Greenlight's Einhorn says still cautious, macro bets weigh

NEW YORK Tue Aug 5, 2014 11:05am EDT

David Einhorn, founder and president of Greenlight Capital, smiles as he speaks at the Sohn Investment Conference in New York, May 5, 2014.  REUTERS/Eduardo Munoz

David Einhorn, founder and president of Greenlight Capital, smiles as he speaks at the Sohn Investment Conference in New York, May 5, 2014.

Credit: Reuters/Eduardo Munoz

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NEW YORK (Reuters) - David Einhorn, head of hedge fund firm Greenlight Capital, said Tuesday that he remained cautious on the stock market and that second-quarter investments suffered slightly from short bets against French bonds and the Japanese yen.

In a conference call for his Cayman Islands-based reinsurer Greenlight Capital Re Ltd, Einhorn said he remained "cautiously positioned" and that, after trimming a number of positions that had gained, gross long exposure in the reinsurer's portfolio declined by 3 percent over the quarter.

"As the market continues to rise in the face of conflicting economic data, global unrest, and looming overdue Fed exit from quantitative easing, we remain cautiously positioned," said Einhorn, who is chairman of Greenlight Capital Re and oversees its investment portfolio.

Einhorn was referring to the Federal Reserve's periodic cuts to its massive monthly bond-buying program, which it has done in an effort to spur hiring and keep borrowing costs low. The central bank has indicated it will end its purchases in October.

Einhorn, one of the roughly $2 trillion hedge fund industry's most closely watched investors and whose Greenlight Capital manages about $10 billion, is a top investor in Apple Inc shares. Einhorn said Tuesday that Apple was still "cheap on an absolute basis."

Einhorn also said macroeconomic bets "slightly detracted" from the reinsurer's quarterly results and cited losses on short bets against French sovereign debt and the yen.

"Our French sovereign bond short and our yen short cost us more than our gold position contributed," said Einhorn, a long-time gold bull.

Einhorn sounded the alarm on France at a Greenlight Capital Re event in New York on May 20, where he said French government bonds were "mispriced" relative to Italian, Spanish, and Greek government bonds and that the country could face a "real crisis."

At that event, he said he had taken a long position in Greek banks since he did not expect the country to default or leave the euro zone currency bloc in the near term.

Einhorn's Greenlight Capital gained 7.9 percent net of fees and expenses in the second quarter, bringing its net year-to-date return to 6.4 percent, the firm said in a second-quarter letter to investors dated July 25.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Grant McCool)

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