You know, you are also involved in you've got your own filing for physical
physically backed Bitcoin ETF. Do you think that the excitement there
has driven up prices across crypto? I mean, today is a down day, but we're
still looking at $29,000 for Bitcoin. Yes, I do think that in June, when
BlackRock announced its filing or when it was announced that BlackRock had
filed for a Bitcoin ETF, the Bitcoin price did shoot up and but has been
fairly stable since then. So I do think it's had an impact, A
bigger impact this year was the regional bank crisis.
It was very interesting to watch Bitcoin go from 19000 to 30000 right in the
middle of that banking crisis as regional banks were going bankrupt.
So it was a flight to safety. So I thought that move was just as
interesting on a flight to safety. Is buying Bitcoin somehow a flight to
safety? Isn't it a little too volatile for that?
Well, if you think about it, Bitcoin serves as two kinds of hedges.
One is a hedge against inflation and outright confiscation of wealth.
The other is against counterparty risk. And I, you know, was when the regional
banks started going down this fear sort of,
you know, memory. Our memories are fresh with oh eight or
nine. The counterparty risk became real.
And so there was this flight into Bitcoin, a completely decentralized,
transparent network which is not subject to counterparty risk.
Kathy So you are in this race. Let's talk about the race a little bit.
The first important deadline coming up is August 13th, where the Ark filing the
SC is either going to delay it, which we think they'll probably delay it.
And then BlackRock is later. You filed before BlackRock but BlackRock
came in with the surveillance sharing agreement with Coinbase that was novel.
Right now we're looking in the future there's talk of a common clock where the
SCC could approve a whole bunch of ETFs at once, putting you on a level playing
field with BlackRock and others. What's your take on how this will play
out given you filed earlier? I think you're probably right that
August 13th will come and go and I think I think the SCC, if it's going
to approve a Bitcoin ETF, will approve more than one
at once. So then again, because most of these
essentially will be the same and it will come down to marketing, communicating
the message. You know, we've been putting out our
Bitcoin monthly for the for the last year.
We are now starting a Bitcoin brainstorming session.
Our first one we launched last Thursday. So we're trying to get the word out
there that, you know, our research is deep and we've been doing it since 2015
when we gained our first exposure to BTC.
We were the first public asset manager to gain exposure to Bitcoin at all in
2015. That's exactly where I want to go.
The grayscale Bitcoin trust known by its ticker gbtc.
If you look at our W, for example, your ARK next generation Internet ETF.
Right now I see GBTC as the third largest holding.
If we are in a situation where the SEC does give its blessing for a spot
Bitcoin ETF, would you plan to sell out of gbtc and buy one of these physically
backed funds? So I cannot talk about what we would and
would not do. And in fact,
our compliance team is, you know, giving us marching orders not
to talk very much about this filing and its aftermath at all.
So just the fact that we filed with our partner 21 shares is is as far as I can
go. So sorry, Katie.
Fair enough. No.
I was expecting something along those lines.
I am curious to get your take on the regulatory temperature right now,
because in addition to this rush of spot Bitcoin ETF filings that we've seen,
there's also been sort of a race that's unfolding for an ETHER futures ETF.
There's been a ton of filings to that effect and not specific to those funds.
But do you sense that the mood, mood music around the SEC and what their
appetite to allow these products to launch has changed in the last several
months? Well, I think that that the two other
branches of government, the judicial branch and the legislative branch are
giving the FCC pause because the FCC is losing cases in court having to do with
its regulations. Around crypto.
That's the first thing. And there are bills that are making
their way through the House and are seeing some bipartisan support.
So I do believe that. Gary Gensler, I guess last week or ten
days ago said something like, Well, you know, I'm not the only one who makes
this decision. There are five commissioners.
Now, of course, we know they're weighted towards the Democrats, two Democrats,
two Republicans. And so one assumes that
the way that Gary votes is the way that the FCC will vote.
But he seemed to be distancing himself a little bit.
And so maybe we can take that as a bit of a clue.
We definitely did. We thought that was a good sign.
But, you know, we're reading all kinds of tea leaves in this.
Let me ask you about Coinbase, because you have increased your position in
Coinbase. It's also who your surveillance sharing
agreement is with. Also, how much is it?
How important is it that Coinbase is a bridge or compliant enough for the SEC
in terms of working with traditional finance?
Is your bullishness on this stock that they are going to be sort of the
traditional finance bridge or is it other you know, you think people are
going to continue trading crypto on Coinbase?
No actual both. We we think that it is the most
regulatory compliant exchange out there and we've been very pleased with how its
derivatives exchange in Bermuda has ramped in here.
It's very early days, but again, clearly a trusted partner and and we are also
seeing that there's more turmoil out there, I guess to be I think that's how
you just say the name of the exchange and tether and finance.
There are still there are rumblings out there that not is all all is well.
And so coin Coinbase is going to be the flight to safety exchange, no doubt
about it. And do you think this surveillance
agreement with Coinbase are going to be enough to deal with things like price
manipulation in this market? I mean, that's been one of the main
concerns from the SEC lawyers with with whom we've spoken.
Well, what I find so interesting still, and this is why we believe that the FCC
will lose the grayscale case, how can you approve a Bitcoin futures ETF and
and not a Bitcoin ETF? And and in fact, if you're really
thinking about consumer protection, a futures ETF swaps space.
So there's counterparty risk there that you would not have with a Bitcoin ETF
which is backed 1 to 1 with Bitcoin in Coinbase is called storage.
It still confounds me. And not to mention that the point that
Eric makes, which is that if there had been an ETF, a lot of people wouldn't
have bought Bitcoin at stocks and instead would use the article.
Tesla CFO Zachary Kirkhorn is stepping down after more than 13 years at Tesla.
Curious to hear your reaction given how long you've been involved in the stock,
how long he's been there, does this give you any pause?
Well, we all loved Zack and love Zack and think he will do very well wherever
he goes. I, I, I know there are rumors out that
there are some CTO positions out there which
he might like to take, so we will miss him.
But his successor has been with Tesla right underneath him since 2018.
So he was put through the fires, remember, in 2018, 19.
And many, many analysts were saying that Tesla was going bankrupt, too.
And so he's been there. He's gone through the fire.
And, you know, it's a tough job. It's a tough, tough job.
So I I guess 13 years was a really good run for Zach.
And I can't say enough good things about him and what he did for Tesla, but I
think he trained his successor well. That's great to hear.
Do you expect Tesla to build 2 million vehicles
this year? I think it's incredible how they've
grown production and it looks like they can do that.
What are your expectations for their growth from here on out?
Well, as you know, we have a five year investment time horizon.
And and we do think this cycle for autos is going to get tougher in here
generally. But we think just like last year when
electric vehicles were up 69% or 65%, something like that, and gas powered
vehicles down 7% globally. We think we're going to continue to see
that share shift accelerate because. Electric vehicle prices are going to
follow the court their costs down in a way that gas powered cars cannot.
So we think that electric vehicles will be less expensive and they are better
cars than gas powered vehicles. So we think they're going to take
tremendous share. And even if the auto market relapses in
here, which we think it could, we don't think electric vehicles will relapse.
So we think the 1.8 million for this year, which was Elon, said 1.8 to 2
million, they're going to have some shut downs in the third quarter for
maintenance and upgrades. And so he lowered he lowered his
expectation to the lower end of that range.
I think he likes to lower expectations and then be.
So I wouldn't be surprised if it's higher than that.
BNN Bloomberg New Economy Forum has voiced concerns about the availability
of cobalt and lithium, and is there enough
to continue making electric cars for the masses, as some producers like GM are
building, you know, massive 200 kilowatt batteries for their trucks?
Is that a concern for you at all? Do you think Tesla has the production
locked in? Well, I know very early on they they
said to their suppliers, you know, if if you will build it, we will buy it.
So, yes, they've been in a preferred position and probably still are.
They're also very smart. Tesla's engineers are very smart.
They are engineering cobalt out of the cars.
They're doing it for a few reasons. The supply is uncertain and it's very
focused in, I guess, the Congo, where there are a
lot of environmental and governance and social concerns.
So they're engineering it out and they're moving into.
