Interesting move was going from $GLD for owning physical gold and storing it because “storage was cheaper than GLD fees”…. kind of gives a bit more credence to all the gold commercials we see on TV.
Also bought Dow Chemical (DOW) at $10 and sold at $12 “way too soon”.
It is a 5 page letter and worth the tie to read (click all images to enlarge). The quote at the end is simply the best…..read it to see it
Disclosure (“none” means no position):
Interesting move was going from $GLD for owning physical gold and storing it because “storage was cheaper than GLD fees”…. kind of gives a bit more credence to all the gold commercials we see on TV.
Also bought Dow Chemical (DOW) at $10 and sold at $12 “way too soon”.
It is a 5 page letter and worth the tie to read (click all images to enlarge). The quote at the end is simply the best…..read it to see it
Disclosure (“none” means no position):
Transcript of David Einhorn s Speech at the Value Investing – Get more Business Plans
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Buying Gold (GLD) ……
Greenlight Capital 2008 Annual Report
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He added 3 million shares of Dow Chemical (DOW) in Q4.
Some more thoughts on the economy….
Yesterday Dow Chemical (DOW) reported and there were two numbers related that have thus far, been ignored as to their greater effect aside from Dow.
Some background. Dow makes the “stuff” and is used to produce the items that go into almost everything we used. So, if they are not selling their products, it is because end users, (you and me) are not buying cars, houses, anything made of plastic or this that need to get shipped. Without going into a chemistry lesson, they are a “building blocks” manufacturer in short.
Yesterday Dow said that Q4 production ran at 65%, a low number not seen in over 25 years. Here is the worse number. December, was 44%……44%!! That means that until December Dow was running approx. 75% in both October and November. Essentially in December international manufacturing activity fell to a bare subsistence level (Dow does business in over 160 nations).
Dow also said it has seen “December trends continue through January”. From this we can see that Q4 US GDP does not accurately reflect the current world economy its direction and. A 3.8% fall does not reflect the condition we are seeing now in 2009 Q1. Simply put, erase Q4 from your mind and concentrate on just December, that is the trend going forward.
Here is the current employment picture:
The blue dots are ADP numbers and the red “x” are the acual BLS numbers (Bureau of Labor Statistics).
Not good and getting worse.
What is the point? Folks keep asking me what I am buying. Answer? Not stocks. Not now. I think Q1 numbers are going to be really bad (yes, worse than Q4 2008) and lower prices will be had. I do not think the current “stimulus” plan as it is currently proposed will do anything in the short term (6 months) and most likely longer as most direct job creation spending there actually is in it (very little) does not occur until the end of 2009 and 2010. There is virtually nothing coming soon.
Are we doomed? No. Are we going to loose are international standing? No. The world itself cannot recover unless we do. I do not see any significant recovery until the end of 2009 which means low equity prices are in order through this summer. Even if you are “long term”, I would advice waiting. There are scores of quality companies that may be cutting dividends (Dow, GE (GE) to name just two) and that would cause additional price fluctuations and for those who may be buying them for income, dramatic reductions there would be in store.
In short, most investors today have never really seen a hard recession. If we are headed, and based on Dow’s numbers we are, for a year not seen in 25 years, that would put us back to the 1980-81 recession. Now, I was only 12 then and most of today’s investors do not know what it was like. I do remember gas lines and am not saying we are heading back there but most folks today have only really experienced economic bumps in their adult lifetime, not a huge pothole and that is where we are headed. How they will react is really an unknown.
They could continue to spend and make their individual situations even more tenuous OR they could retrench spending and make saving a priority. The former is better for the economy for now but the latter is better for long term prospects.
Am I going to panic and sell everything? No. I’ll continue to collect my dividends and wait. But I do have new money to invest that is sitting OR going into oil (USO), (DXO) and Gold (GLD) for reasons discussed in previous posts (there are more but those are just two examples).
All this means that in order to make “market comparisons” one has to go back to the 1970’s and early to mid 1980’s and ignore recent history as we really have not seen the same economic conditions since then. To compare market behavior since then in recent economic dips and draw conclusions to today is meaningless to an certain extent.
