Ark Invest's Wood Committed to Bitcoin

are you doing very well? It's been a very challenging few uh while I should say twenty months, but uh, you know, we're looking at our portfolios right now and um, we are back to where we were in terms of calling them deep value portfolios if you give us a five year investment time horizon, I mean, we're seeing incredible values for the kinds of growth, kind of growth that our portfolios are going to deliver. You know where I want to go. I gotta talk to you about the

crypto space. You Um, you know, it's it's a world you know really well. We think about the ft X collapse, the bankruptcy proceedings today, the coming undone of Sam Makeman Free. You know you have been buying into some of the different names in the cryptos based coin Base, gray scale bitcoin trust. Why should investors trust crypto? Why do you

trust crypto at this point? Yes, if you look at the block chains, let's let's use UH the Bitcoin blockchain and Ethereum, what you'll find is they have the infrastructure. The technology has not skipped a beat throughout this entire crisis. In fact, the hash rate, Bitcoin's hash rate is at an all time high, and that is a real indication of the security of the network. On Ethereum, we're seeing the total value uh staked at twenty four billion, that

is an all time high. So we think the infrastructure is working beautifully. UM. As far as coin Base, this is an onshore regulated UH company and wanting to help shape regulations. Brian Armstrong, the CEO, and Alicia uh CFO have been leaning in into what's going on right now and saying, okay, regulators, we need more clarity in order to protect to protect investors, those who wanted to get involved with a certain types of crypto were forced off

shore and look at what's happened. So UM, I I think that coin Base is going to come out here looking very very strong. It just lost a very big competitor in f t X. Well what is the market missing though, because you know, that could be one narrative, Cathy. But at the same time, we haven't exactly seen shares of coin based rallies since FTX is collapsed. Do you think to you that represents potentially broader concern about just people's interest in crypto following f x's collapse. No, I

think it's more fear. I think uh many people say, we don't know what we don't know? Uh and uh so what we do is we step back, you know, put a little perspective into the situation here and what do we have. So the entire crypto asset ecosystem is an eight hundred billion dollar ecosystem. Apple is three times larger in terms of market cap. So that's some perspective. Many people are saying, well, okay, is this another lehman? Could this be uh? You know, could could we see

the domino effect here? I've just given you one reason why the banking system back in oh eight oh nine trillions and trillions of dollars and it was the global banking system. Right now we have it seems from f d X five to ten billion dollars in creditors. If as uh as f t X has filed bankruptcy, they will be making claims. If you look at Lehman, that was one point to trillion dollars in claims. So again

just trying to put perspective, this is fraud. This is made off, made off with sixty four billion dollars in claims. Again f t X five to ten billion. Now, I know that crypto assets are you know, they attract a lot of attention. This is um you know, the three revolutions we talk about all the time. You know, a new monetary system in terms of the first global private meaning not government controlled, digital rules based monetary system. That's Bitcoin. A very big idea. Defy is a very big idea.

And uh, while that has been thrown into question in terms of you know, shifting from one exchange to another, we've had a lot of shifting around. But I think, uh, I think Defy in terms of taking the middlemen out of financial services and and making the ecosystem much more transparent with much less counterparty risk, is going to take off.

It will continue to move forward. We believe they think one of the things we're trying to figure out is how long that we think the industry will be feeling the ramifications of f t X. I mean, one thing we've learned right with SPF and f t X is what we didn't know. So how long do you think this goes on? Because you obviously have faith in it, You've been buying into it, and you think this is a good entry point at this point, whether it's gray Scale, whether it's coin base, But um, how long do you

think we continue to feel the effect? And do you think there's more contagion to be felt? Um? Well, we always look for the whale, uh in in a situation like this, and if if there was a whale out there, it was f t X and and Sam Bankman freed, you know, King of the hill. Uh So I think we found the whale and uh you know, I'm sure they are going there's going to be more fallout, but we see how big the whale is. And yes, a lot of people have lost a lot of money around

the crypto acid ecosystem, uh losing value here. But if we're right on the underlying technology and the underlying roles that bitcoin and ether ethereum are going to play in this new world. Uh. Then I think we're going to recover pretty quickly. You mentioned that f t X was a quote fraud. It's no lehman or no made off. Give us an understanding of what your interactions more like made off. Oh my gosh, so we'll give us. Give us an understanding of what your interactions were with Sam

