From the Trader’s Desk: The Best of Frenemies – Billions S4 E3

You’ll take my life but I’ll take yours too
You’ll fire your musket but I’ll run you through
So when you’re waiting for the next attack
You’d better stand there’s no turning back
The Trooper – Iron Maiden

Hello from the Trader’s Desk! This week, everyone is waiting for the next attack, be it from a friend, an enemy, or a chicken!

As seems to be the new normal, The War Council (Axe, Wags, Wendy) discussing taking down Taylor and TMC. Hall is not having the easiest time getting into TMC security. His counterpart there is someone whom Hall says “is a good man” and “thorough”. (Could Cook have been one of Hall’s minions at one time?) Hall is going to have to earn his paycheck on this assignment. He comes bearing a gift – a thumbdrive with TMC’s positions and trading patterns! It’s not the MOAB  Axe needs, but he can use the info to front-run TMC and take a little of their alpha. Wendy has a better idea: really go big on positions TMC wants to increase, taking a lot of little pieces of profit. Taylor will notice, and because they are such a perfectionist, will try to figure out the problem, taking them off their game. This is where Wendy has value: not knowing the market or stocks, but knowing the way Taylor thinks. Even Hall is impressed by Wendy!

It is tasked to Ben Kim to analyze this data and take “Big Gulp” size positions. Ben knows these positions won’t necessarily benefit Axe Cap, but it’s all about limiting the upside for TMC. That is never a good strategy in my opinion; worry about yourself, since that is really the only thing you can control.

Our favorite 2 family man, Dollar Bill asks Axe the question of the week:

“Do you know the Chicken Man?”

The Arkansas Chicken Index (ACI) is an economic report and a market mover. It dictates the price of chicken when it reports the available supply of chickens. The supply/demand ratio will determine the price. The “Chicken Man” is supposed to go around to the various farms and report his findings. However, Bill’s got it on good intel (the Mobilized Meals lady?) that Chicken Man doesn’t do that at all! He makes a few calls, and doesn’t confirm any data. The chicken producers don’t care the numbers are wrong; lower reported numbers mean higher prices! Bill is not uncertain that Axe Cap needs to be long names that will benefit. If he is correct, this could be $300 million for Axe Cap, and good performance for Bill and his bonus!

In Brooklyn, Taylor knows something is not right with their strategy. Taylor wants answers from Winston and Mafee. Why are there discrepancies between the realized gains and expectations?  Winston tries to explain that trading costs (commissions and spreads) were higher than modeled. (These things can happen; you can pretty much forecast your commission costs, but depending on volatility in the market at the time of taking the position, you can’t predict what the spread will be.) That is the techno-geek explanation; Mafee gives the trading world explanation: they are being front-runned! This is another example of real world knowledge versus technical knowledge. Real world will win almost every time.

Taylor and Sara know it’s Axe, and that it’s not about money; it’s about disruption. Taylor knows Axe is trying to get into their head, and succeeded, for a minute! No need to involve any Russians; Taylor needs Cook to seal up TMC’s infrastructure tighter than a crab’s ass!

Taylor has a visitor who surprisingly is not a Russian! After some formal pleasantries, we find out this is none other than Taylor’s Dad, Douglas (Hello Alvin from “Mom”!). You can tell there is a strained relationship between these two. Boy, Billions does love complicated parent/child relationships!

Bill and fellow Axe Cappers are waiting on the release of the ACI. The easiest way to play data such as this would be to take long positions in stocks that would benefit from higher chicken prices (I would play Tyson, ticker TSN or Pilgrim’s Pride, ticker PPC). From the glimpse we get of the Bloomberg Terminal, it looks like Bill has played Sysco, ticker SYY, and US Food Holdings Corp., ticker USFD. These are all companies that will benefit from passing the higher costs of poultry to its customers.

11:55 AM comes and its bad news – the ACI report has been delayed indefinitely! Bill needs to find out what’s going down so it looks like it’s a road trip to Chickentown!

Cook reports to Taylor that TMC will be secure in a day or so. Taylor wants it done ASAP, and wants Sara in the loop. Cook already ran his plan by her first. I’m not 100% on Sara. Cook was brought in and recommended by Sara; could that be why he went to her first? But, would Hall go to Wags with info before Axe? I doubt it. How did Hall get that thumb drive in the first place? I know it’s too early for conspiracy theories…. or is it?

Doug seems to be getting along nicely with Mafee, sharing stories of a young Taylor. Taylor was “the most considerate kid you’d ever seen”. Not that they did things for people, but always “measuring information around” them. I guess Taylor has always been this way. It is their nature. During this talk, Doug gets Taylor’s pronouns wrong, but I don’t think it’s malicious. When he thinks back on a young Taylor, in his mind Taylor is his “little girl”. Let’s face it; don’t most parents see their children as kids? I’m 48 and my Mom will still tell me not to talk to strangers when I walk to the store!