Just hunker down and don’t panic, this to will pass. Just do not get fooled by the occasional market jump…
Disclosure (“none” means no position):Long DOW, GE, DXO, GLD, none
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Because of the Fed’s actions, Greenlight Capital’s David Einhorn is buying gold (GLD)
From his recent letter:
This jives with what I have been saying here. Point to note, these swings are usually long term trends. Be patient. The macro-events that will cause gold to rise will take a while to unfold. just tuck it away..
Remember Allied Capital (ALD), the target of Einhorn’s Book “Fool some of The People”? Allied may just default ot was announced yesterday.
Disclosure (“none” means no position):None
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Einhorn had a rough year but the letter is a very honest one, not filled the usual BS some through to excuse away performance..
Visit MarketFolly to download the letter
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Sears, Oil, Futures, Op-Ed
– Not this bad
– Over $60
– A classic
Disclosure (“none” means no position):
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The FT has an article on the carnage from Volkswagon (VOW).
From the Article:
After Porsche declared it held sway, directly or indirectly, over more than 74 per cent of VW’s shares this week, fund managers have been struggling to buy back shares to cover their short positions, pushing the carmaker’s share price ever higher.
There is widespread speculation that the losses nursed by some hedge funds may be enough to force them under.
One hedge fund manager said: “Being long of VW preference shares and short of the ordinary shares was a very common trade and there may have been more than 100 managers doing it”.
Funds including Greenlight Capital, headed by David Einhorn, and Odey Asset Management have recently told clients that they had big short positions in VW.
Other managers, including Highbridge Capital Management, have sought to refute reports of big losses in VW.
Marshall Wace said its losses on VW trades “were immaterial”.
Citadel Investments, one of world’s biggest funds cited to have lost money on VW, said: “We have suffered no losses of substance on Volkswagen whatsoever.”
The losses have been exaggerated, argues Andrew Baker, deputy chief executive of the Alternative Investment Management Association.
He points out that the cost of selling VW short had become prohibitively expensive for many funds. What is more, the trade had become so “crowded” – that is, so many managers were doing the same thing – it would have warned managers of the high risks involved and “managers have become more risk averse”.
Einhorn’s silence is concerning. It is so for a couple reasons. First, other managers have spoken out in regard to their losses and second, Einhorn has been uncharacteristically silent. In the past he has been very forthcoming on a range of subjects and investors must be concerned about his notable silence now.
Shorting has been hugely profitable the past year but an episode like this underscored the risk involved in it. When you “go long” and buy a stock your loss is limited to 100%, the amount you invested. When you “short”, your loss in unlimited. If you short at $10 and it goes to $30, your loss is 200%. In severe short squeezes, it can do so in hours or minutes.
I think many shorts have started to operate as though things will just keep going down, no different than those who bought things assuming the price would just keep going up.
FULL FT ARTICLE
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What took so long?
Here are the basics..
Now this basically goes back to June when (LEH) Lehman CFO Erin Callan, being thrown to the wolves by CEO Dick Fuld said:
The whole time investor David Einhorn was saying the opposite:
The option Fuld and Callan have here simple
1- We are grossly incompetant
2- We lied.
Simple. The firm went under. So either they were lying to try and buy it time or, they just did not really know what was going on. Callan can at least say she was “following marching orders”. Fuld…not so much.
Now, if you watch Fuld’s recent congressional testimony, it was scary. One could think that perhaps Fuld has not yet accepted is firm is gone.
There is always a fall guy(s) / gal(s) when we have these events. Fuld and Callan are going to have a real hard time, real hard, convincing a jury there were being 100% honest and that they are just incompetent….Fuld, for one, seem to prideful to take the ugly option in front of him. It just may be his downfall.
Disclosure (“none” means no position):none
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Just got this emailed to me…It is a great read…
Disclosure (“none” means no position):None
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Here is the full video of Lehman’s (LEH) Fuld before the Senate. I can’t do it justice, you really do have to watch it. Fuld’s action are indefensible, despite his best efforts to do so…
He blames the SEC, short sellers (David Einhorn), Goldman Sachs (GS)…everyone except…oh yea…him..
Disclosure (“none” means no position):Long GS, none
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David Einhorn has granted “Worth” an interview in which he talks about short selling, Allied Capital (ALD), and Lehman..
