➡ Kathy Wood, noted investor, discussed her optimistic view of bitcoin in a Yahoo interview, stating her fund’s continued interest despite regulatory uncertainties. She explained her fund’s shift from holding stakes in the Grayscale Bitcoin Trust to the ProShares Bitcoin Strategy ETF, a move made out of caution due to tax and regulatory uncertainties.
➡ The speaker discusses the impact of fluctuating interest rates on their investment strategies, suggesting that potential deflation could benefit their funds as the firms they invest in thrive in such an environment. The anticipation of falling interest rates is predicted to stimulate the economy on one hand and induce inflation on the other. Despite past challenges, they express satisfaction with the asset retention in their flagship strategy and emphasize disciplined rebalancing as key to beating the market over rolling five-year periods. They also touch upon their continued investment in Tesla amid the evolving electric vehicle market.
➡ The speaker highlights their belief in real estate and electric vehicles, indicating GM and Ford’s hesitance provides more market share for Tesla. They also discuss their interest and investments in artificial intelligence, including OpenAI, and their strategy focusing on sector-based investment, such as their shift from Tesla to Rivian in the automotive sector. They additionally mention their preference for Microsoft due to its involvement with OpenAI.

I’ve seen this pop up on my timeline and it’s Kathy Wood. Now, Kathy Wood is a famed investor and she controls a lot of money, literally billions of dollars in a hedge fund. And she’s famed for making specific investments that have panned out, some not so much. But Kathy Wood is largely considered a celebrity in the investment world or the financial world. Right? And Yahoo had an opportunity to sit down with her in order to get her insight into bitcoin AI investments going into 2024 and the likes.

And I have not seen it yet. And I said, oh, this is right up our alley. I actually had another story planned for you all. But then I seen Kathy Wood talking about, talking her talk and said, I gotta review this one. At the very least, before we get started into the new year, we gotta review Kathy Wood’s thoughts together. All right, so this is what she had to say.

Make sure you subscribe to the Patreon link is in the description as well as pinned to the top of the chat. If you have not already, make sure you subscribe to the channel. Let’s get it popping. We’re as optimistic about bitcoin as we ever have been, but there are a few regulatory and tax uncertainties. And we had been waiting for the discount between GBTC and Nav to narrow.

It was as high as 50% at one point last year when there was great uncertainty around all of the turmoil in crypto generally. And now it’s single digit. And there are now other products out there that we can use to gain exposure to bitcoin in this moment. And it’s just a moment of uncertainty between now, we think, and January, January eigth to 10th. Somewhere in that range, perhaps.

But we, out of an abundance of caution, didn’t want to take any risk. And I mean, let’s get a little bit specific here because we’re talking about the arc, next generation Internet ETF. The ticker there is ARCW. And I think what caught a lot of people’s attentions is that you completely sold down your remaining stake of the grayscale bitcoin Trust instead on the same day you bought into the proshares bitcoin Strategy ETF.

Of course, that tracks bitcoin futures. It doesn’t actually hold the physical bitcoin. Can you explain that? Shout out to Chris J. I’m going to read that super chat shortly. Some people are a fan of her. Some people not so much I see in a chat. Let’s continue. What was the thinking there? Sure. A couple of things. First of all Bido pro shares is already approved. There’s no regulatory uncertainty having to do with it.

So we chose to maintain our exposure through Bido for the time being. And as I mentioned before, there are some tax and regulatory uncertainties still as part of this process. We don’t know exactly who’s going to be approved and whether they’ve met all the criteria. Shout out to QbiRd rain, I appreciate you for the honey ball. Definitely going to be reading that super chat shortly that the SEC has put before us.

We know we have, but we don’t know if others, including GBTC, have. We just don’t know. Again, out of an abundance of caution and GBT’s discount, again, it was as much as 50% relative to Nav. So not only have we enjoyed this year the run in bitcoin itself, but we’ve had the nice closing of that discount. So it’s been double good news for us. But you’ve talked about January 10, Kathy.

