By Sam Forgione
NEW YORK Feb 20 David Einhorn, hedge fund
manager and chairman of reinsurer Greenlight Capital Re Ltd,
said Wednesday that the U.S. government's lawsuit against
Standard & Poor's has made rating agencies vulnerable.
Einhorn, who also runs the $8 billion hedge fund Greenlight
Capital, said on an earnings call for his Cayman Islands-based
reinsurer that the civil lawsuit reinforces short positions in
Standard & Poor's parent McGraw-Hill and Moody's
"We believe the recent case against S&P is a negative for
the rating agencies and Moody's is not immune," Einhorn said.
The U.S. government said earlier this month that rating
agency Standard & Poor's inflated ratings and understated risks
associated with mortgage securities. The lawsuit is seeking $5
The 2007-2009 financial crisis was due in large part to
massive losses triggered by risk mortgage loans packaged and
sold to investors, often with top ratings from credit raters.
Einhorn also said that his investment fund lowered its net
long exposure to 29 percent at the end of January from 39
percent at year's end. He also said that he added to his short
positions, or bets that a company's share price will fall.
He cited the U.S. economy's decline in gross domestic
product at a 0.1 percent annual rate in the fourth quarter.
"As the market continues to advance even as the economy
doesn't, we tend to become less enthusiastic," Einhorn said.
Einhorn added, however, that his short positions negatively
affected performance in January, and that Moody's was his
biggest losing short position last year.
Einhorn also said Apple, one of his biggest long positions,
"has a fortress balance sheet with opportunities to unlock
significant shareholder value." He owns roughly 1.3 million
shares in the company
Einhorn announced on Feb. 7 that he is suing Apple Inc
to halt the company's falling share price and get it to
deploy its $137.1 billion cash pile more effectively. Einhorn
proposed that the company issue preferred stock and return more
cash to investors.