A February story in the Wall Street Journal about a meeting in which hedge fund managers discussed the sovereign debt crisis in Greece continues to draw criticism for alleged factual inaccuracies.
See, the Journal‘s “Hedge Funds Pound Euro” leads off with a story of hedge fund managers talking about the fate of the Euro and seems to suggest that a secretive meeting of fund managers was instrumental in pushing the currency downward.
On April 23, Bess Levin of Dealbreaker published a letter to investors from Greenlight Capital, one of the hedge funds in the story. In it, Greenlight rips the Journal‘s “yellow journalism” for practically unleashing a Department of Justice investigation into the fund:
The Antitrust Division of the Department of Justice read the story and opened an investigation into possible violations of the Sherman Act on the day the Wall Street Journal story ran. It isn’t clear whether anyone at the Wall Street Journal or the Justice Department even considered whether it was possible for a small group of hedge funds that manage a few billion dollars of equity in diversified portfolios to actually corner the most liquid currency market in the world.
Einhorn also said in the letter that he had asked the Journal for corrections regarding the purported secrecy of the fund-managers’ dinner New York Magazine’s Daily Intel reached WSJ senior editor Mike Siconolfi for comment on the matter. He said neither Einhorn nor his publicist spoke reached out to the paper about the story. He also stood by the story’s assertion that the dinner in question was secretive:
Idea dinners always cover a wide range of topics. But the buzz in hedge-fund circles after the Monness dinner focused on one thing: the massively bearish view on the euro that came out of the dinner. Unlike many other idea dinners, the Monness gatherings are closely guarded, secretive events, and lawyers for hedge funds have at times given managers instructions about what they are allowed to say to avoid being accused of collusion.
He also took a swipe at Levin for good measure:
The web site’s employee Bess Levin at no time sought out either the reporter or me for comment before this was published. Had she done so, we would have corrected her misleading assertions.
The story has been raising hackles for some time now. When it published on Feb. 26, Reuters’ Felix Salmon and Ryan Chittum of the Columbia Journalism Review both called out the paper for its sensational headline (“Hedge Funds Pound Euro” is a little much) and a pretty massive causal fallacy surrounding the story itself.
Felix Salmon was not happy:
The story is accompanied by a chart showing the recent deterioration in the value of the euro, for all the world as though it were caused by the hedge funds in question. There’s even hints of conspiracy: the story begins with the tale of a few fund managers having dinner — together! And talking about the euro!
There’s only the vaguest hint, in the ostensibly-sober WSJ, that it’s ridiculous to think that hedge funds could cause a large medium-term change in the value of the euro against the dollar. They can certainly bet on such a move, and make money if it happens, but you can’t manipulate the largest currency pair in the world, when it’s freely floating and does over a trillion dollars in volume per day.
It’s easy to sensationalize hedge funds; secretive by nature and poorly understood by the public, they’re the weird bogey-men of Wall Street. Stories about them are also notoriously hard for reporters to break open, so there may be a tendency to overplay a piece of juicy reporting.