Bill Ackman is known for his bold moves and investment ideas. In this wide-ranging interview, we’ll find out where he’s putting money to work now and get his thoughts on the economy, the markets, possible recession and what he thinks the 2024 election means for the future of finance.

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Billionaire investor Bill Ackman at CNBC's Delivering Alpha Summit — 9/28/2023

Okay, I can't think of a better way to bring this proceeding across the finish line than with our next guest.

He is 1 of the most provocative and interesting investors in the country.

His motto is in investing to make a bold call that nobody else believes in.

And that is what he has done time and time again, usually to great effect.

Pharma, retail, railroads, diet supplements, restaurants, music, streaming.

Please welcome Bill Ackman to the stage and welcome back Scott Wopley.

It's been a minute since we were up here together.

I do want to start, though, with news, but I think it's news.

A reported secret meeting that you had recently, you and a bunch of other people with Zelensky of Ukraine.

Within the last few weeks it was said to have happened.

I don't know it was so secret but basically I think Zelensky wanted to meet people from the business community and there were about 10 of us there.

It was organized by JPMorgan and it was this is a pretty important person I think when we look back in time and in our history, he will, he's played a very important role in the last couple of years.

And it was an opportunity to sort of meet him firsthand.

And I think his, his goal here, I think, was to meet people who could be potential investors in the country, people who could bring business to the country.

And I think what he really had to say was, don't wait till after the war.

You can really help us by bringing business to our country now.

Also looking for people to help rebuild after the war.

Yeah, I think, look, I'm very bullish on Ukraine post-war.

I think most Americans wouldn't be able to identify Ukraine on the map circa 2 years ago.

And today, I think people know how many people live there.

I think they feel a moral obligation to help.

And I think there'll be a very powerful big business case for the rebuilding of the country.

Are you going to commit personally that you'll give money towards the rebuild, either through you personally or the foundation?

So I've invested about 24 million in Ukraine philanthropically during the war.

Some of that was a philanthropic investment in a company called ZipLine, which is a really interesting startup.

They apparently raised $400 million and a $4 billion valuation recently.

But our philanthropic support was to get them to launch in Ukraine.

And basically it's a drone company that ships medical supplies, principally in Africa, but they, places where there isn't good road infrastructure and you need to get blood from 1 hospital to another, or medical supplies or things like that, And they launched in, they're in the process of launching Ukraine because of course the infrastructure of the country is not in a great place and they have lots of need for blood in the right places, unfortunately.

It wasn't really, it was not an investment I was looking for an economic return.

It was an investment to, I think, it was not in their business plan to launch in Ukraine.

And so I actually got a call from Mike Moritz of Sequoia saying, look, we're actually looking for philanthropic support to bring ZipLine to Ukraine.

And I think they are, and actually I had the opportunity to meet the head of logistics for the war at this meeting with Zelensky, and I connected him with the CEO of ZipLine because even in a place like Ukraine, there's a bureaucracy that you need to get through in order to...

If you think about launching drones around Ukraine right now, you have to have a lot of confidence that those drones are good drones as opposed to bad ones.

It was a good segue to get to the markets because just within the last week, Jamie Dimon said that geopolitics remain the market's biggest risk.

I think geopolitics, I don't know, maybe in the very short term that's true, but I think yeah it's sort of the unknown, It's the ultimate sort of black swan type risk.

You worry about an obligation to defend Taiwan.

And we've gone from a period of a couple decades of put aside terrorism, which you can't really put aside, but we really haven't had war between major powers, 2 countries in Europe in 80 years.

And so this is not a bright time in our history.

But we had a period of time where I think Berlin Wall came down and we thought about peace.

So it's a different environment to be investing in for a number of reasons, which we'll get to.

How would you describe what your positioning is today?

similar to what it's been historically, is we own actually really 8 amazing companies.

We have a tiny little investment in Fannie Mae and Freddie Mac, which I think together represent a little, maybe a little over 1% of the portfolio.

But the rest of the portfolio, those are really options on a ultimate kind of government taking them out of conservatorship.

The balance of the portfolio, great businesses we think do well in really any economic, political, or macro environment.

