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Wall Street’s Axman Cometh

“The Ax” was once an influential figure on Wall Street, before Eliot Spitzer put the kibosh on the research industrial complex. Years later, Steve Tusa is the rare analyst elucidating the stakes for America’s most storied conglomerate.

As in many professions, Wall Street loves its specialized jargon. Synthetic CDOs? Backwardation and contango? Leveraged recap anyone?  The more confusing and esoteric the lingo the easier it is to keep outsiders at a distance and make it seem like the industry’s highly specialized expertise is worth the billions of dollars it generates in annual fees. Don’t get me wrong, much of what these masters of the universe do is worth paying for, just probably not as much as they want you to believe, or that in any way justifies the obscene profits that the Big Banks are raking in these days. (In case you missed it, JPMorgan Chase, our biggest bank, is making profits at a clip of around $40 billion a year.)

In any event, one of my favorite bits of Wall Street argot is when investment bankers refer to the most powerful and influential research analyst in a particular industry as “the Ax.” I don’t know the precise derivation of this honorific, but it’s likely a spin on how the same term is used to refer to the most powerful market maker in a particular stock or security. 

Once upon a time, in the years before Eliot Spitzer lowered the boom on the growing collusion between research analysts and investment bankers in order to win lucrative underwriting assignments, the Ax could be a legendary figure. The Ax on Amazon’s stock, for instance, was Henry Blodget, then at Merrill Lynch. Whenever Blodget wrote or spoke about Amazon, the stock moved higher. He was forever putting higher and higher price targets on Amazon’s stock, which would drive the stock up and up and garner him more and more media attention. (Blodget proved to be prescient about Amazon but nevertheless got barred from the securities industry for life after a tussle with Spitzer. It turned out to be the best thing that ever happened to him: He started Business Insider, sold it to Axel Springer and made a fortune.) Mary Meeker, a longtime tech analyst at Morgan Stanley turned venture capitalist, was long the Ax in a variety of tech stocks.

Steve Tusa, a research analyst at JPMorgan Securities—the investment banking arm of JPMorgan Chase—is the Ax in GE, and has been for years. Well before most other research analysts, Tusa spotted and elucidated the problems at  GE in an articulate and authoritative way. As a result, he’s taken his share of grief from the company, but the investors, both institutional and retail, who followed his advice have made a lot of money—or at least avoided losing money. That’s made him a powerful force among institutional investors and thus on Wall Street...

FOUR STORIES WE'RE TALKING ABOUT