Ackman on banking crisis, Fed Hikes, Musk, Dimon, Inflation, Blockchain

• Bill Ackman warned that the banking crisis could hit the US economy if it is not resolved quickly.
• The billionaire investor warned the Fed against raising interest rates until order is restored.
• Ackman touched on inflation, blockchain, Elon Musk and Jamie Dimon’s presidential potential.

Bill Ackman has sounded the alarm about the banking crisis, warning that it could wreak havoc on the US economy if allowed to continue.

The billionaire investor and Pershing Square chief, during an episode of the 20VC podcast uploaded Monday, warned the Federal Reserve against moving forward with further rate hikes until the financial system stabilizes.

Ackman predicted elevated inflation in the coming years and highlighted blockchain’s disruptive potential. He also called for Elon Musk’s loan against his Tesla stock to be taxed, and suggested that JPMorgan CEO Jamie Dimon would make an excellent US president.

Here are Ackman’s top 10 quotes from the interview, lightly edited for length and clarity:

1. “I had a very early view of the economic implications of COVID that allowed us to make a fortune hedging it. I had a very similar view of interest rates and we were way ahead of the curve. The mistake was not make it a bigger bet; we should have made $10 billion hedging interest rate risk, instead we made $2.8 billion because we were a little bit anxious. We didn’t put enough capital behind our confidence.

2. “Unfortunately, I think the bank run is continuing. If you look at the deposit flows to the big banks, if you talk to anybody at JPMorgan who’s opening accounts, they’re literally working around the clock to take in all the capital that’s coming in. i. It is not good for our banking system.”

3. “Silicon Valley Bank made one of the most fundamental mistakes a bank could make. It broke all the fundamental rules. This is one of the simplest, high-level things you should check about a bank, and somehow it became ignored by regulators.” (Ackman was referring to SVB’s failure to hedge against rising interest rates.)

4. “The government still hasn’t given people assurance that every deposit is safe. If that doesn’t happen, all these deposits will flow out of these regional banks, they will stop lending, and the economy will come to a standstill. I will be very cautious about raising interest rates until we solve this regional banking problem. we can’t have another bank shutdown. one more and it’s going to be messy.

5. “Much of the construction and real estate and small business lending is done by these smaller banks. Commercial real estate is an important part of our economy. If these banks lose all their capital and deposits, it will lead to a meaningful slowdown.”

6. “Raising rates puts pressure on the system and cracks appear. We’ve seen glass breaking. I think he needs to be very, very thoughtful about whether we raise rates here or whether we stop.” (Ackman debated whether Fed Chair Jerome Powell should keep raising interest rates to curb inflation.)

7. “You’re going to see sustained levels of 3% to 4% inflation for the foreseeable future. That’s absolutely missed, based on the pricing of long-term bonds. The government is borrowing money for 30 years at 3.6% — that can’t make sense in a world where inflation is 3.5%.”

8. “There are businesses that are guaranteed to be disrupted by blockchain. There are old-fashioned, old-fashioned businesses that everyone hates because they are monopolists, and you can disrupt them with blockchain technology. I would be short those companies.”

9. “If you’re Elon Musk – I don’t believe in wealth taxes. But if you borrow $5 billion against your Tesla stock, and you’ve borrowed more than the cost basis of the Tesla stock, I think the distribution from that type of loan should be taxable . Because it is essentially equivalent to a sale. You get back more than the money you invested.” (Ackman said he believed the “Elon Musks of the world” would support such a tax.)

10. “My favorite version of events is actually Jamie Dimon. Believe it or not, a banker. I want a globally recognized, respected, talented business builder who understands the economy, who understands geopolitics, who has relationships with business leaders globally. I would like to have a better version of Trump, a better business leader to run, and I think they can absolutely get the Democratic nomination.” (Ackman discussed who he would like to be the next president of the United States.)