Big Take: Cathie Wood Bad Spring Only A Blip

at Bloomberg dot com slash podcast. Well in financial markets, the rise of Kathy Wood and her ARC Funds has just been extraordinary, and it's been predicated in large part upon the cool new technologies that are out there that they've really embraced in terms of investments, think no further uh than Tesla. But the recent months have been a little bit challenging. Let's dig into it. We can do that with Ben Stepherman. He's a pronounce personal finance editor

for Bloomberg News. Ben, thanks so much for joining us here. The big take story here's Kathy Wood's bad spring is a blip when the future is so magnificent. Tell us what you found about Kathy Wood and the ARC Funds. Yeah, so this story looks at She's been such a phenomenon

over the last year. You know, she's sort of perfectly captured the mood of the market last year UM, when you know, we were also a lot of people were stuck inside and UM people wanted nothing more to than to look forward to the future, to this too, in this beautiful future that Kathy Would is talking about, which is one of rapid technological change and UM one where investors can make a lot of money by betting on

innovative companies. So those companies just really soared through up until about February and then they kind of turned over and she's had a really rough spring. So so the story looks at her, and it really looks at her vision of the world and and how she sees she what basically what what the vision that she's selling to investors than the one that she thinks she can make

money on if you're patient. I always think UM the timing is perfect for Kathy Would and E T S as well, right, because I've been following UM these exchange traded funds for a good decade. I always try and get Eric Balcunas on the show. He's like our resident UM genius on E T F. There's never been a breakout manager with the kind of fame that Cathy Wood

has in this sector of finance. And it's like the generational um timing is perfect, right because the kids are now investing and they're doing it through E t S and this is an e t F that speaks to them because they hear about it on their social media platforms. She's such a throwback in some ways, not just an E t S but just in investing generally. Like who is the last person who really appealed to read? Who's the last manager that really appealed to the retail investor?

You have to go back to, like you know, like you guess Warren Buffett is is some in some ways or around the two thousand's, but we've had this long period where people have been really really all about the index funds and passive past of investment, and we haven't had a big star come along and capture retail investors imagination. And and here she comes along and she's UM. Not only not in the mutual fund world, she's in the E t F world. That she's a woman, you know,

is very male dominated UM industry. UM. I think she's That's that's just a fascinating phenomenon. Ben, Is there anyone else in E T S? Is there any other a t S manager that we all know. No, I don't think so, otherwise Ben would have written a story on them. Um, yeah, Ben, what is uh what is the thinking here? I mean, what is Cathy Wood saying now about her her strategies here, given that her performance has lagged over the last uh you know quarter or so. What she says is you

gotta gotta keep the faith. That's what she says. And she's a religious person and I really think that that her views about technology and in religion and kind of they kind of aligned a little bit. But but she say to people is, um, we were like, the this sell off and the innovative stocks just means that we have we're going to make more money over the long term. They think that that their portfolio can triple over the

next five years. They have these very bullish um estimates for what's going to happen to say, electric vehicles or DNA sequencing or artificial intelligence, and a lot of the traditional analysts on the street are just like, think, these these things are completely crazy and a little delusional. But um, she has been proved and right, I mean in terms of at least Bitcoin and Tesla when she made targets,

price targets for them a couple few years ago. Um, they eventually were hit, um and what they were huge. There was a huge amount of skepticism at the time. But but you know, basically, for for her to be proven right, technological change really has to accelerate coming out of this pandemic and and you know it may but

we'll see if that actually makes our money. It's so weird that that that um, you know, the read it uh phenomenon has boosted her along with these really um, I mean bitcoin is in some ways I read it phenomenon as well. Now it's kind of moved to Twitter. But um, she's got this millennial draw even though, as you point out, her mentor is Art Laugher, who is

like a psion of the eighties. And right now as we're going through this real shift from reagan Omics over the last forty years too, now the era of six trillion dollar big government budgets, um from President Biden. She still she's she's now coming on and reigning Supreme Yeah, she's a really contradiction. I mean, she's sixty five years old.

