace Gary Gensler with someone who is much more open minded,
Speaker 3: I would say, and will let the legislative process, work
Speaker 3: go to work, and the SEC is supposed to regulate
Speaker 3: and force laws. They're not supposed to create laws by enforcement,
Speaker 3: which is what Gary Gensler was doing. So I think
Speaker 3: that's going to be important. I also think if you
Speaker 3: look at the public equity markets, I think the number
Speaker 3: of public companies out there right now has been cut
Speaker 3: in half in the last fifteen twenty years. The regulatory
Speaker 3: nightmare of being a public company has kept people, has
Speaker 3: kept leaders of companies basically saying if I don't have
Speaker 3: to go public, I am not going public. And so
Speaker 3: I think we're going to see a lot more work
Speaker 3: in that regard to give you know, the average investor
Speaker 3: a shot at some of these moonshots. So I think
Speaker 3: that's going to become very important. As far as the FTC,
Speaker 3: you know, the the anti trust has has gone way
Speaker 3: too far. You know, they they were denying mergers and
Speaker 3: acquisitions that really they the companies were tangential to one another,
Speaker 3: they weren't even really in the same market. So we're
Speaker 3: seeing and and yet at the time, at the same time,
Speaker 3: we've seen these megatech companies grow into you know, massive
Speaker 3: organizations and dominating their markets. So they were denying mergers
Speaker 3: and acquisitions for you know, think about Jet Blue and
Speaker 3: Spirit Airlines. That was ridiculous. That was in the same industry,
Speaker 3: but one is going bankrupt now because because they wouldn't
Speaker 3: allow that m and A. They were just dogmatic about
Speaker 3: it in in, you know, and didn't show to us
Speaker 3: at least any common sense.
Speaker 2: So, you know, so let's jump in. I just want
Speaker 2: to jump in because we don't have a ton of
Speaker 2: time with you, and I want to make sure we
Speaker 2: get to a lot, Kathy, So forgive me please. You
Speaker 2: also mentioned last time you're on with us, you weren't
Speaker 2: wild about the idea of tariffs, and you know, since
Speaker 2: then President Trump said that tariff is the most beautiful
Speaker 2: word in the dictionary. Do you think he will follow
Speaker 2: through with his threat of broad tariffs? And how are
Speaker 2: you preparing and changing your investment style given the threat
Speaker 2: of tariffs.
Speaker 3: Yeah, I'd love to talk about that because we've got
Speaker 3: more information. I think the way the president is looking
Speaker 3: at this, that is, if he puts in place tariffs,
Speaker 3: the other side of that will be income tax and
Speaker 3: corporate tax cuts. And if you think about it, this
Speaker 3: is how America started, you know, President George Washington. We
Speaker 3: had no income tax back then. All the taxes were
Speaker 3: in the form of tariffs. I do think that they're
Speaker 3: not going to be, you know, crazy tariffs. They're going
Speaker 3: to be much more thoughtful and really focused away from
Speaker 3: our free trade agreement partners and towards those countries that
Speaker 3: have not been really letting our companies play on a
Speaker 3: level playing field within their countries. So I think there's
Speaker 3: going to be a lot of negotiation around that really
Speaker 3: really helping us. But I do think tax cuts are
Speaker 3: tax personal and corporate tax cuts are going to be
Speaker 3: much more important than tariffs in terms in terms of
Speaker 3: the growth engine that this economy needs. I'll comment on
Speaker 3: just a couple of other things. I know he wants
Speaker 3: a week dollar, but if he puts in place the
Speaker 3: deregulation and the tax cuts that we expect the dollars
Speaker 3: probably going up. And this reminds me very much of
Speaker 3: the early Reagan years. It's fascinating what's going on. Except
Speaker 3: the first couple of years of the Reagan administration he
Speaker 3: had to deal with back to back recessions because Vulker
Speaker 3: was raising interest rates to fifteen percent plus. We've done that.
Speaker 3: Trump does not have to face that we think that
Speaker 3: the FED went too far. I think the Fed today
Speaker 3: even says it's going to continue to unwind a restrictive
Speaker 3: monetary policy. And I think it's important too, because what
Speaker 3: we expect now is there will be a lot of
Speaker 3: delayed activity as consumers and businesses trying to figure out, Okay,
Speaker 3: how lower tax is going and how is the world
Speaker 3: going to change? Am I going to get a better deal?
