David Einhorn’s Greenlight Capital lost 3.8% net in the second quarter, versus a 10.9% gain for the S&P 500. The firm’s year-to-date return now stands at 4.1%, a bit shy of the index’s 6.2% return.
Shifting narratives
In their Q2 2025 letter to investors, which was obtained by Hedge Fund Alpha, the Greenlight Capital team noted that in the previous quarter, DOGE was a major topic. However, it has more recently become clear that President Donald Trump didn’t actually desire to significantly cut the budget to give the nation’s fiscal situation a boost.
Referring to Elon Musk, the Greenlight team added that seeing the “charismatic former head of DOGE,” who appeared to be truly worried about the budget deficit, “completely fail and return to the private sector” confirms their “long-held” opinion that political leadership on both sides of the aisle simply don’t want to address the issue until there’s a real crisis that forces its hand. The Greenlight team believes DOGE “may have been the last, best hope to avert a crisis.”
Congress eventually passed $9 billion of DOGE-related budget cuts, but the One Big Beautiful Bill is expected to raise the nation’s debt by trillions of dollars over the next 10 years.
Trade policy
In Greenlight’s Q1 2025 letter, the team discussed deeply the nation’s trade policy. They gave Trump and his team credit for cementing a number of major concessions from multiple important trading partners. While the market has expressed joy that trade policy won’t be as extreme as first set out on Liberation Day, the Greenlight team feels that the TACO saying, or Trump always chickens out, is “misguided.”
Of course, Trump has not always followed through on his threats, and the Greenlight team characterized “his often outlandish statements” as “trial balloons.” However, they feel the president is generally executing his agenda.
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