Hedge-fund founder David Einhorn is betting on U.S. stocks to keep falling as inflation proves more stubborn than many expect, according to comments he made during a Wednesday interview with CNBC’s “Halftime Report.”
“I think we should be bearish on stocks and bullish on inflation,” Einhorn said. “I think we’re in a policy now, which is probably pretty good for Main Street, but it’s going to be difficult, and increasingly difficult for financial assets.”
He added that he expects interest rates on both the short- and long-term notes to keep on climbing. Yields on cash-equivalent six-month Treasury bills recently topped 5%, meaning short-term debt is currently offering investors a more attractive risk-adjusted return than U.S. stocks.
And on Wednesday, the 10-year Treasury note yield briefly tapped 4% for the first time since November, according to FactSet data.
See: Stocks are tumbling. Why ‘cash’ yielding more than it has since 2007 could be king.
“I think that both long and short term rates are headed higher and probably higher than what people are expecting,” Einhorn said.
After years of losing money with bets against high-flying growth names like Tesla Inc. and Amazon.com Inc. Einhorn’s Greenlight Capital, which he founded in May 1996, finally hit pay dirt in 2022 as many of the stocks in Einhorn’s “bubble bucket” cratered.
The firm’s strategy ultimately earned Greenlight a 36.6% return, net of fees, in 2022, according to a letter to investors dated Jan. 17 that was obtained by MarketWatch. In the letter, Einhorn said a bet that Elon Musk’s buyout of Twitter would close at the agreed-upon price of $54.20 a share contributed heavily to the firm’s profits.
By comparison, the S&P 500 the most popular U.S. equity benchmark, logged a 19.4% drop without accounting for dividends, according to FactSet data.
In the letter, Einhorn celebrated 2022 as “an exceptionally good year” for the firm.
“In many ways it was our best ever and is most comparable to 2001, the year after the last technology bubble popped.”
He also quipped that the firm is “probably not as smart as we appeared in 2022, but we are probably not as dumb as we appeared in 2018 either. The market environment, as we have been highlighting, turned extremely favorable for our strategy in a period that immediately followed one that was extremely unfavorable for our strategy.”