Einhorn: 'We wonder if the market has adopted an alternative paradigm'

LewisBraham

This sounds familiar:
https://finance.yahoo.com/news/einhorn-wonder-market-adopted-alternative-paradigm-163704878.html

Hedge fund billionaire David Einhorn is struggling to make sense of the stock market. In his latest investor letter, the founder of Greenlight Capital raised an interesting question about valuation.

“Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value,” Einhorn wrote in a letter to investors dated October 24. “What if equity value has nothing to do with current or future profits and instead is derived from a company’s ability to be disruptive, to provide social change, or to advance new beneficial technologies, even when doing so results in current and future economic loss?”

Ted

@Lewis: His hedge fund up 3% YTD, give me a break, an idiot throwing a dart at a stock market board has done five times better than Eddy !
Regards,
Ted

LewisBraham

@Ted How old are you and do you forget how value managers who were subsequently proven right like Yacktman, Eveillard, Grantham, and Sanborn performed in 1999? Look at Einhorn's long term record and you'll see he's no dummy.

JoJo26

Many of us fail to take a long-term perspective and view things over a full market cycle. I'm a firm believer that things will inevitably turn and a lot (not all) of these hedge funds that investors have rapidly fled from will prove they are actually effective investments. This will ultimately lead to investors piling in again, chasing returns and in 10-15 years we will go through the process again. "It's like a circle."

https://youtube.com/watch?v=qmzxR0zfIN0

Junkster

https://www.gurufocus.com/profile/David+Einhorn

Einhorn’s Greenlight Capital was funded in 1996 and through August 2006 had stellar 29% annualized returns. Since then not so stellar ending 2016 which shows a NEGATIVE 2.4% annualized for three years, +3.6% annualized for five and +4.5% for ten.

Ted

@Lewis: No question Greenlight Capital has an outstanding record with an annualized return of 16.1% since it's inception in 1996. However, its a question of what have you done for me over the last ten years, not much !
Regards,
Ted Greenlight Capital S&P 500
3-Year Cumulative -7 (-2.4%/year) 29 (8.9%/year)

5 Year Cumulative 19.1 (3.6%/year) 98.2 (14.7%/year)

10-Year Cumulative 55.6 (4.5%/year) 95.7 (6.9%/year)

LewisBraham

@Ted I agree recent performance has been lackluster, but this is precisely the kind of problem value investors face in a strong bull market, especially value managers like Einhorn who can go both long and short or bet against stocks. It is also remarkably similar to what happened in the go-go 1990s to many value investors who started to lag the S&P 500. Also, eerily similar is talk of a "new paradigm" and that value investing seems not to work on disruptive tech companies. A number of value managers were fired in the 1990s, only to be redeemed in the subsequent crash.

JoJo26

I think we can all agree that the last 10 years have been abnormal... GFC, elongated recovery boosted by QE. I have no crystal ball to tell you when things will turn, but I do believe they will and we will all be on this forum posting about our low (maybe negative) absolute returns.

Junkster

JoJo26 said:

I think we can all agree that the last 10 years have been abnormal... GFC, elongated recovery boosted by QE. I have no crystal ball to tell you when things will turn, but I do believe they will and we will all be on this forum posting about our low (maybe negative) absolute returns.

Abnormal or not, but many Baby Boomers, especially the older ones, have firmly secured their retirements due to the past 10 years (or 9.5 years to be more precise) and have or are transitioning to a more conservative mode. The joys of being old! First it was the decades of the roaring 80s and 90s and then the QE driven decade. For most, no skills required, just being a full fledged participant.

JoJo26

Junkster said:

JoJo26 said:

I think we can all agree that the last 10 years have been abnormal... GFC, elongated recovery boosted by QE. I have no crystal ball to tell you when things will turn, but I do believe they will and we will all be on this forum posting about our low (maybe negative) absolute returns.

Abnormal or not, but many Baby Boomers, especially the older ones, have firmly secured their retirements due to the past 10 years (or 9.5 years to be more precise) and have or are transitioning to a more conservative mode. The joys of being old! First it was the decades of the roaring 80s and 90s and then the QE driven decade. For most, no skills required, just being a full fledged participant.

True, and that's great. However, for investors still participating in the markets, we can't fall victim to the end point sensitivity here...