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Speaker 1: It's me Stephanie Flanders, host of Trumpanomics, and we're bringing

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Speaker 1: you a bonus episode this weekend. It's a conversation I

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Speaker 1: had earlier this month on June twelfth at the Founder's

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Speaker 1: Forum event held annually at the Soho Farmhouse in the

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Speaker 1: English Cotswolds. The conversation features Kathy Wood of ARC invest

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Speaker 1: and Editrian Chief of Bloomberg, John Mickelthwaite, and Lizzie Burden,

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Speaker 1: Bloomberg Television's UK correspondent. A lot has happened since we

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Speaker 1: recorded the conversation, but we discuss wider themes around investing

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Speaker 1: that I think are still timely and relevant. Kathy particularly

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Speaker 1: shared her thoughts on China's competitiveness, the UK's missed opportunities,

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Speaker 1: and whether we were looking at the end of US exceptionalism.

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Speaker 2: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 3: I do think there is some rebalancing of portfolios and

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Speaker 3: it makes a lot of sense.

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Speaker 1: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,

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Speaker 1: and welcome to Trumpnomics, the podcast that looks at the

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Speaker 1: economic world of Donald Trump, how he's already shaped the

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Speaker 1: global economy and what on earth is going to happen next,

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Speaker 1: and we're recording this episode from Britain's most high end

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Speaker 1: tech event I like to think of it, Founders Forum.

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Speaker 1: Some of the biggest names in European tech, even some Americans,

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Speaker 1: have been cited here at SOHO Farmhouse, alongside politicians, former politicians,

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Speaker 1: and pioneering investors. But I am always interested in how

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Speaker 1: Trumpanomics is not only changing the global economy, which we

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Speaker 1: talk about a lot on this podcast, but changing the

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Speaker 1: way the world looks to people who make money and

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Speaker 1: manage money. That's going to be the focus today. You know,

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Speaker 1: there's been enormous focus on the trade war headlines, massive

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Speaker 1: volatility in the markets, definitely damaging for the global economy

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Speaker 1: short term. But if you actually step back and think,

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Speaker 1: you know what else has happened in the world as

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Speaker 1: a result of Donald Trump's economic policies since the start

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Speaker 1: of the year, Dollar's gone down quite a lot. The

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Speaker 1: rest of the world's assets have become, i would argue,

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Speaker 1: more attractive relative to the US than they were. And

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Speaker 1: if you'd asked a lot of people in the markets

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Speaker 1: in the last few years whether any of those things

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Speaker 1: were good, they would say yes, they would say they

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Speaker 1: were actually would be healthy things that we quite wanted

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Speaker 1: to see. We'd been hugely dependent on the US for

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Speaker 1: driving returns, for driving global economic growth. The dollar was

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Speaker 1: pretty strong for all that time, was potentially having a

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Speaker 1: distorting effect on many different trades. So I think you

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Speaker 1: can sort of step back from the hysteria and some

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Speaker 1: of the many things that people are worried about to say, Okay,

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Speaker 1: there's some good things here and maybe this is a

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Speaker 1: time where there is going to be more interest, more

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Speaker 1: focus on other markets, and particularly Europe and the UK.

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Speaker 1: That's the question we had for this episode. You know,

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Speaker 1: are we in a sell America world? And I guess

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Speaker 1: related to that, you know, what would it take to

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Speaker 1: buy Europe or you know, heaven forbid by the UK.

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Speaker 1: So to weigh in on this, we have Kathy wood Found,

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Speaker 1: a chief executive officer and chief investment officer of the

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Speaker 1: investment management firm ARC invest, and to be part of

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Speaker 1: the back and forth Lizzie Burden, anchor and UK correspondent

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Speaker 1: for Bloomberg TV, and John Nicklthwaite, editor in chief of Bloomberg.

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Speaker 1: So Kathy, we start with you, and you're well known

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Speaker 1: for always having a strong view not always the same

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Speaker 1: as everyone else's. Should we be selling America?