Speaker 3: So we're going to need lower interest rates. However, if
Speaker 3: we get the growth beyond that that tax cuts and
Speaker 3: these other measures are going to cause, the dollar will
Speaker 3: probably go up, and so I think that that will
Speaker 3: be a surprise. But it's an anti inflationary force as well,
Speaker 3: and we're seeing commodities react to the dollar going up
Speaker 3: now in anticipation of these interesting policies. And then I'd
Speaker 3: love to just say one other thing. A lot of
Speaker 3: people talk about the deficit, and it is a big
Speaker 3: deficit in the middle of it's a rolling recession. But
Speaker 3: this deficit is worse than the worst deficit that Reagan
Speaker 3: faced at five point five percent of GDP. How did
Speaker 3: he get out of that? And Clinton following beyond him
Speaker 3: more through growth? Not through tax increases, and you can
Speaker 3: add on top of that government spending restraint. So you know,
Speaker 3: this is this is going to be extremely healthy and
Speaker 3: very important. I think for the stock market. The stock
Speaker 3: market has gone through a period here of great concentration
Speaker 3: towards a few stocks, and now we think, and we've
Speaker 3: seen it in the last few days, there's going to
Speaker 3: be a broadening out. We're very excited about something.
Speaker 2: Well, we'll talk about that in just a minute. If
Speaker 2: you're just now joining us, we're joined by Kathy Woods.
Speaker 2: She's a founder, CEO, and CIO of ARC and Vest.
Speaker 2: She joins us from Saint Petersburg, Florida. Kathy, I want
Speaker 2: to talk one more question on regulation and then we'll
Speaker 2: get to a little more on Tesla and Elon and
Speaker 2: you know, some of the big themes that you're seeing.
Speaker 2: I'm wondering about from you, what you think, specifically in
Speaker 2: terms of financial assets is being held back by regulators,
Speaker 2: Like what financial assets do you think should be opened
Speaker 2: up to the trading masses that haven't been.
Speaker 3: Well, it's interesting. We launched a venture fund and we
Speaker 3: put it in we put it in an interval fund structure,
Speaker 3: which is regulated by the sec and we've had access
Speaker 3: to open AI and thropic data, Bricks, SpaceX, Epic Discord,
Speaker 3: lots of companies that young people who don't need the
Speaker 3: income or net worth thresholds that venture funds require, they
Speaker 3: can get into our venture fund because it's in the
Speaker 3: interval fund structure. I think we're going to see a
Speaker 3: much more of a loosening up. You know why we
Speaker 3: can offer our fund to retail investors for as little
Speaker 3: as five hundred dollars, it's because we're not taking a
Speaker 3: carry we're not charging carried interests twenty percent of profit.
Speaker 3: We do charge a higher fee than you'd get with
Speaker 3: public companies. And I think we're going to see the
Speaker 3: democratization increasingly of private companies as well. I think this
Speaker 3: administration will advocate for that, and we'll and will lower regulations,
Speaker 3: whether it's Sarbine Oxley, but regulations that have you know,
Speaker 3: tied companies and knots. It's very expensive to be a
Speaker 3: public company now, and so for any company as the
Speaker 3: digital world and the physical world converge, we think that's
Speaker 3: a big theme going ahead. We're going to need the
Speaker 3: kind of caval raising that the public markets can offer
Speaker 3: over a long period of time, so I think more
Speaker 3: and more of that's going to happen.
Speaker 2: So, speaking of the digital and physical worlds converging, we
Speaker 2: got to talk crypto because bit coin at a new
Speaker 2: record close to seventy seven thousand dollars per bitcoin. Update
Speaker 2: your prediction for us of where you think bitcoin will
Speaker 2: go and when? Now that Trump will serve another.
Speaker 3: Term, Yes, he's going to be very bitcoin friendly for sure,
Speaker 3: including building a strategic reserve of bitcoin. Senator Lummis has
Speaker 3: been at the forefront of advocating for that, so very
Speaker 3: exciting there. Our price target hasn't changed, except perhaps we're
Speaker 3: leaning more towards our bowl case. Our base case is
Speaker 3: a million dollars by twenty thirty and if you go
Speaker 3: into Big Ideas Big Ideas from twenty twenty three in
Speaker 3: the bitcoinon section, you'll see how we get to that
Speaker 3: million dollar, the building blocks of it. You know, it's
Speaker 3: a substitute for gold, so it's digital gold. It is
Speaker 3: going to be used as a new asset class. It
Speaker 3: is a new asset class for institutional investors, a very
Speaker 3: big idea starting with the spot Bitcoin ETFs launched earlier
Speaker 3: this year. And of course we're very gratified that ARKB
Speaker 3: was one of them, and it's going to be used
Speaker 3: as an insurance policy, both in emerging markets and in
Speaker 3: developed markets against confiscation of wealth, whether that means outright
Speaker 3: confiscation of wealth by corruption and so forth, perhaps in
Speaker 3: emerging markets, or by inflation. Inflation is a highly regressive text. Now,
Speaker 3: we don't think inflation is going to be a problem
Speaker 3: with this administration. In fact, we think that the floodgates
Speaker 3: of innovation are going to open up and that we're
Speaker 3: moving into a world tending towards deflation, but good deflation.