I guess she's capturing the attention of all these young investors and she's politically conservative, but yet she's also huge investor in green investments and she doesn't use the word climate change a lot, but she's she's been a champion of Tesla and other kind of and the investors are sticking with our aren't they been? I mean there, I mean there's just been some redemptions, but not that much. No, like fairly a billion dollars has come out of the

funds um since February. And she's she's really people are really sticking with her, and she does a good she goes on she she really wouldn't have an in depth interview with us for this long profile, but she's been on the on the records so much, so many times she comes on TV. She does conferences once a week she's on Yeah, and and that really helped that communication strategy. She really gets out there and tells a story to people about about what they can get. They just a

patient and stick with her. I mean, in some ways, she's really going to benefit from this new era of big spending as well, right because um, as we build out the infrastructure and invest in this in that country, this country is well. Here in Germany, we're helping out Tesla and you know the electronic vehicles. Yeah, her vision for where the economy is headed is is pretty interesting. I mean, do you think that inflation is not going to be a problem because he's an innovation these because

these technologies really are guys. The cost of a lot of these technologies is going to fall as they become more popular. And all right, he's not worried about the economy overheating at all. Ben, congratulations to you and Annie and Claire on this Bloomberg Business We cover story as well. It's an awesome cover. I recommend our listeners check it out. If you have a Bloomberg terminal sitting in front of you, just type NI big take go to see this story.

Cathy Wood's bad spring is a blip when the future is so magnificent. This is Bloomberg. Well. One of the areas of the economy that really got a boost during the pandemic was sports betting online and gaming. People were stuck at home, and the more and more states are allowing sports betting off site, electronic sports betting, it's been a big growth driver. Mike Tavarrella, he's Chamber of the Board of LLIS Game Technolo logies. He joins us to

talk about this business pre pandemic, post pandemic. Mike, thanks so much for joining us here. I love for you to just talk to us a little bit, just give us a brief description of what LS game Technology is. What do you guys do? Sure? Well, great, good good morning, gentlemen. Um So just l L Game Technology has been in the leisure sports betting business for about twenty years, primarily in the Italian market, which is a hugely competitive market

in Europe. In Italy were UH we're customer facing, would beat the sea licenses, both online and land based. And we own our own technology stack and that text stack that we own we developed it only a few years ago, so it's considered one of the newest betting platforms in the world. And if I got put an analogy to building buildings and real estate, it's kind of like a design build where we, you know, took time to understand the behavior of betters, what our clients were driving for.

And we uniquely designed this platform to specifically work in the sports betting UH world, and that's our current business and and in one we're looking at coming into the US and capitalize them on the brilliant growth opportunity here, since possible is repealing. So what how does this work? Then? Can I bet on Buckeyes football? Do I bet on um Paul Sweeney's knicks in the NBA? UM? Can I bet on no hitters in in Major League Baseball? What? What? What? What?

Betting goes? Sure? So so I guess the first point about that is that sport, any any h sports bet that you are permitted to do in any regional jurisdiction, if you will, is always dependent upon the regulation in the area. So for example, in Italy, we're our our clients are able to bet on just about anything under the sun, as you would imagine, and we as an operator get a full feed from our data providers and we use a variety of them UH and and then

we distribute it. And of course the primary UH products like say in Europe and saw in Italy it'll be soccer right song in US like that will differ on state to state basis. And obviously, but if you want to bet on the Buckeyes, UH, certainly, if our feed provides it, then we'll be able to allow you to bet on it, depending on the area that you're in. So it just seems Mike that sports betting. I live in New Jersey where it's been legal for some time. Um,

it's just all over the place. It's all over sports or radio. In terms of the ads for you know, as this economy reopens, one of the key areas is kind of restaurants and entertainment venues. Do you expect sports betting to be integrated into that kind of experience? Well, let me just say this way. UM. You know, the

European market is more or less a leading indicator. And when you look at, um, at what where people are able to uh to bet in those jurisdictions, Like they can go to a local coffee shop or a sports betting Uh, you know outfit so easy ag when you walk into like an agency where you can bet on on anything. Um. That model there has been active in Europe for the better part of twenty years. And we see that ultimately in the United States, after the repeal have passed a couple of years ago, a lot of

the states sort of took out the opportunity and get started. Uh. I see that they tethered certain licenses. The large casinos are single operators. However, I think that that dynamic is going to change over time simply because um, you know, the sports betting is a is a product that needs to be uh well actually should not be monopolized because sports vetters need the variety, They need the variation at odds because the ultimate outcome of the game, uh is

the same. They're regardless of what what who's playing and who the who the athletes is like in a golf tournament, so the outcome is the same. So sports vetters need a variety of operators to be able to compete because the secret sauce between operators is the odds, and you, as a sports vettor are shopping odds. And if there's a monopoly in the area, then obviously uh sports vettors will go offshore and keep it in the dark. And

that's not the purpose of being regulated. So what what our model does is it takes aim at the entrepreneurial engine of economy in America and if you could think about it the restaurant economy in places like New York or Washington. You have millions of people that visit these places throughout the year, like if there's a Super Bowl or a NBA finals, santy cop and you know March madness.