Doug tells Mafee Taylor wanted to marry Doug when they were little as Taylor walks into the conversation. What should Doug have read into that? “Affection” Taylor states! And to kind of cover up that burst of emotion “and I didn’t know that many people.” I think this gives us another hint of the kind of isolated life Taylor had as a child. Always knowing they were different, keeping to themselves and just observing the world around them.

Taylor wants Doug to respect them, just like their employees do, and use the proper pronouns. “This talk again?” We can see this is the point of contention between them.

Breaking up this family feud, Sara tells Taylor Grigor’s #2 wants to know “when you’re going to start fucking earning?” Axe’s plan just may be starting to work. If Grigor is not getting a big bang for his buck, he’s out the door, and so is Taylor’s protection!

Taylor doesn’t blink and now is the time to start working on a derivative that will blunt Axe’s meddling. Who better to help out but dear old Dad. They are going all “Auggie Doggie and Doggie Daddy” and will bond over something they both love: math!

In Arkansas, Bill is on a ride along with the Mobilized Meals lady. She hasn’t been able to contact the Chicken Man, and Bill is worried. Along the way, they pass a quarantine facility for sick chicks. You just know that’s coming into play down the road!

Hall reports that TMC has sealed up the security cracks, and he no longer has digital access. It’s not a surprise to the War Council, but it was quicker than anticipated. Hall knows Cook and knows he’s got “moves”. (I’m curious as to the how/when/where of this Hall-Cook relationship!) Hall goes all Felix the Cat:  whenever he gets in a fix he looks inside his bag of tricks, and pulls out a thing of beauty: Israeli tech that can take photos through privacy glass.

“The Israelis do not fuck around when it comes to their spy equipment!”

No Wags, they do not! As someone whose partner and best friend served in the Mamram unit of the IDF, I know that their tech is top notch! Hall has one set up as they speak; this one is for his personal use. Insert awkward silence here!

Taylor and Doug are working on the derivative algorithm and seem to be bonding. Working on something as pure as math sets aside their differences. Dad likes the way you can find answers because the math dictates it. Taylor knows that sometimes the answer is not satisfying. “So, change the math” is Doug suggestion. They are talking about math, but not really talking about math! Taylor knows humans can’t control math – you can’t bend it to your will. It doesn’t exist to satisfy anyone. It is what it is, just as Taylor is who they are; they are not there to satisfy anyone, including Doug. When you create a derivative (a child) it will develop organically in a way you can’t control. The only options are to learn to accept and understand it, or step away. I think Doug is trying but is finding it difficult. While family counseling is going on, Hall’s Israeli “snapchat” is doing its job.

We now know why the Chicken Man is not answering his phone: he’s dead, Jim! And it would explain the delayed report. Bill needs to find the new Chicken Man and “motivate” him in Axe Cap’s direction or else Bill’s new boss will be The Colonel!

Over sushi and math, Taylor and Doug are admiring the beauty of their equation. In offering an olive branch, Doug tells Taylor he knows that the “woke” stuff isn’t worthless; it’s just that he’s not good at it. He knows that getting the pronouns right and accepting Taylor matters. Is this the first step of the healing between these two? Taylor looks emotional, which is something we rarely see. No matter how successful one can become, having the love and acceptance of your parents is something all children want, and I think Taylor is happy to see that just might be happening.

Hall comes through with the photo of Taylor’s algorithm. This is photo evidence that Taylor knows Axe is front running TMC’s positions and this is the solution. Axe spends as much time as he needs studying it to try and find a way to thwart it. But while he’s doing that, who’s running the shop? “The Street’s going to start wondering if you care more about revenge than making money.” And the street may not be wrong.

Bill is in Arkansas trying to figure out who the next Chicken Man will be when 2 Crown Vics roll up and a load of “suits” step out. They are the new Chicken Army, and there is no way Bill can buy them all off! What will he do with a problem he can’t throw a bag of money at? Never fear; Bill is a man with a solution!

Axe has spent an entire night pouring over the equation. Wags forgets Axe can “do the math” (I think we all do from time to time). Axe is so humble: “What can’t I do?” Um, see that you are wasting your valuable time perhaps?

Doug and Taylor are having breakfast and it seems working together may be bringing them closer. Doug looks around at what Taylor has built, and tells them they are proud of them. He sees a lot of himself in Taylor – he believes they both have the “it” factor: “the unyielding compulsion to get it right. Precision. Perfection.” What an ideal description of Taylor! Doug was never as successful as Taylor is, and his regret is that he would have liked to be just so he could give it to Taylor. I think Taylor is touched by this sentiment, but just doesn’t know how to express it. Doug has told Taylor he is proud and happy for them – two things Taylor has wanted to hear for a long time.

