1 00:00:03,800 --> 00:00:07,400 Speaker 1: I feel her intro music is ill suited for this episode. 2 00:00:07,400 --> 00:00:19,200 Speaker 1: Can we play something else that's better? Okay, Welcome to 3 00:00:19,239 --> 00:00:23,200 Speaker 1: odd Lots. It's Tuesday, January nineteen. I'm Tracy Allowit, executive 4 00:00:23,280 --> 00:00:26,680 Speaker 1: editor at Bloomberg Markets, and I'm Joe Wisenthal, Managing editor 5 00:00:26,680 --> 00:00:30,000 Speaker 1: of Bloomberg Markets. So the world lost a musical great 6 00:00:30,080 --> 00:00:32,800 Speaker 1: last week. I am talking, of course, about David Bowie, 7 00:00:32,920 --> 00:00:35,160 Speaker 1: who died of cancer at the age of sixty nine. 8 00:00:35,560 --> 00:00:39,199 Speaker 1: This makes us all very very sad. But instead of 9 00:00:39,240 --> 00:00:41,519 Speaker 1: being sad on this episode, we are going to use 10 00:00:41,560 --> 00:00:45,199 Speaker 1: it to celebrate Bowie's creative genius. Sorry, just going to 11 00:00:45,520 --> 00:00:48,279 Speaker 1: play Bowie music for the next half an hour as 12 00:00:48,360 --> 00:00:51,120 Speaker 1: much as you might like that. No, We're actually going 13 00:00:51,200 --> 00:00:53,520 Speaker 1: to talk about his financial genius. And what I mean 14 00:00:53,560 --> 00:00:55,560 Speaker 1: by that is, of course, we are going to talk 15 00:00:55,600 --> 00:00:59,120 Speaker 1: about Bowie bonds. Yeah, Bowie bonds. So I've heard them 16 00:00:59,160 --> 00:01:01,720 Speaker 1: a lot, but what are they exactly? So they are 17 00:01:01,760 --> 00:01:05,480 Speaker 1: a type of bond, to be specific, a securitization that 18 00:01:05,600 --> 00:01:10,000 Speaker 1: bundles up future cash flows from the royalties from music rights. 19 00:01:10,280 --> 00:01:12,880 Speaker 1: And David Bowie was the first to do them, so 20 00:01:12,920 --> 00:01:16,520 Speaker 1: a pioneer in ways beyond just music and style. Oh, 21 00:01:16,600 --> 00:01:20,039 Speaker 1: most definitely so. Joining us today from Los Angeles to 22 00:01:20,120 --> 00:01:22,839 Speaker 1: tell the story of Bowie Bonds is David Pullman. He's 23 00:01:22,880 --> 00:01:25,720 Speaker 1: the banker who helped create these in the late ninety nineties, 24 00:01:26,000 --> 00:01:28,959 Speaker 1: and in fact, Bowie Bonds are sometimes known as Pullman Bonds. 25 00:01:29,520 --> 00:01:32,360 Speaker 1: I'm somehow not surprised that the media for first to 26 00:01:32,440 --> 00:01:35,520 Speaker 1: call him Bowie. Um. I'm really excited about that. I 27 00:01:35,520 --> 00:01:38,319 Speaker 1: think it should be a great conversation. Want to quick note, 28 00:01:38,319 --> 00:01:41,080 Speaker 1: We're not just going to talk about Bowie Bonds. Later 29 00:01:41,360 --> 00:01:44,280 Speaker 1: in the episode, We're going to be talking about the 30 00:01:44,319 --> 00:01:47,680 Speaker 1: aptly named Beige Book, seen as one of the most 31 00:01:47,720 --> 00:01:51,280 Speaker 1: boring economic releases in the world, but it actually has 32 00:01:51,320 --> 00:01:54,680 Speaker 1: a fascinating bad history. And just like we'll be talking 33 00:01:54,720 --> 00:01:57,600 Speaker 1: to the father of Bowie Bonds, will also be talking 34 00:01:57,640 --> 00:02:00,360 Speaker 1: to the father of the Beige Book. Right, Bowie Bonds 35 00:02:00,400 --> 00:02:12,400 Speaker 1: and the Beige Book. Let's start. Let's do it. Yeah, 36 00:02:12,880 --> 00:02:16,280 Speaker 1: David Pullman, welcome to the show. Let's maybe start at 37 00:02:16,280 --> 00:02:18,960 Speaker 1: the beginning. Can you tell us how you met Bowie 38 00:02:19,000 --> 00:02:22,680 Speaker 1: and how these bonds kind of came about? Sure, Initially, 39 00:02:22,840 --> 00:02:25,880 Speaker 1: Bowie had a very large catalog of songs that he 40 00:02:26,040 --> 00:02:30,000 Speaker 1: had fought to his manager of the time to revert. 