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

Jenny, thank you very much. Nice to see you. Frank, thank you. Okay, I can't think of a better way to take this process to the finish line than with our next guest. He is one of the most provocative and interesting

investor

s in the world. country, his motto is to invest in making a bold decision that no one else believes in and that is what he has done time and time again, usually to great effect, farmers, retailers, railroads, dietary supplements, restaurants, music streaming, short films , it goes a long way, long, it usually does. stock bonds very successfully, it doesn't matter, this is Bill Amman, please welcome Bill Akman to the stage and welcome back Scott, thank you, thank you, okay, the closer it's been a minute since we were here together, Carl is not coming.

No hugs, we're fine, well I want to start with news, but I think it's news, a reported secret meeting you and a group of other people recently had with Zalinski from Ukraine in recent weeks, was said to have happened. what happened in that room, so I don't know, it was so secret, but basically I think Zilinsky wanted to meet people in the business community and there were about 10 of us there. It was organized by JB Morgan and This is a pretty important person? I think when we look back in time in our history, he's played a very important role over the last few years and it was an opportunity to get to know him firsthand and I think that's his I think his goal here was to meet people who could be

investor

s. potentials in the country, people who could bring business to the country and I think what he really said was don't wait until after the war, you know they can really help. we by bringing business to our country now we are also looking for people to help rebuild after the war, yes, I think I am very optimistic about Ukraine after the war, right?

I think most Americans wouldn't be able to identify Ukraine on the Circ map two years ago. Ago and today I think people know how many people live there, they know a lot about the population. I think they feel a moral obligation to help and I think there will be a very powerful business case for rebuilding the country. Are you going to personally commit to giving money for reconstruction, either through you personally or through the foundation? I have invested about 24 million in Ukraine philanthropically, during the war, you already have some of that. a philanthropic investment in a company called zipline, which is a really interesting startup, it goes way beyond the startup, apparently they raised 400 million from a $4

bill

ion valuation recently, but our philanthropic support was getting them to launch in Ukraine and It's basically a drone. company that sends medical supplies mainly to Africa, but they are in places where there is not good road infrastructure and you need to get blood from one hospital to another, medical supplies or things like that, and they launched, they are in the process of launching Ukraine because Of course the infrastructure of the country is not in a good place and you know that unfortunately they are very much in need of blood in the right places and that was just the beginning, it seems that there will be more investments on their part, if not .

It really wasn't an investment. You were looking for a financial return, it was an investment for you. I don't think it was in their business plan to launch it in Ukraine and I actually got a call from Mike R from Sequa saying, look. We're actually looking for philanthropic support to bring ziplining to Ukraine and I think they are and I actually had the opportunity to meet with the head of logistics for War in this meeting with Zinsky and I connected him with the CEO of zipline because you know even in a place like Ukraine there is a bureaucracy that you have to overcome so if you think about launching drones around Ukraine right now, you have to be very confident that those drones are good drones.

Unlike the bad guys, it was a good transition to get to the markets because just last week Jamie Diamond said that geopolitics remains the biggest market risk. Do you agree? I think geopol. I don't know, maybe in the very short term. right, uh, but I think so, it's kind of unknown, it's the ultimate Black Swan type of risk, right, what are you worried about, you're worried about nuclear war, you're worried about, you know, an obligation to defend Taiwan, you worry about, you know, the war between the United States and we've moved on from a period where, you know, a couple of decades, you know, you let go of terrorism, which you can't really let go of, but we really haven't had war between the major powers, you know, two countries in Europe.

I know 80 years, this is not a shining moment in our history, but we had a period where I think the Berlin Wall came down and we thought about peace, so it's a different environment to invest in for a number of reasons. What we will get to. How would you describe your current positioning? So similar to what it has been historically. We actually own eight incredible companies. I'm sure you know that in most of them we have a small investment in Fanny. May and Freddy Mack, who I think together represent little, maybe a little more than 1% of the portfolio, but the rest of the port, those are really options on a definitive type of government that takes them out of the conservative ship, the balance of the large portfolio We believe that companies do well in any economic, political or macro environment, and then we opportunistically hedge the risks and the two risks that we have been really concerned about over the last year and a half.

