Bill Ackman is preparing to fight the banks, and is generally regarded among his high-flying peers in the hedge-fund industry as one of its savviest investors. But does he have any financial advice for the common man? Jeffrey Goldberg tried to find out when he ran into him (at Boaz Weinstein’s house, of all places) during reporting for his Atlantic cover story this month. It was awkward. Not least because Ackman was just finishing up a diatribe against the media — who, he feels, misunderstand finance people, so consumed are they with jealousy and rage over the meager contents of their own wallets — when Goldberg, the reporter, butted in.
It only seemed right for me to stick up for my fellow ink-stained proles, so I decided to make an intervention. But then I thought, This is Bill Ackman standing before me. He’s a great investor. Maybe he can give me some advice.
So this is what came out of my mouth: “What do you tell the ordinary mortal — say, the person who works in the press that you talked about — what do you say to the person who has $20,000, $50,000, $100,000, or $200,000, maybe, parked somewhere doing nothing? What is your advice right now for that person?”
I looked around. The wizards in the room were having difficulty calculating figures of such humble size. I had thought $200,000 sounded like a large and unembarrassing number. But the room reacted as if I had asked, “Bill, I have 75 cents in my pocket. Do you think I should buy Twizzlers or a big red gumball?”
Ackman answered: “First, it depends on when you’re going to need the money. I’ve always said that if you want to take risk any risk—you have to be prepared to put your money away for five years or more. If it’s that kind of money, I would give someone a couple of alternatives. Do you have enough money in the bank that if you were to lose your job, you’ve got a good window to get reemployed? You’ve got to make sure you have a safety net. Buy a house. I think it’s a great time to buy a house. But put a 20 percent down payment, get a good mortgage from Fannie and Freddie. It’s one of the best investments you could make. The rest of the money, either invest in a very broad index fund—a Wilshire 5000 type of index fund—or if you want to do a bit of homework, I’d invest in a few great unlevered businesses that earn attractive returns. In my opinion, McDonald’s, Visa, maybe Berkshire Hathaway.”
Hmmm, what else? Dunkin’ Donuts, Kentucky Fried Chicken, whatever you people eat. Poor-people food. That’ll be around for a good long time. If I have anything to do with it. Mwhahahaha …
Why I Fired My Broker [Atlantic]