Thursday, October 9, 2008 0 comments ++[ CLICK TO COMMENT ]++

David Einhorn's Greenlight Capital 3Q2008 Shareholder Letter

This is my first time reading a shareholder letter from David Einhorn's hedge fund, Greenlight Capital (thanks to ravinsu on the message board for the link.) Here are some of my comments on his 3rd quarter 2008 letter:

It's an interesting letter because I don't read too many thoughts about short positions. Quite frankly, although Einhorn is famous for being a short-seller, he is primarily a long. He is actually doing somewhat poorly (outperforming the market though) so far, with returns of around -14% (depending on the fund you look at.) As I have remarked previously, this is a market that will test both the shorts and the longs. It is quite possible for almost everyone--except those long US$, Yen, and US Treasuries--to do poorly.

One of the things that probably hurts Greenlight is the short-selling ban on financials (I think banning naked selling is fine but outright short-selling ban is in poor taste and goes against any notion of a free market.) It's actually painful for some hedge funds because shorting is how they make their living, and the government just took away their livelihood. Greenlight is mostly long so this comment applies to those who are more of a pure short-seller.

(Einhorn is likely short MBIA. He refers to a bond insurer that tripled in price, which he thinks will decline. He has previously been critical of bond insurance and likens it to defrauding the insurance buyers.)

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