Stuart Paul (3:22)

I expect that the statement is going to acknowledge the downtick in the unemployment rate that we saw in March. So if you were to describe the labor market as solid, if the statement were to describe the labor market as solid, for example, that might be an incrementally hawkish change to the statement. If we were to see any sort of, any sort of additional emphasis put on well anchored long run inflation expectations. Again, just hinting that the committee as it currently exists has no intention of cutting rates in the near term, I expect that those are going to be the sort of changes that we're going to see. Again, there's so much uncertainty. Policymakers are just going to have to acknowledge that and really lead into uncertainty to maintain their, to keep their options open.

Tom Keene (4:08)

Move on to the news conference. All anybody's going to want to talk about is him, right? I mean, I guess they're going to want to talk about policy as well, but it's going to be what are your future plans? Does he tell us today, you think, when he plans to stay? When he plans to leave, I should say, or if he's going to stay. Once Kevin Warsh is confirmed, I don't

Stuart Paul (4:25)

think he's going to break any news about his future plans today. I think he's going to be pretty precise and vague. And so I expect that again, this is going to be the first question we're going to get. It will probably be 30% of the questions we get at the press conference. And I expect that he's going to start by saying that he's there to represent the views of the fomc. He's not there to make any personal announcements. I imagine that he's going to acknowledge that Kevin Warsh's nomination still needs to be debated on the Senate floor. It still needs to be voted on on the Senate floor. So it would be premature for him to announce any sort of decision that he's made. So we're going to really need to focus on Some of the code words that he might bring up during his press conference. For example, there's a difference between saying that he wants to follow the precedent of former Fed chairs, which would hint that he'd be willing to walk away from his board seat. There's a difference between that and saying that he wants to facilitate a leadership transition. For example, like to me, if I were to hear that, that would be a hint that he'd be more inclined to stay into 2028.

Tom Keene (5:31)

Okay, Stewart's got the decoder ring out. There was a question one of the tip sheets this morning. If he just goes YOLO and starts saying everything he ever wanted to say about Donald Trump. But that would be a bit out of character, I'm guessing. You mentioned Kevin Warsh, Stewart, let's go back to the committee. The hearing that was held for his confirmation before Thom Tillis dropped his blockade, if you will, knowing that Warsh was confirmed today. Let's go back to the Banking Committee hearing. Remember Elizabeth Warren?

Senator Shelley Moore Capito (6:00)

Listen, Trump is still going after control of the Fed, and he is keeping the threat of bogus criminal charges alive until he gets what he wants. These are uniquely dangerous circumstances to advance any Fed chair nominee. But Mr. Warsh is uniquely an unfit candidate.

Rick Davis (6:22)

It's no secret that the reason that Mr. Walsh's nomination could have been held up is because of my concern with the investigation. I want to thank the Department of Justice for the assurances that they gave me. I've got confidence that this investigation is over. And I think that Senator Warren, I get that she wants to score some political points, but she is flatly wrong on every point she just tried to make.

Tom Keene (6:48)

That be Thom Tillis right there, the Senator from North Carolina who held this whole thing up. And knowing that he was a Kevin Warsh supporter, we could see a vote. Stuart Paul on the floor as soon as this week. What will the Fed look like once Kevin Warsh is in the building? What will it mean for the culture in the building and his ability to, to achieve consensus?

Stuart Paul (7:09)

Well, so first things first, he'd be replacing Steven Myron on the Board of Governors. He would then be chairman of the board. I think that a lot of the folks in the, A lot of the staff are going to be a little bit nervous. This is Kevin Warsh who has said that he is in favor of institutional reform. He's in favor of cracking heads if need be. And so I imagine that he's not going to receive the warmest welcome from, from the staff. But then again, he's the guy who's going to be in the driver's seat. He's the guy who's going to be setting the agenda for board meetings. He's the guy who's going to be determining what interagency rulemakings he wants to consider and whether that could lead to deregulation of the banking industry so that he could achieve the sort of balance sheet reduction he said he wants. So I imagine that it might be a little bit of a culture shock for staffers. And I imagine that Kevin Warsh, when he walks back into the building for the first time in several years, I think that this is going to be a Fed that he perhaps struggles to change, to change its course.

Tom Keene (8:20)

Interesting. I just saw Tom Keene walk by behind you. He must be on his way to the studio. So we're getting close here. I just the T. Rex of financial news is in the building. Stuart, it's great to see you as always on this Fed day, no less. Stuart Paul with us live from New York. Stay with us on Balance of Power. We'll have much more coming up after this.

