They cursed and buried him along with shame
And thought his timeless soul had gone
In empty burning hell, unholy one
But he’s returned to prove them wrong, so wrong
Bark at the Moon – Ozzy Osbourne
Hello and welcome to this week’s From the Trader’s Desk. What an episode this week! Billions sure has been bringing it the last few weeks. And if these last two episodes are any indication, we are in for a wild ride the next two weeks!
I wait for this episode every season – the one when Axe wears his metal shirt, and an accompanying song plays during the scene. I have a whole post talking about the significance of the shirts and songs and have tried to make predictions for the upcoming season. Sometimes I was right (Black Sabbath in S3, Rainbow in S5) and sometimes, like this season, I was wrong. Slayer was not on my metal bingo card, and I go into why in an updated “Bobby Axelrod – a Man and his Music”.
Although Slayer’s “Angel of Death” was the outro song this week, I still chose to use lyrics from Ozzy Osbourne’s “Bark at the Moon” because I thought they were much more fitting: Prince thought Axe was buried and dead, but oh, did he comeback and prove him wrong. (Also, “Angel of Death” is about Josef Mengele, and I can’t bring myself to have lyrics like that associated with my writing.)
Before I get into the Axe/Prince cage match, I want to address and explain some financial questions I got on X (formerly known as Twitter) and then go into some observations.
A few readers wanted to know why at the end of the episode, Prince tells Scooter, Kate, and Philip to go to all cash and clear the portfolio of every position. He is doing this because now that he knows his enemies are circling, it will be much harder for them to hurt him financially if the fund is in all cash. No companies that they can buy out, no insider trading claims, etc. However, there are several downsides to this strategy.
Prince Capital just sold all the fund’s holdings in foreign investments and in fully invested in US-based assets. Going to all cash in such a short turnaround time would cause people to ask, “What does he know that we don’t?” and “Why is he getting out of American investments?” For someone running for President of the United States, bailing on the country you want to lead is not a good look. Also, the selling of all those assets at once would cause enormous market fluctuations. Prince Capital has billions of dollars of assets under management – you don’t just unwind that number of stocks, bonds, and private equity investments without causing havoc to the markets. Additionally, you are not going to continue to be the best performing fund on the Street if you are all cash. You can place your money in high yielding bonds and treasuries, but you are still not going to get nearly the kind of returns you would if you were fully invested; I also don’t think your clients will be willing to pay a 2/20 fee for cash positions. They are paying for active management, not fixed income. Finally, you have a staff of traders, analysts, and portfolio managers – what are they supposed to do all day if they can’t trade?
Last week in my own Q&A, I asked why Rian didn’t know Mental was controlled by Prince through a shell company. Well, this week we know why – it was a set up by Prince the whole time. The financials both Wendy and Rian saw were fake. They were numbers that Prince wanted both to see in order for the offer to be tempting enough for Wendy, and to be endorsed by Rian. How could this happen?
Mental is a private company, which means there is less public information published about it. If it were a public company, it would be required to file various reports to the SEC, like 10-K and 10-Q reports that would state the company’s balance sheet, income statement, and cash flow. It would be much harder to fake the numbers on a public company. No doubt it has been done (like Rian states about Enron) but I do think Rian would have been able to spot it.
This got me thinking: who was the one who told Wendy to open her folder of job offers? Wasn’t that Dr. Mayer? I have been suspect of Mayer’s intentions from the beginning and this strange coincidence just makes me question her motives even more. She seemed a little bit too pleased when Wendy signed that contract in her office.
I’m hoping that Rian is stepping into the partnership role to be a saboteur from the inside. She has had a front row seat to see what kind of person Prince is and I can’t believe she is suddenly motivated just by money. The pep talk from Wendy probably put her on the path to doing what is right.
I was so happy to see Axe and Taylor working together again. From the first time Taylor stepped into the offices of Axe Capital (when they were back in CT) we knew they brought something different to the firm, but more importantly was a good partner with Axe. When Axe was forbidden from trading back in S3, who did he put in charge of Axe Cap? Taylor. They did temporarily become enemies in S4 (which was all Axe’s doing), but they both realize they bring out the best in each other.
