CATHIE WOOD: In terms of capacity, the capacity question, what's fascinating about this period is that now we're seeing a flood of IPOs, a flood of secondaries, we've seen SPACs, which really are liquidity events earlier than might otherwise have taken place, because I think there's a collective understanding that the future is here. And if we don't invest now, we're going to lose out. So sure, while we scaled really six-fold last year. And that's much faster than the technologies that we are researching, how fast they're scaling. But they're starting to scale pretty quickly collectively. So we've got five platforms, 14 different technologies, we've never seen this amount of change at the same time in history.

I know I've said to you before, go back 100 years and we saw transformational technologies, telephone, electricity, automobiles. So three of them at the same time. All of them experienced exponential growth and did transform the world. Think about this, we have five platforms now involving 14 different technologies. So we think there's going to be a lot of capacity for innovation oriented investors out there.

JENNIFER ROGERS: And we're going to get into Big Ideas for 2021, you've got 15 in here. Before we do that though, I have to ask you about the story of the day and last week. It's the whole Reddit, GameStop Robinhood saga. What do you make of what's going on?

CATHIE WOOD: Well, I find it very interesting. I've been looking at millennials in the workforce or we've been looking. So it looks like a third of the workforce is millennials and that's going to 75%. I started in the business in the '80s when the baby boomers were coming of age. And there was a strategist, Stan Salvigsen, Merrill Lynch, may he rest in peace. He drew expectations for demographics, baby boomers as a share of the workforce. And what happened was he believed that that meant they'd be much more attracted to equities and that they would drive equities up.

Now here we are, the millennials are going from 33% of the workforce now to 75%. There's a tremendous intergenerational wealth transfer, the biggest we've ever seen in history. So they're going to control a lot more than even the baby boomers did at the time. And I think it means positive-- that there are positive ramifications for both the equity markets and the crypto markets, both of which millennials in which many have taken an interest.

So the GameStop and the let's get the hedge funds, one of the interesting things about this is they're actually aiding and abetting-- and I don't think you've heard this anywhere else-- they're aiding and abetting the bond bubble. What is happening? What is happening? These companies that are left for dead-- by innovation by the way-- are selling-- some of their bonds are selling at $0.25 on the dollar. They're dead as doornails in many, even bond investors' eyes. Once you drop below 0.75 on a bond, $0.75 to the dollar, the risk of bankruptcy looms large.

So now, some of these companies are refinancing, they're actually accessing the equity markets. They're not refinancing their debt, right now, they will, they're accessing the equity markets and their bond prices are skyrocketing. Going-- they're tripling I think this was-- I think it was AMC, their bond price has just gone from $0.25 to $0.75.

Now if you ask me, a student of innovation, maybe there's a shot of survival here and maybe more so now that they've been able to do an equity offering which they could not have done two weeks ago, maybe. But I would not be putting my money there. I want to be on the right side of change. That's what ARK is all about.

Do I like a two sided market? I disagree-- I agree with Elon Musk on almost everything, certainly in terms of technology. But on this point that short sellers are a negative for the market? I, who-- and ARK, who were terrorized during Tesla's plunge during 2019, if you have the courage of your conviction, and our courage comes from research, back then what did we do during that plunge when many speculators were saying they're going to run out of money? Our simple question was, how can that be? The markets have not shut down. And sure enough, they did an offering. Was it at a lower price than many of us would have liked? Sure, but it was small compared to the ones they've done recently. We bought all the way down. It was a gift for us to have those short raise.

JENNIFER ROGERS: Everything you're doing is based on research and I think with these meme stocks, people are saying, well, what's the research, like what are they doing this on? Right, these companies you want to be on, as you said the right side of innovation. So has this exposed I mean, some people think it's exposed a systemic risk to free markets and others think it's the very definition of free markets. So where's the fault?

CATHIE WOOD: Oh, yeah. No, I-- truth will win out here. And the truth is history is not going to be on the side of those companies that didn't invest enough to move into the new world quickly enough. And probably are not going to be a big force moving forward.

