David Einhorn reflects on gold, and markets at Sohn Montreal Conference
NEW YORK (May 29) David Einhorn, Founder of Greenlight Capital, has been a vocal gold bull for 17 years—but that wasn’t always the case during his 30 years of running a hedge fund.
In a fireside chat Wednesday at the Sohn Montreal Conference, Einhorn briefly reflected on his past, noting that while his grandfather was a firm believer in gold and deeply skeptical of fiat currencies, it was actually his grandmother who influenced his early investment decisions.
“One year before we turned bullish on gold, I gave an entire speech comparing my grandfather's investment strategy—buying gold—with my grandmother's, which was buying famous companies that her grandkids liked,” he said. “She saw us wearing Nike sneakers and bought Nike and things like that. She did way better than grandpa, who was always worried about the eventual collapse of fiat currency.”
It wasn’t until the 2008 Great Financial Crisis that Einhorn’s view on gold changed.
“I saw what the U.S. government did to socialize all of the credit risks, and I said to myself, maybe grandpa was more right than I thought,” he said. “So I changed my perspective and became bullish on gold. We've been bullish for 17 years because I believe the U.S. monetary and fiscal policies are too aggressive and pose real risks.”
Einhorn’s gold investments have certainly paid off. In his quarterly earnings letter to investors last month, he reported that Greenlight Capital achieved a net return of 8.2% in the first quarter. At the same time, his gold allocation—a mix of physical bullion and call options—posted gains of 19%.
He added that he continues to see upside potential for gold, as the U.S. dollar loses credibility as the world’s reserve currency. During the chat, Einhorn also warned that the U.S. deficit is likely to worsen, which he believes will hamper economic growth. In this environment, he said he favors European equity markets.
“We’re long gold. I believe in inflation. I believe the budget situation is a serious problem. And right now, I believe in European equities,” he said.
Over his 30-year career, Einhorn has been a regular presence at the Sohn Foundation Conference, participating in 24 events. The Sohn Conference Foundation raises funds for pediatric healthcare and cancer research. This was the foundation’s first event in Canada, and the one-day conference raised $1.27 million for the Montreal Children’s Hospital and Sainte-Justine Hospital.
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