For the Love of Trading
by Tom Teodorczuk | Market Watch | March 21, 2018
We asked Anthony Scaramucci and other financiers: How realistic is Showtime’s hedge-fund drama ‘Billions’? Is the hit show on the money when it comes to Wall Street?
This story contains some plot details about season 3 of “Billions.”
Things have been busy recently for Anthony Scaramucci. Prior to serving as President Trump’s White House Communications Director for just 11 days, “The Mooch” founded hedge-fund investing firm SkyBridge Capital and a hedge-fund conference known as SALT.
So, he’s only now gotten around to watching “Billions,” Showtime’s hit TV series starring Damian Lewis as hedge-fund billionaire Bobby Axelrod and Paul Giamatti as an aggressive U.S. Attorney out to get him on charges of insider trading. Season three of “Billions” — now Showtime’s second most popular series after “Homeland” — premieres on Sunday night.
Scaramucci attended Tufts University with “Billons” co-creator Brian Koppelman (who created the show with David Levien and Andrew Ross Sorkin) and he’s a fan. “Brian and David know how to create a great drama that has a comedic flair and realness,” Scaramucci says.
Much attention has been paid to the perceived similarities between Lewis’s Axelrod and hedge-fund titan Steve Cohen (Dan Loeb and Bill Ackman are other figures cited as inspiration for the character). “The characters that I saw were not reminiscent of any one person but they appeared to be composites,” says Scaramucci. “I can see why the show is so popular. They have a real hit. It’s binge material.”
‘High-impact historical fiction’
Robert Wolf, former president and chief operating officer of UBS who now serves as founder & CEO of 32 Advisors, is another “Billions” junkie.
“I love the show,” he says. “It takes all the big events and the ‘larger than life’ stereotypes of Wall Street from the 1980s to today and creates a fast-paced, high-impact historical fiction.”
As to the authenticity of operations at Axelrod’s fictional hedge fund, Axe Capital, Wolf says, “I can identify with many of the stories from my trading days at Salomon Brothers to my weekend at the Fed for the Lehman crisis and to having regulators around on a non-stop basis.” (In 1991, while Wolf was at Salomon Brothers, the erstwhile investment bank was caught up in a bond-auction-market manipulation scandal which partly inspired season two of “Billions.”)
The second season of “Billions” ended with Axelrod out on bail after his arrest was orchestrated by Rhoades. The assets of Axe Capital have been frozen and the company is, according to an employee, “the most toxic shop on the street right now.”
“I think everyone in the industry is aware of ‘Billions,’ says Ben Axler, the founder and chief investment officer of Spruce Point Capital Management. He’s particularly impressed with the character of Bobby Axelrod.
“He displays a lot of the traits of a successful hedge fund manager,” Axler says. “He’s calm, cool and calculated about how he’s approaching the investigation of his firm and how he’s going to try to prevail to save it and his passion, which is trading.”
“That part of the series is very accurate. The people who have been in this industry a long time are very good at it and they don’t want to stop what they’re doing or their love of trading. For some people it’s about money, for others it’s love. For Axelrod, it seems to be about both.”
Axelrod’s fictional world isn’t too far removed from that of Axler’s. “I started my short-selling career shorting Chinese companies, and in the last season in ‘Billions’ there was an episode when Axelrod shorted a Chinese company. I thought to myself, ‘That’s very similar to what I was doing,’” he says.
This season on the show, Axe Capital is forced to cope with its founder being separated from the firm’s day-to-day operations.
“I’ve never been at a firm that has been under investigation but they did a good job of showing the uncertainty in the conference rooms where employees were huddled, trying to get clarity about the direction of the firm,” says Axler.
But he added, “In the first few episodes of season three, there was no evidence of anybody leaving Axe Capital. In reality, you would have had some people go to another firm that has more certainty and employment stability.”
A new ‘Bonfire’
Bruce Goldfarb, founder and CEO of Okapi Partners, says that while “Billions” exaggerates some scenes for entertainment value, “it really does capture the social milieu that some hedge fund players inhabit — the way people live, their wives, the social events they attend after-hours. There hasn’t been something fictional that has felt as real about the Wall Street world since [Tom Wolfe’s 1987 novel] “The Bonfire of the Vanities.””
A plot arc in season three revolving around New York’s leading hedge-fund managers attending an “idea dinner” hit Goldfarb close to home. “The ‘idea dinner’ had a very real feel to me based on ones I’ve attended and descriptions from clients who have been at them,” he says. “’Billions’ captures the ‘friends and frenemies’ behavioral element of those dinners and it feels real how they look for everything to be particular in a private room.”
