Unstructured Finance

By Matthew Goldstein

With money managers increasingly falling in love with their own voices and so many willing to give them a platform to air their thoughts, I’ve long thought it would be good if someone could come up with a Volubility Index that measured performance against the number of times someone was quoted or made some stock, bond, or market prediction.

It won’t be me because I’m not enough of a math geek or algo genius to even think about how to put something like that together–but it would be interesting to see the results. And given this year’s big surge in money managers spouting off–what with the Ackman-Ichan blood feud over Herbalife and and Einhorn trying to be ever so clever in trying to stop the slide in Apple shares with his iPrefers share class dividend proposal–may be it just will happen.

Anyway, the latest issue of Businessweek with its cover story on David Einhorn and the failure of the “Einhorn effect” to work its magic on Apple’s stock got me thinking again about the Volubility Index. The BW story is a long one and chronicles Einhorn’s long history of driving down the price of stocks he is shorting, but notes his plan to get Apple to unlock its big pile of cash is having limited impact on the stock–even after the Greenlight Capital manager held an unusual press conference to discuss his idea.

Personally, I don’t think it’s much of surprise that the Einhorn effect hasn’t had much impact on Apple. It’s hard for a manager to move a big cap stock like Apple through activism and it’s far easier to do that on the short side–especially with a less widely held stock like Green Mountain Coffee Roasters or for that matter Herbalife, which Ackman caused to plunge late last year with his big short thesis. For more on the trouble with moving big cap stocks, look at Ackman’s trouble with calls to shake up Target a few years back.

Carson Block’s Muddy Waters outfit has gotten a lot of early attention for its short side attacks on Chinese companies that question the accounting practices at those companies. But one short seller told me a lot of the early companies Block’s firm wrote about like Sino Forest were ripe for the picking because no one was really paying much attention.

Daniel Loeb, who runs $8.7 billion at his hedge fund Third Point, has been an opportunistic buyer in the bonds of Chesapeake Energy, the embattled natural gas producer, according to sources familiar with the matter.

But Loeb, known to rattle the cages of companies for years (see: war with Yahoo), isn’t piggybacking on Carl Icahn’s or O. Mason Hawkins’s activist role in Chesapeake, demanding changes in management or the overhaul of its business practices.  Indeed, all the elements are there for a veteran agitator like Loeb, as Chesapeake has been embroiled in scandal over a controversial investment program involving CEO Aubrey McClendon.

But the New York-based hedge fund manager, who told his investors in June that Chesapeake is now his fund’s fourth largest position, could simply be making a straight investment play and leaving the rest to Icahn and Hawkins. Imagine that?

By Matthew Goldstein and Jennifer Ablan

You gotta give credit to O. Mason Hawkins and Carl Icahn, the unlikely partnership that managed to get some important concessions from Chesapeake Energy Corp., the embattled natural gas company. But when it comes to public pensions that also own stock in Chesapeake, it’s a far different story.

The head of Southeastern Asset Management and the billionaire activist trader came together to get Chesapeake to agree to shake-up its board and allow the pair to name four new independent directors on the company’s nine-member board. And for the most part, Hawkins and Icahn managed to wrest that change from Chesapeake without much help from public pensions that own shares in the Oklahoma-based company.

The move is an attempt by Chesapeake to deal with criticism shareholder anger that company long has been to forgiving to the wheeling-and-dealing of its chief executive Aubrey McClendon.