Ark Invest's Wood 'Positive' on Bitcoin

it doesn't always work. Oh. I know, but I think we've come a long way. Carol, Right, We've come a long way. So listen, I gotta ask you about the trade today. Uh. We really felt like earlier that the speculative trade, the euphoric trade when it comes to technology, was over. What do you make initially of the pullback that we saw today. Well, you know, the what I've been surprised by over the last really four or five months is cyclicals and value stocks have started to outperform

the broad based market in disease. Uh. And the surprise to us is that we and our innovation strategies that are outperformed as well. That's very unusual So the way I have interpreted that is that the market is broadening out. The bowl market is broadening out, which is a very

healthy development. I think what we've seen in the last few days the correction in technology is UH, perhaps you know rotational again value there, given how many years value has underperformed, Uh, there could be a bit of rotation

back into value. Uh. If if you understand our portfolios, UH, you'll be very careful where you go in terms of the value space, because disruptive innovation, the likes of which we have not seen in more than a hundred years, is probably going to hurt a lot of value sectors more than growth sector. So what are you doing on a day like today? Are you are you buying? I mean the NASDAC was down almost four percent today, Tesla

was down significantly. Did you buy? Oh yes, oh yes, And we've uh we published our trades at the end of every day, so you will see them the markets closed. We bought a lot of Tesla today across any strategy that holds Tesla, and we will be publishing in a few weeks UH a report updating our thoughts about Tesla, our excitement about the potential of a ride hailing service as a bridge to an autonomous service and are higher and the higher odds that autonomous is going to happen

for Tesla. Uh. And part of the reason for the higher odds is now that weymo is on the road autonomously, we know it can be done. Uh. Tesla has so much more data than Google or anyone else or everyone else combined that we think it's in the pole position. Well, it's interesting too. You know. It's funny Kathy, people you know, expecting you to be on and they were sending us tons of questions. You know, this whole idea of the

treasure trove of data that Tesla has. Specifically, you talk about it a lot, you know, do other people believe it? Do you? Are you seeing other you know people kind of uh put that out as kind of one of the fundamental reasons that you want to own Tesla. It's not just a car company, right, It's a technology company. It's a battery company. Is that thesis of it being a data company getting a lot more recognition. We do not think many analysts or investors are giving Tesla credit

for autonomous. Uh. If they were, the stock would be a lot higher. What we do think they're giving Tesla credit for increasingly? Is you know, it's an electric vehicle franchise, and how far ahead of the competition Tesla is when it comes to battery technology, to artificial intelligence, both in the form of a chip through the data collection. We think thirty billion plus miles compared to Google's thirty million ish miles. UH and still over the air software updates

to UH to change performance. It's it's remarkable that more are not on board, even the last one yet. UH. So I think it's franchise has legs here. So so how does that translate into market value for Tesla? How much more opportunity is there? How much how much more opportunity is is left for this run up to continue? Well, I'll give you a sense of UH, and this is from our big ideas one. You can get that on

our site ARC dash invest dot com. UH. We we believe that the autonomous market, so the ride hailing market but autonomous, will be a seven trillion dollar revenue opportunity. And right now, the right hailing companies human driven right hailing, UH, their market cap probably accumulatively is around two hundred billion globally. UH. If we're right, Tesla is in the pole position in the United States to become the autonomous taxi network. Autonomous

is going to submit to natural geographic monopolies. So in the US, our confidence in Tesla has gone up the more we understand about autopilot and the more data. Uh. It's one to one and a half million robots out there, including my model three, are collecting to inform its artificial intelligence engine. So that's six to seven trillion dollar market we think is going to be more in the developed world,

ironically than in the um emerging markets in terms of value. Uh, for reasons we can get into if you would like. So the US could be a third to a half

of that of that market. So think about that three and a half trillion dollars opportunity, and it's it's going to be more of a monopoly than I think most investors in analysts understand right now, Kathy, I want to go back to kind a bigger, broader market today for a moment if I can, because you've talked a lot about the reflation trade and how rising rates and a rotation to value that this could be a challenge to

your investments. Are we done with those challenges? Or do you think what we saw today we're going to see continue of the tech trade under pressure. Well, I don't know how long this rotation will continue. All I do know is that we have a five year time horizon and our all of our price targets are five years out. A few days ago, I would have told you that the returns that we're expecting now we could be raw.

