Cathie Wood, the wildly successful money manager known for making a huge bet on Tesla, weighed in on her support for Bitcoin, explained why her Ark Invest firm has sold nearly all the Chinese stocks it previously owned and talked about what her firm is buying now during an appearance on a panel Thursday. Here’s what Wood—who appeared on Forbes’ list of America’s Richest Self-Made Women in August, with an estimated net worth of $400 million—told the panel, moderated by angel investor and entrepreneur Jason Calacanis at PreMoney, a conference put on by investing firm 500 Global in Miami Beach, Florida.
In September, Wood predicted that the value of Bitcoin would rise to $500,000 in five years. She remains a staunch supporter of Bitcoin, despite some in the crypto world losing their affinity for it. “There’s a sense that the Web3 world is evolving away from Bitcoin and Ether into cheaper, faster” cryptocurrencies, she said. “But they forget that the more features and the more centralization you have … you’re talking about recreating Visa.” That is, recreating an old structure in a new form. Wood said she’d been “hearing that Bitcoin is so yesterday. I think that’s a big mistake. Look at what’s going on in El Salvador.”
Calacanis asked in response: “You believe that dictator? You don’t think he’s a bad actor?”
Wood replied that they’re “giving $30 in each Chivo account [the digital wallets created for each citizen in El Salvador]. Pre Chivo, only 1.2 million people had bank accounts. Now 3 million out of 4 million eligible people in El Salvador have banking services.”
Calacanis followed up: “Most tech doesn’t last more than a decade. Why would Bitcoin last any longer than that?”
Wood answered: “This is the most secure blockchain technology out there. What’s going on right now would have been [Nobel Prize winning economist] Robert Mundell’s dream: to introduce a global monetary system not under anyone’s control.” (Wood explained that she studied under supply side guru Arthur Laffer – an economist famous for the Laffer Curve—who was influenced by Mundell.) She elaborated: “Look at Turkey. The Turkish people have lost half their purchasing power since February. Wouldn’t it be nice to have a little Bitcoin?”
The topic turned to China, and the moves the Chinese government has made thisCK year regarding digital assets—banning cryptocurrency exchanges and outlawing the mining of cryptocurrency. Wood said her firm had owned shares of Chinese e-commerce giant Alibaba, but had sold them along with other Chinese stocks. “We own very, very few stocks there [in China] because they’re unpredictable. They are grappling with what most governments are grappling with: the gap between rich and poor.” Wood added that 75% of consumer savings in China is held in real estate, and real estate values are starting to fall. Her analysis: That the Chinese government is willing to risk the decline in real estate values in order to address the wealth gap.
Calacanis put it this way: “I think the mad king is circling his wagons because he feels threatened. I’m talking about Xi Jinping.”
Wood’s response: “I think it’s to the benefit of the U.S. if China isolates itself. They are less likely to become the global superpower.”
WHAT WOOD IS BUYING NOW
Wood said Ark has been buying Robinhood–a stock that has fallen nearly 40% since its IPO in July—but didn’t elaborate on why. Also: “We’re looking for the digital wallet: Coinbase, Square’s Cashapp, Paypal’s Venmo less so,” she said. “Most analysts are focused on banks, which we think are being hollowed out … by defi and digital wallets.” So she’s staying away from traditional banks.
Two other stocks she’s buying: video communications tool Zoom and cloud communications company Twilio, both part of a new wave of telecom tools. “What I don’t think people recognize is that we have not had a refresh cycle [in telecom] in 30 years. She explained: “I’m thinking about Cisco … and the old telecom stack.” Covid, she said, has inspired a new crop of options.
Calacanis asked about electric automakers (possibly Rivian, though he didn’t specify), saying, “Speaking of fraud, should a company that’s sold zero cars be worth $150 billion?”
Wood’s answer: “Investing is about the future. It’s not fraud, it’s perhaps misvaluation. I don’t call that fraud at all.” Regarding the crop of publicly-traded electric automakers with little to no revenues, Wood said: “We called out Nikola. We knew what he [former chairman Trevor Milton] was saying was wrong. We knew that there was trouble.” (In July Milton was charged with securities fraud by the U.S. Attorney’s office in Manhattan; he pleaded not guilty). Wood also mentioned Rivian and Lucid, saying Ark doesn’t own either stock. Why? “They are going after niche markets.” She said Ark has spoken to both companies about autonomous driving, which they’re not focused on. Wood’s take: Without autonomous drivers, neither can scale—though Rivian may be helped by its ties to Amazon, which owns a chunk of the company and has pledged to switch to electric delivery vehicles.
Her bearish take isn’t exactly surprising, given the big bet she’s made on those companies’ biggest competitor. Wood pointed out that ARK discloses its holdings at the end of each day and has done so since 2014. Its single largest holding, by far: Tesla, where Ark is sitting on a $2.4 billion stake.