From the Trader’s Desk: S2E5 “Currency”

“This is some fucked up universe we’ve decided to live in.”
source: Showtime

And with that, I welcome you to “From the Trader’s Desk” and my take on Episode 5, “Currency”.

There was a lot going on in this episode: currency plays, rising interest rates, 15 bips on the 10 yr.  Things that I don’t think twice about, but may need a bit of explaining to some of our readers. I’ll do my best. As always, if there is something I don’t cover, just ask! Currency trading is not something I do at all. I stick with domestic equities. However, I do have to know a little about it, since currency, and interest rates can (and do) effect the overall markets.

This was a unfamiliar Axe in “Currency“. He was taking risks he wouldn’t normally take, all because he didn’t want to have a down quarter. It clouded his vision, and his outlook in my opinion. He was willing to risk so much, just to not have one misstep. It reminded me of a classic mistake gamblers on a losing streak make: doubling down. I have it seen firsthand: down $500 on the 1:00 PM NFL bets, you try to recoup that and more by placing bigger bets on the 4:00 PM games. If you win, you can get even or maybe pull ahead; but if you lose, now you’re down $1,100 (when you bet with a bookie, you have to pay a “vig” of $5 on every $50 you lose). It’s a risk, and that is what gambling is, but it’s not a smart risk. As Axe says “Who makes a bet if they don’t know the outcome? Suckers!”

source: Showtime

We open up with Wags finally making a clean appearance at Axe Capital. But the King says “it’s not your turn to speak”. He was been fighting a war, and where the hell has his “Number One” been? Let’s look back at the last 48 hours….

Sansomic stock is falling like the guy who jumped off the balcony. Axe has a big position in this name and this is going to cause him to miss the quarter by 2.3%. In Axe’s mind, this is not acceptable. Boyd gives him a call. Seems like the Street knows this is an issue, and Sam Brandt, who hosts Street Scoop will run with the story unless Axe comes on her show. As someone who has to watch CNBC all day, these type of shows are important to traders and fund managers alike. Managers want to get their ideas out there, since they are hoping it will move a stock in their direction. Traders, like me, like to hear what the big dogs are interested in. I will say that most of the time, it’s BS. I’ve never made a trade based on what a fund manager says on TV. If anything, (and you can ask my partner) I’m usually arguing with the TV telling them why I think they are wrong. They don’t answer me back.

source: Showtime

Axe needs ideas, and he needs them now! An earnings play on a petroleum name? Try again! Selling some of the longs, and adding “classy names” to the investor letter? Window Dressing! And from the same analyst who in “Risk Management” suggested to go all cash, “flee to quality blue chips”. These “selfish motherfuckers” are giving Axe nothing! They are playing it safe, so their own performance is good and they get their bonuses. I know what that is like. When I was an analyst, how your names did in the portfolio dictated your bonus. Even if the fund didn’t do that well, if your names outperformed, you got paid based on that. Axe is looking for the big bet because for him, a down quarter is personal. It’s a reflection on who he is. He can’t let that happen. Even though all funds have a down quarter, or year, Axe is not like them. Steph tells him he’s “not a machine” he is allowed to be human, make mistakes. Well, I guess she doesn’t know that being mediocre is not who Axe is. She just doesn’t get him. He is Steve Austin: better, stronger, faster. This is why Dollar Bill’s non-pitch of an idea tempts Axe. He has “solved one problem” (Chuck on his ass) and made a “crucial one” (down quarter) “harder to solve”. Has walking the straight and narrow actually made Axe just like everyone else?

Deb tells Axe Mafee has an idea, but he’s afraid. Poor Mafee. He’s got the job, he’s got the girl, hell, he’s even got Axe’s heart (“No one could ever take your place in my heart Mafee”) but he is still too insecure to tell Axe about Everette. But then, I guess the bathroom stall is where guys bond, because Mafee does just that.

source: Showtime

Everette tells Axe he knows the Nigerian Government must devalue their currency, the Naira. Their oil industry is much weaker than the numbers suggest. A government would devalue it’s currency in order to make their products more competitive on the open market. The oil industry today has a lot more players, and the price of oil is not what is once was. Market share is critical, especially to economies that heavily rely on oil. Everette doesn’t know when this is going to happen, but to speed up the process a big bet against the currency would cause the decline in the Naira. But this just can’t be any bet; it’s got to be a “Five Families” big bet. Axe knows just who to call.

