Are US stocks becoming “casinos”? Ackman warns that highly leveraged speculation will increase market volatility and is optimistic about Visa (V.US), Mastercard (MA.US), and Netflix (NFLX.US)
The Zhitong Finance App learned that billionaire investor Bill Ackman, founder of Pershing Square Capital Management, warned that with the increasing popularity of highly leveraged transactions and speculative activities, the US stock market is experiencing more and more unreasonable price fluctuations, and there is even a risk of becoming a “casino” again. However, he also pointed out that this market imbalance has created opportunities for long-term investors to buy high-quality companies at low prices.
Ackman said in an interview on Tuesday that he is concerned about the current state of the stock market. “Every three or five, I feel like there's a problem with the market.” Ackman said, “The trading prices of some stocks are completely unreasonable in my opinion. Yes, if you're a long-term investor, it's certainly a good thing to be able to buy stocks at ridiculously low prices. But I don't think it's good for the country in general.”
He further pointed out that as the level of leverage in the market rises, the stock market is once again showing speculative characteristics similar to casinos. “We're back in that casino-style market with 95% leverage.” Ackman said, “I don't think this is beneficial to the economy or society, and this phenomenon is causing sharp fluctuations in stock prices.”
Ackman is particularly concerned that the rise of single-day leveraged investment products, perpetual futures, and sports betting is encouraging more and more investors to participate in the financial market with a short-term speculative mentality. He believes that when investors view the stock market as a tool to get rich quickly rather than a place for long-term investments, excessive use of leverage can have serious consequences.
In recent years, leveraged investment instruments and high-risk trading products have become increasingly popular, enabling investors to establish greater market exposure with less capital. However, such transactions may also amplify market fluctuations, especially when investors concentrate on closing positions or when market sentiment suddenly reverses, leading to drastic changes in stock prices that are inconsistent with corporate fundamentals.
Despite concerns about the speculative climate in the market, Ackman acknowledged that this share price fluctuation, driven by short-term sentiment, has instead created many investment opportunities for Pershing Square.
He said that Pershing Plaza has taken advantage of the sell-off in the stock prices of many large technology companies to establish positions at attractive prices. For example, earlier this year, Pershing Square bought Microsoft (MSFT.US) stock during a period of concerns that artificial intelligence (AI) might disrupt traditional software-as-a-service (SaaS) business models and trigger a large-scale sell-off of software stocks.
Furthermore, after US President Trump introduced a tariff policy that caused Amazon (AMZN.US) stock prices to fall, Pershing Square also took the opportunity to buy the company's stock. Ackman also mentioned that after the launch of ChatGPT, the market once feared that generative AI would impact Google's search business, causing Alphabet (GOOGL.US) stock prices to fluctuate greatly. Pershing Plaza also used this opportunity to establish Alphabet's investment position.
These investments reflect Ackman's consistent investment strategy of finding high-quality companies with strong competitive advantages and long-term growth potential, and buying when the market sells off sharply due to short-term concerns.
However, Ackman stressed that although irrational market fluctuations are beneficial to long-term investment institutions like Pershing Square, this does not mean that this market environment is encouraging. “It's good for us in the long run. When I say 'we' I mean Pershing Square.” Ackman said, “But I don't think it's good for the whole country.”
When talking about current promising investment targets, Ackman specifically mentioned global payment giants Visa (V.US) and Mastercard (MA.US). He called these two companies one of the best in the world, showing their recognition of the payment industry's business model and long-term competitive advantage.
Also, Ackman is optimistic about the streaming platform Netflix (NFLX.US). In August of this year, he revealed that Pershing Plaza had re-established Netflix's investment position. Ackman previously invested in Netflix, but pulled out in 2022 due to a slowdown in the company's user growth. This repurchase shows that he is once again optimistic about Netflix's competitive position and long-term development prospects in the global streaming media market.