Delivering Alpha Live: David Einhorn says he has increased bets on inflation since Trump’s election

Hedge fund manager David Einhorn sees the market as overvalued and sees himself as one of the few managers still looking for bargain stocks. He recently revealed a position in beaten-up Peloton and at DA he revealed a new position in CNH Industrial, a maker of farm equipment that he described as a “medium-sized” position and under-the-radar value play coming out of a bearish cycle.

“It’s exactly the kind of situation that absolutely nobody cares about right now because it’s cheap, and the news over the next period of time isn’t going to be very good. Agriculture prices are low, and agricultural equipment is ending down cycle,” Einhorn said at a panel with CNBC’s Leslie Picker.

—Yun Li

Hedge fund manager David Einhorn sees a market with rich valuations that is nonetheless still enticing.

“This is a really, really, really pricey environment, but it doesn’t necessarily make me bearish. Asset prices can trade at the wrong price, and they can trade at the wrong price for a long period of time,” the head of Greenlight Capital said Wednesday at Delivering Alpha.

“An overvalued stock market, that’s not necessarily a bear market. It doesn’t necessarily mean it has to go down anytime soon, and so I’m not particularly bearish,” he added. “I can’t really see what’s going to break the market at this point.”

As far as opportunities, Einhorn, who recently took a stake in Peloton, said there are companies that are “hated and forgotten about.”

—Jeff Cox

Greenlight Capital president David Einhorn Election said the election results were good in terms of avoiding the issues of political stability which he was worried about not long ago, but for the economy there is a much bigger problem coming in Trump’s policy in the form of higher inflation.

“We have increased our bets on inflation,” he told CNBC’s Leslie Picker at DA. “We will have another inflection up in inflation,” he said. “The policy mix being proposed is inflationary and we will see more of that over the next few years.”

Einhorn forecast inflation headed back to 3.5%-4.5% but not back to the 7%-9% level.

That views come from all of the tax cuts that Trump would like to do, and even if he does not do them all, or Congress refuses to pass them all, the combination of some tax cuts in a strong economy with wage growth —and an immigration policy that will be inflationary in terms of cost and labor — will lead to “a bunch of inflation.”

“What they chose to do about that, I don’t know. There is an argument for tolerating it and trying to run the economy as hot as possible. I don’t really know what they will do,” he said.

But Einhorn also said he isn’t bearish on the stock market even though he has recently talked about how expensive he thinks the market is.

But he did add that the bond market has not yet begun to price in what will be a “difficult treasury situation.”

—Eric Rosenbaum

Jagdeep Singh Bachher, UC Investments’ chief investment officer and vice president of investments, oversees a portfolio with $188 billion under management, but in recent years, he estimates that 25%-35% of his time has been devoted to working with students on the rising number of issues which have led to tension on campus. His investing system sold fossil fuel and tobacco investments in 2018, but in the past year, it faced major student unrest over war in the Middle East.

He recalled in an interview at DA that the day before a board meeting he quietly walked into a student tent on campus where students were calling for the CIO of the investment organization through a loudspeaker. “They didn’t know I was there,” he said.

He ended up giving the students his email and cell phone number after revealing his identity, but four months later, a board meeting was disrupted and he told them, “You never called.” 

Ultimately, he offered the students full transparency on the portfolio and got the students to send a letter with their demands, which included divesting from anything having to do with Israel.

So he told them the university would need to sell $32 billion in U.S. treasuries, which surprised the students.

“We’re the biggest backers,” he told the students. “And then they said, ‘okay, we’ll have another conversation.'”

While he related the incidents with a light touch, Singh Bachher said he takes the relationship with students, and their concerns, seriously, and they have continued to have lots of dialogue. “We need to learn from them. They are the early detection systems.”

—Eric Rosenbaum

Disney tapped James Gorman to replace Mark Parker as the company’s next chairman, effective in January, and has said it will name a successor for CEO Bob Iger in early 2026.

After his losing proxy battle at Disney, Peltz had kind words to share about Gorman as a chairman. “Gorman — he’s a good man, and he is going to do a great job, and he will get a respectable CEO in there.”

But he hit Iger and another former Disney CEO, Michael Eisner, for acting as if they were Walt Disney reincarnated. “I don’t know what happens in that office. If you’re there for a couple of years, you think your name is Walt Disney. … They all seem to think they are Walt Disney. I knew Bob a little before the fight and I never saw him draw a Mickey Mouse.”

Peltz said he doesn’t believe the Disney timeline for replacing Iger, though he said he has no inside information. Peltz told attendees at DA that he expects a new CEO at Disney before the end of 2025.

—Eric Rosenbaum

Among all the tax changes that President-elect Trump might make which could affect investors, one that probably gets less attention in the U.S. is on the minds of big foreign investors.

Jo Taylor, Ontario Teachers’ Pension Plan CEO, said one risk that the Canadian pension investor faces is “how much of an outsider may we become,” he said.

The Ontario pension plan has $120 billion invested in the U.S., and “the freedom to operate, and ability the ability to still be a preferred investor” in areas where it can provide long-term capital is a key issue. “Taxation changes would be most immediate one,” he said of worries about new policies that could emerge in the U.S. “We always try to have a neutral approach to global taxation,” he said.

If the pension giant’s taxability changed in regards to profits being translated back to Canada, if it became a taxable entity in a new manner, “even a small tax percent is quite a lot of money,” Taylor said.

—Eric Rosenbaum

Anne Walsh, Guggenheim Partners Investment Management chief investment officer, was surprised by the stock rally after the U.S. elections, but less so that stocks went up than that they went up by so much. But her bigger concern remains on the bond side of the markets.