And then we opportunistically hedge risks.

And the 2 risks we've been concerned about really over the last year, it's a year and a half, energy prices and kind of the longer part of the curve, the treasury curve, becoming rates moving up.

Betting on the long end of the curve, rates continuing to go up.

You nailed that, and you've been making that.

Well, nailed it would be, we put this on like 18 months ago.

We haven't made, we actually made almost 3000000000 on two-year rates.

We've made a relatively modest profit here.

So if we nailed it, we would have made more.

I sort of was quiet about it for a while and then sort of made my point a couple of months ago, and rates have moved a lot since.

I mean, are you still figuring that rates at the long end, the 30-year, for example, or however on the long end, are still going to go higher?

Look, I think there's, even in the relative short term, there are a number of reasons why rates can move a lot.

Among them, we have a government shutdown.

We're going into what looks like a highly probable government shutdown.

All these little government agencies that put out data that the Federal Reserve relies on to decide whether to adjust interest rates, they're going to lose access to that data.

So we're going to have this sort of dark period.

We have probably the worst technical environment in our lifetimes for supply of bonds versus buyer bonds.

We have Russia, to the extent they own US securities and more, selling.

And we have an economy that is still strong and inflation, 3.5%, 4%, persistent.

But our view is basically you're not being paid enough to enter into a 30-year contract with the US government at a fixed price.

You know, 4.7 or wherever it is now doesn't make sense in a world where we think structural inflation is north of 3% for the very long term.

We went through this very unusual period with extremely low interest rates, where everything just got cheaper.

Since the financial crisis, the effort of the Federal Reserve was to make sure we didn't have deflation.

The aspirational goal is to get to 2% inflation.

Then the pandemic and trillions of fiscal stimulus, the psychological stimulus of being free to roam after being locked up.

All of these factors coming at once kind of lit inflation.

And we still have this massive deficit spending, we still have infrastructure spending, and the government's selling literally hundreds of billions of dollars of securities, bills, and at some point they're gonna have to sell more and more of the longer instruments.

And If you look at the balance sheet of the Federal Reserve, it's an imprudent balance sheet.

If you think about the United States, if this were like a business, you wouldn't have so much short term, you wouldn't have a third or more of your debt repricing within the next year.

I think actually Steve Mnuchin did a good job as Treasury Secretary.

The 1 thing he missed is he should have issued a lot of 30-year, 50-year, 100-year paper at crazy low interest rates, and that's gonna be a burden.

Hearing a lot from investors these days, Ken Griffin was on our network within the last week or so.

I just had a conversation with Rick Reeder of BlackRock.

Those who are talking about the possibility of much higher real rates for much longer than people think for the very reasons that you're talking about.

And where are the buyers going to come from?

And the result of that is going to be higher.

I don't know about much higher real rates.

I think, again, my view is inflation, or kind of the house view is inflation is going to be persistently higher.

I guess I control the door on the way in and out, I guess.

But our view is really that we're in a different world.

And you have a generation of people who are used to rates, you know, 4 sounding like a high interest rate.

And it's, you know, on a historical basis, it's an extremely low rate of interest.

So I would not be shocked to see, you know, 30-year rates well, you know, well into the, you know, through the 5 barrier.

And you could see the 10-year approach, approach 5.

And that could happen in the very short term, like literally weeks.

We've seen a huge move in the last number of weeks.

think a lot of that is investors kind of rethinking.

What's interesting about the 30-year Treasury is people reflexively buy it whenever they, you know, because they've made money doing it in advance of a recession.

But it's really not an instrument you should use to speculate on the short-term economy.

It's a fixed-price contract with the U.S.

Government for 30 years and reflects really structural forces.

And I think the structural forces have changed.

You must be negative to the equity market.

How could you have a positive view of stocks if you think that that's the outcome for bonds and yields?

Because if you own high quality, the key is owning businesses that have pricing power.

Businesses that can do well in a world of, and by the way, many businesses can do well in a world of 3% inflation.

The key is, it's hard to manage a business in a world where inflation is volatile, or inflation is 8%, or the kind of crazy numbers.

But many, many businesses can do very well in a world of 3% inflation.