I think in another report. Is that possible, whether it’s you or somebody else, in terms of the first spot, bitcoin, ETF actually getting approval? Well, we think the probabilities have gone up because the SEC has. I see you. Marley Murrow said you’re definitely not a fan. We’re going to talk about it. And highly engaged compared to what was happening before. Before, it was just denying approval. Denying approval.

And we just kept putting our filing in. Again, determined. And so here we are. We think we’re first in line, and that’s why there is this January 10 deadline. But we like the idea that the SEC has been so engaged, and it’s not just with us, it’s others as well. We think a number of funds could be approved at the same time. And they’ve been asking not only one set of questions, but follow up questions.

And again, that’s a very good sign. Well, speaking of engagement. Oh, go ahead, please. No, the last few questions have been very technical and so more durigur. And you’d expect them to be asking these questions as we head toward an approval. Now, it’s not 100% certain, and so we want to make that clear as well. This is the SEC, and we never know what might happen along the way.

Regulators can be tricky, that’s for sure. Hey, listen, you mentioned engagement. Let’s talk about engagement with your funds overall, and especially the Arc innovation Fund. Let me stop there, because I want to speak on every point as much as I can that she’s made. She’s basically saying that she’s bullish on bitcoin and they’ve enjoyed the ride. And I know that bitcoin has been enjoying a little bit of a ride going into 2024.

In a general sense. As far as the valuation of it, I’m not a fan personally. I’m not telling you what to do. I’m telling you what my mindset is. I have been researching feverishly and paying attention to different cryptocurrencies, blockchain technology, ethereum, bitcoin, the like. Right? And I understand blockchain technology and that it’s going to play a huge role going forward in the future, regardless of whether people hurry up and jumped on a bandwagon and then they crash out and all of that.

Blockchain technology is always going to be here to stay. But I still do not fully understand the valuation of it. I don’t understand where it get its valuation at. See, I understand a stock, a publicly traded company’s stock price, and sometimes it could be overvalued or undervalued depending on how you understand the markets or how the market is going to react to it. I know we got to stop a lot of day traders.

I know that cryptocurrency in itself is very volatile and the value of it is based off of its popularity. But I truly do not understand how it truly gets its valuation. I don’t. I’m a C student. Nobody has been able to explain it to me. I understand XRP also. But again, nobody up to this point, and here’s my biggest point from that, is that I don’t advocate for anybody, regardless of what an expert tells you, because you always have to do your own research.

I don’t advocate for anybody to invest in anything until they 100% understand it. I understand the valuation of different companies and whether I agree with that valuation or not, or whether or not it’s a growth stock, dividend stock, the earnings per share, the potential growth that comes along with it, the analyst expectations and everything. I can break all that down depending on which company that we’re talking about to at, to a science.

I truly understand those companies. I understand that industry. I don’t understand personally, and I’m never going to try to be the expert for everything. I’m just going to tell you the truth now. If you ask me to give you some insight on the automotive industry, if you ask me to give you some insight on certain technology companies, if you ask me to give you an understanding on certain banks, we can break that down to a science.

And that’s what we’re going to have stock club starting this Sunday, this weekend. But all of these years of me doing research, and I’m going to still stay immersed in it because I am a fan of blockchain technology. Nobody has been able to explain to me exactly what the valuation or where the valuation comes from as far as cryptocurrency. Yeah, it’s a lot of people that probably got rich.

It’s a lot of people that went broke, too. Way more people that went broke. I don’t care about the money aspect of it. I care about understanding something before I get into it. And I’m never, and this is the thing that I teach my people. I will never, ever tell people to, I can’t tell you what to do, but I’m never going to tell somebody to do something that I don’t understand or they don’t understand just because somebody else is bullish on it.