These are our estimates, so consider the source. But uh, the compound annual rate of return that we were expecting for our portfolios during the next five years was fifteent, which is our minimum hurdle rate of return as of today. Just given the last few days of correction, that is closer. Now, compound annual rate of return over five years is a doubling over five years. Right, that's a healthy return. What

happens very short term, I can't tell you. All I know is we are keeping our eyes on the prize, and the prize just got a little bit more interesting. But I have to ask you, were you kind of secretly rooting for a little bit of a of a pullback um to kind of get some of the performance, chasing money out of the market. Well, I do believe we we love a wall of worry, and we were seeing the wall of worry start to build. I saw it on social media, a lot of chatter, some just

waiting for our funds in particular, uh to take a tumble. Uh. Some maybe to buy, and some happy to sell and short and all of that. We love the liquidity that this provides us. We think it's very healthy and very healthy shake out. But I'll give you a sense of what where I in history. I felt this way before. In nine six, we were in a very interesting market. Alan Greenspan was the FED chairman, and he was at the time UH warned all of us against irrational exuberant uh.

And many investors were just beginning to understand how how the internet was working, and uh, you know what the interesting applications were going to be. Uh. We had another four years of a move, which when you think about that time, that move was too much capital chasing too few stocks, uh, too quickly. The technologies weren't ready, the costs were way too high for most of what we're seeing today. But all the seeds for what we're investing

in we're planted back then. So we've had fifteen to twenty to twenty five years of gest station of these seeds, and now they're starting to flourish, and we are ready. From a technology point of view and from a cost point of view, that's so important to see that electric vehicle costs come down. Uh, so that by this time, maybe in a year or two, uh, the sticker price of the average electric vehicle will below be below that

of the average UH gas powered vehicle. Yeah. And and by the average electric vehicle price will be eighteen thousand, and the Toyota Cameray will still be a no brainers. Yeah. I gotta ask, um, so much money is pouring into your funds? Uh? South Korean retail investors literally give you a nickname, money tree. Um, in terms of money. Does

it ever become too much that's pouring into your funds? Well, what I've always said when we've been asked the capacity question is that if we are right and the five platforms that involve fourteen different technologies are are ready for prime time, if not already in the sweet spot of their s curve, then our capacity should grow exponentially with

those platforms. Now, what happened to us in the last year was not exponential but parabolic growth in terms of the flows, and it's been very gratifying, and we're so happy that more and more investors are diversifying into innovation. They need to to hedge against all of the value traps that innovation is going to UH is going to create. UH. But we do believe that given the swish we had this year, UM, we will need a little time to have the capacity come our way. How is it coming

our way? Well, you see, because of the performance of stocks like those in our portfolios, we're seeing a significant number of I P O S UH secondaries. There's the stack revolution. There's a stack revolution. And if you think about what happened even last year, so our flagship fund was up around a hundred and fifty percent, that meant that our capacity went up a hundred and fifty percent. If you look at our performance since since UH for the past five years, our performance of the Flagship fund

is up a thousand percent. So that means our capacity is up a thousand percent. And if we're right and we're still on these exponential growth trajectories, we should continue to find good capacity going forward. So I'm also curious about you, know, of the positions you have, and I'm

sure you've been asked about this for Cathy. But you know, I'm just looking at some of our research that you guys are already a ten percent holder and I think more than twenty companies and a holder in three And forgive me my my mouth's a little bit off, But I mean, is that do you get nervous about that level of concentration. I mean some investment managers would say, so, how do you feel about that? Yes, what we've put in risk controls to prevent uh. Again, some of that

happened because of the swish. Very fair enough, we put in risk. Yes, we put in risk control so that you know we do so that we will not be considered quote unquote an affiliate of of any of these companies. That's why I think what we want to be on

the right side of regulation. Uh. And so you will see fewer and fewer names over fift let's say, going forward, especially as many of our companies, our issueing are are are doing secondaries importantly, and the reason they need to do them is often in the world of disruptive innovation and particularly because of artificial intelligence, the companies that invest the most aggressively today are going to have a higher

probability of winning. Winner take most markets, like I just described autonomous taxi networks, and so they have to fund. You know, last quarter Tesla did another five billion dollars UH in equities UH and so again bringing more capacity. It is doing so well though that we think, uh, it will not have to do much more in the form of equity or fixed income funding in the future. Kathy. One story we saw play out was the so called Robin and Revolution, the rise of the retail trader um are.

