In an interview to appear today on FOX Business Network’s (FBN) Risk & Reward (5PM/ET), host Deirdre Bolton speaks with Billionaire Hedge Fund Manager Bill Ackman about China, the markets, and minimum wage. When asked about China, Ackman said, “I think China has some real issues. I think they’re trying to maintain an overly strong currency while their economy’s not doing nearly as well.” Ackman went on to say, “I don’t know if it’s 2008, but it could have a fairly big recession” and that “long term, I’m bullish on China.” Ackman commented on whether the market swings impact his decisions, saying, “it has almost no impact unless something beyond or something we want to buy becomes interesting because the price moved up and down.” When asked about minimum wage Ackman said, “I’m a bit wary about making large changes in minimum wage in terms of impact on employment.” Regarding New York City Mayor Bill de Blasio, Ackman “I think the that the rhetoric should be a little bit more pro-growth and a little bit less about reallocation of wealth.”
Bill Ackman on China:
[drizzle]“I think China has some real issues. I think they’re trying to maintain an overly strong currency while their economy’s not doing nearly as well. And that makes it very difficult for them to use the kind of tools we use to recover and trying to — the risk of going through its own version — I don’t know if it’s 2008, but it could have a fairly big recession. And without monetary policy tools, you know, you could have a Japan-like lost decade…So I think they’re under a fair amount of pressure. I think there’s recent small devaluation could be the beginning of a larger one. I think they could solve a lot of their problems by letting their currency depreciate. And I think ultimately that’s where they’re going to end up.”
Bill Ackman on the markets affecting the way he makes decisions:
“It has almost no impact unless something beyond or something we want to buy becomes interesting because the price moved up and down. And I think there’s a huge amount of capital that’s relatively short-term. Obviously talk about high-frequency trading. But even just general trading, oriented capital, people trying to make money every day, every week, every month. And that kind of trend following money can cause fairly dramatic moves in markets in short periods.”
Bill Ackman on investing in Mondelez:
“Well, I mean, China is coming from a very long-term growth market…it’s not a place where — it’s not a particularly meaningful component of revenues today. It is one of the faster growing markets in things like chewing gum and ultimately chocolate and some of these treats that middle class people like. And I think the Chinese economy, in order to long-term be successful, will need to develop more consumption. It’s sort of the luxury, small ticket consumption, the kind of thing I think will do very well in China over the long period, not particularly effective like any of the things that are happening now.”
Bill Ackman on whether China has only two years before it runs out of money:
“I don’t know about the next subprime. I’ll start by saying that the Chinese people are extremely bright, incredibly motivated, really remarkably entrepreneurial. If they — I would be a very long-term bull on China. I do think they’ve made some mistakes in the short term in the way they manage — some ways managed upward the stock market. It’s almost promoting special issue margin lending and then attempting to manage an imploding bubble. I think that’s not been a great — doesn’t build a lot of confidence for an investor to find out the stock they own they can’t sell and the prosecuting short sellers think like that, they’re not inspired a lot of confidence. Long term, I’m bullish on China.”
Bill Ackman on what he’s doing with Howard Hughes feels like a partnership:
“Sure. Actually, most of our so-called activist investments are partnerships…Most of the companies we own — and there’s a period activism in investment; if the business is run by a CEO that we don’t have confidence in, then of course the dynamic is what people traditionally think of as an activist, minor proxy confidence replacing boards…In the case of Howard Hughes, this was a business we built from scratch. It came with a blank piece of paper. It’s partly a general bankruptcy. There were 34 neglected assets.”
Bill Ackman on how Pershing Square is going to look 5-10 years down the line:
“Pershing Square does not invest in private assets. Everything we own is a large, publicly-traded company. But we get very actually involved in the businesses that we own. And in this case, I’m chairman of the board. I talk to David almost every day. That’s really about his choosing. He tends to call me. We tend to take a fairly hands-off approach, find the best people to run businesses. But if we can be helpful, we want to be. And David’s very good at calling on his board of directors, not just me; he’s got a great board, very real estate affluent executives who really have been helpful in building the company. So I think in — if you look a Pershing Square in 5-10 years, I think we’ll own eight or 10 great companies run by outstanding management teams. I think we’ll own many of the same businesses we own today. I mean, if you look at our portfolio, there isn’t a lot of turnover. It’s one or perhaps two new things year. And when we can find a great business driven by a talented team, we want to own that kind of company for a very long time.”