And you should on lithium, actually, if you look at the price, it went up
tenfold in two years and now it's down about 40% from that peak.
I think lithium is one of the most pervasive minerals out there.
So we don't think lithium is an issue at all, especially now that the Chinese and
the Koreans and all of the U.S. OEMs are are basically telling lithium
miners, just just build it and we will take it.
So and then the other interesting thing is, again, this is Tesla leading the
charge, so to speak, in this category, lithium ion phosphate.
So taking out the nickel and other metals
that may end up in short supply, especially if we get into very strong
cycles and the lithium ion iron phosphate is a much lower priced or will
lead to a much lower price car as well. Cathie, real quick, I wanted to get in
the superconductor. This is something that's been in our
team is getting obsessed about. You are an innovation fund.
I'm guessing you're looking at this. How much of this is hype and hope versus
a potential legit reality and how do you play it?
Well, it was interesting when when the news broke a little more than a week ago
and many people just thought it was a fraud.
But our chief futurist, Brett Winton, said, wait a minute, this is not a
fraud. It can't be a fraud because it's so
simple. You you can buy from, you can buy,
you can buy phosphorus, copper. And there was one other ingredient
there, and you could actually follow their instructions and duplicate this.
We're going to find out pretty quickly. And what it does seem is that it is
possible. So we went from thinking Friday a week
ago, oh, maybe ten, 15% chance to now, while the markets the betting markets
are up 40%, I think we're more in the 60% plus range.
So and you know, it could it could be the breakthrough we need for quantum
computing or at least bringing it into reality from a commercialization point
of view sooner than expected or or those high speed trains,
it could change so many things, and particularly our electric system where,
you know, we lose so much heat in data centers, where we lose so much energy
because of the inefficiencies associated with current electricity.
Cathy, I promised Florida, but I actually want to start in China and get
your current views on what the stock market there looks like because a few
years ago you were out and I think you came back.
A little bit. And JD.com.
What's your current thinking around the equity market in China and what
opportunities are there or not? Well, we're we're maintaining our
position. Really
common prosperity suggests that the government is aiming for for companies
not to be too profitable, but to really help the country to expand and make the
lives of everyone better, which is noble.
That's what we all want is to, you know, shrink the divide between the rich and
the poor. We are focused on a few things there.
We're focused on the fact that China is exporting deflation.
It's down for 5.4%. And it is one reason that we think that
the world is going to face more of a deflationary period here than I think
most people think. It's also very interesting to watch the
yuan. I think that the government would be
stimulating more aggressively if the yen were a little stronger and it has been
weakening and they're very careful about their currency.
So I don't think they're going to be able to stimulate as much as many people
might like or expect because the yuan is showing some fundamental weakness here.
And you know what's so interesting about that?
Sorry, I just want to add an exclamation point here.
The fact that they're exporting deflation and they're the yuan is down.
That's that's a double whammy. That is that from from from China's
point of view, you know, the fact to see deflation as their currency is down,
Normally when a currency is down, you see inflation.
So, Kathy, we know you moved to Florida from New York City.
I believe you were in the Chelsea neighborhood.
I visited your office way back in the day.
Yes. You're now down in Florida.
A lot of asset managers, a lot of people who watch Bloomberg TV are considering
moves like this. How has it changed your investing
process, if at all? Being there?
Are there pros and cons to being in Florida versus in New York City?
I guess the the the there's for us no change in our investment process.
Covid told us we could work remotely and so we have a hybrid setup, but we do
have rotations of all of the teams through Saint Petersburg, Florida, and
even more so during the winter, I might add.
So that's working out. But I think it's it's it's been a
wonderful place for us and it's great to have everyone come together, either in
various teams or all together like reunions.
So it's working pretty well for us. We only have a few seconds left, so I'll
just ask a short question. Elon Musk and Zuckerberg may have a cage
match fight. Do you have do you take a side in that
in that fight? Do you do you think Musk is up to the
task? I whenever he puts his mind to
something, I wouldn't I wouldn't bet against him.
That's what I'll say. But I did read this morning that he's
saying that or tweeting that he has to probably go for a back operation first
for something to having to do with his disks.
So I would I would hope that he would wait until he's completely on the mend.