Bankman Freed before this followed. And have you spoken to him, because I know you were at Crypto Bahamas along with many other people earlier this year, the f t X Salt conference. Yes, I had a zoom my team and I had a zoom with Sam before that conference. I think they wanted to have us represented at the conference. Uh, and so I did. I did give a presentation there or I was on a panel. Um. But other than that one phone call just to set up, I have

never talked to him. Um. And you know, he by the end of the phone call seemed to be distracted by whatever else he was doing. So that was my one exposure to him. Um. And you know, I think the thing that is shocking is how many people were very close to him, and one would have presumed looked at all of the documents and got a sense of the books Uh, the fact that so many people were

completely fooled um is quite shocking. And you know, I think he had this aura around him or something that caused people to to to ask fewer questions than might otherwise have been the case. It's very hard to understand. Do you worry it all about as you buy into Gray Scale, Kathy, Um, you know the whole world of the Digital Currency Group and Barry Silver's company, I mean the various connections that kind of go back to f t X. Are you at all worried about a liquidation

or anything. Well, we know that the Gray Scale investment trusts are the most valuable part of that company right now and uh, and they are revery their cash cows, their revenue generating. Um. We we do not think we think they're going to try and hold on to that uh if nothing else, so UM we are. We're looking at a forty one discount of this first relative to bitcoin today and so we actually think there's a lot

of upside. Now. One of the things that we know that Gray Scale and Michael Son and Cheim a great Scale wanted was to convert this this trust into an e t F. I think what's happened with the fallout here might increase the probability that a bitcoin e t F will will be approved. I'm not saying immediately, but um, we know that. And even the newest SEC commissioner him Lizarraga I think is his name, has come out and said we need more, We need as regulators to focus

on decentralization and transparency. What is the most decentralized and transparent crypto asset in the world. It is bitcoin, and yet retail investors do not have easy access through a liquid asset like uh an e t F which which honestly I don't understand given that they approved a bitcoin futures and so you know, I think it might increase the odds we shall see. Well, and some of them been wondering whether or not you're playing the arbitrage um

with GBTC right now? You know, is it that because of the trust deep discount at this point, is that the thinking for you to kind of be moving more money into this name, Well, it is one of the few securities we have to own securities in e t f s, so it is one of the few securities we can buy. And yes, it's at a very big discount. Uh so, so it is more attractive bitcoin um bitcoin if they were to even liquidate it. You know, we've

got such a big discount relative to to bitcoin that um. Again, we don't think they're going to this is the most valuable property. I think they're going to hang onto it, and I think over time the discount will close. Don't know if it's because of a conversion to a bitcoin ETF. I'm sure the regulators will take a very close look at d c G and the Gray Scale Bitcoin Investment Trust. But we do know this is a grant or trust, highly regulated, highly regulated. I mean, we have to do

our homework on it. And we know that all of the bitcoin behind g BTC is in cold storage at coin base, and coin base has confirmed this. Uh so uh, you know, we feel quite comfortable with it here, Kathy. We've talked coin Base, We've talked g BTC. Are there any other opportunities in crypto that you see right now in the wake of f t XS collapse as prices have been beaten up. Well again for our e t

F s we uh we. As you mentioned on coin Base, we also owned Square and it is interesting that Jack Dorsey has chosen the most transparent, most decentralized crypto asset to center UH blocks crypto exposure too. And I realize he's trying to from a developer community point of view, leave them on their their own. But we do think bitcoin UH, and you can see through the behavior of the infrastructure hasn't skipped a beat, not one beat at more secure than it was yesterday, the day before, in

the day before. So I have a feeling this is going to elevate Bitcoin in the eyes of not only the crypto world, but the investment world at large. And I have a feeling it's going to have more running room through the rest of the world. I think this is the way that this is blocked go to market UH, to get into the rest of the world. And we

think they're going to be very successful. So then I'm assuming Kathy that you're going to hold to your bitcoin forecast for what is it, a million per coin by that still feels good to you, yes, and you can you know, sometimes you need to bow old test. You need to go through crises UH to see UH, to see who the real um to see the survivors first of all, but really to test battle test the infrastructure

and the thesis. And again, we think Bitcoin is coming out of this smelling like a rose because of what I have mentioned previously. And I do think that the one thing that will be delayed is um perhaps institutions stepping back and just saying, Okay, do we really understand this? Uh and once they actually do the homework and see what's happened here, I think they might be more comfortable moving into into bitcoin uh and and perhaps ether as a first stop, you know, as they'll understand it more.

