Yeah. So here are the facts. Facts are i dont know whether were going to win or lose tomorrow neither does adp, so when i saw fabers report i was kind of puzzled by it, so i looked the top ten investors own 32 of the company. 75 of those shares have not been voted yet, and why is that . Because the big institutions wait until the absolute 11th hour to vote because they dont want to get lobbied by management or us want to put their votes in and have it be definitive. I dont know if theres any way someone can call the election and point out under the proxy rules its illegal for either side to indicate how the vote is going. Now, obviously mr. Faber is going to report whatever sources he gets, but, you know, i certainly have no incentive to have him report that were losing so clearly someone on the other side perhaps it suggested that. Its just not appropriate behavior the bottom line we dont know today, and and, you know, well just talk about what the proxy contest is about whether we win or lose tomorrow, lets compare whats happened hover the last 90 days 90 days, cnbc played a role here ceo went on tv and said, ill quote him exactly. He said im directly saying bill ackman doesnt know what hes talking about. That was august 10th. Is that when he called you a spoiled brat yes and then he said on august 17th we strongly disagree with many assertions made by mr. Ackman. It betrays a fundamental lack of understanding of the current state of our business. Thats a press release by the company. October 20 look at how the message has changed 90 days later and this is carlos. We probably agree on a lot of Different Things the need to transform our technology at adp, need to be efficient to improve mar egyptian and hes a few years late in terms of the ideas he has, and he also said we just got it to another 500 basis point improvement over the next three years so if wes advocating for a 500 point basis point improvement we will be able to accomplish the same thing. The problem is the company didnt take us seriously and over the course of 90 days weve done a number of things, one, educate the adp shareholder about how big the opportunity is to run the company much more effectively. Theres not a shareholder who disagrees this company could be much more profitable and efficient than it is today. You can make that point about any planet on planet earth this company could do this better im not saying more efficient. We think the company can increase its margins by 60 , right, from 20 to 32 , a hunk increase for a company of this size absolutely a buyin among the Shareholder Base and carlos is talking about a 500 basis point improvement. Let me finish my point my point is what does an activist investor attempts to do an activist investor apremts to prod a company to achieve its best we have various techniques to do that write public letters, have a proxy contest, join board of directors, but whatever the outcome is tomorrow, weve accomplished our objective of putting the company in a position where it will have to perform. If we end up on the board, well work very closely with bhangment as a member of the board and then other directors to help make it happen if we dont end up on the board its completely up to management and this board to deliver but the shareholders will hold them accountable and they have made a significant number of revisions and ill reveal a few of them had. One, growth will be 6 to 7 over the next three years and they projecting 2 to 3 to the year that ends june 30th meaning the growth will have to jump beginning, you know, the third calendar quarter of next year, they have to show some pretty dramatic progress and will show pretty dramatic progress in the back half of this year because they say the growth is sort of back end weighted. Thats a big commitment they will have to live up to. They are also committing to this 500 and 600 basis point margin we of ear skeptical that have number and thats a commitment that they have made publicly, and then with iss, one of the proxy advisory firms, and ill quote what they said there they talked about the upcoming release of their socalled vantage 2. 0. They said the board needs change, but they stop short of recommending you. No, thats not true iss recommended me to the board, but they the mechanism by which they recommended me was to recommend shareholders, their clinds withhold against a director on the other slate. Well, they didnt suggest people vote for you or your nominees. What they didnt have happen, as they say, they didnt feel it was necessary for three new directors to join the board so they felt by withholding for one they would increase the chance i join wows increasing the chance and directors two and three join iss had a couple of mitigating factors and one was the following. It says in responding to the dissonance challenge the company argues that the upcoming release of its new vantage 2. 0 platform for large clients willbert service and help revert this negative trend right. So one of the things that iss considered is that the company is effectively announced they will have a new prergs of their product so thats upcoming upcoming certainly you would expect that in the relative short term, so in order if the company wins, it will it will be because they made commitments to shareholders, and they will have to deliver on them, and if they dont, you know, well be back at them, you know, were nine months away from the launch of the next proxy contest. We hope we dont have to go there are. I Hope Management delivers and is super successful. Thats the downside case of my not joining the board. If you lose tomorrow. Yes. Youre not selling your shares well keep a large position in the company well always make adjustments according to capitol flows hand that kind of thing this will be a major major investment for us, and, you know, we like the company. We think theres a huge opportunity to make it more profitable we have the management and position now where they ran around a shareholders and made a lot of commitments and public commitments and commitments to iss. If they dont deliver, whats great about this strategy is good news is good news for us. If stock go up well make a lot of money and if they dont deliver well have a landslide next year. God willing well win tomorrow, but i cant call the election for tomorrow but either way shareholders win which is the most important thing. Going back to the faber report this morning, you know, david has been at this a long time