Hedge-fund manager David Einhorn, who runs Greenlight Capital, says we're seeing another tech bubble, CNBC reported, citing his fund's quarterly investor letter.
"Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it," Einhorn wrote in the letter (PDF) posted online by @Levered_Hawkeye.
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He continued: "In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm. Some indications that we are pretty far along include:
- "The rejection of conventional valuation methods;
- "Short-sellers forced to cover due to intolerable mark-to-market losses; and
- "Huge first day IPO pops for companies that have done little more than use the right buzzwords to attract the right venture capital."
In the letter, Einhorn writes that Greenlight is short some "high-flying momentum stocks" and "cool kid" companies that he's dubbed the Bubble Basket. He explains that the basket approach allows him to make each individual short small in an effort to reduce risk.
The short positions weren't disclosed in the letter.
However, the consensus on Wall Street continues to be that we are not in a tech bubble. Valuations aren't as high, IPO activity isn't as frenzied, and venture-capital funding isn't exploding as it did a decade ago.
Earlier this month, Goldman Sachs put out a note giving six reasons we're not in a tech bubble.
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Unfortunately, it's only after a bubble bursts that we realize we were in a bubble.
Einhorn, famous for his prediction of the Lehman Brothers collapse, also detailed a number of stocks in the letter that he's long as well as some positions he exited during the first quarter of this year.
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