So one of the things that I did find interesting, I didn't know that a stock could be or that 140% of the float of a stock could be short. That was a surprise to me. And so I think that hedge funds or whomever is shorting. It's not just hedge funds, there are all kinds of investors shorting out there. It's going to be interesting to see if they will stay or if they will move to such, what I believe was an outrageous position relative to the float out there. So kind of in a way they might have seen this coming, and I do know that the one firm that got in trouble was the-- I guess, the Reddit folks were focused on the listed puts of the--

Now what's unfortunate about that is they probably don't know much about OTC puts, over the counter puts. Those are opaque, they can't see them. All this move will do is push all of that market over the counter. Which is extremely profitable for banks, but it's more expensive for the end investors. So it's a little unfortunate.

I as an investor, I always like to hear the other side of the argument and that's the other unfortunate thing that's going on here, I think. There are people now afraid to talk about why they're bearish on certain stocks. If during our Tesla 2019 experience, if we didn't have the cacophony of investors, sell side, buy side, retail, institutionals, putting down Tesla, we wouldn't have gotten the opportunities to buy it that we did and we wouldn't have understood how much those investors did not understand what was going to move the stock. That helped us. And if their voices are shut down, I think that will be doing a disservice to all investors. Because I want to know what are the arguments against this position. Clearly, we're missing something, but we weren't, we weren't when it came to Tesla.

JENNIFER ROGERS: So let's talk about it. Your big call on Tesla, you've been proven right there. For your Big Ideas for 2021 you write about, you've got number seven electric vehicles, and number nine autonomous ride hailing. So we've had news this week from Faraday Future going public in a SPAC, we've got GM's announcement to go all electric by 2035. What's your outlook for EV and could you imagine ARK investing heavily in names other than Tesla giving some of this news that we have coming out?

CATHIE WOOD: Well, we're looking, because if we're right, this market is going to go from 2.2 million sales, that's units, in 2020-- it might be 2.3, to 40 million in 2025. So all of these announcements have increased our confidence that the capital markets are going to finance this transition from internal combustion engine to electric. That's great.

Who is going to be leading the charge so to speak, we still think it is Tesla, certainly in the United States. Even in China, Tesla is the number one brand. Now, the smaller vehicles in China, there is a company I've forgotten its name. It might be associated with SAIC and GM by the way-- that is pulling ahead, but that's not counted as a true electric vehicle. These are the ones that go 25 miles an hour, golf cart types of things. So we think that China might hold the secret as to the next big winners.

We know that NIO, we do not own NIO, it's a battery swapping company. So instead of charging, they swap batteries. That that is going to win the day. We think that Xpeng, which we do not own, but which is emulating Tesla might. We're seeing, and we do own in our more specialized strategies, BYD was a battery manufacturer to begin with, and Warren Buffett owns-- has owned for many years, a piece of BYD. That has done very well. We own that. And then Geely, which bought Volvo, and I believe the Chairman of Geely owns a position in Daimler. It is also doing a lot of interesting things in terms of partnering with various companies, including Baidu.

So if I had to give you which of the Chinese names we have the highest conviction in, it's probably Baidu and that had been a hard sell for me because their search business was falling apart. And it did seem to me with more than 150 or 200 electric vehicle manufacturers, many being government subsidized, that there would be a bloodbath. And Baidu, the government has deemed it the autonomous platform for China. We weren't sure whether to believe that or not or if it would get caught up in the carnage, but it does seem to be doing something very interesting.

And there's also another company called AutoX. This is more-- this is, they're working with Dongfeng, Dongfeng which is mostly involved in the trucking space, but we did take note that AutoX has gotten approval from California to go fully autonomous there. I didn't know that until very recently. So that could be another one to watch.

JENNIFER ROGERS: So Big Ideas 2021, first of all, I just want to remind people that all your research is on your website, along with all your trades. I mean, everything is there, people. So you can go and click and read the whole thing. We're going to go through a couple more of the Big Ideas though and I want to talk about crypto. We've got number six and seven Bitcoin fundamentals, and Bitcoin preparing for institutions. So you've got a lot of fans in the crypto space I want to know what you think here and of course Bitcoin, some people think look, it's already hit its highs for 2021. The high watermark of above 40,000. What's ARK's thinking here?

