If you haven’t read Hugo Lindgren’s piece on David Einhorn, go read it now, it’s excellent. I even like the way that Lindgren links Einhorn’s poker prowess to his short-selling abilties:
A few days before this year’s conference in May, Einhorn and his analysts at Greenlight had a private call with Erin Callan, the then-chief financial officer of Lehman Brothers…
She was evidently not prepared for the complexity of Einhorn’s questions and tried to bluff her way through. “The conversation was reminiscent of the ones I had with Allied,” says Einhorn. “We had our questions, we were organized, but she was evasive, dishonest. Their explanations didn’t make any sense.”…
A trader who has known him for more than a decade said his talents at the table translate easily to the market: “There are lots of smart people out there. I don’t think all of them have the ability to read the rest of the players as well as David…
He certainly knows what bluffing looks like. In its early days, Greenlight prospered, in part, by identifying a succession of weak financial firms and aggressively shorting them… His shorts on Conseco, CompuCredit, Sirrom Capital, and Resource America–some of the more spectacular corporate flameouts of the late nineties and early aughts–each returned more than 80 percent.
Today, his gambling skills are held in higher regard than ever. While his supporters hail him as a brave reformer and his detractors call him a predator, most of Wall Street looks at him as the guy who called Lehman’s bluff and walked away with a giant pot.
There’s also new news in the piece about the way that Einhorn’s Lehman short came about: it started as just one of a basket of 25 financial stocks that Einhorn started shorting in July. Eventually he covered all but Bear and Lehman; now, only Lehman is left. Has he covered that short too, now? My guess is yes, or a lot of it at least.
I get the feeling that Einhorn’s an equity guy at heart: he was short the stock, not long credit protection. He doesn’t need Lehman to go bankrupt in order to make money, he just needs the shares to fall. Which they have done, quite spectacularly. And any poker player knows it’s nearly always better to take your winnings when you can rather than try to get greedy and play out the hand to the bitter end.