The Daily Alpha: Alternative Thinking on Beauty Queen Economics and Cohen Reconstruction

The Daily Alpha: Alternative Thinking on Beauty Queen Economics and Cohen Reconstruction

Garrett Baldwin

June 7, 2016

“The newspaper reported Sunday that the founder of Point72 Asset Management tore down his mansion in the Hamptons ‘several weeks ago’ so he could build a new one.”

CNBC reports that Steve Cohen has torn down his $62 million mansion.

Alternative headline: Man tearing down eight-figure houses because he can.

Alternate-alternative headline: One-man housing bubble stirs residents in Hamptons.

Cohen had already torn down one property on the land a few years back.

Now, he’s torn down the one that he’d built but never lived in so that he can build another temple.

There is a great Lewis Black bit  [NSFW] from early last decade about the heads of Enron, Tyco, and WorldCom and how they spent their massive fortunes that they’d built on years of questionable business practices.

Sure, it’s his money – he can do whatever he wants with it.

But following SAC Capital $1.2 billion penalty and the firm’s guilty plea for insider trading, this is the first thing that comes to mind when you read this article…

These are the problematic optics facing the hedge fund industry that Mary Childs was talking about over the weekend at the Financial Times. As we said, when someone does something that shows bad optics for the industry, we’ll report it and offer our editorial.

Cohen doesn’t represent the hedge fund industry as a whole, but he’s a big enough brand that he certainly draws sharp attention – making it easy for activists to universalize their criticism.

On the issue of the new construction, The New York Post reports that Cohen’s spokesman Jonathan Gasthalter had no comment.

Of course not…

Is there any defense to this Queen of Hearts style of madness?

“Hedge fund managers indicted for selling fake Uber and Airbnb shares to pay for Vegas strippers.”

You do not need comedy or wit for this one.

You can just sit back and enjoy Rich McCormick’s matter-of-fact reporting.

Yesterday, we spent a lot of time talking about the good side of the hedge fund industry, and then within 24 hours we get one of the industry’s most notorious managers tearing down homes in the mansions for no stated reason, and then two other hedgies ripping off middle class investors and using the proceeds to get strippers.

On just these two stories, Sen. Elizabeth Warren now has enough material to carry her anti-Wall Street rhetoric through the 2032 election.

“BNY Mellon and FT Remark on Tuesday released the findings from a survey of 400 investors, and nearly all of them expected to make a net return of at least 9% on their hedge funds last year.”

That’s Rachel Levy at Business Insider.

Well, that explains why New Jersey pension holders are angry about “2 and 20,” even though their alternative assets still beat the market and other portfolios in their possession.

It gets wilder when you dig into the numbers. Five percent of the respondents in the poll said they expect a net return --- after fees of 18%.

Were these all former clients of Bernie Madoff?

"Learn to think for yourself."

That’s JPMorgan CEO Jamie Dimon’s advice to Americans as the election season heats up this summer. Dimon said that Americans are being manipulated by politicians…

Good luck to us all.

Right now, 50% of America still believes that Hillary Clinton should still be the nominee even if she’s indicted over her email server…

And the other choice is the ever waffling Donald Trump…

What are people who already know how to think for themselves supposed to do without relying on friends Jameson and Marlboro to get them through this summer?

“When it comes to social and economic inequality, I think that the rich and the poor need to stop being so segregated. I think there is a middle class. I think that the rich need to…”

Finally, this happened at the Miss USA pageant in Las Vegas on Sunday.

One of the judges decided to ask Miss California Nadia Mejía how she would solve economic inequality in America.

Here’s the question from judge Nigel Barker (wait… why is a British guy a judge in Miss USA?):

"One of the biggest challenges facing the United States is social and economic inequality. How do we narrow the gap between the rich and poor?"

What happened next… well… it didn’t go so well for her.

She flubbed the answer… plain and simple.

But that prompted the usual Twitter rudeness that we’ve come to accept in this country. Articles after articles have been written about Miss Mejía’s answer as if she somehow should know how to solve the world’s ills without preparation for the question in front of the world to hear.

Julia La Roche at Yahoo Finance – who was herself in the Miss United States 2014 pageant as the representative from New York –  writes an interesting reflection about what is happening in the contestant's mind when a question like this is asked. This can’t be an easy thing to do, particularly on a topic in which the contestant has little knowledge, as Mejía has since admitted.

“In that moment of answering the onstage question, the contestants know that the crown and their dream of becoming Miss USA is within reach,” La Roche writes.  “And sometimes, your nerves just get the best of you.”

The real issue – however – is why that question was asked in the first place.

Why are we asking 20-year-old beauty pageant contestants questions that Presidential frontrunners can’t even answer. The current President hasn’t been able to answer himself in a coherent manner for seven years – let alone in under 30 seconds?

