Einhorn says S&P lawsuit pressures rating agencies

NEW YORK Wed Feb 20, 2013 10:07pm IST

David Einhorn, president of Greenlight Capital, holds a toy wand as part of a joke during the Sohn Investment Conference in New York, May 16, 2012. REUTERS/Eduardo Munoz/Files

David Einhorn, president of Greenlight Capital, holds a toy wand as part of a joke during the Sohn Investment Conference in New York, May 16, 2012.

Credit: Reuters/Eduardo Munoz/Files

Related Topics

Stocks

   

NEW YORK (Reuters) - David Einhorn, hedge fund manager and chairman of reinsurer Greenlight Capital Re Ltd, said Wednesday that the U.S. government's lawsuit against Standard & Poor's has made rating agencies vulnerable.

Einhorn, who also runs the $8 billion hedge fund Greenlight Capital, said on an earnings call for his Cayman Islands-based reinsurer that the civil lawsuit reinforces short positions in Standard & Poor's parent McGraw-Hill MHP.N and Moody's Corporation (MCO.N).

"We believe the recent case against S&P is a negative for the rating agencies and Moody's is not immune," Einhorn said.

The U.S. government said earlier this month that rating agency Standard & Poor's inflated ratings and understated risks associated with mortgage securities. The lawsuit is seeking $5 billion.

The 2007-2009 financial crisis was due in large part to massive losses triggered by risk mortgage loans packaged and sold to investors, often with top ratings from credit raters.

Einhorn also said that his investment fund lowered its net long exposure to 29 percent at the end of January from 39 percent at year's end. He also said that he added to his short positions, or bets that a company's share price will fall.

He cited the U.S. economy's decline in gross domestic product at a 0.1 percent annual rate in the fourth quarter.

"As the market continues to advance even as the economy doesn't, we tend to become less enthusiastic," Einhorn said.

Einhorn added, however, that his short positions negatively affected performance in January, and that Moody's was his biggest losing short position last year.

Einhorn also said Apple, one of his biggest long positions, "has a fortress balance sheet with opportunities to unlock significant shareholder value." He owns roughly 1.3 million shares in the company

Einhorn announced on February 7 that he is suing Apple Inc (AAPL.O) to halt the company's falling share price and get it to deploy its $137.1 billion cash pile more effectively. Einhorn proposed that the company issue preferred stock and return more cash to investors.

(Reporting by Sam Forgione; Editing by James Dalgleish, Jennifer Ablan and Maureen Bavdek)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

FRESH RULES

A man speaks on his mobile phone in front of the Reserve Bank of India (RBI) seal at the RBI headquarters in Mumbai July 30, 2013. REUTERS/Vivek Prakash/Files

RBI says all companies must apply 2-step payments for credit cards

The Reserve Bank of India said that all transactions involving domestic credit cards must follow rules requiring additional verification, a stance that could impact companies such as Uber Technologies Inc that provide more simple app-based purchases.  Full Article 

REUTERS SHOWCASE

Record Highs

Record Highs

Nifty touches record high; software stocks gain.  Full Article 

New Adviser

New Adviser

Arvind Subramanian likely to be chief econ adviser.  Full Article 

Pricing Mechanism

Pricing Mechanism

Govt sets up a four-member panel to re-examine gas pricing.  Full Article 

Royalty Rates

Royalty Rates

India to hike iron ore royalty, miners may struggle to pass on extra cost.  Full Article 

Diesel Deregulation

Diesel Deregulation

Oil ministry to seek Cabinet nod on diesel deregulation - sources  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

Reuters Exclusive

Reuters Exclusive

Apple iPhone 6 screen snag leaves supply chain scrambling   Full Article 

Helping Regional Mills

Helping Regional Mills

Govt raises sugar import duty to 25 pct from 15 pct.  Full Article 

Curbing Risks

Curbing Risks

RBI to lower ceiling on bank loans to a single corporate group.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage