Sunday, November 22, 2015

Great Critical Post On Einhorn

From Value and Opportunity:

"Either Einhorn assumes implicitly that cost of capital goes down dramatically or he has some 'secret' that I don’t know. If I look at Einhorn’s last pitches, especially AerCap, SunEdison and Consol, there seems to be a common theme: He is always pitching capital-intensive companies with significant debt where he assumes pretty low cost of capital in order to show upside."
A correspondent writes,
"I think there's a mix of macro and micro forces at work here: on the macro side, by pressuring investors to reach for yield, the Fed has made it possible for crappy companies like SUNE to pursue the financing strategies they have. On the micro side, value guys like Einhorn have great historical returns, which has led to inflows, and now they're managing more money than they can realistically invest, which has forced them to put money into increasingly marginal stocks."
SUNE has been completely obliterated. Seems like a decent chance that the bear market has finally arrived.

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