Hell Is Coming

Summary

On March 18, 2020, Bill Ackman joins CNBC by phone at the height of the COVID-19 market panic and delivers an emotional, nearly half-hour warning that "hell is coming" unless the United States immediately shuts down for thirty days. The interview is framed around a tweet he sent to the President earlier that day: close the borders, keep only essential services open, and have the government pay wages until the economy reopens. What follows is not a calm macro call but a visibly frightened investor walking through the exponential math of a virus with a long asymptomatic infectious period, the personal vulnerability of his own elderly father, and the cascading economic destruction he already sees in Chinatown, hotels, airlines, and restaurants.

The segment also discloses, almost in passing, that Pershing Square has taken aggressive protective measures and that Ackman has turned bullish. He explains that he has been buying Hilton, Restaurant Brands, and Starbucks on the way down, because the only answer that works is a short, hard, globally coordinated shutdown. The interview was pilloried in real time as fear-mongering from a positioned trader. In context, it is the public face of the COVID hedge: Ackman had already spent roughly $27 million on credit protection that would soon be closed for $2.6 billion, and he was redeploying the proceeds into the concentrated equity book the hedges were designed to protect.

Full Text

Machine-generated transcript (ASR); minor transcription errors may exist. Speaker turns and paragraphing restored editorially — words unchanged.

Interviewer:

I do right now they'll want to bring in Bill Ackman on the phone he took the Twitter today to urge the President to take more dramatic measures to stop the spread of the virus bill I thank you for joining us today thank you a number of ideas you put forth I'm gonna read one of them for our viewers to start mr. president the only answer is to shut down the country for the next 30 days and close the border as you say tell all Americans that you are putting us on an extended spring break at home with family keeping only essential services open the government

Interviewer:

pays wages until we reopen I know from our conversations that you have been worried for some time what how did it manifest today with these tweets and going public maybe just a little bit of context

Bill Ackman:

you know I'm an optimist but beginning in I don't know late January I was getting increasingly bearish and I woke up with a nightmare and my nightmare was you have this virus that replicates and insects incredibly rapidly you know each person infects two and half people each of them affect 2 and half people you know one becomes 2 2 becomes 4 4 becomes 16 16 to 56 65,000 you get to just massive massive numbers and watching this thing roll out in China it kills you know one to two percent of the people in China the numbers been closer to four people think that's because the health systems been overwhelmed but one to two percent means friends and

Bill Ackman:

family are going to die the concentration was the effect were sort of older people older people with longer cardiac conditions I have a father is almost 81 he's you know he's got yeah lung cancer he lost two-thirds of his lung capacity as a result of surgery got some health issues and you have a virus thing that really scared me is unlike the flu or when you're sick you know you have it here you go as much as two weeks without showing any symptoms or maybe a little bit of a cold meanwhile you're incredibly infectious and I thought the combination of that the fact that this

Bill Ackman:

the virus lives on surfaces for as much as you know nine days if we believe what we're reading means this thing can spread everywhere and when China shut down Wuhan they told people you know 12 hours from now we're going to shut down Wuhan well what happened five million people left one and 5 million people dispersed around China and five million people dispersed around the world and it seeded the virus and I think people are just not used to thinking about exponential compounding on a daily basis in the beginning you don't see anything and I think the fact it was it sort of people repressed

Bill Ackman:

reports that it only killed old people it only killed sick people I think it made most of the country not particularly concerned I think the fact that you know 99% of the people lived made most of the people not concerned the fact that it was in China and was like far away and you know Chinese have unusual dietary that you know have a seat some things we don't eat I just think all of these things made people not take it seriously but you know when I did the math I said you know the laws of probability tell me this thing is going to be everywhere every one fifty percent of the world is going to get infected and

Bill Ackman:

I sort of rolled this thing forward and I said it's just it's just a matter of time

Interviewer:

do you take comfort in in some of the steps that have been taken

Bill Ackman:

it certainly appears as though our response now from a federal level is much better than it was initially I think we can all admit and and take comfort that it is ramped up now

Interviewer:

what about the steps that have been taken the city in which you live is considering a shelter in-home declaration

