David Einhorn Interview NotesThe following piece on David Einhorn is being published as part of our Hedge Fund Tracker Tool where we create profiles of hedge funds and hedge fund managers who have been in the news.
Resource #1: (3.10.09) When you're convinced the central banks don't really have a grip on a global crisis, what do you do? You buy gold. Which is exactly what the likes of David Einhorn, of Greenlight Capital, is doing, as are Eton Park and TPG-Axon, according to the Financial Times. A bet on gold right now "is a bet against all paper currencies." Lots of research units are predicting that the price of gold will soar to more than $1,000. source
Resource #2: (11.3.08) What do you do when you lose billions of dollars short-selling Volkswagen? Here is what hedge fund managers did last week: they sat down and cried.
This was the most delicious detail in an utterly delightful story. To read in the FT that these tough guys wept because no one had told them Porsche had built up a stake in the carmaker must have delighted many commuters as they made their chilly way to work last Wednesday.
It filled me with special satisfaction as I had just been doing some detailed textual analysis of the letters that hedge funds have sent out to investors in the last few weeks to explain away their abominable performance in the third quarter.
There is much to deplore in these, but the phrase that most stuck in my gullet came from Greenlight Capital (one of the funds to have lost heavily in Volkswagen). It signed off its letter with the quotation: "There's no crying in baseball." This managed to be both butch and banal; to quote glibly from a Tom Hanks movie when you have made the savings of your investors shrink was insultingly crass. And now we know it isn't even apt: there may or may not be no crying in baseball, but there is crying in hedge funds.
Never mind VW; the letters make one want to cry, even without further provocation. Admittedly they must have been devilish hard to compose given the size of the losses, but one might have thought normal principles would apply: keep it short, stick to the facts and try to offer some hope for the future.
The two letters I studied - one from Greenlight, the other from TPG-Axon Capital - follow a rather different set of rules. Extraordinary times, it seems, call for extraordinary communication techniques. Read More...
Resource #3: (10.28.08) Hedge fund manager David Einhorn's Greenlight Capital suffered heavy losses in his portfolio when German carmaker Volkswagen's shares spiked 82 percent on Tuesday, people familiar with his portfolio said.
The German carmaker briefly zoomed past Exxon Mobil to become the world's biggest company by market value as hedge funds who bet Volkswagen's price would drop further were forced to cover their positions.
Carmaker Porsche Automobil Holding SE (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) surprised the market by announcing it had effectively gained control of 74 percent of Volkswagen's voting shares.
Einhorn's Greenlight Capital L.P. had already lost 16.4 percent in the first nine months of the year, Einhorn told investors in a letter on October 1. He said Porsche was one of nine losers in the portfolio that each cost more than one percent of capital in the quarter. Read more...
Resource #4: Here are some quick highlights from a recent interview with David Einhorn by Worth Magazine:
On the case for short-selling:
I do think that there is a social value in identifying companies that are doing bad things and betting against them. I've seen the demise of a fair number of these companies, and it's not because we've bet against them, it's because these were flawed companies. And our country, our markets, our economy are better when companies that are flawed or cheating are replaced by better ones.
On why hedge funds are more reliable than investment banks:
Hedge funds appreciate that if they do a bad job, if they blow themselves up, there's nobody there who's going to bail them out. They're going to lose their business, they're going to lose their reputation, their customers are going to lose their money, and it's just going to be a sorry experience for everybody. But if a big investment bank, like Lehman Brothers, makes a big mistake with their accounting because they didn't have adequate systems, they believe that the Treasury or the Fed will bail them out.
On the Securities and Exchange Commission:
They've done a poor job of enforcing the rules to protect investors. They protect issuers at the expense of investors, and a lot of investors are suffering the consequences. Investors need accurate information. They need there to be consequences when companies go too far out of bounds. Read more...
Resource #5: Greenlight Capital David Einhorn 13F Holdings
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Link to This Resource: David Einhorn Interview | Greenlight Capital Hedge Fund Managerhttp://richard-wilson.blogspot.com/2008/09/david-einhorn-interview-greenlight.html