Bill Ackman on U.S. recession concerns, coronavirus pandemic

Pershing Square Capital CEO Bill Ackman joins Yahoo Finance’s Julia La Roche and Seana Smith to discuss the market outlook amid the coronavirus pandemic, recession concerns, and more.

Video Transcript

SEANA SMITH: Also closely watching the recent developments, the latest developments, I should say, related to the coronavirus. As it stands right now, confirmed cases worldwide rising to 350,000. We have a growing number of states ordering residents to stay home. The stay at home mandate that is being ordered from a lot of governors here nationwide.

We also have many big name investors, hedge funders, money managers, they've been very vocal about what they want to be done in order to flatten the curve. We had hedge fund billionaire Bill Ackman renewing his call for a 30-day shutdown to fight the coronavirus outbreak. He tweeted this morning, quote, "A coordinated federal-led shutdown for 30 days, and then a gradual reopening with testing, testing, testing so we can kill the virus when it reappears."

And we have Bill Ackman joining us now on the phone along with our very own Julia La Roche. And Bill, thanks so much for taking the time to call in this afternoon. We really appreciate it.

I know over the last several days you put forward a number of ideas. I want to-- first off, with your tweet from this morning, it was in response to something Lloyd Blankfein had tweeted. And in essence at the end of Lloyd Blankfein's tweet he was saying that he wants people with a lower risk, lower risk people to the disease, to return to work in a few weeks. From where you stand, from your view, just in terms of how this should be handled, he, of course, as many are, are worried about the impact that this could have, or will have, is having on the economy right now. What's your response to that?

BILL ACKMAN: I agree with Lloyd Blankfein. The only difference I have with him is that you don't put someone back to work unless you know that they don't have the virus. And the key is testing.

And the testing has to move from this PCR testing. You know, the swab that you drive up and get your nose swabbed. It's not a scalable test to antibody testing, which they already have in China. They're testing to a small extent in the United States.

But you do an antibody test, you can tell if someone's had the virus and recovered. You can tell if someone is asymptomatic, but has the virus, whether they're infectious or not. And it can be done, because it's a simple blood test. That can be done much, much more quickly with an enormous degree of scalability.

So if you take the-- the logic behind, again, the 30-day period is a made up period. It could be three weeks. It could be four weeks. It could be 35 days. Let Tony Fauci decide what the period is.

But the idea here is you've got a virus that can incubate in you for two weeks without you showing any symptoms, and it can't survive outside the human body for more than four days if it's on a metal surface or a plastic surface. Four days sounds like a long time to pick up something. But if you literally shut down the country other than essential services that we need to keep the country going, you can kill a very large amount of the virus that's out there.

And then if you launch an antibody test of the entire country, test every citizen, which is a feasible thing to do with a blood test, then people can know whether they're infectious or not. And if you're infectious, you stay home. If you need medical treatment, you go get it. And if you're an older person or you're vulnerable during this period, you stay in shelter. But you can reopen the economy with a younger, healthy workforce.

And so I agree with Lloyd Blankfein. The only thing I would add to what he's saying is you just have to test. And you have this invisible enemy. And the problem an invisible enemy is, one, it's frightening, and two, you don't how-- it's very difficult to manage. Once you identify where the cases are, you start to see, OK, we've got cases brewing in this small town. Let's isolate this town. Let's make everyone in this town stay at home, but you don't have to shut down the entire economy.

That's where I think this needs to go. Just thinking about this idea makes me bullish that we're not going to be sitting here for 12 months, 18 months waiting for a vaccine. The country can continue.

JULIA LA ROCHE: Bill, it's Julia La Roche here. And you just mentioned that you're bullish. You're certainly someone who's known to be bullish on America, long-only investor for the most part.

While we have you, I want to get some clarification on some comments that you made on CNBC last week, especially around stocks. You made some comments about Hilton Hotels, for example. Could you clarify those comments?

BILL ACKMAN: Sure.

JULIA LA ROCHE: And are you a buyer of stocks right now?

BILL ACKMAN: Yes. So one, we're a buyer of stocks right now, absolutely. And we have been an aggressive buyer over the last call it 10 days or so. We bought, I think, around $2 billion worth of equities. And for a fund that has total equity capital of-- or total assets of $8 billion-ish, obviously, that's a big-- or maybe it's less than $8 billion now. But it's a big commitment to us.

So one, we're very bullish. And we do think there are certain companies you, obviously, like more than others. You've got to have a strong balance sheet to withstand the current environment.

The point I was making about Hilton is Hilton is arguably the greatest hotel company in the world. I have enormous respect for Chris Nassetta, the CEO, and the management team. I know the chairman Jon Gray very well. This is a company that's battle-tested. It went through the crisis with a fair amount of leverage, and they survived and thrived. So it's a great company.

The point I was making was we can't-- no company, whether it's Hilton or-- very few companies can survive an 18-month shutdown of the United States, right? Hotels are being closed right now. Occupancy is something approaching zero. You can sustain that for a short period of time if you're a well capitalized company. You can't sustain it for 18 months.

