While Greenlight founder and iconic value investor David Einhorn (who, let's be honest, has had better decades) stole today's show with commentary from his latest letter to investors in which he not only described what's going on in tech an "enormous bubble" but also defined the exact date when said bubble burst as Sept 2, 2020, when the Nasdaq hit its all time high thanks to the gamma-squeezing lunacy of SoftBank...
... he had several other, less reported but perhaps even more important comments in his latest letter, this time addressing the precarious state of the union as the country heads into arguably the most important presidential election in history. We have excerpted these in their entirety because while Einhorn's timing on the end of the tech bubble has proven to be rather dismal in the past 5 years, his political observations are spot on (highlights ours):
The coming election will settle (or attempt to settle) which side is in the majority. This may rank among the most perilous times, absent war, in modern American history. The pandemic has exposed and exacerbated deep-rooted inequities. Peaceful protests for social change by day have sometimes devolved into rioting and looting at night. As the police have been unable to keep some cities safe, protests have been met with armed opposition from vigilante militias. Violence and death have ensued. The pandemic has compounded the public safety problem by making it impractical to arrest any but the most violent offenders, as jailing creates a public health risk.
It isn’t difficult to envision this tempest exploding after the election, no matter which side wins. According to Politico, 44% of Republicans and 41% of Democrats believe there would be at least “a little” justification for violence if the other party’s nominee wins the election. A poll by Rasmussen Reports found that 34% of likely voters believe a civil war is likely in the next 5 years. While this is probably too pessimistic, it likely reflects a rising tail risk.
At the national level, the political parties are unable to find common ground on almost anything. The winning side tells the losing side that “elections have consequences” and uses that rationale to change rules that had previously maintained political balance and stability. This dynamic has been escalating over the past few election cycles, creating dysfunction in governance. The current president acts as if he only represents the states (and people) that voted for him. The opposition threatens to retaliate should they gain control by eliminating the filibuster, adding two new states that will alter the electoral map in their favor and packing the Supreme Court with additional seats. This tit-for-tat and related social unrest create risk. The political center is collapsing.
The only common ground between the two parties seems to be money-printing. Over $3.3 trillion has been printed year-to-date, which represents nearly 22% of all U.S. dollars in existence at the end of 2019.
Unsurprisingly, gold is outperforming. Investors who have argued against gold for decades are now buying some.