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Speaker 3: Well, it's very interesting, and especially to be here for

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Speaker 3: the last week effectively and watching Blue of course, and

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Speaker 3: listening to how many people are asking and suggesting that

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Speaker 3: American exceptionalism is done. And I don't know the answer

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Speaker 3: to that, but here is what I will say. The

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Speaker 3: way they validate the observation is the dollar's going down.

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Speaker 3: And I understand that because the dollar is quite impactful

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Speaker 3: as the world's reserve currency.

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Speaker 4: So if you.

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Speaker 3: Look at the long term of the dollar, yes, we're

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Speaker 3: down ten percent, you're to date, But if you look

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Speaker 3: at where we started after eight oh nine, I think

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Speaker 3: we bottomed it seventy on the dollar tradeway to dollar

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Speaker 3: dxy and we're now we're at one hundred, so we're

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Speaker 3: still up forty percent. And if you put it in

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Speaker 3: the context of long term history, we're at the middle

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Speaker 3: to higher end of the range that has been in

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Speaker 3: place for years.

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Speaker 4: So that's the first thing.

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Speaker 3: I don't agree that the dollar is telegraphing that America

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Speaker 3: has lost its way? Do understand why there has been

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Speaker 3: a correction for all the reasons you say, it seems

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Speaker 3: like we're in utter chaos in the US with trade wars,

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Speaker 3: and you know, even closer to us the Trump Musk

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Speaker 3: drama that we've been through. I do think there is

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Speaker 3: some rebalancing of portfolios, and it makes a lot of sense.

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Speaker 3: Our valuation levels in the United States are much higher

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Speaker 3: than elsewhere in the world. But there is another phenomenon

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Speaker 3: that I think in saying that the US was taking

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Speaker 3: all of the oxygen out of the room, that did

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Speaker 3: not take into account that really it was what we

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Speaker 3: ended up calling the mag six. So take Tesla out

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Speaker 3: the MAG six. We have never seen concentration like this before.

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Speaker 3: So yes, there's a rebalancing away from the MAG six.

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Speaker 4: And why is that.

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Speaker 3: It is because, you know, after building cash hoards, because

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Speaker 3: they weren't allowed to make any acquisitions under the last administration,

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Speaker 3: so they didn't need to compete with one another to

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Speaker 3: buy their companies. Now we're seeing a rush and we've

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Speaker 3: heard scale AI for meta platforms at a ten billion

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Speaker 3: dollar valuation, and we are seeing massive capital spending out

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Speaker 3: of these companies. The investor base in those companies they

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Speaker 3: were looking for safety. This doesn't feel as safe anymore,

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Speaker 3: so I think there's a rebalancing. Thank goodness, they're rebalancing

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Speaker 3: towards other exposures to innovation.

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Speaker 1: Just to come back on that a bit, I guess

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Speaker 1: a lot of people be surprised that you're talking about

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Speaker 1: it as a sort of long overdue adjustment correction somewhat

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Speaker 1: in terms of the balance between the US and the

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Speaker 1: rest of the world, but also within the US market

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Speaker 1: where you identify those massive concentration. A lot of people

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Speaker 1: look at the US and say, look, there's a reason

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Speaker 1: it's been doing so well all this time. It's had

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Speaker 1: these underlying competitive advantages that you've seen even come through

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Speaker 1: post COVID in a way that a lot of other

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Speaker 1: countries haven't seen, which are being undermined by Donald Trump's policies.

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Speaker 1: Whether it's that you know, the research infrastructure and the

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Speaker 1: funding for basic research that we've seen slashed, the soft

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Speaker 1: power associated with the SeNSS of educational excellence, the openness

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Speaker 1: to foreign talent. You're untroubled by any of that.

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Speaker 3: So I think there are puts and takes. So again

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Speaker 3: back to the dollar, I actually think the dollar is

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Speaker 3: going to move continue to move up. And the reason

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Speaker 3: I say that's.

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Speaker 1: Mean start to move up, because it's been moving down well, I'm.

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Speaker 3: Going to continue from that seventy right to one hundred,

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Speaker 3: to one hundred and ten back to one hundred. And

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Speaker 3: I think it is because there's a lot of controversy

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Speaker 3: and argument on this point. So returns on invested capital,

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Speaker 3: what will they do in the United States.