What do you think of young people getting involved in the market right now? What do you think of the access that they have on an up like robin hood that makes it really easy and friction less to buy, sell and trade. You know what, I think it's wonderful. Many people worried about, especially during the game Stock Dame game stop controversy, worried, you know, was the little guy

going to get hurt? H Well, if if a person doesn't know enough about options, um or or equities at all, and it's just following the crowd, it wasn't going to take long for them to learn a very important lesson. So I think many have learned very important lessons. What is happening now, I think is delightful for for a couple of reasons. I remember when there was no robin hood, and when social media was not much of a big thing.

Getting my children interested in investing in equities was very difficult, very difficult. Now. While some people may argue that it's gamifying the space, it also teaches investors lessons very quickly. So a lot of individuals who moved into game stop or a C or that bath and beyond all of the the usual suspects suspects, they learned. They learned that they weren't on the right Those companies are not on the right side of change. And there was you know

that there was going to be a significant correction. So I think corrections are are a good They keep us all humble and keep us all focused on what could go wrong. They create a wall of worry, which the strongest bull markets I've been in are built on top of walls of worry. And I like the fact. I like the fact that there are more concerns now about valuations, about inflation, about interest rates. I like the fact that

there are these words. But I also like the fact that the markets are moving through this pretty um uh efficiently. Almost very efficiently. If you looked at the trading in in ARC in ARCS, E t F, this, this, UH today and yesterday. I think if if we had told market makers and authorized participants and E t F providers generally that we were going to see UM thirty five to forty million shares of our flagship funds trade in one day, I would have said, okay, that that would

blow up the system. It didn't. It was very efficient, I know. And and there's options trading around our funds as well, and the only thing I will say say they're as a note of caution is we do have a five year time horizon options. Options players do not, and you can get hurt badly, especially given our time horizon, which is great for the retail investors. We only have a few minutes left, so I'm going to kind of do a little rapid fire with you and go through

some things. There is a question coming in from Twitter who says, how does Cathy quantify risk in emerging tech and differentiate them from the rockets that just take off? Just quickly your thoughts on that, How do you do that? Well? We use rights law. We center our research on something called rights law, which says for every cumulative doubling in the number of units produced cost declient at a consistent rate.

So we watch it for those companies that that that are creating the technologies and make sure that they are writing down the cost curve so that they're they're finding new and new sources of demand as they go forward. There are some companies that try and milk the technology, and we saw a Lumina try to do this over the last four years and they've lost the plot and other sequencing players are are starting to encroach upon their territory.

They're still very strong, but they should have continued writing down that cost curve aggressively. Competition comes very quickly for those in the league need to keep driving the competition. UM, I gotta get to your thoughts on on bitcoin right now. What are you thinking? We just got noticed that that square about a hundred and seventy million dollars worth of bitcoin in the most recent quarter. Thoughts on bitcoin? Yes, yes, we're very positive on bitcoin again, very happy to see

a healthy correction here. Uh. No, market is straight up. Everyone should know that everyone should have some dry powder for for days like these, And I've been saying that for a while. We see so many use cases of a bitcoin, but probably the most important use case is an insurance policy around the world against confiscation of wealth. And that can happen in two ways. It can happen with inflation. Bitcoin I think is the best hedge against inflation out there bar none better than gold and uh,

and it can happen out right. I mean when you saw in the Middle East, uh prints take or sees his own relatives. Well, uh, you know everyone should know if you think there's a five per cent chance of that happening, you should put five percent of your portfolio long term into or your wealth into something like bitcoin. You can carry the keys in your head across the border, right you think about right in terms of what that

that allows you. Hey, your big ideas one we've been talking about it a lot off air ourselves, a hundred and twelve pages. It's on the website. What are the big ideas Kathy that we need to be thinking about? Well, the new ideas, Uh, you know, big ideas are not just a one idea. So we've we've updated our deep learning digital wall. It's bitcoin e v right, hailing some of the things which are drone work are sequencing long read sequencing. Our new our new sections are called reinventing

the data center. We think Intel is going to lose UH is going to lose most of its share in the data center, and that's its most profitable UH division. Virtual world so gaming UH and sport, gambling, gaming becoming moving away from just the pure gaming world. But with platforms like Unity and unreal networks like Epic, we're going to be bringing virtual worlds into everyday business. Of course, virtual reality, augmented reality, we are getting to the point

where that is viable. Orbital aerospace is another one. The space race. We're very excited by that. Kathy, we can talk to forever and we shouldn't point out there's ARC swag and I know a d percent is donated to charities, so you guys thinking about the broader community as well. Kathy would thank you so much. Always appreciate it. Be well, Kathy Would. She's CEO, chief investment Officer, and founder of ARC invest on the phone from Connecticut,