Bill Ackman:

I think Governor Cuomo has done a superb job and I think the White House the president the vice president are finally doing taking a lot of the necessary steps but it's not enough and the reason why it's not enough is the only way what's going to happen if we continue the way we are operating is until a vaccine is manufactured distributed and injected we will go through a depression-era period in the country and millions of people will die around the globe and as many as a million Americans are gonna die and it's just math okay and the problem is if you lock down New York what will happen is Governor Cuomo will say okay

Bill Ackman:

we're locking down New York you know there was a rumor of that so what did everyone do everyone got out of New York moves went somewhere else because they didn't no one wants to be locked out and they and they spread the virus and they're not doing it you know to cause anyone harm they just don't even know that they're infected and by the way you look at the data from Korea there's some very interesting evidence that suggests that people from 20 to 30 are the massive spreaders you know the so called are not you know the reproduction number of the virus I think is much higher particularly in that group of people so

Bill Ackman:

you have a group of people that are you know 20 to 30 the Millennials they're going out there having fun they don't feel sick not afraid of anything and they are spreading this everywhere and by the way when the college is shut down they all go on spring break and they spread it everywhere and so I think there's a very high probability that millions of Americans have the virus and I'll give you some interesting you know anecdotal data points so we took very aggressive measures at Pershing Square you know cuz I was obviously very bearish on this on February 27th I told the firm that

Bill Ackman:

we're going to work from home we have a small firm we've got 50 people we already have two people and again we've been working from home for three weeks we have two people out of 50 that are likely to have the corona virus based on their symptoms we're waiting for outcomes in one case for a test yet the other one is not in a can't get a test or is in a place where it's more difficult for them to get a test but you know it's kind of 4% of our company taking aggressive aggressive measures so it's incredibly widespread its deadly and as we heard on the president's announcement and

Bill Ackman:

this is if you actually track foul twitter this was out a few days ago it's killing young people it's killing healthy people right I think if originally what happened if this broke out in New York and it was killing babies okay the country would not have taken the approach it is taken okay but that is the approach that we have to take assume it's gonna kill your child okay let's assume it's got a 1 in 50 chance of killing your child and operate accordingly so this the very simple answer is and by the way it's happening but you know the the mental model I used is by February Chinatown in my view as a microcosm for the country what happened in Chinatown well

Bill Ackman:

the one thing people did is they stopped going to Chinatown because they were afraid of you know well maybe people coming home from China and then you want to eat Chinese food it's a Chinatown you know restaurant revenues went down 50 60 70 80 percent what happens well the Busboys loses this job the guy doing dishes the waiters lose their job the the number-two chef the chef you know that the owner has to shut the place the supplier stop you know providing supplies right the banks that lend to that community start getting defaulted on loans every landlord in china has gotten a call from their tenant who says I'm sorry I can't pay rent I have no revenues coming in and

Bill Ackman:

I said look this is a model for the country and that's happening now right the canary in the coal mine and by the way it's not just and the other thing that happens of course the entrepreneur that owns ten Chinese restaurants in Chinatown okay he's also devastated so it starts with the bottom and it works its way through to the top okay and the same things happening right now in our country right it starts with the guy who owns a Embassy Suites Hotel okay he's wiped out all right you've got you know when you go from eighty percent occupied to zero okay you're toast you've got to go down to 50 percent you're toast but you're certainly toast when you go to zero so

Bill Ackman:

he defaults but now you know take a look at Hilton stock we're a major shareholder of Hilton Hilton is the canary in the coal mine this is an incredibly well capitalized amazing dominant global company that actually doesn't know many hotels it just collects royalties down from like 120 250 okay it's going to zero okay along with every other hotel company in the world you know Park hotels and resorts you know stocks down from thirty three or four this is a spinoff from Hilton why is it it's down from thirty three to four because every hotel is going to be shut down in the country

Interviewer:

everyone hang hang on just one second you say Hilton is going to zero I mean I know

