David Einhorn Explains Why He is Negative on the Market – Greenlight Re’s Q1 2011 Conference Call
Greenlight Re, the reinsurance company founded and controlled by David Einhorn, had its first quarter conference call on May 3rd. Einhorn provided a lot of market commentary, an update of his new purchases, and an explanation of why he is so defensively positioned. Below is a brief summary of the investing-related commentary:
- The investment portfolio was very defensively positioned and net exposure averaged 28% in the quarter (ended at 34%)
- 98% gross long
- Covered his shorts in for-profit education stocks during the quarter
- Bought Best Buy, Yahoo!, and Delphi during the quarter
- “The market has been incredibly resilient in the face of continued escalation of commodity prices, turmoil in the Mid-East, and further European sovereign issues, catastrophe in Japan and a deceleration of US domestic economic growth. All of these factors individually are a cause for concern and coupled together, they’re even more worrisome. Momentum-driven markets persevere until they don’t.”
- Is worried that the quantitative easing “experiment” may not produce desired results (housing has not stabilized).
- The key questions going forward are how consumers will react to higher prices and how much cost pressure gets absorbed by the corporate sector.
- If earnings turn out not to be what people think they will be, the market could turn down quickly.