And the kind of companies we own, they're very much like royalties.

So we own Universal Music, which is a royalty on listening to music.

If there's music playing out there, Universal's getting a fraction of a penny for every song that's being streamed.

Google's a royalty, if you will, on people advertising on the web or on YouTube.

Restaurant brands is a royalty on people eating at Burger King or any of their various concepts.

Hilton is a, I continue, a royalty on people staying in hotels and eating and drinking and going to events.

The beauty of these kinds of businesses is, you know, actually inflation is ultimately their friend, right, as long as they can keep their costs, as long as their costs don't inflate as quickly as their revenues.

And I think the nature of those, so I feel comfortable owning those kinds of businesses even if inflation remains high.

And also again, historically, if you think about, what is the value of a business?

It's the present value of the cash, you can take out of it over its life, discounted back an appropriate interest rate.

We were not discounting businesses back using 2% as an appropriate rate of interest.

So we've historically, you know, our discount rate we've used, you know, just rough measure It was more like 10% 9% you know numbers which discount the uncertainty inherent of investing in equities

Alphabet is 1 of your more recent investments.

Yeah, we bought it late last year, early this year.

It had a lot to do with AI because AI was the reason why the stock was cheap, right?

Chat GPT was launched, incredible game-changing kind of product, and Google really fumbled their offering.

And so people said, oh my God, Google's way behind on AI, and the stock sold off to 15 times earnings for 1 of the greatest businesses in the world.

And we did a fair bit of work, but Google's been almost a decade, they bought DeepMind, huge, spending billions and billions of dollars on AI.

It's a company known for hiring great engineers.

You could certainly presume they were at a pretty good place on AI, but they're, again, very different from a startup.

They took a much more cautious launch approach, and I think, and then kind of fumbled in early demonstration, made people think they were behind in Microsoft and chat GPT would sort of, if you will, open AI would eat their lunch, And it led to a very mispriced stock.

And then we actually, we've bought more in the 120s.

Some would suggest that, and it was said on this stage earlier today by somebody who sold Alphabet when the chat GPT and open AI thing came out.

We bought from them, so we should thank them.

That the ball was fumbled and recovered by the other team who ran for touchdown and then piled on with other touchdowns.

And now Alphabet may not be able to recover the leadership role that it had.

And DeepMind is a perfect example of Alphabet having this in-house and still fumbling the ball.

I would say they fumbled the PR around the ball.

But I think they've subsequently demonstrated publicly that they are integrating AI in all their various products.

Obviously the most obvious example is Search.

And they are, I think their bard is, you know, sort of certainly neck and neck with ChatGPT.

And we think they're, you know, if you Think about the enormous amounts of access to data that they have by virtue of the various, everything from search to the various products they offer to their customers, email and otherwise.

Data and the ability to legally extract and train on data is a really important competitive advantage.

They also have designed their own chips, access to the cloud, access to the processing power is critical.

So they've got many, many competitive advantages.

And I think it's in some ways you know in an integrated fashion that gives them an enormous advantage.

They will be a dominant player in AI for the very very long term I would expect.

I joked at the outset that we haven't sat together in a while and they certainly haven't done it here and 1 of the last times we did was you know Carl comes out you guys give each other a hug and it was this this big moment and it's hard to believe for me and I wonder for you that it's been 10 years.

But they had we held our short we be up like 70%.

I'm still psychologically short on that position where we've got a nice profit.

Being psychologically short is a much lower risk way.

Are you different as an investor than you were 10 years ago?

And all mistakes are opportunities for learning.

And so hopefully, I sort of decided at 50, I was like, OK, I'm not going to make any more mistakes.

We've had the best 5 years in the history of the firm.

And we're fortunate in the way that we're structured.

I've been a kind of Warren Buffett devotee, unofficial.

He's been my unofficial mentor for many years.

And if you look at his trajectory, he started out as a, what today you would call an activist hedge fund manager running a series of private partnerships over time?

He took control of what he called a crappy textile company or probably what was best described as a crappy textile company But the access to the permanency that capital gave him the ability to take it's kind of the very long-term view in a world where people in the investment management business generally have to make short-term decisions because their capital can leave.

