Cathie Wood on Bitcoin Holdings, Tesla, AI, 2024 Outlook

Bloomberg Television
28 Dec 202319:57

TLDRIn a recent interview, Cathie Wood of ARK Invest expressed optimism about Bitcoin despite regulatory and tax uncertainties. She discussed ARK's strategic shift from Grayscale Bitcoin Trust to ProShares Bitcoin Strategy ETF due to regulatory clarity and tax concerns. Wood also shared her views on the potential approval of a Bitcoin ETF, the performance of ARK's funds, and the future of Tesla and Elon Musk's ventures. She highlighted the deflationary nature of technological innovation and the importance of scaling in the electric vehicle market. Wood's insights into the private markets and her evaluation of company founders, including Elon Musk, were also a key focus of the conversation.

Takeaways

  • 🌐 Optimism about Bitcoin remains high despite regulatory and tax uncertainties.
  • 🔄 The discount between BTC and NAV has narrowed significantly, from as high as 50% to single digits.
  • 💹 ARK Next Generation Internet ETF (ARKW) sold its stake in Grayscale Bitcoin Trust and bought ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures.
  • 🚀 The SEC's engagement with Bitcoin ETFs suggests an increased likelihood of approval, with a January deadline in sight.
  • 📉 The ARK Innovation Fund has outperformed major market benchmarks despite being down from its high in February 2021.
  • 💡 Cathie Wood's investment strategy is based on the belief that interest rates will come down due to deflation, which benefits technologically enabled innovation.
  • 🔄 The metals to gold ratio indicates a potential decrease in long-term interest rates due to deflationary trends.
  • 💰 ARK has experienced outflows, but the firm is satisfied with asset retention and client support.
  • 🚗 Tesla remains a top holding for ARK, with traditional auto manufacturers pulling back from electric vehicles, leaving more market share for Tesla.
  • 🛰️ ARK Venture Fund includes investments in private companies like SpaceX and X (formerly Twitter), with a focus on a five-year investment horizon.
  • 🤖 OpenAI's GPT-4 is considered a leader in AI performance, but ARK is also interested in open-source models for their cost-effectiveness.

Q & A

  • What is the current sentiment towards Bitcoin according to the speaker?

    -The speaker expresses optimism about Bitcoin, noting that they are as optimistic as they have ever been.

  • What regulatory and tax uncertainties are mentioned in the context of Bitcoin?

    -The speaker mentions that there are uncertainties regarding the approval of various Bitcoin-related products and the criteria set by the SEC, as well as potential tax implications.

  • Why did the speaker's team sell their stake in Grayscale Bitcoin Trust?

    -The decision to sell was based on regulatory and tax uncertainties, as well as a significant discount between the trust and its net asset value (NAV), which has since narrowed.

  • What did the speaker's team buy instead of Grayscale Bitcoin Trust?

    -They bought into the ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures and does not hold physical Bitcoin.

  • What is the significance of the January 8th to 10th date range mentioned?

    -The speaker suggests that this period might be when the SEC makes a decision regarding the approval of a Bitcoin ETF, which they believe has a higher probability now due to increased engagement from the SEC.

  • How has the Ark Innovation Fund performed compared to major market benchmarks?

    -The Ark Innovation Fund has outperformed major market benchmarks, with a year-to-date increase of 72%, although it is still down 65% from its high in February 2021.

  • What is the speaker's view on interest rates and their impact on their funds?

    -The speaker believes that interest rates will come down due to deflation, which would be favorable for their funds as the companies they invest in thrive on deflation.

  • What is the speaker's outlook on Tesla and its position in the market?

    -The speaker remains positive on Tesla, noting that traditional auto manufacturers are pulling back from electric vehicles, which could leave more market share for Tesla and others.

  • How does the speaker evaluate the performance of their funds and investment strategies?

    -The speaker refers to a study that suggests disciplined rebalancing based on set rules can lead to better performance over a rolling five-year period compared to the market.

  • What is the speaker's perspective on the valuation of X (formerly Twitter)?

    -The speaker believes that X will become a significant 'everything app' and maintains a positive long-term outlook despite recent markdowns in valuation.

  • How does the speaker view the opportunities in private markets compared to public markets?

    -The speaker sees opportunities in private markets as being close to those in public markets, noting that public markets have been leading private markets in recent years.

  • What is the speaker's approach to evaluating companies and their founders?

    -The speaker uses a scoring system that includes metrics such as moat, barriers to entry, management, culture, execution, valuation, product and service leadership, and thesis risk.

Outlines

00:00

📈 Optimism on Bitcoin and Regulatory Uncertainty

The speaker expresses optimism about Bitcoin despite regulatory and tax uncertainties. They mention a significant discount between BTC and NAV that has narrowed from 50% to single digits. The focus is on the ARK Next Generation Internet ETF (ARKW) and the sale of Grayscale Bitcoin Trust in favor of ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures. The decision was made due to regulatory certainty with BITTO and tax considerations. The conversation also touches on the potential approval of a Bitcoin ETF by January 10th and the engagement of the SEC with various funds.

05:00

📉 Market Performance and Interest Rates

The discussion revolves around the performance of the ARK Innovation Fund, which has outperformed major market benchmarks despite being down from its high in February 2021. The speaker refutes the idea that interest rates will continue to rise, suggesting that the Fed might be considering the opposite. They attribute the fund's performance to the deflationary nature of technological innovation. The conversation also addresses the correlation between the metals to gold ratio and long-term interest rates, with the expectation that rates will decrease due to deflation.