WORTH: Let me ask about some of the labels the press has given you: “Short-seller.”
David Einhorn: It’s not really the right description. We’re long and we’re short, and most days I’d much rather the market go up than down. But we do find some bad companies doing bad things and we sell them short, and I think that’s a good thing.
That label is often used as a pejorative.
Indeed.
What’s wrong with being a short-seller?
Well, first of all, a lot of people don’t understand it. They don’t understand whether short-seller means “short term”—they get confused with that. They don’t like the idea that you’re effectively betting that something bad happens. People want other people to succeed; they want the stock market to go up. I want other people to succeed; I want the stock market to go up.
But 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.
Some people argue that this isn’t the right time to expose such companies, because they may fail and damage an already shaky economy.
How do you define when the right times are and when the not-right times are? The best way to handle this is to not put your business into a position where, if things don’t go exactly the way that you hoped, you’re forced to not tell the truth about your balance sheet.
Let me read you a sentence that appeared in the New York Times recently in a piece about you and Lehman Brothers: “For eight months now Mr. Einhorn, a rabble-rousing hedge fund manager, has pilloried the venerable Lehman Brothers in an effort to drive down the bank’s stock price, which he is betting against.”
How many things in that sentence would you take exception to?
Other than “David Einhorn,” I think everything.
“Rabble-rousing”?
A Washington Post journalist referred to me as a “cocky punk.” It’s interesting to see how folks are willing to engage in this.
The most loaded part of that sentence is probably the characterization, “in an effort to drive down the bank’s stock price.” That’s a common charge made against you in the context of Lehman and Allied—that you’re talking down these companies purely out of financial self-interest.
It’s self-evidently true that if the stock goes down we are positioned to make a profit. The question is, is that the whole story? And the answer is, it really isn’t.
If you talk about a stock, it’s not going to go down because you talked about it. It’s only going to change in price, up or down, based upon whether you add significant new information or analysis into the market. So the purpose of talking about the stock is to add information into the market, and if people find it old news or unpersuasive, more likely than not, they’re going to take the opposite side.
I’ve stood up and talked about lots of stocks where there’s been absolutely no reaction in the stock after I talked about it. And that’s fine too.
Why is it so hard for people to believe that a hedge fund manager could speak out on an issue for motives unrelated to profit?
DE: People believe what they want to believe, and the hedge fund industry’s press is miserable.
One of the things that must have been a real challenge for you, during the controversy over your short of Allied Capital, was this suspicion and distrust of hedge funds.
It’s the same thing as the, “Disregard what David has to say because he shorted the stock” argument, told by the management, who has all of their eggs in the stock. Who’s more biased in this equation? The short seller?
[Short-selling] is what it is and everybody can see it for what it is. Yet there’s this free pass given to management. They’re just supposed to promote and say whatever they want to say, and not tell the truth if that’s what it takes. And this is somehow acceptable.
I think the same [paradox] is true for the hedge fund industry. It’s boiled down nicely in the current credit crisis. The banks and the investment banks have had a very effective media campaign which basically says, ‘You have these lightly regulated, unregulated, whatever, hedge funds, that are the secret systemic risk—this is the monster. And what you really need to do is deregulate us and do something about those guys.’
We’ve seen that the hedge fund industry has acquitted itself pretty darn well as the credit crisis has unfolded. But the vast majority of banks and investment banks were taking on excessive risk with poor controls and pretty flawed thinking. And creating the exact same system risk many times over, many times bigger than anything that was imagined about the hedge funds.
And hedge funds don’t have government help to fall back on.
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.
The rest of this interview with David Einhorn will appear in the October issue of Worth magazine.
Disclosure (“none” means no position):
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This is great stuff…….
From Nasdaq
The following NASDAQ-listed company has been voluntarily removed from the SEC’s original list of Included Financial Firms:
* Greenlight Capital Re, Ltd. (GLRE). Effective Wednesday, September 24, 2008, this company will not be subject to the restrictions of the SEC’s Emergency Order.
So, while people can yell, scream and curse those like Einhorn who publicly short stocks and are not afraid to tell the world they are, they is one name they cannot call him. Hypocrite.
Disclosure (“none” means no position):none
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