Welcome to Maren Talks Money, the after Show. This is where we unpack all the commentary or some of the commentary at least that you hear in our regular podcast. I'm Maren Sunset Web this week. John Seppek, senior reporter at Bloomberg, author of the Daily Money to Still the newsletter which you should be reading every day. Do so if you are not, joins me to discuss my conversation with our investment management founder, CEO and CIO Kathy would John, you'll have listened to the whole thing by.
Now right, I have read the transcript. Yes, that's like listening to it.
It is like listening to it. The fact is better than listening to it. And it was a longer conversation than a lot of the ones that we have on this podcast, And I thought I would let the conversation run because a lot of people are still very heavily invested in our innovation. A lot of people are incredibly loyal to Kathy and those people and other people really want to hear what she says. So did you enjoy it? Yeah?
I mean she's a very engaging and entertaining storyteller, and I think that's basically the secret of her success. I think that that is Katy's edge. Kathy's edge has been able to sell a good story to investors and make money from it. That doesn't necessarily mean that the investments that she's in are going to make money, or certainly not necessarily from the prices at which she's been keen to pay for them.
I think that's calling her are you are you? Are you calling her an asset gatherer the way stock picker because it's quite rd John Well, I.
Know, I mean, I mean only within fund management circles, but I guess that's the ones that she moves in. I mean, yeah, I mean it's a it's it's ingenious marketing.
And I actually think that you know, it's it's interesting because obviously, I know it's something you didn't touch on, but Kathy has has kind of discussed our kind of strong religious kind of views, and there is something evangelical about ARC I mean obviously even the name, and whenever it was going through the conversation, I just thought it was really interesting because it's like they're very convincing arguments, but they are also very much arguments that are kind
of cherry picked tape so they're also macro based, you know, for somebody who's a stockpicker, they're all about themes and they're all about, you know, the big picture and talking about deflation. For example, I.
Did ask her about that. To be fair, I did start with let's let's start with macro, I said, because she's known to be quite a good macro analyst, right, So so we started with that. I led her into the conversation about about deflation.
And nothing like that. And I actually think, and I have been saying for quite some time, that we're going to see defleation before all of this is over, and we're beginning to say it already.
Yeah, but isn't it a bit convenient deflation? You know, because basically all of the stuff that she owns in ARP, and the reason that the ARK has done badly over the last couple of years is because interest rates have gone up, and it's very much been associated as the most you know, the kind of long duration stocks, the ones that don't make any money yet, but as long as you hold them and believe then eventually they'll make
lots of money. They kind of fairy tale stocks and the sort of things that's thrived in the low interest rate world, and I guess it's like it's a bit
like soft Bank. So when you look at soft Bank, the big Japanese kind of investment fund that's owned by Massa y or She's sowing and he's got these kind of like almost comedy PowerPoint packs where he'll talk about all the private companies that he ones and you know that he's kind of found, and there'll be like he had one for we Work that somebody put up the other day and reminded us of them whenever they bought
we Walk. The idea was that there was a kind of a graph and it showed the line going down and then bouncing back up to never before seeing hies and it was kind of like the commentary around it was, this is the the the theoretical turn around for this company. And of course we worked, just went bust.
This is the week we said goodbye to we worked. Maybe for that maybe for the last time, it can be reincarnated things like we worked, So let's not right it off John next year. This is the week we said everyone said say goodbye to the money, that's for sure, But I.
Think it's this. We've lived in a bull market for storytelling, and that was created by low interest rates, so you could basically tell any story as long as it was a good one, somebody would give you money. And I think Kathy's still stuck in that world because.
I thought the success is based on Yeah, the bit I thought you'd like best in the entire transcript or audio for people who are you know, the time to listen to the audio as opposed to skim the transcript. The best bit was when Kathy told me that her fund was a deep value fund and said, that'll that'll give John a bit of a spluttering into his coffee. You know, are but you're not really valuation driven, are you.
We are if you give us five years, and if you give us five years, then we are a deep value manager. We're a deep value manager.
That was brilliant. That was the idea that it's like Wardern buffet John his cigar, but these proper Ben Graham stuff and yeah, so it's deep value relative to kind of like I mean, you know, Becoin is deep value. Now if you believe I think Kathy does that, it's going to go to one point five million dollars before twenty thirty, I think was her most recent forecast for bitcoin.
So yeah, it should if you buy it slightly grand and yes it's deep value, but only in the sense that if you believe the most outlined dish production is going to be correct, then it's cheap relative to that protection.