obviously a very credible reporter with good sources you dont feel like you have an uphill battle and certainly weve always been the underdog. You dont feel based on his report that this is not going to work out. I would love to know whose david source is for the notion that were lose, right, because the shareholders havent voted yet, and and, you know, the top ten shareholders are going to vote. We know for a certainty, and there are 32 of the shares outstanding, and they are more than that probably 40 Percentage Points of the vote that will be turned in the fact that 75 of those shares havent voted yet, you know, absent vanguard black rock and state street and northern strust leaking to cnbc, which i think the probability of that is very close to zero, you know, the fact that one share hold her and another is supporting us teachers just came out supporting us, its great news, fantastic, great news but doesnt mean well win. What about the idea that cramer put forth this morning on the same program he said that adp is just not bad enough, right . Maybe they can improve this. Maybe they can improve that. 40 return on equity the market has given them a 28 multiple and the stock has done well obviously whats wrong with that sure. So isnt that evidence that the company is not doesnt need the level of interference, if you want to call it that were not interfering, so i think a few important things number one, the reason why the stock is trading at a 28 pe is because of our involvement, you know the unaffected price, according to analysts before our analyst is 97, 18. Today its 110 and 112 and at stock has been a bit of a weather fan on our winning when we got the glass lewis report the stock ran and when we got the iss which wasnt as great an endorsement and dropped to 112 or when david leaked or whatever you want to call it. He reported. Reported based on unnamed Anonymous Sources that, you know, looks like were going to lose, the stock has gone down today on that fact what shareholders is saying is our involvement is clearly a positive you can see that in the stock price every day and thats how the shorterterm investors will trade the stock based on whether we win or lose tomorrow. The important things are we have educated the Shareholder Base. Theres not a shareholder we havent met with the that hasnt thank the us for the quality of the research we put out. Voluminous amount of information and detail that we put out there that lifts the veil on things that were not understood about the business thats inherently positive for the company and inherently positive thing for the shareholders if we lose tomorrow it will be because an investor says, you noey what, bill, ill give them another nine months. They made a bunch of promises to me i like their promises. I like growth inflicting starting the back half of next year and like 7 to 9 growth for 19 and 20, again, what iss is referring to their report and i respect isss decision to reserve those as mitigating factors and respect that they have an upcoming release of a product thats going to win back market share which is what it says in the iss report that management apparently told iss, but if management doesnt deliver on the commitments that its made to iss and to shareholders well in had a very influential position in the company on the case if we lose tomorrow the only thing thats decided tomorrow is who is responsible for delivering on the promises made by management im on the board of the company. I and the other nine directors, whether they include our two other nominees or just me on that board, were going to be responsible for delivering for shareholders if i dont end up on the board tomorrow, then its all on management its all on this board and their ability to deliver, and they have got in to live up to the commitments they made to the proxy advisory firms, because those are public commitments they have to live up to the commitments they made to shareholders. You dont take any personal responsibility for how this whole thing has played how the, like the kind of criticism that Lee Cooperman has leveled against you, that if you would have just met with the company privately . Okay. Not waged this proxy night . We tried. Thats the criticism that you hear from lee and two things on lee why is lyrics by the way, come on nbc three times or whatever to criticize what he calls my comportment . The answer is when asked directly about our case for change, he refuses to address the case for change. All about my comportment which has nothing but other than incredibly polite, straightforward. I finally figured out why lee has been going on cnbc all the time lee is on the board of overseers of colombia business school. The dean is Glenn Hubbard. Both lee and i like Glenn Hubbard. We chose to run against him because hes on the board for 13 years. In some sense hes the most vulnerable by virtue of that hand i dont think he liked that i was going after the director i dont think it has anything to do with the fumt a. M. Facts. He was on the board for 20 years. Left five years ago. Unwilling to comment about our case for change. I like lee and hes protecting his friend are i respect people who are loyal and protect friend but thats not what this is about i like Glenn Hubbard but hes add the as much value as he can over a 13 period of time which is why we sought to replace him and the other two longest i want to answer your question, fully, scott give me a chance. Go ahead. We sought to replace him for that reason. But in terms of my conduct here, the choice we were given by management and the board was either to file a slate the board was not willing to meet with us i wanted to have a full meeting with the board, work privately with them as we have with their products and zoetis and many other companies as were working very hard with chipotle as we deal with their issues and its all happening in the background and privately the board had a choice to make f. They had given us a oneweek extension and agreed to meet with us within that oneweek extension process we could have avoided a proxy contest. Its up to emthis. At the end of the day i think its been a very, very healthy thick with the company one, the ceo has gone out to meet with the major shareholders its good for them to make promise to investors because thats how they will hold him accountable and its been a very good thing for us to as i say lift the veil on the company and the shareholders today, and look at every Analyst Report and every