That’s my stance on it. Let’s continue up 72% year to date, easily outperforming some of the major market benchmarks, still down 65% from the high back in February of 2021. For you, though, a lot of critics we bring up, I got you burning up arc, and you have a lot of fans and you have a lot of critics. There’s a lot of discussion. Does it feel, though, a little bit like a victory lap? This, you know, we are very happy that a couple of things have happened, that this idea that interest rates were going to continue moving higher has been proven incorrect.

And I think even the Fed, while there is that small possibility, even the Fed is now starting to talk about the other side of the interest rate move. And so I do believe all we’ve seen so far is a reaction to that macro phenomenon or judgment call. We went through our flagship strategy, and all of our strategies went through a very difficult time from February 21 through December of 22, as interest rates first of all were presumed to move up or forecasted to move up.

And then when they did move up, so it was almost like a double discounting. And so we’ve seen the first installment of the correction there to the upside for our funds with this notion, and it’s again the forecast that interest rates will come down. And we would presume that if they do come down for the reasons we think they’re going to come down, the most important one being deflation, then our funds will be in good shape because our companies thrive on deflation.

Technologically enabled innovation is deflationary. So, Kathy, a very good morning to you. It’s Manus first time we’ve met on. So we’re going to move to a deflationary environment. We’ll come back to the big macro call in a moment. Just let’s square it away. Before I talk to you about the flows in the funds, which is how much interest rate cuts do you presume, are you forecasting? Leave the forecast of everybody else aside.

What do you presume will happen next year? Well, we put up a chart in one of our in the nose, which is a YouTube video that I do every month, employment Friday. And in that chart, you will find a ratio. It’s the metals to gold ratio. So metals price to gold price. And there has been an extremely tight correlation between that ratio and long term interest rates. In October we published it, or early November.

And what you will see is that there was a very wide gap that had developed. The metals to gold ratio was near its low for the past 1215 years, and interest rates were at their highs, 5%. The correlation, if you just eyeballed that chart, the correlation suggested that rates should go to 2%. Now, maybe they won’t go all the way to 2%, but we think that long term interest rates are way above where they’re going to end up because of deflation.

Okay. Which will actually drive up the valuation of a lot of these companies, which is why everybody is expecting 2024 to be a big year. The Fed has been signaling, and everybody has been signaling that the Fed is going to drop rates. They’re going to drop rates, and interest rates are going to come down. People are advocating for it. They think that this is the thing that’s going to help stimulate the economy.

I think that it’s also going to cause more inflation, because the only weapon that the Fed has against inflation, literally, is raising rates. Right. And rates aren’t even as high as they were at different points in history. But that is going to cause. And people are preparing for that. That is going to cause, basically, quote, unquote, a gold rush, and people having a sphere of missing out and people continuing to think that money is very cheap, which then incentivizes them to spend more money or to finance more or to pull more money out of the banks.

And it kind of stimulates the economy. But there’s a gap between the valuation of precious metals, gold, and also the interest rates. And so that’s going to be the thing that inspires, or it’s going to incentivize people to move a certain way when it comes to their investments and their consumer spending, which ultimately benefits the banks. We’ll come back to that and see whether we get. I’m going to ask you about the flows into the funds, which is obviously, as Carol just said, you’ve got a bit of a victory lap going on at the moment, but this is the first year of outflows.

I don’t think that they should lower interest rates. All of the people that’s looking to make a whole lot of money is looking for them to lower interest rates. I don’t think that they should lower interest rates. Have those outflows stopped? You’ve had a great performance in the back part of this year. Have the outflows stopped? And has that bleed stopped? Yes. Well, we were very gratified at our asset retention in 21 and 22.

In fact, we had net inflows, if you combine both years of more than $18 billion, and this year, more money flowed into arc than went out of Arc might expect that those who averaged down into the very steep declines that we were seeing in 22 especially, might take some. And everybody was losing out in 2022. So I know that some people in the chat was saying, well, she made some bad calls you couldn’t miss.