Bill Ackman:

again I'm a major shareholder what I'm saying is if we allow this to continue the way we allow it to continue okay every hotel company in the world okay it's done okay because no business can survive a period of 18 months without revenue okay and that's it stick with me and that's what happens okay when if you operate the way we're operating now okay now let me give you so that's a very very thought okay and I've been super bearish but I got bullish okay and the reason why I got bullish and I've been aggressively buying stocks including Hilton today okay and I've been buying all the way down Hilton restaurant brands Starbucks you know walk your way through our police talks and

Bill Ackman:

not buy our companies were on the board and I'm restricted but the reason why is the only answer for the world is to shut the world for 30 days okay it's in so simple okay and it's happening it's happening slowly on a rolling basis country by country but if you take the model from China what do we learn from China the thing that out of control they had no warning okay but the Chinese took incredibly aggressive measures and they shut the economy they absolute the economy in Wuhan the shut the economy anywhere there was a virus and they shot the economy for weeks and then they gradually reopening the economy and the Chinese are incredibly disciplined and

Bill Ackman:

they wear max masks they practice social distancing and they're you know President Xi is now toggling between controlling a spread of the virus and reopening the economy okay and that can work and you look at what how kuru South Korea has handled this and how Singapore's handled this but you need a global effort where every country in the world at the same time says for the next 30 days it's basically spend time with your family I you know my Twitter feed I like their good night last time a tweet is probably a couple years ago yeah I said president all that has to happen is

Bill Ackman:

the president goes on TV by the way doesn't need anyone else by him side he goes on TV he sits down with you know in front of American people and he says here's what we need to do to defeat the virus we got an invisible silent deadly enemy okay how do we kill it everyone just goes home I hit on a couch the sick one for a second it's no the couch you watch Netflix you ordered if you order in Chipotle and you stay there for a month and you spend time with your loved ones okay and the virus will die okay and during that period of time the federal government steps in and supports every American that needs help okay

Bill Ackman:

we have a hot you know rent holiday no one needs to collect any rent no one needs to collect any interest no one needs to collect any taxes the government you know mails checks to people too so that people can pay for food you keep grocery stores open you create this you know the drugstores open you know we keep fast-food open because people get tired of mom's cooking after a couple weeks and then you you know anyone who's out in the public domain where it's masks minimizes interactions and in a month we're done with this and by the way the country survives the economy survives if we do this we're just incrementally over time until there's a vaccine we're done okay and

Bill Ackman:

what will happen is the hotel industry and the restaurant industry will go bankrupt first Boeing is you know on the brink okay Boeing will not survive without a government bailout okay so look at airline industry auto industry restaurant industry hotel industry you know we're capitalism does not work in an 18-month shutdown capitalism can work in a 30-day shutdown and we got to do the 38 shutdown and if the president has to bring out the National Guard to keep people in their homes which I don't think you will need to do you should do it you

Key Themes

• Asymmetric Hedging — a small, capped premium spent on credit protection to fund buying at panic prices
• Volatility vs. Permanent Loss of Capital — distinguishing a price panic from destroyed intrinsic value
• The March 2020 Twitter Proposal — the thirty-day shutdown letter as policy advocacy and risk communication
• Concentration as Risk Mitigation — why a concentrated book requires catastrophe insurance rather than dilution
• Simple, Predictable, Free Cash Flow — the Hilton and restaurant holdings he is buying, not selling, through the panic

Context & Significance

This interview sits in Act IV, the renaissance, and it captures the mindset of an investor who had spent years rebuilding around the Eight Commandments and permanent capital. The Valeant valley taught Ackman that conviction without a kill switch is dangerous; the COVID crisis showed what the kill switch looks like in practice. Rather than sell the concentrated equity book into a panic, he had bought asymmetric protection when it was cheap, and the moment the thesis paid off he became a buyer of the same businesses the market was abandoning.

The honest retrospective is that the television appearance was widely misunderstood. Condemned as alarmist, it was in fact the public argument for the policy response — a short, hard shutdown — that would save both lives and the economy. Ackman was not betting on hell; he was insured against it and pleading for the action that would make the insurance expire worthless. Read alongside his tweet from the same morning and the 2020 annual report, the interview documents how the renaissance portfolio was designed to survive volatility, and how Ackman used the volatility to add to positions he already believed were permanent.