From the October 2013 issue of Futures Magazine • Subscribe!

Off Topic with Dan Dicker

Alpha Pages: Recently in the Huffington Post you declared that hedge fund giant Steve Cohen was “a knowing and guilty manager” and “deserves a conviction.” Jon Corzine may avoid prosecution for his role in MF Global. What are your thoughts?

Dan Dicker: It’s a crying shame. [Corzine] should go to jail. Corzine clearly knew he was dipping in to seg funds and was using this Hail Mary pass to Man. He’s hardly a guy who hasn’t been around and he knew well he stepped over the line. The hubris is unbelievable. The point is none of these [people] will ever go to jail. Steve Cohen won’t go to jail. These guys don’t ever pay for it. They just pay fines.

AP: Is it due to his relationship with Obama?

DD:  I don’t know if it’s political or not. This country has difficulty getting its arms around financial fraud, yet it does get simpler legal issues like murder. [People] tend to see financial fraud as a victimless crime, which is entirely wrong. But it’s tough to understand depths of [financial] wrongdoing. They are complex issues. In general they don’t get the spotlight and people like Corzine and Cohen can afford the best lawyers money can buy. The government is usually relentless, but it usually settles for fines.

AP: Why are you in favor of a transaction tax on futures trading?

DD: I would like to see some sort of gating of HFT, as I think it’s a scourge. A transaction tax is one way to do it, but there’s difficulty in how it’s done so it doesn’t hurt people legitimately doing business. They should focus on [taxing] churn volume, and the volume exchanges pay for, which [is another] scourge and a destroyer of fair markets. If transaction tax is a way to get at it, I’m in favor of it…but on balance I’m not sure a decent tax proposal is out there that doesn’t also hurt real traders.

AP: What does the delay of the application of Dodd-Frank rules mean to you? Who is to blame?

DD: The whole process was watered down before [the rule making and] was watered down as each group has slowly dissembled it, like FINRA and FIA and all these advocates for HFT, such as exchanges or investment banks. At this point Dodd-Frank is fairly toothless.  That doesn’t mean the futures biz hasn’t changed already. I mean targets for Dodd-Frank are closed or will be in [the] next several years. In the end, targets (such as investment bank prop desks) are gone but the process was bastardized and hijacked. None of that should be protected or saved or ring fenced [like HFT] will be. To a large degree it’s very disappointing.

AP: If in your words, “Oil is the new gold,” then what is gold?

DD: Gold is what it’s always been…a stupid yellow metal. It’s a trade driven by retail customers, in many ways currency paranoids. I don’t know how to describe the group in the gold trade. I’m happier being short gold and I’ve never understood the gold trade. At least with oil, at the end of the day you can burn it to stay warm. Gold is only good to hold the door open in a good stiff wind.

AP: You tend to be rather publicly outspoken with respect to your opinions. Where are you no longer welcome?

DD: No longer welcome? In general, I’m well respected and my opinions are well respected. I haven’t gotten muzzled anywhere or had any doors closed, I don’t think. I call them as I see them. I do lean to the left, but when I see something, I call it.

For example, I’m a huge advocate of natural gas, but the environmental dangers of fracking are nonsense. Environmentalists should check out the Gulf of Mexico, which looks like Swiss cheese on Mars. They should see what it takes to get 3 miles down. Some scary stuff there.

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