Hell, Sen. Bernie Sanders has been on stage for 30 years, and his solution to solving inequality is to implement economic policies that just make everyone poor like in Venezuela, technically narrowing the gap between rich and destitute, we guess... but bankrupting the nation in the process.

Why aren’t there more articles from Entertainment Weekly, Hollywood Life, and Bustle about that?

Sanders actually votes on economic policy in the United States Senate.

But just take a glance at one small sentence from her answer: “I think that the rich and the poor need to stop being so segregated,” she said.

That’s actually a pretty damn good observation.

Many rich people need to see the struggles of the poor every once in a while to address solutions, develop empathy, and not be dismissive of economic challenges faced by the middle- and lower-income workers.

Many poor workers and entrepreneurs need access to capital, the ability to pitch ideas, and the ability to learn from wealthy entrepreneurs and business leaders.

We should take that brief answer over Sanders’ plan 100 times out of 100.

This isn’t to suggest that beauty pageant contestants might not have intelligent answers to these topics. That sort of question, however, can’t be answered in sound bytes, even though the media and judges are hell bent on trying to simplify complex societal questions into digestible blurbs.

But let’s try this out…

How do you fix inequality between the rich and the poor?

“It will require some policy salad that includes technological libertarianism of government functions, a reduction in rent-seeking by big business, a dramatic overhaul of the nation’s drug laws, big fixes to a massively flawed public education system, increased stakeholder activity in the markets among all Americans, greater stock ownership among the lower and middle classes, a reduction in state, local, and federal government interference in the starting and ongoing operations of small businesses, a dramatic overhaul of lobbying laws in Washington D.C., punishment for nations that devalue their currencies and incentivize outsourcing to their locations, an end to central bank quantitative easing programs that favor one class of citizens over the others, and…” by now the bell is going off… “Well, a lot, lot more.”

And understanding all of these issues takes more years of education and rigorous academic debate than the contestant who was asked this question has been alive.

If she actually did provide an answer like the one above – one that relies on decades of policy study and debate around the newsroom – at just 20 years old, she shouldn’t be Miss California.

She should be running the Federal Reserve.

Subscribe here to receive The Daily Alpha.

Follow @thealphapages

Be sure to check out Modern Trader and a very special offer for first-time readers.

And follow @moderntradermag 

Garrett Baldwin is the voice of the The Daily Alpha and the features editor for Modern Trader magazine.


Getting in on the Groundfloor

Dara Albright

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.21.15

Garrett Baldwin

Assume Breach

Garrett Baldwin


The Week Ahead for Forex


Alternative Thinking

The Daily Alpha - 09.18.15

Garrett Baldwin

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.17.15

Garrett Baldwin

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.16.15

Garrett Baldwin

Modern Trader

Rise of the Ethical Hacker

Garrett Baldwin


Quotes of the Day

Garrett Baldwin

Modern Trader

Why are Hedge Funds Hiring Poker Pros?

Garrett Baldwin

Gambling and Gaming

Wall Street Casino

Garrett Baldwin

Gambling and Gaming

Investing: A Pretentious Word for Gambling?

Doug Litowitz

Gambling and Gaming

Gambling and Gaming: A Common Thread of Risk

Michael Stegemoller, Baylor University


Where Gambling Meets Trading

Modern Trader, William Ziemba


Fire-sale: Were Three Leading Organizations Hit By A Global Cyber-Attack?

Dr. Timothy Summers and Dr. Joseph Wall

Real Talk

CNBC Demystified

Doug Litowitz

Modern Trader

False prophets

Garrett Baldwin, Illustrated by Mario Zucca


Why OTC is Back in Vogue

Edward Lopez

Modern Trader Magazine

Does Your Alma Mater?

TAP Innovation Series

Alpha Pages Innovation Series: Acorns

Garrett Baldwin

Alternative Energy

Yield Cos? More like Yield Can’ts!

Bryan Birsic

Vice Spending

April Vice Index Shows Strong Rebound

Andrew Zatlin

Disruptive Technology

Part II: Possible Hedges Against the Robot Apocalypse

Garrett Baldwin

Disruptive Technology

Part I: Possible Hedges Against the Robot Apocalypse

Garrett Baldwin

Water Investment

Rick Rule: Time to Change California’s Water Policy

Global AgInvesting

Insider Trading

Why The Second Circuit Refuses to Reconsider Its Newman Decision

Jonathan N. Halpern, Ehren M. Fournier

Futures Magazine



Art, Antiques & Collectibles • Forestry • Film Investments • Alternative ETFs • Wine, Spirits & Cannabis • Hard Assets • Sports & Exotic Wagering • Oil & Gas Exploration • Startup Investing • Private Equity • Treasure Recovery • Commodities • Digital Currencies • Peer-to-Peer Lending • Venture Capital • Hedge Funds • Private Real Estate • Managed Futures & CTAs • Forex & Derivatives Trading • Alternative Energy • Futures & Options