“Uneasy lies the head that wears the crown…”
Greetings from the Trader’s Desk!
Before I dive into the episode, I would like to thank the writers of this episode, Brian Koppelman and David Levien. As a New Yorker, kid of the 80’s and a trader, I can tell you they bring the realness of all three of those things of which I am and hold dear. From the mid-town Manhattan office of Axe Capital, to the setting of my favorite place for pierogies, (Veselka) to having real hedge fund managers (Marc Lasry of Avenue Capital and Michael Platt of BlueCrest Capital Management) at the idea dinner, a line from the movie that changed my life (“Wall Street”), to a beautiful view of the Freedom Tower, they continue to not just make this one of my favorite shows, but bring it home so authentically. By Season 3 some writers would be phoning it in, but they certainly don’t.
I started my post with a quote from Shakespeare’s Henry IV. In this scene, Henry is distraught and contemplating the weight of leadership and responsibility of being King. We see Axe similarly isolated, alone and distraught. However, is he still King? (I write more about this here) Yes, it still says Axe Capital on the door, but does Axe still wear the Crown? His assets are frozen, so neither he nor his firm can trade. If the King can’t reign, is he still the King?
The CIO of Axe Capital, Taylor, is entering the new headquarters in mid-town Manhattan. If Axe is leaving CT so is everyone else! The music playing in the background is “The Next Big Thing”. Is that Taylor or a new big idea for the firm? Both!
PMs and analysts are gathered in the conference room for the first meeting since the firm’s assets have been frozen, due to Axe’s indictment. This is a group of ravenous wolves. No trading means not being able to produce and make their numbers (most analysts and PMs have a benchmark they need to beat; how you do against that benchmark determines your bonus). The leader of the pack, Dollar Bill is chomping at the bit; he wants, no, needs to trade. Taylor’s first order of business is for someone from the group to produce an amazing idea that Axe can pitch at an idea dinner being held in two days. These dinners are real; I’ve never been to one, but it’s a chance for managers to show off a bit, and size each other up. Axe needs an idea that will prove to the Street he still runs the sharpest shop out there.
Dollar Bill is not having it, and either is anyone else. The only meeting he wants is a go-time one! Oh, and one more thing: where is the true leader of the firm? Where the fuck is Axe?
Axe is alone in a huge, gorgeous bachelor pad: floor to ceiling windows with breathtaking views of the city; priceless art on the walls; sleek, expensive furniture. When I see it, I think: cold. Not temperature cold, but no feeling, a lack of warmth, sterile. Speaking of cold, in walks Wendy to check in on her patient. (I give her a lot of grief, but this is the first episode ever that she didn’t annoy me. I actually liked her. Pull up the fainting couch.) She is the first adult to see the place. Axe has really secluded himself. Is it shame? Who would be embarrassed by that apartment? No, he can’t face the world. Axe has put all of his self-image into being Bobby Fucking Axelrod (Hello! It’s Axe Capital for a reason!). He believes he’s a shell of who he thinks he should be, and will lock himself away until then. Not the way a true leader should act, if you ask me.
Taylor is at the office, guarantying bonuses as long as someone comes up with an idea. Rudy is brutally honest (love Rudy!!) and says, since they are “the most toxic shop on the Street”, how did they get an invite? Dollar Bill speaks for me, and knows that Axe would never go to this “hog show” and give away choice ideas. Wags is telling the troops how Axe was begged to be at the dinner, meanwhile….
Axe is telling Wendy how he had to beg to get invited to this dinner. I believe that she is the only breathing person he would every admit that to. He has no choice since he has been indicted by her husband. Wendy reminds him it was he who “gave into the worst of your instincts” that got him to this place. Axe does something I didn’t see coming: he owns it! “Yeah, maybe that too.” A true narcissist wouldn’t admit that, and would continue to play the victim. Axe needs to get out there and tell his story. As Don Draper would say “change the conversation.” Axe doesn’t want the story to be that he and his shop is crooked, it needs to be about the next big thing that Axe Capital is working on. He needs to dominate this dinner, but it’s not fear that is holding him back, its rage. In the past, it has been Chuck’s rage that has blocked him from success. I truly believe these men are two sides of the same coin, although they would never admit that!
