What Cathie Wood JUST Said (& My Reaction)

well um when when i first met vinay it

was at an etf conference where

i was or an arc was kind of a curiosity

it was in 2018

and nobody believed we would make it uh

everybody was curious how could an

active manager

uh work within an etf rapper that's for

passive it's fully transparent

but the nae believed that we were going

to be successful

and believed in our transparency our

active

our information flow and he's run with

that

with the tiffin companies uh very

focused on transparency

and bringing in intelligent access to

especially uh registered investment

advisors and institutional investors so

um we were intrigued with his business

or we have been intrigued

uh we've piloted some of his uh services

and have been very satisfied with the

result

so benay it brings us to you and what

you're trying to build

obviously there's a lot of money going

into fintech not just from venture

capital but some of the biggest banks

jpmorgan visa doing billion dollar deals

in the last few weeks

so i think of magnifier subsidiary as a

sort of google

for investments but you're expanding

into actually

selling the investment products talk

about what you're trying to build what

your vision is

yeah thank you sir for having me here

kathy thanks for joining as well

and you're absolutely right look fintech

investment has gone from

vc investment in fintech has gone from 4

billion in 2016

to 8 in 2018 to 35 billion last quarter

just in fintech a lot of this activity

has been largely focused on payments

lending new banking and what's happening

in the space of wealth and investments

is still

new and still mason so tiffin we think

is part of the solution

we are a platform that really builds

fintech products for the world of

investment and wealth management

and uh what we are really doing magnify

which is one of our subsidiaries

when we presented it here uh in august

had a few hundred thousand users which

the number of searches on our platform

has

exceeded 10 million last year which is

clearly telling us

that the marketplace needs a simpler

easier

more natural way to discover compare

investments

and the next national step for us was to

enable action

in how can you discover compare and then

maybe invest

which is what we're doing now with our

so quick note this is basically a

company

where they build fintech companies so

they do the infrastructure for

fintechs you used to push people after

they search stuff to

to other asset managers and brokers now

you're going to do it yourself how do

you take your commissions

great question first so i think that you

know this goes back to my academic

background it's pretty clear there's

lots of research

and evidence that uh excessive trading

hurts performance

and we also know that guess which

segment of the market trades excessively

it's really the discount

brokerage audience and the discount

brokerages all of them have an incentive

to promote trading whether it's through

commissions or whether it's through

it's through selling order flow so we

thought hard about how can we build a

platform that is really investor focused

and encourages investment um

so we don't make revenues from selling

order flow or from commissions

what we do is charge asset managers

investment managers

who who access the investors using our

platform and we do that in a very

transparent simple way

where if you go in and search for for

example e-commerce without amazon

you will find the first result sponsored

in a very transparent manner

we also have subscription services

um kathy wanted to talk a little more

broadly about fintech we

we know you're a big fan of it across

all of your

portfolios and uh it's been a great a

great play for you

so far is different some of those stocks

though on on simple multiples

can look quite expensive and we wondered

whether

we'd found a cheaper alternative for you

earlier on the show

we have bank of america chairman and ceo

brian moynihan

and uh here's a soundbite from that

interview

we are a technology company we're

basically huge capable technology

platforms

okay i heard him say that they literally

asked him

are you a fintech and he says we are a

technology company

i'm like bro bank of america why don't

you just be

straight with people and go we're not

like my answer would have been

something more like no we're not a

fintech a fintech is a smaller company

that doesn't have the experience

of an institution like us you know if i

were bank of america right like if i

were pitching them i would go from that

angle like

we actually have way more products and

way more services we're not a little

baby

financial company we're we're a big

financial company with better options

for our clients right like that's the

pitch i would have given

but this this pitch would in my opinion

was just like dodging the question it

was

sorry kathy i'm i'm i'm being a little

bit cheeky here but

seriously would you consider buying bank

of america as a fintech company for your

portfolios

well we do we we would not it's not what

we do

uh we are very focused on innovation and

uh and and very rapid growth companies

so our

revenue growth is uh north of 25 so

we're not going to see that

from the traditional banks but what we

will see is much like what has happened

in

traditional retail we have walmart and

costco and target

they are doing very well while a lot of

the market

is hurting badly so we do think that uh

industries that are going to that that

are um

they're under attack from fintech from

many many directions no question about

it

uh but the biggest and those who invest

in

technology in the the smartest way

possible

are going to basically consolidate the

industry we do

