Nelson Peltz On Why Inflation Could Be A Good Sign

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Nelson Peltz On Why Inflation Could Be A Good Sign
Image source: CNBC Video Screenshot

Following is the unofficial transcript from a CNBC interview with Trian Partners CEO & Founding Partner Nelson Peltz on CNBC’s “Fast Money Halftime Report” (M-F, 12PM-1PM ET) today, Wednesday, October 20th in honor of the 10th anniversary of the program. Following is a link to video on CNBC.com:

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Nelson Peltz On Why Inflation Could Be A Good Sign

SCOTT WAPNER: Let’s get the view now of Nelson Peltz. He is the CEO of Trian Partners. Nelson, welcome back. It’s nice to have you on the program again.

NELSON PELTZ: Hey Scott. Good to be with you. Congratulations for 10 years. Who would have thought, Scottie.

WAPNER: I’ll tell you what, I wouldn’t have. But it’s great to have, it’s great to be here and it’s great to have you with us. You know Jim Cramer and the gang are here as well. What a day I mean new closing highs, Nelson, on a day where you’ve got Paul Tudor Jones and David Einhorn on the network talking about inflation. How do you see things?

PELTZ: Look, I think we’ve got inflation clearly, but the inflation is a lot of people making more money and I’m not just talking about guys like me and the guests on your show. I’m talking about the, the average Joe whose wages have gone up as a result of Covid, as a result of the scarcity and I think that’s a good thing. I think the fact that they have more money to spend. The big thing is to get them to go back to work and the fact that they have more money to spend, they’re going to buy a little bit more Wendy’s, they’re going to buy some snacks from Mondelez, they’re going to buy their toothpaste from P&G and on and on. They’re going to spend some extra money and invest it in Invesco, so I think that’s all good for the economy. I am not as much of a bear on interest rates as many may think because they’re very few people in the world, very few groups in the world that need higher interest rates. Homebuyers don’t need it, governments don’t need it and the dollar doesn’t need it. So, I think that we’re going to have some inflation. I think some of it is good. Some of it always is not good, but I don’t see tragedy coming along here.

WAPNER: Because I mean your, your companies are in the thick of it, right, whether it’s P&G yesterday talking about it. You’ve got wage pressures at Wendy’s, labor issues, right. Everybody is talking about it especially in the area where you cut your teeth. I mean consumer packaged goods is where you’ve made your living.

PELTZ: Scott, everybody’s complaining, but everybody’s earnings are up. Everybody’s sales are up. So, keep complaining, keep sticking me, okay. Things are getting better, you know, the market really missed P&G’s earnings yesterday. P&G’s sales were up 5% over a quarter that was fantastic, okay. They missed consensus by 1% and yet people don’t understand that we had the COVID elite, you know, the Clorox’s and the Campbell’s, who did so well during COVID. And the minute it looked like COVID was over, their sales fell out of bed well P&G was not part of that. P&G sales continue to climb. People continue to want to use their products, the same thing at Mondelez, the same thing over and over again. They kept going to Wendy’s, yeah, we can’t get help at Wendy’s and that’s a pain and it’s hard to get some products at Wendy’s but nonetheless, Wendy’s is doing pretty damn good. So, we’re gonna learn to deal with this new phenomenon. People hopefully will go back to work. I think that’s very important. And when we talk about the markets, Scott, what we were thinking about, we talked about this not long ago, think about people who’ve been in the market and in their 30s, they have never seen a down market. To them, a down market is read, is like reading about World War I.

WAPNER: This is true.

PELTZ: There’s no—

WAPNER: They’re looking at it today and they’re thinking the same thing. The market only goes one way, at least right now.

PELTZ: That’s right.

WAPNER: I know Cramer wanted to get in here too.

JIM CRAMER: Nelson, and you’re right. I went over Procter, they’re going to be able to put through price increases so they’re gonna have great margin expansion within a year. I want to talk about you. I know you very well. I’m going to ask you, maybe you think it’s rhetorical, you are a very wealthy individual, congratulations, because I know that you made it yourself.

PELTZ: Thank you.

CRAMER: You are surrounded by young people, more young people than I know of anyone who is of your age.

PELTZ: That’s correct.

CRAMER: You share a positive attitude that I often find among younger people. It seems to have trumped your view of whatever, you could hurt a billionaire. The billionaires, come on, they seem to be out of touch, you are in touch. Do you think that kind of, do you think that influences your relatively positive outlook?