CATHIE WOOD: We do not agree with that. And what's been interesting this time around, is if you look at Google search trends for Bitcoin or Bitcoin's price, against the Bitcoin price itself, you'll find that there's not a lot of speculative activity by that measure. In fact, in 2017 they were one for one, together. But it has been pretty quiescent until maybe very recently but throughout last year. And so that gave us a lot of comfort.

We believe that the institutional behavior and moves recently have been fascinating. We have been expecting institutions to start moving into Bitcoin and other crypto assets but primarily, Bitcoin the most secure of the blockchains. Because if you look at the correlation of Bitcoin's performance relative to any other asset class, it has the lowest correlation. Meaning, if you buy some Bitcoin you will further diversify your portfolio and increase your returns with lower risk, right? So that's why institutions look for that low correlation. Bitcoin has it. And so that's clear. We have 10 years of history now.

But what surprised me and us generally, was to watch MicroStrategy, which has put all of its-- all the cash on its balance sheet into Bitcoin and even did another equity offering so it could put more cash on its balance sheet. And I think that's a little crazy because I think the regulators will have something to say about this in terms of what is this, is this company the MicroStrategy technology company or is it like an ETF? So we don't know about that.

But then you saw Square put 1% of all of its assets in Bitcoin. And I think you're going to see more of that. We didn't expect that. What we did expect was because of the low correlation of returns, institutional investors to move in.

The most surprising one to me thus far has been MassMutual. It put $100 million into its general account. Now its general account is enormous, so $100 million is something like 0.001, but what that move told us is, MassMutual is very conservative and very highly regulated. And so it had to jump through many more regulatory hurdles than I thought would have been possible by now. So I think that is a seal of approval.

And then, of course, you have the institutional infrastructure moving into place, whether it's with custody, and everyone knows a lot about Fidelity being out there in terms of wanting to custody Bitcoin in particular. You have the Intercontinental Exchange, and you've got the CME now with Bitcoin futures, one settling in kind, one settling in cash. And so we do believe that Bitcoin is getting ready for institutional.

But when we actually think about this is Bitcoin ready for institutions? Bitcoin is only-- it's roughly a $600 billion market cap. So not even half the size of Apple or Amazon, right? Does it put it into perspective? And yet it is a very big idea. I think a much bigger idea than Apple or Amazon. It's the first global, truly global, digital currency out there. And it is completely decentralized. There's no throat to choke.

So unlike with Libra, you had Europe and the US and many countries saying we'll never allow this, that's because there was one throat to choke. With Bitcoin there's no throat to choke. And in fact, when China basically shut down the exchanges in China that dealt in crypto, especially Bitcoin. That activity just moved over to Japan, Thailand, and Korea, other countries that wanted-- they wanted to move ahead in this innovation space. They did not want to miss this next big thing.

JENNIFER ROGERS: Listening to you talk about Bitcoin and crypto and even with Tesla, look there's a lot of people that follow everything ARK is doing and the trades and then they want to buy but how do you know-- and this is just a larger question, just like an investor, not about those names in particular but how do you know when to sell? What advice can you give to people about that, because I think for investors that's almost-- it's harder than figuring out when to buy is when to sell.

CATHIE WOOD: Yes. Well, we have a very disciplined process. And so our minimum hurdle rate of return for a stock to enter the portfolio is 15% at a compound annual rate over five years. We expect the stocks in our portfolio to double over the next five years.

Now when you have big runs as we did last year, a lot of stocks dropped below that 15% as a five year expectation. And so when they drop into the 10% to 15% we'll be taking profits. So we are selling. If they're core to our platforms then we will probably sell if we think it has gotten way out of hand, we'll sell it down to 50 basis points. We've gone from 10% to 50 basis points in stocks and exiting some as well. Even if they are core we just think, OK, they're going to need a long time to grow into this valuation and we don't want to live with or sit with dead money.