one of them have said weve done a superb job educating people about the situation, and that ultimately is what holds the Company Accountable to deliver, and thats how well make money. My investors will judge us, not based hon whether we win or lose a proxy contest. They will judge us paced on how did we do on this investment, so the stock is up, you know, from 98 to 110,able i you know, we expect it to go a lot higher and whether thats because management does everything and the existing board takes it away, thats terrific. I hope that happens for them its an amazing thing. If i lose, i want the company to do extremely well. If we win the proxy contest, well work inside the board of room to help them out. Just likes nels onl who lost a proxy contest at dow chemical, right. It was dupont. Dupont. Lost to dupont and then now management was under a lot of pressure they missed one quarter, fairly dramatically and the board fired the ceo, and that stick to think has been a double, ultimately. Even though nelson lost of the proxy contest. P ge still the same story, ran around, made a lot of commitments and nelson who is dangerous and lost the proxy contest by a small margin. First quarter they have disappointed shareholders. The stock is down 10 bucks and if they dont make meaningful progress over the next couple of quarters, they will be work. Theoretically you did enough work on adp that you could have tried to meet with the company. Scott, we did i 100 tried up to them whether they will meet with us. Before you asked for an extension to the nominating period, and maybe this would gone differently if you had a private quiet conversation with the Company Without asking them to its all theoretical. Bottom line is its relevant to this conversation. Not particularly relevant. May have worked out differently. Disgroo. If the board agreed to meet with us it could have worked out differently. A company has the result of a proxy contest. A number of very significant commitments about revenue growth, about margins, about delivering a new version of their product. I mean, these are pretty serious commitments that they have made that will help across the problems weve identified. If they fail to deliver, you know, its thats nine months from now that we have to launch is the nominating deadline hand let me make a few other things clear one of the things that hurt us in this contest as a disadvantage is the company didnt have a universal proxy card and said we asked for it too late september 10th after they reject it had, september 12th, like a universal proxy card so shareholders can pick the Board Members they want. People are clear about what they talk about. If you dont attend the meeting, you have to vote for our candidates or the companies. Theres no picking or choosing from either category and you say thats unfair. Its just not fair to shareholders and by the way not an institution in the world who likes the current scenario they said we asked too late and it would be too confusing. What im doing now is im officially asking for the universal proxy card and now were a year away from next years election and well have that next year and its going to be hard for them to argue that they havent got enough in the again, i hope we dont have to run another proxy card but in the event we do they will no longer have the excuse we asked too late. When you made the comment in the interview with the street, somebody emailed me and says there goes ackman. He thinks he wants to lose hand now wants to move the goal posts and change the rules. Not changing the goal posts something that really needs to be addressed, this election is a perfect example of that. Think about imagine if you had to vote for you could only vote for the republican candidates for every candidate on the november 7th or you can only vote for the democrats. Out couldnt pick a democrat or a republican or an independent, you know, for president , for all the various your local state senator, et cetera its not just people would be in an uproar about that, ultimately in the general election here theres no reason the only reason why companies refuse to go along with this because its a tactic that advantages the company, and so make it very straightforward for sure shareholders pick the best director on the slate and the ones with the fewest votes and the ones who dont drop off the board. Thats a very simple thing to ask for. How much of this do you think is a referendum on you personally wall street journal has a story that stays the vote offers, quote, a status check on the standing of activist investor bill ackman a win could be a reprieve and bad loss could raise questions about your future. I think the test here is going to be how does adp do over the next 12 months and over the next three years thats the test. Have we picked a good target are we right about the opportunity for margin improvement hand how do we get there, by my joining the board or we put enough pressure by virtue of the proxy contest that the company accelerates market improvement and accelerates the launch of a new product . If that happens its a win for us if adps stock is down 50 , its a massive loss for us, and its a disaster if adps stock is up 20 over the next year, i think our investors are going to be very happy. They wont judge us based on winning or losing a proxy contest. They will judge us how this investment does over time. The stock is up a bunch from when we acquired it, and well see. There are inevitably though people who are going to judge you based on the success or failure. Im not at politician. Do you think thats fair . Im not had a politician. Im not running for office. You commented on this piece do you feel that those are the stakes for you personally . The stakes here are the outcome of the investment. If this is a good investment or a great investment or a bad investment, i will be judgeled accordingly. And one of the tech nokes in activist users is weve done a proxy contest. If i get on this bill and the Company Fails to deliver on peoples expectations, it will be a black eye for me. If i dont join the board and the Company Fails over the next to deliver, it will put up in a very strong position to be influential at next years annual meeting if im unsuccessful this yore. Has anybody said to you in the canvassing process that im sure you and your associates have done, look, some. Ideas are good, but bill is a risk bill is too much of a risk to vote with now given whats happened in the past couple