CNBC Transcript: ARK Invest CEO & CIO Cathie Wood Speaks with CNBC’s Brian Sullivan on “Last Call” Today
WHEN: Today, Thursday, March 9, 2023
WHERE: CNBC's "Last Call"
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Following is the unofficial transcript of a CNBC interview with ARK Invest CEO & CIO Cathie Wood on CNBC's "Last Call" (M-F, 7PM-8PM ET) today, Thursday, March 9th for premiere week. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2023/03/09/to-maintain-deposits-today-you-have-to-pay-up-ark-invest-ceo-cathie-wood-on-sivb.html.
All references must be sourced to CNBC's "Last Call."
BRIAN SULLIVAN: Joining us now with reaction to somebody who has become synonymous with Silicon Valley innovation and investing all around that even that is ARK Invest CEO Cathie Wood. Cathie, couldn't think of a more perfect person to have on because this is scary what's happening. I mean, do you worry that there is a greater contagion risk from Silvergate and Silicon Valley Bank or do you think again, it is kind of contained within those two?
CATHIE WOOD: Well, first, Brian, I'd like to congratulate you on your new show. I'm very happy for you and your team. So does this concern me? Is there contagion? Well, certainly there was contagion last year, and we often describe what happened last year, which was a crisis in crypto as really proving the concept what happened. It was centralized, opaque institutions that failed. And some of that was because of fraud. And if you look at, if you looked at the blockchain technology, so Bitcoin, blockchain and Ethereum, they really didn't skip a beat. Sure the prices went down, but if you looked at the way they were processing transactions, the smart contracts, the automated margin calls, they, they, they worked perfectly. So, we think that it proved the contract, concept that decentralized transparent ecosystems are going to do much better we think than centralized institutions that are opaque. And actually, in the case of these banks, maybe took on more risks that people didn't know about.
SULLIVAN: Yeah, and I don't want, I don't want to, I don't want to necessarily blame crypto for for Silicon Valley Bank because I don't know what happened. We're going to learn what's going on and maybe things will ultimately be fine. General Atlantic took a big stake yesterday. We'll see. Here's what makes me nervous and why I wanted you to come on and talk about the bigger picture, Silicon Valley Bank, they don't make mortgages. They are a bank for venture capitalists, private equity, some of the smartest and richest people in America, many of which are of course in the Silicon Valley area now taking their money out. When I see those types of people getting clearly panicked, why should we sort of remain calm?
WOOD: Well, I do think that the Silicon Valley Bank is a bit, it's got some similarities to other banks but differences as well and we look at the mismatch between their assets and liabilities. So when money came gushing in during the Covid crisis with all of the stimulus money, Silicon Valley Bank put a lot of that to work in what were at the time high yielding assets that averaged only 1.6 or 1.7%. Today in order to attract and maintain deposits, you have to pay up and, and banks are not paying up and they are all seeing their bank deposits go down. If you look, I'm saying that's an average because it's year over year are down across the system by 4%, why? Because money market funds are paying much higher interest and so funds are flowing. Now the large banks do not have a problem. I mean with all of the capital standards that they have been subjected to since '08, '09, they actually been too flush with deposits. They don't want to make that many loans.
SULLIVAN: Well, they all did. By the way, Cathie, I know today was kind of a wild day they all got crushed a Charles Schwab which is which is not a bank to be clear. Charles Schwab lost 13% of its value to, Charles Schwab went down I'm not picking on them. Big name. When I was covering subprime back in 2006, 2007, I heard the phrase, it's contained. It's contained. It's over here. It's not a big deal more times that I can count. We know that was wrong. This is not that but the St. Louis Federal Reserve about a month ago had a report saying higher rates is a huge move in rates and change in bonds may catch banks off guard. We clearly learned that today with Silicon Valley Bank. I can't believe just maybe I'm just a grizzled old, you know, angry journalist, but I can't believe they're the only ones that this massive move in rates is going to impact.
WOOD: Yeah, I mean bank analysts are taking if they haven't already a close look at the duration mismatch of various banks. And so you saw some banks went down much more than others. Yes, the big banks were hit. And as we've talked to people who I think understand the big banks very well, we don't think there's a problem there. But there are mismatches in the smaller banks and and they got hit today. So yes, it's an issue.
SULLIVAN: Does it make you, does it make you change how you invest Cathie?
WOOD: No. No, it doesn't. We've got a five year investment time horizon. We're focused on companies that are going to transform the way the world works, and sure they rely on on funding and orderly capital markets. Many of them did secondaries during 2020 especially, which was a great year for innovation. So most of our companies do not have immediate needs for financing. I would say 99% of them, I'm sure one or two might do a financing but so we don't think there's usually there. No, we're not worried for our strategy. In fact, what we've been looking at for the for the last well six months, almost six months, is the inverted yield curve which has gone more inverted so the long term bonds are yielding less than short term instruments. That's part of the problem for these banks that we just talked about, but it is also a macro indicator we think that is telling us the bond market is speaking very loudly, that is telling us that the risks are not on the side of inflation. If anything, when I hear and see banking crises and this is bank by bank, I don't think it's a banking system crisis, but when I see bank crises like this, I think more about deflation than inflation. Right? That certainly was the way to think about '08, '09—
SULLIVAN: Well, we'll see Cathie and we gotta go and we love your take. If, if money printing and bailouts also come with this, it's small now, these are big banks, but it's not national. But this is I think, I think this is a bigger story. Very quickly, do you think Silicon Valley Bank survives? Do you think, they're 40 years old, do you think they'd make it?
WOOD: You know, I did not see before I came on your show what Peter Thiel has said. He's, he's very powerful in the world of Silicon Valley so that that would lower the odds I would say. And that's all I'll say, you know, it's just banks are not our area of expertise. We think the world is going to move over to digital wallets ultimately with much more decentralized transparent ecosystems and away from traditional banking system.
SULLIVAN: Cathie Wood, gotta leave it there. Thank you very much, Cathie, really appreciate it.