Is US heading for another Covid-19 crash? Bill Ackman bets pandemic will rattle stock market again
Hedge fund mogul Bill Ackman has made another massive bet that the rising number of Covid-19 cases will see corporate defaults. In March, he made a net profit of over $2 billion after selling his bets against the market less than a week after issuing a warning that “hell is coming” and implored the White House to call a shutdown for a month.
The billionaire investor from Pershing Square Capital Management said at a Financial Times conference on Tuesday, November 10, that markets once again became too complacent about the virus that has killed more than 241,000 people in the US so far. He put on a new trade hedging his equity exposure with insurance against corporate defaults at the beginning of the week. “I hope we lose money on this next hedge. We’re in a treacherous time generally and what’s fascinating is the same bet we put on eight months ago is available on the same terms as if there had never been a fire and on the probability that the world is going to be fine,” said Ackman.
The 54-year-old also revealed that on Monday, November 9 -- the same day Pfizer announced promising results from a vaccine trial -- Pershing bought some $8 million worth of insurance that will pay out if the firms start defaulting on their debts.
Ackman feels next few months will be challenging
Ackman also predicted the conference that the next few months will be “challenging”. “I hope we lose money on this next hedge. We're in a treacherous time generally and what's fascinating is the same bet we put on eight months ago is available on the same terms as if there had never been a fire and on the probability that the world is going to be fine,” Ackman, whose moves boosted Pershing Square much, said. The hedge fund is up by 44 percent so far this year, after having been down seven percent before the successful bet.
Ackman said he harbored hope over the economy’s recovery in the long run, saying it was likely to see a “robust recovery” while predicting the challenge. It was the same day Pfizer declared early success with its experimental Covid-19 vaccine, which sent stock indexes to a record high, according to Observer. Ackman said the news was “actually bearish for the next few months” and it was likely to make people complacent over wearing masks and less likely to see the virus as a threat as earlier.
Ackman denied that his prior predictions, including the ‘hell is coming’ interview on CNBC in March, were aimed at sowing fear or seeing the markets going into freefall. The investor’s attorneys said he did not conceal Pershing’s hedge position from the people before his interview and backed him saying, he did not do anything wrong. Ackman told investors in late March that he heard some interpreting his remarks as being bearish on the market and ridiculed the idea that his appearance pushed the market down an additional four percent that day.