41 00:02:30,800 --> 00:02:33,920 Speaker 1: Revert means he was going to sell them or no. 42 00:02:34,480 --> 00:02:39,600 Speaker 1: What happened was David as a teenager and the manager 43 00:02:40,280 --> 00:02:43,520 Speaker 1: realized importance of his work. So you negotiated very hard 44 00:02:43,680 --> 00:02:46,480 Speaker 1: with the record companies to make sure they got recaptured 45 00:02:46,680 --> 00:02:49,640 Speaker 1: and a reversion of the record masters that he created 46 00:02:50,160 --> 00:02:53,520 Speaker 1: on his original songs that he started in the sixties, 47 00:02:54,200 --> 00:02:56,799 Speaker 1: and then continue that going forward, which is extremely rare 48 00:02:56,840 --> 00:03:00,440 Speaker 1: for artists on their record masters. And negotiates hard that 49 00:03:00,520 --> 00:03:04,560 Speaker 1: the for these and he confidence in himself in times 50 00:03:04,600 --> 00:03:07,360 Speaker 1: because most artists that they'll fail, they give up their 51 00:03:07,440 --> 00:03:09,880 Speaker 1: rights to the record masters, which is not at all 52 00:03:10,000 --> 00:03:13,720 Speaker 1: a typical Probably ninety nine point nine nine percent of 53 00:03:13,760 --> 00:03:16,519 Speaker 1: all artists don't have the record masters. And you know 54 00:03:16,680 --> 00:03:19,760 Speaker 1: this publishing and its writers share and they said, well, 55 00:03:19,800 --> 00:03:21,320 Speaker 1: you know, probably in the back of their minds, like 56 00:03:21,919 --> 00:03:23,680 Speaker 1: you know, this kid is a teenager, you know, who'd 57 00:03:23,680 --> 00:03:25,440 Speaker 1: be nothing in five years or whatever it would be 58 00:03:25,440 --> 00:03:28,560 Speaker 1: going forward, So big deal to get back his record masters. 59 00:03:28,639 --> 00:03:31,320 Speaker 1: And you know, obviously it was a David Bowie and 60 00:03:31,360 --> 00:03:33,440 Speaker 1: his manager at the time, we're betting that that would 61 00:03:33,480 --> 00:03:36,160 Speaker 1: not happen, that he had confidence himself that he would 62 00:03:36,160 --> 00:03:39,560 Speaker 1: these be successful, and he took less up front to 63 00:03:39,640 --> 00:03:42,680 Speaker 1: deal to to get that, which was a big statement 64 00:03:42,680 --> 00:03:48,440 Speaker 1: about as a teenager, to show how savvy and sophisticated 65 00:03:48,480 --> 00:03:50,480 Speaker 1: he was. I mean not many teenagers give another word 66 00:03:50,640 --> 00:03:54,480 Speaker 1: recapture or version. So in the nine nineties, he still 67 00:03:54,560 --> 00:03:57,200 Speaker 1: has these master rights to his music right and he's 68 00:03:57,200 --> 00:03:59,560 Speaker 1: trying to decide what to do with them. Correct, So 69 00:03:59,600 --> 00:04:02,720 Speaker 1: wet we passed forward to that and he's deciding was 70 00:04:02,880 --> 00:04:05,040 Speaker 1: doing him and at the time everyone's coming back to him, 71 00:04:05,040 --> 00:04:09,840 Speaker 1: and it was also an opportunity for David Ticket not 72 00:04:09,880 --> 00:04:12,120 Speaker 1: only back his record masters, but he also had a 73 00:04:12,160 --> 00:04:16,160 Speaker 1: publishing administration neal for his publishing, his writers, Shore, every 74 00:04:16,279 --> 00:04:18,039 Speaker 1: all the rights were coming back to him that he 75 00:04:18,040 --> 00:04:20,800 Speaker 1: would have a hundred