In the Mind of a Wall Street Reporter

Tyler Hey, what's up, guys? And welcome back to Talking Shop with The Water Coolest. I'm Tyler, and I'm very excited today to talk to Thornton McEnery. A lot of you guys probably know him from DealBreaker, the financial news and culture website Thornton, can you tell the kids at home a little bit about yourself?

Thornton Yeah, I was an early, early employee of Business Insider in its infancy. And then I was at Crain’s New York business. And then I went over to DealBreaker where I became the executive editor. I was there for a few years covering Wall Street. And then I covered Wall Street for The New York Post. And now I'm at MarketWatch, where I'm covering the meme stock revolution and the way it's impacting Wall Street and the people it's bringing out into the forefront of the new world of investing.

Tyler And you’re doing a YouTube show now, right?

Thornton Yup, we talk meme stocks. The idea is we're going to try to get people to understand the way this whole thing has really changed the market structure, all these retail investors coming in and sort of upending what everyone assumed was a closed circuit. It seems like everyone inside the closed circuit thought it was closed. And now it's changed the way the markets are going to function, at least in the short term. And if we're honest, I think it’s going to be the long term. 

Tyler Before we get into meme stonks, let’s talk a bit more about your old beat: Wall Street. There’s a lot going on right now between going back to the office. CEOs are putting their feet in their mouth quite a bit. And then, of course, there's the infamous Goldman deck that sparked this latest trend of banks actually giving a damn about analysts and associates.

I'm curious what is one of your favorite stories of the lousy treatment of analysts and associates, maybe not in the past year, but, you know, maybe going back four or five years, is there any story that stands out?

Thornton I can't remember really any specific. I mean, they sort of all blend together in my mind.

But I will say this about Goldman Sachs… I talked to people on the Street, and there is a sense that the pandemic has completely short-circuited Wall Street. Even older executives were working more hours. The idea of allowing analysts to leave to sleep in their crappy apartments for a few hours has disappeared. These guys were kind of on-call 24 hours. And so, yeah, if anything, the pandemic shifted things all the way back to ‘worse.’ I think it got even worse than the 80s and 90s.

And on the vaccine/back to office front… I’ve been telling everyone that the vaccination rate on the Street will be one hundred percent. And they said they can't mandate that that's not legal. And I was like legal and mandate… that's very different. That's not what I'm talking about. It's Wall Street culture. If you want to be here, get vaccinated. And, you know, guys like Jamie Dimon, guys like Jim Gorman, they're going to make it happen. You don't have to work there. They're going to get these people vaccinated and back in the office.

Tyler Jim Gorman said recently, if you can go to a restaurant, you can come to work. What are your thoughts there?

Thornton I don't really disagree with Gorman’s point. I mean, at a restaurant, you're not sure who’s around, what their recent testing has shown, or if they've gotten the shot. But on a Morgan Stanley trading floor, you're pretty certain that everyone there has at least been tested to get in the building and has probably gotten vaccinated. So, I mean, yeah, while maybe it was tone-deaf, he isn’t wrong on a factual basis.

David Solomon has had the same approach since the pandemic was raging. He was saying we've got to get people back as soon as we can. And it makes sense. Gorman and Solomon and anyone with a big trading operation, those guys are in a tougher spot. Right? I mean, if I'm running a large custodial bank. There's a whole other side of my business that I can keep people working from home. But if you're running a huge trading floor and that's a huge part of your business, you need people at the office. You can't have people trading from home. We've seen what that does. It's not pretty.

Tyler What was your favorite gift that was given out when all of the banks had knee-jerk reactions to the Goldman Sachs’ analyst deck?

Thornton Jeffries’ Peloton was the best one. And I think it spoke to a bigger trend. In my opinion, Goldman is the weakest it’s been in 20 years. Insiders are saying Solomon isn’t as popular as Lloyd was. And the other firms on the Street smelled blood in the water. They saw that Goldman was getting bad PR, and they jumped at the opportunity. Not only from a business perspective, but from a recruiting perspective. This could be a potential game-changer if Jefferies or Morgan Stanley can position themselves as the premier landing spot for top talent.

Tyler I want to switch gears a little bit and talk about some of the things that have been in the headlines.

There was just an article in Bloomberg about Bill Hwang laying low in New Jersey, where he's lived for a while. He’s just kind of playing that dad life. What do you think Bill Hwang's next move is?

