David Einhorn, the founder of Greenlight Capital, recently sat down with CNBC to share his views on markets, gold, and the fiscal recklessness of Washington. His tone was filled with frustration and foreboding, peppered with the dry humor that’s made him a Wall Street icon.
Let’s start with gold, a topic Einhorn has championed for years. “Gold is not about inflation,” he said. “Gold is about the confidence and the fiscal policy and the monetary policy.” His conviction is unshaken, even as gold hits record highs. Where’s it headed next? “Higher,” he quipped. Pressed for specifics, he added: “If gold is, I don’t know, 31 or 3200 today, I’d be really happy if it went to 3500 or 3800. I’d be really unhappy if it went to 30,000 or 50,000. So I hope I don’t wind up being too unhappy.”
Einhorn’s gold bet isn’t just a trade—it’s a hedge against Washington’s dysfunction. “There’s a bipartisan agreement to do nothing about the deficit until we actually get to the next crisis,” he said, with palpable exasperation. The math is grim: proposed spending cuts are a drop in the bucket. “Like, that’s enough to cover next year’s defense spending increase. That’s going to get eaten up really, really fast.”
His skepticism extends to policymakers. “They’ve thrown their hands up and said, well, we can cut a few things around the edges. But structurally, we have to leave the tax code actually with more tax cuts and the structural spending we have, whether it’s entitlements, defense and interest relatively unchanged.” The takeaway? “Everybody agrees that it’s a structural problem and it’s not sustainable. And yet there’s not even the beginning of a plan to do anything about it until there’s an actual crisis.”
Einhorn’s bearish turn in February was another red flag. “We began seeing… they began firing people in the government. And I think they began terrorizing what I would call to be Democrat voters or people who are in businesses relating to Democrat interests.” The result? A chilling effect on spending. “Half the population was ebullient about the election. And half the population was depressed.”
So what’s an investor to do? Einhorn’s playbook includes gold, inflation swaps, and a heavy dose of skepticism. “All of these behaviors are ultimately lead to inflation and higher inflation,” he warned.
His message is clear: the market’s calm is a mirage. The real storm—driven by fiscal irresponsibility and political paralysis—is brewing. And if Einhorn’s track record holds, it’s time to listen.
You can watch the interview here:
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