percent control over. Okay, So how 76 00:04:20,839 --> 00:04:23,680 Speaker 1: did you meet him and come up with this idea? 77 00:04:23,920 --> 00:04:26,640 Speaker 1: What happened was at that point when he had all 78 00:04:26,680 --> 00:04:28,880 Speaker 1: these rights coming back, and there's also some there was 79 00:04:28,920 --> 00:04:32,520 Speaker 1: some tax advantages and estate planning advantages, David and his 80 00:04:32,520 --> 00:04:35,680 Speaker 1: business manager were looking to sell his catalog and that 81 00:04:35,760 --> 00:04:38,000 Speaker 1: came up because I was doing transactions with his business 82 00:04:38,040 --> 00:04:42,120 Speaker 1: manager and other errors investment banking and as it turned out, 83 00:04:42,600 --> 00:04:45,640 Speaker 1: he mentioned to me in passing, so I thought, okay, 84 00:04:45,640 --> 00:04:48,080 Speaker 1: well it's not something we're looking at doing a sales catalogs. 85 00:04:48,120 --> 00:04:50,200 Speaker 1: That's that's nice you're working on. Then he realized that 86 00:04:50,279 --> 00:04:53,919 Speaker 1: David wasn't gonna sell because these were his babies. So 87 00:04:54,040 --> 00:04:56,799 Speaker 1: this turned out to be a smart move. So instead 88 00:04:56,800 --> 00:05:00,240 Speaker 1: of selling the entire catalog, what he did was base 89 00:05:00,360 --> 00:05:02,960 Speaker 1: and what you did was basically a securitization of the 90 00:05:03,040 --> 00:05:06,320 Speaker 1: future cash flows from the rights to that catalog. Correct. 91 00:05:06,360 --> 00:05:09,400 Speaker 1: What happened was, I will ask some questions how much 92 00:05:09,400 --> 00:05:12,400 Speaker 1: has it earned this as a David's business manager, And 93 00:05:12,640 --> 00:05:14,279 Speaker 1: at the time he told me what was earned, and 94 00:05:14,279 --> 00:05:16,280 Speaker 1: he earned as much what it was earning as much 95 00:05:16,279 --> 00:05:20,400 Speaker 1: as a large corporation. So the next the question was 96 00:05:20,440 --> 00:05:22,360 Speaker 1: did he have three years of financials? They said they 97 00:05:22,360 --> 00:05:24,920 Speaker 1: had five? I said where they already said yes. I said, 98 00:05:25,080 --> 00:05:26,840 Speaker 1: are they by Big six at the time whould be 99 00:05:26,839 --> 00:05:29,440 Speaker 1: big four accounting firms at the time. He said yes, 100 00:05:29,720 --> 00:05:31,960 Speaker 1: to which I said, I could securitize that, to which 101 00:05:31,960 --> 00:05:35,320 Speaker 1: his business manager said, what securitization? And I wanted to 102 00:05:35,360 --> 00:05:37,680 Speaker 1: just correct that only because so they got it right 103 00:05:37,760 --> 00:05:42,120 Speaker 1: the quotes, but in terms of uh. David, then he 104 00:05:42,200 --> 00:05:45,960 Speaker 1: got the information in terms of this deal, and he 105 00:05:46,040 --> 00:05:48,960 Speaker 1: decided within a split second and said, why haven't we 106 00:05:49,000 --> 00:05:52,719 Speaker 1: started yet? So he basically, even though this concept of 107 00:05:52,800 --> 00:05:57,440 Speaker 1: securitization maybe unusual, as soon as it was explained to 108 00:05:57,520 --> 00:06:00,200 Speaker 1: him that he could sell the cash flows of the 109 00:06:00,279 --> 00:06:03,760 Speaker 1: songs rather than the songs himself, he instantly understood the 110 00:06:03,760 --> 00:06:06,440 Speaker 1: appeal of it. Yeah, And what's amazing is he got 111 00:06:06,480 --> 00:06:10,960 Speaker 1: the concept faster than other investment bankers and ast ors, 112 00:06:11,120 --> 00:06:14,040 Speaker 1: other people in the financial