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Introducing Three Of Wall Street’s Hottest Market Indicators

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Turney Duff, Billions, Wall Street market indicators
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With Turney Duff, Author of The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess, Contributor to Showtime’s Billions and CNBC’s The Filthy Rich Guide

Turney Duff, Survivor Of Wall Street Excess

If you’re looking for an eyewitness account of the wild rides, Dionysian excesses, trophy and status seeking, and the fortunes made and lost on Wall Street over the past couple of decades, Turney Duff might be your man. As a trader at major hedge funds, he participated in the decadent boom times and bloody busts and lived to tell the tale in his 2013 book The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess.  He also has consulted for the Showtime hit Billions, is a regular on CNBC’s The Filthy Rich Guide, is a frequent article contributor to many financial websites, a blogger on his site TurneyDuff.com, and has enjoyed a host of other accolades.  He joins Steve to talk about the culture of “The Street” and its seeming lack of all limits on ostentatious and hedonistic behavior during bull markets as well as his own story of getting in over his head with the temptations he found while raking in a high 6-figure salary.

Is The 2017 Stock Rally Feeding A Spend Big Culture On Wall Street?

The high-octane stock market rally that’s been in the driver’s seat since the November election has no doubt created a lot of wealth—at least on paper— and 2017 bonuses for fund managers and traders are on track to rain a lot more money on “The Street.”  Steve asks Duff whether he’s currently seeing the kind of flashy, risk-taking exuberance that marked the go-go years of the late ‘90s and mid-2000s, pre-crisis.  Duff replies that he’s not seeing the same levels of decadence that he witnessed and joined in during those earlier bull runs.  He does admit, however, that many of the men on Wall Street he knows seem to be breaking in the direction of “increasing their deviant factor,” but he’s not convinced that “we’re heading back to where it was.”  The feedback he’s gotten from many friends and acquaintances about a recent article he wrote on the dawning of a new extravagance on Wall Street has been critical of his thesis, arguing that there’s no such thing.  Nevertheless, Duff sees evidence that a lot of big money players are ramping up their spending on “extracurriculars,” even as many others are holding back and keeping a lower profile.

Conflict Of Money-Shaming Vs The Reemergence Of Wealth-Flaunting

Steve floats an explanation for the relative reticence of bankers and financial pros. After the financial market meltdown in 2008, the culture on Wall Street became much more conservative for a number of reasons: Obama’s election signaled that new regulations of the industry were on the way, bonuses were slashed, thousands were laid off, public sentiment was in a nasty mood towards the nation’s financiers, and countless people and companies had been burned by the stock and housing markets.  Duff agrees, noting that when he asked his Wall Street contacts before the most recent market rally, as recently as October 2016, a majority were in savings mode and reluctant to use expense accounts.  He believes the reason is that people have not felt financially safe since the crisis, even as markets have steadily overcome their losses.  The trauma of seeing homes and stocks lose over 50% of their value has left a mark that will endure, even on younger generations who weren’t directly affected.  Duff sees a fair amount of “wealth-shaming” going on by the public, a persistent hangover from the crisis that is perhaps concentrated in the notion of the 1% vs the 99%.  Steve finds the phrase “wealth-shaming” a helpful barometer of larger scale changes in the culture.  Until recently, the very rich have kept their spending relatively in check and discrete, but Trump has arguably ushered a new cycle of unashamed, ostentatious displays of wealth.   In Steve’s estimation, online and TV advertising for luxury goods has ballooned in 2017, which he thinks is a bellwether of more status seeking materialism to come.  Duff says this describes his life in the early 2000s well, a time when he was “two gold chains short of a hip-hop video,” as he describes it.

The conversation takes a short detour to the question of trickle-down economics, which Duff is very skeptical of.  He bases this on how different his financial decisions and purchases were in the early 2000s than they are today.  The idea of luxury spending reaching the critical mass to benefit everyone on the lower rungs of the economy seems far-fetched to Duff.  Steve replies that he would save the question of trickle-down economics for another day, but agrees with Duff’s assessment that things have changed a lot since the last crisis, people’s spending priorities have changed, and this has a lot to do with a perception of instability and insecurity in the economy.  Job losses on Wall Street and elsewhere, often due to technology, are provoking uncertainty about the future, and a lingering conservative mentality around money is leading people to keep their cash safely un-invested in risky assets.

Does Market Frothiness And Ostentation Signal A Market Top?

As for the question of whether people are spending money more freely in 2017 thanks to booming stock and housing markets, Steve points out that he’s not interested in the fabulous lifestyles of those who’ve benefited the most from this boom but in the possibility that all this activity might be signaling a top in the market.  Based on their discussion so far, he doubts that Duff is seeing the same kind of frothiness and danger.  In terms of the lavish lifestyles themselves being an indicator of an imminent market correction or collapse, Duff is doubtful.  He thinks an alternative explanation might be that given the level of political conflict and ill will in DC—as well as the noises being made by the Administration about rolling back Dodd-Frank regulations—Wall Street doesn’t feel like the bulls-eye is on its back the way it has been since the financial meltdown.  Financial professionals are more comfortable these days displaying acts of conspicuous consumption than they have been, but Duff doesn’t think it rises to a level that is unsustainable, looks like a market top, or necessarily foreshadows an impending market downturn.   Steve proposes that instead of being at the beginning of a new chapter of “irrational exuberance,” we are perhaps in the 3rd inning of a long game.  He wraps up their talk by mentioning that he’ll be checking in with Duff whenever he needs to “see what the meter says” about purchases of Aston Martins, Cartier watches, and top dollar escorts.


Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here
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Steve Pomeranz: Turney Duff chronicled the spectacular rise and fall of his career on Wall Street in the book The Buy Side.  And he is also a consultant on the Showtime show Billions, which is a show I really love and he’s featured on the CNBC show the Filthy Rich Guide, which airs Wednesday at 10:00 p.m. We’ve spoken to Turney before and had some fun talking about the excesses of Wall Street when times are good, so I thought it would be a good time to revisit him and check out current Wall Street behavior now that we’ve seen the market rally so much in 2017.  Hey, Turney, welcome back.

Turney Duff: Thank you, thank you for having me back.

Steve Pomeranz: The last time we spoke, we spoke about pricey Aston Martin’s going for $200,000 and $1,000 an hour escorts and that was kind of the sign that the wild days of Wall Street are back.  Would you say that since the presidential election, we’re starting to see that kind of excitement again?

Turney Duff: Definitely, it has increased.  By collecting the data, guys, women too (but women aren’t calling escorts as far as I know) have definitely increased their deviant factor.  We’re not heading back towards where it was, but one interesting thing I’ll tell you which was not in my article…equally, so I’m getting feedback from friends and other people, acquaintances whatnot, almost taking the other side and upset a little bit that this is being put in print.  You’ve got people who are starting to increase their spending habits on, let’s say, curricular activities but you have an equal portion of the population who are much more sensitive to that.  So, it’s kind of interesting.

Steve Pomeranz: We’ve gone through a full turn here, there were the wild days, there were the ‘90s, of course—I don’t know if anything will ever match that again—but whenever Wall Street goes into these cycles, when you get to the up-cycle, things can get pretty wild; the bonuses get really big, and there’s a lot of excess, just kind of discretionary income.  But the last few years, maybe the Obama years, just to encapsulate it, have been very conservative years.  Obama himself was conservative, and the markets had hurt a lot of people. The mortgage debacle and housing had hurt a lot of people, and the market has climbed back slowly but inexorably to its current point.  I know that you polled your contacts back in 2016, what were they saying to you last year?

Turney Duff: It’s interesting because two times ago when I polled them people were much more inclined to save, which was definitely a dramatic shift from my days of being on Wall Street. But it all makes sense, you got 2008 and then for the next, say, four to five years, even though the market’s recovering, no one feels safe.  Expense accounts are being watched, and there’s some wealth-shaming going on by the public because if you walk into a party, let’s say, a cocktail party in 2003 and you say, “Oh what do you do?” And you’re like, “Oh, I work at Morgan Stanley,” the person would be like, “Oh.” But in 2012, you walk into a cocktail party and say, “Oh, what do you do?” And they’re like, “Oh, I work at Morgan Stanley.” They’re like, “Oh.” (with less enthusiasm) There’s a little bit of that going on, and I know a lot of guys who …  It’s like musical chairs.

Every time the music stops they pull a chair, and I know guys who’ve been trying to get back on the Street for three, four, five years, and so the jobs, I believe, have changed and probably lessened, but if you are making a couple million dollars a year or north of that, they are starting to feel more comfortable spending frivolously.