You mentioned Jack Dorsey. I want to switch gears if I can, And I was thinking about Twitter and Tesla. Like I said, there's so many things that are going on in our world right now that I feel like you are the person to comment on. How do you make sense of Elon Musk? So when you know you've talked to you've been investor in Tesla for a long time, are you comfortable with his actions around Twitter of firing

people hiring them back? Um, you know the verified check talking about people paying for it and then taking that back. Do you feel comfortable with this name? And I should put out that right you own private shares of Twitter and have talked about wanting to own more yes, Um, yes we do. We we saw we owned Twitter for quite a while and we sold it into the rumors that Ellen was going to buy it because we knew there would be a lot of controversy around that. So

it moved into the sixties. I think it got to seventy and we sold there and have been watching, Um, have been watching from the sidelines. But if you look at that model longer run, it has not delivered on the promise. And you know, I think opening uh the algorithms which we think he will do, and taking away the kind of human driven censorship and uh, and and allowing the transparency of the algorithms that they do put put out there, you know, allowing people to question them.

I think it's going to be very healthy. If you look at the daily average users, I think the various metrics that you can count daily, they have been going up dramatically. So you know, if you I know a lot of people who you know, basically decided to quit Twitter because they didn't like the kind of censorship and so forth that was going on. So I actually like

what he's doing. It seems interestingly enough, though, that a lot of brands don't like what he's doing Kathy, and we've seen some prominent companies pull back or at least pause advertising on the plant photo. Of course, I mean that makes sense if you know, you don't necessarily want to support the guy who owns Tesla, if you're making you know, competitive competitive competitive vehicles Tesla, but bigger brands

that are worried about brand safety. And I'm wondering, you know, I don't know what you're seeing in your Twitter timeline, but I'm seeing ads that are what not relevant to me anymore not relevant to me now and aren't actually ads that are for companies. They're more like ads for influencers these days. It doesn't seem like it's necessarily moving in the direction of increasing revenue from an advertorial perspective right now. Well, I do think that this is not uh,

this is not just an advertising vehicle. In fact, this is that probably might diminish quite significantly in terms of its important longer run. You'll you'll remember that Ellen started his entrepreneurial pursuits UM in UH with a precursor to PayPal. So he very a very long time ago had this idea of a digital wallet, a super app like what's app um in mind and of course took a big detour into another passion of his. Um. We know he

knows a lot about this world. And I think if anyone in the US can do this, I think I think he can. I think he'll surround himself by the right business leaders. He's not going to do this himself. If you look at Tesla, he's not. You know, if you look at many people say, aren't you worried about Tesla, No, we're not. Because of our work on electric vehicles. They are.

They are are grabbing a disproportionate share and will continue to do so of a market that we think by will account for eighty five to of all cars sold in in the world. Uh So that's on automatic pilot. He's now working on autonomous, which we think is uh is going to work. In fact, I just have the pleasure of riding in a Cruise car in San Francisco, an autonomous car GM uh US wanted to see, wanted to check it out, and I have to tell you

I love the ride. And uh, I know autonomous is possible because Cruz and WEIMO are doing it, and we think Tesla is going to do it in a much bigger way. So that's Tesla, but onto Twitter, it really needed to be shaken up. I think think he can make it be a great business and very profitable. And if so, how I do think about the amount of data that Twitter has UH and it's proprietary data, and think about the combination of that and artificial intelligence. Remember

he has AI expertise and experts. I know he brought in some of his engineers UH and they are going to I think surprise and delight heading for a super app kind of product. And you know, by our estimates

and you'll find this in our big ideas. I think it was um the vale all you of each customer in a digital wallet UH should be And when I say that the market cap associated UH should be in the twenty thousand plus range, because it's not just for financial services, it will ultimately be for for commerce and AI is the glue that's going to pull this all together and the data that they have, the data is the new oil. You've heard that this is absolutely true

