- Courtesy of Randy’s Donuts
David Einhorn, the founder of the hedge fund Greenlight Capital, believes that the British exit from the European Union means that more monetary easing is on the way.
And he explained this concept the same way he has been doing it for years: by talking about jelly donuts.
“Brexit by itself will not be a significant economic event,” Einhorn wrote in his second-quarter investor letter, explaining that the UK economy simply was not big enough to make much of an impact on the global economy.
“However, the mere pretense of an event is likely sufficient to entice the global monetary authorities into serving up a fresh course of Jelly Donuts.”
It also sent gold prices up, Einhorn said, which meant a nice profit for Greenlight.
Einhorn first referred to global monetary easing as “Jelly Donuts” – a nod to Homer Simpson’s love for the sugary baked good in “The Simpsons” – back in 2012 in an op-ed article for The Huffington Post:
“A Jelly Donut is a yummy mid-afternoon energy boost.
“Two Jelly Donuts are an indulgent breakfast.
“Three Jelly Donuts may induce a tummy ache.
“Six Jelly Donuts – that’s an eating disorder.
“Twelve Jelly Donuts is fraternity pledge hazing.
“My point is that you can have too much of a good thing and overdoses are destructive. Chairman Bernanke is presently force-feeding us what seems like the 36th Jelly Donut of easy money and wondering why it isn’t giving us energy or making us feel better. Instead of a robust recovery, the economy continues to be sluggish. Last year, when asked why his measures weren’t working, he suggested it was ‘bad luck.'”
It’s unclear where he thinks we are now, but we’ve got to at least have a tummy ache given how weird the market has been acting. Stocks are melting up, bond yields are still at historic lows, and global growth is nowhere to be found.
And as Einhorn pointed out in 2012, Homer and Marge Simpson are watching their retirement savings stagnate.
A few more things to note in this letter:
- Einhorn’s significant losers on the long side in Q2 were Apple and Macy’s. Greenlight has exited its position in Macy’s. On the short side, Amazon and an undisclosed fracking short caused Greenlight some pain.