markets. He grasped new ideas 113 00:06:14,040 --> 00:06:17,680 Speaker 1: and concepts and was willing to take a chance and 114 00:06:18,120 --> 00:06:20,200 Speaker 1: was wasn't afraid to fail. And that's why he was 115 00:06:20,200 --> 00:06:23,760 Speaker 1: so successful in terms of trying these things. So we 116 00:06:23,800 --> 00:06:25,839 Speaker 1: went ahead with it. We did a deal in rockets seed. 117 00:06:25,880 --> 00:06:28,839 Speaker 1: Now what's interesting when when when when David's hearing this 118 00:06:28,920 --> 00:06:31,120 Speaker 1: for the first time and making a decision to go 119 00:06:31,240 --> 00:06:34,040 Speaker 1: forward within less than a second, not a second, less 120 00:06:34,040 --> 00:06:38,360 Speaker 1: than a second. There's no is not a written word 121 00:06:38,960 --> 00:06:41,480 Speaker 1: in the history of the world prior to that meeting 122 00:06:41,880 --> 00:06:44,680 Speaker 1: on anyone even thinking about doing this, much less than 123 00:06:44,720 --> 00:06:47,280 Speaker 1: doing it. What was it like actually going out and 124 00:06:47,400 --> 00:06:50,320 Speaker 1: selling these bonds? Because they're brand new things. Lots of 125 00:06:50,320 --> 00:06:52,680 Speaker 1: people haven't heard about them before. How did you do 126 00:06:52,760 --> 00:06:54,520 Speaker 1: the sales pitch and who did you end up selling 127 00:06:54,600 --> 00:06:56,800 Speaker 1: them to? Okay, Well, first of all, during those it's 128 00:06:56,839 --> 00:06:58,960 Speaker 1: like a couple of months. Usually new deals even today 129 00:06:59,000 --> 00:07:02,280 Speaker 1: they take a year of the market. They were investment grade, 130 00:07:02,279 --> 00:07:05,440 Speaker 1: they were disingul a level rated by multiple rating agencies 131 00:07:06,200 --> 00:07:10,720 Speaker 1: and the national recognized rating agencies as well, and they 132 00:07:10,720 --> 00:07:13,920 Speaker 1: were twenty year legal finals, fifteen year expective maturity, and 133 00:07:13,920 --> 00:07:16,400 Speaker 1: a price off the US ten year treasury the average 134 00:07:16,440 --> 00:07:19,760 Speaker 1: life of the bonds. And what we did, they were 135 00:07:19,800 --> 00:07:21,920 Speaker 1: done as a true private fasting, so that the charms 136 00:07:21,960 --> 00:07:25,040 Speaker 1: of the deals are confidential proprietories that others couldn't see 137 00:07:25,360 --> 00:07:27,920 Speaker 1: what the deal was other than the actual the rating 138 00:07:27,920 --> 00:07:31,280 Speaker 1: agencies and the investors in the bonds. So they went 139 00:07:31,440 --> 00:07:33,880 Speaker 1: to go to Life Insurance Company because they typically buy 140 00:07:34,040 --> 00:07:38,000 Speaker 1: long term investing gray bonds and that was a perfect 141 00:07:38,000 --> 00:07:41,720 Speaker 1: fit for them. They never missed a payment, they never triggered, 142 00:07:41,760 --> 00:07:44,640 Speaker 1: they never they paid off in full. And what was 143 00:07:44,760 --> 00:07:48,840 Speaker 1: interesting is that the first they actually just ran the 144 00:07:48,880 --> 00:07:51,440 Speaker 1: actual cover, which is interesting to me. In the article 145 00:07:52,480 --> 00:07:56,360 Speaker 1: about David Bowie, the cover story that broke, uh when 146 00:07:56,640 --> 00:07:59,000 Speaker 1: David had done this deal with me and they got out, 147 00:07:59,040 --> 00:08:00,440 Speaker 1: which was at the end of nine six in a 148 00:08:00,480 --> 00:08:03,280 Speaker 1: close in the beginning of so at the very end 149 00:08:03,320 --> 00:08:05,360 Speaker 1: of the year. So the story