in the case of Twitter. Well, Kathy, I mean the currency Twitter as a currency has worked really well for you. You've got one point five million followers on the platform. A lot of people see what you tweet. We saw eulogies last week being written for Twitter. It didn't end up dying as many people thought it would. But what would happen if Twitter went away? And are you concerned about that? You know it's been and and yes, we

speak from experience. This is an extremely productive social network for us, is our most productive and uh, you know it truly is the global public town square. You know I can write an open letter to the FED and put it out over Twitter. Now do I think the Fed's going to listen to me? No, I don't, but that they may listen, That the FED board members may listen to someone who might think that I have something

to say, which is simply a question. Wait a minute, how can you be unanimous seventy five basis points at a time? How can you be unanimous when there is so much conflicting data out there, including an inverted yield curve? Now at seventy five basis points, that's crazy. I think we're going to look back in history and say, what were they thinking unanimous? Commodity prices are falling. You've got excess inventories all over the place. We're seeing massive discounting.

I think we're gonna see deflation and then they'll make a move in the opposite direction. But we need, you know, we need a steadier hand than that. So when Kathy went to you, because you've argued this and you and you put this out there in terms of FED policy, in terms of deflation, when do you think it will come? I think we're seeing it. I think if you look at a lot of commodity prices, not only are they down thirty two some of them from their peaks, they're

down on a year over year basis. In fact, oil itself is almost down on a year over year basis. Now the big pushbacks on this call we get our wages and rents. We're seeing rent inflation reverse quite suddenly and dramatically. So what I think we will look back in history and say this inflation shock was the function of a supply shock caused by COVID, supply chain problems afterwards,

and even more problems after Russia's invasion of Ukraine. Um, if I can just take one second, I would like to give uh an analogy to the late nineteen teens. We were in the middle of the massive, you know, most massive innovation the history of the world had seen. Telephone, electricity, and automobile all at the same time. But we had World War One and we had the Spanish flu sound familiar now, That was much worse than what we've gone through.

We've gone through nothing like that, But there were massive supply chain problems back then, and inflation peaked at twenty four percent right in June. In June, and by June it was minus fifteen percent. So I think that our eight to ten percent inflation, which is where it was at the peak, is going to turn around and we're going to see some very big surprises on the inflation front. And you know who agrees with us, the bond market. Look at the bond market is doing now then three yeah,

three sev inverted. That's telling us that the bond market is saying recession and or big surprises on the low side of inflation expectations. So and it's probably both. Kathy, unfortunately, have a couple of minutes left here. One thing we did want to squeeze in um. We've been talking about in the newsroom that Alliance Bernstein is getting ready to launch actively managed disrupted disruptor e t F. And from what I understand you pitched them. You know years ago. Um,

how does that make you feel? And you know, to see a firm from that you worked at kind of doing a very similar thing or looking to do something similar. Yes, well, um, Alliance Bernstein I believe got the first fully active, fully transparent e t F in I think it was early. It got the approved in early two thousand thirteen. So that's when I put my hand up and said I'll

do that. And um uh, there were there was a belief that e t f s were not safe or you know, there were a lot of arguments against it. Probably the biggest one was mutual funds, which are much more profitable. I would say the economics there are higher than e t f s. How does it make me feel? You know, I'm the more the merrier. I think this is a fantastic rapper for the end consumer. It's fully liquid, unlike mutual funds you have to wait till the end

of the day. Transparent, fully transparent, that's what that's what investors want. Uh. It is more tax effective, much more tax effective. We're seeing mutual funds that are down thirty percent this year, but they're slapping their investors with thirty uh in capital tax gains uh and then finally, it's more cost of active when you because all of the what you see is what you get with these fees. There aren't a bunch of hidden fees, so it's a

great rapper for the end consumer. I highly recommend it and we're happy that that they that they are seeing the light now. All right, Well, good to get you to weigh in on that and just so much more, Kathy, we always appreciate your time. Be well, have a great Thanksgiving. Kathy would uh CEO, c I O and of course founder of our invest joining us there via Zoom