Energy prices, and something like that. the longest part of the curve, the Treasury curve becomes rates going up, betting on the long end of the curve, rates continue to go up, you've made it and you've been doing well, it would be if we put this like 18 months ago we haven't beat you, we actually made almost 3

bill

ion on two year rates, we made a relatively modest profit here, so we made it, we would have made more, but are you? I was silent on it for a while and then I made my point a couple of months ago and rates have moved a lot since you are still in that bet and how long will it be until we are right or wrong.

I guess I mean, you're still thinking that rates on the long end, year 30, for example, or however on the long end, will continue to go up. Yeah, I look, I think even in the relatively short term there are There are a number of reasons why trips can move around a lot. We have a government shutdown. We are entering what looks like a very likely government shutdown. We're going to have a data closure. All these little government agencies that publish data. that the Fed relies on to decide whether to adjust interest rates, they're going to lose access to that data, so as a dark period, we probably have the worst technical environment of our lifetimes for bond versus bond supply. of buyers right, we have China selling, we have Russia to the extent that they and US securities and more sell, we have Saudi Arabia selling um and uh, you know, we have an economy that is still strong and an inflation, you know, three and a half 4%, uh persistent. but you know, our view is basically that you don't get 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, it doesn't make sense in a world where I think structural inflation is above 3% in the very long term and we went through this very unusual period with extremely low interest rates.

You know, everything got cheaper and you know, since the financial crisis, you know the Federal Reserve's effort was to make sure that we didn't have deflation, you know, the aspirational goals of getting to 2% inflation and then the pandemic, and you know, trillions of fiscal stimulus, you know, the psychological stimulus of being free to roam after being locked down. up, you know, all of these factors are coming at once, kind of inflation going on and we still have this massive deficit spending, we still have infrastructure, uh, spending, the government is selling literally hundreds of billions of dollars of securities, ya you know, um, bills and and at some point.

At this point, they are going to have to sell more and more long-term instruments and if you look at the balance sheet of the Federal Reserve, you will see that it is a reckless balance, you know, if you think about the United States, if you were. This was like a business where you wouldn't have so much short term that you wouldn't know a third or more of the appreciation of your debt over the next year, so it hasn't been managed. I think Steven Nan actually did a good job. As Treasury Secretary, the only thing he missed is that he should have issued a lot of 30-year and 50-year paper at 100e at incredibly low interest rates and that's going to be a burden for many investors to hear these days.

Ken Griffin was on our Network over the last week I had a conversation with Rick Reer from Black Rock who are talking about the possibility of much higher real rates for much longer than people think for the same reasons you are talking about the broadcast. so massive and where will the buyers come from and the result of that will be higher, yeah, real, I don't mean much higher real rates, uh, I think I think you know, my view is inflation or something like that. . The house sees that inflation is going to be persistently higher, well, you are the house.

I guess I control the door coming in and out, I guess, but you know our view is really that we're in a different world and you know The world changes gradually, uh, and there's a generation of people who are used to the rates, you know , four sounds like a high interest rate and you know historically it's an extremely low interest rate so I wouldn't be surprised to see that. you know, the 30-year rates, well, you know well, you know, through the barrier of five, uh, and you could see 10, the 10-e approach approaches five jams and that and that can happen in the very short term, like literally SE weeks, a huge move has been made in the last few weeks and I think a lot of that is that investors are reconsidering what's interesting about the 30-year Treasury is that people are reflexively buying it when they buy it.

They know because they have made money doing it in advance. of recession, but in reality it is not an instrument that you should use to speculate on the economy in the short term; It's a fixed price contract with the US government for 30 years and it reflects really structural forces and I think the structural forces have changed. negative stock market, how could you have a positive view on stocks if you think that's the outcome for bond yields? Because if you have high quality, the key is to own businesses that have pricing power, businesses that can do well in a world of and because many companies can do well in a world with 3% inflation, The key is that it's hard to run a business in a world where inflation is volatile or inflation is 8% or you know the kind of crazy numbers, but many, many businesses can do it. very well in a world with 3% inflation and the type of companies we own are very much like royalties, you know, so we own Universal Music, which is a royalty for listening to music, if there is PL music playing, Universal receive a fraction. of a penny for every song, you know, that's streaming, Google, Google is a royalty, so to speak, on people who advertise on the web or on YouTube, Restaurant Brands, it's a royalty on people who eat at Burger King or any of its several.