breaks and they quote 150 00:08:05,400 --> 00:08:08,120 Speaker 1: these large investors that are in music, some bonds and 151 00:08:08,200 --> 00:08:11,360 Speaker 1: other asset classes may say, are you kidding me? Are 152 00:08:11,400 --> 00:08:14,040 Speaker 1: you crazy? And that was that the written reactions when 153 00:08:14,040 --> 00:08:17,680 Speaker 1: this the first article it comes out. Now what happens 154 00:08:17,680 --> 00:08:20,440 Speaker 1: when that article runs. It was on the cover that 155 00:08:20,520 --> 00:08:23,240 Speaker 1: morning at the Wall Street Journal, and we had already 156 00:08:23,240 --> 00:08:24,720 Speaker 1: placed and had the right of the bonds. No one 157 00:08:24,800 --> 00:08:27,800 Speaker 1: knew that, and they were already placed. There's already sold. 158 00:08:28,720 --> 00:08:31,280 Speaker 1: The phone is ringing off the hawk to buy the 159 00:08:31,320 --> 00:08:34,120 Speaker 1: bonds from the biggest investors in the world at the 160 00:08:34,120 --> 00:08:38,000 Speaker 1: institutions that buy asset attacks and one uncarrelated asset. The 161 00:08:38,040 --> 00:08:42,800 Speaker 1: new assets is uncarlas the stock market risk diversified. So 162 00:08:43,120 --> 00:08:45,800 Speaker 1: it was the reaction was at that moment I knew 163 00:08:45,800 --> 00:08:48,360 Speaker 1: that we had really hit something in terms of the 164 00:08:48,360 --> 00:08:51,520 Speaker 1: reaction was so positive on the market. They weren't going 165 00:08:51,600 --> 00:08:53,360 Speaker 1: to find out about it. They were going to buy them. 166 00:08:53,400 --> 00:08:56,160 Speaker 1: How big was the offering It was fifty million dollars 167 00:08:56,160 --> 00:08:57,720 Speaker 1: and it is right at the single A level. I 168 00:08:57,720 --> 00:09:00,959 Speaker 1: want to go back real quickly to the first when 169 00:09:01,000 --> 00:09:03,760 Speaker 1: you first brought the Bowie bonds to the ratings agencies, 170 00:09:03,800 --> 00:09:07,160 Speaker 1: because here you were, you had created this new type 171 00:09:07,160 --> 00:09:10,240 Speaker 1: of product. What kind of questions did they ask since 172 00:09:10,280 --> 00:09:13,960 Speaker 1: obviously they had never rated one of these excellent questions. Well, 173 00:09:14,120 --> 00:09:16,319 Speaker 1: we're sitting there with one of the major range and 174 00:09:16,360 --> 00:09:20,360 Speaker 1: I always k who it was exactly, and we're sitting 175 00:09:20,400 --> 00:09:24,200 Speaker 1: there and uh, you know, it's it's sad now in 176 00:09:24,280 --> 00:09:28,120 Speaker 1: terms of everyone's morning, the death of David Bowie. And 177 00:09:28,200 --> 00:09:31,920 Speaker 1: now this is almost twenty years ago where this first 178 00:09:31,960 --> 00:09:38,800 Speaker 1: meeting in right approximately almost almost exactly yet period a 179 00:09:38,840 --> 00:09:41,360 Speaker 1: few months short of it, so an I llegal final 180 00:09:41,400 --> 00:09:44,600 Speaker 1: maturity of the deal. So they say, a question comes up, 181 00:09:44,640 --> 00:09:49,960 Speaker 1: says what happens if David dies? So as he asked 182 00:09:49,960 --> 00:09:52,960 Speaker 1: the question, and the person of the range was very 183 00:09:53,040 --> 00:09:56,760 Speaker 1: stu we worked with on that and other deals. He 184 00:09:56,760 --> 00:09:59,120 Speaker 1: he thought about it and answer his own question as 185 00:09:59,160 --> 00:10:00,760 Speaker 1: if he asked so if he was there where business 186 00:10:00,760 --> 00:10:02,320 Speaker 1: now is just a meeting with us success right now, 187 00:10:02,360 --> 