of years . No. Do you fear that that could influence the vote process at all . Anything could influence the vote process, but i think the investors here are focused on would adding a major shareholder to the board will be helpful i think well get everyones support except for those who say well give management a few extra quarters to deliver. Its not a debate about compare this to the gm proxy contest where someone accused green light of Financial Engineering and they lost because people didnt want Financial Engineering and they didnt want two classes of stocks Everyone Wants what weve been advocating for Everyone Wants adp to have higher margins Everyone Wants them to address their enterprise competitiveness, their enterprise product competitiveness and the question is whether or not people people want us on the board this year or whether we get on next year do we give manage president the votes well lose will be someone no one is voting against the ideas we have. It will be, you know what, the stock has done well. That hurts us. Thats why were the underdog. Along with some other metrix that i mentioned. But the biggest thing that hurt us in this proxy contest is that the stock has done well verseus the s p. Its massively underperformed the competitors in the industry. A great industry, which is why the stock has done as well as it has, but the judgment in terms of the outcome here is going to be based on how the company does what about for activism in and of itself . You mentioned nelson peltz. Mmhmm. He loses apparently the most recent contest that he had with p g although people clearly could make a case in some corners that maybe an activist was needed cramer certainly tried to make that point i think leading up to it, and the Stock Performance of p g leading into that vote which suggests that maybe they do need a shakeup mmhmm. The dupont thing, okay, he loses nelson peltz loses the vote, maybe wins the war in the long run ceo leaves. Yeah. Company performance since has been better. You may come up on the short end of this stick. Yes. Whats the message there for activism in general . I think youre making all the arguments that im making. Its not the outcome of this proxy contest, whether we win or lose and by what margin that counts what matters is does this catalyze the company to improve its performance . And if it does, then theres a future for shareholder activism. If companies can just dismiss the arguments that major shareholders make about their underperformance relative to competitors, about losing market share, those things can be dismiss mid, then capitalism is in a very, very bad place and i think the evidence you give. Nelsons story is a perfect one. Look at dupont lost the proxy company why, because some of the big index funds voted against him, and and, you know, without the support of those major funds, its very difficult to beat the index funds control america. The index funds are going to be the swing vote in every proxy contest in every election. Yes, and youve made the point critically in this particular situation that there is such a smaller shareholder contingent that you think it could turn the balance of this particular vote. The individual shareholder. The mitigating factor, a lot of those accounts are managed accounts and a lot of managed account providers perform according to glass lewis or iss and depending on that percentage, it can make a difference i would say the proxy adviser and the index funds control america, and its very important to get it right. Let me ask you about herbalife before we take a quick break. Sure. You revealed just last week on squawk box you have sort of restructured the position. It now exists entirely in puts why did you do that . So, herbalife is sort of an interesting situation where weve been entirely right on the facts, on the regulatory issues, on their ripping off consumers, on their misleading people. According to you youve been right. According to the ftc ftcs conclusions are identically what weve said. They didnt say it was a pyramid scheme. They said it was tantamount to a pyramid scheme forcing them to restructure the company u. S. Business down 17 , you know, mexico down 9 china down 3 , you know, declining in almost every market in the world tom line down 3 , 4 the guidance next year 4. 60 to 5 bucks. This Company Earned about 4. 50 in 2012 when we shorted the stock or 2013 when we shorted the stock so weve been entirely right on the fundamentals but the talk has gone from 48 to 60 and whats held back why havent we won as a short seller in the answer is the company has retired 30 of the outstanding shares and carl icahn has bought 23 of the outstanding shares and in the short term or intermediate term supply and demand makes a difference what the focus of all investors, bill has had a big short position hell be forced to cover so the more we can push the stock price up, well make it inevitably that they have to cover. We shorted the stocks to owning putts and now its all about the fundamentals of the company. The stock was 78, 79 when we did the conversion the stock today is 66. Part of that is, one, investors are realizing this is no longer about bill being northed to cover because hell no longer be forced to cover and two, the focus is on the fundamentals and as the fundamentals deteriorate theres only so much stock they can buy back they have 1. 5 billion of maturities coming up, you know in, a year novel, another 1. 5 billion coming up back up in two and a half years so they will have a current obligation of 1 billion 150. My point is they are levering up and buying shares and could go everything they can to drive the stock price up at the end of the day the fundamentals will rule and because of all the Share Repurchases its a very small float in the stock, so its as hard as it is to buy the stock, its also that hard to sell the stock if i were forced to cover i could push the stock price up. Im no longer forced to cover. If investors actually decide they want to sell because the fundamentals are bad, extremely difficult to sell without pushing the stock price down which is why its come down 16 in the last week or so. Theres a difference, you would add mitt, between a slowdown in the business which may or may not be temporary, neither one of us know because were not running herbalife nor are we inside that business, but thats a far cry, isnt it, from the business being a fraud as you said no, its not a far cry at all. The reason why their business is struggling there isnt fundamental demand for the product and they have to hoodwink people in order to buy it no consumer goods packaged companies has their sales go up and fall dramatically and familiar dramatically. Youre not going to change your view . The facts have been 100 confirmatory and i think it will turn into a Nice Investment for you. Is this the first and final step of you throwing in the towel . No throwing in the towel. Ive not thrown in the towel, but one thing is for sure. This is the last time im going talk about this can. Ill write a little letter to investors talking about summarizing our facts. Now that it become a relatively small position pot i want us to step out of being the focus of this situation. I want all of the focus to be on the fundamentals of the company. Call this the last time. Last time ever youll talk about herbalife on television . Ever in my life this is it, done the world will be a better place. Theoretically the puts could expire and you just walk away quietly now. That could happen. When are they dated in. That we dont disclose. Well take a break and come back. Hour. Bring in the gang. Sure. Well take a quick break and come back with bill ackman next, we run through several other stories and stocks make news today were backn o nus. Itwmite your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Allow you to take advantage of growth opportunities. With a level of protection in down markets. So you can head into retirement with confidence. Brighthouse financial established by metlife. Were back on halftime. Bill ackman of Pershing Square also with us, joe terranova, josh brown and steve weiss and Jim Lebenthal . What makes you think you can this this around were confident we can make the company turn were confident. Thats a short answer. Still long lines, people are buying the product and they are doing 2 million in revenue they were doing 2. 5 million in revenue before they had the various issues but the issues they have had all addressable through better operations and oversight. Full disclosure since we have some of the gang here today, josh, youve been negative on chipotle steve, youve been negative on chipotle suggesting theres no reason why this stock cant continue to go lower. I love the restaurant i just think there was a magic about the company, and and sometimes the magic wears off, and once it wears off, then people say, okay its Quick Service restaurant. Why am i paying 30 times earnings for why does it have a growth multiple if its not growing, et cetera i dont think its not savageable this thing was looked at like oh, my god its the next mcdonalds by a generation of investors, right, from 06. I dont think anyone thinks that anymore. Thats when it was at 700 something a share. Right. Look at mcdonalds. Mcdonalds has certainly had its cycles of people really loving it and hating. Thats true. And today they are in loving it mode. Look at burger king. The dog of all restaurant companies. Were a major shareholder of pittsburgh king and helped take the Company Public again when 3g bought it and took it private at a 30 premium, samestore sales declined for each quarter for the previous three years and they have made magic with burger king so here the company has been the stock was 500 as they are making progress they had one employee sick in a store. A bunch of people got sick and everyone threw the thing out and the stock is down 50 from that kind of near recent high this is still a great contact. Its more than that they didnt have to spend money on marketing the way they now have to so that wont be great for margins long term. There was a time when the only add they needed was the line out the door and they had that for years. Whats interesting for chipotle and why were involved is not betting on a recovery from the food safety issue this is one of the least optimized of the Quick Service restaurants. No thrivethrus. No breakfast, no mobile app, the lines. Stand in front of a chipotle today theres still lines. People see the line and go some place else. How much are you paying for that in the current multisnowfall forget about what the stock has done what doesnt really matter what matters is what have the earnings done and thats the valuation. 30 times next year given the benefit that they hit their target for once, first time in three years. Yeah. Its still very expensive in a competitive sideways. The opportunities in the stock market are creed because most investors are focused on what next years earnings are going to be and for a story like this one when a company has been through what they have been through and sales gone from 2 million to 2. 5 million, the argument is not to put a multiple next year whats the reasonable expectation for a recovery and what will the earnings be two years out, four years out, six years out and on that basis they are a cheap stock if they can reform if you can make a recovery from a food safety crisis, which almost every Fast Food Company has made a recovery and you start layering in things lyrics you know, online ordering, breakfast, longer house, you know just had their first drivethru. In 2006 when they spun out of mcdonalds, did the ipo, there were no real competitors on a National Basis that were doing very fresh mexican food. That is obviously not the landscape today. Actually there are competitors on a National Basis. You dont feel like del taco is a competitor. Qudoba. Getting bigger and feasting off a concept that chipotle really created other concepts. Not just limited to competing against other mexican take a look at burger king. Whenburg ding did their turnaround you dont think there was competition in the hamburger space. Did they turn it around or did they shrink the size of the food and really focused more on shareholders than no. Look at sales per box. Up 30 or more from where they were look at quality of the stores and the International Growth of the business. Burger is crowded and still working. Its not a credit space r. There taco places in other community . Im sure theres other tocco and mexican concept. Very are difficult to do what chipotle has done at a 23 National Scale and we havent even talked international. We stepped in after the problems had taken place. They invited us on to the board of directors we had a private meeting like scott keeps talking about in the case of adp and welcomed the input and put two directors on the board including the former cfo, matt paul, from mcdonalds, who was at mcdonalds when they incubated