Thursday, July 6, 2017

Ooh, Ooh: Sleeping With the Enemy (the inside scoop on short seller Marc Cohodes and BOFI Federal Savings Bank)

David Keohane commends to our attention the less-than-attractive side of the investing biz. I couldn't stop reading.

From the Southern Investigative Reporting Foundation's The Investigator:

BOFI Federal Savings: Sleeping With the Enemy Can Cost a Bank a Lot of Money
In the evening of Aug. 8, 2016, a retired hedge fund manager named Marc Cohodes was puttering around the house on his Cotati, California, farmstead when he received a most unusual phone call.
The caller was Polly Towill, a partner with Los Angeles’ Sheppard Mullin and, according to Cohodes, she got right to the point: She was calling on behalf of her client, La Jolla, California-based BOFI Federal Savings Bank and she was authorized to explore retaining him as a consultant. What the bank needed him for, said Towill, was to help the bank’s legal team and its CEO, Greg Garrabrants, better understand how short sellers developed their opinions and how they shared their views.

Of particular interest to BOFI, said Towill, was anything Cohodes knew about short sellers who published their research on Seeking Alpha, especially the one who used the pseudonym “Aurelius.”
Given who Cohodes is, a more improbable request is difficult to imagine.

A short seller for 30 years as a partner — and then general partner — of a prominent short-biased hedge fund, Cohodes undoubtedly knows most members of the small community of dedicated short sellers either professionally or socially.

(His approach to short selling is simplicity itself. Those few hardy souls who are willing to wager considerable sums against popular or beloved companies, regardless of market or economic conditions have what he describes as nothing less than “a genetic defect.” Most people are predisposed to be curious about how things work; Cohodes and his friends wonder how things break.)
Moreover, unlike most short sellers who keep a low profile for fear of attracting legal headaches and inducing costly short squeezes, Cohodes is unafraid to vocally defend the right of short sellers to publicly express critical opinions without being sued.

And these days now that he is free of the concerns of running a hedge fund, Cohodes is practicing what he preaches, big time. He regularly takes to Twitter — where he has a following of 14,400 — to riff on whatever enters his mind, such as delivering eggs from his free-range chicken flock to a San Francisco store, companies he’s shorted with his personal account, his fondness for the rock band Collective Soul and rum punch. On occasion he’ll put on a collared shirt and expand his Twitter schtick into a presentation, as he did when he appeared at the Grant’s Interest Rate Observer conference in April....MORE
HT: FT Alphaville's Further Reading post.

We've visited Mr. Cohodes a few times, beginning with:
June 2013 
Lest We Forget: The Hedgefunder That Goldman (may or may not have) Crushed and Forced to Become a Chicken Farmer
These are a few of my favorite things:
Goldman and hedgies and farmers and chicken...

Julie Andrews I ain't.

And neither is this guy. From the New York Times March 25, 2012:
I am so sorry. We caught up again in:
July 2016
Meet the (former) Wall Street Short Seller Betting Against Canadian Real Estate
and this year's:
The World According to a Free-Range Short Seller With Nothing to Lose

We did not post on his Grand Canadian adventure when it blew up a couple weeks ago: 
Short-Seller Nailed Home Capital, Then Got Stung by Buffett
  • Cohodes says lender’s Berkshire deal is sign of desperation
  • I’m not wrong just because Buffett shows up, Cohodes says
because when people start talking like that I question either their veracity or their sanity.