And that's why what's going on-- what's interesting-- so I gave my CNBC interview on Wednesday. On Thursday, I think 11:00 at night California announced kind of a shelter in place regime. The following morning, 11 o'clock, Governor Cuomo announced a shelter in place regime. And then literally every day you look-- pull up a map of the United States. And sort of as the virus makes its way around the country, the states that are seeing the writing on the wall are going to shelter in place.

And rather than have it be done state by state with slightly different regimes, my argument is do it all at once. Go all 50 states at once, and the good news is that I think Tony Fauci would say that's the best way to eliminate the virus. The other point I would make is that's the best thing for the economy. The best thing for the economy. Businesses can plan if you shut the country for 30 days and then you carefully reopen it, and you test people, and you protect older people during that period of time.

But businesses can't plan if you have a shutdown with no-- if you shutdown one state with an open-- with no end date. That doesn't work for any company.

But we've been buying Hilton. I was buying-- like I said on my CNBC interview that we were buying Hilton as we speak, because my view is the country's going to do the right thing. The government's going to do the right thing. We're going to shut things down. We're going to reopen them within a few weeks.

And then we're going to be-- we'll catch up. We're behind right now because the testing regime was launched too late. And this virus was really allowed to spread. And every time you shelter in place one state, people go from that state to the adjoining state, or they fly to see their parents in Michigan. You just spread-- unwittingly, people are spreading the virus everywhere. And if you could turn on a light and see who has the virus, it's all over the country. It's everywhere.

SEANA SMITH: Hey, Bill. We're just getting breaking news now that the coronavirus stimulus bill will be blocked again in the Senate. They simply still do not have enough votes.

When we take a look just in terms of what investors want to hear from the Trump administration, what they want the Trump administration to do on a federal level, if we don't get some sort of resolution on some sort of package in the short term, what does that mean for markets here over the next couple of days?

BILL ACKMAN: They'll sell-off. I mean, the stimulus package will give the president and the treasury secretary the tools they need to manage the economy through this period. Not getting this resolved just speaks to dysfunction in Washington. And it's not a good thing.

I think it's going to get done. I think these negotiations, I remember during the crisis, Congress turned down-- the House turned down, like one of the financial recovery plans, the market sold-off massively. And then everyone came to their senses and made a deal.

I think the same thing's going to happen here. But yes, the market will sell straight down on this news until-- and then it'll go back up. But it won't really recover. I hate to say it this way, but it's the virus, stupid. It's like this is important for the country, but until we state we have a coherent plan to shut down the virus, the economy can't recover, and the markets can't really recover.

Once we have a coherent plan and the plan is underway, the markets will recover, because people will see the writing on the wall. The stock market is a discounting mechanism. It predicts the future.

Right now, the president is saying one thing, well, we're thinking about opening the country, even though it may cause the virus to spread everywhere. That scares people. And when he said that, markets went down.

But actually, interestingly, if you look at the trading on Friday-- Thursday night, California came out with shelter in place, Friday morning, Cuomo said, hey, we're doing the same thing. By the way, he's shown unbelievable leadership. He's been a fantastic governor. I'm proud to be a member of the state of which he is the governor.

And then the president came on 11:30 or 12:00 with the task force, and he said, we're not thinking-- when we was asked the question, are you going to follow in New York and California's lead? He said, I don't think we're going to need to go in that direction or something like that. The markets went from up 4 to down 4 and 1/2 on Friday. And I just think the markets are looking for an answer.

The answer is a minimum shutdown period but that's defined. I think 30 days provides a margin of safety from the two-week kind of incubation period. But take it super seriously during that period. And then we reopen the country. Healthy people go back. Healthy people get tested. And then they can go back to work. And then older people, immunocompromised people have to stay away from other people until everyone's tested and we have better therapeutics and we get closer to a vaccine.

JULIA LA ROCHE: Bill, it's Julia again. How do you see this moment in time, what we're going through, changing our society, changing the economy going forward? How are you even thinking about the future, whether it's 5 or 10 years from now?

BILL ACKMAN: Look, Bill Gates gave a Ted talk in 2015, which has made its way around the internet. And it probably got some views-- a fair number of views when he gave it five years ago, but now I think everyone in the world's going to see it. And he sort of predicted-- almost-- it would be a coronavirus-like pandemic, and that we were totally unprepared, and we could take some steps that could save us, save a lot of lives, and save a lot of money. Unfortunately, Bill Gates's advice went unheeded. And we are in the position that we're in. I think we're going to be more prepared for the next pandemic, because there's going to be one. I just think the laws of nature, unfortunately, take us to this place.

I think-- I do think video technology is very powerful. I'm not an investor in Zoom, but I would say everyone in business, schools, et cetera are adopting it. And that technology is going to be very widely used. And I really do prefer video calls for team meetings than a conference call where you don't know who's reading on their BlackBerry. So we're using it for board meetings, everything else. I think it's a great device.

But I also believe that people-- all I can tell you is once this thing is over, my wife had a show at MOMA, which opened on February 22. It was supposed to run through May. And opening night I was super concerned about this, obviously, for all of various reasons. I wouldn't let anyone go near or touch her, or hug her, et cetera. We left. We didn't stay for the whole thing. We left early.

