CNN and Sen. Bob Casey’s Economic Illiteracy

The network spins short-selling into a hit piece on Republican challenger Dave McCormick’s business record

WSJ editorial. 

"You can tell the Pennsylvania Senate race is tightening because CNN on Wednesday rolled out a hit piece on GOP Senate candidate Dave McCormick’s record as former CEO of Bridgewater Associates. The story happens to fit perfectly with Democratic Sen. Bob Casey’s campaign strategy vilifying private business. 

“Senate candidate Dave McCormick led hedge fund that bet against some of Pennsylvania’s most iconic companies,” reads the headline, which Mr. Casey tweeted. The Democratic incumbent and his allies in the press can’t find any wrongdoing during Mr. McCormick’s five years (2017-2022) running Bridgewater, so they’re peddling economic illiteracy disguised as investigative reporting.

The piece claims that Bridgewater under Mr. McCormick shorted the stocks of roughly four dozen companies headquartered in Pennsylvania, including Hershey Co., U.S. Steel, Comcast and Penn National Gaming. Short-selling is when an investor borrows a security and then sells it with the intent of buying it back at a lower price.

Well-diversified investors take short positions to hedge risks in their portfolio. As the Biden Securities and Exchange Commission explained last year, “short selling provides the market with important benefits, such as providing market liquidity and pricing efficiency.”

Yet the CNN story makes short-selling sound nefarious. “Short positions, which are essentially bets that the companies’ stocks will drop, can hurt corporations by depressing their stock prices, making it harder to gain new financing, invest or hire more workers, according to experts,” CNN says. “For financial institutions, short positions can be lucrative.”

Yes, and so can long positions. The goal of investing is to make money, but short sellers can also lose money if the price of stocks they short rise before their short bets come due.

In any case, there’s no indication that Bridgewater was betting against Pennsylvania companies. Its investment managers don’t take short positions in particular stocks. Rather they short industries. Pennsylvania companies happened to be in baskets of stocks its investment fund managers shorted.

Mr. McCormick’s campaign says long positions accounted for 61% to 98% of Bridgewater’s investments in nine of the largest publicly traded firms headquartered in Pennsylvania between 2017 and 2021. They are AmerisourceBergen/Cencora, Hershey, U.S. Steel, Comcast, Penn National, PNC, Lincoln National, PPG and Aramark.

CNN acknowledges 18 paragraphs into the story that Bridgewater “did invest in stocks of some of the same Pennsylvania companies it shorted in other years, and overall, it reported spending more money buying stocks of Pennsylvania companies than shorting them in four of the five annual reports reviewed by CNN.” That’s a long way of saying its short-selling story is political spin.

If Mr. Casey disapproved of Bridgewater’s investment strategy, why did he tap the hedge fund to manage government worker pension investments when he was state treasurer some two decades ago? CNN tries to dress up its non-scoop by opining that Mr. McCormick’s investment strategy was “politically risky” even if it was “financially smart.”

The implication seems to be that Mr. McCormick shouldn’t have managed his investment funds in the best interest of investors, including pensioners, because risk-mitigation strategies could later be twisted by his opponents if he made a future bid for political office. But if Bridgewater had lost money under Mr. McCormick’s leadership, you’d be hearing about that from Mr. Casey and CNN too.

This episode goes far to explain why Congress is filled with lawyers and political lifers who’ve never met a payroll. Any business person who runs for office these days can expect his record to be distorted as somehow scandalous. It’s far easier to run as a cipher with no record of accomplishment like Mr. Casey. No wonder Washington is a mess."