David Einhorn, founder of hedge fund Greenlight Capital, believes that Brexit means more monetary easing is on the way.
And he explained this concept the same way he’s been doing it for years — by talking about jelly doughnuts.
“Brexit by itself will not be a significant economic event,” Einhorn wrote in his second quarter investor letter, explaining that the UK economy simply isn’t 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 Doughnuts.”
It also sent gold prices up, Einhorn pointed out, which meant a nice profit for Greenlight.
Einhorn first referred to global monetary easing as “Jelly Doughnuts” — a nod to Homer Simpson’s love for the sugary baked good — back in 2012 in an op-ed for the Huffington Post:
A Jelly Doughnut is a yummy mid-afternoon energy boost.
Two Jelly Doughnuts are an indulgent breakfast.
Three Jelly Doughnuts may induce a tummy ache.
Six Jelly Doughnuts — that’s an eating disorder.
Twelve Jelly Doughnuts 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 Doughnut 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.
Meanwhile, 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 signficant 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.