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all right well some guests need no introduction and joining us right now on Bloomberg Radio and also on Bloomberg television uh we're delighted to have back with us of course um Ark invest founder CEO and CIO Kathy Wood we wanted to actually talk to her because there's so much going on certainly this week whether it's today when it comes to the jobs report but it's also what's been going on with open AI so looking forward to just bringing her in and wel welcoming her I should say on Bloomberg but also on Bloomberg television all right let's get to Kathy Wood joining us um Kathy great to have you here with us how are you I'm great Carol thank you so much for inviting me well it's good to have you here there is a lot going on and we were saying um obviously we want to kind of start macro which we often do with you and first up the upbeat labor market the FED finally now cutting interest rates you've been beating the drum for some time about the FED to cut rates at the same time we had treasury secretary former treasury secretary Lar Summers out saying the half a point cut was a mistake Stanley ducken Miller the hedge fund billionaire he believes the FED shouldn't have cut rates uh at the most re uh most recent meeting he thinks that uh the central bank has boxed itself into a corner um by guiding for even more rate Cuts ahead do you think the Fed rate cut was a mistake absolutely not uh not at all um it's been very interesting to watch the revisions in E economic activity until this report the revisions in the employment numbers had been down and they were much me much weaker uh than had uh originally been reported you know we look at uh earnings reports and look at their revenues and we're seeing a lot of companies showing negative revenues so you know the headline numbers are heavily influenced recently certainly in in terms of some of the upward revisions in personal income by transfer payments that's government stimulus and interestingly uh dividends but not if you look at the uh economy the cyclical part of the economy is sick it's sick if you look at uh the sectors in the economy one by one they've been falling into a recession no matter what the headline numbers say housing went down immediately when the uh fed started raising rates we're we're down 20 to 40% still that's a recession you've got non-residential Construction in recession Autos very weak Kathy I know it's a backward looking number but then what do you make of today's payrolls report 254,000 jobs added to the economy for the month of September that doesn't seem recessionary yeah it's so if you just let me finish Tim I I'll get to that in one minute so we've got those sectors and then you've got uh the the small and medium business sector uh their confidence is at 0809 levels and we've got certain pricing measures certainly the cyclical ones uh that have been deflationary actually uh so one thing that uh I do think is going on that is helping is as prices are coming down and the cons the consumer getting better and better deals and uh and they're spending uh so I think that is sustaining you know a lot of people say real growth causes inflation in this case and actually in history most times if you cut prices you'll get more activity uh the consumer as long as the labor market hangs in here and and yes today was very reassuring that way as long as the labor market hangs in here uh and the and companies like Walmart and Costco and o auto companies either increase the discounts or cut their prices I think the activity will come uh and the labor market will continue to hang in uh but if they try and Jack prices back up it was very interesting to see FedEx after turning positive in revenues and then turning negative year-over-year on re revenues basically saying they're going to use prices to make it up I think that's going to backfire uh and I'll think I think during the next year you'll under that many people will understand how deflationary the undercurrents are in the economy now deflation is not always bad part of it is because of innovation technologically enabled Innovation the car prices EV prices are coming down their costs are coming down too so um I think there there's a there's a lot of confusion in terms of what's going on out there uh because productivity is stronger than expected giving companies the latitude uh to cut prices and Salvage margins that if that sustains great Kathy when we talked with you earlier this year let's go back to March for a moment you mentioned the possibility of inflation going negative this year you also talked about unemployment going above 5% are those still your calls yeah um we would this year I mean we're going to have to push it out because inflation did levitate uh as companies tried to price to make up for shortfalls in unit growth it levitated in the three and a half to 4% range now it's broken below three uh and uh we're hearing more and more companies you know basically trying to attract consumer attention with lower prices so yes if you look at money growth on a a year-over-year basis it was negative for I think about a year and a half maybe more uh money is a leading indicator for inflation and we do believe uh that inflation will go much lower lower than people expect right now wouldn't be surprised to see it go negative uh especially especially if the consumer is worried about a job loss whether because of AI and automation generally um or what have you so the saving rate tends to go up during those periods and that will mean we believe that companies will have to price even more aggressively in terms of over 5% uh unemployment rate uh we could see it we we we could see it I will say today uh gave meaw in terms of this productivity Dynamic and sort of the okay companies may not if they get the productivity growth from existing uh employees they may not feel like low uh laying them off they can lower prices to keep a consumer demand going hey Kathy um election front center where just a month and change out from the election here in the US and I'm wondering how this dynamic in your view changes whether president Trump is reelected or we see a Harris Administration and I wonder what who you would support too in terms of what you think is good for the US economy and and America okay so our our focus is on Innovation and something very important happened this past year um we were very concerned that excessive regulation was driving Innovation off our Shores uh particularly when it came to crypto or digital assets um we've had a very hostile regulator uh and and and the same I would say is true of the um uh FTC in terms of denying m&a because that has prevented a lot of innovative companies from enjoying liquidity events by selling out to bigger companies um I think we're hearing from both both uh candidates that those two jobs are on the line maybe for that reason and we're seeing more alignment that Innovation solves problems and uh and and so we should not discourage it so from that point of view um uh you know I'm happy to see the bipartisan movement here um you know we'll favor lower regulation every day when it comes uh to Innovation I don't think tariffs are a great a a great thing at all for uh Innovation and for economic activity uh so there's something on both sides that will give us pause but um the most important thing is the biggest impediments to Innovation we think that that we're developing Clarity around what's going to happen at the SEC and uh the f TC so do you think one thing is better than one of the candidates I should say is better for the investment environment for companies versus the other uh so here I'm going to revert to being the CEO of a company where you know I'm representing both sides and uh I'm focusing therefore on Innovation which is of primary concern to us and I've given you a sense of where where we think uh uh both sides are on Innovation uh regulations the one the one that will lower more regulations because regulations are strangling this economy strangling small business strangling big business uh that's a very important one tariffs would be harmful as well so fair enough fair enough well let's talk Innovation which is your world um AI big news this week open AI um raising six and a half billion in new funding $57 billion valuation um Arc put in $250 million The Wall Street Journal reminding us that that's the minimum amount required to open up their financial document so why this investment why are you interested and what did you learn uh about the company and its growth trajectory or about the business to be quite Fair um looking at those financial documents well we've been doing research on AI for 10 years now that's why we were so early into to Nvidia uh and you know we've uh obviously uh taken it down in most of our portfolios out of the flagship one of the things that we've been looking for is the the the next big play uh and you know we think Nvidia is still a fine stock but in terms of the unexpected out there um we do think it's going to be in the software layers uh and as you know paler has be a big position for us in the top 10 uip path as well it had a stumble but it's coming back now and I think as more and more people understand how well positioned it is uh it will do very well but a lot of the software companies that we think are going to benefit are in the private sector and I'm thrilled that we have a venture fund that is really uh our our our um purpose here is to democratize venture capital so that for $500 you know anyone can get access to open AI which is the third largest position or SpaceX which is the largest position um but if you look at software many people say well we have so many software companies in in the public markets what do you mean uh and what what we mean by that is we think that so the software world is going to change fairly drama dramatically uh and we're going to see a shift maybe a share shift away from software as a service towards platform as a service uh so so think about paler and Foundation models uh and infrastructure as a service so so cloud and the reason for that is because Engineers are going to be made so much more productive developers so much more productive by open Ai and anthropic and xai and and and Google and meta meta's uh La llama 3 we're going to see companies uh uh customizing their own software customizing software for their own companies as opposed to just going automatically to you know one siiz fits all software as a service hey Kathy forgive me we're only have a couple minutes left so I want to get into a few more questions here I don't mean to keep interrupting you but um you mentioned closing IR Stak in Nvidia you did that in the flagship Arc Innovations fund uh last year um but you also told us back in March that you used some of that to buy into coinbase since February of 2023 coinbase is up a bit more than 150% no question a great return but Nvidia up nearly 500% since that time do you regret that move last year if you had look if I if I had bought both uh coinbase and Nvidia and sold something else would I have been happier about that decision sure I would have been happier actually from the time we bought coinbase uh to the time maybe we were talking to you or whenever we measured it coinbase actually had done better than Nvidia it has come back in nvidia's had another uh big run um but we're now really focused on the future and uh so uh software to us is um going to be a huge Opportunity Foundation models uh we think uh will uh deliver $15 trillion doll around that in the next 5 to 10 years in market cap that's from a standing start uh so and we'll see what happens to Nvidia over that time you know I think uh is there something that could make you buy into Nvidia at this point or add to your Flagship I mean I know you owe some but yeah yeah yeah if the if the price came down you know again I think uh I must say one of perhaps my um weaknesses in a momentum Market is watching you know watching a lot of momentum Drive the stock and realizing that a lot of people who never owned it are getting in and might be weak holders so you know that that factored into my thinking but uh you know we enjoyed if you if we we got into Nvidia 40 cents based on this stock in 2014 so you know uh wherever we got out we were extremely happy with what it's been the third largest contributor to our Flagship fund so um you know tactically sure we we would have loved to still have it you know at you know a bigger position in in the portfolios but again we're all about the future and our our research is focusing us on this software layer that has uh has huge amounts of appreciation ahead let's go to Tesla number one holding in your Flagship Arc Innovation ETF it's down about 40% % since an all-time high back in November of 2021 little change year to date you know when when do you decide you know in terms of of Tesla you know it's a different Market an EV Market you understand you know what's going on in that Marketplace more than ever you know what is your thinking about Tesla today um you've got an estimate of $2,600 a share for 2029 what gets us there and just quickly sorry we've only got about 30 seconds autonomous Mobility think 10 10 October 10th here that is going to focus a analysts not just on AVS but on the autonomous opportunity uh Tesla is the largest AI project in the world talk about shifting resources from Nvidia into Tesla uh we think longer term that is going to prove to be a very good move we know you have to run so appreciate your time be well Kathy Wood of course of Arc invest joining us right here I'm Bloomberg business week on radio and TV
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