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00:00Kathy, great to have you with us. Let's start broad and talk about where we stand in markets
00:04at this point, because you take a look at September performance. This was supposed to be
00:09a bad month, seasonally speaking. Instead, we're on track for the fifth
00:12straight months of gains. Can we keep this momentum going through year ends?
00:18Well, we think a lot of good things are happening from a policy backdrop and therefore
00:24ultimately a macro backdrop. The deregulation that we're seeing is stunning. It started with crypto
00:30and AI. We have a crypto and AI czar now. And I think what many people have not paid enough
00:39attention to, mostly because tariffs have been getting all the headlines, given how chaotic
00:44they seem. But in OB3, so the one big, beautiful bill, there was a tax policy measure that
00:54we're not sure has been integrated into many forecasts yet. And it has to do with
01:00depreciation, moving from depreciation to full expensing of structures that has never happened
01:08before. Manufacturing structures for the next three years in the first year, they go into
01:16service. They will be able to expense fully in that year, as well as equipment, domestic R&D and
01:25software. So music to innovations years, I would say. I think we're to have a boom in economic
01:32activity. That first one, the manufacturing structures is just for three years. The other
01:38ones have been made permanent. And so this takes our effective corporate tax rate in the United States,
01:45not statutory. That's still at 21. But the effective tax rate for the next three years,
01:52at least, is going to be roughly 10 percent, one of the lowest in the world. So I think we're in for
01:58some very good times. We think we're moving from a rolling recession into a recovery and then into a
02:05productivity driven boom in activity. OK, so you mentioned fiscal policy. I want to get your take
02:11on monetary policy as well, because your fund feels like it's inversely correlated with rates. You get a
02:16big boost from lower rates with those tech holdings, those innovation companies. How far down do you see
02:20interest rates headed with an incoming Fed chair who will be probably much more aligned with President
02:26Trump's goal of lower borrowing costs? Well, first of all, Katie, if I could, if I think that was Katie or
02:34maybe it was Scarlett. It was Scarlett. OK, Scarlett, I apologize. So if you look at our performance in
02:442017 and 18, so when interest rate fears were rising and then interest rates rose, our portfolio
02:53outperformed in both years significantly. And 2018 was a down year. We were up. So I know that COVID,
03:03the boom bust around that time period got a lot of people thinking, OK, inversely correlated to
03:09interest rate. Historically, that has not been the case. So just wanted to make that comment in terms
03:16of the Fed. We do think interest rates will continue to come down. But if we're right in in 2026,
03:26at some point, it will be clear we're moving into a productivity driven boom. What does that mean? Productivity is one of
03:33the most potent anti-inflationary forces. This is this is Reaganomics. It's deja vu. And you'll see back then in the 20 years that
03:41ended in the tech and telecom bubble, real growth was very strong. And during those moments in time, inflation came down to surprisingly low levels. And we think that's going to be true next year as well. In fact, we would not be surprised to see inflation well below 2% next year.
04:03Kathy, with that said, you know, I think a lot of people are slightly worried about inflation, but really just, you know, interested in a hedge. I showed in the flows that every week this this year, it seems like gold has been in the weekly flows and the leaders. GLD in particular is on its way to a record year. And even IAU is in the top seven. I mean, there's just so much gold buying along with this sort of rosy economic and stock market picture. Why do you see that?
04:33Why do you think people are buying so much gold? What's your take on that?
04:37Well, I do think there's been a lot of uncertainty, geopolitical uncertainty, especially. So it seems as though there is a barbell strategy going on here, which is equities to take advantage of lower interest rates and potentially the economic environment that that I just mentioned.
04:57And then gold just as a hedge, it seems to me. And the same has been true of crypto assets. They are much more volatile than gold, but they have also done well over time. So I think I think this really is a barbell strategy.
05:15I do want to talk about crypto. You think about gold transitioning into crypto. For a lot of people, that's digital gold. When it comes to some of the investments that you're making, Bloomberg News has reported that you could be one of the backers behind Tether, for example, in a major funding round. Is that correct? Is ARK backing Tether?
05:36We can have no comment on that. So that's what I'll say there.
05:44There. I will say you'll see that we have we have back debts and and circle. So we're very well exposed to this crypto cycle. We think stable coins generally and of course, Tether and circle have 90 percent of the stable coin market.
06:03Now we think that is a very important entree. The holders of stable coin will have an entree into the DeFi ecosystem. So decentralized financial services that will now take place on public blockchains.