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Tom Keene (10:12)

Let's assemble our political panel because the politics are pretty involved here with all of this. When we consider the impact of the war in Iran, the pricing pressures that consumers are facing, it's a huge conversation on Capitol Hill, much like the confirmation of the new chair. Bloomberg Politics contributors Jeannie Shannon Zaino and Rick Davis are with us. Jeannie is our Democratic analyst and democracy visiting fellow at Harvard Kennedy School's Ashe Center. There's Rick Davis, a Republican strategist and partner at Stone Court Capital. Jeannie, what's the swan song going to sound like for Jay Powell when he stands before reporters today? Does he play it straight?

Jeannie Shannon Zaino (10:50)

You know, I think he will, but I know many of us are hoping he does, like, an unpowered, like thing and really lets us know how he feels. As to your earlier point, but I seriously doubt it. You know, it's, it's interesting to listen to Senator Tillis, though. He says he has a lot of confidence this investigation is over. And we are sitting here, you know, not 24 hours after they indicted Jim Comey on seashells that he took a picture of a year ago. And I wonder, do you think that Jerome Powell feels quite as confident as Senator Tillis that this investigation is over, or does the Department of Justice come roaring back? Because, of course, Todd Blanche is, you know, aiming to be the attorney general, not just acting. He is performing for an audience of one. And he is indicting a former FBI director for Seychelles. So. So, you know, I'm not sure if I'm Jerome Powell that I would feel quite as confident this thing is over because apparently the retribution tour continues.

Tom Keene (11:53)

Well, I mean, if you just go and look at the statement from Judge Jeanine, she made it pretty clear that if this inspector general report turns up new information, she could reopen this investigation. Rick Davis is, I'm guessing Jeannie's implying that Jay Powell might want to stay around for a while. Do you agree with.

Rick Davis (12:13)

Well, first of all, it makes me laugh you call her judge U.S. attorney. But I made the same mistake earlier today, so I applaud you. Yeah, look, I mean, the safety play here is stick around, right? You know, use the COVID of the Fed and the lawyers of the Fed to defend yourself. And I would point out, I mean, you know, Chairman Powell did a video pushing back directly at the president when he was first attacked by the Justice Department. This guy has not held his breath when it comes to fighting for the Fed independence and his own credibility. And so I can imagine when he is replaced by Kevin Walsh as chairman, it may be a liberation moment for him, especially if, if we're right and that like the Department of Justice decides to continue to harass him.

Bill Ackman (13:11)

Yeah.

Tom Keene (13:13)

Are you optimistic about Kevin Warshini? I'm not sure where Stuart Paul left that with us, but he implied that he might not be terribly popular when he gets in the building. I guess Myron's going to have to figure out what to do in the meantime, because if Jay Powell doesn't leave, he might have to find another job. What will the Warsh culture look like?

Jeannie Shannon Zaino (13:34)

That's right. I mean, I think to the earlier point, there is a lot of concern. You know, there is no question he is eminently qualified for the position, but things that he has said, and I think in my mind, even more importantly, just like Todd Blanche, the fact that so many people that Trump brings into any position, even one that is supposed to be independent, people feel beholden to the president. They feel pressured. And if we just go back to his hearing, that was the number one concern. Will you be able to maintain independence given the onslaught of pressure that you're going to feel? And as we know, Trump will be your best friend one day and, you know, criticize you up and down the next. And so I think that's where the concern is going to be raised. And of course, we are talking about a very fraught time. We've got the inflation, we've got high unemployment. We've got what seemingly now never ending, hopefully not, but never ending war. And we've got consumers very, very concerned. And an administration that just a few minutes ago was in Congress telling members that if they ask about the cost of something, it's a gotcha question. So all of that is the environment. So, you know, bless Kevin Boris for wanting to come in on this, but I do think it's going to be a really, really tough moment if he intends to fulfill his promise to maintain independence. And I hope he does.

Tom Keene (15:05)

Well, that's interesting, Rick. Yeah. I don't know if the Fed chair is going to weigh in on the war with Iran, but you've seen oil prices today. I mean, these are some of the highest that we have seen yet since this all began. In fact, I think Brent is in a whole new world at $119.50, the highest since 2022. WTI and Brent are both up almost, well, both over 7%. In the case of New York crude up almost 8% today, gasoline at 422. I can only imagine what the next UMich consumer sentiment index is going to look like, which you frequently point to. It's going to handcuff the Fed, isn't it?

Rick Davis (15:43)

Yeah, I think that they're going to put me in a really tough position. I actually looked at some of the gas gallon, gas prices in competitive Senate races and it's a disaster for Republicans going into reelections for some of these races because in some cases it's approaching four and a half dollars a gallon. And, and when you look at the current spate of polling, which will be reflected, I'm sure in the Consumer Sentiment Index is, you know, folks are getting more and more grumpy. I mean, the President's numbers are falling precipitously in one month. You know that, that there's a lot of things going on. It could be the war, it could be the economy, but more and more people are going back to the cost of living. And I think that is really going to pinch the Fed on its policies.