Concepts Hilton is a, I continue, you know, royalty about people who stay in hotels and, uh, eat and drink and attend events. The beauty of this type of business is that inflation is actually ultimately your friend, as long as you can maintain your cost. as long as your costs don't inflate as fast as your income and I think the nature of them is regular. I'm comfortable owning that type of business even if inflation is still high and so are you historically, if you think about yourself. Knowing what a company is worth is the current value of the cash you can withdraw from it over its lifetime, discounted at an appropriate interest rate.

We weren't discounting companies using 2% as the appropriate interest rate, so we have Historically, you know our discount rate that we've used, just rough measurements, more like 10% uh, 9%, you know numbers that discount the inherent uncertainty. to investing in stocks. The

alpha

bet is one of his most recent investments. That's right, yes, we bought it late. last year, early this year, yeah, or early this year, how much did that have to do with AI? It had a lot to do with AI because AI was the reason stocks were cheap, right, GPT launched, you know, an incredible game-changing kind of product. and Google really botched their bid, so people said, "Oh my God, Google is so far behind in AI" and the stock sold off, you know, 15 times earnings, for one of the biggest companies in the world. , and you know, we did quite a bit of work, but You know, Google has been, you know, almost a decade. uh, they bought onedeep mind.

You know, they've spent billions and billions of dollars on AI. It is a company known for hiring great engineers. And we can certainly assume that we are in a pretty good place. in AI, but you know again they are very different from a startup, they took a much more cautious launch approach and I think then they faltered a little bit, an early demo made people think they were behind on Microsoft and would chat with GPT, so to speak. Open AI would eat your lunch and that led to a very mispriced stock and then we actually bought more in the 120's it's our second largest investment

alpha

bet yes some would suggest that and he said it today in this scenario someone who saw the old alphabet when GPT chat and open AI came out, we bought from them, we bought from them, so we must thank them, yes, the ball was lost and recovered. for the other team that ran to score and then racked up other touchdowns and now Alphabet may not be able to regain the leadership role it had and Deep Mind is a perfect example of how Alphabet has this inside house and still turns the ball over.

I would say they missed the ball, but I think they subsequently demonstrated publicly that they are integrating AI into all of their various products, obviously the most obvious example of search, and I think their B is you know, certainly neck and neck with chat gbt and, uh, we think they are, you know, if you think about the enormous amounts of data access that they have under the various, you know everything from search to the various products that they offer. to your customers via email and otherwise, you know, data and the ability to legally extract and train on data is a really important competitive advantage.

They've also designed their own chips, you know, access to, you know, the cloud, access to You know processing power is critical, so they have a lot of competitive advantages and I think in some ways, you know that of integrated way gives them enormous advantages. They will be a dominant player in AI in the very long term. As expected, I joked from the beginning that we haven't sat together in a while and we certainly haven't here and one of the last times we did it was You know, Carl comes out, you guys give each other a hug and it was This is great moment and it's hard to believe for me and I wonder if it's been 10 years since the Herbal Life battle with Carl, yes you think it's been 10 years, yes by the way if we had kept up we would be up like 70%, so I'm still psychologically short that position where we have a nice profit.

Do you still see ghosts at night? Being psychologically short is a much lower form of risk. Yes, yes, are you a different investor than you were then? You are different? I'm an investor like you for 10 years and if so, of course I'm a continuous learning machine, uh, and all mistakes are opportunities to learn, so hopefully you know that I decided at 50. I thought that it was good. I'm not going to make any more mistakes and I made one, but don't look, we've been very fortunate, we've had the best five years in the history of the company and we're fortunate in the way that we're structured, you know, I've been kind of From an unofficial Warren Buffett devotee, he has been my unofficial mentor for many years and if you look at his career, he started as what you would call today an activist hedge fund. manager who ran a number of private partnerships over time, he took control of what he called a shitty textile company or probably what was best described as a shitty textile company, but access to the permanence of that capital It gave them the ability to take 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, you know, can go away, really five years ago. we got to that place in terms of the structure of our organization and it allows us to take the kind of very long-term view and you know we can buy ghou at $94 a share when people are afraid, you know, and we can and we can own it and I think that's good.