00:10:04,760 Speaker 1: there's on the deal. You no, we're we're signed. Well, 188 00:10:04,880 --> 00:10:08,680 Speaker 1: you know it's it's actually it's a good thing. My 189 00:10:08,760 --> 00:10:12,240 Speaker 1: response was, because there's no new product right now, we 190 00:10:12,280 --> 00:10:15,319 Speaker 1: won't And then they got you got an understanding that 191 00:10:15,360 --> 00:10:17,920 Speaker 1: the catalog would soar as it is now in terms 192 00:10:17,920 --> 00:10:20,240 Speaker 1: of value and the interest. And then I followed with, 193 00:10:20,559 --> 00:10:23,400 Speaker 1: but we won't tell David that because David's very young man. 194 00:10:24,120 --> 00:10:26,720 Speaker 1: So the idea that in terms that they thought about that, 195 00:10:27,000 --> 00:10:29,560 Speaker 1: in terms of they understood that the royalties would continue 196 00:10:29,600 --> 00:10:32,360 Speaker 1: and actually increase if something would have happened, they were not. 197 00:10:32,559 --> 00:10:34,880 Speaker 1: The question was really that a lot of people do 198 00:10:35,080 --> 00:10:38,200 Speaker 1: ask at the time and even after, we're gonna understand 199 00:10:38,240 --> 00:10:41,440 Speaker 1: the concept that it's not tied to the artists. These 200 00:10:41,480 --> 00:10:45,440 Speaker 1: songs have a life of their own, and separately that 201 00:10:45,840 --> 00:10:49,600 Speaker 1: it states and airs and successors and a science continue 202 00:10:49,640 --> 00:10:52,439 Speaker 1: to get the royalties, whether the author of the songs, 203 00:10:52,679 --> 00:10:56,640 Speaker 1: the artists as songwriter, or any other intellectual proper or 204 00:10:56,640 --> 00:11:00,960 Speaker 1: creative assid entry masses is living or not. I question 205 00:11:01,480 --> 00:11:04,840 Speaker 1: in terms of the structure of the Bowie bond, they 206 00:11:04,880 --> 00:11:08,600 Speaker 1: paid a regular coupon, would they did the price that 207 00:11:08,679 --> 00:11:11,360 Speaker 1: they got or that the payment the investors got, did 208 00:11:11,440 --> 00:11:14,400 Speaker 1: they fluctuate and go up like you know, say, in 209 00:11:14,480 --> 00:11:17,560 Speaker 1: the event that David had died during the period of 210 00:11:17,559 --> 00:11:20,120 Speaker 1: the bond and people started buying more and more of 211 00:11:20,200 --> 00:11:23,319 Speaker 1: his c d s, would the end investor have received 212 00:11:23,320 --> 00:11:26,240 Speaker 1: a higher coupon those months? Good question, and you know 213 00:11:26,400 --> 00:11:28,600 Speaker 1: I do a number interviews on this and I wanted 214 00:11:28,720 --> 00:11:31,199 Speaker 1: your respected David. I respond to everyone because I want 215 00:11:31,240 --> 00:11:33,959 Speaker 1: to make sure that you know his legacy has preserved 216 00:11:34,040 --> 00:11:37,199 Speaker 1: and in the transaction. What was I was uncomfortable with 217 00:11:37,280 --> 00:11:39,040 Speaker 1: a couple of things that your listeners and view is 218 00:11:39,120 --> 00:11:41,640 Speaker 1: really good. Is the deal always maintain its invest in 219 00:11:41,640 --> 00:11:45,960 Speaker 1: grade rating? The deal deal paid off early as well, 220 00:11:46,280 --> 00:11:48,880 Speaker 1: so the bonds holders and bonds of time the seven 221 00:11:48,880 --> 00:11:51,640 Speaker 1: point and I present interest, which was a higher interest 222 00:11:51,760 --> 00:11:55,000 Speaker 1: rate than US chargeries, which is normal. There was the 223 00:11:55,360 --> 00:11:58,440 Speaker 1: spread over yours treasures at the time was in the 224 00:11:58,480 --> 