Yeah, it was an interesting because she did say that there's a bit here. You know, most people when they when they look at their valuation, they're looking just at this year, maybe next year, and then say, well, we look at five years now. I listened to her saying that, and I thought, well, quite right, you should give up five years. And I think everybody does. Yeah, I mean fas kind of a trope of fund management to say, judge us over five years, not over one year or
two years. Of course, we don't much to judgem over one year or two years. You know, we enjoyed that a lot more, don't we. But we should obviously judge everyone over five years. But I think the thing that I found interesting was that she knows and we discussed that very rising interest rates are horrible for long duration assets, but and high interest rates are horrible for long duration assets assets to the returns come far in the future.
Jam tomorrow stocks as you like to call them, John, but she still feels that the stocks in her hopefully have been featured unfairly.
Yeah, I mean, and I suppose that's the only thing you start from, that kin of you start from, like king, a top down approach. And also, like I said, the micro story that she's telling one about deflation, So she clearly realizes the falling interest rates would be bullish for her fund. But she said she's also got a hedge it by saying, yeah, but these stocks will do well anyway.
I mean, again, have a period. She's had a previous period of performing well when rates arising, but obviously nothing like this when rates arising just a little bit in a rather different environment, there's a massive rise in interest rates. The constant rises a very different environment.
Yeah, and also staying high is a different environment as well. And I just don't think that you can. Well, I suppose it's it makes sense that she wouldn't change her story now, because well, yeah, why why would you? I mean, that's not people people do buy fund managers on the basis of their style, and one of the kind of
killer things for any fund manager is style drift. If you turn around and you know, if everyone's owning you for one reason and then you say, oh, so I'm going to change my mind, then that's that's going to destroy your career. And that's absolutely fair enough. And from that point of view, you know, I've got a lot of respect for it. I mean, in lots of ways, she's just a more kind of aggressive American AE style Scottish mortgage trust.
And I was like, well, interestingly, one of when I was at an event the other day and talking to people about about oh and also about Scottish mortgage, and several people said to me that they used either our course Scottish mortgage interchangeably to balance out they're rougher and their personal assets.
I think thats just.
In case, just incaseion. And these are fascinating stories and incredibly compelling, and you know, so many of these things may well happen, will probably happen. You know, we're on the edge, we hope, you and I and everybody else, we're on the edge of the kind of technological revolution that will give us see the productivity revolution that we've been waiting for for decades. In decades some way we've been saying for ages, look at all this new tech.
It's going to be a productivity revolution, revolution in healthcare revolution, and this revolution of that. It hasn't quite happened, but it feels like if you look at the kind of thing that things that Cafie says, I know she've been saying them for a few years, but nonetheless, the technology
is ready, it's available. We may be on the edge of the explosion that we've been waiting for, but that won't necessarily translate into the prices of the stocks in portfolios like that going up another four hundred percent in a year.
Yeah, that the difficulty. It's like, there's always timing with these kinds of things, and there's always the winners and the losers where any kind of tech thing, I mean, one of the interesting point is that obviously the biggest tech kind of hype this year has been around artificial intelligence, and the best stock, in fact, pretty much the only stock to play that as a picks and shovels play was Navidia, the big chip manufacturer, and of course Katy
famously got rid of that, one of the few tech stocks that she kind of disposed of before it then kind of rocketed earlier this year.
And that is an interesting one really.
Now competition well it's not as much as getting no competed, but so yeah, you know what I mean. It's like it's very much the go to stock for that sector, and it was actually was the go to for the gaming boom and the bitcoin boom as well, because their chips are the key ones for all of those process and activities. And I just thought it was in the the same time as everybody else was jumping on that bind wagon, she actually kind of exited it and unfortunately
the wrong tame. But it does she sure you that even I find this focused on this stuff is going to get it wrong sometimes sometimes.
The thing one of the things that I thought was interesting was the discussion we had about chemical and nuclear and her firm belief that moving into uranium and bdefault obviously into nuclear energy is the only way forward for the energy transition, and she's very into the idea of
the modular reactors, et cetera. I thought that was quite interesting because it's not the subject that I would have associated with her, And she tells me that, in fact, she's been looking at that since well for the last decade or so two.
Decades about nuclear because they're looking at tax again, we believe it is the cleanest other other than hydro.
It is the.
Cleanest energy source out there. It is the safest when you're good. Accidents associated with exploring and developing for energy, and yes, we think that after years there is you know, ten twelve years are being denigrated that environmentalists and others are now looking at the facts when it comes to nuclear and deciding, you know what, we probably well, I.
Mean, that's interesting. I think that was interesting. I'm quite bullih in nuclear as well. It is a very different area low and when you think about it, the nuclear story is pretty old one. Actually, it has come back over and over again in cycles, and what has tended to happen is unfortunately, if it's something you like. For Kushima was what put an end to the last uranium
bull market, and hopefully this time it is different. And finally we're kind of outgrowing a fear of and nuclear, partly driven by even needn't you find the way you keep the lights in?
