This is classic "survivorship bias." There were 20,000 hedge funds in the halcyon days of 2007. No matter what the markets did over the next 18 months, five to 10 funds would have had scored 100%-plus returns and been celebrated. If Bernanke had cut interest rates drastically in 2006, maybe New Century would have continued to be a huge moneymaker by issuing subprime mortgages. David Einhorn would be known today as having the canny intuition to get long that stock (and join its board) in 2006, instead of for calling Lehman's implosion in early 2008. Had the housing boom continued, perhaps Greg Zuckerman's book would be about former Bear Stearns hedge fund manager, Ralph Cioffi. Of course, this didn't happen and, instead, Cioffi is fighting civil charges by the SEC, and John Paulson is the hero. Survivorship bias leads to celebrating the winners and -- usually -- overinterpreting their moves leading up to their success and trying to apply these actions to future situations. At least no one in the mainstream media has yet called John Paulson "the next Warren Buffett." Remember Eddie Lampert? That's what Business Week and countless other magazines called him back in 2004. Although many still defend Lampert as smart, his past five years of performance have been very disappointing, and his Sears Holdings ( SHLD) investment specifically has been ... early.
Although it's easy to pick on the financial media for these flubs in hindsight, they are merely reflecting our own deep-seated human desires for making sense of a seemingly senseless market. They wouldn't tell us who'll be the next Warren Buffett, unless we wanted to buy their magazine (or click on their links) to find out. We gravitate to "winners" for pearls of wisdom to help us be more winnerlike.