David Einhorn: what’s he about?

I don’t know anything about David Einhorn. I’m a fat guy with Google.

Apparently he has a book called “Fooling Some of the People All of the Time, a Long Short Story”

In 2002, David Einhorn, the President of Greenlight Capital, gave a speech at a charity investment conference to benefit a children’s cancer hospital. He was asked to share his best investment idea, so he did. He described his reasons why Greenlight had sold short the shares of Allied Capital, a leader in the private finance industry. Greenlight bet that the stock would decline because the company’s business was in trouble and its accounting was corrupt.

Einhorn’s speech was so compelling that the next day, when the New York Stock Exchange opened for trading, Allied’s shares remained closed. So many investors wanted to sell or short the stock that the NYSE could not balance all the sell orders to open Allied’s trading in an orderly fashion.

What followed was a firestorm of controversy. Allied responded with a Washington–style spin-job — attacking Einhorn and disseminating half-truths and outright lies. Rather than protect investors by reviewing Einhorn’s well-documented case against Allied, the SEC — at the behest of the politically connected Allied — instead investigated Einhorn for stock manipulation. Over the ensuing six years, the SEC allowed Allied to make the problem bigger by approving more than a dozen additional stock offerings that raised over $1 billion from new investors.

Undeterred by the spin-job, lies, and investigations, Greenlight continued its research after the speech and discovered Allied’s behavior was far worse than Einhorn ever suspected — and, shockingly, it continues to this day.

Fooling Some of the People All of the Time is the gripping chronicle of this ongoing saga. Page by page, it delves deep inside Wall Street, showing how the $6 billion hedge fund Greenlight Capital conducts its investment research and detailing the maneuvers of an unscrupulous company. Along the way, you’ll witness feckless regulators, compromised politicians, and the barricades our capital markets have erected against exposing misconduct from important Wall Street customers. You will also discover the immense difficulties that prevent the government from sanctioning politically connected companies — making future Enrons inevitable. This revealing book shows the failings of Wall Street: its investment banks, analysts, journalists, and especially our government regulators.

At its most basic level, Allied Capital is the story of Wall Street at its worst. But the story is much bigger than one little-known company.Fooling Some of the People All of the Time is an important call for effective law enforcement, free speech, and fair play.

Honestly, I don’t know what any of that means. I still don’t know the man.

Here he is giving a speech in 2002. As a man in my early 40’s I can tell you that there’s a difference between 40’s and 30’s – so don’t necessarily judge the man you see here.

and here he is in 2010 seeming more self-assured

Still nothing.

the Times tells us

While many fund managers work well into the night, Mr. Einhorn is known to leave the office early enough to get home to Westchester for his daughter’s Little League games. He is active in several charities and, with his wife, Cheryl, set up a trust whose mission is to help people get along better.

But Mr. Einhorn also grew up in a financially minded home. His father is a banker who helps facilitate mergers and acquisitions. Mr. Einhorn helped found his hedge fund in 1996, when he was in his late 20s — a young age by industry standards — with less than a million dollars, much of which came from his parents.

Little league – cool. I don’t know what the hell “less than a million dollars” means. I have “less than a million dollars” but the context clues suggest that daddy laid out some serious cash. No harm in that, I would help my kids too – but it does say “rich kid” to me.

Is David the cute little boy in the Kingman costume…or something else?

I’m cautiously optimistic, emphasis on the cautious. Very cautious. I can’t pinpoint it, but my spidey sense is tingling. As I have argued with some of you in the past, the devil you know is better than the devil you don’t. I’m a Mets fan. I worry.

That being said…welcome aboard David. I hope you get your championships.

4 Replies to “David Einhorn: what’s he about?”

wow

first video isn’t working, so i have nothing to compare the second one to, but this guy, like 7 months ago, basically was predicting $4.35/gallon gas…and basically trashing stimulus I & II (that’s “quantitative easement” for you who don’t speak politics); of course, many economists view this as a huge failure

the wilpons would do well to invest whatever they have left (and/or owe to picard) with this kid…er…guy

thanks for posting that shannon

GregB says:

May 27, 2011 at 6:36 am

My opinion on how the Fed started printing money for this crisis, is that if they didn’t, we were headed towards a financial disaster zone, no liquidity.

There’s a lot of deflationary pressure to counteract the inflationary, and I suspect the deflationary still has the upper hand.

Einhorn is one of the smartest guys on Wall Street — and not smart in a “rip off the little guy” sort of way.

Rather, what the story of Allied shows is that this is a guy who saw through the BS and recognized that a company that people were falling over themselves to praise was really built on smoke and mirrors, and so he bet heavily that the company would eventually go down. He reached this conclusion by studying the company’s financial information, and supported that conclusion with evidence.

More recently, he was also in the financial news today because he called for Microsoft CEO Steve Ballmer to step down. Einhorn has a bit of say in the matter, as the fund he runs is the second largest Microsoft shareholder.

The key to the “less than a million dollars” line is not that he started from nothing. He clearly started from a family with some means, but not ridiculous wealth. Rather, he was able to take that initial sum — whatever the exact figure — and turn it into over $6 billion. Any idiot (like Jeff Wilpon) could take billions from his father and turn it into millions. It takes real skill to turn a million dollars (or less) into several billion.

The really important thing to know about Einhorn is that he does not spend money on something if he doesn’t perceive value in the investment. If he’s spending $200 million of his own money on a stake in the Mets, he has a real belief that it will eventually be worth a hell of a lot more than that. It’s also pretty likely that his deal with the Mets includes a clause specifying that if the Wilpons decide to sell the remainder of the team (or if they’re forced to do so), that Einhorn would have the first shot at buying it. That would be very good news.

The baseball owner closest in temperament and skillset to Einhorn is Stuart Sternberg, owner of the Tampa Bay Rays. The Mets could do (and have done) a lot worse than having management like the Rays…

The Mets are definitely a good investment for someone with deep pockets who can ride it out, there’s no question there’s dividend here. Even if the Mets are worth $0 now, or are a deficit, it’s still a good investment. This is a great era for baseball. Teams are playing in baseball stadiums rather than football stadiums, on grass rather than plastic. NY is a baseball town, the biggest city in America and there are only two teams.

This is the same reason I keep my plan, because buying now is buying low.

I just wish this guy was a Mets fan through and through, and I wish he had no connection to Selig or Milwaukee. He may take advantage of the situation and steer the Mets towards profits rather than championships.

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