Gold

The price of Gold trades at over $1000 per ounce today and the stock market plunged again.

Generally speaking, people don't like to convey bad news, even though the news is true. David Einhorn has successfully forecast the current financial crisis in his book Fooling Some of the People All of the Time published in 2007. David Einhorn is President of Greenlight Capital, a "long-short value-oriented hedge fund", which he began with $1 million in 1996. Greenlight has historically generated greater than a twenty-five percent annualized net return for partners and investors.

Starting July 2007, Einhorn became a short seller in Lehman stock. He believed that Lehman was under-capitalised, and had massive exposures to CDOs that were not written down properly. He also claimed that they used dubious accounting practices in their financial filings.

When Bear Stearns had to be bailed out by the Federal Reserve in March 2008, Lehman was widely considered to be in a fragile state. Lehman's CFO was Erin Callan, hailed by the Wall Street Journal as "Lehman's Straight Shooter". But she had been on the job for just six months and her background was as a tax lawyer, not in finance.

In a speech at a conference in April, Einhorn started talking publicly about his Lehman short positions. Lehman called Greenlight and asked for a copy of the speech, which was sent over.

In May 2008, Lehman CFO Callan had a private call with Einhorn and his analysts. The conversation with Callan was to give her a chance to explain discrepancies he had uncovered between the firm’s latest financial filing and what had been discussed during its conference call about that filing.

Ms. Callan is said to have fumbled some of her responses to questions on Lehman's asset valuations. When Einhorn later went public with the conversation, the declining Lehman share price took a further knock. Callan was fired a few weeks later, when Lehman reported a worse than expected $2.8bn second-quarter loss.

Lehman finally went bankrupt in September 2008.

The fact that Arthur was born in the worst recession may not be a bad thing. This means everything can only go uphill in his life.