Why Bill Ackman's Got A Bone To Pick With The Fed

Zinger Key Points
  • The billionaire investor called on the Fed to get more aggressive in its tightening efforts
  • Bill Ackman noted that current Fed policy has paved the way for "double-digit sustained inflation."

One hedge fund manager took to Twitter Inc TWTR on Tuesday to express serious inflation concerns and the potential consequences of inaction. 

What Happened: Pershing Square's Bill Ackman called out the Federal Reserve for its inability to recapture investor confidence in the markets. 

"Markets are imploding because investors are not confident that the @federalreserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job, and that is what is happening now," Ackman said via tweet.

The billionaire investor called on the Fed to get more aggressive in its tightening efforts. He suggested that a failure to accelerate rate hikes will lead to a collapse in the economy. 

Given the supply/demand imbalances in energy, food and housing, Ackman believes the only way to tame inflation is to aggressively raise rates. 

"Or the stock market crashes, catalyzing an economic collapse and demand destruction," he said.

See Also: Can Investing In U.S. Farmland Really Help Keep Food On Your Table? - How Inflation Might Actually Be Helping This Sector

Ackman noted that current Fed policy has paved the way for "double-digit sustained inflation."

"How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do 'whatever it takes.' And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle," Ackman said.

Why It Matters: The hedge fund manager noted many stocks are cheap at current levels. He believes that if the Fed responds to raging inflation appropriately, stocks will surge. 

"Markets will soar once investors can be confident that the days of runaway inflation are over. Let’s hope the Fed gets it right," Ackman said.

Photo: Insider Monkey from Flickr.

Posted In: Bill AckmanInflationThe FedGovernmentHedge FundsTop StoriesEconomicsFederal ReserveGeneral