10:03

🚗 Tesla and the Evolution of the Auto Industry

The speaker reflects on Tesla's growth and the evolving auto industry, noting that traditional manufacturers like GM and Ford are stepping back from electric vehicles until profitability is achieved. This, the speaker suggests, will leave more market share for Tesla. The conversation also shifts to the ARK Venture Fund, which includes investments in private companies like SpaceX and X (formerly Twitter). The speaker discusses the markdown of the Twitter stake and their long-term investment horizon, expressing confidence in the potential of X to become a dominant platform.

15:07

🌐 Private vs. Public Markets and AI Development

The speaker compares opportunities in private and public markets, suggesting that the private markets are now close in terms of potential. They note that public markets have been leading private markets in recent years, but this trend may be changing. The conversation also touches on Elon Musk's impact on the companies he leads, with the speaker highlighting his ability to create barriers to entry through innovation. The speaker also discusses their investment in Coinbase and their exposure to AI through their private portfolios, expressing admiration for OpenAI's advancements and the potential of open-source models.

Mindmap

Keywords

💡Bitcoin

Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. In the video, the speaker discusses their optimism about Bitcoin and the regulatory and tax uncertainties surrounding it, as well as their strategy regarding Bitcoin exposure through different investment vehicles.

💡NAV

Net Asset Value (NAV) is the total value of a company's assets minus its liabilities, divided by the number of shares outstanding. In the context of the video, the speaker refers to the discount between Bitcoin and its NAV, indicating the difference in value between the actual worth of Bitcoin and its market price.

💡ETF

An Exchange-Traded Fund (ETF) is a type of investment fund and exchange-traded product, traded on stock exchanges much like individual stocks. The speaker discusses the ARK Next Generation Internet ETF and their decision to sell their stake in Grayscale Bitcoin Trust, opting instead for the ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures.

💡Regulatory Uncertainty

Regulatory uncertainty refers to the unpredictability of future regulatory actions or changes that can affect businesses or investments. In the video, the speaker mentions regulatory uncertainty as a factor in their investment decisions, particularly in relation to Bitcoin and the approval of Bitcoin ETFs by the SEC.

💡Tax Uncertainty

Tax uncertainty involves the unpredictability of tax laws or how they will be applied, which can impact investment decisions. The speaker in the video expresses concern over tax uncertainties related to Bitcoin investments and the potential implications for their funds.

💡ProShares Bitcoin Strategy ETF

This is an ETF that tracks Bitcoin futures contracts, rather than holding the physical Bitcoin. The speaker discusses their decision to invest in this ETF as a way to maintain exposure to Bitcoin while managing regulatory and tax uncertainties.

💡SEC

The U.S. Securities and Exchange Commission (SEC) is a federal agency responsible for enforcing federal securities laws, proposing securities rules, and regulating the securities industry. In the video, the speaker refers to the SEC's engagement with various Bitcoin ETF proposals and the potential for approval, which would be a significant development for the cryptocurrency market.

💡Deflation

Deflation is a decrease in the general price level of goods and services in an economy. The speaker in the video discusses the expectation of a deflationary environment and how technologically enabled innovation, which their funds are invested in, is deflationary in nature.

💡Interest Rates

Interest rates are the cost of borrowing money and are determined by central banks. In the video, the speaker talks about their forecast for interest rates, suggesting that they believe long-term interest rates are higher than where they will eventually settle due to deflationary pressures.

💡Outflows

Outflows in the context of investment funds refer to the money that is taken out of the fund by investors. The speaker discusses the outflows from their funds, indicating that despite strong performance, some investors have chosen to withdraw their investments, possibly for tax management purposes.

💡Tesla

Tesla is an American electric vehicle and clean energy company. The speaker has a long-standing investment in Tesla and discusses the company's position in the electric vehicle market, as well as the evolution of the company and its CEO, Elon Musk.

Highlights

Optimism about Bitcoin remains high despite regulatory and tax uncertainties.

The discount between BTC and NAV has narrowed significantly, from as high as 50% to single digits.

ARK Next Generation Internet ETF (ARKW) sold its remaining stake in Grayscale Bitcoin Trust and bought into ProShares Bitcoin Strategy ETF.

ProShares Bitcoin Strategy ETF tracks Bitcoin futures and does not hold physical Bitcoin, reducing regulatory uncertainty.

There is a possibility of a Bitcoin ETF getting approval by January 10th, with the SEC engaging more actively.

ARK Innovation Fund has outperformed major market benchmarks, despite being down from its high in February 2021.

Cathie Wood believes that interest rates will come down due to deflation, which is beneficial for technologically enabled innovation.

The metals to gold ratio suggests that long-term interest rates may decrease due to deflation.

ARK has experienced outflows, but asset retention has been strong, with net inflows over $8 billion in the past two years.

Cathie Wood's long-term view on Tesla remains positive, despite recent challenges faced by traditional auto manufacturers.

ARK Venture Fund includes investments in private companies like SpaceX and X (formerly Twitter).

The valuation of X (Twitter) has been marked down, but Cathie Wood believes it will become a dominant 'everything app'.

ARK sees more opportunities in the private markets compared to the public markets, especially after a strong run this year.

Cathie Wood evaluates companies and their founders based on a scoring system that includes metrics like moat and barriers to entry.

Elon Musk is considered a maestro at raising barriers to entry through innovation, driven by first principles physics.

ARK is impressed with OpenAI's leadership in AI but also supports the open-source movement for more accessible technology.

ARK has exposure to AI through its private portfolios, including investments in companies benefiting from the OpenAI drama.

Cathie Wood does not reveal specific future holdings but mentions the acquisition of a company in London with interesting funds.