Sunday, December 12, 2010

Is David Einhorn the Smartest Money Manager on Wall Street?

I don't know, but I know a lot of money managers and he is smarter than any I have talked to.

I really just started paying attention to Einhorn after I saw a clip of a brief appearance he made on CNBC. He impressed me with what he had to say there, which is why after noticing that he appeared on the Charlie Rose Show, I clicked on the video clip to see what he had to say. I have to say that I pretty much agreed with everything, except for a couple of small points where he thinks regulation can solve some problems and I don't.

That said, I think he sees things as clearly as you can and tends to get at the core of problems. Many of the topics he discussed on the Charlie Rose Show are topics I have discussed here at EPJ.

One topic he mentioned though is something that I have also noticed, but haven't yet mentioned at EPJ. At one point in the Rose interview he says that government appears to more concerned about 50 point drops in the market than hedge fund managers are. How true! He gives an example of an overnight drop in foreign markets where the Federal Reserve called a special meeting and cut rates. He then points out that the drop was simply about one rogue trader in France. News that the market would have easily absorbed and handled on its own.

I had a more personal experience along this same line. I was talking to a very senior financial person who has been involved in high level decision making both within the government and in the private sector. The day I spoke to this person the market was down about 180 points. I viewed it as simply a down day, a strong technical correction nothing more. I barely noticed the drop. When I got on the phone with this person, his first comment was about the 180 point drop and how Bernanke should be doing something about it.

This struck me the same way Einhorn was struck by the Fed reacting to an overnight downturn in markets, government type players are reacting to very small moves in the market. This is completely new and did not happen in period past.

The lesson from this is that if the Federal Reserve starts reacting to small dips in the market it is going to be pumping a lot of money, and that it is never, under current thinking, going to sit back during any major drop. The Greenspan put has been replaced with Bernanke babying of the market.

The Charlie Rose interview with Einhorn is here.

1 comment:

  1. @R. Wenzel - 1) I'm surprised that a fund manager with so much belief in government regulation enforcement would score so high in your 'brains' list. In essence, he's saying the system is good...just not enough enforcement. Of course Charlie Rose promotes this as ANOTHER bright guy touting government regulation.

    2) PLEASE get your backside on Judge Napolitano's excellent show...and shed some light on what is really going on with the money supply...QE1...QE2...reinvestment of MBS repayments and interest payments...why QE2 is likely to be much bigger than $600 billion because of the multiplier effect....and why some ($1.25 trillion) of QE1 went into reserves...and, finally, why rich people simply saving money (not spending it like middle/lower classes or like unemployeds will spend their unemployment checks) is a necessary precursor to the issuance of credit IE there has to be savings before there can be credit.

    (Assuming I got all that correct), I'm frustrated every time I see people on TV denouncing savings/touting spending/demand.