06:19So we think that's really the definition of the next generation Internet. It's the layer of the Internet that was not built early on, because in the late 80s, early 90s, no one expected financial services to take place on the Internet.
06:37So finally, finally, 30 years later, we're getting the layer of the Internet that is going to enable us.
06:45So, Kathy, you mentioned DATS. ARK W has a big holding of Tom Lee's Bitmine and Brera Holdings, which is now Soulmate.
06:52I want to get your take on what you think of DATS versus ETFs. Why would DATS be a better way or a preferred way of investing as opposed to just in the coins themselves?
07:02Yes. Well, one of the reasons we did not choose to invest in one of the Ether ETFs is at least as of now, there will be they will not be allowed to stake.
07:16And we think staking for yield is a very important part of the Ether Ethereum story. We were having a lot of trouble, therefore, getting access to Ether in our portfolio.
07:32So when Bitmine Immersion came along, we thought that would be a great opportunity after it sold off significantly following the burst. We did take our position and same with Soulmate.
07:48We have a lesser exposure to Solana, but, you know, we now have exposure to the big three, Bitcoin, Ether and Solana. And we think all three are going to play an important role.
08:01I would like to just come back to what Scarlett just asked, because I do wonder this. Let's just go to the Bitcoin DATS, right?
08:07Great. There's so many that have popped up since strategy and since the ETFs were launched. Why on earth would you buy a DAT over an ETF at 20 basis points?
08:18Well, we have not bought a Bitcoin DAT, so I should be clear there. But Ether, yes. Solana, yes. Staking's a big answer to that question.
08:30In terms of the Bitcoin ETFs, I think they are illustrating that, or the Bitcoin treasuries, they are illustrating that at least in the treasury market, for whatever reasons people choose to buy microstrategy, maybe it now is offering a yield curve with its debt strategy for Bitcoin.
08:56So that's kind of interesting. But these are winner-take-most opportunities. We think that the companies that allocate assets to these new instruments, that the one that moves the fastest, the most aggressively, is probably going to win the lion's share.
09:22Maybe it's geographic. I know Metaplanet in Japan has done well, but microstrategy is king of the hill, obviously, here in the United States.
09:30Kathy, I want to focus in on two of your funds, the ARK Innovation ETF and ARK-F, because there's been some really interesting trading over the past month or so, specifically around IPOs.
09:42I look at ARK, for example, ahead of the Klarna IPO. You saw your fund, AUM, balloon by $3.5 billion, a real surge in share creations, which were then redeemed in the days that followed.
09:54It's been theorized that this is basically a way for whoever's behind the trade to get exposure to shares of the IPO in a sort of roundabout way.
10:03And I know you've addressed this before, but does ARK know who is behind these huge trades?
10:11No, we don't. But we do think, as you say, Katie, that they are solely, that the surges are solely to get into whatever the IPO is.
10:25Now, what happened is, Circle, we were a cornerstone investor, $150 million, and you saw what happened to that stock, saw no such activity around that particular IPO.
10:40However, it seemed to give, I'm going to say market makers and others, the idea that, wait a minute, if ARK can get a big allocation to these IPOs, maybe we can benefit by anticipating which ones they will get and choose to participate in.
11:00So, they've been doing that. We're seeing that. But it does take a bit of guesswork, and we don't participate in every IPO.
11:11So, I don't think, I think that they'll probably be a little more judicious in doing this going forward, because I think some of this trading has caught them out flat-footed.
11:23Yeah, yeah, that's a good point there, that it does take some guesswork.
11:27You want to be right when you're moving this amount of money, but help me when it comes to the structure of this and how much, say, ARK has.
11:35When you see a big trade like this coming through, is ARK in a position where it can reject the trade from the authorized participant?
11:45No, we can't. We just, you know, one of the most wonderful things about ETFs as a portfolio manager is I don't have to worry about flows.
11:55With mutual funds, the portfolio manager has to worry about flows.
12:00But the market around us facilitating ETFs, market makers, authorized participants, it's fantastic.
12:09They handle all of the flows.
12:11I see.
12:11They're using all kinds of instruments, and we don't have to worry about it.
12:15So, you know, I don't bother about it.
12:18But does it bother you in general?
12:20Is it a problem for you that certain investors might be undertaking this strategy?
12:26No, it doesn't.
12:27This is what makes a market.
12:29And if they guess right, great.
12:31If they don't, well, then they have nothing.
12:33They've incurred some costs.
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