Greenlight RE Cuts Gold Stake, But Likes Metal Amid Global Uncertainty

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Last week, we were the first to bring you news regarding Greenlight Capital’s Q2 letter (ok Katya Wachtel of Reuters was number one, beating us by 30 minutes, but we were number two and were the first to post full letter). Today, the re-insurer Greenlight Capital Re, Ltd. (NYSE:GLRE) posted second quarter results. David Einhorn had some interesting comments on a ‘controversial’ asset class ‘gold’ in Greenlight RE’s SEC filings.

Greenlight RE Cuts Gold Stake, But Likes Metal Amid Global Uncertainty

Many have been wondering what the ‘gold bug’ David Einhorn has been doing with his holdings of gold since the precious metal has collapsed in price. Dan Loeb recently sold more of his gold holdings, as we discussed in commentary on his second quarter letter. Turns out David Einhorn has also cut his holdings in gold. Below is an excerpt on that topic from Greenlight Capital Re, Ltd. (NYSE:GLRE)’s SEC filings today.

Greenlight RE gold holdings

Or long investments (including financial contracts receivable) reported in the condensed consolidated balance sheets as of June 30, 2013, were $1,070.6 million, compared to $1,200.7 million as of December 31, 2012, a decrease of $130.1 million, or 10.8%, primarily as a result of disposal of a portion of our long equities and, to a lesser extent, due to decrease in commodities during the six months ended June 30, 2013. The decrease in commodities was due to a decline in the price of gold combined with the disposal of a portion of our physical gold holdings. As of June 30, 2013, our exposure to long investments increased to 105%, compared to 102% as of December 31, 2012, while our exposure to short investments decreased to 62%, compared to 64% as of December 31, 2012. This exposure analysis is conducted on a delta-adjusted basis and does not include gold, CDS, sovereign debt, cash, foreign currency positions, interest rate options and other macro positions.

However, despite the sale, Greenlight RE still has a large exposure to gold due to macro uncertainty. The filing states:

In the face of a more challenging earnings backdrop, a Chinese slowdown, and a continuation of emergency policies, we believe the market’s rapid advance is creating a potentially unstable condition which could resolve a number of ways and is difficult to predict. We ended the quarter with a reduced gross exposure, positioning us to ride out future volatility and to take advantage of new opportunities. Given the investment environment, we anticipate, for the foreseeable future, to continue holding a combination of a significant position in gold, macro positions in the form of options on higher interest rates and foreign exchange rates, short positions in sovereign debt and sovereign credit default swaps.

We will have more details on this topic tomorrow after David Einhorn speaks on the Greenlight Re conference call so make sure to check back.

H/T Noah Buhayar of Bloomberg.

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