Things go better with Coke

Not to be confused with crack

Another polemic from hedge fund manager David Einhorn is in the wild, with his presentation at Grant’s (Interest Rate Observer) Spring Investment Conference earlier this month spreading across the financial interwebs with the virulence of a Britney crotch shot. At the macro level he blisters the usual suspects—rapacious investment banks, flawed risk models, mentally impaired credit ratting agencies, and captive regulators—before calling out Lehman Bros and its charismatic management, applauded recently for “not playing bridge while the franchise implodes.”

On recent market actions:

The next question is whether the bail-out was a good idea. It really comes down to Coke vs water...Coke tastes better and provides an immediate sugar rush and caffeinated stimulus while quenching thirst. Water also quenches thirst, but it isn’t as stimulating...It doesn’t make you fat and is much better for your long-term health...

One of the things I have observed is that American financial markets have a very low pain threshold. Last fall with the S&P 500 only a few percent off its all time high prices after a multi-year bull market, certain commentators and market players were having daily tantrums demanding that the Fed give them the financial equivalent of Coke. Other parts of the world endure much greater swings in equity values without demanding relief from central planners.

The Fed responded by providing liquidity and lower rates...now they have introduced the Big Gulp, also known as the Bear Stearns bailout and an alphabet soup of extraordinary measures to support the current system. If that doesn’t turn the markets, they are threatening the financial equivalent of having the water utilities substitute Coke for water throughout the system.

Private profits and socialized risk
by David Einhorn
Apr. 8 2008 [Tug o’ the forelock: Alchemy of Trading]

Earlier on NakedShorts
The Einhorn Agenda
Oct. 26 2007