Boyd can’t join in, since he does business with Nigeria, and doesn’t want to take down a government. This play is way out of Axe’s risk parameters, and he doesn’t want to lever up. Levering up would mean him taking on debt, which is not a good idea on a shaky play like this. Boyd suggests the other 3 Horsemen of the Apocalypse: Krakow, Malverne and Birch. Their love of profit and winning should trump their anger at Axe.

source: Showtime

At a typical New York diner, Axe lays out his plan. In order for this to work, he needs them and their capital. I found it interesting that last episode, Chuck knew that to ingratiate himself to Boyd, he needed to ask for a favor. This time it is Axe’s turn. Chuck and Axe are alike in so many ways. I guess that is why they hate each other so much (and why Wendy cares for them both as well).

Birch is the first one to be in, which I thought was a bit too quick (I guess we now know why). Krakow and Malverne follow, and we have ourselves a deal. Axe is hoping that there is “honor among thieves” and that this will make his quarter.

In the morning meeting (and yes, those do happen; unfortunately I’ve been in way too many) Axe gets a call from Boyd – someone leaked. The Nigerians will now be raising their interest rates in order to prop up their currency. When a Central Bank (our Federal Reserve) raises interest rates, it makes money that is deposited in banks in that country more valuable. The reason the currency would rise is that you must deposit the cash in the bank in the local currency, hence more demand, higher price.

Axe’s knows who the leak is, as he calls Birch first. Not only did Birch leak, he played the other side of the trade. I believe that Axe would never have gotten in bed with people he doesn’t trust (or respect) if it wasn’t for his obsession on being down 2.3% for the Q. He’s making decisions based on his personal feelings, which is a huge mistake. This is not the confident Axe of Season 1; this is an unsure Axe who is doing things against his nature.

Axe tells Birch he would have done the same, and that is true. It’s just business, but its one hell of a tough business! The person who you cut today, may be the person you need tomorrow.

How can Axe turn this around? He needs someone whose word is gospel on the Street. Someone who’s shaving “15 bips” off the 10 year Treasuries (the term 15 bips means 15 basis points or 0.15%). He needs Lawrence Boyd to go on Street Scoop and tell the world Nigeria needs to devalue their currency. Again, this is not typical Axe. He needs someone else to save his quarter; he’s not in control of the situation. He’s manipulating it, but not truly controlling it.

Krakow and Malverne sit in Axe’s office, while Axe is convincing them to stay the course. If they want to bail, well then he’ll just buy them out. Axe is so confident, the boys are sticking it out. This is a total bluff by Axe, but sometimes it’s not what you say, but how you say it. I was in a morning meeting years ago, and I had to read what the senior analyst, who was out, thought of a stock. I had no idea what I was saying (this was a hardware name, and I covered software). But he told me to just talk with conviction, and it will be alright. Well, I did just that, and he was right.

“No third world nation is going to run me out of my position!” “I will drive them into the ground!”

Axe makes it sound like the Nigerians are raising their rates just to screw him. It’s becoming way too personal. There is no distance between the trade and Axe. He has become this play. It’s going to define him. You can NEVER let that happen. One of the first things I learned was never marry a stock. Hell, don’t even date it. It’s just a trade.

And so we are back where we started. Wags coming to Axe to make the ultimate sacrifice: himself. In order for Axe to “modernize and optimize” Wags is willing to fall on his sword. Wendy has made him realize that just because Axe doesn’t need him, doesn’t mean he has to die. But Axe needs his First Officer. The place does not function without Wags. Oh, and by the way the Terminator just axed Steph (yay!) so Wags is back as Charles Brandon to Axe’s Henry VIII.

source: Showtime

While stopping off at home to change for Street Scoop, Lara complains she was treated “like the wife” at her meeting with Spartan-Ives. Axe is not having it. He told her she was not ready. (But he really didn’t. All he did was ask “are you sure you’re ready?”). Axe cuts her down like she is just one of his analyst’s giving him crappy ideas to save his quarter! She said she went in there like a “business woman” but did she? She wasn’t dressed for a real meeting, she didn’t have a presentation, did have stats or data. She has had some minor success and just assumes she can take it to the next level? He was pretty blunt with her, but she needed it. She is just too used to getting her way. Axe can’t talk – he needs to go “save my quarter”. I can’t wait to see where the fallout of this conversation goes!