She said investors will be “more wary” given the election rally and the pulling forward of expectations about tax cuts and regulation and expectations they will contribute to growth.

But it is in the bond market where investors should expect even more volatility. The bond market has been reacting to reflationary concerns since tax cuts would contribute to the deficit and even as the Fed makes progress on inflation the latest CPI data out Wednesday showed “stasis” in that effort.

“Volatility will be with us for a while,” Walsh said.

She expects the 10-year Treasury to trade between 3.5% and 4.5% for “a while,” possibly a few years she said.

“That’s the question for bond investors, not just the extension of tax cuts but new tax cuts and no offset with revenues,” Walsh said.

There will be elevated levels of fixed income volatility relative to equity volatility, but investors should also be aware of a worsening risk premium for stocks.

—Eric Rosenbaum

Jo Taylor, Ontario Teachers’ Pension Plan CEO, said his fund is taking a two-pronged approach in investing in the red-hot artificial intelligence space.

“We try to play it both ends of the spectrum. So we’ll invest in larger businesses that are able to monetize more and more opportunities,” Taylor said. “We have a venture growth team that will work with U.S.-based funds to find the emerging, perhaps more niche AI businesses, which may be disruptive and able to create disproportional value.”

AI stocks such as Nvidia emerged as the biggest gainers over the past two years, driving the bull market to new heights.

— Yun Li

CNBC anchors Andrew Ross Sorkin and David Faber surprised the Delivering Alpha audience with AI deepfakes of themselves to demonstrate the latest in generative AI tech.

“AI me is almost as good as ‘Squawk Box’ me,” Ross Sorkin joked.

The rise of this type of technology has led to concerns regarding misinformation as deepfake videos could sway public opinion and affect the many elections taking place globally in 2024. 

—Sara Lindsay

President-elect Donald Trump’s victory last week has introduced a heightened level of policy uncertainty into investment decisions, said Olaolu Aganga, chief investment officer at Mercer U.S.

“The policy changes are really what could impact how we allocate capital,” Aganga said Wednesday at CNBC’s Delivering Alpha conference in New York. “So it’s the uncertainty around that, and just making sure that as we look for opportunities, they’re more centered around the longer-term types of themes.”

Along with that, she said focus will be on various market themes, including changes in tax law as well as the likelihood of Trump to turn focus away from renewable energy. Mercer, a professional services firm, looks closely at corporate risks, equity demand and the state of real assets.

“All three are impacted by any kind of policy changes,” Aganga said.

—Jeff Cox

Billionaire investor Nelson Peltz is confident in the incoming Trump administration, but he doesn’t think the stock market rally will last.

“Trees don’t grow to the sky, definitely not uninterrupted,” he told CNBC’s Sara Eisen at CNBC’s Delivering Alpha conference. The Trian Partners’ CEO thinks investors are getting caught up in the hype and that things will cool down. “There will be something that will upset it. I think we’ve got euphoria from the election. On the other hand, you look at the international stocks, we’ve gotten slayed over the last week.”

He also expressed concerned about an S&P 500 led by a top-heavy group of high-momentum stocks.

—Jeff Cox

Nelson Peltz believes U.S. President-elect Donald Trump will use tariffs as a negotiating tool to convince Europe and others to lower duties on U.S.

“I think he intends to do it, but I think our trading partners are going to change it. I mean, why should a Chevy in Paris cost over $100,000,” Peltz said.

“I think Trump is right. I think the threat of the tariff will bring these guys in line. I think we need that. That’s where to start the negotiation. That’s his style, you know, come to the table with a hammer and see what happens,” Trian Partners’ founding partner and CEO said at the conference.

Trump made universal tariffs a core tenet of his economic campaign pitch, floating a 20% tax on all imports from all countries with a specifically harsh 60% rate for Chinese goods.

— Yun Li

Trian Partners CEO Nelson Peltz says he has been trying to convince a portfolio company to not register in Holland after last weekend’s antisemitic attacks that occurred around a football match between a Dutch team and team from Israel.

“You really must come down hard and obliterate it. There’s no room for it, no room for any of this stuff in America,” said Peltz, who noted he has recently been reading a book about WWII.

“To see all these horrible things the Nazis did, and here we are, we’re gonna let this get started all over again?”

—Eric Rosenbaum

For top hedge fund investors such as David Einhorn, if it’s not time to call a market a bubble or be outright bearish, elevated price-to-earnings ratios should result in caution. In a recent letter to his investors, Einhorn called it the “most expensive” market since his hedge fund Greenlight Capital was founded in 1996.

Einhorn went on a “buyers’ strike” at the end of 2023, but came back into the market acquiring medium-sized positions in names like software firm Alight and drugmaker Viatris.

Last month, he made a bullish case for Peloton, saying the shares are significantly undervalued.

Investors will be interested to hear if he’s still finding any values. “We think Paul Tudor Jones is right when he says that managing the last third of a great bull or bear market move is often the toughest,” Einhorn said in his recent letter to investors.

—Yun Li

There’s been a rush of enthusiasm on Wall Street regarding Donald Trump’s election win, but hedge funds actually generate more alpha when the White House is occupied by a Democrat president than a Republican one, according to hedge fund database HFR, reviewing data going back to 1991.

When compared with the S&P 500, the industry underperformed regardless of who was president. But during Democratic administrations, the gap was about 183 basis points, with hedge funds delivering average, annualized returns of 10.16%, compared to 11.99% from the S&P 500. The underperformance gap during Republican administrations was 331 basis points. (1 basis point equals 0.01%.)

Of course, making predictions about what the next four years entails for stock pickers based on politics is hard to do. In the end, hedge fund returns are far more correlated with positioning relative to various asset-class performances than particular policies by any administration.

—Leslie Picker