Tom Keene (16:26)

It's really something. $4.23 for gasoline. Gas, Jeannie, we're creeping back up to that $5 or whatever the high was during the Ukraine war. And the President is now saying, according to reports today, he's telling his aides that we need to hunker down for an extended blockade in the Strait of Hormuz to essentially wait out the Iranians. If this goes up to four and a half or $5, if crude oil keeps rising to 120 or 150, what will it mean for our economy? We're going to be talking about the R word at some point soon. Are we?

Jeannie Shannon Zaino (17:01)

We are. And some people have described it as if this keeps up the war and the blockade, we are heading towards a Titanic style disaster. And you know, the idea that the President is going to wait out the Iranians, if we can just all take a step back and think time is on the Iranian side, Iran can wait this out. They have been practiced at this for decades. What the President needs to do, and I'm happy he's not escalating, what he needs to do is get back to the negotiating table. The only end to this thing is to negotiate a settlement. And unfortunately for the President, given where we are now, that negotiation is not going to be pleasant or fun for the United States by any stretch of the imagination. Iran is saying, first things first, we end the war. Second thing is we open the strait and we remain in control and then we'll deal with nuclear. That's not what the US Wants. But at this point, if we think we can wait it out, we should remember recent American histories of wars. When somebody feels that they are in an existent, they are under an existential threat and that is how Iran feels in the face of Israel. In the US they will fight to the end and Iran is well prepared to do that. And so the impact on the economy in the US and worldwide would be devastating. And, and Iran will, will sustain that. And I'm not sure that the US people are going to feel the same way. That's the conundrum we have gotten in. 60 days into this.

Tom Keene (18:35)

Just want to mention quickly the headline on the terminal on Pershing Square USA now indicated at 36 to $39 when trading begins in this IPO. Remindingly the IPO price of 50 it has not begun trading yet. Reporting today, Rick, that President Trump summoned oil and gas executives to the White House yesterday. They were there presumably after the King went up to the Hill to talk about the menu of options here and how energy markets would respond to some of the various decisions the President could make, including what we're doing right now, just maintaining the blockade, but for a longer period of time, but also the potential for a resumption of strikes or other military kinetic action among the attendees. According to Axios Chevron CEO Mike Wirth. You had the Treasury Secretary, Chief of Staff Susie Wiles, Kushner and Witkoff were both in the room. Is he going to ask them to start increasing production? Is there something that the oil industry can do to relieve some of the pressure?

Rick Davis (19:42)

Well, the problem is they can't increase production enough to supplant what the entire world is currently short of because of the closing of the strait. So prices are a global price. And regardless of our America first strategy and our ability to pump more and our ability to, you know, be energy independent, a lot of the global pricing is still fixed. And you know, I think a lot of these individuals you describe have a global point of view. They can explain to the President, you know, that we're caught in the trap of our own making that you know, as long as the straits close, the prices are going to continue to go up and those affect the prices here at home. And you can see it every day in the reports on Texas crude pricing. So at the end of the day there's no real solution that the U.S. oil producers can do just for the U.S. i mean our economy is actually holding up better than virtually any other developed country in the world right now. But that, that doesn't fix his political problems that people don't feel that way.

Tom Keene (20:42)

Yeah, really interesting as we wait for trading to begin. And ahead of our conversation with Senator Shelley Moore. Capito. Jeannie, what are your thoughts on this? I mean, some folks say it's time to crank up the shale oil, but to Rick's point, it's going to be a drop in the bucket.

Jeannie Shannon Zaino (21:01)

It would be a drop in the bucket. And let's not forget, even if the strait was open today, it is going to take time to get back to where we the answer to this is a difficult answer, but it is a negotiated settlement with Iran and we are talking just to get back to square one, which is an open strait and a stabilized economy, and then deal in a negotiated way for a settlement on the nuclear end. That's the only answer we're going to see and that's the only answer that will work. Everything else, the United States has lost steps to Iran. And that is a really unfortunate reality of where we are 60 days into this.

Rick Davis (21:42)

Yeah.

Tom Keene (21:42)

Something tells me this will work its way into the conversation today with Jay Powell, Rick Davis and Jeannie Shan Zaino. Thank you so much both for a great conversation, Bloomberg Politics contributors and our great panel today here On Balance of Power. Stay with us On Balance of Power. We'll have much more coming up after this.