Boyd and Axe are getting ready for their spot on Street Scoop. Boyd is going to help Axe out on the Nigerian play, and save his quarter. Axe gets a call from Bach that Boyd is going to be arrested within the hour. This is vital info, but Axe can’t give Boyd the head’s up. Axe is in self preservation mode, and needs Boyd’s words on the Street.

Boyd’s segment reaffirms his “good friend” Bobby Axlerod has got the call on the Naira right. The Malachi Crunch has saved the day (oh how I love that the Billions writers are about my age and throw in these little nuggets from my childhood. I wanted to be Pinky Tuscadero when I was seven, until I wanted to be Leather Tuscadero when I was eight).

Axe tells Boyd the windbreakers are coming. Boyd can read the landscape: Chuck screwed him, just like Axe told him he would; but also Axe knew they were coming and didn’t tell him. Boyd knows its business. He gets it. Why else would he hand over his pricey watch to Axe? What struck me in that scene wasn’t that Boyd wasn’t pissed at Axe; it was just how pissed he was at Chuck. Getting the shank from Axe is OK, it’s business; getting it from Chuck is clearly not.

We get another short scene with Axe and Chuck and as usual it’s crackling. Chuck thinks he has won another round, and just has to try and rub it in: “I don’t believe in omens or fortune tellers, but this must feel a little like your future foretold, huh?”

And with the best line of the night, which I think will come back to haunt him, Axe gives as good as he gets: “You mean watching you arrest other people as I walk right out of the door? Yeah, kinda does.”

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!

9 thoughts on “From the Trader’s Desk: S2E5 “Currency””

  1. Right on the money, as always!

    This has been an unfamiliar Axe the entire season. Much more out of balance. I’ve noticed he hasn’t meditated at all this season.

    1. He hasn’t meditated, nor has he had Wendy to ground him. I have always been anti-Wendy, but now I am seeing that she might actually be the anchor Axe needs.

  2. Wonderful post, partner!

    It’s so interesting to see the irrational risks Axe is taking to save the quarter. I loved the symmetry with the US attorney’s office that they both had 3 days to save their asses in different ways. But what I see is that the two men — and I am completely with you that they are so similar to each other and that may be the reason Wendy is attracted to them both — approach towards their people very differently. Chuck understands them and treats them as human who don’t want to make mistakes and encourages them to take some calculated risk where as Axe wants his people to be complete machines. Because he’s a fuckin’ terminator! Haha I knew Steph hung herself the moment she said he was “allowed” to have a down quarter!

    “Honor among thieves” could really work but Axe was the one that violated it in the first place when he served Birchie’s head to Chuck last season. But Axe did not know that Birchie knew: Birchie’s self interest was equal to fucking Axe after all. But I liked it that Krakow and Malverle stuck to the strategy. I love this kind of loyalty among them even though they may be playing games against each other at times. Same with Boyd. The same applies to the legal side, too, with, for example, Chuck and Spyros partnering up. They are all on the same side after all.

    One worry I have now is the casino deal. I am feeling uneasy about that casino guy. IDK I would probably not commit to business relying on information coming from a gambler 🙂 Hope Axe does not screw up there. But you are absolutely right, this is a different Axe, driven by emotions — even though he does not accept it, he is more human than we have ever seen, isn’t he? He needs Wendy right away!

    I thought Lara needed that schooling. First, you never really stress your spouse further at a moment he is stressed already (but IDK if Axe shared with her his business problems – maybe not) but secondly and more importantly how can you expect to expand a business that you started on an impulse — with no plan whatsoever? So if she wants to be a businesswoman she needs to learn to act like one.

    And I am in love with your Wolf Hall analogies: And I was thinking about More vs Cromwell 😀 😀 😀 I forgot about how much I LOVE Wolf Hall. I need to re-visit asap.

    1. Thank you as always!

      As I have been always anti-Wendy. I am now seeing how she help ground him. These emotional plays could be his downfall. I don’t know if she would have been able to discourage him from doing anything he did in Currency, but she may have at least made him take a breath and re-look at the landscape.

      Axe knew he was taking a huge risk by having to go to the Horsemen of the Apocalypse, which is why S1 Axe would have never done it, in my opinion. So, going against his instinct got him burnt. He figured out how to turn it around, but he was lucky. And yes, sometimes it is better to be lucky than to be good, but Axe is supposed to be good at what he does.

