Thursday, March 24, 2011

Lee Cooperman Talks His Book On CNBC

This earlier post described the feisty discussion between Ken Langone and one of CNBC's favorite guests, Steve Rattner.

Rattner seems to be one of those favored cronies, like Bill Ackman and Lee Cooperman, who are given air time to basically push their views in order to publicize positions and, hopefully, enhance their portfolios' values. In the second linked post, I noted,

"Cooperman clearly believes, as a result of his fund's analytical team's meetings with HD's management, that the company's stock will eventually be appreciated, even though, now, it's "undervalued." His reeling off of the many operating statistics, mostly rather abstruse numbers, sounded like he was reading from a list his analysts had prepared for him."

I hadn't reread this post in quite some time, so I was pleasantly surprised that I had noted how Cooperman seemed to be reading quickly from a script prepared by his staff.

On Wednesday, Legg Mason fund manager Bill Miller, once famous for an unbroken string of years beating the S&P500 Index return, was a co-host for a portion of CNBC's afternoon programming. He, in turn, invited Omega Advisers' Lee Cooperman to appear, via video link, as his guest.

What followed was one of the most transparent, blatant examples of self-serving, legal investment book-talking that I've seen on CNBC in quite some time. After exchanging mutually-congratulatory greetings and such with Miller, Cooperman answered some questions about market conditions and the like. He stepped through some points which were conveniently reprised on overlay text, suggesting the thing was well-prepared and coordinated long before air time. It was so pre-programmed that Cooperman evidently forgot he was on video, and began to do something annoying with his finger and his ear. I honestly don't recall what he said, as it was so fascinating, in this video age, to see him attempt to push a finger all the way through his head on camera.

Someone asked Cooperman a question about his 'single measure' or some similar term that he watches, and he gave a forgettable answer. Then, in a sudden burst of verbiage, he hurriedly said that his firm had just acquired a new client and/or several hundred million dollars to manage. He said he'd contacted all of his very excellent analysts for ideas, and then, in a blur of words that were nearly incomprehensible, Lee rattled off a list of investments they were making for the client.

I don't know quite why he was in such a rush, but he was, again, as some years ago with the Home Depot figures, reading from a script. The CNBC co-anchor made some joke about there being too many stocks named to do appropriate disclaimers on all of them. Cooperman didn't even grin- he was obviously pleased that he'd done the job he really wanted to do that afternoon, i.e., enunciate a list of equities, into which he'd already put client money, in hopes that viewers would rush to their terminals and follow Lee's lead.

When a floor specialist who can see trades coming does this sort of thing, it's called front-running, and is illegal. That's because the specialist knows which way orders are going, and takes additional positions in order to then sell them to fill the orders. When a portfolio manager goes on air to name his current positions, the effect is the same, though the act is not illegal. By publicizing his current positions, he reasonably expects some viewers to follow his lead. But, instead of selling anything to those subsequent investors, he enjoys a rise in his portfolio's value as new buyers push the prices of his current holdings higher.

Later in the afternoon, Jim Cramer, who, according to his own statements, engaged in his own brand of market-affecting tactics as a hedge fund manager, made the obligatory statements of adulation about Cooperman, thus adding more focus to the list.

The shame of it is that none of this is illegal. It may be unethical. It may, and, I believe, does constitute a sort of media-based crony financial capitalism. But it's all perfectly legal. Why else do you think so many lesser-known portfolio managers seem so thankful to get 3 minutes of air time? They just want a few of the names they hold in portfolios to be publicized, hoping some viewers, either retail or institutional, will take the bait and buy, pushing the price up further, enhancing the guest's portfolio values.

Much is still made of Cooperman's investing skills. I haven't seen one of  Omega's performance reports in years, so I am not personally aware of his recent performance record. I guess we'll all know, shortly, with the new fund managers' reporting requirements arriving via Dodd-Frank.

Until then, however, few will actually know how well Omega's portfolios have been performing. But you can bet they did a little better by the close of Wednesday afternoon.

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