You know, these establishments are flocked by LSU fantas during championship games, so it really becomes a supercharge and social environment where sports and sports betting is already consumed the most. So our model even though we're able to do everything that say, for example, New Jersey requires like requires from

a licensing perspective, be it online or land base. Our technology because of the this a bit a model that we use in the Italian market and all these small shops, it is able to scale down as opposed to just only scale up. It's able to scale right down to the smallest denominator and we're able to service these restaurants and bars and allow them the opportunity to do that.

But again it's always predicated on regulations. So in New Jersey, for example, they would need to permit restaurants and bars or small entities to be able to get a license to process a sports bet as an axillary product to their core business, and that really has to happen. We hope to see that, we see that that trend is occurring, and it started in d C and and that really

would be a cool trend. And I think that that's uh that's gonna be a differentiator in the US as we brought alright, Mike, Well, we hope to get you back on as we learn more. As you know, this progresses post um legislation, post regulation. Mike Chavarella is the chairman of the board at l S Game Technology, talking to us about sports betting and um how it could look as the economy reopens and as these businesses start to really get going. He's betting on l s U.

I'm betting on the buck Eyes. This is Bloomberg Now. I want to bring in Kim Bussing. He is a US luxury reporter for Bloomberg News. He's got a news story on the terminal. Macy's needs another miracle on thirty fourth Street to secure its future. But Kim, I gotta

start out with some props. Man. I first started following you after I saw that two sixty million dollar park that you posted about in New York, and then I started reading through your stories, and I think you have an incredible unique eye and picking out some trends in some social trends that are really carrying through to the markets.

I read your story on Another Lane that the sneaker seller that I thought was great, UM about the the pot users that are spending eight hundred dollars on bong say stigmas fade here in Canada's becomes more mainstream, and I just think it's so cool that you're able to piece these things together that are are kind of trendy among a new generation UM that is now getting more and more money to spend, but also tie in so well to to markets and the growth areas that we're seeing. Well,

thank you. I really appreciate that. It's really important to look at at cultural things and how they're influencing companies and what they do and and the products they sell it and what people buy. Alright, So Macy's, you talk about a pillar of New York City and New York City retail sits smack there that in the middle of Manhattan at thirty fourth Street and sixth Avenue. But it's a department store and that's a tough business. Talk to

us about how they're boring. Is looking to reinvigorate the company. Yeah, Macy's wants to build a skyscraper on top of the biggest department store in America. So this would be an office tower, UM at somewhere around nine feet, which is a bit shorter than the Empire State Building nearby, uh, just a couple blocks away, and Macy's Herald Square. That store is their flagship. It's their most important store in the country. It's their most valuable real estate. Their headquarters

are there. UH, it's their most productive store. It's the overwhelming center of gravity for this business. So it makes sense that they would want to double down on that. But of course there's questions here right whether it's something like that would work, what's the business situation with Macy's, because you know, I'd prefer to go to Bloomingdale's, which is also there's up across street from our les headquarters. I'd rather go to Birdworf Goodman UM to look around

stuff that I probably can't afford. Um. You know, there's so many other choices UM in London, in New York, around the world. Macy's just seems kind of like Sears in terms of how exciting it is to walk through. Macy's had just embarked on a their latest turnaround plan in February twenties. Line that up with the pandemic, and a whole lot of that was derailed and they went into emergency mode, just like just like everyone else out there, um,

and they're there, everyone's still in it. So the department stores have been on the decline for for so very long, but that there have been glimmers of hope. You know. Macy's has been closing stores to to have less square footage out there, and while investing in digital commerce, e commerce, online sales and all of that, and so they've been making those steps, but it's still just seems like an eternal struggle for for department stores. Can they get New

York City approval to build a skyscraper on top of Macy's. Yeah, so where that that's at right now? Is the latest thing they've done is submit a proposal to invest two thirty five million dollars in the area surrounding the Macy's store that's Harold Square itself. That means pumping money into the neighborhood and order to secure those rights to build

the skyscraper. Um. These plans will turn that plaza, the Herald Square Plaza, into a more pedestrian friendly area with a bunch of new transit entrances because it's on top of a subway station that nobody likes. I use every day, by the way, every single day, and that proposals now public and will will be set to go through the city's review procedure that involves the community Board, local leaders,

city council and everything. Alright, just real quick, Kim, any sense of timing and whether we're gonna get some clarity here whether they can do this. Uh, We're just gonna have to see what they think about about these plans. Uh, something like this will take many years anyway, and they're currently in preliminary talks with developers to try to find

some some partners for it. All right, that's an aggressive move by Macy's to try to add some value to a company that's really in a challenging space up in the department store of business, Kim, to see maybe it plays in though, you know, to the way the city is gonna change post pandemic. It's gonna be really interesting. And Kempstone some reporting on like the new look of New York and with the impetus of massive spending that we're gonna get across the country, maybe we do see