Bloomberg Announcer (22:02)

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Tom Keene (22:18)

Always a pleasure to bring in Senator Shelley Moore Capito, the Republican from West Virginia, joining us now live from Capitol Hill with a very important deadline ahead tonight that Senator, we'd love to ask you about. It's great to see you. Welcome back to Bloomberg TV and Radio. Around here we say Happy Fed Day. So I hope you're celebrating, but importantly this evening and I hope you're feeling all right. By the way, I've got the same pollen going on here. I totally this is Washington this time of year. The House cannot seem to find footing around a FISA reauthorization which expires tonight. Is the House the main impediment to the president's policies right now?

Senator Shelley Moore Capito (22:56)

Well, I think the president's been very forceful and asking and so have the intelligence community as well, that we need FISA reauthorization to be able to disrupt and to catch and to to be the most effective intelligence operation that we can be for the safety of the American people. I certainly would vote to reauthorize and have many times to reauthorize fisa. I think it's found to be helping us when we're investigating foreign, foreign individuals that are after us and wanting to do us harm. And I hope the, I hope the House can see the way towards passing this tonight.

Tom Keene (23:33)

Well, indeed that would be a pretty big deal. Does the President have options as has been reported, to continue working under FISA if there is a lapse?

Senator Shelley Moore Capito (23:42)

Well, right now I think what we're, what we're operating under now is almost a two week six suspension and as you mentioned and expiry expiring later tonight. We could, we had, we would have the option possibly to re, extend the extension. But I do think the President has some maybe extraordinary means that he can use to still use the, the asset of FISA for our own homeland security and our international security. Those options, but the preferred options and certainly the best legal option is to have this confirmed so that we can have it for the next three years, which is the goal. And this, you know, people need to realize this is not listening in on American citizens. This is foreign people, foreign actors in foreign lands that are trying to disrupt and terrorize and figure out cyber crimes and other things to disrupt our national security.

Tom Keene (24:36)

Got a Fed meeting today once again, Senator. And of course course oil and gas prices, energy prices broadly are going to be part of the conversation. As we can consider the impacts on inflation or the potential impact with a national average today of 423. I'm looking at West Virginia. You're hovering just over four. You've got a four handle now in West Virginia at 406. I don't think we're going to be driving coal powered cars anytime soon which might bring prices down in your state. Senator, how concerned are you that this stalemate could drag on for months?

Senator Shelley Moore Capito (25:08)

Well, I think we're all concerned and I think rightly so. I think we see what the impacts of the situation in Iran and in the Straits has, has caused to the international markets. I noticed that the barrel of oil is up today fairly significantly and that impacts our gasoline and our particular diesel prices. You know, when you talk about AG and other industries in this country that use diesel in great amounts, this has huge impacts for them. And so the longer it goes, the more not just impactful but worrisome it is for the long term economic effects. The President is working hard to try to bring this to a close. He's been at the negotiating table with his team. The problem is Iran is not trustworthy. We, we know this but it also, it seems to me as though they are having a lot of infighting to decide who's going to be in control of their country. And while I think that's good to have the disruptions, it makes it difficult to know who you're dealing with here. And you know, they want to take talks about whether they're going to develop a nuclear weapon off the table. In my opinion that's a non starter because that's the real danger to the world. So hopefully sooner than later we'll see things wrap up. The fact that we are talking and briskly talking I think is, is a good indication that this could come to a close sooner than later.

Tom Keene (26:31)

I've been hearing from some of your colleagues in the Senate, Senator, that at the 90 day mark we will be needing an AUMF to continue in Iran and these are members who support the war, but that something should be codified congressionally. Knowing now we have a $25 billion price tag. Would you support an AUMF at the end the day of, of this period of time, whether it's 60 today or 90 days?

Senator Shelley Moore Capito (26:52)

You know, I'm certainly going to look at that. I do think that there is a push and pull as to how much oversight we have. And we have. I will say the administration has been forthcoming in terms of information and classified briefings to keep us on top of what the situation is and what kind of assets we have there and what little less transparent on what the real cost. But we should be getting more of that transparency there. That's where I think we can be most effective. Whether I would vote to authorize a use of force, I'm going to cross that bridge when I come to it. Hopefully things will have settled. We don't have boots on the ground there. I think that is a significant factor in terms of making the determination as to whether the President needs to come to Congress for a declaration of war. But there's no question in my mind that Iran is and was and continues to, to be a source of concern for us. And not, not in a small way. This, in my view it was not if we're going to do this, it was when the President had had the, the nerve and the ability to do this at this time. And I have been supportive of that.

Tom Keene (28:00)

Yeah, only got a couple minutes left. Senator, something that you know a lot about as Chair on Environment and Public Works is the impact of this energy conversation that we're having. And we've seen kind of a push and pull when it comes to alternative energy. Gas and oil prices start to go up. Fossil Fuels are more expensive. People are, as you know, human nature would dictate, more likely to reach for an alternative. But we've seen an unwinding of wind especially and solar under the Trump administration. As the chairwoman on this important committee, do you see that alternate energy industry being unwound permanently?