To see them trying to come up with ways through financial moves to try and free Wendy from Prince’s trap was like old times. Taylor knows that the Bobby Axelrod they gave up business school for can find a way – the Axe that see strategies and moves that no one else could cook up. But it takes Taylor repeating lines that Axe spoke to them to get him to finally focus:
“A bad motherfucker once told me hate is nature’s most perfect energy source. Endlessly renewable.”
This gets Axe stew in his hatred of Prince and what he is trying to do to Wendy and leads to Axe coming up with the perfect plan to neutralize Prince.
Prince values “loyalty” above everything else. But it’s not loyalty he wants, it’s blind obedience. That is what all authoritarians want, and that is what Mike Prince is. Dictators are paranoid, and Prince proves it by telling Scooter he needs to know not just what his employees are doing, but what they are thinking! He would rather be feared than loved. I think that his addiction to this perceived fidelity lets him fall right into Chuck’s trap. Of course Prince would think Chuck was springing Kai Huang Liu Jr. to show loyalty to him. Chuck also says the words that are like an elixir to Prince “I follow the chain of command”. That is exactly the kind of sycophant Prince needs to surround himself with. He never even thinks that someone who was dead set on putting him away may have ulterior motives for trying to get into his good graces. His narcissism is what lets him fall for the trap. And what a trap it is!
Before I continue, I can’t wait to see exactly how Chuck got Axe to be allowed back in the United States. He got Andolov back by saying he was using Andolov as an expert witness in by commodity fraud case in the oil industry. Is Axe going to be a witness against Prince?
And where is Bryan Connerty? I do not believe that the request to Kate to get his law license back was put out there for no reason. I could totally see Bryan being legal counsel for Axe Global when all of this is said and done. He will finally become a lion!
In last week’s Trader’s Desk, I asked “Is Prince stupid enough to go to Haddon Hall and confront Axe?” And the answer is yes. He just had to go and kick the hornet’s nest because he felt the need to square away one of his enemies. But Axe was sitting on the sidelines basically minding his own business, running Axe Global and watching Gordie trade crypto. But Prince is drinking his own Kool-Aid and feels he can box in Axe by threatening Wendy. He is dripping with overconfidence and thinks he can set ground rules for Axe. Does he know who exactly he is dealing with? Yes, Prince bested Axe once, something he makes sure he rubs in Axe’s face, but does he think he can do it a second time? Taylor gave Axe the nudge to think outside of financial moves to get to Prince, but I do think that the sanctimonious visit by Prince set the whole thing in motion. Axe may have been pretending to be Zen and wanting to keep his nose clean, but deep inside we all know he has been waiting for this opportunity for a long while. Axe cannot wait to wipe that smug look off Prince’s face and does just that at Lincoln Center.
The scene at Lincoln Center between Axe and Prince is one of compare and contrast:
In one corner you have Bobby Axelrod: working class kid from Yonkers who had an unconventional road to become a titan of Wall Street. He is bold, brass and in your face, and when he is wearing his battle armor of a metal t-shirt, well he is about to go to war. And as he is standing there in his Slayer t-shirt and black leather jacket, you know it’s on! What you see is exactly what you get.
In the other corner we have Mike Prince: middle-class kid from middle America – Mr. All-American. College basketball hero and running for President of the United State so he can “do good”. And as phony as the day is long. As he is walking up the steps into his coronation concert dressed in a tux, he spots Axe and looks as if he has seen a ghost.
This confrontation is the polar opposite of the one at Haddon Hall. Axe is the one laying down the ground rules to Prince. The physicality, the accent, the aggressiveness tells Prince, and the rest of the world that Bobby Fucking Axelrod is back. Getting Prince to back down from possibly putting Wendy in jail for 35 years by using Andy’s “friend” Derek is genius.
And even though they are now in a Mexican standoff, Prince knows he is the target of the sleeping giant he just awoke from his slumber. Why else would he instruct his flunkies to go to all cash if he wasn’t scared?
Axe has won this battle, but the war is just beginning. As he convenes with his War Council at Chuck’s brownstone, he lets them know what’s on the agenda:
“Now, let’s get to work.”