a change. Yeah, maybe it's it's really interesting, but it would be great for that area as I walk past it every day, can passing us luxury reporter for Bloomberg News. He joins us here in the Bloomberg Interactive Broker studio. Is so good to have folks coming in live. I want to bring in Dave King right now. He's senior portfolio manager and head of Income and Growth Strategies over at Columbia thread Needle Investments. They have five hundred sixty

four billion dollars in assets under management. Dave um, we're seeing today more growth for I noticed this morning cyclicals again are rising Ford and General Motors. We got games in General Electric and Boeing, and there's some clear catalyst there um as our stocks. Thattor told us earlier with you know, airbuses announcement yesterday and GM's plant openings forwards investments. But it seems like this whole reopening m reflation respending

trade is really getting back on track. Is it something you're betting on as well? Well? I think that that's true. But I also think the reason to bet on it is last year's market favored quality bonds and disruptive growth stocks.

So not only are you benefiting from the strength in the economy, which at some point was predictable, but also good starting valuations on the kind of companies that you're you're referencing um Ford Motors having a great day, but the stock price is lower than when I joined Columbio

eleven years ago for Examp. So you're you're, you're really have that combination and um, as I've said too many people for several months now, I think the play is the dogs of the Dadao or revenge of the nerds, you know, by the by the big companies that people thought were boring. And as the economy recovers and perhaps you see some price inflation, make money. All right, give

us some name some of those dogs, would you. Well, the dogs of the Tao for people that don't know the procedure, are simply the ten highest yielding stocks in the Dow, and at the moment that's Chevron, IBM, Verizon, Dow Chemical, no relation, um Walgreens, Merk, Coca Cola, am Gen three M, and Ciscose do no. I know. I try try getting through a day without using the products and services with those companies, and you know, imagine that those stocks were woefully out of favor last year, and

I think you get the investment opportunity. It's it's not something you need a master's degree to figure out. But it's not on Reddit, and it's not you know, um, Cathy Wood isn't investing in these companies. Well, you know, I don't know the second point for a fact. The first point, I'm sure you're right. Um, it's it's really old fashioned. You know, I'm just sitting here staring at one monitor with my sleeves rolled up and buying stocks

like this. And I'm clearly not in vogue. But we're up between fifteen and and Dividend Opportunity Fund this year, so it's it's not crazy. There's something going on here, David. You know, I think investors, certainly since the financial crisis, they've been pretty comfortable with some of the big tech, big cap tech names, you know, an Apple or Amazon. I can buy those things, put them in my four one K and really not have to think about them

for a long time. Now. This rotation play has been working so well for you know, value investors and in and even small cap investors. Give us a sense of how long you think this thing can work? Is this something I can just put away? It will be a multi year trade. Well, there there's variants in in the value sector with that, and it's a great question. Um. You know, among the dogs that I've mentioned here, I have a feeling that that would be fine to do

with Merk. I already mentioned an auto company that was highly cyclical, So I don't know that you would necessarily take that approach with every one of these stocks. But you know that being said, the investments that Berkshire Hathaway made last year and they have special dispensation to not

reveal them for six months. We're in Chevron and Um as well in Verizon, two of these dogs, and UM, I think people were like sort of shrugging their shoulders when they heard that, and then all of a sudden, oil prices went back to normal levels, and Buffett's probably up thirty percent in the Chevron already. Verizon hasn't done much yet, but you know, he's got time. We've got time. So UM. There is, in other words, a need to

sell some of these stuff box at some point. But given people's predilection to trading so rapidly these days, I'm talking about, you know, take a look at it in a year or two, and if it's doubled or tripled and doesn't have a good yield and isn't a dog of the doo, maybe you should, you know, take a big profit then. I mean, I absolutely love that UM the idea, and obviously you've made a ton of money on it. What are your biggest worries though, What are

the headwinds that you watch out for. Well, I do think there's a huge question whether the inflation we're seeing today is temporary dislocation coming out of one of the strangest recessions ever UM, or whether it's going to prevail to that. I'd say if we have prevalent inflation for a while, it'll be bad for all financial assets, but

for income seekers. Twenty of the thirty stocks in the TAO yield more than the tenure treasury, and if we have inflation, you won't get more coupon from the government, and you'll only get a hundred dollars back, whereas the nominal dividend in most of those twenty companies will grow over time. So I really still see it as a clear alternative for an income oriented investor. They were gonna have to leave it there just because of time, but

we really appreciate your time. Dave King, Senior portfolio manager and Head of Income and Growth Strategies at Columbia thread Needle Investments. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio