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January 30, 2009 |
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Hedge fund manager David Einhorn, who predicted the fall of Lehman Brothers and was generally spot-on in late '07 and early '08 regarding undisclosed risks at the large banks, recently initiated a position in gold in his fund, Greenlight Capital. In his January 20, 2009 letter to investors (cited in brief by BusinessWeek and Bloomberg), Einhorn writes:
We never thought we would ever buy gold or gold stocks... David's grandfather Benjamin was a goldbug... And it was a lousy investment. Being a patient investor is one thing. Being 'wrong' for three decades is quite another.
To everyone's dismay, we believe that some of Grandpa Ben's predictions are playing out. Our current chairman of the Federal Reserve, Ben Bernanke, is an 'inflationist.' ... The size of the Fed's balance sheet is exploding and the currency is being debased... Our instinct is that gold will do good either way; deflation will lead to further steps to debase the currency, while inflation speaks for itself. We have bought gold, calls on gold, an index of gold mining stocks (GDX) and calls on higher long-term U.S. interest rates.
See more of Greenlight's current holdings in this recent post from Market Folly.
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