End Times for Omega Man

11/30/2011 10:23 am EST

Focus: MARKETS

Igor Greenwald

Chief Investment Strategist, MLP Profits

A top hedge-fund manager venting his angst at President Obama is deeply conflicted and possibly delusional, writes MoneyShow.com senior editor Igor Greenwald.

I worry about Leon Cooperman.

He’s the 242nd-richest American, according to Forbes, with a net worth pegged at $1.8 billion. Some of that came from 24 years as a star at Goldman Sachs (GS) and lots more from the Omega Advisors hedge fund that Cooperman has run for the last two decades, which is now up to $6 billion.

Two generally successful decades in the hedge-fund realm is the equivalent of a 200-year dynasty for mere mortals. It ought to be enough for anyone, even for a very proud son of an immigrant plumber from the South Bronx.

But Leon’s no spring chicken at 68, and there’s evidence he might be a tad bored with traditional portfolio management.

He’s recently sold out big stakes in losers like Teva (TEVA), Ford (F), and MGIC (MTG), only to double down on eBay (EBAY) and try to catch the falling knife of Research in Motion (RIMM).

Cooperman’s had plenty of successes too, of course, even if this 2007 forecast wasn’t one. But he remains a very cranky pundit.

On Monday, Cooperman published an open letter to President Obama accusing POTUS of “setting the tenor of the rancorous debate…that smacks…of ‘class warfare.’” Cooperman also blames Obama for “the divisive, polarizing tone of your rhetoric [which] is cleaving a widening gulf…between the downtrodden and those best in a position to help them.”

He proceeds in this vein for two excruciating single-spaced pages before capping the effort with an elaborate straw man. “Capitalism is not the source of our problems…and capitalists are not the scourge,” so “time for you to throttle down the partisan rhetoric and appeal to people’s better instincts, not their worst,” Mr. Chicago Community Organizer.

Now, we can disagree on the utility of Obama’s policies for business, though I’m hardly alone in thinking corporate America ought to be pleased.

But there’s no question that Obama has, repeatedly, said the opposite of what Cooperman claims. Here he is in the Rose Garden on September 19 specifically calling for higher taxes on top earners:

“Nobody wants to punish success in America. What’s great about this country is our belief that anyone can make it and everybody should be able to try—the idea that any one of us can open a business or have an idea and make us millionaires or billionaires. This is the land of opportunity. That’s great. All I’m saying is that those who have done well, including me, should pay our fair share in taxes to contribute to the nation that made our success possible.“

And here’s Obama in New Hampshire last week:

“The truth of the matter is, I can’t tell you how many well-to-do Americans that I meet say to me, look, I want to do more because I know that the only reason I’m doing well is because somewhere along the line, somebody gave me a good education; somewhere along the line, somebody gave me a college scholarship; somewhere along the line, somebody gave me a chance. And I want to do the same thing for the young people who are coming up now.”

Does this sound like a campaign of vilification?

It would be easy to assume that Cooperman has simply lost it, that the losses on some of his larger holdings are getting to him. But I think this talk from the last TED conference by UK sociologist Richard Wilkinson might shed more light on the cause of Cooperman’s delusion.

To sum up, Wilkinson shows that societies afflicted with relatively high economic inequality tend to be much less happy and healthy than the more egalitarian polities, even when the latter are poorer overall. And the rich are not spared from the mental illness and neuroses that inequality seems to spawn.

In Cooperman’s case, he appears to project on Obama the anger he feels about others’ attitude toward his life’s work. He claims to be all in favor of wide-ranging debate, calling “this reassessment of so many entrenched economic premises healthy and long overdue.”

Still, he feels victimized by the tone. Occupy Wall Street’s barbs appear to have found their mark. Cooperman spends a long time justifying his social utility. He’s clearly incensed that it’s in doubt.

Fortunately, the hedge-fund ubermensch instinctively knows how to alleviate this insecurity. Last month, he proposed that those earning more than $500,000 annually get hit with a 10% tax surcharge for three years as part of Cooperman’s tax-but-don’t-spend-plan.

The don’t-spend part would put the economy out of its misery, but the extra taxes are so far in excess of anything Obama has contemplated they might just be large enough to ease Cooperman’s conscience.

Moreover, according to the latest research by leading authorities on income inequality, a significantly higher tax burden on top earners wouldn’t slow down the economy, and could even help it.

That suggests the surcharge—henceforth to be known as the Cooperman Tax—could be made permanent. Cooperman’s fellow plutocrats can thank him later.

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