we do believe that uh what has happened

to retail

is going to happen to financial services

at an accelerated rate

makes sense kathy wanted to take the

opportunity with you just to ask about

some of some of your other

investments obviously a lot of buzz and

people pay attention when you come on

you made a lot of news warning about

china and have been unloading some of

the

the chinese names amid the crackdown

we've seen from the from the chinese

government what do you think is going on

there and what

happens to your holdings that are still

quite substantial and names like alibaba

are you just going to continue to unload

well

what you've seen is uh mostly in the

flagship strategy which

which incorporates all of our innovation

platforms

all of our ideas scarce real estate uh

50 names and when we see a

an assault and i would say it's more on

the valuation of many of these names uh

uh we we will pull out and and

consolidate towards higher conviction

names

in our other portfolios uh what you'll

see in our autonomous

technology and robotics strategy ark for

example

we haven't done that much except at the

margins

with those companies that we believe

need to expand outside the rest of the

world

in order to sustain their growth rates

we do believe that china is

clamping down i don't know if it's

capital controls

i do know there's a little bit of a

retaliation uh

against the biden administration's

policies which are a continuation of the

trump administration's policies i think

that's been the biggest surprise

for china and i think for most investors

we thought that the

u.s uh china savor rattling would

diminish somewhat that has not what you

will not see us do with the chinese

stocks

is pull out of those names that are more

endemic to china

itself china does want to be a leader in

innovation

and uh and is very supportive uh for

for uh its companies scaling as quickly

as they can

internally what i feel is going to hurt

at the margin though

is any company and in fact in their last

policy

announcement they said any company with

more than one

million users and as you know in china

i think wechat has over 800 million

users

they're going to be under tougher

regulatory scrutiny so i do think that's

a valuation downgrade

i think that has happened and uh let's

see what happens from here

uh i as i said i don't think china wants

to cut it

cut itself out of the innovation game i

think it'll encourage it internally

and we'll wait we'll wait for things to

settle down and then

again reopen and allow its companies to

scale more

into the rest of the world what what

about kathy

uh china's uh clampdown on on bitcoin

did that also

warrant a evaluation downgrade in

bitcoin

uh well it was the combination of that

and uh the

esg concerns that uh elon

elon musk headlined uh at one point in

time

uh so yes there's been angry but let me

explain give you a comparison in 2017

china shut down all of its exchanges

bitcoin exchanges

and uh the market went through a a

big uh fallout because many people

thought oh my gosh most of the trading

is taking place in china this is the end

well guess what it migrated elsewhere in

the world

japan korea and thailand were the

biggest beneficiaries back then

and as you will remember after that

bitcoin uh

started to scale from one thousand

dollars it was actually less than one

thousand

to twenty thousand dollars in that one

year so

i think the same is true with miners

somewhere between 50 and 7 65 of all

mining

bitcoin mining was in china i actually

think it's a healthier phenomenon

uh to uh disperse that mining and a lot

of it is coming to the united states

and moving towards renewables and as you

know we have just done a paper with

square we're going to have a conference

on

july 21st uh we're one of the hosts with

square

where we're going to explain how bitcoin

mining will probably become part of

utility ecosystems

and will proliferate renewables

faster than would otherwise be the case

so

we're pretty excited by that and we

think that uh elon musk

and tesla generally uh will become a

part of that ecosystem

so uh we think this is temporary we

think institutions pulled back and said

wait a minute what do we have here

esg's top of mind and i think we're

answering those questions

uh and at this conference you'll see uh

there could be nothing better than

bitcoin

in terms of esg governance with the

transparency

social this is a little bit of a use a

different use case but

uh enabling economic empowerment

throughout the world

uh and uh environmental if we're right

that

uh this community bitcoin community is

very environmentally conscious as are

the institutions

i think that we're going to see all of

the e s

g answered at that conference well that

it's a non-consensus view on on

certainly on bitcoin right now

kathy uh but maybe you're reassuring the

bitcoin fans they don't have to hate

elon musk

speaking of mr musk you know i was going

to ask you about

that and tesla and your position

he said this week at a trial kathy that

that tesla would die without him

and i'm curious whether you agree and

what it says about a company that you

value at almost two trillion dollars

that the ceo says without him would be

worthless

yes um well uh i think

that uh getting through the 0.809 near

bankruptcy

uh was elon musk brute force

determination and creativity ingenuity

and i believe also that it's uh

move up to this point he has been very

critical

uh especially around the move towards

autonomous i know most people don't

believe that

that's going to be successful but we

believe is going to be very successful

and he has been driven and

focused and has not let short-term

oriented shareholders

uh um divert him from