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Speaker 4: Relative to the rest of the world.

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Speaker 3: I think they're going to go up, but not one

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Speaker 3: hundred percent sure, because I think other countries have massive

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Speaker 3: opportunities now to capitalize on the biggest wave of innovation

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Speaker 3: in history. Five innovation platforms robotics, energy storage, artificial intelligence,

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Speaker 3: blockchain technology, and then multiomic sequencing in the life science space.

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Speaker 3: And this is open for all, and I love to

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Speaker 3: hear what I've heard here in the UK this week

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Speaker 3: about focus on getting into the game in a big way.

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Speaker 3: Your educational institutions here are incredible. Your AI stripes, I

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Speaker 3: mean deep Mind came out of the UK arm and others.

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Speaker 3: So what I love about this environment is the competition

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Speaker 3: is open.

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Speaker 4: Let's see who wins.

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Speaker 3: But I do know in the United States, why might

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Speaker 3: things get better for us? As I said, I don't

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Speaker 3: think they've been that great over the last four or

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Speaker 3: five years. And the reason is this concentration suggested to

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Speaker 3: me flight to safety cash and Okay, maybe they'll be

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Speaker 3: involved in this AI thing.

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Speaker 4: That's what that was.

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Speaker 3: Now I think there's more risk taking. Why is that

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Speaker 3: Number one deregulation? We've been strangled by regulation that is happening,

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Speaker 3: And the most provocative deregulation that we're seeing right now

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Speaker 3: is in healthcare, which is shocking. It's actually very exciting.

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Speaker 3: And I think tax cuts. Keeping the tax rates down

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Speaker 3: and getting the corporate tax rate effectively down from twenty

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Speaker 3: one percent to maybe fourteen percent by allowing full expensing

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Speaker 3: of capital spending in year one, I think will also

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Speaker 3: be very important. So I think that's good. I also

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Speaker 3: think that competition is really good for America from China,

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Speaker 3: from the UK, and from Europe. So I think this

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Speaker 3: will be a good thing. And we're at our best

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Speaker 3: when we're competing. And I think the last thing is

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Speaker 3: many of the cutbacks you're referring to are involved with

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Speaker 3: the public sector and deficit as a percent of GDP

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Speaker 3: six and a half percent. What they're trying to do

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Speaker 3: is stop the crowding out of the private sector. So

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Speaker 3: let's see what happens.

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Speaker 4: There seem to be fasically.

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Speaker 5: I think there's a lot of faith in those companies

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Speaker 5: that aren't in the Mag six or Mag seven. And

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Speaker 5: I just wondered, what kind of names are they? What

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Speaker 5: are the because everyone's made so much money historically by

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Speaker 5: being with matter and whatever. Now suddenly, if you're right

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Speaker 5: and those are being sidelined a little, what are the

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Speaker 5: sort of names that you would you would see in

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Speaker 5: the new wave of the rec innovation.

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Speaker 3: Yes, well, one of the things that happened during the

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Speaker 3: last four years is we almost lost our crypto and

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Speaker 3: we should start saying digital assets a little bit more

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Speaker 3: to make it a little more understandable but to the

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Speaker 3: rest of the world, and it's coming back now. So

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Speaker 3: in the top ten of our flagship AARKK, we have

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Speaker 3: both Coinbase and Circle. So digital wallets I think are

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Speaker 3: going to be a huge opportunity because this digital asset

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Speaker 3: revolution has just started. So definitely crypto is a big wave.

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Speaker 3: Our highest position is Tesla. We think Tesla is the

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Speaker 3: largest AI project on Earth, and not just because of robotaxis,

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Speaker 3: but because of humanoid robots. And then I would point

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Speaker 3: to Tempa say I we think this could become the

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Speaker 3: hell care information backbone of the United States. And then

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Speaker 3: Chrisper Therapeutics, which actually technically is headquartered in Switzerland, is

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Speaker 3: now deriving revenue. Many people think what I'm about to

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Speaker 3: say is going to happen in five years. It's happening now.

