| NEW YORK
NEW YORK Oct 24 Hedge fund manager David
Einhorn raised concerns about the U.S central bank's latest
round of stimulus, saying Federal Reserve Chairman Ben Bernanke
"announced desperate measures in non-desperate times."
"What once looked like a purchasing spree of unimaginable
proportions is now just the monthly budget," Einhorn said in a
quarterly letter to investors dated Tuesday. He runs the $7.7
billion Greenlight Capital hedge fund firm and is one of the
industry's best-known managers.
In September, the U.S central bank said it would begin a new
round of bond-buying to stimulate the economy, purchasing $40
billion of mortgage debt each month until the outlook for jobs
Einhorn asked what tools the central bank and Congress would
have if the U.S economy goes into another recession, which he
said would occur "sooner or later."
"When (the recession) comes, it is very likely we will enter
it prior to the Fed having 'normalized' monetary policy, and
we'll have a large fiscal deficit to boot," Einhorn said in the
investor letter, which Reuters reviewed. "If the Fed is willing
to deploy this new set of desperate measures in these
frustrating, but non-desperate times, what will it do then?"
Although Einhorn said he did not have the answer to that
question, he said allocating a large part of a portfolio to gold
still seemed like a "a very good idea."
Besides Bernanke, central bankers in Japan, the United
Kingdom and the European Union have been on a "money printing
spree" Einhorn said. "While the ink may be endless, the market's
tolerance is not (though there is no sign that is nearly
In the investor note, Einhorn reiterated his bullish
positions in automaker General Motors Co and healthcare
company Cigna Corp, his bet against Green Mountain Coffee
Roasters Inc and a new short position in fast-food
chain Chipotle Mexican Grill Inc.
If hedge fund managers are short on a stock, they are
predicting the price will fall. If they are long, they are
expecting the price to rise.
At the end of the third quarter, Greenlight's largest
disclosed long positions were Apple Inc, Cigna, General
Motors, gold and Seagate Technology.
His Greenlight Capital funds gained 9.4 percent net of fees
and expenses in the third quarter, bringing returns to 13.2
percent year to date. Hedge funds on average were up about 5
percent for the year through September, trailing the broader
stock market's gain of 16.4 percent.
Since Greenlight's inception in 1996, Einhorn has provided
investors with average annual returns of 20 percent.