In the beginning of the pandemic, everybody, I think I made a 63% return on my portfolio. I’ve never in my entire life, in my entire life, ever had a 63% return. I had the best years of my life during the pandemic as far as my investment in my portfolios. But then everybody is always going to be a pullback. But you never, ever look at the pullback as the same way that everybody else does.

You look at it as an opportunity to invest more money because you didn’t have to do anything, so you just bought more of whatever it is that it was. And so the outflow is. I guess what she’s referring to from 2022 was the pullback or the drawback as far as how much her portfolio suffered once that bull run started to end at the end of 2021 profit. So we have had, I know, for our flagship strategy, it’s roughly $500 million in outflows, maybe for all of our strategies, 1.

8 million. So maybe 10% of the inflows that we enjoyed during 21 and 22. So, again, we’re very gratified and grateful to our clients for the support that we continue to receive. So has the outflow stopped? We have had days of on balance very recently, yes. And I think part of this is many. So, no, it hasn’t stopped. But she. Come on, man, don’t finesse me. People do tax management toward the end of the year.

And so some of the outflows might have been associated with clients who got in at a high cost base and were just harvesting some tax losses. But I think we’re through that. Do you find it a little surprising, though, Kathy, considering the run up, or. I’m curious about the conversations you do have with investors, considering the year that you’re having, and then to see those flows, it’s got to be a little.

No, no, not at all. Actually, we put out a piece for resolute, our distributor, and we basically showed them if you rebalance our strategy when there have been big moves one way or the other. I just wanted to talk about AI rebalance regularly or based on a rule like when the funds up 15% relative to everything else, take some profits. And what it showed, that study showed that if you are disciplined that way, that over any rolling five year period, it is highly likely almost 100%.

I’m not quite sure if it’s quite that high, but that you will beat the market, meaning, as measured by the Nasdaq or the S P, over a rolling five year period. And so a lot of our funds are with advisors who are very sophisticated and responded somewhat, perhaps, in this tax management part of the year, to that message. Listen, very rarely do I find anybody on an individual level over a long period of time.

I’m not talking about having one good year or something like that. Right. Very rarely do I see people actually beat the s and P 500. Very rarely do I see people over a longer period of time beat the s and P 500. But that’s just me. I feel like we have to talk about Tesla and Elon Musk. And I know you just had a conversation on Twitter X.

This has been, I think, from day one, right, in terms of you starting out that you’ve had this investment in Tesla. And I remember when we first talked and you were getting started, you talked about him being the next Thomas Edison and how his vehicles would turn the US economy upside down. Having said that, there’s an evolution and the EV world has changed. How are you thinking it’s still a top holding.

How are you thinking about the Tesla story right now? Well, first of all, Carol, thank you very much for letting me interview that time. That was nearly ten years ago. Archive is about to celebrate his 10th year anniversary, and you gave us that opportunity, so thank you. The world is evolving, actually, I think, even more closely to what we expected, because we expected a lot of traditional auto manufacturers to see the writing on the wall.

Dave Ramsay said he beats the S and P 500 and rush as quickly as they could into scaling big. Jay Reed says socks is the best investment. Even better than real estate. No, it’s not. No, it’s not. Not even close. Not even close. No, it’s not. In my experience, there has been nothing better than real estate. Nothing has been better than real estate for me personally. Time into electric vehicles and what has happened recently, both GM and Ford have said, we’re stepping back.

We’re not going to do this until it’s profitable. The problem with that is, in order to be profitable, they need to scale. That’s how this works. These are learning curves that they are riding down, and those are expressed in cost declines. So the fact that they’re pulling back means there’s more share for Tesla and others who choose to go for it. And, Kathy, I want to keep the conversation going on Elon Musk, but I want to bring it to the Arc venture fund.