00:12:03,920 Speaker 1: mid hundred basis point range over US treasuries, so the 225 00:12:03,960 --> 00:12:06,559 Speaker 1: deal was obviously the interest rates were much higher and 226 00:12:06,960 --> 00:12:09,760 Speaker 1: then that part of time than nineties. So we're looking 227 00:12:09,760 --> 00:12:12,520 Speaker 1: at spread in the mid hundreds over the U. S 228 00:12:12,559 --> 00:12:15,440 Speaker 1: Treasury and the tenure treasurers used to price it. So 229 00:12:15,760 --> 00:12:20,080 Speaker 1: your question is as more cash flow came in two 230 00:12:20,280 --> 00:12:24,400 Speaker 1: from the royalties, the bonds were paying down faster, which 231 00:12:24,520 --> 00:12:29,440 Speaker 1: was better for the investors. But separately, now you have 232 00:12:29,640 --> 00:12:33,600 Speaker 1: more collateral and assets, it's worth more over time because 233 00:12:33,960 --> 00:12:37,079 Speaker 1: cycle our deals were self liquidating, so the balance is 234 00:12:37,080 --> 00:12:40,079 Speaker 1: getting lower and lower. The cash reserve were having deals 235 00:12:40,120 --> 00:12:42,320 Speaker 1: is getting higher and higher as a proportion of the 236 00:12:42,360 --> 00:12:46,199 Speaker 1: outstanding blans and the casuals increasing from the royalties as 237 00:12:46,200 --> 00:12:48,160 Speaker 1: they are now. As an example, assertated is that the 238 00:12:48,640 --> 00:12:52,400 Speaker 1: royalties will be soaring, so the bonds holders now have 239 00:12:53,080 --> 00:12:56,400 Speaker 1: more collateral and having securities that actually should have a 240 00:12:56,480 --> 00:12:59,200 Speaker 1: higher rating. We were capped by the rating of the 241 00:12:59,240 --> 00:13:02,599 Speaker 1: payers or is in a deal, including companies like E 242 00:13:02,760 --> 00:13:06,200 Speaker 1: M I at the time publishing Catalogust and sold UH 243 00:13:06,360 --> 00:13:09,600 Speaker 1: to a joint tenship with Sony. But the example is 244 00:13:09,640 --> 00:13:13,560 Speaker 1: that we're limited just like in the transaction with a country. 245 00:13:13,600 --> 00:13:17,600 Speaker 1: As sovereign debt dealing, you're limited by the major payer 246 00:13:17,640 --> 00:13:21,439 Speaker 1: in your deal out there rating. So that's why we're 247 00:13:21,480 --> 00:13:23,800 Speaker 1: limited to the investment grading rating that we had. But 248 00:13:23,840 --> 00:13:26,360 Speaker 1: they every single deal, including the first deal for David 249 00:13:26,400 --> 00:13:30,240 Speaker 1: Bowie Boye bond, every we maintain their investing grade ratings, 250 00:13:30,240 --> 00:13:33,400 Speaker 1: never missed a payment and paid off in full. All right, David. 251 00:13:33,760 --> 00:13:37,079 Speaker 1: One last question before we let you go, Uh, what 252 00:13:37,160 --> 00:13:39,520 Speaker 1: was it like working with David Bowie? And do you 253 00:13:39,559 --> 00:13:42,160 Speaker 1: have maybe a fun anecdote from the times when you 254 00:13:42,200 --> 00:13:44,120 Speaker 1: were putting these things together? And I just want to 255 00:13:44,160 --> 00:13:47,360 Speaker 1: also combine with that question, what did David Bowie think 256 00:13:47,400 --> 00:13:51,199 Speaker 1: about the fact that this musician, he was an artist 257 00:13:51,280 --> 00:13:55,160 Speaker 1: avant garde? Was he was he surprised that he became 258 00:13:55,440 --> 00:14:00,440 Speaker 1: also famous for in part becoming a financial market innovator. 259 00:14:01,760 --> 00:14:05,720 Speaker 1: I mean, I'm you know, actually it makes and it 260 00:14:05,720 --> 00:14:08,200 Speaker 1: makes sense that if you look at the news overall. 