Wendy wants to find out when that rage served him. Axe picks a point in his childhood when he needed money so he scammed some older kids with a faked signed jersey and hockey stick signed by legendary NHLer’s Mike Bossy and Brian Trottier. Nice shout out to the Islander dynasty that ruled the NHL in the early 80’s. (I’m a Rangers fan, so to the writers: Potvin Sucks!) When he was caught they beat him “like Dave “the Hammer” Shultz”, an “enforcer” who played for the Philadelphia Flyers, or as they were known, the Broad Street Bullies. His rage at them, his parents (a piece for you Damianista: we know Axe’s Dad left the family, but was still around when he was in 5th grade, about 11-12 years old) and at himself for getting caught, turned to jet fuel to propel him to never be in that situation again in regards to money. I think it’s interesting that he is angry at getting caught, but has no remorse for committing the actual scam! Axe at 11 is the Axe of today: not sorry for the crime, he’s sorry he got caught.
Wendy reminds him “could it be your brain, your instincts, your feel for the markets” that have made you successful? (Things he had BEFORE he met her, just saying…) Perhaps his rage just made him focus more on the “prize” and those natural abilities became more useful. Now she wants to focus on when his rage has worked against him.
Axe wants to once again blame Chuck, but Wendy brings it back to the man who actually made the choices – Axe. His need for revenge clouds his judgment and dulls the true skills that got him to the top of the hill. His need for retribution on the Rhoades family is what got him into trouble with ICEJ. There was no reason to make that play and take unnecessary risks, except to crush an enemy. Did that need for vengeance make him predictable? He fell right into Chuck’s trap. Rage and anger take up a lot of energy; can Axe continue like this for 5 years? 10? Does he want to become what most Kings are at the end: distrustful of even their most loyal subjects, deceitful in order to keep everyone off balance, paranoid, isolated, and alone? When things get too deep for Axe, he bolts. He needs to get back to the here and now, fight for his reputation and his company. In order to do that, he needs to get out of the mausoleum that is his apartment, and get back to Axe Capital.
The world is a crazy place at the office: Todd Krakow is Secretary of the Treasury (yes, Alexander Hamilton is turning in his grave), Ari Spyros, fresh from the SEC, is the new head of compliance (people who have worked for the government at some point usually go to the private sector; the money is much better, and between the contacts and knowing how the systems work, they are worth their weight in gold) and Lara is bringing Steven Birch with her to go over the books and her assets. What the hell? It’s like the Bizarro World at this office!
Since the government has Axe Capital assets locked up while Axe is under investigation, everything is at a standstill. It could take 4-6 months before the money can be available, and that is a lifetime in the market. There is a way to get some of that money freed up, but the price is extraordinary – Axe’s license to trade. Asking him not to trade is like him giving up his “license to breathe.” I knew exactly what he meant.
I was diagnosed with Hodgkin Lymphoma in May of last year. My treatments for the last 6 months of 2017 prevented me from trading. When I was finally able to get back to work in February, it felt amazing. Not only was I healthy enough to work again, but doing what I love to do made me feel whole and normal for the first time in a very long time. Trading for Axe isn’t just his job; it’s who he is, and I can relate to that 100%.
Axe has more pressing things to do than think about the wild idea of him giving up trading – he has to break-up an argument between Lara, Birch and Wags (poor Ben Kim stuck in the middle!). Wags, being the loyal lieutenant, is refusing to let a competitor see the trades. Axe is shocked that Lara might be contemplating giving her money to a “stock jockey” like Birch to manage. Does she know how he selects stocks? What’s his position sizing? Market timing and risk management? No, because as Axe tells her, he doesn’t have any of those things. “His decision process is “Google, Exxon and Proctor & Gamble”. Those are basic names that won’t necessarily hurt your portfolio, but do not take much knowledge or imagination to pick. Birch will still charge you 2 & 20 (a fee of 2% of your assets, and 20% of any profits). Axe gives in and let’s Lara and Birch have access. Axe is not worried: “Lots of guys watch Bruce Lee movies; doesn’t mean you can do karate.” Axe knows that it’s his unique skills set that are valuable. No one can mimic him, so have at it!