Senator Shelley Moore Capito (28:41)

You know, I'm one of those who believes we need everything and we need everything all the time. Certainly I come from a coal state, natural gas state. So on that side of it, we've been providing energy for this country over 100 years, certainly from, from our coal. And so we have a great appreciation for that and we still want to be a part of that. And we are. But at the same time, the insatiable desire for more power is going to require everything. And so my view is if we can permit, which I've been working on a lot, and keep the environmental parameters in place, we should have it all.

Tom Keene (29:18)

Precedent talks about coal, clean, beautiful coal, as he likes to say, as part of that all of the above, what does that mean for yourself statement?

Senator Shelley Moore Capito (29:27)

Well, that means a lot. It means the elongation of a lot of the power generation from coal where the Biden administration was trying to force the premature closing of many of our coal fired power plants. But also the Biden administration was going to prevent you from being able to build a natural gas new facility to power. We have to do things that make sense and baseload energy is absolutely, absolutely critical here. If we don't know it now, we certainly have learned it over when we see the impacts, what happens internationally on our energy. So these are big things for our state because we're a big natural gas provider.

Tom Keene (30:04)

But also coal just quickly, does all of the above or everything include wind? The president has really isolated wind as kind of the outlier.

Senator Shelley Moore Capito (30:14)

You know, I know the president doesn't have much affection for wind, either offshore or onshore. Personally, we have wind in West Virginia if it's sighted properly and can generate the kind of power that we need. I think we should be looking at everything absolutely about that.

Tom Keene (30:29)

All of the above means all of the above To Shelley Moore, Capitol Senator, thank you. It's great to have you back on Bloomberg TV and radio. Stay with us. On balance of Power. We'll have much more coming up after this.

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Bloomberg Announcer (31:43)

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Bloomberg Host (32:01)

Now, the big deal of today, and it's a day that's been years in the making for Bill Ackman and his hedgehog fund, Pershing Square. Pershing has raised a $5 billion for a US dual IPO in pursuit of a Warren Buffett investing powerhouse. And for our radio and TV listeners, I want to welcome Pershing Square CEO and founder Bill Ackman. Bill, thank you so much for stopping by today.

Bill Ackman (32:22)

Of course. Thank you.

Bloomberg Host (32:23)

So as I mentioned, this has been years in the making out at least two years. It's had fits and starts, much like this American IPO market itself. What was it like to get this over the line?

Bill Ackman (32:32)

It's great. It's a great day, but it's really, you know, it's the beginning, right? The beginning of a journey.

Bloomberg Host (32:38)

So it's the beginning of a journey. And now armed with 5 billion. How quickly can you put that to work?

Bill Ackman (32:43)

Actually, we think it's a very good time to put the capital to work and we invest in the most liquid companies in the world. So it's really, it's weeks, not months.

Bloomberg Host (32:49)

So it's weeks. But there's this question. So some of the companies that you own in your other portfolio, for example, example Uber Matter, they've had a good run and you're already very long them. So the question might arise, is now the right time to be doubling down?

Bill Ackman (33:03)

Actually, I think the companies you mentioned are very cheap stocks today. Interestingly, some of the best businesses in the world are trading at the lowest multiples. They've traded that in some cases in history. Actually, those multiples bottom maybe two weeks ago. So we're a little bit off the the all time bottom but you know, very bullish on the economy and you know there are some amazing businesses available at really cheap prices. This will be kind of a continuation of what we're doing now. So we're going to just add to existing positions which will give us more ownership in our strategy. We like to be a big, big

Bloomberg Host (33:32)

shareholder, as you said, very liquid stocks. So the market is there. What about for like a Fannie or Freddie where they trade otc, how does that work? How do you dive back in without moving the market?

Bill Ackman (33:42)

We'd be very thoughtful about the way we deploy the capital and we're not going to tell anyone on TV what we're going to do.

Bloomberg Host (33:48)

I see. You don't want to front run anyone perhaps. Wise decision. And look, you've discussed, you were talking about it earlier this morning on CNBC that closed end funds, they trade at a discount to nav that that's not a surprise. So what does success look like in this scenario is for example, like a 10% discount.

