Hold gold as deficits don't matter - billionaire David Einhorn
(Kitco News) - Billionaire investors continue to tout the benefits of gold, with David Einhorn, the founder of Greenlight Capital, highlighting the yellow metal as one of his firm’s top ten positions for 2020.
“We begin 2020 with a portfolio that continues to be concentrated in our best ideas. We currently have 96% of capital in our top 10 longs and 47% of capital in our top 10 shorts,” Einhorn said in an extensive recap to his investors published Tuesday.
Looking at gold, Einhorn said that the precious metal is the firm’s hedge against growing government debt and ultra-loose monetary policy from the Federal Reserve.
“The bipartisan consensus is that deficits don’t matter – it implies we can always print our way out of trouble,” he said. “All told, we can count on aggressive fiscal and monetary policies in both good times and bad. Gold continues to be a hedge in our portfolio against adverse outcomes related to those policies.”
Another major position on Greenlight Capital’s books, which could impact its gold holdings, is a short bet on corporate credit spreads. Einhorn noted that corporate debt appears to be growing out of control.
“Credit spreads are at cyclical tights even though (a) the economy appears to be decelerating, (b) we are far along in the economic cycle, (c) corporate debt has exploded, and (d) rating agencies have been complacent by allowing debt/EBITDA ratios to expand without downgrading the underlying credits,” he said.
Many analysts have noted that public and corporate debt could create major headwinds for the global economy, adding further uncertainty in fragile financial markets. Any rise in market uncertainty is expected to push gold higher, analysts have said.
Einhorn has been a long-term gold bull. Last year, Kitco News had an opportunity to ask him about his investment in the yellow metal.
“I hold gold, and I am never going to get rid of it. I hope that I never have to use it,” he said in May during the Sohn Investment Conference in New York City.
Einhorn’s outlook on gold came the same day Ray Dalio talked up the yellow metal at the World Economic Forum in Davos, Switzerland.
In an interview with CNBC, the founder of Bridgewater Associates said that cash is trash and gold should be part of a balanced global portfolio. Bridgewater sees gold pushing to $2,000 an ounce as central banks ignore growing inflation threats.