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Greenlight Capital’s David Einhorn, in his third-quarter letter to investors, said the firm is solidly outperforming the S&P 500 this year after his bearish pivot in January. Greenlight Capital funds are up 4% in the third quarter and 17.7% for the first nine months of the year, versus a decline of 4.9% and 23.9% for the S&P 500 in the third quarter and first nine months, respectively.
Einhorn said while it is not clear if the U.S. is in a recession, it is clear the Fed “wants to deflate the stock market.” Amid this Fed policy, Einhorn said the correct posture is to be bearish on stocks and bullish on inflation.
“As long as official policy is to make the stock market go down, so that people are less wealthy, so that they buy fewer things, so that prices stop going up, all while doing nothing about fiscal policy, we believe the correct posture is to be bearish on stocks and bullish on inflation,” Einhorn said in the letter seen by Investing.com.
The hedge fund manager added that they reduced their gross long exposure substantially this year and expect to have more cash once the sale of Twitter Inc (NYSE:TWTR) to Elon Musk goes through.
“To that end, we have reduced our gross long exposure substantially this year,” Einhorn commented. “Further, our investment in TWTR is inherently short-term. As such, we expect to have additional dry powder after exiting that investment upon resolution (and we hope completion) of its sale.”
While gold fell in the quarter, Einhorn said the firm remains long the precious metal.
“Sometimes in a bear market, investors simply want cash,” Einhorn commented on gold. “Further, high short-term interest rates provide competition for gold. Nonetheless, we remain concerned that the current inflation problem could evolve into a currency and/or sovereign debt crisis. Accordingly, we maintain our gold position, despite the possibility for continued near-term weakness.”