Thanks For Playing! Bill Ackman’s Bond Short Was Short-Lived

Everybody look at Bill. Bill needs to be reminded how important he is. You can help by clicking the heart icon or the little arrows arranged like a box below his latest social media post. Better yet, you can write an article about him so he sees himself in the news. You’re welcome, Bill.

I’m talking about Bill Ackman of course. Bill, like a lot of billionaires, seems to think that having a lot of money makes his opinion count more than everyone else’s or at least more than people who don’t have as much money as he does. That’s true in some contexts, but not all.

Bill, like all of us, is entitled to his opinion and as an American, he also has a right to express that opinion openly. The problem (or at least I think it’s a problem) is that Bill appears to believe his opinion on matters unrelated to markets should carry as much weight vis-à-vis those matters as his market views do vis-à-vis markets.

That’s not uncommon among the ultra-wealthy. They tend to view the accumulation of money as the pinnacle of human achievement — an unequivocal attestation to what they imagine is a kind of full-spectrum superiority. The financial media, trapped inside the same bubble, perpetuates the situation. You’ll often see hedge fund managers and bankers quoted on matters about which they simply have no claim whatsoever to expertise. The results are everywhere and always farcical, and it never seems to dawn on the likes of Bloomberg, WSJ, FT, CNBC and so on that you’d never find CNN’s roster of political pundits randomly weighing in on the VIX.

At least with Ackman’s bond short he’s in his wheelhouse. Or near it anyway. I begrudgingly covered that “story” last month noting (fairly, I think) that Ackman’s thesis was just a recitation of familiar talking points which were by August so commonplace that Bill could’ve picked them up from a BI article (sorry, BI). On Monday, Bill took to “X” to make an announcement: He’s covered that short.

“There is too much risk in the world to remain short bonds at current long-term rates,” Ackman declared. “The economy is slowing faster than recent data suggests.”

Regular readers will immediately note that I’m in agreement with Bill on those points, being the duration knife-catcher that I am. But, to play Devil’s advocate, it’s worth noting that exactly nothing has changed in terms of the factors Ackman cited for his original bond short. Those factors were, truncated:

• The long-term deflationary effects of outsourcing production to China are no more
• Workers and unions’ bargaining power continues to rise
• Strikes abound, with more likely to come as successful walkouts achieve substantial wage gains
• Energy prices are rising rapidly
• The green energy transition is and will remain incalculably expensive
• There is no sign of fiscal discipline by either party or by the presumptive presidential nominees
• The government is selling hundreds of billions of bills, notes and bonds weekly
• Major infrastructure spending is beginning to contribute to economic growth and the supply of additional debt.
• Recession predictions have been pushed out beyond 2024
• The long-term inflation rate is not going back to 2% no matter how many times Chairman Powell reiterates it as his target

That’s all just as true this month as it was in September and August. In fact, some of it’s even more true now.

Bottom line: Ackman took a position, made a big deal of it in public, then exited with what I assume was a profit in fairly short order, even as the long-winded rationale appears entirely intact. Markets are efficient, but they aren’t that damn efficient. Treasurys surely didn’t price in the constellation of concerns painstakingly enumerated by Ackman in the space of 60 days. Note that Ackman’s original “target” for 30-year yields was 5.5%. He exited well short of those levels and as noted here a month ago, 5.5% seemed to belie the grandiosity of his narrative. In my opinion, this was never about the narrative. It was about riding the momentum to a quick buck.

It’s impossible to say how much, if any, of the bearish momentum that accumulated at the long-end of the Treasury curve starting in August was attributable to, or in any way helped along by, Ackman’s multi-point, publicly-disseminated bear case. And to the extent he did fan the flames, there’s nothing illegal about taking a position then talking about it in public. But… well, suffice to say there are contexts in which billionaire hedge fund managers’ opinions do in fact “count” more than everyone else’s. This is one of those contexts.