Bill Ackman: Fed Won’t Make Mistake On Inflation

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Following is the unofficial transcript of a CNBC exclusive interview with Pershing Square Capital Management CEO Bill Ackman and Professional Tennis Players Association CEO Ahmad Nassar on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, September 6th.

Bill Ackman Invests In A Pro Tennis Association Founded By Novak Djokovic

Bill Ackman: The Fed Has To Raise Rates To 4% Or More

Ackman On Investing In Tennis

BILL ACKMAN: And the reality is that if you’re not 100 in the world or better, you lose money on the tour. You make less than minimum wage. And the result of that is it’s a sport for affluent people.

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So Pershing Square’s strategy is to find these great businesses that have kind of lost their way and help kind of redirect them and make them successful over time.

I feel like tennis you go to the US Open, it's an incredible experience. It's an amazing, you know, it generates 450 million or something like that in revenues and it makes a profit of a couple 100 million dollars, it’s one of the greatest businesses in the world.

But the problem is, it's not a great outcome for the players. The players get a very small percentage of about 12%, 13% of the revenues. In other sports, that number is 50—

Ackman On Inflation

ACKMAN: Our biggest fear was inflation and that's why I wanted the Fed to raise rates quickly and soon. They're now doing this.

ANDREW ROSS SORKIN: And do you want them to continue?

ACKMAN: I think they have to. I think what they've said they're going to do they have to do which is raise rates to something in order of 4% or maybe a little bit more, short rates, keep them there for a reasonably extended period of time a year or so.

And then hopefully inflation starts to come off and and you're seeing I think some some indications that inflation is coming coming off.

Ackman On Equity

ACKMAN: I think once people realize the Fed doesn't have to keep increasing rates and we’ll soon be taking rates down, that's kind of a buy signal for markets. And so the question is how far in advance does the market predict that kind of outcome.

I think if people see inflation come off, eight and a half, you start to see a pretty powerful continuing trend then I think people will expect at some point the Fed to ease.

But they're not what they're not going to do is to take rates to 4% and see a good inflation print and then start taking interest rates down again. They're not going to make that mistake.

Ackman On Returning To The Office

ACKMAN: I think it's important. I think it's very hard to build a culture and maintain a culture of an organization virtually. I think we were able to operate very effectively during Covid because we had the opportunity for 18 years to build a culture.

If we were just launching our company, I mean, I think the other big problem that every CEO has to be thinking about if you're exclusively work from home, you're you just need to change your like, you know, email address and you can switch to a new employer. Right?

So it's the frictional costs of switching are so low that I wouldn't have that much confidence in a virtual firm and I'm sure companies are really seeing that. You just literally turn off your monitor, wake up the next morning, you're working for a new company.

You don't need to clean out your desk. That's not a good, that's not an ideal design. But it really depends on the business.