Bill Ackman (34:04)

Okay, so I want to give you a new construct to think about, please. Okay, so there's hundreds of closed end funds, but they're a very different animal for what we're doing here. We're adopting the closed end structure, the legal structure structure, the corporate structure because it's the most flexible and most tax efficient corporate structure in America. It's never been used for the purpose that we're going to use it for. But if you think about our business as a business, think of us as an investment holding company. It's a business that turned a 19% return on equity for the last 22 years. If you look in Bloomberg so much you do a search real time, find me a business that's earned 19% on equity for the last 22 years that trades for less than two times book value. And we're taking the company public at book value. So we think that's going to be a cheap price. Now the nature of IPOs are such that in the first couple of days I can't tell you exactly what's going to happen. But over time we're going to compound this book value, or navy as some people call it, if we do anything like what we've done in the past, a high rate over time and it's going to compound and it's going to grow and we're going to run it like a real company. Closed end funds are kind of a backwater. No one's actually wakes up up and gets excited about investing in a closed end, a traditional closed end ipo. They're kind of generic. You don't know who runs them. I bet Bloomberg's never even run a story. And they don't have conference calls with their shareholders. They don't have particularly distinguished boards of directors. If this were a C Corp, no one would be asking me whether it should trade at a discount or not. But we can't deploy our strategy in a C Corp, which is why we've chosen this structure. And it's more tax efficient than C Corp. It's a flow through entity for tax purposes. So more tax efficient. And then we fix the things that are problematic about closed end funds. So it's the lowest cost compensation for a management firm like us to manage this pool of assets. In fact, we charge our other funds incentive fees. We don't do so here. We're not permitted to do so here. So it's the lowest cost version of Pershing Square. You take our record over the last eight years since we've had permanent capital, it's been a 24.9% return. That's a very high rate of return relative even to the stock market, which you know, about 10% per annum, not as well. So it's a liquid way to invest in Pershing Square at very low cost. And we're going to build the value of this entity over decades.

Bloomberg Host (36:14)

Well, and I know you've said, by

Bill Ackman (36:16)

the way, that's just one of the companies we took public today.

Bloomberg Host (36:17)

That's true. And you have Pershing Square, the holding company, the Holdco. And you also have ambitions to maybe list more funds. How quickly can you ramp up a. I know you said just by the nature of what you're doing by compounding that you could get to a trillion in 20 years. Do you have your own internal targets you're thinking of?

Bill Ackman (36:34)

So the first priority is to compound at a high rate for a long period of time. That's a much easier thing than doing an IPO is going to take management time and attention. So we're going to focus on investing. We're going to focus on getting our universal music deal done. We're going to focus on helping the administration figure out to how Fannie and Freddie. We're going to help our company succeed. And the beauty of that is it grows our A. And the beauty of this, of Pershing Square, the management company some people call the GP, is it grows with compounding. Other asset management firms generally only grow with raising money. If you look at a KKR or the other sort of alternative asset management firms, if they stop raising money, they shrink because they're constantly sending money back to their investors. As they sell assets, they send money back. In our model, we build off a base and if we're up 20%, the assets will grow about 20%. And so that's a very fast rate of growth without the need to raise any.

Bloomberg Host (37:31)

Can you rival the size of those? I mean I know it's a very different model, but do you see yourself growing to a size of, of a Blackstone of an Apollo over time?

Bill Ackman (37:38)

For sure. And that was the point I was making. We'll have 25 today. The closing of this IPO will have 25. 26 billion of fee paying assets is

Bloomberg Host (37:47)

the way you invest. Need to change then because these are huge platforms that have many different types of assets they invest in beauty.

Bill Ackman (37:52)

For our strategy, we invest in the largest companies in the world, kind of large cap, mega cap companies, mostly based here. We're tiny in the context of the capital markets. We manage the money in a concentrated fashion. But with 25 billion of capital, a couple billion dollars per investment, that's small in the context of the market we invest in.

Bloomberg Host (38:10)

The way. And you know this, this is quite unique as you point out. There's not really another structure that's listed like this. How are you thinking about it though in terms of having a listed structure, both Pershing Square and us, that it is centered around you and your very small team, which I know is. You see that as a benefit too. Does it change how you communicate? Does it change what you put on social media because it could impact share prices?

Bill Ackman (38:33)

It does.

Bloomberg Host (38:34)

Well, I guess legally is one question, but. But beyond that.

Bill Ackman (38:36)

Well, actually, believe it or not, I've been very constrained on social media and maybe you find that a surprise. But with respect to talking about Pershing Square, there are a lot of limitations up until this moment in time. Now we have an SEC registered entity, our existing offshore closed and fund. We're not allowed to talk about it in America.

Bloomberg Host (38:54)

Right.

Bill Ackman (38:54)

And this is where I spend the vast majority of my time. So it's something we can't talk about. The beauty of this entity is we're going to be able to we make an investment. We can say today we bought a 10% stake in company ABC. Here's why we own it. Ticker symbol PSUS and investors, we can keep very close touch with our shareholders. And one thing that Elon Musk has done very well over a long period of time is he built a base of followers that were very supportive of Tesla over time reduced the cost of Tesla stock and that's been a competitive advantage that Tesla's had over time. We have already a very large base of followers in the capital markets. They haven't had a way to invest with us until now.