Thornton I don't know where you go. I guess private equity would be the next move? It's going to be hard for him to raise money. I think that's one of the more obvious things you'll ever hear me say.

But yeah, I would guess another type of family office fund is really where he's got to go. I can't fathom anything else. But hey, stranger things have happened, you know, I mean, we've seen people come back. We see people come back from worse. And it's not like he blew up a real fund.

Tyler I’m curious about what you think about the Robinhood IPO. I know you're covering meme stocks and retail investing now. What do you think about them deciding to sell about a third of their shares directly to individual investors, which, of course, is something that typically does not happen? Do you think that's going to be something that catches on or do you think people are going to realize this was a terrible, terrible idea?

Thornton I am confused by Robinhood's approach here, and in a way, I think they're confused by their approach here. I mean, selling stock to individual investors makes sense because Robinhood has proven that it works.

They sort of launched the meme stock movement on their own platform, and to an extent, they’ve become one. But then the CFO is on CNBC seeming oddly offended by the notion that they'd be a meme suck. So I think there's confusion there about what they want to be. I think they're afraid of the volatility that comes with being a meme stock. But quite frankly, that's their audience, right? I mean, Wall Street sort of sees the critical flaws right now in Robinhood’s business model (read: payment for order flow).

And really what you're seeing now after his first earnings report is a company that's basically a crypto exchange. That was more than half of their entire revenue for the quarter. And almost half came from Dogecoin. It's wild. So I think Robinhood, more than anything is trying to ‘find itself.’

Tyler And how do you see meme stocks evolving? I think it's clear now that retail investors have a say, and they're here to stay. But where does it go from here? Do we see something as crazy as GameStop ever again? Or do retailers latch on to something for a couple of weeks, drive it up and makes a little money? Or is it something totally different?

Thornton It was, like everything else, a function of the pandemic. I mean, you had a lot of people doing this because there wasn't a lot else to do at that point. I think that the critical mass is what really caught these hedge funds off guard. I mean, it started with Hertz, and that surprised people. I think Hertz really brought people to the table like, oh, my God, what's happening? And they started messing around a little bit. And then in winter people couldn't even go outside anymore. So people are inside on their computers...

God willing, we won't do that again this winter. Hopefully, we will be living a more relatively normal life than we were last year. But I will say that there are people in this who have learned this world, that some of these people are shockingly cogent in their understanding. There are a lot of people who are being wildly underestimated in this whole thing. And they're going to stay out there, and they're going to stay in these groups, and they're going to stay alert, and they're going to watch this, and they're going to create more disruptions. This scale might be hard to replicate, but I wouldn’t be shocked to see another $GME.

If I'm a short seller right now on Wall Street, I'm going to be concerned about being on the other side of this. And I think the long-lasting effects from my perspective will be the regulation. What I keep hearing is a lot of complaints from Wall Street yelling at the regulators. Saying these people are going to hurt themselves. But I'm not really sure what these hedgies think is going to happen. What do they think Gary Gensler is going to do? What do they think FINRA is going to do? They're going to tell Americans they can't spend their money investing in certain stocks? That's not realistic. What is more realistic is that you're going to get these regulators looking at this stuff, and they're going to start seeing some really strange behavior in shorting. They're going to see weird synthetics. They're going to see naked stuff.

If Wall Street asks for a real look into this, that might be a mistake, because I think you're going to see an SEC that’s suddenly very active with a chairman who does not mess around and loves to get elbow deep in this stuff, go after short selling. I think that's the most realistic outcome of any regulatory investigation into what happened in January.

So that could be something that would surprise maybe the Street in a weird way. But these people aren't going away.

Tyler And what do you think the impact will be on these individual companies. We know what's happening to the stocks, but do you think AMC and GameStop continue to sell shares? Do you think other companies follow suit? Do you think at the end of the day Wall Street Bets actually saves GameStop, which is for all intents and purposes, was a poor performing company? 

Thornton GameStop has already paid off a massive amount of debt using, using the stocks. So, I mean, to a certain extent, GameStop is not the shitty company it was in January. And it's not me saying this. It’s actual adults and analysts who've come out and said these guys are much better positioned. AMC, I think, showed recently the limits of this when Adam Aron push for another capital raise.

Tyler I think a little insight for the apes out there is a perfect way to end it. I really appreciate you taking the time, man. Can you tell everyone where they can find you?

Thornton My pleasure. Sure, you can find me writing for MarketWatch and my YouTube series is Meme Markets.

END.
 

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