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Speaker 3: It is deriving revenue from curing sickle cell disease and

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Speaker 3: beta valacimia.

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Speaker 2: Let's just come yes, why you're talking about crypto. I'm

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Speaker 2: fascinating what your view is because I wondered when the

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Speaker 2: president is favoring crypto, is he hurting the dollar.

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Speaker 4: I actually think.

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Speaker 3: That bitcoin in particular will discipline our monetary authorities a

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Speaker 3: little a little bit like gold did during Chairman Vulkars

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Speaker 3: and Chairman Greenspands and maybe even Bernanke's time. But what's

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Speaker 3: also interesting is if you look at stable coins, which

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Speaker 3: are really the gateway or the on ramp into the

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Speaker 3: decentralized finance world or the internet financial system.

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Speaker 4: What are they backed by.

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Speaker 3: They're backed one percent by treasury securities in the case

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Speaker 3: of Circle, largely by treasury securities at Tether as well.

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Speaker 3: So that's a demand for dollar based assets that most

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Speaker 3: people didn't expect to be there. It's about two hundred

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Speaker 3: and fifty billion dollars now and it's just started.

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Speaker 1: So let's get onto the Europe side of this, because,

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Speaker 1: in fact, Kathy mentioned that there's a potential for some

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Speaker 1: competition in some of these highly innovative fields and growing areas.

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Speaker 1: Do you feel all the UK has potential to do that.

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Speaker 5: I think what has been noticeable so far is you

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Speaker 5: could see to some extent of America from a kind

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Speaker 5: of geoeconomic point of view, almost doing what you would

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Speaker 5: not want to do what it used to do to

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Speaker 5: other countries, where you sanction countries like Iran by stopping

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Speaker 5: them being able to import things, stopping people going there.

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Speaker 5: America is now to some extent doing it to itself

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Speaker 5: in the same way as Britain did with Brexit. If

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Speaker 5: you sanction yourself normally long term, that's not a great thing.

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Speaker 5: The interesting thing I think to me is that the

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Speaker 5: fact that Europe has not kind of picked up that challenge.

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Speaker 5: If you look at something like university graduates, for instance,

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Speaker 5: you would imagine at the moment the cream of graduates,

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Speaker 5: probably people in this audience, either them or their children.

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Speaker 5: Everyone wants to go to American universities. Stephanie Iron guitar

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Speaker 5: last week, suddenly everything is changed. People are scared of that.

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Speaker 5: And yet what's rather remarkable is if you look at

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Speaker 5: the European countries, you look at Britain, there hasn't been

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Speaker 5: a thing saying, for God's sake, come here, not in

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Speaker 5: the same kind of public way that you might expect

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Speaker 5: slightly more from Canada. And I think that's true of

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Speaker 5: various other things, especially within the European Union. You've still

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Speaker 5: got a variety of people arguing about whether you have

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Speaker 5: a bank union, which is most people would expect, is

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Speaker 5: the bare minimum. These are all things that kind of

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Speaker 5: people spent fifteen twenty years arguing about within Europe. So

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Speaker 5: I think people like me expected there to be a

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Speaker 5: wake up call to Europe, but it hasn't so far.

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Speaker 5: Outside military spending, it hasn't really come through.

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Speaker 1: And you spent quite a lot of time as a

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Speaker 1: UK correspondent, you're I see you often standing in ten downing.

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Speaker 4: Streets in the rain.

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Speaker 1: This week and this week, you know, there's been these

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Speaker 1: kind of two quite distinctive kind of big, big events.

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Speaker 1: There's US hosting these trade talks that everyone was paying

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Speaker 1: attention to between the US and China, and then the

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Speaker 1: Chancellor having a big day yesterday with a spending review.

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Speaker 1: This government would say they're starting to address long for

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Speaker 1: festering structural problems, whether it's planning and things. They're also

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Speaker 1: staying quite a lot of at least there's been lots

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Speaker 1: of good music about investing in tech, infrastructure and just

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Speaker 1: energy capacity. Probably not enough. Do you feel when you're

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Speaker 1: sort of the does this feel like a country that's

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Speaker 1: kind of getting its act together on some.

