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