Tags: Einhorn | Bernanke | gold | easing

Einhorn Down on Bernanke, Up on Gold

Thursday, 25 Oct 2012 11:51 AM

By Dan Weil

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David Einhorn, head of hedge fund manager Greenlight Capital, is highly unimpressed with Federal Reserve Chairman Ben Bernanke’s massive easing program.

And he sees gold as investors’ answer to this flawed Fed policy.

“It seems as if nothing will stop the money printing, and Bernanke assures us that it will continue even after the economic recovery strengthens,” Einhorn writes in a letter to investors obtained by Dealbreaker.com.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Bernanke acknowledges that the Fed’s policy of record-low interest rates hurts savers, but argues they’re ultimately helped by the rising asset prices and healthy economy resulting from the Fed’s easing, the hedge fund titan says.

But does an accommodative policy actually promote a healthy economy? Einhorn is skeptical.

In addition, he says, “we have just spent 15 years learning that a policy of creating asset bubbles is a bad idea, so it is hard to imagine why the Fed wants to create another one.”

The central bank is shooting all its bullets when the economy’s not even in a recession, Einhorn notes. So what will it do if things get really bad?

“We don’t know,” he says. “but a large allocation to gold still seems like a very good idea.”

Sterne Agee metals analyst Michael Dudas shares Einhorn’s bullishness toward gold. “As long as the Fed keeps real interest rates low, forever it seems, we think gold will continue to get bid,” he tells CNBC.

Dudas thinks the precious metal will reach $2,000 an ounce next year.

Editor's Note:
You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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