But then we will get corrections like the coronavirus, right? And what we do during a correction we will have sold stocks that are core and for example, 2U and Teladoc are-- they were in both our next generation internet portfolio and our flagship before the coronavirus. Both of them benefited from stay at home. They started moving up as other of our stocks were crashing. They moved up to such a point, they dropped below the 15% as these others were giving us opportunities to deliver 50% plus at a compound annual rate.

At the beginning of last year, at the beginning of last year that number, that five year a number was 42%. Today it's closer to 20%. So stock by stock we're looking at that 15% and the more it falls below, the more profits we will take. So we have such a creative research team however, and there are so many stocks vying for our attention and with these IPOs vying for a position in our portfolios, that when a stock drops below 15% we know there's something else waiting knocking at our door, waiting to get in.

JENNIFER ROGERS: I think that it is hard for regular investors to have that sort of discipline. Obviously you've honed that over years being in the market here. Now that ARK has really been transformed to this behemoth, I would love just to know what is Cathie Wood's typical day like? What do you do?

CATHIE WOOD: Well, first the word behemoth--

JENNIFER ROGERS: You are.

CATHIE WOOD: We feel like a startup still and we still have that feel and I never want to lose it. So to give you a sense of that, when the coronavirus started I brought the team, everyone in the firm together at the beginning of every day and we're still doing that. And what happened during that period-- so that meeting is at 8:45. Now I'm reading research before that and so forth. But 8:45, we bring the entire firm together.

And I think this has helped our cohesion as a firm, which I didn't think was possible because I thought we were really close before. We have an open office, everybody can hear everything going on. So I didn't think it was possible, but I think what happened is the parts of the firm that were not involved with the investment process were fascinated by the kinds of discussions we had.

And so the whole firm has coalesced around-- in the beginning it was coronavirus, are we going into a depression, is this a disaster from which we will have trouble recovering? And very quickly, I don't know if you know this, but I went on to YouTube every week and started holding our clients' hands and anyone else because we had a point of view. No, that's not what this was.

So we start with that meeting and research actually, most people who are not in research will drop off at about 9:15. We continue till about 10:30. So the first part of my day, you can-- it depends when I get up, whether it's 7:00, 7:30, I've been able to sleep in since a little commute time, a few feet. Anyway, so and so that's research.

And then every day we will have between stock meetings, where we do a deep dive into our portfolio tracker, which has our scoring system, that was Monday, that is always Monday. That was today, for example, that lasted actually until two, past two. And then usually in the afternoons, especially because I will have been sitting that whole time. I've said to Althea, who has been with me for almost 20 years now, Althea, for my health, I need to go out and walk. And so I do all my phone calls. She schedules all the phone calls and I'll sometimes do them on video if they want to watch me walking around. But for the afternoon. And those will be business, they will be company management, they will be analysts, they will be business opportunities.

But in terms of my time, I would say 80% is on investing and because I am our Chief Investment Officer, it is my core competency and I have delegated the management of the firm to other very capable people. That's the part of the firm we're growing right now, including people to go out and represent me. So I've gotten used to this. I think my productivity has skyrocketed here. And I think our investing has gotten better because we can pounce on every opportunity in real time as we're Zooming with each other. So it's been-- and then, of course, when it's earnings season as it is right now, I will be spending from 4 o'clock when earnings start, we'll actually I'm at five now, only Vertex reported today, so.

JENNIFER ROGERS: So you're OK.

CATHIE WOOD: Yeah. And so I'll be going through. But sometimes we'll have 10, 20, sometimes 30 companies reporting. And what I will do is I'll say, OK in the aftermarket team, which are getting hurt the most that's where I'll spend my time. And I will go on to and I'll toggle among the conference calls and listen particularly to the Q&A, listen to what's bothering other analysts out there.

Remember I told you we like to see the other side of the story, listen to what's bothering to them and think about have we integrated that risk or does that matter to us and usually it doesn't because they're worried about the 30 basis points in operating margin miss. And we don't care about that because that's this quarter. We've got our eyes on the prize, it's a five year time horizon.

And actually a margin miss is actually for us a good thing because what does it usually mean? It means a company has decided to invest aggressively now to capitalize on this opportunity. And we think that's the right thing to do. Those who are not investing aggressively enough, who are buying back their shares, leveraging their balance sheets, paying dividends, leveraging their balance sheets, they are going to be the losers.

JENNIFER ROGERS: So we're going to have to let you get back to your productive day but it's since you said you like to see the other side of the coin sometimes, I mean, you have such great optimism and energy. I can-- and you're doing so well. And I always feel like when I was playing basketball and doing well and you come into the huddle and you'd have a really big play coming up, I'd be like please don't pass it to me, because I just-- I was not that kind of player. I was like I'm happy to do the assist but things are going so well. And I just like how are you-- look at how the market is doing right now and how your funds are doing.

And my dad said to me three months ago, Have you ever interviewed Cathie Wood? Like you've kind of like become this personality. How do you manage that? And I would think the stress or the responsibility that comes with all these people that are putting their trust in you at this level where people think there's like froth in the market, how do you manage that and what do you say to them?

CATHIE WOOD: A couple of things. First of all, the discipline that I describe, the sell discipline, I am-- first of all, I'm thinking of our clients every day, all day. And truth be told all of my IRA is in our funds and GPTC which is the only way I can gain exposure to crypto or at least Bitcoin there. So I'm in there with you, we're aligned. We're on the same team, that's great.

But the other question are we in a bubble? I do not believe so. And I am very happy that many people are worrying that we're in a bubble. I was in, I experienced the late '90s bubble and yeah, the value investors out there were really worried and they think they're going to have their day in the sun again because they did so well during the tech and telecom bust. I don't think that's the case now. I think that the seeds for what we're experiencing now were planted back then. Too much capital chased those opportunities too soon after too few opportunity-- there were too few opportunities and the technologies weren't right, the costs were way too high.

We're at prime time for those five platforms now and those 14 technologies. And we've just begun. And they're going to be very disruptive and maybe destructive to a lot of value spaces. Not everyone, but anyone looking at price to book, watch out for that book, it may disappear because of disruptive innovation. Anyone looking at that high dividend yield, saying I got to hold onto the stock. Be suspicious of high dividend yields if that company is in harm's way. And I would say there is about 50% of the S&P 500 in harm's way.

Why don't I think we're in a bubble? Because if you look at equity flows since the beginning of 2018 and remember, we had a big market in 2017, so you'd have expected flows to really start to gush, what has happened since then is there's been net liquidation, if you just look at ETFs and mutual funds, there's been liquidation to the tune of $350 billion if you take away share repurchases, don't count those and but if you look at fixed income, there has been a net inflow of roughly $900 billion.

So think about that, a $1.2 trillion gap there. I will not believe we are in a bubble, equities that is, until we see that relationship flip. I believe bonds are in a bubble and I believe what just happened with GameStop and AMC and American Airlines, Bed Bath and Beyond, all of those, that is exacerbating the bond bubble because you're bailing those bond holders out so they can put money elsewhere and so I find it a really interesting phenomenon. I don't think it'll last.

I think it's been a good wake up call for investors generally to understand who is doing what and why and for investors like ARK to say, look, truth will win out, make sure you're on the right side of change because there is so much disruption and destruction taking place out there and it will take place at an accelerated rate during the next 5 to 10 years. So be careful.

And we put out a parody, I don't know if you saw it, we put out a parody and it was really we were trying to make this point because we were having trouble communicating it to those who really believe that index funds are safe. We do not believe they are. So be careful and stay on the right side of change. We'd love to help you with our research. It's available for free, come to our website ark-invest.com and let us help you.

JENNIFER ROGERS: Cathie Wood, it's always great to talk with you again. Yeah, you can go get all her research. I went through a whole ream of paper, but you don't need to be a Gen X person like me and print everything, you can just read it online. Cathie, thanks so much and I hope we'll get to see you in person one of these days.

CATHIE WOOD: That would be delightful. Thank you so much Jen, and great to see you.