chipotle so its an eminently fixable company. Given the issues of the company, isnt the problem they are trying to do fresh food in a format where other chains have looked at and said we really cant do that in. They put in place very god and are make it even tighter the latest issue they had was not an issue of the supply chain problem. It was an issue of a sick employee who came into work and they didnt which could happen anywhere. But because its chipotle it get attention. When chipotle issues were happening, there was a story in the press that there was fecal matter in the ice cubes at i wont mention the hamburger chain but people largely ignored it, but because this is chipotle and where the focus is. Get back to that minimum wage issue that we talked about. The magic can come back by the way, mcdonalds, burger king. Thats jack in the box. They have a social media presence, young people. People still love the change. Ask my daughter. Thats why they paid for even for bad publicity. My daughter is millenial customer and people still like it. Im not a millenial but my stomach is i still like the food. I think weve killed that one. Let me ask you weve kidded, jim, on occasion. Thats what youre calling to call it. Weve ridiculed jim about his investment which is no longer an investment in jc penney. You obviously have a history there. Lets look broader retail though. Yeah. Youve made many Retail Investments over the years. Had a hand number. Many, handful. Only a few investments, handful. I would say sglefrl made a handful of Retail Investments over the year, better . Yes. So through your eyes, what do you see when you see retail today . I see retailers that have to adapt. I still think they will be why arent you short retailers . We should have been not short big sellers. Not what we do they have to adapt if youre selling a commodity product, which is less convenient than ordering on amazon, youre dead, but if you can create something new one of the things were doing at howard hues corporation, opening the southport sea port next year, an incredible retail venue, but it will stores they dont have anywhere else, we have a store thats only in milan. Its not just clothing they have art and books and and, you know, completely integrated unusual experience that brings in cut america and unique mid you cant get anywhere else and cant buy on amazon those kind of concepts are going to do very well. The other thing were doing at seaport, again, owned by Howard Hughes corporation, well have a lot of entertainment and food and drink. People still want to come together you know, retail used to be about kind of convening people but theres no reason to go buy your underwear and walk into a macys to do it. Thats the point youre making thats what it takes you have takes innovative concepts. Everything under one roof to get people you have to make an experience that people are excited about participating in people dont want to go to a Big Box Department store anymore. So thats what vornado did, kept the fifth Avenue Stores and got out of malls and retail and if its not an experience its just a transaction that doesnt need to take place in something that we own i think thats the right view so i definitely agree. But its the expense that goes up for the real estate company, not for the retailer, although eventually im sure it will be felt in their bottom line depending on how they charge the rent so its still a percentage of their gross or their profits so it still makes it pretty dicy because youll have to figure out, okay, somebody will come in there. Thats a tourist area. Nobody is going there but youre making it a destination place. Youre betting on unique tastes to come and do it. Im talking about seaport and elsewhere. New york city, its food, right. What are people right now were building a building on the pier its out on the pier. I was over thereto other day. Unbelievably spectacular one of the problems with manhattan its an island yet its so hard to get to the water so the seaport is one of the few places you can literally sit and have a drink overlooking the water overlooking the Brooklyn Bridge david chang is doing a restaurant, a food hall akin to a harrods food hall and it will drive continual demand for new yorkers, and then espn just took 19,000 square feet and they will broadcast, instead of having a studio, no disrespect in englewood, new jersey, you should have made that deal. We made several good ones in the city, were good. Espn used to be to have to drive out to connecticut to go interview. Thats the point. If you want to hire talent, its got to be in the cities and then also people have to want to take selfies of themselves at these places not just experiences its got to look good the seaport is a great setting to specifically make money, to buy the retailers is still very dicy. What youre talking about i dont know how you play it from the retail standpoint. Buy howard hurgs corp. Concepts started in the last six months that will become major retailers, but they have the benefit of starting with a blank sheet of paper, and its very hard to take a macys, right, which has had a huge fixed asset around the country stuck in a bunch of malls and turn it into incredibly innovative retail. For somebody who made one of the greatest trades ever in ggp, general growth properties, does the mall exist five years from now . Yes. In what form . Think about what a mall is. A mall is 100 acres at the intersection of the two most important highways in a particular community a lot of malls are not located in new york city located in the midwest and your choices for convening people is no longer a town square. There may be church but beyond that theres no place to get together and hang out with other people so the malls will adapt to becoming places where people get together to meet other people, to see other people, but its going to be more food and entertainment and innovative concepts tied to, you know, an internet back end. Youll be generating your revenue through the other areas rather than going to buy a pair of jeans or suit. You can probably people still like theres still elements of shopping that people like a mom and daughter going to shop together is still a thing that mothers and daughters like to do, but you have to make it something where its a unique experience beyond what you can order oint internet. Do you worry when you look at names and im not talking necessarily from an investment standpoint, the jc pens and macys and