We were moving the whole firm. Everyone went to work from home, and like the notion that we're bringing people together. We canceled a party for 150 people that I was going to throw for her. And all I can tell you is when this is over-- the reason why I'm bullish on the economy is that people are going to want to travel. People are going to want to go out to eat. People are going to want to throw parties, weddings, and I'm sure you miss-- I miss-- I love my family, and it's wonderful to be with a lot of my family right now.

It's an interesting time to be with your parents. I'm living with my parents, which I haven't done in a very long time. But I don't have all my kids here, which is sad. But there will come a time where we go back to being able to be with other people. Although, I do think people's-- I don't know if people are going to shake hands going forward. And I think we're going to be more thoughtful.

I think people are going to think more about the environment. I think there are good arguments to be made that some of the pandemics are driven by environmental damage, practices that we have that are abusive of animals, for example. And perhaps this is nature's way of getting back at us.

But hopefully, the environment, interestingly, is very similar to pandemics. The climate change just seems very, very far away. And the same thing was for a pandemic. We haven't had a pandemic like this for 100 years. So who can afford to plan for a 100-year event? No one-- everyone's got bigger shorter-term priorities.

Climate is-- climate change is a very similar kind of issue. And you see all of the wildfires in California and Australia, and all the various mudslides. Make your list of events that are traumatic, early warning indicators. And hopefully, we'll get more serious about the climate after this experience.

JULIA LA ROCHE: Maybe a case for some ESG investing, if you will.

Bill, I had some folks ask me to ask you about Fannie and Freddie, because if we have forbearance or mortgage holidays, how do services and mortgage insurers survive? Wouldn't that mean they'd have a big cash flow problem? What would the liquidity look like for Fannie and Freddie?

BILL ACKMAN: Fannie and Freddie are-- they're going to be fine. I've never felt that the mortgage insurers, kind of separately capitalized, publicly-traded mortgage insurers were a good business. My guess is the government will make some accommodations to protect them. I'm just not a fan of the traditional mortgage insurers.

I think Fannie and Freddie are-- ultimately, they're building fortress balance sheets as we speak as they take their earnings and are starting to retain earnings and rebuild their balance sheet. I do expect them-- obviously, the highest priority for the Trump administration is the coronavirus and getting the economy back.

But I would say after that's done, this is very high on the list for Secretary Mnuchin, for these entities to be-- again, it's another one of these issues where people don't worry about it, because they think it's not tomorrow that there's going to be a problem.

But if this crisis leads to an economic collapse and it leads to a lot of people defaulting on their mortgages, then the US government is going to have to start writing checks to Fannie Mae to save it. And we don't want to do-- that was the whole point for why we needed to have these as separately capitalized independent public companies where the private sector is the first loss shareholder. And Mnuchin and the head of the Federal Housing Finance Authority, Calabria, are heading in that direction. That's important long term for precisely this kind of reason.

The country's not done a good job planning for long-term problems. And the result is the costs end up being much higher than if we did. If we had taken Bill Gates's advice and made some investments five years ago and planned for this event, we would have plenty of masks available. We would have ventilators. We would have testing. We would have other mechanisms to prevent this global catastrophe.

SEANA SMITH: Bill, there's been estimates just in terms of how bad this could be for the labor markets. We had Goldman and Bank of America out with notes last week talking about the weekly jobless claims, how they could really see a big spike starting last week.

We also had a St. Louis Fed President Jim Bullard. He was making an estimate that as much as unemployment could actually reach 30% in the US. When we try to just decipher just in terms of what we can expect here going forward, how bad it could get, where do you stand on that?

BILL ACKMAN: Basically, it can get extremely bad. If we have a prolonged period with a rolling series of shelter in place from states. I mean, basically what's happening is as states start to see the cases and deaths spike and the hospitals start to be threatened, then they go into shelter in place mode. And that's going to happen around the entire country. And maybe Wyoming, or states that have large landmasses and smaller populations per acre will be last.

But everyone will be affected. And we need to get out ahead of that right now. And if we do, we don't have a prolonged economic recession, depression. We have a short hit. And then all the job losses, people get hired right back, because you know what? People are going to want to go out to eat again. People are going to want to go to the theater. People are going to want to go to the gym. All of these things that we've had to eliminate, there will be long-term demand for.

So the way I'd think about this is it's more of a shock that we have to manage through. That's why the government can help keep people-- give people money so they can buy food when they don't have revenues coming in the door, they don't have salary coming in the door. But once we get through this, the world is going to recover. And the sooner we get through this, the better.

And in my view, and interestingly, Steve Bannon was on Fox Business. And he made the same case for what he called bringing the hammer down. Bring the hammer down on the virus, and then reopen the country in 30 days.

And then I'd add to that test everyone in the country with an antibody test to know whether they've had it or they have it or they're a risk to anyone with a mandatory bracelet on your wrist to say when you've been tested and whether you're affected or not. And we'll be in a much, much better place in the relative short term, and the country could reopen.

SEANA SMITH: All right. Bill Ackman, CEO of Pershing Square. Thanks so much for taking the time to talk to us this afternoon.