Axe Capital is in chaos. Everyone is focused on pitching their idea to the CIO, who just happens to be in their office smashing electronics. Taylor is not smashing phones out of frustration (Spock-like Taylor would find that illogical), but in search of the idea for the dinner. Wags needs some alone time with the CIO so it’s off to the Turkish Baths they go!
This is the perfect place for Wags to ask Taylor if they are jumping ship. Flashback to the new Treasury Secretary offering Taylor his firm to run. Axe knows people, so if he believes in Taylor, so can Krakow. Taylor declines. They are happy running Axe Capital. Something they say to Wags makes me pause: they know Axe’s belief in them is what gives them legitimacy until they have their own track record, “so I am loyal to him. Until and unless it becomes necessary, I will not leave.” Is Taylor already planning for that scenario? Since we all know Axe expects and demands unconditional loyalty, I see a reckoning coming.
Axe finally shows up at the office and calls Dollar Bill into his office. He wants Bill to give him the temperature of the troops. Bill doesn’t want to rat, but he does, given assurances any info won’t be known to come from him: Taylor failed at handling the meeting. Taylor, Wags and Wendy to the principal’s office! Axe is pissed that Taylor and Wags held the meeting without Wendy, and tells them “Bill says it was a shit show.” (Yes, Bill, Axe just threw you under the bus.) Wendy was with Axe, so Taylor did what was needed: get ideas for the dinner. It really wouldn’t have mattered who was in that room; unless it was a meeting to give the go ahead to trade again, it was always going to be unmanageable. When Axe dismisses Taylor, Wags and Bill, Wendy makes him focus on fighting the case and leaving the emotions out of it. “You taught me an average trader makes a trade and feels good; a great trader makes a trade and feels nothing.” That was the Axe of Season 1, and we see the trouble it has gotten him in when he veered from that philosophy. Axe needs to make the tough decision: he must give up trading to save his firm, even as he is worried that the face of Axe Capital will be Taylor and not him. Wendy convinces him this is the right play. I do think he will regret it and could have a scapegoat in Wendy when/if he does.
Taylor finally has the idea for the dinner. Everything seems to be connected to the internet – phones, refrigerators, home thermostats: the Internet of Things (IoT). These products all have microchips in them, and the product makers make the chip companies sign non-disclosures so they don’t tell other manufacturers how the products are made. Find the common component in all the different products, find the gold! In the early 2000’s my business partner (and smartest man I know) had a similar idea regarding the internet. He didn’t know which .com would succeed, but he did know they would all have to run on the routers and “pipes” of Cisco Systems.
All that smashing pays off: the play is Quartes chips.
Axe (for now) believes it’s a good thing his CIO can deliver when he can’t. This will be the last time they can speak about individual stocks or it will violate his non-trading agreement. But is it really? Can Axe stay away? I doubt it. Kind of like Chuck was off the Axe case, but wasn’t!
By sacrificing something so dear to Axe, he may have just saved his firm. For now, it’s all on Taylor.
At the swanky Del Posto, all the top managers from all different strategies (equities, bonds, quants, currency, etc.) will gather for a dinner that will have the Street talking for the near future. And the word on their lips has to be Axe Capital.
A “who’s who” of the hedge fund world is sitting around waiting for Robert Axelrod. Smartphones start blowing up; the news of Axe being barred from trading is hitting the wires. Debate at the table: was Axe bested or did he best “those fuckers” as the BI (Business Insider) headline suggests? They believe they’ll be able to read Axe when he arrives as to which argument is true.
As the door opens, Taylor Mason, CIO of Axe Capital introduces themselves to the group, and not only announces a “silver-backed fucking gorilla” of an idea, but the new face of Axe Capital.
On the night Axe Capital telegraphs to the Street they are once again players, the King is alone in his big, cold mausoleum viewing the brand new Freedom Tower. Will Axe rise again like that Tower from the rubble?