that mission so i do think just like

amazon if jeff bezos had not been there

i think about all the years i remember i

suffered with it uh

but what about going forward all the

years

uh jeff bezos during the tekken tele uh

crash and for i think through 2006 seven

after

he was saying we are not going to be a

profitable company

we are going to uh reinvest all the

upside from revenues

into the business and we are going to

take the lion's share of this business

uh not only that one and aws

so these leaders who are willing to

um to buck up against their largest

shareholders

and and say no we must invest now

if we want to capitalize on this

exponential growth

opportunity i think i put elon uh

jeff bezos steve jobs in that category

you know apple certainly would have

disappeared were it not

for uh steve jobs so uh these are very

special

visionary leaders there are not very

many of them they don't come around

uh there aren't the this big a set of

opportunities either

uh we think there are more now than

there have been historically because of

all of the innovation evolving

uh but i i understand what he says uh by

saying he doesn't like to be a ceo but

he had to be

uh and i agree with him i do agree with

him

she didn't answer i wanted to come back

to tiffin and uh

she didn't answer going forward and now

they're off the topic i'm kind of bummed

about that

like what if he left today i wondered

whether you were outright critical of

some of those apps

like for example robin hood but many

others too uh

that uh are incentivized by driving

volumes and what makes you confident

you'll attract those retail traders that

certainly at the moment

are very much engaged by trading stocks

whether or not

your platform might offer better

long-term returns for them or not

yeah wilfred great question look i think

robinhood has built a great business

uh for themselves for sure and we

respect them for bringing many more

participants into the markets

it's just a natural evolution that once

you democratize access

i think access without intelligence is

detrimental

and our purpose is quite different from

from robinhood's

what we want to do is to promote

investment

longer-term trading and better outcomes

you know we

we believe in gamifying knowledge for

better outcomes

rather than gamifying trading if you

will but

one meets you know one step had to

precede the other is my view on this

today there are enough participants even

beyond robinhood

there are many discount brokerages so

the segmentation

of the audience across brokerages

provides

enough opportunities we believe to

attract folks who

probably want to invest more responsibly

more intelligently

where'd they go and finally kathy i

always ask you every time you're on

what you think is the best opportunity

right now a lot of these hyper growth

names have been hit

and have not rebounded with the nasdaq

and some of the mega cap

tech name so so where do you see the

best opportunity

among all the names you like or even

maybe some new ones

well you know we've had a good rebound

sorry

we've had a good rebound since uh midway

mid-may i think uh and so growth has

come back

into fashion i think we're in a bit of a

dueling match

maybe risk off right now for the market

you were talking about inflation earlier

if i could just lob in a few examples of

major deflationary forces we're seeing

lumber prices today uh are

less it's they've dropped by almost

two-thirds

since the middle of may i do believe the

fed today is talking about

housing risks and so forth so that

perhaps that's one reason

but that's been a severe drop as ha

copper has come down 10 15

we are are seeing uh even in the auto

space the mannheim

used car index for the first time in 13

months

ticked down we believed used car

prices are uh going to to fall

uh they've they've gone way too far away

way too fast

and um we we talk all the time about the

deflationary forces associated inflation

i believe leah

earlier mentioned it uh but it's not

just on the disruptive innovation

side our companies causing uh these uh

falling prices that explode demand

that's good deflation there's another

thing going on it's called creative

destruction

and companies who have not been keeping

up with innovation

are going and have been leveraging up to

buy back shares

and satisfy short-term oriented

shareholders

they are going to have to service their

debt by cutting prices

so i think not only do we have good

deflation and bad deflation at work here

but now we're seeing the beginning of

cyclical deflation

and i think we're in a risk-off period i

know uh we got hit today a lot of growth

strategies got hit there was a shift

towards defensives

and i think there's a lot of confusion

but if growth is going to be scarce

because inflation's going to come down

uh

our kind of strategies which generate

revenue growth rates in the 25

percent plus range are going to shine

longer term

happy wood exciting i didn't mean yeah

cut you out so you know our top names

uh as usual tesla's at the the

head of the pack uh roku is a very

important name to us

square zoom shopify uh

teledoc uh these many of them are

described that

stay-at-home stocks and why you know

we're going back to work why

why are you paying attention to them uh

these

what we believe is the world or

coronavirus crisis

changed the world dramatically and

permanently

and one when consumers and businesses

find faster cheaper better more more

productive

more creative they're not going back to

the old world

so many of these stocks have been cut in

half and then

some because there have been algorithms

saying their stay at home stocks

sell them uh we think that's a mistake

cathy wood thank you very much fenay