Bloomberg Host (39:30)

It does sometimes make for more volatility though when a post can potentially move around share prices. How do you think about that?

Bill Ackman (39:37)

I mean we're only going to post stuff. That's true.

Bloomberg Host (39:39)

I think that's, I think that's a good rule to stand by.

Bill Ackman (39:42)

Yes.

Bloomberg Host (39:43)

At the same time, you know you've been pretty early in some major dislocations in this market. Be it Covid be the inflation that followed and some really slow successful hedging strategies behind that. Do you, do you see any dislocations like that at the moment and hedging strategies you'd want to deploy?

Bill Ackman (39:59)

No, actually I think we're in a pretty, we're heading to a very good place. Obviously we have a war still underway but I think we have by far the upper hand. I think the Iran has been denuded of military capability and I think it's only a matter of time administration. I think this move of closing the strait I think was a kind of a kung fu grip type move on the part of the President and I think it's putting a huge pressure on Iran. So I think we're going to get this resolved in the relative short term. I think that's really the biggest overhang on the market. Right. You know the, you know we close the straight obviously has an impact, you know some over 4 percentage points or something of oil on a daily basis. Can, can, can move a market and that has an impact causes inflation in the short term. But I think it's a short term phenomenon and I think once we're through it, I do see, you know Federal Reserve that should be able to reduce interest rates. We have massive, you know, air spending, we have massive energy spending. We have a tax bill that's driving investment every day. There's how many deals that are being announced. If administration is very supportive of, of transactions as opposed to an FTC would which would stop everything. So there's, I think you're going to see lots of reasons to be bullish on markets generally.

Bloomberg Host (41:14)

You're pretty early in this call posting on that any dips would be short lived and they were, I didn't say any.

Bill Ackman (41:22)

I was very. I basically it's called a recent bottom. Let's put it that I thought stocks Were getting stupidly cheap. So I sort of called it out.

Bloomberg Host (41:29)

Didn't even sell off 10%. I feel like some people feel uncomfortable with that. I think oil today is trading somewhere around 116 and stocks feel unbothered.

Bill Ackman (41:38)

You can't think about stocks. You're thinking about stocks from an index perspective.

Bloomberg Host (41:41)

Okay.

Bill Ackman (41:42)

The index is like looking at the surface of the ocean. I mean, sorry, the index is like looking at inside the ocean but the surface is moving around a lot. What I mean by that is there are, you know a lot of stocks. There's enormous disparity in terms. There's enormous volatility. We have a lot of earnings coming out in the next 24, 48 hours. And you see, you can see massive moves in different directions. There's so much capital leveraged short term focused tightly risk managed which means stop losses and things like this. And the result of that is that our capital markets you can see massive moves in share prices. If you have the ability to be long term every once in a while you know the price of a really high quality company gets stupidly cheap sheet because someone gets, you know is forced to sell because of a bad print for the quarter or a guidance change. Really something that doesn't necessarily have any material impact on the long term business. And those are the kind of dislocations we take advantage of.

Bloomberg Host (42:38)

But the dislocations it sounds like are over. The stupidly cheap moment has, has come in pass. Is that fair?

Bill Ackman (42:43)

I would say we're above stupidly cheap bottom but I still think there are a lot of very high quality like the way we, we sort of modify model. Each of our companies, we build a model and we were our kind of go forward next three year IRR was something north of 30% at the bottom. You don't see that with really high quality companies. It's probably now in the mid-20s. It's still a very high rate of projected return for some of the best businesses in the world. And that's suggestive to me the market's cheap or at least cheap. Some of the. This is a case where the highest quality companies cheap. I'm not to going saying that energy companies are cheap today.

Bloomberg Host (43:18)

Sure. So you have to avoid value traps essentially in this market as it stands.

Bill Ackman (43:22)

That's I think is it true of

Bloomberg Host (43:25)

any, of any market. Fair enough. You know in this sort of quest to build a Berkshire Hathaway type model. So you've listed these two.

Bill Ackman (43:33)

Let me, let me clarify.

Bloomberg Host (43:34)

Sure.

