Billionaire Bill Ackman Issues High Inflation Warning. Here’s What He’s Betting On.

  • Billionaire Bill Ackman is not happy with the Federal Reserve
  • Ackman believes the Fed was too late in addressing inflation
  • The investing legend is offering two resolutions to inflation: higher interest rates or a collapse of the stock market
An image of a calculator with the word inflation on the screen, sitting on top of a graph with a pencil next to it
Source: Sauko Andrei / Shutterstock

Market participants are on full alert after Pershing Square CEO and billionaire Bill Ackman issued a dire inflation warning on Twitter (NYSE:TWTR). The fund manager explained that “inflation is out of control” and that current market participants are losing confidence in the Fed’s ability to reign it in. Ackman also said the market will continue to decline if the Fed is unable to control inflation.

In his Twitter post, Ackman offered two resolutions to inflation. The first is “aggressive monetary tightening.” The second is a “collapse in the economy.”

Let’s get into the details.

Bill Ackman Calls for Higher Rates to Curb Inflation

Bill Ackman’s post calls the current state of the economy into focus; the billionaire pointed to a 3.6% unemployment rate, supply and demand imbalances in energy, housing, labor and food and the “wage-price spiral.” These factors in mind, Ackman doesn’t believe inflation can slow until the Fed aggressively raises rates or the market crashes.

Ackman added that, in recent days, various current and former Fed members have contemplated a slowdown of interest rates or a pause this coming fall. Ackman believes these members are completely wrong, blaming the Fed for its “late pivot on inflation.”

In the past, there hasn’t been a precedent for 200 to 300 basis point interest rate increases to address 8% inflation with unemployment at 3.6%. However, Ackman argues that current Fed policy is setting up for sustained double-digit inflation. As a result, he believes there are currently “no buyers for stocks.”

Still, the billionaire says this can ultimately be fixed by the Fed doing “whatever it takes” to curb inflation. He thinks the agency should immediately raise rates to a neutral rate. Once inflation settles down, Ackman says “markets will soar.”

What Is Ackman Betting On?

Pershing Square is a highly concentrated hedge fund with more than $10 billion spread across eight positions. In addition, the fund has an average holding period of 16.13 quarters, or just over four years. As of the first quarter, Pershing’s largest positions are Lowes (NYSE:LOW), Chipotle (NYSE:CMG) and Hilton Hotels (NYSE:HLT). Lowes carries a 20% portfolio weight, Chipotle carries a 17.1% weight and Hilton carries a 14.6% weight.

During Q1, Pershing reduced its holdings in Lowes, Hilton, Domino’s Pizza (NYSE:DPZ) and Restaurant Brands International (NYSE:QSR). The fund also increased its stake in Canadian Pacific Railway (NYSE:CP). Finally, during the quarter, the hedge fund bought and sold Netflix (NASDAQ:NFLX) for a more than $400 million loss.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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