The Secrets Of Billions

Wall Street is crooked. This is not really a surprise to anyone. I lived on the street. And I worked on the street.

Wall Street starts at broadway and continues down to Water Street. Along the way, it gets crooked.

Right around Broad Street it starts to curve. If you are standing at one end of Wall Street and try to look at the other end, you won’t see it.

It’s crooked. It jags. It turns a little. People walk back and forth daydreaming about getting rich. Others are crying because they couldn’t make it. And if you can’t make it there, as the song sort of goes, you can’t make it anywhere.

Which is really true. Because “there” is where the money is. And people get desperate around money. So desperate they will do anything to get it.

At one point I invested in a dozen hedge funds. Eleven of them ended up being caught doing illegal activity. I think a few people are in jail.

Every night I was scared because I started to see what was going on until eventually I shut the whole thing down.

My investors were very upset I shut things down when things were going well. This was in mid-2006. By 2009 I finally got my money back from all of them. That’s how desperately Wall Street tries to hold onto your money. I thought Wall Street was a quick way out. But it was a quick way to stress and misery. I got out. I stayed out.

“BILLIONS” the new show on Showtime is the first show that I think accurately describes what is going on on this tiny street.

But there’s a lot of terminology in the show and I thought I would explain some areas. This is to say, I’m about to have spoilers. So don’t read further if you are a purist. Watch the show. I may do this after future shows as well if you like this post.

At a basic level, the show is about a “hedge fund manager”, Bobby Axelrod, played by Damian Lewis, and a US Attorney, Chuck Rhodes, played by Paul Giamatti. I put “hedge fund manager” in quotes because it’s a term I’m about to explain.

The US Attorney wants to go after the huge hedge fund manager for “insider trading”.

And that sets the stage for a good vs evil epic where you don’t know what is good, what is evil, what the law should be, what capitalism is about, what is the psychology of money and success, and, of course, let’s get some sex in there (else what good is life).

Here’s what you need to understand to fully understand the show.

 – “Hedge fund manager” – I was a hedge fund manager for awhile. Not like “Axe” in the show. Much smaller. But the same principles. People invest money with you (like in a mutual fund) and you can do WHATEVER you want with that money to return greater money.

Unlike mutual funds, hedge funds are fairly unregulated. Which means…bad stuff can happen. Like a Bernie Madoff who steals billions.

One time I tried to get Bernie Madoff to invest money in my fund. His response, “We have no idea where you put your money and the last thing we need is to see ‘Bernard Madoff Securities’ on the front page of the Wall St. Journal.”

Hedge funds are called “hedge” funds because the original ones (and Warren Buffett had one of the original hedge funds in the 1950s) can both buy stocks and bet against stocks.

In other words, they can “hedge” their risk by being half in favor of the market going up and half in favor of the market going down. And if they pick the right spots, then they win no matter what and avoid losing money when the market goes down.

That said, there is a famous saying on Wall Street, “when you ‘hedge’ you take twice the risk and make half the money”.

– “Insider trading” – there is no one definition of this. And the definition changes all the time. This is what makes the show interesting. It’s a gray area.

But basically, if you know information that is private (“Company A is buying Company B”) then you are not allowed to make money on that information.

The essence of stock market law in the US is this: every transaction has to have risk in it. If you eliminate risk by, for instance, paying for information that nobody else knows, then you have committed a crime.

Should Insider Trading Ever Be Illegal?

Whether it should be or not…it is illegal.

But let’s play for a second.

I don’t think it should be illegal. When someone makes a trade in the market, the knowledge they had in their heads is now encoded directly into the stock market.

The more “knowledge” that is baked into the market, the more efficient the market is. The more insider knowledge that is in stock, the more smoothly they will move and the more they will reflect the actual things that are effecting a company.

I’d rather have insider trading be legal and let the government go after the funds that actually steal money, like the Madoffs.

But many people disagree and this is not a fight worth arguing about.

– “Dominatrix” – in the first scene we see a man (later revealed to be the US Attorney) being tied up and peed on by a dominatrix. The question is, why does this powerful man need to be dominated to achieve satisfaction?

When I lived in the Chelsea Hotel one of my neighbors was a professional submissive. When we would meet for drinks at the end of a work day she often couldn’t sit on the chair. “Ow!” she’d say.

She had been hit all day by men paying her money. One time she told me a story, “This guy came over with a bag of fruit. He put the fruit all over me. Then he took pictures. Then he got off by masturbating to the photos.”

She then told me she was in a huge rush because she had to meet her girlfriend. It was Valentine’s Day. She made the client clean up her room because there was fruit and whip cream everywhere.

Later, I met the girlfriend, Veronica. She told me a story. About how she went to the mansion on Park Avenue of a famous movie director, “You would be shocked if I told you the name,” is all she told me.

She had to knife him until there was blood all over his lobby and she almost had to call the hospital. But that was what he wanted.

“Why would he want that?” I asked her.

“Powerful men spend the entire day giving orders and being in charge,” she said. “At the end of the day they want someone to be in charge of them.”

Much later she married a computer programmer. I ran into her at a party. She said, “He’s just like you!” And she was happy.

– The SEC (Securities and Exchange Commission) versus the US Attorney

Not everyone on Wall Street (or prosecuting Wall Street) is on the same side. Early in the show we see that the SEC has some “evidence” against Bobby Axelrod, the mega hedge fund manager who is managing billions of dollars.