nordstroms, they themselves wont exist the way they do right now. They will have to adapt very, very quickly. Going back to ron johnson at jc penney who said look, we have to adapt and had great ideas on how to make that real estate and make it interesting and those ideas cost a huge amount of capital and was relying on the cash flows of the old customer to support the business. A very, very difficult thing to execute, and it may not be the current owner of the ball that get the benefit. Maybe that the mall goes back to the bank and that person has the ability to make deals with different tennants so i think people arent going to stop shopping they wont stop going to, you know, malls. Its still Good Real Estate from a location point of view, but youve got to get rid of the kind of commodity or the you know, the sears, jc penney, macys mall is done, in my view. Sears is probably, you know, i hate to say, it First Quarter of 18 is kind of do or die when the Holiday Season numbers come out. Theres paper out there thats less than a year in maturity that yields 25 . Im just curious josh and i have had some arguments about whether the bonds are telling you anything im curious whether you have an opinion about what that says about sears. Sears, again, the same issue. They have a huge fixed asset base a bet on sears is a bet on of the assets of the company which include longterm leases and real estate. They are not in this company though they are in it seritage. A lot still left in the sears company. But they are encumbered do the assets exceed the liabilities less what this will cost as this winds down . Bond prices are saying no. I havent studied sears in a long time but i think thats the. How do you view areas Like TechnologyArtificial Intelligence . The areas that are change the way we even think about the future of business and innovation and employment or workforce . The economy hat large . A great segue, adp, where theres a vote tomorrow. Heard about that one. You think what is adp . You know, its at risk of being the macys of 20 years ago you know, such a dominant company. Has the best assets and the best locations. How can you envision a scenario where macys doesnt exist . The answer is technically dramatically changed the landscape. What were trying to make sure is that technology doesnt drive the company out of birks and in their theres already early indications of that in their enterprise business, 1,000plus customers, customers like workday that have adapted. They use technology to better take care of their customer. Take the smaller customer so you say like trinet. We dont care about these guys they are that you canning 50person firms and all of a sudden the 50person firms have grown up on another platform thats the risk for every company in our economy right now. As the owner of any Business Today youve got to take Technology Risk incredible el seriously. Doesnt matter what your total shareholder return has been for the left 10 or 20 years, doesnt matter that youve paid a dividend these are completely backward looking things, right. Right. And look at at kodak. Incredibly dominant market share. Didnt take digital photography seriously, and digital photography or its eke vents, you know, amazon and retail or workday in the payroll business, in the Human Capital management business, these are the things that shareholders need to be on the look forks and this is why actually share herald activism is inherently a good thing because the activist has a heij sentive by being often a large shareholder of the company to sound the alarm and say, hey, management, wake up. So what if the stock went up over the last three years so i think youll see activism at Successful Companies that still have opportunities and risks that need to be addressed. You think active management in general is going to have a renaissance after some pretty tough years . So i dont think the stock market the s p 500 cant compound at 15 forever. That doesnt work. The math doesnt work so at some point indices get overvalued in erms of the under indeksd asset, you know, and that will help create a renaissance for act ave managers. When you look at stock market now, and maybe youre looking apt your next target, are things too expense itch at the current valuation in the stock market . We invest in very, very few things if i had to invest in the market generally, its harder for us. And were actually building a stake in something new and i think thats a cheap stock so theres still stuff to be found. Youve just invested in something new. Still in the process. Next years proxy contest. No this time well have plenty of notice before the meeting. Burks i mean, for somebody who has read ben graham who goes to Warren Buffetts annual meeting and and considers him the legend, obviously, a very special place i know for you you still think Value Investing is the is the place that you can make money sure. Amid serious questions about the viability that have particular area . Did you read david ironionei recent letter . The mistake people make is underestimating the risk of technological entrants, right, so it may look cheap based on history. It may look cheap based on next years earnings, but value of a business is the present vast cash over its remaining life, and if there are two guys in a garage working on something that will disrupt that business you have to take it seriously. Fill is offically, the question most people would love to ask you. What do you think of bitcoin . Given what you just said and i think its reasonable statement, theres cheap and cheap for a reason if you dont think about what the future is did you ever think like the benefit of public stocks is that they are liquid . You can buy them and sell them mmhmm. But then when you get really High Conviction on something and tablepound and do powerpoints with hundreds of slides, you turn a liquid asset, you transform it into an illiquid asset because there are reasons why you can no longer get out. Either youve convinced not you, but the colloquial you, youve either convinced your investors that you have to stay in and everyone is wrong, and then when you want to change your mind or technological change is introduced into a sector, you cant, so the question is there such thing as too much conviction . In order to be a successful investor you have to have how do you know the right amount of cop vicks i guess is what im asking . If youve been humbled recent lip it helps to keep things in balance. Thats a very helpful