Bill Ackman on activist looking at retail properties:
“I will say, just going back to McDonald’s what we pushed McDonald’s to do was to sell their stores to the franchisees and become a pure real estate — we called it a brand loyalty company. McDonald’s would simply own the brand and the real estate and rent those stores and collect a royalty from the franchisees. McDonald’s took a couple of steps in that direction and our goals are not purely financial. They were operational. Franchisees are much better operators of stores because you own five stores and if you live in a community and you — it’s your whole network, you work very differently in those stores than perhaps someone spending six months with the McDonald’s parent company, hoping to get to corporate after a stint in the stores. What’s interesting is that Burger King, which was a part of our 3G, adopted our plan for McDonald’s very explicitly. In fact, they called me when they bought the business and they said, look, we’re going to take your McDonald’s plan.”
Bill Ackman on minimum wage:
“I’m a bit wary about making large changes in minimum wage in terms of impact on employment. I think that many of the — you know, the typical minimum wage job, the Burger King job, someone 17 years old, 18, going to Burger King, you know, those are entry level jobs but you can make $90,000, $100,000, $110,000 being a manager of a Burger King store. And the way you get there is by starting out at the bottom and making your way up. I think you increase minimum wages by 50 percent, does encourage companies to start — it becomes economical to spend money on automation and other things. I’m very much in favor of people earning minimum wages making more. It’s hard to make a living on a — you can’t. It’s very difficult to live on a minimum wage. But if it’s a point of entry and you work hard and you can…assistant to a manager and store manager, it’s an entry point in some marketplace. And so it’s a complicated question.”
Bill Ackman on how many pitches for investment ideas he gets per quarter:
“Lots of people approach us. Most interesting ones come typically from a large shareholders who’s owned a business for many years. Canadian Pacific was an idea brought to us by a shareholder. Air Products was an idea brought to us by an unhappy long-term shareholder.”
Bill Ackman on whether he wants his daughters to become coders, programmers or go into real estate:
“I want them to peruse their dreams and whatever gets them excited. But I think it’s — in my experience, you — I think pushing your kids to do something is just not a great strategy. You know, let them find passions and I want them to be happy and peruse those passions.”
Bill Ackman on the best advice he would give to the next President:
“I think the United States of America is a bit like the kind of companies we target, right? It’s a phenomenal business, but it’s been undermanaged for a long period of time and it needs to be managed more effectively.”
Bill Ackman on tax inversion:
“Yeah, we — tax inversions. I mean, effectively, what’s going on now because tax inversions are discouraged, those foreign companies are buying U.S. companies and, you know, if a U.S. company is inverting to go offshore, they’re still likely to keep their employees and their corporate headquarters and everything else. If they’re — not allowed to invert or they’re discouraged from inverting and they’re competing in an industry where the foreign pharmaceutical or other business are operating with 15 percent tax rates, you know, the foreign companies are just going to buy U.S. companies and they’re going to be much less willing to keep the jobs here.”
Bill Ackman on whether hedge fund managers pay less taxes than nurses:
“Actually, interestingly, hedge fund managers, we don’t get a lot of benefit from carried interest in terms of the way that we’re structured, interestingly. I’m all in favor of fairness in terms of taxes and I’m also totally happy if the right thing to do is raise taxes and carry interest.”
Bill Ackman on the one percent and the rest of the population:
“I think, you know, one of the great things about the United States — you know, when I was growing up and someone down the block’s dad bought a Corvette, you know, I wasn’t jealous, I was motivated to do well so I could buy the car that I liked and I think having a country where people are inspired by successful people is a good thing…we want to design a tax policy that motivates people to create wealth and jobs and not want to relocate elsewhere. Look at the U.K. changed tax policy in a way that was very negative for hedge fund managers.”
Bill Ackman on whether he sees New York going downhill since Bloomberg’s tenure:
“I think you want an environment in which people are — it’s OK to be successful and it’s encouraged and people aren’t embarrassed by it. I don’t know de Blasio well enough. I think the that the rhetoric should be a little bit more pro-growth and a little bit less about reallocation of wealth.”
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