nair thank you as well for joining us

from tiffin

and congrats again on the uh the new

addition to your board

thank you both bank of america didn't

make the list no

that's a good one to end it on uh okay

uh i want to just uh add some commentary

on this because uh

uh yeah there's some things that were

really interesting on this uh oh boy

that was a priceless uh way to end that

uh so some things that that are very

important to highlight uh

some notes that i took from what kathy

wood just said number one

i i love that she makes it so clear that

they target

growth companies look bank of america is

a company that is not expected to

grow anywhere near like

fintechs that makes sense right because

fintechs are starting small and

they have explosive growth ahead of them

in fact wall street estimates

for growth at a company like a bank of

america right now

are 2.8 percent for 2021

4 for 2022 5.6 for 2023

and so it becomes a little bit more

apparent that when you compare growth

and you're like wait a minute that's

well that's kind of low you know well

now it makes sense

why do you think you're paying a lower

multiple for the companies uh

sometimes i see these threads on reddit

and people are like oh

if the p e ratio is high it means it's

overvalued

no it doesn't it means there's a lot of

growth being priced in

sofi is expected to grow over 51

in the next year just to give you an

example let's think of another one

i don't know what's what's another one

uh we could uh um

ally maybe you could maybe consider ally

ally would be somewhat in the middle i

think i'd love to be able to look up

like a robin hood

uh yeah no i see ally not much growth

here actually

uh pretty low growth and ally so bad

example uh and then i don't use ally but

i'd love to look at like a robin hood

growth but i'm sure you can estimate

that yourself too

now your expectations are that robin

hood's not going to grow like a bank of

america at

two or three percent uh or it's going to

more likely grow

in line with what kathy's expectations

are for growth companies growing more

than 25

per year i guess suppose an easy example

would be because we talked so much about

it

as an easy example would be comparing to

let's say tesla right tesla's growth is

expected to be 50

compounded growth in deliveries over the

next few years

so uh that that's huge by the way so

anyway

uh additionally kathy wood reiterated

that during tough times

they they'd like to uh consolidate

their position so what they'll do is

they'll have fewer positions they'll

sell out of some positions that they

have less conviction in

and they'll add more to higher

conviction names she

talked a little bit about china how she

thinks there are a lot of risks with

china right now

china is uh is possibly uh

creating some issues because take a look

at this you've got

this as a as a headline here on

bloomberg us to extend

trump era halt on economic dialogue with

china

treasury secretary yellen and her staff

have no plans to resurrect the regular

u.s china economic dialogue

that governed ties between the two

nations during the obama and bush

administrations

and so here's just another example of a

kathy woods sort of

well i mean this was a headline piece on

on bloomberg here but but kathy wood

applying headline news

to her investing strategies she's saying

look this is a problem

when biden got in we thought relations

with china would get better

but biden's actually continuing them in

in essentially the worst direction

unfortunately

then we have information about her

talking about

uh china she spent a little bit actually

a good amount of time talking about uh

chinese china and bitcoin how uh china

essentially getting out of bitcoin

mining which previously potentially

supplied 60

60 to 70 percent of all of bitcoin

mining which estimates vary on this

so this is kathy's estimate 60-70

percent of bitcoin mining was in china

she says

she says from an esg point of view

environmental social governments right

this is a really really good thing uh

sustainability transparency uh social

empowerment very very good

uh so she likes this i've read her paper

with square on bitcoin

or paper uh with bitcoin or about

bitcoin with square

talks a lot about how we can actually

use bitcoin to help expand our green

energy grid this is something that

governor newsom for example in

california would be very smart to pay

attention to like why don't you pay

attention to the fact

that we could work and incorporate

blockchain incorporate bitcoin and

utilize this

with green energy expansion so we could

use energy that's otherwise being wasted

wonderful opportunities uh this is why

i'm running for governor california and

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now tesla

on tesla elon musk in testimony i

actually pulled up

the exact quote so i could get the uh

the appropriate context because

personally i believe context is very

important

in a statement during his trial about

his acquisition of solar city

he claimed that while the ceo position

is one that he doesn't necessarily want

he must maintain the position or quote

frankly

tesla is going to die yeah that's not

good

that is a very current statement elon

musk is saying

presently either tesla is at risk of

dying without him

when kathy wood was just asked about

that on cnbc

she didn't answer she did not answer

that she literally talked about elon

musk and how important he was during the

bankruptcy

phase or or near bankruptcy phase in

2008 2009

how important jeff bezos was to amazon

when it was you know and how they didn't

want to be profitable how they wanted to

reinvest everything

how important steve jobs was to apple

during the tough times in the 80s and

90s