Of course, it’s not an ETF. You invest in private companies, et cetera, in there, and you take a look at the portfolio. You have SpaceX in there, and you also have X, formerly known as Twitter. And in July, you had told the Wall Street Journal that you had written down your Twitter stake by 47%. Fill us in on the past couple of months. Have you written it down further, or how has that changed? No, I think it’s.

I wanted to go into AI. I don’t care about that. Amazing company. Good news, one lands. But let’s talk a little bit more about the private markets, because obviously, the private credit market has gotten a lot of attention. Right now, you’re looking at the private markets through this interval fund that you have. When you think about the opportunities there on that five year horizon that you have, do you see more so in the public markets or in the private markets right now? Well, now that we’ve had this very nice run this year, we think the answer to that question is, in the private markets.

They’re close. They’re close. Was Musk brilliant, but also erratic? And I’m curious how you think about Elon, the individuals versus Elon, the companies he’s creating, the things he’s doing. Because I think if there is time, any other CEO of a major publicly held company would, I think it’s safe to say, not be able to get away with a lot of what he has done. So help us educate us how you make sense of it, of someone you have followed, talked with above Elon, or is he at the money.

You’ve got Elon, you’ve got Brian, you’ve got Tony Wood at Rocco. Does anybody come close to Elon or is Brian Armstrong maybe even at the money with Elon or above? Well, we don’t actually look at the world that way, one relative to the other in terms of management team billion to 100 billion. Will you take a position in OpenAI? Is that going to be part of your holdings as you explore the next development of AI in your holdings? Well, in our private portfolios, we are already exposed to anthropic, which has been a major beneficiary of the drama around OpenAI that we all witnessed a few months ago.

But if you look at GPT four, which is the latest large language model that OpenAI has published, it is way above others in terms of performance. So there you have it, the pros and the cons. So we can’t tell you what we’re going to do in that portfolio. But we are so impressed at how OpenAI has led the industry. We’re also impressed, however, at the open source models and we’d like to encourage more of that movement.

We know that meta platforms with llama two and it’s working on others is moving very quickly and making great strides. So for much lower cost, open source is free. Companies can get close, not at GPT four, but close. So we want to see the open source movement in the venture fund we also own. Kathy, we’ve got a. Oh, sorry. No, man, they should have just let her keep going, let her rock.

Not obviously I’m a Microsoft fan, so I’m heavily invested in Microsoft. I’m heavily invested in meta. Obviously I think artificial intelligence or AI is going to play a huge role. You see that Microsoft right at that ship when the OpenAI founder and CEO was ousted and Microsoft took control of that real quick and put him back in. But allegedly there’s some technologies that’s happening and OpenAI is so far ahead of everybody else as far as artificial intelligence and language models that there’s some fear that they have technology that’s way beyond anything that anybody could imagine and I can’t imagine what that is.

But Microsoft is heavily invested in them. They have a vested interest in seeing them successful. I’m just going to stay with Microsoft specifically. I think that they have been one of the best performing companies. I am invested also in chip companies, Nvidia. I think that they’re great. I’ve actually divested a lot of my portfolio as far as where I am in the automotive sector and I like to invest based off of sectors, not just companies.

I invest based off of sectors and I’ve divested a little bit or a lot of my portfolio from Tesla and started to put it into Rivian last month, November over to December, Rivian did me over a 40% return on my portfolio. And I was actually talking to Ian Dunlap, who some of you all may know as master investor over at earn your leisure. And I was sending them some stuff and saying, hey, man, you might want to take a look at this, and so on and so forth.

So my long term play in automobile sector, and I’m not telling you guys what to do, I’m not an advisor, is Rivian as far as the automotive sector? Well, I’m not going to talk about any of this. I’ll talk about it in stock club. We’ll debate about it, we’ll go about, we’ll go over it. I’ll post a link to what we’re going to do for stock club this weekend inside of the Patreon.

The Patreon link is in the description as well as pin to the top of the chat. We’ll talk about that. .