Steve Pomeranz: You use this term wealth-shaming, I think that’s a very accurate term.  Again, when so many people are suffering, and you have the 99%ers and the 1%ers and that cultural environment, there’s a lot of resentment to this small amount of population that’s doing extremely well. People are hiding their wealth, they’re keeping it under wraps; they may be doing things, but they’re doing it out of the public eyes, and they’re being very careful about it. And then in walks Donald Trump who is unashamed of his lavish lifestyle, his children all are proud of it and display it proudly. And now you’re starting to see, when you look at any decent website or upscale website or magazine, these diamond encrusted Cartier watches and the Piagets are being advertised pretty heavily, so I think the cycle is turning against this wealth-shaming, and now it’s becoming once again okay to display your wealth.

Turney Duff: Yeah, I would agree with that assessment. In the early 2000s, I usually described my life as a couple of gold chains short of a hip-hop video.  It was nuts.

Steve Pomeranz: That’s a pretty embarrassing for you to admit by the way.

Turney Duff: Oh, whatever, you know, it’s the truth, what do you want me to-

Steve Pomeranz: Yeah okay-

Turney Duff: I’m not gonna lie-

Steve Pomeranz: Okay.

Turney Duff: But it might be coming back and, not to throw us off topic or a curve ball and we don’t have to get into politics because I know people have their own opinions, but trickle-down economics has never worked.  And they’re gonna take a stab at it again and I can guarantee—well, I guess I can’t guarantee you—but if I just take myself and compare myself from 10,15 years ago, I’m not going to spend like I did 10, 15 years ago or I’m gonna need two x in my savings account before I make certain purchases, so to think companies or investors or whoever are gonna pass down their wealth …I’m sorry the bar has changed.  It’s not gonna work.

Steve Pomeranz: Well, I won’t get into the idea whether trickle-down works or not, that’s another discussion, but I think you do make a good point and that is that the world has changed and become seemingly more unstable.  You mentioned Wall Street jobs, people losing their jobs, unable to get back, and with technology moving as fast as it is, people just feel more insecure. So, there is this tendency for everybody to want to stuff their chairs with cash and bank accounts and just have this margin of safety sitting in your own account because you just don’t really feel secure about your future.

Turney Duff: Yes. I a 100% and you know I look at myself in 2007, I bought a $2,100,000 house.  I put 600 down, so I borrowed one point five, the previous year, I don’t know, I probably made like $700,000 or something, but in a million years I wouldn’t do that right now. No. That’s crazy.  But it seemed normal back then.

Steve Pomeranz: My guest is Turney Duff, he chronicled the spectacular rise and fall on Wall Street in the book The Buy Side.  He’s also a consultant on the Showtime program Billions and he’s also featured on CNBC’s show Filthy Rich Guide.  Now we’ve talked a little bit about your polling your contacts in 2016, I guess 2017 people are being a little bit more free in their spending. But the reason I’m asking all this, I don’t really care what people spend, I don’t really like watching shows like the lives of the rich and famous, I couldn’t care less, but I look at it as a sign whether as to whether we’re approaching a top in the market.  This irrational exuberance, this frothiness, and I’m getting a sense from you that we’re not there yet.

Turney Duff: I would agree with you that we’re not there, at least, in terms of this indicator.  But… and I don’t know how much this also plays into the fact but, in those early Obama years, Wall Street was public enemy number one.  We were the only enemy in town, and now you have Republicans hate Democrats, Democrats hate Republicans, the media hates DC, DC hates media, there’s a lot of other distractions now, and so Wall Street is probably not feeling as hated and they’re a little more comfortable to be spending their money in public.  But in terms of just kind of being too excessive, I don’t think we’re there yet, but it’s-

Steve Pomeranz: It’s starting, it seems like we’re at the beginning, or not the beginning, maybe we’re in the third inning or something like that of that.

Turney Duff: Right, right.

Steve Pomeranz: So, we want to keep tabs on that.  I’m gonna be getting in touch with you from time to time to see what the meter says with regards to Aston Martins, Cartier watches, and escorts.

Turney Duff: Yeah.

Steve Pomeranz: Tell me a little bit about the Filthy Rich Guide, we’ve got about a minute left.

Turney Duff: Sure, so it’s interesting you said that you don’t like shows like Lives of the Rich and Famous, but, no, because this is probably the perfect show for you because it’s actually a cynical, sort of snarky look at the ridiculous things that some of these billionaires do.  There’s some, well, porn element to it, but it’s a funny sort of snarky look at it, so it’s a fun show.

Steve Pomeranz: Okay, cool.  My guest Turney Duff, the show is The Filthy Rich Guide, it airs on Wednesday on CNBC at 10:00 p.m. Hey, Turney, thanks so much for joining me.

Turney Duff: Thank you.

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