Bill Ackman's presentation on Fannie Mae and Freddie Mac; Anthropic CEO warns AI could be on a dangerous path without proper safeguards; Waymo's setback in San Francisco after a bodega cat was killed
1) Yesterday, my college buddy Bill Ackman of Pershing Square Capital Management gave an online presentation on housing-finance giants Fannie Mae (FNMA) and Freddie Mac (FMCC). In it, he detailed how the federal government could monetize its 79.9% stake in these two government-sponsored entities ("GSEs").
(You can watch the 34-minute presentation with his narration here, download the 28 slides here, and listen to the 51-minute Q&A here.)
Bill's presentations are always compelling, and this was no exception. The market responded favorably, as both FNMA and FMCC rose more than 7% yesterday.
Pershing Square has owned these stocks for 12 years and is their largest outside shareholder. The stocks did nothing for the first 11 years... But Bill is nothing if not persistent – and has been richly rewarded for his patience.
The stocks have had an enormous run since President Donald Trump was elected and started posting online about taking them public, as Bill shows in this slide:
Bill argues that it's too soon for the government to try to sell down its stake in the GSEs, which remain in a legal limbo called "conservatorship":
Instead, Bill recommends that the government do three things. First, it should declare that the senior preferred stock has been paid off (which has been a major overhang on the common shares).
Next, it should exercise the warrants that will give the government 79.9% of the shares outstanding... and lastly, relist the stocks on the New York Stock Exchange (ever since they went into conservatorship during the 2008 financial crisis, they've traded on the over-the-counter market):
Then, Bill argues, the Trump administration "will have a three-year runway to carefully plan an exit from conservatorship that addresses the capital rule, nature of ongoing government support, regulatory framework, and management and governance."
He concludes that, if Fannie Mae and Freddie Mac trade at 16 and 13 times estimated 2026 earnings, respectively, their shares would soar 300% to 400%.
That means the government's stakes would be worth $310 billion combined – which, needless to say, would be a huge windfall for shareholders (including Pershing Square) and the government:
I think the shares of both GSEs are very interesting speculations.
There's huge upside if the Trump administration does anything along the lines of what Bill outlines. But if it fails to act – as was the case under all prior administrations since 2008, including Trump's first term – the stocks could crash back to where they were a year ago.
Another risk is if the government decides that the senior preferred stock hasn't been paid off, in which case the common stock would get crushed. Bill addresses this in his presentation, and I don't think it's likely, but it's possible.
If you're compelled by this stock idea, my advice is to treat it as you would any other speculation.
2) 60 Minutes had an insightful segment on Sunday interviewing Dario Amodei, the CEO of Anthropic, which operates artificial-intelligence ("AI") assistant Claude.
He warns of the potential dangers of fast-moving and unregulated AI, and as such has focused his business on safety and transparency:
Congress hasn't passed any legislation that requires commercial AI developers to conduct safety testing, which means it's largely up to the companies and their leaders to police themselves. To try to get ahead of potential problems and ensure society is prepared, Anthropic CEO Dario Amodei, says the company is working hard to try to predict both the potential benefits and the downsides of AI.
"We're thinking about the economic impacts of AI. We're thinking about the misuse," Amodei said. "We're thinking about losing control of the model."
3) I've written quite a bit about autonomous-vehicle operator Waymo (see archive here), which is owned by Alphabet (GOOGL).
I rode in one in San Francisco two months ago and saw a Waymo with a safety driver in New York City last month. I was also pleased to see that it's expanding its service to five new cities in the coming weeks: Miami, Dallas, Houston, San Antonio, and Orlando. If you have a chance, take a ride in one – it's amazing!
Waymo did have a setback recently in San Francisco, however, when a bodega cat darted under the wheels of one of its cars and was killed. As this New York Times story noted, there has been an uproar:
Hundreds of animals are killed by human drivers in San Francisco each year. But the death of a single cat, crushed by the back tire of a Waymo self-driving taxi, has infuriated some residents in the Mission who loved Kit Kat – and led to consternation among those who resent how automation has encroached on so many parts of society.
I know how people love their pets – Rosie the Wonder Dog and Phoebe the Wonder Pup are part of my family. But this shouldn't halt the expansion of driverless cars.
These statistics from the article put things into perspective:
... according to city data, human drivers killed 43 people in San Francisco last year, including 24 pedestrians, 16 people in cars and three bicyclists. None were killed by Waymos...
The city does not track how many animals are killed by cars each year, but the number is in the hundreds, according to Deb Campbell, a spokeswoman for Animal Care and Control in San Francisco.
She said the agency's cooler last week contained the bodies of 12 cats thought to have been hit by cars in recent weeks. None of them seemed to have prompted media coverage, shrines or meme coins...
Waymo is adamant that its cars are much safer than those driven by humans, reporting 91 percent fewer serious crashes compared to human drivers covering the same number of miles in the same cities. The data was in a company research paper that was peer-reviewed and published in a journal.
And this growing support is good to see:
And Grow SF, a moderate political group with ties to the tech industry, found that San Francisco voter support of Waymo had jumped from 44 percent in September 2023 to 67 percent this July.
I do worry that one of these companies will rush a product to market before it's safe and ready – in order to deliver on heady promises made to investors and prop up its stock price – and someone dies as a result.
This is what happened when a woman in Phoenix, Arizona was struck and killed by a self-driving Uber in 2018, even though it had a safety driver at the wheel (here's an NYT article on the incident).
In particular, given Elon Musk's aggressive nature, I hope regulators will be very cautious before they allow Tesla (TSLA) to remove safety drivers from its robotaxis...
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.