Axelrod, he says, “appears to be smart, thoughtful and he has flashes of personality that go from humor and caring to rage. I have witnessed that with some clients. The people who excel in the hedge-fund world are sometimes on a spectrum of thought and behavior that gives them an edge. That’s how Axelrod comes off.”
Goldfarb was particularly impressed with the finer details of “Billions.”
“Take the [Robert] Motherwell painting in Axe’s bachelor pad. His paintings are often of bull’s genitalia and that’s an apt analogy of the bravado and machismo that is part of the industry,” he says.
A line that particularly impressed him is when Axelrod observes, “Lots of guys watch Bruce Lee movies — doesn’t mean you can do karate.” “That sentiment covers the attitude that investors have when they think about the information they put out to the market that they’re willing to share,” says Goldfarb. “That’s a mindset that separates good hedge funds from bad hedge funds.”
Euan Rellie, co-founder and senior director of investment banking firm BDA Partners, also speaks highly of “Billions.” “We all know being a hedge fund manager, in many ways, is about sailing as close to the winds as you sensibly can,” he says. “Billions has that right.”
He adds: “The investment decisions in the show are quite plausible. I like the analysis in the show of the chip that is going to dominate the Internet of Things. That’s actually the way people talk in finance where people are looking for that game-changing, disruptive investment thesis.”
“Some of those situations are clearly drawn from real life. You can tell the writers are obviously reading The Wall Street Journal or Businessweek and then transferring that into the scripts,” he says.
“Billions” seems influenced by former U.S. Attorney for the Southern District of New York Preet Bharara’s aborted crusade against hedge-fund manager Steve Cohen, then of SAC Capital Advisors. Though SAC Capital pleaded guilty to insider-trading charges in 2013, Cohen was not criminally indicted.
To Rellie, this gives the show a very “2013 feeling.” “It’s clearly influenced by that over-the-top hedgie rubbing everybody’s nose in it socially, epitomized by Steve Cohen. But I think that’s a dated notion now.”
“Hedge fund managers, private equity managers and investment bankers in a way can’t believe our luck at the moment, so the notion of saying a big ‘F*** You’ to the world seems a bit misplaced. There are Axe Capital employees who are just ridiculous, sexist relics saying f*** every third word. Those days are gone and those characters feel less convincing to me,” he says.
By contrast, “Billions” earned kudos for diversity from Rellie in regards to non-binary CIO of Axe Capital Taylor Amber Mason (the first major non-binary character in TV drama history, played by Asia Kate Dillon). “The character of Taylor, the non-binary CIO, for me redeems the story a bit because it brings it forward,” he said. “I run an investment banking firm and we’re desperate to be more diverse.”
In addition to the trope that Good People do Bad Things, and vice versa, central to “Billions” is the cat-and-mouse showdown between Axelrod and Rhoades.
But those scenes are implausible, says Jeff Brown, partner at international law firm Dechert and a former prosecutor at the United States Attorney’s Office for the Southern District of New York, where he served as co-chief of the general crimes unit.
“I enjoy the show but it’s not at all reflective of what happens,” he says. “The U.S. Attorney doesn’t meet criminals. Prosecutors don’t leave the office and meet the targets of their investigations since they would then become a witness and be off the case.”
The U.S. Attorney’s office in “Billions,” Brown adds, is comprised of “these super-erudite, esoteric Latin-citing, almost nerdy kind of guys. That’s a mischaracterization. The people who are super-articulate are not good at prosecuting people because there, you have to make decisions and can’t be paralyzed by analysis.”
The reality, Brown says, “is much more plain-speaking. It’s more methodical and rigorous: Can we prove this or not? Are we going to arrest the guy or not?” Another mistake, he notes, is that attorneys in real life don’t have nameplates at their desks, as they do on the show.
He adds, “It isn’t like ‘The Art of War’ but I’m sure that would be boring if the show was accurate because Rhoades would sit in his office all day and take phone calls. I don’t resent the show for not being accurate because it’s fun to watch. But anyone who sees it thinking that’s the way things actually work — I would want to talk them out of that.”
Suggestions for future seasons
“Billions” is expected to continue for several more seasons. As for possible plotlines for future seasons, according to Axler, “Twitter and social media have become an influence in finance and I don’t think they’ve explored that yet.”
“If I was writing the script of ‘Billions,’” says Rellie, “I would start exploring the interplay between D.C. politics and the financial markets, because regulation is really going to matter and hedge funds have thrived by being unregulated.”
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