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Speaker 4: Of these fronts?

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Speaker 3: Yeah?

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Speaker 2: Is it nice mood music or is it just nice noises?

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Speaker 2: When you have the US China deal to go back

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Speaker 2: to that not deal, but you know it's not a decoupling,

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Speaker 2: but they've made up for now. There's always the chance

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Speaker 2: that they don't get on again and that this only

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Speaker 2: lasts for a few weeks. So we put that to

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Speaker 2: one side. Then we look at the UK. We're the

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Speaker 2: Prime Minister on day one of London Tech Week announcing

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Speaker 2: that billion pounds of spend on compute. Nick Claire gohlho

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Speaker 2: are on this stage just saying to me Microsoft spends

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Speaker 2: eighty billion dollars of the same thing in one fiscal year.

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Speaker 2: It's kind of chicken feed. When you look at the

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Speaker 2: ideas that are coming out from the government. In terms

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Speaker 2: of growth, yes, they're fiscally squeezed, but you've got a

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Speaker 2: lot of people saying they spent fourteen years in opposition,

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Speaker 2: could they not come up with anything more radical to

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Speaker 2: boost the economy, to get that growth, to get that investment.

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Speaker 2: So I think that there's a sense of disapp ointment actually,

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Speaker 2: but there is an effort to do the right thing.

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Speaker 2: I mean, kissed Armor, the globe trotting deal maker, first

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Speaker 2: in line actually at the White House to get this

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Speaker 2: trade packed with Donald Trump. But is it meaningful?

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Speaker 1: I mean, Kathy, Yeah, you can see this that we have.

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Speaker 1: You know, we're very good at laying into the US.

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Speaker 1: But then actually we're also quite as some of said,

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Speaker 1: we feel sort of excitement about our own failings as well.

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Speaker 1: We like to we're very happy to dwell on our

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Speaker 1: bad weather and our bad failings, even as we point

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Speaker 1: hold in the Trump policies. So what was your what's

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Speaker 1: your response to this sort.

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Speaker 5: Of wave of negative waves of negativity.

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Speaker 3: Well, the first thing in terms of Europe, and then

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Speaker 3: we'll do I'll do UK, but Europe past. I don't

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Speaker 3: know if you've pronounced it Meeka or micah here in

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Speaker 3: you know, adding some clarity to crypto or digital assets regulation.

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Speaker 3: So I thought that was a very interesting and important

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Speaker 3: step in this world which is going to transform the

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Speaker 3: financial system.

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Speaker 4: So that's good.

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Speaker 3: And I also do believe that half of the solution

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Speaker 3: is understanding the problem. And as I go around Europe,

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Speaker 3: which I think regulation is a problem there.

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Speaker 5: Just come back on that. Then yes, yes, you've like

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Speaker 5: Stephanie me, this is much younger to be wandering around

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Speaker 5: seeing European prime ministers for twenty years. If you drop

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Speaker 5: a list of the problems over regulation, no integration. They've

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Speaker 5: understood the problem for years. They've just been totally unable

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Speaker 5: to work out a way to deal with it and

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Speaker 5: get elected.

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Speaker 3: And it is why a company like palent here has

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Speaker 3: said we're pulling our employees out of Europe because the

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Speaker 3: demand elsewhere is so great and they're tied up in knots,

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Speaker 3: you know, regulatory knots, and you know it's just not

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Speaker 3: going to productive. I do think, however, this move towards

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Speaker 3: increased defense spending, which involves massive technology, is going to

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Speaker 3: create a wave of innovation out of necessity, and I

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Speaker 3: think that's a very good thing and they're all united

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Speaker 3: on that, and I think Germany agreeing to what is

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Speaker 3: it three percent of GDP very important from a tech

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Speaker 3: point of view, which is my lens. In terms of

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Speaker 3: the UK, I must say I watched serendipitously the interview

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Speaker 3: between Prime Minister Starmer and Jensen Wong, and I found

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Speaker 3: it very interesting the way that your Prime minister started

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Speaker 3: with healthcare, which in the United States, you know, most

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Speaker 3: vcs have found that a very difficult place. Here you're

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Speaker 3: opening it up in.

