Billionaire investor Bill Ackman is dusting off his crystal ball as investors grow anxious about the markets this fall.
The upshot? Any calls for a recession should be taken with a grain of salt, but high inflation and soaring interest rates remain a big problem for the U.S. economy right now.
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The founder and CEO of Pershing Capital Management, Ackman appeared this week on The Julia La Roche Show and set the stage with his entrance into the financial markets.
“While I was in college I started out with a Fidelity Spartan brokerage account where I had about $40,000 to my name,” he said. “My parents were paying my tuition and I was paying for everything else, so I figured the worst that could happen was if I lost the money it would mean another year of business school.”
“But if I made money it could lead to a career, so I focused on companies where I had a competitive advantage and started that way,” he added.
Ackman has kept that focus on investing in “great businesses” since he started investing in stocks in the 1980’s and has amassed a net worth of $3.5 billion in doing so. Over 40 years later, he’s still at it and says his “crystal ball” is telling him the economy and markets are doing better than people think, although there are some major caveats.
“I believe I had a crystal ball of what was going to happen,” when the covid-19 pandemic broke out in early 2020, especially on key issues like interest rates and company-specific pandemic bets. “Now, though I would say the crystal ball has clouded a bit in the last period. I think these are unusual economic times and perhaps we always say that, but I don’t think this is a pattern that has been repeated…or it hasn’t been for more than 100 years,” he told La Roche.
Even so, Ackman sees some upside in the U.S. economy, or at least more than people may think.
“For two years, people have been saying that recession’s around the corner and you know we’ve had a very different view, and continue to have this view that I think people are coming around to, that the economy is actually still quite strong,” he noted.
Threatening economic growth is stubbornly high-interest rates and continually rising inflation, and those are issues that aren’t going away anytime soon.
“I don’t see inflation getting back to 2% so quickly, if at all,” he said. “(And) “interest expense (tied to the U.S. federal debt) will become a much bigger part of the deficit that is not going to be a contributor to the economy.”
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Ackman also expresses concern over regional banks and the commercial real estate sector.
“I would say the commercial real estate picture has not gotten better, if anything, you know, you’re going to start seeing real defaults, particularly with office assets,” he said. “Regional banks have the most exposure to construction loans so they're going to be a lot of construction loans that won’t be able to repaid. There will be a lot of restructurings, so either the investors groups are going have to put in a lot more equity or the banks are going to start taking some losses.”
For his own future, Ackman told La Roche it’s “possible” he could run for high office someday, and is disappointed that the country “can’t do better” than President Joe Biden and former President Donald Trump.
For now, his favored presidential candidate would be someone like JPMorgan Chase & Co. CEO Jamie Dimon, who could best a “beatable” President Biden.
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