After the last Value Investing Congress in which Einhorn discussed his thesis on GM, Cigna, Chipotle and updated on Green Mountain, there were no major surprises in his last letter (which can be found here). At the same time it was curious to see another portfolio manager joining the chorus of “financial wise” people against the ultra easy monetary policy being implemented by the Fed. The analogy between the U.S. Central Bank and Amex was intriguing:
“This buying binge brings to mind American Express cards, which are famous for their promise of no pre-set spending limits. (…) Like American Express, the market won’t let the central bankers know what their spending limits are until they have exceeded them and get cut off. (…) We have just spent 15 years learnings that a policy of creating asset bubbles is a bad idea, so it is hard to imagine why the Fed wants to create another one.”
On GM, Einrhon stated that the government stake is no overhang – on the contrary, it presents a good opportunity to GM make a highly accretive transaction and the same effect would be achieved if GM started an open buyback program.
To make it a little funnier, Eirnhorn summarizes the bullish thesis for Chipotle including “No quiero Taco Bell!”
During the conference call (click here to listen – Einhorn starts speaking @ 10min30sec), David Einhorn made it clear he is more cautious going forward, as he diminished his net exposure from 37% 2012 average to 26%. He is concerned with several headwinds including economic slowdown, rising key commodity prices (mentioned food and energy) and deterioration in corporate earnings growth. He also mentioned his bearish thesis on iron ore, in which he believes iron ore could go down to as much as $60 in 2014 as a big supply hits the market. Besides he is looking for assymetric macro hedges for his portfolio. (maybe Bass’ presentation on Japan?!)
His largest long positions are Gold, Apple, Seagate, Arkema and Sprint.