PELTZ: Absolutely. You know Jimmy, you’re right. I’ve got 10 kids. I’ve got a lot of young kids. Their friends all hang around all the time. I have a different view of life. I’m going to be 80 at my next birthday. People my age, they say to the wife, “Honey, when are we having dinner tonight. Is it gonna be 4 or 4:30.” That’s not my life, okay, I get it from these kids and I watch them on the internet and I watch what they do and I can’t do what they can do, but they give me a whole different view of the world. And I like my view better than some of these old guys.

WAPNER: Alright so no early bird special for you and let me, I want to ask you something about P&G.

PELTZ: Scott, you know what time we had dinner last night. Scott, come on.

WAPNER: I do, I do. It was not 4 or 4:30.

CRAMER: Where did you go?

WAPNER: More about that later. I don’t know if this is a Freudian slip or not but when you were talking about P&G, you said we, and of course you announced recently you’re leaving the board and I’m wondering why, if it appears to me from your comments today, that you still obviously care a lot about the direction of this business.

PELTZ: Of course I do. I’m still a major shareholder. I made a lot of friends from top to bottom, from Jon and David and on through. I’m rooting for those guys every day. I was on too many boards. I was on five boards. I’m now down to a mere three. I got down to two for about a second and a half and wound up being drafted on another board. But the fact is that I love P&G. I’m very proud of the changes they made and, you know, sometimes, you know, it starts with an argument, it starts with a fight and then we wound up to be great friends and David Taylor and Jon Moeller. I still consider really good friends of mine I spoke to Jon yesterday and, you know, he listened to what I said. I’m not a director anymore but he heard me and I’m very proud of the changes they made. I’m very proud of what P&G is today and loved being on the board but it was time for me to move on.

WAPNER: Okay, let me ask you about Wendy’s which you said you are, you know, you’re chairman of the board, we know that. Why has the stock underperformed McDonald’s Corp (NYSE:MCD), Nelson. Year to date, MCD up 13, Wendy’s up one and a half. One year, MCD up six and a half, Wendy’s down seven. What’s going on with that?

PELTZ: I can ask you the same question, I have no idea. I think the company is doing great. We just opened in the UK. We have more stores coming online. Same store sales are up. We became the number two hamburger guy in North America. Finally, unseated Burger King. So, I don’t know why the stock is down but that’s life. The company’s doing well over any period of time, it’s gonna reflect great value. Don’t forget, we got into this stock of roughly four bucks, no dividend. Today it’s paying close to, you know, 48 cents. Stock is in the 20s. I’m not happy, but it’s better than a sharp stick in the eye.

WAPNER: Didn’t you just have, Jim, didn’t you just have Wendy’s on?

CRAMER: I’ve had Wendy’s on recently and I too am surprised that the stock isn’t higher. It represents a very good buy, they have a lot of momentum. I think that what people, it got memed. It jammed up to 28. It got some bad holders there as the apes circled it or whatever they do but look, there’s absolutely no doubt about it. If you like that group, you should like that stock.

WAPNER: You know Nelson, I hear you talk about these things and—

PELTZ: Scott, scott, hold on. Is Julia there? You know Julia?

CRAMER: Julia?

WAPNER: Julia.

PELTZ: Julia’s got a surprise for you Scott.

WAPNER: Uh oh.

CRAMER: Oh my god. Pass them. Pass the fries partner.

PELTZ: Now you’re talking.

WAPNER: Oh see now, now you’re trying to influence. You’re trying to influence the interviewer through his stomach. I’m not going to start throwing softballs at you now, Nelson.

PELTZ: It’s done already. You’re influenced.

CRAMER: They have great cut fries. They’re great cut. Pass the Baconator will you. Did you bring the Baconator?

WAPNER: I’ll eat some off camera. I’ll eat some later.

PELTZ: Come on. Have it on camera, Scott.

WAPNER: I’m not going to have it on camera. Let me ask you this. You sound like unflappable about pretty much anything, whether it’s inflation or, you know, Wendy’s is not doing as great as you want it to do. What are you worried about? What are you worried about? Are you – you’re not worried about inflation, you’re not worried about, you know, prices going up that much, you think companies are going to be able to handle it, especially the stronger ones. What are you worried about?

PELTZ: I worry about when people are going to understand that this is a stock market of things other than FAANGS and a couple other stocks, that there are great companies out there that have been in business for a very long time, they don’t grow as fast as the FAANGS. They don’t have the built-in fear that I would have, what are the governments going to do to these companies. Those are some of the things that worry about. I worry about everything. Okay, but the fact is, I like what’s going on. I do worry about inflation. I do worry about our government, because, you know, each government we have is worse than the last. I worry about them raising interest rates, which we don’t need. I worry about pulling out of Afghanistan too early. I could tell you a lot of things I worry about.