Axe is still mulling over Taylor’s equation when the new ACI numbers are released, and it’s not good. The number is higher, meaning the price will drop as there will be more than enough supply to meet demand. The long position of SYY and USFD are the wrong call. To the Batphone! Bill’s got a “final solution” to this problem, (Not gonna lie, that was just plain creepy.) Bill is going to cause a “chicken holocaust” by stealing a sick chick from the quarantine facility and place it among the healthy birds!

Not using a bucket but a bowling ball bag (I wonder if that could be the next promotion at KFC: Bowling Ball Bag of chicken! Only $15.99!!) Bill drives to a chicken farm with his sick chick. But who is waiting for him? The Dynamic Duo of Axe and Wags.

Bill is a “whatever it takes” man if there ever was one. He lives and dies for Axe Cap and his boss. There is no line he won’t cross. But (and who saw this coming?), Axe is the voice of reason: this move would solve the problem, but could poison the entire food supply! The risk is not worth it.

“We can’t all be right all of the time. Sometimes you just gotta take a loss.”

We see Axe say these words, but we know he doesn’t live these words!

Axe finds a mistake in Taylor’s math! Taylor doesn’t make math mistakes, so was this done on purpose? To let Axe know they were being watched? (There has been a lot of debate about this: did Taylor do it on purpose? Did Taylor let Doug make the mistake? I’m going to go with it was a message to Axe.)

Taylor knows Axe: knows he would spend all his time on the math and on not much else; getting him off his game. However Axe sees even more: this is a call for detente!

Axe and Taylor finally meet! Lower Manhattan as viewed from Paulus Hook in Jersey City is the stunning backdrop for this modern day Reykjavik Summit!

Taylor does not want to be at war with Axe. Axe gets that, but perhaps Taylor should have thought that out, Their actions were sure to bring Axe down on them, and down hard. This should not be a surprise to Taylor. But what we have in front of us are two smart, intense people, one rational, one emotional.

Taylor sees the world rationally; war is a distraction for both of them. It prevents them from operating at full potential. Taylor knows that both their time and energy is way too valuable to waste on each other. Taylor will have to waste time waiting for the next attack from Axe, and figuring out how to defend from it.

Axe is guided by his need for vengeance, and his anger at Taylor. He is not moved by Taylor’s rational argument. In Axe’s mind, this whole situation was brought about by Taylor’s betrayal (again, Axe never seeing the role he played in it!), so now they’ll have to deal with the outcome and deal with Axe’s wrath.

And what exactly has that rage gotten him? Walking into Grigor’s trap, investing in a shitty robot, wasting time trying to stop Taylor getting leverage (which they got anyway), and wasting hours going over Taylor’s math? Time better spent focusing on Axe Capital.

Taylor knows Axe well enough to know that this rational argument is not going to win Axe, so they must sweeten the pot. Taylor proposes offering Axe attractive terms to invest in TMC. It will give the Street the perception TMC is “blessed” by Axe, but also that TMC is giving Axe Cap a look at their trades and strategies. This will all be for show of course; Taylor won’t give Axe anything, but perception is reality and that is what will count. It will look like Axe can reign in the rogue, and is still the Alpha Dog. This is just the thing that feeds into Axe’s ego, and he agrees.

“Can I trust you on this?”

“You’re the fucking genius, you figure it out!”

Back in the car, Wags wonders if Taylor “bought” the truce! This is Axe trying to set up Taylor; but Taylor has been one step ahead of Axe so far this season and Axe continues to underestimate them. Axe thinks Taylor took the bait because they are trusting. I don’t think Taylor is trusting when it comes to Axe at all! Did Taylor set Axe up? When these two brilliant minds go toe to toe you never know where the next twist and turn will come from.

We used to only get a Chuck-Axe scene once or twice a season; now it’s become a regular thing!

Chuck and Axe are sharing a drink in Chuck’s office (away from Wendy?). Chuck has been putting people in jail and making enemies; Axe has been making people rich and making friends (I know what side I’d be on in that equation!) Two very different men, who are now friends “of a sort”.

Chuck needs Axe to help him win this election; not just with money, but with Axe’s friendships and his influence. But why would Axe help Chuck? “The last time you were a lawman, it wasn’t so good for me.” No, it will be different this time, Chuck promises. Really? “A man changes when he puts on that star.”

Chuck has been horse trading with everyone to get ahead. Now he’s dealing with the ultimate trader! The idea of Axe actually having the law on his side seals the deal. Axe will ask for his favor at a later date.

Can Axe trust Chuck? Chuck will do “whatever it takes” to win and has thrown everyone under the bus at one time or another.

Who are true friends? Who are true enemies? Everyone is just looking out for themselves and alliances will be built and fall accordingly. For now, everyone is the best of frenemies.