      I agree with you on the casino and that casino developer. I didn’t go into it on the post (I was already at 2200 words!). That guy was sleaze squared! But I guess that is what casino guys are. This is a deal I truly believe is going to backfire on Axe.

      Lara was offended she got treated like the wife, but the only reason she got the meeting was because she was the wife! If she really wants to be a businesswoman, she needs to deal with the reality of her product not being unique, and figuring out a way to make money want to come to her, not the other way around.

      I used the Brandon analogy instead of Cromwell or More, one because they both lost their heads, and two, Brandon was much closer to Henry than either of the other two. Step was Cromwell in this episode: she told the King something he didn’t like and off with her head!

  3. Great post, nice and tightly written! And very helpful information about the currency play and the effect interest rates have on currency. I still don’t quite get it, but it’s mostly b/c I don’t want to get it, not due to your excellent education on the subject. 🙂

    Hey, my arguing with the TV and not hearing back anything was THE reason I took to Twitter. 🙂 Still don’t hear anything back most times, but at least the words get out there for someone to glance at as they scroll by.

    IDK about what you say about Axe doing things against his nature this episode. True he is impulsive and a bit desperate in this episode, but I think big ostentatious calls ARE his nature. He can be smarter about the calls, but not necessary any more thoughtful, by nature, if that makes any sense.

    “Again, this is not typical Axe. He needs someone else to save his quarter; he’s not in control of the situation. He’s manipulating it, but not truly controlling it.”

    Well, last season he did try to go to Boyd for help after the 9/11 reveal when his investors were jumping ship. He needed the “healing waters of Lourdes” then and was rudely stood up. So, I’d have to argue with this bit too.  He’s asked for help before. This may be purely my own political bias, but I don’t see anyone in this business being in real control, it is ALL about manipulation. Whatever control won is temporary, eg Axe finishing with a win on the naira short, and it’s always gotten via some manipulation, big or small, legal or not.

    “There is no distance between the trade and Axe. He has become this play. It’s going to define him. You can NEVER let that happen. One of the first things I learned was never marry a stock. Hell, don’t even date it. It’s just a trade.”

    I love how you phrased this! Maintaining a state of detachment is the way to get anything done, we all know. Practicality wins bets, gets you from one day to the next, emotions don’t. To me, though, Axe’s passion is THE most redeeming thing about this character. It’s his drive to win, his passion rising from his core like it does, that is so darn riveting to watch.

    In any other actor’s hands, I can’t imagine liking Bobby Axelrod one bit. I’d have a tough time sympathizing with him or caring about whether he wins or loses, no matter how legally or illegally he played the game. The story is captivating, the ins and outs of the maze of it. But the “caring what happens” part is all on the actors, I think. And, luckily, they landed stunners for leads.

    1. Thank you for the kind words!

      I totally understand about the currency, interest rate stuff – luckily you don’t really need to know all the intricacies of currency trading to understand what went on in this episode. I do like that the writers do that.

      I agree with you about Axe’s nature being the big deal. I just don’t think it would be in his nature to bring in 3 people he doesn’t trust or respect. His first instinct was to go to Boyd; Boyd suggested the others.

      Axe did ask for help from Boyd in the past, but it was more to save his rep, not necessarily to do a deal with. If you look at what Axe did with the telecomm play in S1, he didn’t even tell Wags. He plays things close to the vest. Axe having to go outside to make this deal was taking a risk that in the past, I don’t think he would take.

      Axe’s passion and drive is definitely what got him to the top. And, I know that is what I truly love about this character. But when he was going on about how no 3rd world nation is going to push him out of a position, then something changed. Everyone has a bad trade. Nobody in this business bats 1.000. That is just fact. But when you have a bad trade, you just tip your hat, and move on. He did not do this. He is a risk taker, but this was just too risky.

      The acting in this show is remarkable. I know we (or at least I) focus on Damian and the amazing way he brings Axe to life. When I watch this show, I see Axe, not Brody, not Charlie Crews, not anyone but a kid from Yonkers that made it big, and will do whatever it takes to stay there. The writing makes us care about these people and what happens to them. That is the mark of a great show. And aren’t we lucky to be able to watch and write about it! 🙂

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