UPDATE 1-Einhorn sees inflation on rise, gold as currency

Tue May 18, 2010 6:07pm EDT

* Greenlight Re holds Arkema, Lanxess, CIT Group, Vodafone

NEW YORK May 18 (Reuters) - Hedge fund manager David Einhorn said on Tuesday that there is "going to be a lot of inflation" and that he thinks of gold as a currency.

Speaking at an investor conference for Greenlight Capital Re Ltd (GLRE.O), where he is chairman of the board, Einhorn said "large valuation discrepancies" have emerged between cyclical companies benefiting from the economic recovery and non-cyclical companies.

Einhorn said last year that he was buying gold and betting that interest rates will rise. He has warned about the exploding size of the U.S. budget deficit, a reflection of the massive government bailouts of U.S. corporations.

At the investor conference he said that at Greenlight, "We tend to think of gold as a currency" and that "I think there's going to be a lot of inflation."

Greenlight Capital Re said the largest positions in its investment portfolio were specialty chemical makers Arkema (AKE.PA) and Lanxess LXGS.DE, commercial lender CIT Group (CIT.N), Vodaphone Group Plc (VOD.L) and gold.

Einhorn rose to prominence for publicly questioning the financing behind Lehman Brothers and its accounting before the investment bank failed in September 2008. (Reporting by Jennifer Ablan and Emily Chasan, editing by Matthew Lewis)

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