Friday, August 1, 2014

Not Newsworthy: Steven A. Cohen

Not Newsworthy: Steven A. Cohen

After paying a big fine and shuttering SAC Capital, Steven Cohen’s family office, Point 72, made about $1 billion in profits so far this year.  A billion dollars is only a lot of money if you don’t already have $10 or $11 billion.  Mr. Cohen’s gains aren’t noteworthy, and yet his returns were featured on the front page of The New York Times.  Under the headline “Profits Soaring After Disgrace at Cohen’s Hedge Fund,”[1] Matthew Goldstein reports, “Mr. Cohen, 58, is continuing to do what he has done best for more than two decades: make an astounding amount of money from trading stocks and bonds.”

Bloomberg News led with the following headline, “Steven Cohen Still Beating Hedge Funds After Shutting SAC”. [2]    Mr. Cohen’s 9% return handily beat the average hedge fund’s return of 2.5%.   A financial publication ought to know better than to publish a meaningless comparison.  Mr. Cohen’s exposure to the stock market virtually insured that he’d beat the average hedge fund, which invests in all sorts of securities with lower returns.

Both stories are written as morality plays in which the evil Mr. Cohen has retained his Midas touch. As I’ve written before, the danger of the investment business is its amorality; the fact that the only value that matters is making money.  I doubt Mr. Chen is an evil guy who is plotting his next criminal exploit.  I also doubt he’s remorseful about having been ensnared by insider trading charges.  Like any good trader, he’s moved on.  Because the Justice Department was unable or unwilling to seek penalties that would have wiped out Mr. Cohen’s fortune or put him in jail, Mr. Cohen’s life will go on as before. 

He has more than enough money to surround himself with analysts and traders who will reaffirm his genius.  Wall Street will continue to clamor for his business.  His fortune will buy him respect among art dealers and cultural institutions.   I wish the media and the public wouldn’t buy into this image.  We’d have a better understanding of the money management business if the media treated Mr. Cohen for what he really is: just a smart guy who got very lucky.


No comments:

Post a Comment