We really, 5 years ago, got to that place in terms of the structure of our organization, and allows us to take the kind of very long-term view and we can buy Google at $94 a share when people are scared about, you know, and we can own it.

And that I think is a nice, a very fortunate competitive advantage we have.

Are you a better risk manager today than you were before?

But I mean, look, short selling was never something we actually liked, like shorting stocks because the asymmetry is in reverse.

We're big believers in understanding asymmetry both in life and in investing is critically important and short selling is on the inverse side of it.

First time very profitably shorting bond insurers and Fannie Freddie going into the financial crisis and then the famous Herbalife.

But since then we all we do is we own really really great businesses and if you want to be a successful investor over time and you find a handful of great businesses doing nothing but owning them is an amazing strategy.

It's underappreciated, if you will, as a successful way to make money.

from you that I said to myself, This looks to me like a different Ackman was Netflix.

And I remember the day where that earnings report came out and that stock dropped like a bomb.

Enough that we spoke, because I went on CNBC and reported our conversation and said, that's enough.

And I said, The old Bill Ackman might have said, now this is just a moment in time, management team's great, company's great, I'm staying with it.

The new Bill Ackman was like, no, I'm done.

So I still think the management team is great.

And I've gotten to know Reed Hastings even more since that time.

And obviously, Ted and the rest of the team, Spencer, et cetera, I think it's an amazing company.

I think what we misunderstood or misappreciated was Once they announced basically a different strategy, it became a much more disparate outcome.

We still thought they would be successful.

We said, look, we think Netflix is gonna be a great investment over time.

But in terms of do we want it to be 1 of 8 things we own or 1 of 10 things we own.

No, because it's kind of the range of outcomes as a result of the sort of change in strategy, going to an advertising model, et cetera, and predicting the probability of the success of that was a different kind of hurdle for us to climb.

So it's sort of the facts change in a meaningful way, became a different kind of investment.

I would have been happy to have that as a, you know, maybe even a 2.5% position, 3% position in the portfolio, but that's not what we do.

We don't collect 30 things, we put 3% of our capital.

We own, you know, we have 22%, 25% of our capital in Universal Music, we have whatever, 16, 17% of our capital in Google.

We feel very comfortable We can sleep at night and have a very high confidence level what they look like over a long period of time.

If a business doesn't meet those threshold characteristics or something about the business changes where we misunderstood the predictability of the business, we're happy to sell and find something else to do.

And basically, we took the Netflix losses, but the capital, if you will, and we invested in Google and it was a good decision.

We were able to make a bigger investment in a company we had more confidence in.

I think part of my point would be just because you like the management team and you think it's a great company doesn't mean it's a good stock.

And you recognized that at a moment where maybe in the past you wouldn't have because you would have believed in it so much That you wouldn't have sold it when you did.

Thought it was a I thought it was risk management like maybe people hadn't seen from you in the past.

I think it's something we would have done in the past.

I think the big difference is, look, we're very happy to buy more of something.

In fact, our favorite outcome is we, best outcome is we get our entire position purchased and then it goes straight up.

What normally happens is you buy something, you make it a meaningful position, and then something happens that causes the market to either not like the stock or the market itself goes down and you can buy a lot more of something you know well at an even more attractive price.

And we've done that all the time in our history.

I mean, Chipotle, we bought initially at $400 a share and then they had a couple more food safety problems and the stock was 250, right, which is about the move, almost exactly the move that Netflix made.

And then we hired Brian Nickell to be CEO and we bought more.

And 1 of the best investments we've made.

I do that to keep you compete with this format.

Well, you give me good material that I can bring up right

Icon has his problems with, Hindenburg Report comes out.

You tweet, quote, There's a karmic quality to it.

Over his storied career, Icon has made many enemies.

I don't know if he has any real friends he could use 1 here you also like indeed to the archaic us the bottle I think we can call it.

When I saw it, I was like, oh my god, he's poking the bear.

No, look, Carl was not a friendly counterparty when I dealt with him over the course of my life.

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Billionaire investor Bill Ackman at CNBC's Delivering Alpha Summit — 9/28/2023