At the conference on Tuesday, Einhorn conceded in the near-term, his short position may continue to suffer a rebound in Moody's earnings. Still, he pointed to the Cheyne SIV trial to vindicate what's been a slow-burning short bet. Were fraud to be proven, other investors in securities rated by Moody's during 2007 and 2008 may chose to sue rating agencies before their rights expire, in a prospective explosion of legal liability stemming from the crisis, said Einhorn.
Both Einhorn and Buffett have sparred publicly on Moody's. In a June 2010 testimony to legislators, Buffett defended rating agencies, noting that Moody's shouldn't bare all of the blame for the crisis. "Look at me. I was wrong on it too," said Buffett about of the housing market, which he said greatest bubble he's ever seen. Buffett was excoriated in the press for his testimony, and in a
interview, Einhorn subsequently pressed his short, questioning both the credibility of Buffett and the agencies.
Investors should watch for a February trial on fraud charges leveled against Moody's to settle the score between Buffett and Einhorn.
For more on Einhorn's presentation at the Congress, see why he's
kicking the tires on GM
See why Bill Ackman may have forgotten about his J.C. Penney and Procter & Gamble
and why Jana Partners' Agrium breakup pitch is a
shale oil and gas bet
for other big investing ideas presented at the Value Investing Congress.
-- Written by Antoine Gara in New York