Speaker 3: Technologically enabled in innovation is deflationary. So I think many
Speaker 3: people are going to be really surprised at how low
Speaker 3: inflation goes in the years ahead.
Speaker 2: Kathy, I want to talk performance and get an understanding
Speaker 2: for where you see the future, because you've seen outflows
Speaker 2: every month in the ARC Innovation ETF this year except
Speaker 2: for this month, it's a year where you're underperforming the
Speaker 2: S and P five hundred by a wide margin. The
Speaker 2: RC Innovation ETF it's about flat, the S and P
Speaker 2: five hundred up more than twenty five percent. What's your
Speaker 2: message to investors who've lost money with you? And do
Speaker 2: you worry that performance will lead to an extended period
Speaker 2: where you won't attract money.
Speaker 3: Well, I think, as I've just described, innovation had quite
Speaker 3: a few obstacles during the last few years, so that
Speaker 3: speaks for itself. If you look at our performance, let's
Speaker 3: break it down. You look at our ARKW, which is
Speaker 3: our next generation Internet fund, very focused on AI and
Speaker 3: digital assets. It's up more more than the market this year,
Speaker 3: more than I think it's twenty seven to twenty eight percent.
Speaker 3: If you look at ARKG, which is our Genomic Revolution portfolio,
Speaker 3: it is down twenty two percent. And a big problem
Speaker 3: for that portfolio has been the lack of M and A.
Speaker 3: You know, the absence of M and A. This this group,
Speaker 3: if any, needs those liquidity events because big companies, big
Speaker 3: pharma companies, need the innovation that is coming out of
Speaker 3: the smaller company companies. So we think that's going to change.
Speaker 3: We also if you listen to now I don't know,
Speaker 3: I don't think he'll be FDA commissioner, but Robert Kennedy,
Speaker 3: you know he wants to clean up corruption in healthcare.
Speaker 3: You know, they're a huge lobbying lobbying organizations for pharma.
Speaker 3: They are not. They are not out there advocating for
Speaker 3: the innovators. I think the most important thing he said
Speaker 3: is this, we want to go back to the rich
Speaker 3: tradition of the gold standard of evidenced, evidence based science
Speaker 3: in terms of healthcare, and the tools are here for preventative, predictive, personalized,
Speaker 3: and participatory behavior healthcare. So I think healthcare that the
Speaker 3: convergence of healthcare sequencing technologies, DNA, RNA proteins sequencing technologies,
Speaker 3: artificial intelligence, and Crisper gene.
Speaker 2: So I want to jump in here, and I'm glad
Speaker 2: you brought in I'm glad you brought up RFK because
Speaker 2: I had a question about that to you, Kathy, And
Speaker 2: I'm afraid it's probably our last one, just because we're
Speaker 2: running out of time. He's been a vaccine skeptic. You
Speaker 2: mentioned RNA technology, mRNA technology, what the COVID vaccines, the
Speaker 2: Newish COVID vaccines were based on. Are you concerned that
Speaker 2: how he views public health is going to affect innovation
Speaker 2: happening in the space.
Speaker 3: No, I'm not. If you read what he said very recently,
Speaker 3: he sounds pretty libertarian about vaccinations. You know, there are
Speaker 3: some people who really feel it's important, and others who don't,
Speaker 3: and you live and let live. But one thing I'd
Speaker 3: like to say is this past administration has been a
Speaker 3: menace to what we're calling the multiomics revolution, which is
Speaker 3: going to be the most profound application of artificial intelligence
Speaker 3: and new technologies in history, going to cure disease. And
Speaker 3: yet as I look at the traditional analyst response to
Speaker 3: these drugs like Chrisper Therapeutics and Intellia that are starting
Speaker 3: to cure disease, and how they think that's bad business
Speaker 3: because they don't have an annuity keeping someone keeping someone's
Speaker 3: symptoms under control. That's an annuity. They prefer that to
Speaker 3: a cure. In our latest Monday newsletter, it's called Disrupt
Speaker 3: arc Disrupt you can find it on Twitter. You'll see
Speaker 3: that we believe that curing disease is going to make
Speaker 3: the patents of the companies with those cures two to
Speaker 3: twenty times more valuable than those other kinds. So I
Speaker 3: think there's a complete misunderstanding of the dawn of the
Speaker 3: new health age. And I am so excited, so excited
Speaker 3: that the Trump administration is going to bring this new
Speaker 3: world to life for us.
Speaker 2: Kathy, would we always want more time with you. Thank
Speaker 2: you so much for spending a big part of your
Speaker 2: afternoon with us. We do appreciate it. That's Kathy Wood,
Speaker 2: the founder, CEO, and CIO over at Arcinvest, joining us
Speaker 2: from Saint Petersburg, Florida.
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