David Einhorn, Greenlight Capital founder, & president discusses donating his $4.3 million haul in a non-profit poker tournament for education, with Michael Brown, City Year co-founder & CEO.
Video and transcript below:
joining us on set in a specialsquawk exclusive is poker extraordinaire david einhorn andmichael brown, co-founder and ceo of citi year, named one ofamerica’s best leaders. thank you for being here. poker world you won but you got bluffed at the very end there. can we talk about it? what happened? it wasn’t at the very end. the very end i lost on a hand, the other guy had a little better hand than i did but there was a hand where i misplayed, i should have checked and called what he was doing and he outplayed me. have you ever won that much money? you put up a million bucks. no, i’ve never won that much money. this was probably the biggestpoker prize tournament ever. and how often do you play poker?in the underground things in the city or what are you doing? all together including going to charity events, playing with my kids at thanksgiving and stuff like that, maybe ten times a year. so in these tapes of you playing you’re wearing a red jacket which is the citi year icon amazing charity. we did something two or three years ago. a citi year breakfast. city year is like an urbanpeace corps, recruit young adults ages 17 to 24 giving a year of full time service serving the highest poverty schools in the country helping to address the high school dropout crisis. every year about a million students drop out of high school. that’s the bad news. the economic effects are staggering, it costs the country over about $1.5 trillion over the next decade about the 10 million students that will drop out absent intervention. we know where the young people are. 12% of the high schools in the country produce 50% of the dropouts and we know what they need. city year corps members go into the schools from 7:00 in the morning until 6:00 at night and keep them back on track. we’ll say yes to a lot more schools and students that need city year. i want to thank david publicly, an incredible achievement, 48 ayers and to come in third and most were professional poker players. what are you doing behind thesunglasses? do they read cards? you can’t see through the cards with those. actually i had a hard time with the glare. there was a lot of tv and the lights were there. i couldn’t see the cards so i got the sunglasses to cut down on the glare. you don’t want to look around what was that card there. so you’re very interested in education. do you have a position on schoolchoice, charter schools? what is interesting about city year and i think the charter schools are great, there’s high performing charter schools and you know how to education anybody. we’ve proven that which makes education a solvable problem butwhat’s really good about city year is whereas the charterschools it’s conflicted. it’s the teachers unions on one side and new rules over here and new schools. i think in order to fix thepublic education problem, we have to fix the existing publicschools, and what’s exciting about city year is it’s not offensive to teachers unions. it’s not offensive to any of the existing constituencies that are sort of behind the failing public schools.it’s just an added resource that comes in. what if they’re failingbecause of the unions? i don’t want to ruffle anyone’s feathers but what if that’s the root cause to fix the public education system you need to deal with — schools that fail should beallowed to fail. that that is the problem, not that you’re not going to offend them. it’s able to improve the culture within the school. it’s built to make the environment nicer for the kids,gives the kids a better opportunity to succeed within the school.i went to one of the breakfasts and i literally cried. it was unbelievable. it was extraordinary. while we have here we have to talk about markets and what’s going on in the economy. you wrote a piece about two months ago i want to say and used this metaphor about the jelly doughnut, the fed as the jelly doughnut in terms of stimulus and what they’re doing. where do you think we are now? jelly doughnut number 41. and there’s a point where you have too many jelly doughnuts. we’re going to qe5 at this point, you think this is doing nothing? i think it’s actually counter onproductive, yeah. i think having the very, very low zero rates is depressing to people. i think it deprives savers ofreasonable incomes and ability to forecast a reasonable income and it cuts down on consumption. i think all of the stimulus, it drives up food prices, it drives up oil prices and lowers standards of living and ability to spend on other things.if you had a conversation with ben bernanke? raise the interest rates to o2%r 3% level something like that. you have a number of stock picks going on right now going into earnings season.you expect this to be a good period? a bad period? what are you thinking? i’m hoping it’s a good period for our lungs. i kind of walked into that. you have been a big bull on apple. yes. are you still there? absolutely. stock’s come down a little pit. it’s coming back up. on a relative basis. it fluctuates. we’re not in apple for a quarter. we’re two, three years into the apple investment and the way it seems headed it’s likely we’ll be there for a good while longer. you had a big short on green mountain, which worked out so far. i noticed i came into the studio you served last time green mountain in the back room. now it’s flavia. i don’t know what the story is. maybe you did that to impress me, it worked. that call happens and you see the stock move. ayou amazed at your own power? it’s weird. you open your mouth on a phone call and they don’t know what the question is and if you’re right but it’s doomed. sometimes it’s much ado about nothing honestly. what is, you? the kind of reactions. going back to apple for air second, where do you think it goes? you’re in it for a couple of years. we’ve been in it for a couple of years. what is your target? i think the stock issubstantially undervalued. it will be a trillion-dollar company. i would expect. first one. i think it’s, you know, the best big growth company we have. it is the dominating brand in the area that it is and trades at a multiple below the average in the s&p 500. i think that’s extraordinary. you called lehman, right? i don’t know if the libor scandal means anything to you but do you have views on what this could do to the banking aboutis? i was going to throw morgue noon the mix in terms of how you’re think being wall street. i don’t va any opinion about the libor thing, it is what it is and it’s nice whenever they clean up some of this stuff.more broadly you’ve written about wall street and wall street culture and some of the issues you think about too big to fail, you look at what’s happening to jpmorgan, finding out more about the credit loss views from the oracle in. i don’t know about oracle. were you surprised by the jpmorgan news when it broke? i didn’t know anything about the subject. when you read about it you thought? it sounded like somebody took a very big position in something. david’s a man with few words but the words that he says do — sometimes he says nothing like just now. i’ve been instructed to ask whether you have a position inherbalife. i haven’t said anything about herbalife. hold on, who instructed you to ask about herbal life? i got the ghost in my ear. i think it might have been god, i’m not sure. and you’ve heard that song, i want to meet her someday. impressive that david is one of the people who fundamentally researches stocks, doesn’t trade on momentum and picks individual stocks to win or lose. that’s adable in today’s world, trade today, sell at the next minute world. i think it’s really fun. you go deeply into the financials, deeply, deeply. or into the operations orwherever the, we need to go. great debate over amazon. you’ve been, have some thoughts on that? i don’t think it was such adebate about amazon. i was pointing out that amazon is tough on its competitors because amazon doesn’t seem to feel compelled to make a profit and it’s hard to compete againstsomebody who doesn’t feel a need to make a profit. is that a good investment long-term or bad investment long-term? it makes it tough for the competition. it doesn’t say anything aboutamazon one way or the other. you don’t own amazon but notshort on amazon. no. so when you made that comment which was about a month ago? it was at the rish zone. he’s doing a great job, horrible jo be? with amazon look at the dynamic it creates for its xet, to. the office and electronics guys how they suffered at amazon’s hands. do some housekeeping on herbal life, did you ever have a position? yeah, we haven’t said. you haven’t said. yes. the stock got hammered almost immediately in seconds. we haven’t said and i’m not going to say today.bringing it back to education, views on for-profit education companies, there’s been a number of other hedge fund managers who have been short that world. we were a few years ago and it worked out nicely for us. we’ve left that. do you have a broader view on — he really is a man of few words. i think these are, this is a very tough business model. i think that huge percentage as the money goes into marketing, a lot of it goes into profit margin. the quality of the education generally isn’t very high and people are being charged $30,000 a year of loans saddling them for the rest of their lives, nonforgivable loans, the student loans and i think it’s a lot of the kids who wind up in theprograms turn out to be victims. the business was so reliant on government subsidy. when you look at a business and say if the government subsidy went away, would you survive, and the answer is