Lucky competitive advantage we have, are you a better risk manager today than you were before? I certainly think so, but I mean, look, short selling was never something we really liked, like shorting stocks because asymmetry is the other way around, you know? We're big believers in uh, you know, understanding asymmetry in both life and investing is vitally important and short selling is on the reverse side, so you know, we did it a couple of times, the first time , very profitably shorting bond insurers and uh, you know, Fanny Freddy went into the financial crisis and then, uh, the famous life of Ur, um, but since then all we do is own businesses really great ones, and if you want to be a successful investor over time, you find a handful of great ones. companies that do nothing but own them is an incredible strategy and it is, uh, underappreciated if you will as a successful way to make money at the time I said to myself this seems like a different acman to me.

Netflix, okay, Netflix Okay, you were a big believer in Netflix and I remember the day that earnings report came out and the stock dropped like a bomb. It's okay, not like it fell much. Okay, significantly, it fell a lot, for sure. Yes, enough to talk. because I went on CNBC and reported our conversation and you said enough was enough. I was wrong about this and said that old Bill Acman could have said now that this is just a moment in time. The management team is great company. I'll stick with that. The new Bill Acman said, "No, I'm done, that's all.

I'm moving on because I still think the management team is great, and I've come to know that you know Reed Hastings, even more since then, I think he is." a first class person and obviously his, you know Ted and the rest of the team, Spencer etc. I think it's an amazing company. I think what we misunderstood or misappreciated was that once they announced basically a different strategy, it became a much more spread out strategy. As a result, we still thought they would be successful, we wrote a little letter to our investors, we said, look, we think Netflix is ​​going to be a great investment over time, but in terms of whether we want it to be one of the eight things we own or one of the 10. the things that we own don't because it's kind of a range of outcomes as a result of the kind of change in strategy, going to an advertising model, etc., and predicting the probability of success of that was a different kind of hurdle that we had to overcome . uh so the facts changed significantly and it became a different type of investment.

I would have loved to have that, you know, maybe even a 2 and a half% position and a 3% position in the portfolio, but that's not what we didn't collect 30 things? We put 3% of our capital that we own, we have 22%, 25% of our capital in Universal Music, we have whatever, 16, 17% of our capital and Google, you know, these are businesses that we feel very. comfortable we can sleep at night and have a very high level of confidence in what they look like over a long period of time if a company doesn't meet those threshold characteristics or something about business changes where we know we didn't understand the predictability of the business that We're happy to sell and find something else to do and basically take the losses from Netflix, you know, but the capital, so to speak, we invested in Google and it was a good decision, we were able to make a larger investment in a company. more confidence in I think part of my point would be that just because you like the management team and think it's a great company doesn't mean it's a good move and you recognized that at a time when maybe in the past you wouldn't.

I didn't do it because you would have believed in it so much that you wouldn't have sold it when you did. I thought it was a moment. I did it. Well, I'll accept it. I thought it was a. I thought it was risk management, like maybe people do. I haven't seen you in the past, okay, you don't accept that. I don't believe it. I think it's something we would have done in the past. I think the big difference is that we are very happy to buy more of something. Not everything we buy goes straight up, in fact, our favorite outcome is that, you know, the best obvious outcome is that we buy our entire position and then it goes up, that rarely happens, what usually happens is that you buy something, eh, you make it into a meaningful position. and then something happens that causes the market to dislike the stock or the market itself to go down and you can buy a lot more of something you know well at an even more attractive price.

We have done it all the time in our history. you're pretty Chipotle being a perfect example, I mean Chipotle, we initially bought it at $0000 a share and then they had a couple more food safety issues and the stock was at 250, which is about the move, almost exactly the move that did Netflix and then I hired Brian Nickel to be CEO and we bought more. And you know, one of the best investments we have made. You don't do many interviews. You sure tweet a lot. So that's going to keep you competing with this format, well, give me some good material that I can mention right now, okay, um, the icon has its problems with Hindenberg.

