When Sharp Guys Speak, It's Time to Listen
A few years ago, I wrote about Saratoga Capital, a small brokerage startup I helped get off the ground in the early aughts, and our first client, a large—and difficult to manage—hedge fund named S.A.C. Capital Advisors. The fund was named after its founder, Steven A. Cohen. By 2013, SAC managed $14 billion in assets. The company averaged a 30% return from 1992 to 2013.
Dealing with “SAC,” as the fund was known among traders, was the first time I heard the terms “sharp” or “sharpie” used about a trader. In Wall Street parlance, when someone tells you the person on the other end of the phone is “a sharp guy,” it’s a warning; it’s a low-key way of telling you the person knows a hell of a lot more about what’s going on than you. If a sharp guy is selling, you don’t want to be buying.
The reason some folks in finance are so damned sharp is because they’re breaking the law. That’s why S.A.C. Capital pleaded guilty to insider trading and paid almost $2 billion in fines in 2013. To be clear, the company pleaded guilty, not Cohen personally. He wasn’t even charged with a crime:
Cohen was never charged by prosecutors, but in 2013 SAC as an institution agreed to pay a record $1.8 billion fine, becoming the first major Wall Street institution in a generation to plead guilty to criminal misconduct. Under Cohen’s watch, eight SAC employees, including Martoma, either pleaded guilty of securities fraud or were found guilty at trial. In the wake of the fine, the fund rebranded itself as a family office called Point72 Asset Management that manages his personal fortune.
Given the circumstances, things turned nicely for Cohen. Even though several people who worked for him went to prison, he got to keep his reputation—and his billions. By 2020, Cohen’s once-sullied reputation was rehabilitated. So much so, the folks who run Major League Baseball allowed him to buy the New York Mets for $2.4 billion. Heck, Showtime’s Billions is loosely based on Cohen’s run-in with the law.
If all this seems strange, you haven’t been paying attention. Billionaires don’t go to jail, they become oligarchs. Please try to keep up.
The point of this trip down memory lane is this: Steve Cohen may have a sketchy past, but somehow, he was smart enough to land on his feet. People in the know still consider him to be a pretty sharp guy, especially when he says something like this:
Score one for the home team.
The other day, my wife and I had lunch at a burger joint on the island. It’s still off-season, so the only other customer was a guy sitting a few feet away from us. Before long, the three of us were chatting about how expensive real estate on the island had become. Then the guy, who looked to be in his early forties, said something about the economy “turning around.”
You need to understand what a bonkers comment this was. In the preceding 20 or 30 minutes, this person told us he’d just sold his home and that he was part of a small group of investors buying Texas real estate properties. He told us he was retired from the military and recently divorced and played golf daily.
According to him, the only reason he was in the restaurant, enjoying the final cocktail of his six-martini lunch, was that he was killing time ahead of a tee time at a nearby country club. To most people, this guy was living his best life. But to hear him talk, you’d have thought we’d just come out of The Great Recession.
Me being me, I couldn’t resist the temptation. I said, “With all the tariffs being imposed, plus the federal layoffs, we’re heading for a recession.” A look of discombobulation flashed across his face, letting me know I’d disrupted his perception of reality. At that point, I shared my background with him. I explained how tariffs work, how our last tariff misadventure nearly sank the agricultural industry, and that laying off 200,000 federal workers is bad for the economy.
To his credit, the ex-marine accepted what I had to say. His only attempt to counter was to mention “waste, fraud, and abuse,” to which I replied, “If I were looking for waste in government, the military would be the first place I’d look!” He laughed in agreement. Soon after, we shook hands and went our separate ways.
By then, I’m sure he realized that while he may not have met the sharpest guy on Wall Street, he’d definitely encountered the sharpest guy in that restaurant.
Marlon, Love this! You are the best 'splainer on how the money world works. Deep appreciation from a fan who is just trying to keep up.
Fun lunch 🇺🇸