WAPNER: What’s an acceptable corporate rate? Since we’re on that topic about DC if rates are going to go up. If the corporate – let’s just say the corporate rate is going to move off of the level that it is now. You sit in the boardrooms, you think about these issues, what’s an acceptable rate to you if you have to say it’s going to go up?

PELTZ: I’m not going to get pinned to that. I’m not an economist. I don’t know those things. But I lived through an era when I was issuing junk bonds at 15%, thrilled to do it. Thrilled to do it. So, I’ve seen the other side of this coin. This is free money. Maybe this free money gets a little bit more expensive. But other than that, I don’t – I’m not concerned that it’s going to get real expensive, that it’s going to hurt things. I don’t think so. Maybe I’m wrong.

WAPNER: Let me ask it this way. if you were maybe, you know, a month or two ago, more concerned about aspects of the Biden agenda being passed, today it certainly seems weaker than it was then. Manchin seems – Senator Joe Manchin seems to be one of if not the most powerful person in Washington these days, with all due respect, of course, to the President of the United States. Is that how you see it?

PELTZ: You are 100% right. Joe is the most important guy in DC, maybe the most important guy in America today. He is keeping our elected officials, somewhere in the middle and anywhere center right to center left works for me. It worked forever in this country, until we had these elected officials who started pushing us to the extremes where it doesn’t work, where it’s uncomfortable. This is still capitalism, it’s not socialism. Okay. This is still a meritocracy and we better keep it that way. We have – and our problem is that the elected officials today are myopic. They can’t see past eight feet across the aisle to see the guy from the other party. Our enemies are across the ocean, they’re not across the aisle. And these guys we sent to Washington better learn that and better learn how to get along. And Machin is showing them the way and they are fighting him. But I got to take my hat off to Joe, who’s been an old friend of mine for 10 years. I call him every week and say Joe, you’re doing great. Stay tough. Stay tough, buddy. He is phenomenal.

WAPNER: But let me ask you a couple more things if I could before I let you go. And speaking of adversaries, if you will, how do you see China today? What advice are you giving CEOs in the boardrooms you’re in about how to deal with China? You’ve noticed the crackdown on various industries as well as we have. How do you see it playing out?

PELTZ: You know, it’s fascinating. China is fascinating because the companies that were invested in have a very big China businesses and I worry every day that the government might change their attitude toward them. So far they haven’t. And part of the reason I believe is that they manufacture such a high percentage of what they sell in China, which means we’re employing people, we’re building factories, and we’re reinvesting our profits back into the country instead of taking out in dividends, so what’s wrong with that picture? What people need to understand in China is that China – and they’re not going to like this word – the leader in China today is a dictator. They call him president. But when you’re president for life – if you were president for life in the Dominican Republic, you wouldn’t be a dictator. We have a dictator in China. When you have dictators, they only keep their position because they have strength around them. Normally it’s from the generals. And so, this man has done an amazing job in China. On the other hand, he is a dictator. And he’s got his group of people in China, whoever they may be, that he’s got to make happy. And if making happy means that –  and someone was saying to me the other day that we all look at an economy in the shape of a triangle. This guy looks at an economy in the shape of an A with a very strong center and I think that’s fine. But I got to tell you something, I worry about China, I worry who’s pulling the strings there. And when you’re president for life, the question is how long is your life.

WAPNER: Let me end by asking you one more question and I’m doing it because I have Stephanie Link here, who is the most bullish person on my investment committee about General Electric, okay. She’s been in the stock a long time, she’s added to it on the way down. What’s the current state of your position? I remember when you said you sold two-thirds, I think, and you said you wish you’d sold three thirds. But what about today? Do you think that the company is turning itself around?

PELTZ: Absolutely. I just looked – watch earnings, watch sales. You have a company that there is nothing more you can do bad to a company. That they had the best airline, airforce, airplane business in the world and they got shut down. Okay, that’s coming back. They’ve got a manager, I rarely ever met who can hold his jacket. Culp is phenomenal. And let me tell you something, he’s done a great job, and it will start to show itself. And, you know, you’ll either believe it or not. But time will prove it. So he’s great, the company. He’s got a piece of the company that are fantastic. He’s dealing with the difficult parts. I think everybody, the investors will be pleasantly surprised over some period of time that they’ve stayed in it. And, yeah, you’re right. I sold a third in the 30s. I wish I had sold three thirds. I would have bought it back here, but I didn’t. We’ve lived through it at Trian and I think we’ve got a horse that’s phenomenal in leading this company.

WAPNER: I loved our conversation. Thank you for being here. Thank you very much for the lunch as well. I know the folks here are going to appreciate that.

PELTZ: The fries are fantastic. Jimmy, looking forward to seeing you, buddy. Thanks, guys.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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