she told us nothing about her opinion

about what if elon musk leaves tomorrow

i didn't really like that non-answer i

don't know if she just forgot to get to

that part

now i'm just going to inject that yes i

know that kathy wood

said she agrees with elon but keep in

mind she's deflecting the question

the question is what would happen if

elon musk left now

and she says i agree if elon weren't

there in the past

it'd be bad so what do you think going

forward

but sara eisen had a pretty blunt

question and we got a miss on that one

personally if elon musk today is saying

tesla's going to die without them

that's scary right that's scary to hear

now i do personally believe

that this could be just an exaggeration

of elon musk

i i do believe that tesla is in a

wonderful

position to to grow and and sustain

without him

but i could be wrong and i'm not trying

to undervalue what he contributes

but it just makes me wonder like could

tesla continue at this point like apple

continued without steve jobs or does

tesla need another 10 years of elon

to get to that point of stability right

when steve jobs

unfortunately passed away and stepped

down from apple before that

uh sorry from from apple apple was very

very well

positioned i mean they they were what

was this 2013 or 14

you know iphone 1 was out iphone 3g was

out the ipad was out

uh i think facetime was already out at

that point let me see steve jobs

his face time was 2013 or 14 as well oh

wow wait a minute never mind

he died in 2011. oh i misaligned that a

little bit my bad

uh maybe i'm just not remembering when

facetime came out facetime release

facetime release date oh see okay okay i

just had my dates wrong facetime came

out in 2010 the ipad came out in 2010

the original iphone came out in 2007. so

a lot of these these really important

like innovative products came out right

before

uh his death and uh these were

incredibly successful products

so uh i'm surprised i was a few years

off on that one but

i was correct in my order just wrong in

my years

uh anyway uh then uh then let's see here

we also have this uh let's talk about

the market this dueling match in the

market

that kathy was talking about uh this

really has to do with the dually match

of inflation

i actually tweeted about this a little

bit i didn't really love

her investment or joining the board of

this this tripping company or whatever

uh maybe maybe this is uh

something that um uh i mean it's not a

company that i believe that we can

invest in

let's say triphen let's see if they're

public i don't believe it is i think

it's way too new

i think it's a larger sort of company

that uh or

sort of a a company that develops the

backbone or

infrastructure for companies like maybe

a robin hood

or a sofi or other sorts of fintechs or

maybe smaller banks wanting to become

fintech-esque but not something that's

available apparently to be invested in

right now

so uh yeah wasn't so excited about that

we did hear talk about the dueling match

of inflation deflation

i do want to give you these poll results

i would like i do want to get more of

your votes here

so please go on twitter and vote but

take a look at this will inflation be

transitory or not aka are you

in camp sarah eisen or michael bury and

we've got uh

the vast majority of you voting here

transitory

less than three percent in 2022 almost

half of you believing that

another almost uh well just over 17

percent of you so this would be about 60

percent of you going for the transitory

argument

and then another about 40 percent of you

going for the not transitory argument

but go ahead and cast your vote because

this is very early

in the poll so it could still shift

substantially but uh kester pull

uh vote to see how you feel at realme

kevin on twitter

okay uh kathy wood then went back to her

argument about deflation

uh and uh how there are going to be a

lot of deflationary forces

creative destruction innovation that

means older companies are going to have

to drop prices to try to be competitive

as they potentially go bankrupt and

disappear

as more innovative and better

technologies advance and take over

this is an argument she's talked about

many times before it's not really worth

fully rehashing it right now

uh she did also reference that lumbra

fell

a good chunk here in the last few weeks

i don't know if lumber is exactly the

best

reference okay look i want to be fair

i'm a big fan of kathy wood but i'm not

exactly sure that lumber is the best

reference to say deflation is here

because lumber just ran up like crazy

so it's no surprise that it the

speculative bubble of lumber is

is now behind us and it's falling down

so i don't i i'm certainly and look i'm

somebody who believes inflation's going

to be transitory that we're going to

have a bigger risk of deflation

but i'm not going to use lumber as my uh

as my backup

so as you can see him i have my

differences of opinion to kathy wood

uh but uh in general i think we're on

the same boat

so i hopefully appreciate this insight

if you do make sure to subscribe

and uh somebody says uh that kathy wood

did say that she agrees with him

about yeah but okay maybe maybe so i

just got a notification that some of you

say kathy said she agrees with a lot

so maybe she has she said she agrees

with elon but

the thing is her entire conversation was

focused on

the past she didn't give us any insights

into what about going forward right like

what what if elon leaves going forward

and i think that was a little bit

frustrating uh which which is also what

i highlighted

in in the past few minutes when i talked

about it anyway thank you so much for

watching this folks thanks for being

here

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