The report comes out, your tweet quotes, there is a karmic quality to his story. The racing icon has done many. enemies, I don't know if he has real friends, he could use one here. You also compared it to the Aragos debacle um. I think we can call it a small shot and not Freud, why did you tweet that when I saw it I thought oh? OMG he's bothering the bear, no look I Carl was not a friendly counterpart when I dealt with him, throughout my life I made peace with a guy, he is a lovely person to hang out with and have dinner with um, but uh.

I didn't like the way you handled a couple of situations I had in terms of business and, you know, Carl being briefly attacked, I thought there was a quality of life circle to it, you also tweeted that transparency is you are not a friend of the IEP yes, have you ever been short no, you have never been short on the IEP never no, we no longer sell stocks short? I've been, this could have been a special situation no, no, you know what you're right about. That was also short psychologically short, so by the way, I think we're going to create a fun short psychological short and everyone can invite everyone to invest with us, how do you know when to cover?

Do you know when to cover when he gets so close? Z out you um, so I also want to talk politics with you. That's okay, because speaking of Twitter you are very passionate about it. In February you said a quote from Vivic Ramaswami. I'm going to make it bold. and call early, he will run for president and win his support now. I have supported VI. uh, you know, I've known him for probably five six years. very talented, very capable, very intelligent. a little too much, maybe more than a little too far to the right I, you know, I expected him to be, as I described him, kind of a more center-center-right candidate, um, and I think he has a lot of great ideas, but in some positions, Ukraine and others, I think that, you know, I deeply disagree, so while you said that he is young, smart, talented, will attract the center to the right to win, he speaks hard truths that many believe but are afraid to say anymore You don't believe those things.

I agree with everything I said there, except he wasn't going to do it. attract the center right. I think his problem is that it's hard to win being to the right of President Trump, and I think some of his views are to the right of President Trump and I think that's a challenge. I think there are a lot of Republican Republican candidates and I think there are a lot of people who have traditionally voted Republican who would love a more centered centrist, a Republican as an alternative, a capable business leader, with, I would say, more centrist, more traditional .

I would say Reagan uh views and I don't think we emerged that candidate in a way uh, I mean, you know, he created an opportunity to compete with you with President Trump, okay, so it seems like he's off the writing list. checking. If we don't get any more contributions, we'll see where he goes in his various policies and, look, I think look, I like several of the Chris Christie candidates that I've spent some time with recently. I thought he did a great job. In the debate, I think he is much more of a, I would say, more traditional Republican candidate.

I think he's done a great job in New Jersey as governor. He has a lot of political experience, but you know, he's someone that the American people will support, I don't know, but I think we would benefit from a broader range of options on both sides of the aisle, here yes, which is why I have supported several people, including Robert F. Kennedy Jr., yes. you support him, uh, certainly, I like his voice to be in the race for sure and I'll meet him for the first time, in fact, tomorrow, have you given him money yet? Uh, I wrote you a check, yeah.

I think some would look at that and say: How could someone who was so excited about coid come to my show? We all remember that, no matter how committed he was to the vaccine and to vaccinating the greatestpossible number of people possible given their position. about vaccines in general, some might wonder how support can be provided, so I actually think Kennedy raises a lot of important questions that need to be asked and answered about vaccines and that's something we're delving into, just today I was talking about phone with a scientist and we want to put together what I think needs to be done, it's a very detailed deep dive into all the vaccine research on vaccine safety, and then you'll know what are the things that we don't have.

A lot of work has been done on the cumulative impact, uh, on a child, for example, you know, when I was a child I received three injections. I have a four year old girl. She is on schedule to receive 73 injections. You know it's possible. Don't be the virus, if you will, the one that's designed to make you immune to a particular disease or the dead virus or the mRNA technology and maybe you know about aluminum or some of the other preservatives. We are in vaccines that create risks and challenges and, by the way, as a father of a four-year-old child, where the four-year-old child does not have the capacity to consent to being injected with something, I feel a moral and parental obligation.

