oral histories

May 22, 2013: “I’m thinking about putting more money with him,” said Ed Butowsky, managing director at Chapwood Capital Investment Management, who manages $1 billion in client money. The Dallas-based adviser did not say how much his wealthy clients have invested with Cohen’s SAC Capital Advisors, but said the figure tallies into the tens of millions. “Stevie Cohen is the Michael Jordan of hedge fund managers,” Butowsky said, comparing the billionaire trader’s success in the markets to the feats of the legendary professional basketball star. “I’d be a fool to take out money.”

June 12, 2013: The very thought that people want to trash Stevie Cohen, who is one of the great legends in portfolio management, because of some allegations, shame on them,” Butowsky said. “If it was me and I had to live through this stuff the last three years, I would tell everybody to go jump off a boat.”

July 24, 2013: Ed Butowsky, managing director at Chapwood Capital Investment Management, which has several million dollars invested with SAC Capital, said: “I don’t believe that criminal charges against the firm would impact Steve Cohen’s traders and their ability to make money.” Read more »

The Whale and the Quants

If you’d like some non-real-time insight into the London Whale, may I highly recommend this oral history, by Edinburgh sociologists Donald MacKenzie and Taylor Spears, of how investment banks came to price and trade and hedge things like the index CDS that the Whale dabbled in? It made me tear up a little. It is let’s say somewhat technical but it’s not really about math or derivatives, it’s about how people experience their lives in derivatives departments of investment banks.

The main discussion is about the relationship between certain derivative pricing formulas and the credit crisis, and in particular about why ratings agencies did a bad job of rating asset-backed CDOs. The authors attribute these mis-ratings to a cultural problem, in which the people building and rather ABS CDOs were credit-analyst banker type rather than quant types who derive their views from market prices and efficient market assumptions: Read more »