During a recent conversation between Cathie Wood and Elon Musk, the focus turned towards an interesting topic – index funds. Musk expressed his skepticism towards these passive investing vehicles, stating that they have become too large and contribute to exaggerated gains and declines in stock prices.
Musk’s comments were prompted by the timing of Tesla’s addition to the S&P 500, which occurred on December 21, 2020. At that time, Tesla’s market capitalization had increased almost ninefold in the previous 12 months, reaching around $700 billion. Both Musk and Wood found it peculiar that index investors missed out on such significant gains.
They acknowledged that the growth of index investing is undeniable and cannot be managed or fixed. This contrasts with the past, when a larger percentage of assets under management were actively managed. Investors should be aware that the stock market’s dynamics have changed, and the influence of passive investing must be taken into account.
The Unlikelihood of a SpaceX IPO
Another topic discussed during the conversation was the possibility of SpaceX going public through an IPO. Wood and others had previously speculated about this potential move, but Musk cast doubt on the idea. Instead, the conversation shifted to the advantages of being a public or private company.
Wood highlighted that public markets tend to place great emphasis on current cash flow, which may not align with a company like SpaceX. Musk supported this notion by explaining that being privately held allows companies to take more risks, especially in capital-intensive industries like automotive manufacturing. He also noted that public markets generally have more capital available than private markets.
Musk concluded that, in his opinion, a company should only consider going public when it has a highly stable and predictable revenue stream. This implies that SpaceX would need to achieve a certain level of financial certainty before pursuing an IPO.
In summary, the conversation between Cathie Wood and Elon Musk provided fascinating insights into Musk’s opinions on index funds and the potential future of SpaceX as a public company. While the conversation may have been more philosophical than practical, it offered valuable perspectives for investors and those interested in the world of finance.
Self-Driving Cars Are Still the Future
Elon Musk, the CEO of Tesla, and Cathie Wood, the CEO of ARK Invest, recently discussed the future of autonomous-driving technology. Musk expressed his confidence in Tesla’s self-driving capabilities, stating that “the cars are incredibly good at driving themselves.” He reiterated that self-driving cars present a tremendous opportunity for Tesla.
When it comes to regulatory hurdles, Musk praised the National Highway Traffic Administration for their sensible approach, even in light of recent actions. He believes that once the technology is ready, the regulatory framework will be accommodating.
The Importance of X for Tesla Investors
During the conversation, much of the focus was on X, a privately held company. Although X’s performance may not directly impact Tesla, it is worth noting that losses at X could result in stock sales by Musk. As such, significant stock sales by any CEO are always a matter of concern for investors.
It is worth highlighting that ARK Invest, led by Cathie Wood, has shown a strong belief in Tesla. The firm recently purchased approximately 111,000 Tesla shares across two funds. Tesla holds the second-largest position in the ARK Innovation exchange-traded fund, with Coinbase being its largest holding.
Recent Performance and Outlook
Tesla’s stock experienced a minor decline of 0.4% during midday trading on Friday. Meanwhile, both the S&P 500 and the Nasdaq Composite saw modest gains of about 0.2%. Year-to-date, Tesla’s stock has shown impressive growth, rising approximately 107%. This recovery comes after a significant decline of 65% in 2022.