Bill Ackman (43:34)

Because I think it's a little confusion so we're building an asset management firm that has some of the similar attributes to a Blackstone, a kkr, but it's extremely investment centric. We're going to grow this business principally by compounding as opposed to raising lots of funds. So that's one Buffett was not in the asset management business. Buffett was building a corporation over time. We have a company called Howard Hughes holdings. We bought an incremental stake in about a year ago. I became executive chair. Our cio Ryan became cio. The full Pershing Square team became available to the company. And that's the company we talk about, about, about building a modern day Bertha. And the first step we took was we signed an agreement by a company called Vantage Holdings. That deal is going to close in the next, you know, call it 60 days, something like this. And we're going to manage the assets of that insurer and we're going to work with management to make sure they underwrite very high quality, profitable insurance business. If you look at Berkshire over the last six of years, it's built most of its value running, becoming effectively an insurance holding company. That's what Buffett has built over time. And it was his successful management of the assets. So when you heard Buffett buying Apple, it wasn't Buffett buying Apple, wasn't even Berkshire buying Apple, was the Berkshire insurance subsidiaries buying Apple. And we're going to do the same thing. We're going to manage. So the goal of Howard Hughes is to build a long term diversified holding company akin to what, what Buffet it has done over a long period of

Bloomberg Host (45:00)

time and sort of defining what, you know, your various holdings and your investments look like and what they're not. I know one distinction you've made very clear because there have been these nerves around retail funds, but it's been really centered around BDCs and private credit. You've really drawn a distinct line that these are not. There's no exposure there. I wonder if part of that though is skepticism of the asset class itself. Is there any skepticism of that asset

Bill Ackman (45:23)

class class of private credit? Generally?

Bloomberg Host (45:25)

Yes.

Bill Ackman (45:27)

Look, any time you have an asset class grow very, very quickly with a lot of participants competing, you know, return, you either have to accept lower returns or more risk. That's the only way you can kind of grow in that environment. And there's like everything else, there's a continuum of, of quality in terms of sponsorship. I don't think there's inherently something wrong with private credit. I think the one thing I would say is investing in illness, liquid Assets you really should have very long term capital or permanent capital.

Bloomberg Host (45:56)

And here you are on your quest to obtaining more permanent capital.

Bill Ackman (45:59)

Is so much capital is managed where the underlying asset is long term. A company, a stock is a long term asset, right? The vast majority, what's caused the stock market to behave the way it does is the vast majority of asset management firms have very short term money. They have money that can leave in a minute, an etf, they have money they can leave overnight in a mutual fund or even a hedge fund. You know our, when we bulk of our assets were hedge funds, about half the money could leave every year. It's hard to be a long term investor if your money can leave overnight.

Bloomberg Host (46:31)

So one of the arguments for that though of being able to redeem is just you're accountable to shareholders, how do you keep that, how do you keep accountability to shareholders when they're not able to redeem assets out of the fund?

Bill Ackman (46:44)

Shareholders have more liquidity than they do in any fund because they have a stock that trades and they can buy and sell over time.

Bloomberg Host (46:49)

What needs to go right on the flywheel because if you do have any sort of discount to nav, does that make it more difficult to list other vehicles like this?

Bill Ackman (46:56)

We're going to focus on doing a great job for the PSUS shareholders. And if we do a great job, we communicate to them, well, we deliver the kind of performance we have over time, we deserve to trade at a premium as opposed to discount.

Stuart Paul (47:07)

Right.

Bill Ackman (47:07)

Again, the, the average closed end fund, the best SEC, the best performing closed end fund over the last eight years generated a 14 and a half percent return at a time. We generated a 24.9% return. That's a huge disparity. And by the way, that fund trades at a 15% discount. Sorry, 15% premium.

Bloomberg Host (47:23)

Do you think you could treat it a premium?

Bill Ackman (47:26)

Here's my argument, right? Businesses that earn the kind of return that we have generated over time traded two to three times book value. Should we trade it at a discount to book value? It makes no sense. We have a tax advantage, we have a favorable corporate structure, much more flexible, much more tax efficient liquid less than New York Stock Exchange. I mean put aside, I don't know what happens in the first couple of days after an offering, you know, but with good shareholder communication, keep people informed, good performance, this can become a core holding. And by the way, the bulk of, of this entity is sold to very long term holders, right? And so now with so much of the stock held by long term holders, it's the marginal buyer and seller that will move the price around.

Bloomberg Host (48:09)

So by the way, are you as excited as everyone else is about getting to hear from me quarterly? Now when you give quarterly updates, do you wish it was semiannually?

Bill Ackman (48:17)

No, no. I'm very happy to enjoy communicating and I certainly enjoy communicating with people who've entrusted of their future to us. Yeah, we actually operate. You're not as aware of this, but today we do quarterly conference calls for our existing vehicle. Sure we're not going to do them onshore. Yes, we're able to answer questions from shareholders the way that you would want those questions to be answered.

Bloomberg Host (48:38)

Very much so. Looking forward to that. Bill, thank you so much for your time this morning. We appreciate it. Bill Ackman, CEO and Founder of Pershing Square

Tom Keene (48:47)

thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already, Apple, Spotify or wherever you get your podcast. And you can find us live every weekday from Washington D.C. at Noontime eastern@bloomberg.com

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