02.02.2009 - Hedge fund star Einhorn now invests in gold, Gold and oil seen as the best commodities in 2009
From Komfie Manalo, Opalesque Asia: Hedge fund whiz David Einhorn, founder of the New York-based Greenlight Capital, has finally invested in gold, reports BusinessWeek.com. Einhorn, who was credited for predicting the fall of Lehman Brothers and taking on Allied Capital (ALD), a commercial lender he accused of fraudulent accounting practices, has long avoided investing in gold. But with the price of gold steadily rising since November 2008 to close at $910.70 per troy ounce on Jan-26-2009, many investors, including Einhorn, are convinced the precious metal may be the best option to protect them against a possible economic catastrophe. Besides, the Federal Reserve’s stimulus package plan also might drive the price of gold up. In his letter to his investors on Jan. 20, Einhorn explained why he had avoided investing in gold. He said his grandfather Benjamin, “an amateur gold bug, lost money for 30 years waiting for the U.S. currency to lose its value due to runaway inflation that never arrived.” He said his grandfather had advised him that investing in gold and was the only “sensible” strategy against the threat of inflation and risks poised by so-called fiat currencies. “To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out.” In addition to buying gold, Greenlight told said it added call options on gold and the Market Vectors Gold Miners exchange-traded fund to the company’s investments. According to Bloomberg.com, Einhorn’s $5.1b hedge fund declined 22.7% in 2008, against the Standard & Poor’s 500-stock index’s 37% drop. Another Bloomberg.com report said Greenlight had lost about 23% last year, its first annual loss, after wrong-way bets on Helix Energy Solutions Group Inc. and Volkswagen AG. Early this month, SeekingAlpha.com reported that the superior investment skill of Einhorn and Greenlight’s long/short strategy should outperform the markets in good and bad times. 39-year-old Einhorn has had phenomenal success managing Greenlight Capital, a value-oriented hedge fund that has grown into a billion dollar firm from humble beginnings with only $1 million in assets in 1996. Golden outlook As of Jan. 27, the 16-company Philadelphia Stock Exchange Gold & Silver Index gained 90% in the three months while the Standard & Poor’s 500 Index fell 0.4%. Gold rose 21% in that period. Gold futures for April delivery fell $11.30, or 1.3%, to $888.20 an ounce on Wednesday (Jan. 28) on the New York Mercantile Exchange’s Comex division, said Bloomberg.com. Richard Gray, a mining sector analyst at investment bank Blackmont Capital in Toronto Canada, forecasted gold would average $950 and trade as high as $1,100 in 2009, according BusinessWeek.com. Gold and oil best commodities in 2009 Most analysts have predicted gold to be four digits in the face of historic redemptions and the rush for liquidity. According to CommodityOnline.com, gold continues to be one of the best performing asset classes of the decade. And while the meltdown in global markets have pulled gold prices down in November, the precious metal remains in a long-term bull market. Overall, analysts are forecasting gold to regain the $1,000-an-ounce level this year and could substantially outperform any general stock market recovery. Another commodity that needs a serious look at is oil which peaked to a record high $147 a barrel in July 2008 to a low $32 a barrel in December-08. But with major oil producers, particularly members of the Organization of Petroleum Exporting Countries (OPEC) having the ability to manipulate the price through production controls, MineWeb.com said, the sector will see a quick recovery from declining prices. MineWeb.com further said the impact of cuts in oil production takes time to sink through and affect the markets and so is expecting the price of oil to double within the next few months. Barclays Capital, one of the firms bullish on oil, forecasted oil to reach $76 a barrel for average U.S. crude in 2009. To subscribe to Opalesque’s free daily briefing on commodities, click on ‘Commodities Briefing’ (and uncheck other options) here: Article Source: http://www.opalesque.com/index.php?act=registration
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