Insight on his investment in the fast food business, with William A. Ackman, Pershing Square Capital Management, who says he is no longer invested in McDonald’s but has respect for what the company has done. Ackman discusses his previous investment in Borders, Amazon’s dominance inthe e-book

Full video and transcript below:

all right, let’s down to andrew, he’s at tulane’s 2012 m&a conference, and he joins us with another very special guest.hey, andrew? hey, beck, i’m here with bill ackman of pershing square. always great to have you on the show. seeing you here in the big easy is a lot of fun. i have a lot to talk about but you piqued my interest minutes ago when you were talking aboutmcdonald’s same-store sales, you hinted that you liked the fastfood business, and when bill ackman said you like something,maybe you are actually looking at something. we are big shareholders in wendy’s in 2005, we convinced them to spinl o off tim horton’ and we owned mcdonald’s over a fairly long period of time. you are not in mickey ds now, are you? no, we’re not. but i like a business when you charge a royalty other people’s sales, and 8% or 9% in rent, you are getting 13% or 14% of gross revenues in stores and every time they sell a coke, mcdonald’s makes 14 cents. but you like the way they’remanaged. should we be seeing bill ackman’s name next to you — i probably wouldn’t tell you if i liked something in advance of my buying it because that would be a bad idea. in the news this morning, i want to get to this, you used to be the owner of border’s — the worst investment. i apologize. but you probably saw on the wall street journal the anti-trust settlementpotentially on the table around the book sellers that the bigpublishers and apple in terms of setting the price. and i’m curious as someone who has been in the business and seen how hard that business is to work, does this make a lot of to work, does this make a lot of look, i think the publishers have had a tough go largely because amazon has taken so muchshare in the business and with the kindle they set a price point of, you know, $999 which they tried to enforce and i think that puts a lot of pressure on the publisher. i don’t know what if anything apple has done. but i think it’s a good thing that there’s an apple and an ipad and people read books. and it’s interesting that they’re attacking apple which — well, they’re attacking apple and the book publishers which are in a horrible position the most part these days because they may get in trouble for colluding trying to prop up the prices they have left. if you think of a book, it’s an incredible deal, $10, $11, $12, whatever the number is, you get hours and hours of entertain.the price of book x have basically gone straight down over the last whatever period of time, it seems like an interesting area for the anti-trust authorities to be concerned about. i think it’s important that there is competition for amazon otherwise they’ll have the whole market and they’ll raise prices. we’ll have christine varmi on later in the day and we’ll talk to her about it.formerly with the anti-trust department of the government. ron johnson running jcpenneys and former apple guy, your guy, you brought him in. when are we going to see the real turn in that business? you’re now on the board. ron started november 1st,january 25th he made this incredible presentation, pier 57 in manhattan, a couple hours — it was really a great show andsomething worth seeing. even if you are not interested in jcpenney, if you are interested in retail, he talked a lot about the department store business, from november 1st to january 25th he rolled out new brands, new marketing, new pricing strategy, new strategy of how the store is going to be laid out, comprised of 100 shops as he talks about it and, you know, that the company will be transformed over a four or five-year period, that’s basically what he laid out. how much patience will youhave? enormenormous. does that mean we can do losses, we had a fourth quarter loss. i wouldn’t credit ron with the fourth quarter of jcpenney because he didn’t join the company until november 1st and the quarter ends in february. but the company very publicly came out and said we’ll earn $2.16 adjusted for the year. i don’t think we’ll have two years of losses. the question is how quickly is the customer going to understand the new pricing and the promotion, that will take some time when you make that kind of change. the company has said publicly, you know, that sales were down for the first month of february. that’s something that’s expected when you have customers used to a very promotion-driven strategy. and one thing he can’t do yet isnew product. all right. it takes time to get new product. new product is not really coming into the store until really the fall. but the good news is, i’d much rather have a down february without the right product, probably the lowest sales month of the year, the most important part of the year at the end of the year and that’s when he’ll start to have the new product in store. the customer will have eight, nine, ten months of understanding the message, you know, what i love about these guys is how quickly they respond to experience. you have your finger on thepulse of the economy through a lot of these businessesincluding jinclude including jcpenney, where are you at right now, project out 12 months? i’ll try to give a differentiated view. i think there’s a decent chance that we massively outperformexpectations. you’re with joe. 30% is his number. 30% gdp growth? no, no, no. 30% on the dow. i think it’s the dow, joe,right? 30% on the dow. that’s on my wish list, andrew. bill remembers this, he was probably in college, but the three days back — three years back in the mid-’90s where people just don’t think it could ever happen again. i’m just sort of wishful when we had three years in a row, bill, of 30% plus. and when you mentioned that to someone the idea of even one year there’s so much disbelief and skepticism that maybe the time is right for that eventually happening. that’s my only point. yeah, i think it’s very possible. and the reason for that is, you know, i think the housing’s really the big question mark, right? and i think you started to see and we have the benefit, you know, on the board of the howard hughes corporation we own 7,000 acres of land, you know, residential land in las vegas of all places, probably the worst market in the country, starting to see some glimmers on the part of home builders are putting down deposits and we own land in houston which has been a very, very strong market.and my view is you have housing prices down 30% to 50%. you have interest rates down 30% to 40% from where they were callit five years ago. so, the effective cost of owning a home is the lowest it’s ever. rental rates, the apartment rates are trading at low yields because rates have gone up 7%, 8%, 9% per anum, so it’s cheap to own a home versus an apartment you rent. the reason people haven’t stepped up to buy homes because they are afraid of losing their jobs. warren buffett said you should go out and buy as many homes as you can. have you done that? i haven’t, but it’s a great sort of opportunity. to finish the thesis if i can. once unemployment stabilizes which i think we are headed in the right direction, all of a sudden people feel comfortablebuying home and i think once they start buying homes againand the prices start to tick off the bottom as opposed to everytime it’s cheaper or you look and you miss it and it goes up in value, i think you can see a snapback

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