Hedge-fund manager David Einhorn, who warned about Lehman Brothers' precarious finances before it collapsed, said on Monday he's betting on rising interest rates and holding gold as a hedge for what he described as unsound U.S. policies.
If monetary and fiscal policies go awry investors should buy physical gold and gold stocks, Einhorn said at the fifth Annual Value Investing Congress in New York. Gold does well when monetary and fiscal policies are poor and does poorly when they are sensible.
Einhorn is president of Greenlight Capital, with more than $5 billion in assets under management.
Over the last couple of years, we have adopted a policy of private profits and socialized risks -- you are transferring many private obligations onto the national ledger, he said.
Einhorn said, Although our leaders ought to be making some serious choices, they appear too trapped in the short term and special interests to make them.
According to a joint analysis by the Center on Budget and Policy Priorities, the Committee for Economic Development and the Concord Coalition, the projected U.S. budget deficit between 2004 and 2013 could grow from $1.4 trillion to $5 trillion.
Last week when Federal Reserve Chairman Ben Bernanke, U.S. Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers spoke in interviews and on panel discussions, Einhorn said, my instinct was to want to short the dollar but then I looked at other major currencies -- euro, yen and British pound -- and they might be worse.
Einhorn added, Picking these currencies is like choosing my favorite dental procedure. And I decided holding gold is better than holding cash, especially now that both offer no yield.
(Reporting by Jennifer Ablan and Joseph A. Giannone; Editing by Kenneth Barry)