2 Grand Central Tower

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140 East 45

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Street, 24

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Floor

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New York, NY 10017 Phone: 212-973-1900

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Fax 212-973-9219

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www.greenlightcapital.com

October 28, 2016 Dear Partner: The Greenlight Capital funds (the “Partnerships”) returned 3.4%,

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net of fees and expenses, in the third quarter of 2016, bringing the year-to-date net return to 3.8%. During the quarter, the S&P 500 index returned 3.9%, bringing its year-to-date return to 7.8%. Last quarter we ended our letter with a quote about Tesla. This quarter we begin with one from Dave Pell, editor of NextDraft: “

It’s pretty amazing that we live in an age when a CEO of two public companies can give a talk about colonizing Mars and shareholders don’t see that as a warning signal.”

It’s not so amazing when one considers that those same complacent shareholders have been willing to look past years of over-promising and under-delivering from a promotional CEO. Elon Musk’s ability to spin a yarn and keep a story going seems to mesmerize his investors, blinding them to the challenges the company is facing. In contrast, we have central bankers who are determined to see flashing lights that aren’t there. We are more than seven years into an economic recovery, yet central bankers behave as if we’re still in crisis. Not only are experimental emergency policies being maintained, they are being expanded despite little evidence that they are needed or helpful. The newest manifestation comes from Japan, where the central bank has committed to monetize the entire government bond market if needed to keep the ten-year rate at zero. Leading economists are currently destigmatizing the idea of fiscal policy stimulus financed by direct money printing, so that goes into the coming attractions queue. With U.S. unemployment at 5% and the core CPI rising 2.2% over the last year, it is difficult for the “data dependent” Fed to further rationalize emergency rates based on its official dual mandate. It appears that the real criteria for raising rates are:

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Market forecasters fully expect a rate increase.

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The most recent move in the S&P 500 was positive.

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There is no trouble in foreign economies or financial markets.

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There are no potentially destabilizing geop olitical events, including foreign elections.

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The Cubs win the World Series. At the most recent Federal Reserve meeting, Chairwoman Janet Yellen indicated that the case for raising rates had strengthened, and three governors voted to do so, yet the Fed decided to wait.

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