The annual Sohn conference didn't get much attention on Friday because it was virtual and because of the wild moves in markets but there was some good content.
In his presentation, Greenlight Capital founder David Einhorn made the case for gold, saying it was finally time to pull the trigger.
"Eventually is not a good time horizon for a hedge fund but my thought for today is that 'eventually' is now, or at least close enough to buy gold," Einhorn said.
Gold is down $43 to $1827.
The call is largely macro, highlighting enormous deficits and the potential for global inflation.
"Investor eagerness to throw nearly all growth capital at software-is-eating-the-world companies has driven up the cost of equity for companies that ensure the world can eat," he said. "The current energy crisis isn't stimulating any change."
He talked about a decade of under-investment in the 'old economy', citing:
- cement
- steel
- mining
- fertilizer
- chemicals
- paper
- traditional energy
- housing
He noted that higher prices aren't fueling investment because of low multiples so that all the adjustment will need to come from the demand side. Because of that, inflation will be much more persistent and those sectors as attractive investments.
For gold, he argues that because of high public debt, the Fed can't raise rates as much as it needs to. He also argues that the dollar has been weaponized by the freeze of Russia reserve assets.
"When countries don't trust each other over bonds or currencies, gold becomes the ultimate reserve asset," he said.
Ultimately though, he believes the Fed is bluffing and doesn't have the courage or ability to raise rates high enough to tame inflation. The spike will eventually come when the Fed is forced to loosen rates into an inflationary spike in order to help the Treasury fund itself.
Watch his presentation here:
