From the Trader’s Desk: A Review of Season 1 of Billions – Capturing the Essence of the Hedge Fund World

Hello from the “Trader’s Desk”!

As we get ready to enjoy the second season of Billions, we thought we would introduce our upcoming new series “From the Trader’s Desk” with my review of Season 1.

“From the Trader’s Desk” will be my take on what’s going on in the show (and a little fact checking) from the point of view of a Wall Street trader. I hope you enjoy reading it as much I enjoy writing it! Now, without further ado…

“Those who can, trade; those who can’t, prosecute.”

source: Showtime

That phrase came to mind once I knew the synopsis of Billions. Hedge Fund Titan (Bobby Axelrod) vs. the US Attorney (Chuck Rhodes). It’s a scenario that’s been playing out on Wall Street for some time. The players change, but the song remains the same.

I’ve spent my whole career on Wall Street; working my way up from a back office clerk to finally running my own money. So, I come into this show not only with the knowledge of the terms and situations, but also with the perspective of the hedge fund world.

As I told the creators and writers of Billions at Paley Live, they have done a great job in both getting the feel for what hedgies do, and who they are.

source: Damianista

Let’s take the ‘what they do” aspect first.

I know for many people, watching some scenes Billions was like listening to a foreign language! Short, long, cover, prime broker, etc. But, I can tell you that the show gets it right. (Hats off here to Damianista for having the brilliant idea of adding a Billions: Glossary to the blog. It’s always good to have a quick reference when things get in the weeds!)

source: Showtime

One example is in Episode 4 “Short Squeeze”. Bobby is short the trucking company Cross Co., which means he wants the stock to decline in order to make money. However, Chuck Sr. gets wind of this, and gets a sell-side analyst to upgrade the stock (the analysts who work for Axe would be considered buy-side analysts like I was). The stock jumps and Axe’s is losing money, big time. His Prime Broker (who he borrowed the shares from) wants him to cover. This happens all the time. An analyst upgrading or downgrading a stock can cause very big price swings. And depending on the analyst, it can bury a stock; and put a money manager out of business!

source: Showtime

Another example is in Episode 3 “Yum Time”. Axe takes a significant stake in a snack company, Yum Time. He feels the company can do better and wants to put his own people on the Board of Directors. He becomes what is called an activist investor. Some of the biggest and most successful managers on Wall Street today are activists. Carl Icahn, Bill Ackman, Nelson Peltz; these are names everyone knows on the Street. Sometimes they can turnaround a company and make a huge profit (Mr. Icahn has done it many, many times) and sometimes it doesn’t (Mr. Ackman had double digit percentage losses in 2015 due to two poor activist plays).

Getting the trading aspect of the show is great, but I personally believe that the creators and writers get the essence of what goes on in the hedge fund world, and who these people are, better than any other show or movie since 1987’s Wall Street. And that is something that is harder to do than just get the terms right.

What the creators, writers and let’s face it Damian Lewis himself, do is bring Bobby Axelrod to life.

source: Showtime

In Episode 5 “The Good Life” Raul Gomez (one of the first investors with Axe Capital) tells Bobby the reason he invested with him isn’t just because he knows a lot of data, and can pick winners, but that because Bobby “lights up when you talk about” stocks and the market. As Damianista can attest to, I tend to do the same thing. People who get into this business, and stay in it, love it. It is not just what they do for a living, it is who they are. They are always looking for that next win, the slight edge. Sounds like an addiction? Maybe that is why Bobby goes to the lengths he does to come out on top.

source: Showtime

Another scene that I thought was spot on was in Episode 1 “Pilot”. Bobby is being informed of a possible trade by Danzig and Ben Kim. They feel they have some info on a stock that will make it go up and they want to long it. But, Bobby knows the players, not just the game. Based on what he knows, he tells them to actually short the stock. A big part of any trade is not just knowing the data – anyone can do research and homework to find out the basics of stocks; it’s knowing who the CEO’s are and how they think. What big funds have positions in the stock and are they long or short? What is just rumor for the sake of moving a stock, and what has a grain of truth? The only way you can truly have that kind of insight, is being immersed in the stock and the market. The little details will give you the big picture. I deal with those types of things every day. The most recent example of this is Twitter (TWTR). Late last year, there were rumors that Disney (DIS) or a software company, (CRM) was looking to buy Twitter. TWTR shot up from approximately $16 to $25 (64%) over the next few weeks. DIS is one of my favorite stocks, and I know it pretty well. The deal didn’t make sense to me, knowing that management of DIS is very careful of the types of companies it acquires. They purchased Marvel Entertainment and Lucasfilms because it fit within their business model of have “universes” for their films. The combined purchase for both studios was $9 billion. Between the Marvel superhero movies and the Star Wars movies, DIS has made that back and then some. So a purchase of TWTR was not a good fit at all. CRM is a software company that provides customer relation software in the cloud. A purchase of TWTR, in my opinion, made absolutely no sense. I told any of my friends who owned TWTR to sell in the low $20s. The rumors turned out to be just that – rumors. The stock trades today around $17.

source: Showtime

I think the last 6 minutes of Episode 12 “The Conversation” hits the nail on the head and is probably some of the best acting on television in 2016. The conflict between Wall Street and law enforcement (whether it be the SEC or the US Attorney), is perfectly played out. Axe is unleashed! Many of the words he speaks are thoughts and feeling of most Wall Streeters. I or many of the people I work with could have made this same speech:

“What have I done wrong? Really? Except make money, succeed. All these rules and regulations – arbitrary! Chalked up by politicians for their own ends. And these fines you’re always going after – where do they go? Who gets them? The poor? No! The Treasury, the Government. It’s taxation by other means.  This country was built on industry and competition, so they will always have a place for me. I make the system run! I have contributed hundreds of millions of dollars in taxes and philanthropy. I employ hundreds of people directly; thousands indirectly. What do you do? Nothing, besides suck from the municipality, feed off it. And, in exchange, you do what? Keep order? You’re a traffic cop hiding in federal robes!”

source: Showtime

Hearing this point of view on television I believe is rare. The media has called hedge fund managers “fat cats”, and focuses on the astronomical amounts of money that can be (and is) made. But, most of us are just hustling hard, doing what we love, trying to make money to take care of our families. Are there bad apples? Of course. But there are bad apples in every profession.

I believe Billions got it right in one of the most important ways: showing both sides of the coin, and letting the viewer decide.

Author: Lady Trader

"Lady Trader" is a Brooklyn girl, and a Wall Street lifer! Recently fought cancer, and won! I love heavy metal, history, sci-fi, oh, and blogging about Billions and it's great lead actor, Damian Lewis!

3 thoughts on “From the Trader’s Desk: A Review of Season 1 of Billions – Capturing the Essence of the Hedge Fund World”

  1. Wonderful post, Lady Trader! I wholeheartedly attest to the fact that your face lights up when you talk about your job. You are lucky to be doing what you are doing but also you verify a point that Damian has made earlier about the hedge-fund world. He has said, for most of the “big” hedgies, it is not about money but it is about the game – winning and adrenaline. I think the people that get into the profession are natural risk-takers that can take whatever comes their way. It is the opposite of me who can never play on the stock market just because the anxiety would kill me. Maybe it is because I do not have much money that I can afford to lose 🙂 But I think some people are just cut for this kind of job! 🙂

    I completely agree that every profession has its good apples and bad apples, including mine, no doubt about it! But, so, what kind of an apple Axe is? IDK maybe this should be a total new post 😀 For example, Axe doing the Telecom play is quite dirty, isn’t it? And he is probably not doing it for the first time…. Having said that I do not really know where you should legally draw the line. The guy acts on information after all, BUT he acts on information that is not available to others which of course makes the playing field uneven. There is a lot of gray area around there that is hard to figure out what is right and what is wrong. As you point out, the show is not moralizing and just letting us think about it. Brilliant.

    I am so looking forward to your take on the new season!

    1. Thank you for your kind words! It is always so easy to write what I know and love!

      “But, so, what kind of an apple Axe is?”
      That is a great question! I want to believe he is good – just trying to win at all costs. But then he does trade on inside info (I kept yelling at my screen “No, don’t do it, you’re better than that!” at the same time saying “what a smart, sneaky bastard” on how he covered it up) and what he did to Wendy and Donnie, and I can’t say those things are good at all.

      There is a huge debate on what is or isn’t insider trading. Even the Supreme Court in it’s recent decision didn’t really define it.
      Then there is the debate on if insider trading should even be illegal. And I agree, that may be a totally new post!

      1. I can imagine you yelling at your screen and loving it! 🙂 Axe is a genius, no question, but yeah I think it is about winning and being on top rather than the money itself for that kind of men playing with huge amounts of money. Because, otherwise, does Axe need to do that? No, not at all, right? He would make money any way. But you are right he wants to win at all costs. Interestingly, I am okay though what he did with Donnie – I just see it as an arrangement between two rational men and it was not illegal. Except for the part where he did not tell Donnie about the experimental treatment option. I am also okay with September 11. One can judge Axe emotionally there but not legally for what he did on 9/11. He did not do anything illegal. But, of course, he saw bigger damage for what he did there because of the public image he used to have!

        And I need to read about SCOTUS decisions whenever I have time – it is fascinating to think about where to draw the line.

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