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Speaker 4: A very provocative way.

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Speaker 3: And NHS is known for being progressed in terms of

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Speaker 3: longitudinal data, and data is the name of the game

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Speaker 3: in AI, so I am more optimistic.

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Speaker 1: I did want to ask you. I've just got back

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Speaker 1: from Hong Kong and I talked to quite a lot

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Speaker 1: of investors and others, and it sort of strengthened something

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Speaker 1: that I'd been thinking over the previous few months, which

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Speaker 1: is when you ask people, and I did that. You

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Speaker 1: ask people what's the thing that's most surprised them in

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Speaker 1: the last few months or the last six months. And actually,

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Speaker 1: particularly there, it is not anything that Donald Trump has done.

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Speaker 1: It's what's happened in China. It's the breakthroughs, whether it's

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Speaker 1: deep sea or and the things underpinning that, and the

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Speaker 1: things that have followed in the wake of deep seek.

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Speaker 1: It's the breakthroughs in electric cars, the pace at which

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Speaker 1: under the surface Chinese key industries have developed. And it

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Speaker 1: sort of feels like the subtext almost everything that many

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Speaker 1: columns of many pieces being written about China, where on

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Speaker 1: any subject, the subtext is China's going to win.

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Speaker 3: So it's interesting. We spend a lot of time. I

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Speaker 3: think the open source movement in China. Open source software

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Speaker 3: movement is very powerful now examining it though not though

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Speaker 3: I think it's great for competition around the world.

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Speaker 4: We're using some of the deep seat breakthroughs.

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Speaker 3: They distilled from our models, you know, we complimented them

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Speaker 3: very creative, so that's good. We can use those models

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Speaker 3: and we're doing some open source models as well.

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Speaker 4: In China, nobody wants to pay.

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Speaker 3: For anything, you know. I got a question from one

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Speaker 3: of the LM providers over there, CEOs. He said, how

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Speaker 3: is it that people are willing to pay twenty dollars

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Speaker 3: a month? I said, because they want to be able

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Speaker 3: to use it more instead of the limited time for free.

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Speaker 3: He says people won't pay here, And I'm thinking to myself,

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Speaker 3: you know, the question for all of us is commoditization.

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Speaker 3: Are they going to commoditize everything? Look at what's going

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Speaker 3: on with EV's. Thank goodness, Tesla is not an EV manufacturer.

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Speaker 3: People say that I just told you what I think

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Speaker 3: it is, but I know I asked. I did a

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Speaker 3: podcast there in Hong Kong just a couple of months ago,

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Speaker 3: and I said, okay, you have to use some of

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Speaker 3: these productivity gains. This is a a co CEO of

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Speaker 3: APEC for a large bank, actually it was HSBC. I

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Speaker 3: can say that here, right, and you've got to turn

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Speaker 3: around that productivity and we and so do we?

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Speaker 4: What do you need to do with those productivity gains?

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Speaker 3: You need to raise compensation because you need to drive

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Speaker 3: your consumer economy.

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Speaker 4: What do we need to do in the United States?

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Speaker 3: It compete more effectively against Japan, I mean China is

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Speaker 3: we need to use it to cut prices. That's why

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Speaker 3: we think there's going to be a deflationary pull in

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Speaker 3: the US economy more than people expect.

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Speaker 1: Right now, All right, on that bombshell, we have covered

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Speaker 1: a lot of ground. We haven't done justice to any

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Speaker 1: of it, but I appreciate the Lizzie and John contributing.

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Speaker 1: Thanks for listening to Trump nomics from Bloomberg. It was

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Speaker 1: hosted by me Stephanie Flanders. I was joined by Ark

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Speaker 1: invest CEO Kathy Wood, Bloomberg TV UK correspondent Lizzie Burden,

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Speaker 1: and Bloomberg Editor in chief John Wick of Wake with

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Speaker 1: special thanks to the team at founders Forum.

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Speaker 4: Thank you, thank you stuff