Say it Ain’t So, Stevie?

Saturday’s WSJ article about the highly-secretive Steven A. Cohen was, well, quite shocking. It was an extremely well-written and informative piece that really humanized the man that has been the subject of so much mystery, admiration and scorn over the past decade. One quote in the story completely blew me away, however, as it seemed so out-of-character for the larger-than-life SAC himself:

That quick-trading game is now over, says Mr. Cohen. With about 7,000 hedge funds competing for investment ideas, good stock investments are getting more scarce. “It’s hard to find ideas that aren’t picked over, and harder to get real returns and differentiate yourself,” he says. “We’re entering a new environment. The days of big returns are gone.”

To make matters worse, the stock market, he says, is no longer as forgiving for investors. The tailwind of low interest rates, low inflation and strong corporate profits, he says, has been lost. There are no more easy pickings, he says.

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“The hedge-fund run is not over,” he said. “I think the game is changing, and if it is, I have to react. We won’t go off the ledge with everyone else.”

This does not sound like a multi-billionaire running an eleven figure sum for some of the most powerful investors in the world. Where’s the hubris? What has changed? Is he right that the easy money has been made and it will be tougher sledding from this point forward?

I’m not buying any of this. SAC and its team is way, way too smart to be pigeon-holed by a single strategy. If there is too much money chasing too few ideas, invariably there is a lot of dumb money out there that can be exploited by someone smarter and more experienced. I mean, come on, he is up 18% YTD on a big, big number. That is pretty good based upon the stats I’ve seen.

Further, what of globalization? I’m not sure that the big money will be made trading conventional strategies in the U.S.; it may be made in Asia and other rapidly-growing parts of the world. As these markets become more liquid, firms like SAC can increasingly deploy larger amounts of capital which is what is often required to get these mega-firms to play. It may also mean that instead of 225 names he will have to follow 500 or even 1000 names to manage the liqudity risks while reaching for alpha. He has great people working with him that can build this seamless global platform, so I am 100% confident that this will be one of the ways that SAC will change with the times.

Then what of technology? As written about previously (most recently in my Lonelygirl15 post), tools now exist to extract, filter, analyze and display information from the Internet in a manner previously unimaginable. Given the trend towards more and better data and information being put out there on the Internet, it will be those with the vision, the brains and the tools to take advantage of this alternative data set that will establish a true edge on the competition. Again, SAC is a very forward-looking organization with the resources and trading acumen necessary to exploit the massive opportunity for discovery that is the Internet, so I am also certain that they will lever their expertise into this area as well.

So, from my vantage point things don’t seem so bad for Stevie. Maybe he is showing his soft side so we’ll all get complacent and he’ll clean our clocks! That seems far more likely than the defeatist attitude on display in the WSJ article.