Way?
We decided this mindal look kind of force all fuel infrastructure.
Well, it feels like now we're beginning to accept that wind and solar are not as cheap and effective as we thought they might because pretty much our any way out if we want an effective energy transition.
Yeah, but it's interesting because, as you say, that's not really it's a bit different. And again it sort of feels like this is a booll market you've supported that you think you can get on board, rather than we can't be cause a very old companies have any old school company as well? Renovation there Well yeah, I mean I'm assuming to being in a manor the deploy have get slightly more innovation than we.
No, you're right, but that's one of the things that Ed Conway kept telling us over and over and over. Don't underestimate or we need to recognize how incredibly productive these minds have become. The innovation in mining is massive. There's not as many people down minds as they used to be. Very innovative, very productive. So now you're right to take it back. It's an innovative coming is interesting. Love me if you get the bill.
No, and I just pulled a chart of Camico up. So Camiico, as you would expect, kind of last peaked in twenty eleven when you know figures you my up. It then basically went down pretty much NonStop. We a little blip up in twenty fourteen, and it kind of came to its absolute bottom in the March twenty twenty, whenever obviously the pandemic was causing the amount of havoc.
It's now almost back at that twenty eleven high. So I'm just wondering at which point in the billmarket between the bottom in twenty twenty and then reaching the old kind of twenty eleven high Kathy actually bought it, having you know, been thinking about it for a decade.
I can't answer that, but we'll look it up later.
I just wondering through it that way.
Well, look at up leisure. Okay, anything else we want to talk about in there? Anything else? Grab your attention.
I thought it was really interesting and I love hearing the body of these technologies. I love you a little bit. Crespos, fun conversations, robots boy, that sort of stuff. But as a classic casey, story drive an investment, and one of the things that we're always told to try and avoid doing this investors is being seduced by stories focusing on the numbers. Yeah, so yeah, absolutely bill market for storytelling. And I don't think she should change because you know it's not I could wait be.
People buy her for what she is. And the thing I didn't talk about with her, and if she ever comes on again, I'd really like to talk to about her is the building of the business, you know, because it is an extraordinary business. Billions and billions under management, pretty high management fees relative to some other fund manager managers working in the same area, so you know, it makes a fortune. It makes an absolute fortune based on
the as on the management on the fleet. So she's running the performance of the assets aside, she's running a really fabulous business.
Yeah, and I mean she's a very good entrepreneur. Great now absolutely have to handle that.
Yeah, and I mean she she counts as her company is also an innovative company. She's an innovative disruptor in her own right, which is impressive. And when I ask you the question about gold and bitcoin, I guess I kind of knew the answer, I'm afraid. So if I'm going to give you a choice of three asset classes or three assets, should I say, and you have to choose one to hold for ten years, You're not going
to have to think very hard. The three are gold, a deposit account, cash deposit account, or bitcoin.
Bitcoin hands down, hands down, Bitcoin is a hedge against both inflation and deflation.
So is gold. Yes, so is gold, but.
Bitcoin is digital and if you look at the incremental demand, we're going to see gold already has its demand. You know, it's happened right. Bitcoin is new and institutions are barely involved, and young people would much prefer to hold bitcoin then to hold gold. So you know, it's interesting that both gold and bitcoin are hedges against deflation. But bitcoin's been doing better recently.
Yeah.
Yeah, But what I like's with us, it's like, to be fair, she's the one that's coming closest to anyone that we've talked to of sort of kevin the rationale for it, and uh, you know, in a clear way whether you agree with it or not, what you know, to be honest, that only the main reason that favorite gold is cause well it's been around for ags and onnlike most things, that's actually a benefit in this your circumstance. But absolutely I don't disagree be the argument. I think
there's a valid argument. I mean, I'm not convinced that it's going to go over a million dollars, but then maybe one day I'll be kicking myself. Keep telling you about some and we'll just lose the password, please you.
All right, all right, A lot of people keep telling you on Twitter, I'm just better. Well do you know what I am better? It's true, It's true, right, okay. So another one to add to our bitcoin lister, and the last thing I'm going to say on it. She is the first person who has told us that you should hold bitcoin because it's a hedge against deflation and inflation.
No one's ever said that to us before, and obviously there is no evidence of that yet early days for bitcoin, but it'll be quite interesting if that turned out to be true, which I suspect it won't, but you never know. You never know, John, thank you so much for your criticisms and misery. Thanks film, thanks for listening this week's Maren Dog's Money The After Show. This episode was hosted
by me Myren Subset Web alongside John Stepfak. It was produced by Summersaidi and additional editing by Blake Naples