thing but investing is about having a a delicate balance being between confident enough to know that youve done your homework so that youre right and the rest of the world is wrong the ggp example, the stock at 30 cents, basically people are saying its zero were staying can go bankrupt and make money for the shareholders and even in the recent environment theres 100 return for the investors you have to be humble enough to recognize when the facts are different than the original thesis and the big loss we took on valiant is when new facts came out in the q3 o q4 of, you know, where management had kept secret this fill order thumbing hand when we learned about some massive increases in drug prices, we we too readily accepted managements answers to concerns we had and, you know, we took huge losses as a result. This very delicate balance between relying on what management says, from that experience i only rely on Empirical Data you never feel that your shareholders, you say like ive been telling these people to believe me on this its almost impossible at this point to say im wrong or i changed my mind. We changed our mind we change our mind all the time one of my best sales. Thats how you survive. Best sales, jc penney at 13 a sale, 12. 90. The into stubbornness we have seen it in managers all the time they dont know they are getting stubborn perhaps thats what happened on valiant. Penney, theres no stubbornness we exited when the facts changed. I would argue the facts changed a lot before that. You just werent seeing the change i was on the board for nine months when you join a board of directors thats limiting it is limiting. You have to think seriously about it if we lose tomorrow, the benefit is you get to put all this pressure on the company from the outside and retain complete flexibility on our investment i joined the board and again, its another reason for shareholders to vote for us. You get 8 beneficial holder on the board of directors of the company, we will work really, really hard. We got to go. Thanks for being here. Thanks for having me. We will see how it shakes out tomorrow bill ackman joining us exclusively on cnbc. Just ahead, the call on chips that will have you taking a hard look at intel despite the fact the stock is already up 30 even greater than that in a year. [lance] monica, it is absolute chaos out here gale force winds, accumulations up to 8 inches. Dont know if you can hear me, but [monica] whats he doing . [lance] can we get a shot of this cold front, right here. Winter has arrived. Whooo hahaha [vo] progress is an unstoppable force. Brace yourself for the season of audi sales event. Audi will cover your first months lease payment on select models during the season of audi sales event. I cant wait for her to have that College Experience that i had. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise another day of work. Why do you do it . Its not just a pay check, you actually like what you do. Even love it. And today, you can do things you never could before. Youre developing ai applications on the cloud. Finding insights hidden in decades of medical documents. And securing millions of iot sensors. So get back to it. And do the best work of your life. Welcome back bullish call on intel. The chip makers push into a. I. , Artificial Intelligence, in an effort to boost growth beyond pcs. We made it our call of the day josh, you are a shareholder as of about a month ago yeah. Im in this thing. I bought the breakout. I like the company i just wanted to own it for a reason the reason is that its going up i think theres enough momentum here to see the stock in the high 50s they say 25 or more, barrons, over the next year or less listen, at the end of the day this is a big powerful stock trending higher. Looks phenomenal even on down days for the market. You can see it under accumulation yet its not overbought yet. There could be a lot of room i like the dividend, i like the buyback i like that they are taking cash flow from the pc business and funneling that into investing for whats coming next because invidia is crushing them in a lot of important areas they wont let thatcontinue. Its a good story. The stock looks great on trend joe, here you go, this partnership teaming up with amd of all companies because they look at invidia, squarely in front of them. What do you make of that thats the ultimate show of confidence the Technology Sector and disruption they are doing overall to the market. Confidence or desperation its not desperation. Its confidence. Its spending 15 million, it will continue, it will be texas instruments, it will go into the semiequipment space. Thisis a very confident move o their part its indicative of the entire sector steve cabium is rumored to get a bid today. I own it, i have talked about it many times its no different than health care you go out and buy biotech companies. Except here you are buying companies with legit revenue streams. Jimmy qualcomm. Making this offer, you are a shareholder in qualcomm. Intel, too, by the way. Im thinking about what bill ackman said about defining a Value Investor as somebody who is looking to buy a stock at a discount to the Intrinsic Value. The key comes into how do you define Intrinsic Value most Value Investors say what would a private company, third party, pay for that stock. Now you have a price on qualcomm its 70 i happen to think theres hair on this deal and it will be difficult to get through from a regulatory process however, you have value there. What do you mean . [ speaking simultaneously qualcomm buying nxpi, is that more attractive to you at this point i would rather have the stock taken off my hands but not necessarily at 70 a share. Look, this is a hostile, it is hostile right now. Qualcomm hasnt come out and said they are not going to accept it but thats obviously what they are going to do. So it probably going for a higher price the problem is the regulatory issues this will face. Huge win with whole foods good stuff thank you very much. Power lunch begins now heres whats on the menu. The saudi purge. Anticorruption crackdown led by the crown prince rounding up dozens of royals, ministers and businessmen including billionaire principles al w waleed first the panama papers, now the paradise papers. New leaked documents revealing exactly how the rich are hiding their wealth commerce secretary wilbur ross among the names. And this could be the largest tech deal ever a 13 billion offer for qualcomm its been a redhot sector this