To get to the bottom of this, I think I just talked to a prominent scientist at UCSF today who said to me, you know, Kennedy is right about 75 to 80% of the things he says about the vaccine, the unfortunate thing is that there are 20 to 25% where unfortunately there is not enough data for the things that he says, he says convincingly and so I think it's time for us to know that this whole vaccine thing has become a political issue where, already you know if you got vaccinated and wore a mask you were in a party if you refused to get a shot and didn't wear a mask you were another political party it's just not a political issue and there's a real reason look we have a generation of children who have much more. uh, asthma, I have a lot more eczema, I have a lot more autism and we still don't understand why that is, and is it something that's in the vaccine?

Is it something about vaccines? Is it other toxins in the environment? , believe. We have an obligation as parents to resolve this before you know, before we can maintain it. That's where this new curiosity arose from you becoming a father, no, from listening to what Kennedy had to say instead of looking like the greatest. I would say it's interesting, I'll give a lot of credit to Elon uh and Twitter or the medical scientists who raised questions about our approach to the covaccine and got demoted on Twitter and some of the articles he posted on one of the preprint sites were like his misinformation was removed and you know, and you look at this guy, Jay Bachar, at Stanford, his recommendations for how we should have handled coid turned out to be pretty accurate, but they basically took it off Twitter as misinformation and now Twitter has become a place where people can express their views and I'm a great defender of freedom of expression and I try to use Twitter.

Look at some of the most Prof Prof. Well, most of the most profitable investments I've ever made. I did it thanks to what I did. I found out on Twitter what the exchange we did was where we bought CDs. It was clear to me that it was a very high probability event that Co was here, we would have to shut down the global economy and I learned that because I could take a dispassionate view and collect data without it, um, at least those issues hadn't been examined yet. , so to speak, and you know Elon basically opened up Twitter now and you know the downsides of a very open environment. format, there will be some hate speech, there will be some things that people won't like.

The good thing is that free speech has been kind of a critical tenant of our country's principles and helps preserve democracy, so I. I think it's a really important vehicle and with Kennedy I read the headlines and I always had the perception that he was a total nutcase and then I spent some time, you know, several hours listening to him on a podcast doing a little more work. about him as a person, I said, you know what he's raising some really important points about vaccines that I hadn't thought about, so I would say, you know, a year ago, I would have automatically taken a booster, now I want to, I'm going to think. . about risk and reward and I don't think it makes sense to me, it might make sense to someone who has health problems and is older, but vaccines have risk and reward and you have to do the math to determine if the risk is worth the reward . and I hadn't really spent much time thinking about it before Canid.

I give him a lot of credit for that January 20th and January 25th that he took the oath of office. I don't know, yeah, I don't know, uh, but I think um. I think you know how logical the absence of Trump or Biden will be, someone more credible running for office and I've done everything I can to try to convince others to run, you know, I was a big supporter of Mr. Mr. Diamond Uh, who? Unfortunately I decided not to. Are you thinking today about what the impacts will be on the market if one of those two doesn't win, no, no?

I think about the global impact, you know, I think our country deserves a great leader that the whole country can get behind. And imagine what America would be like if you woke up in the morning and you were incredibly excited, the whole country was excited about who was leading the country correctly and therefore we are working together as a country to solve the problems to grow the economy. you know how to protect the world, you know, that's a world that we've had in our history, we haven't had it recently and I would love to see that world come back, well, you're a very sought after speaker, uh, because you're not afraid to address the issues. difficult and I appreciate you being here.

I know we all do it too. Welcome back to

delivering

Alpha. We hope to see you next year. Thanks Billman. Thank you very much Bill. That's fascinating, really good. yeah, cue the bottles uh uh, I want to go deeper into how to be psychologically short, that's all I want to say. I think I could spend a lot of money on therapy, uh, if I did that. I think Bill Akman discovered some very interesting things. I didn't expect anything less uh again as always fascinating provocative uh a little more of Buffett in him today I think maybe he would dispute this than what he had 15 or 20 years ago his great businesses sit back and watch them grow um anyway we have come to the end, I'm very glad that everyone came.

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