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Einhorn shorts US 'short-term thinking'
Last Updated: 2:25 AM, October 20, 2009
Posted: 1:54 AM, October 20, 2009
Famed short-seller David Einhorn is bullish on gold because he's bearish on Obama.
Members of President Obama's prized economic team, including Treasury Secretary Tim Geithner, are "quintessential short-term decision makers," Einhorn said, explaining his sudden fondness for gold.
Watching Geithner, Federal Reserve Chairman Ben Bernanke and White House economic advisor Larry Summers on television recently, "my instinct was to short the dollar," Einhorn joked at the Value Investing Congress, a star-studded investment conference held in Midtown.
Instead, he decided to invest in gold, even though futures hit a record price of $1,072 an ounce last week.
Gold does well when "monetary and fiscal policies go awry," said the hedge-fund manager best known for shorting toppled investment bank Lehman Brothers.
Specifically, Einhorn trashed the team's "too-big-to-fail" policy requiring taxpayers to prop up large, troubled institutions, like banks.
"Our authorities have taken the view that kids will be kids," he said, comparing the officials to the parents of teenagers who know they will be rescued any time they get caught.
He suggested public officials break up large financial institutions that appear on the brink of collapse rather than bail them out.
Einhorn also said Geithner's regulatory reform plan was akin to efforts to stop terrorism by "frisking grandma and taking away everyone's shampoo."
He scoffed at the idea that the government might try to regulate complex financial instruments like credit default swaps, believing they should be wiped out. He said regulating the swaps is like "trying to make asbestos safer."
... and on Reuters:
"If monetary and fiscal policies go awry" investors should buy physical gold and gold stocks, Einhorn said at the fifth Annual Value Investing Congress in New York. "Gold does well when monetary and fiscal policies are poor and does poorly when they are sensible."
Einhorn is president of Greenlight Capital, with more than $5 billion in assets under management.
"Over the last couple of years, we have adopted a policy of private profits and socialized risks -- you are transferring many private obligations onto the national ledger," he said.
Einhorn said, "Although our leaders ought to be making some serious choices, they appear too trapped in the short term and special interests to make them."
According to a joint analysis by the Center on Budget and Policy Priorities, the Committee for Economic Development and the Concord Coalition, the projected U.S. budget deficit between 2004 and 2013 could grow from $1.4 trillion to $5 trillion.
Last week when Federal Reserve Chairman Ben Bernanke, U.S. Treasury SecretaryTimothy Geithner and White House economic adviser Larry Summers spoke in interviews and on panel discussions, Einhorn said, "my instinct was to want to short the dollar but then I looked at other major currencies -- euro, yen and British pound -- and they might be worse."
Einhorn added, "Picking these currencies is like choosing my favorite dental procedure. And I decided holding gold is better than holding cash, especially now that both offer no yield."
(Reporting by Jennifer Ablan and Joseph A. Giannone; Editing by Kenneth Barry)
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