You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. The Interviews That Shaped the Post-GFC Market - No. 3 - Bill Ackman's 2020 "Hell is Coming" MomentThe markets fell for this one... and Ackman cleaned up... it was a masterclass in how markets function and a reminder of what you need to watch at all times...
Dear Fellow Traveler, Let me tell you about what I consider one of the greatest magic tricks in modern finance. On March 18, 2020, Bill Ackman appeared on CNBC, looking like he'd seen a ghost. Maybe several ghosts. An entire haunted mansion's worth of ghosts. Like Scooby Doo… but with money… "Hell is coming," he said to a stunned audience at the height of the COVID crisis… For almost 30 minutes, Ackman painted an apocalyptic picture of America's future. He was the Bob Ross of apocalyptic finance at that moment… begging for a 30-day shutdown… warning of unprecedented economic collapse. The market had its worst day since 1987… …. Now… here's the punchline… Ackman had already bet $27 million that hell was coming. Talk about talking your book, baby… By the time his tears dried, that bet was worth $2.6 BILLION. That's "billion" with a "B." As in "Boy, did everyone else get played." A Masterclass in MisdirectionI’ll remind you that my signal went negative for the first time we’d been testing it on February 21, 2020 (five years later, it went negative on the same day - before the trade collapse.) It felt bizarre - because there wasn’t an economic shutdown yet… There wasn’t anything suggesting that COVID could be THAT bad. But I’d been watching something that made it all feel contrarian. Quoth the Raven was posting articles and images around Twitter that showed that
Probably nothing… he would joke. I started selling stocks aggressively in January 2020 - largely on the back of QTR’s and Chris Martenson’s insights on Covid in China - and I was one of the few newsletter writers doing so despite all the false confidence that continued to build. I didn’t have, at the time, the confidence to short the S&P 500 because Tim Melvin and I were still working on then-untested momentum models… The rest of Wall Street was still debating whether COVID was "just the flu." But Ackman was quietly buying credit protection. Not a lot of money by hedge fund standards - just $27 million. He wasn't shorting stocks directly. Too obvious. Too risky. Instead, he bought credit default swaps on investment-grade and high-yield bond indexes. He bought insurance on corporate debt right before the corporate debt market had a heart attack. The beauty of this trade? It was asymmetric. If he was wrong, he'd lose $27 million - pocket change for a guy managing $10 billion. If he was right? Well, you're about to see what happens when you're right. Oscar-WorthyFast forward to March 18, 2020. Ackman dials into CNBC. The market is already down 20% from its highs following the February 21, 2020, downturn... Fear was in the air. But we didn’t have a full panic. Not yet. Then Ackman starts talking. "Hell is coming," he says. He said America will end unless we take drastic action. He called for an immediate 30-day shutdown of the entire country. He warned that hotels would go bankrupt. That the economic damage would be "irreversible." CNBC's anchors looked like they were now seeing ghosts too... The market immediately tanked. The Dow dropped even faster… and faster... Ackman said that his colleagues were calling him a “lunatic…” Twitter exploded. "Is Bill Ackman okay?" people asked. Narrator: Bill Ackman was more than okay. Now You See It, Now You Don'tHere's what viewers didn't know… While Ackman was on CNBC, his hedges were printing money.... That $27 million bet was now worth $2.6 billion. That's a 100x return in less than a month. For context, that's like turning your Starbucks budget into a yacht. With a helicopter pad on it... But wait, it gets better. After closing his hedges at the absolute peak of panic, what did Ackman do? He immediately went long. (Insiders started loading up too around March 25.) Using that $2.6 billion windfall, he bought beaten-down stocks like Hilton, Lowe's, and Starbucks. Right at the bottom. Right when everyone else was selling. And on 60 Minutes, one of the dumbest interviews of all time would soon take place… With the Fed fully telegraphing to the world that they were about to turn the money printers on… It was so blatant and so incredible… all I had to do was see what insiders were doing… Buying… manically… It's like yelling "FIRE!" in a crowded theater, buying the theater for pennies after everyone flees, then selling tickets when people come back. Within months, Ackman’s portfolio surged even more… The Triple Play: Lightning Strikes ThriceAckman wasn't wrong about the risks. COVID was serious. The economy did need intervention. Hell did arrive for many Americans. But he was positioned to profit from the very hell he was warning about. This is the game at the highest levels. It's not about being right or wrong. It's about being positioned correctly when you're right. And if you can scare everyone else into selling while you're buying? That's not market manipulation. That's "providing liquidity during a crisis." When asked about the ethics of his trade, Ackman defended it as hedging his portfolio. Protecting his investors. Doing his fiduciary duty. Which is true. But… the next time you see a billionaire on CNBC looking concerned about your well-being, ask yourself: What's their position? Because in modern markets, the most profitable words aren't "buy" or "sell." They're "Hell is coming." Especially when you're the one selling the fire insurance. As always, watch the insiders… because they called the bottom when Ackman did too… That’s what makes this interview so important… follow the money… look for the contrarian side of things… and ignore the noise. These events - and there will be more of them - are how you get richer. Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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