David Einhorn's Speech at the Value Investing Congress

David Einhorn is one of the brighter minds in the hedge fund field - and unlike Mr. Rajaratnam at Galleon, seems to actually do his own homework. Below is the full text of his speech at the Value Investing Congress today - I was eagerly waiting to see what he had to say. (hat tip to Zerohedge)

Regular FMMF readers will see Einhorn and a certain blog writer agree on many things. He talks about "short termism" - we've been discussing "kick the can" as American policy since day 1 of the blog. As we mentioned just weeks ago, we're not buying gold (silver) for inflation protection but to protect ourselves from the destructive behavior of the world's central bankers - most notably, America's.

Of course, gold should do very well if there is a sovereign debt default or currency crisis.

When I watch Chairman Bernanke, Secretary Geithner and Mr. Summers on TV, read speeches written by the Fed Governors, observe the “stimulus” black hole, and think about our short-termism and lack of fiscal discipline and political will, my instinct is to want to short the dollar.....

... I conclude that picking one these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.

The banks had the US taxpayer (via Federal Reserve) to bail them out... but who bails out the Federal Reserve? We'll send a query to Zimbabwe to find out.

It's relatively lengthy but how can you resist a speech where (as we often do) he quotes Colonel Jessup: "You Can't Handle the Truth!" Good bed time reading. As always click "full screen" for an easier read:

Einhorn Vic 2009 Speech

Comments

[doubleguns:]

"From the impossible to the inevitable without ever stopping at the probable."

Seems that is exactly where we are. Dow 10000 and climbing.

Oct 20 09:39 AM

[igggy:]

Einhorn's book (Fooling some people all of the time) is pretty interesting too. Highly recommend.

Oct 20 01:22 PM

[John Galt:]

> On the anniversary of Lehman’s failure, President Obama gave a terrific speech. He said, “Those on Wall Street cannot resume taking risks without regard for the consequences, and expect that next time, American taxpayers will be there to break the fall.” Later he advocated an end of “too big to fail.” Then he added, “For a market to function, those who invest and lend in that market must believe that their money is actually at risk.” These are
good points that he should run by his policy team, because Secretary Geithner’s reform proposal does exactly the opposite.

The financial reform on the table is analogous to our response to airline terrorism by frisking grandma and taking away everyone’s shampoo, in that it gives the appearance of officially “doing something” and adds to our bureaucracy without really making anything safer.

Perfect summary of the corrupt and disingenuous Obama administration. It's the financial version of frisking down grandma to act like you are doing something, all the while stuffing her coat pocket with 100 dollar bills because she's family and lobbied correctly.

I also like how Einhorn pointed out the decay in demographics for developed nations. My favorite underrated fact is the 1980-200 bubble happened when Boomers were in the peak earning years...

It's no secret that younger nations like Brazil & China have those tailwinds at their back, while older nations ( Japan) are in deflation...

Oct 20 02:28 PM

[tripleblack:]

Good one, Mr. Galt.

I think I speak for many when I say that I am tired of listening to great speeches from President Obama, and am ready to see great ACTIONS from him. He has said one thing and done the opposite SO often that I am now in the habit of inverting his every promise and proposal to arrive at an estimate of what he actually intends to DO.

I agree with your points, save perhaps for China sharing a demographic tailwind with Brazil... China's statistics are first and foremost difficult to prove, coming as they do from a very opague government, but even so their own numbers indicate they are soon going to cease growing their population.


On Oct 20 02:28 PM John Galt wrote:

> > On the anniversary of Lehman’s failure, President Obama gave a
> terrific speech. He said, “Those on Wall Street cannot resume taking
> risks without regard for the consequences, and expect that next time,
> American taxpayers will be there to break the fall.” Later he advocated
> an end of “too big to fail.” Then he added, “For a market to function,
> those who invest and lend in that market must believe that their
> money is actually at risk.” These are
> good points that he should run by his policy team, because Secretary
> Geithner’s reform proposal does exactly the opposite.
>
> The financial reform on the table is analogous to our response to
> airline terrorism by frisking grandma and taking away everyone’s
> shampoo, in that it gives the appearance of officially “doing something”
> and adds to our bureaucracy without really making anything safer.
>
>
> Perfect summary of the corrupt and disingenuous Obama administration.
> It's the financial version of frisking down grandma to act like you
> are doing something, all the while stuffing her coat pocket with
> 100 dollar bills because she's family and lobbied correctly.
>
> I also like how Einhorn pointed out the decay in demographics for
> developed nations. My favorite underrated fact is the 1980-200 bubble
> happened when Boomers were in the peak earning years...
>
> It's no secret that younger nations like Brazil & China have
> those tailwinds at their back, while older nations ( Japan) are in
> deflation...

Oct 20 02:39 PM

[John Galt:]

Japan has 64.3% of it's population in the 15-65 year old "working" demographic group... The lowest in the developed world.

While the USA has 67% in that group, China has 72% in that group and basically the same in the 0-14 group. ( The only thing is we have an immigration population, they don't).

15-64
Japan = 64 %
USA = 67%
Brazil = 67%
China = 72%
( which side of the scale do you want to be on, who buys more stuff, grandma and grandpa or the 25-35 year olds starting out a family, buying cars, homes, refrigerators etc.)

Brazil has basically the same working age population as the USA (67%), but with an 8 years younger media age...

Brazil has 27% of it's population in the 0-14 demographic
USA has 20% of it's population in the 0-14 demographic
Japan has 13% of it's (aging) population in the 0-14 demographic
( and no immigrants).

Median age in Brazil = 28.6
Median age in USA = 36.7
Median age in Japan = 44.2

The X factor is immigration. The Japanese traditionally don't take in immigrants, will they make an exception in the future? They are leaders in robotics and automation taking over low skilled work... Robots don't need take sick days, robots don't ask you to pay for free health care...

The USA has always been a leader in immigration... Europe has been accepting immigrants...

Oct 20 03:41 PM