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and this is one of the most profound Innovations of our time so my conviction and it's born out of our research it's borne out great research that Yasin Frank and and David are doing uh now uh as well as what Chris has done and and the community largely so there's no doubt in my mind and you know many people think that I'm too confident uh in in not just with Bitcoin but all of our strategies we Face the same kind of pushback with all of our Innovation strategies this is nothing new this feels the same it's a little different to explain but um it's very it's not a company so more Finance uh but but it's it's a monetary system which is economics and I'm I'm comfortable in both of those zones undeterred by the market sell-off this year Arc invest founder and CEO Kathy Wood doubled downed on disruptive innovation stocks and predicted deflationary Trends will continue into next year CEO and CIO of arkhanvest Kathy Wood updates about her outlook on bitcoin fed policies and inflation she also speaks about the importance of investing in Innovative Technologies uncertainty of fed's decision making and the deflationary signals um we we get questions all the time I think people love to hear our uh our take on excuse me about crypto broadly no it's okay so but what we talk about is in the way I just described Bitcoin that's the money Revolution and then we have the financial services Revolution D5 a little more centralized but and then we have uh the the Next Generation internet uh revolution around digital property rights and I realize all of these are involve property rights but when you're talking about the Creator economy and and the blending of uh consumption and investment um it's probably even more centralized and in that third bucket um I I think when people hear us uh describe this new world especially young people it hits a responsive cord and the young people are bringing their parents into it so that's an interesting Dynamic that's no that really hasn't happened in my career before right yes and they're bringing Arc to their parents as well interesting wood continue to espouse her Playbook of an investing in disruptive technology and growth companies despite big losses for her fun this year as many of her stocks have plunged from pandemic era highs in 2020.
ark's Flagship fund The Arc Innovation ETF is down over 60 percent in 2022 compared to a 25 drop for The Benchmark S P 500 as rising rates have hammered tech stocks well um we just published an open letter to the FED today okay and uh basically said wait a minute how can you be unanimous in your decision making you fed board members unanimous at the last few votes when there's so much conflicting evidence out there and uh so you know yes we feel as though the FED is making a mistake here and that yes uh High uh beta stocks which would be our kinds of stocks more volatile than the market do get hit disproportionately but something's happening now and it's happening with Bitcoin as well which I find very interesting so our strategy bottomed in trade the flagship on May 12th and um and the s p and NASDAQ have broken below their lows last week they broke below their last lows we did not now maybe I'm jinxing myself and we will now but um our strategy has held up better since May and same with Bitcoin same with Bitcoin after the the the volatility in May um it's it's held in much better it hasn't hit new lows successive new lows it's in a Range much like our strategy is during a bear market and towards the end of a bear Market our strategy starts outperforming why there's a saying in our business that the new leadership shows itself toward the end of a bear Market it starts out performing so at the end of 0809 for example um I I was at a different firm but our Flagship strategy bottomed in relative terms uh uh November 24th I remember it well and um yet the market didn't bottom until May of 09 I mean March of 09 and in the first quarter the market as measured by the s p was down 10 we were flat so and then we came out flying and I'd like to think that's what's going to happen the problem is the Fed here and in the piece we wrote today we said please consider the conflicting evidence and at least debate you know it's talk about the risk of centralization this is a massive risk because it's not just the FED uh it's it's not the FED board members it's probably one member and that's Powell who's insisting on unanimity in their fight against inflation so what they're doing what they've just done is raised interest rates 13-fold from 0.25 on the FED funds rate to 30 to 3.25 and they're going to go to four We Believe on November 2nd that's a 16-fold increase in interest rates wood has been a vocal critic about the central bank's monetary tightening and interest rate hikes writing an open letter to the FED on Monday warning about a policy mistake the unanimity of fed Governors is worrying she said pointing out that the Federal Reserve and Jerome Powell think that this is the 1970s the funds still boasts an annualized return of nearly 10 since Inception in 2014 when wood founded the firm as rising to fame and surging nearly 150 percent in 2020 her Flagship Arc Innovation fund fell 24 in 2021 losing over a fifth of its value while the S P 500 was up 27 percent so when we started Arc we had four technology platforms genomic sequence and saying robotics energy storage and then next Generation internet Brett Winton our director of research when we were at Alliance Bernstein together was occasionally bringing into our brainstorm on Fridays this thing called Bitcoin so that really started in 2011.
we started Arc in 2014. um I guess we had gone through Mount gox and and so we said okay let's start with the Next Generation internet and as as time went on and we did our research on bitcoin and the first paper we wrote was in 2015 and it was in collaboration with art laugher and so I said art I want you to take this paper can Bitcoin serve the three rolls of money and I want you to tear it apart now our art art is known for his fiscal policy expertise but his his um Mentor was Robert Mondell who won a Nobel Prize for his monetary Theory and he was very involved in bringing the Euro together so I don't know how people feel about that these days but nonetheless I'm glad we're not part of it yes there you go so then um uh so art did rip it apart and which was fantastic and and he came back to us and he said I've been looking for this ever since we went off the gold exchange standard he said I may not it's a rules-based monetary policy rules-based monetary system and I said oh and he said I may not agree with the rule because he was thinking more in terms of inflation so you'd want a price rule as opposed to store a value which quantity he says but it's okay it's a it's a rule and we need to get back to this and I said to him art how big could this be and he said well how big is the U.S monetary base now Bitcoin was 250 at that time so is it roughly a six billion dollar Network value or Market Gap and I said how he said well he said how's the monetary I said it's 4.5 trillion dollars he said there's your answer I said really and I am immediately I I put a lot of money especially our analyst Chris bernisky at the time would describe that Arc has reacted to the market turmoil this year by concentrating portfolios on our highest conviction stocks she has reduced her number of Holdings but put that money to work by adding to favorite big name positions such as Tesla zoom and Roku The Arc Innovation ETF currently has 34 stocks down from 57 earlier this year wood believes her fund will once again outperform the market once the economic paying from the high inflation in the federal reserve's rate increases subside anyone who bets against American innovation in the long term is likely doing bad business she argued so do you agree with Kathy Woods outlook on inflation and macroeconomic growth o ]
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