261 00:14:08,280 --> 00:14:11,960 Speaker 1: I mean, this is a huge component of how David 262 00:14:12,040 --> 00:14:14,320 Speaker 1: is remembered. I mean it's it's in terms of around 263 00:14:14,320 --> 00:14:17,560 Speaker 1: the world, in terms of the press. What it was 264 00:14:17,640 --> 00:14:21,320 Speaker 1: interesting about it which really stuck out for me, It 265 00:14:21,560 --> 00:14:25,360 Speaker 1: was he was the perfect person to have for the 266 00:14:25,400 --> 00:14:29,080 Speaker 1: first deal ever. It's kind not only just because he 267 00:14:29,160 --> 00:14:33,120 Speaker 1: was known as an innovator, but how he handled himself. 268 00:14:33,280 --> 00:14:36,000 Speaker 1: He was the word is your genius has used in charms. 269 00:14:36,040 --> 00:14:38,320 Speaker 1: There's no questions of genius in terms of his music 270 00:14:38,360 --> 00:14:40,680 Speaker 1: abilities and artists He's someone's gonna remember this. If you 271 00:14:40,760 --> 00:14:43,840 Speaker 1: walk into museums, you see works that are priceless. That's 272 00:14:43,880 --> 00:14:46,400 Speaker 1: what David Bowie is created. But the difference is David 273 00:14:46,440 --> 00:14:50,200 Speaker 1: bowiees prices, works have casual royalties that come from them, 274 00:14:50,240 --> 00:14:54,040 Speaker 1: so that's unique. So what is special about him was 275 00:14:54,400 --> 00:14:58,800 Speaker 1: he never ever question me in terms of whether deal 276 00:14:58,880 --> 00:15:01,080 Speaker 1: is going to happen or not, how long was taking. 277 00:15:01,200 --> 00:15:03,640 Speaker 1: He was the most supportive person to work with and 278 00:15:03,640 --> 00:15:05,880 Speaker 1: he wasn't afraid to fail, which was the key to 279 00:15:05,920 --> 00:15:08,760 Speaker 1: the success. So I'm doing this deal for the very 280 00:15:08,800 --> 00:15:11,120 Speaker 1: first time no one's ever done in the world before, 281 00:15:11,560 --> 00:15:14,320 Speaker 1: and he's not worried. I'm thinking, though, is this going 282 00:15:14,360 --> 00:15:16,360 Speaker 1: to be able to happen? Right? And we're doing it 283 00:15:16,560 --> 00:15:18,960 Speaker 1: and he's not nervous at all. On top of that, 284 00:15:19,120 --> 00:15:22,760 Speaker 1: the deal happens, there's a cavalcator press, over five thousand 285 00:15:23,280 --> 00:15:29,680 Speaker 1: articles in the press, radio, TV magazines and David which 286 00:15:29,720 --> 00:15:31,840 Speaker 1: was you know, I didn't realize that going into this deal. 287 00:15:32,200 --> 00:15:35,280 Speaker 1: My favorite song by him not knowing at the time 288 00:15:35,320 --> 00:15:39,680 Speaker 1: there was his number one first number one was same. 289 00:15:40,480 --> 00:15:45,120 Speaker 1: So David understood that and he gave that to me. Right. 290 00:15:45,280 --> 00:15:49,800 Speaker 1: He understood he wouldn't do any interviews, which created a 291 00:15:49,880 --> 00:15:52,600 Speaker 1: bigger mystique and legend for David on this deal. So 292 00:15:52,800 --> 00:15:55,960 Speaker 1: I just on this deal, David samus. Most artists would 293 00:15:55,960 --> 00:15:59,920 Speaker 1: want all the attention for themselves, right, David, It gives 294 00:16:00,120 --> 00:16:02,760 Speaker 1: me in terms of any report of the calls and 295 00:16:02,880 --> 00:16:05,400 Speaker 1: one wants to talk about the deal. Any artists, other 296 00:16:05,480 --> 00:16:07,920 Speaker 1: famous artists at the time that are friends of his 297 00:16:08,360 --> 00:16:12,400 Speaker 1: asked him talk to David Pullman, every single one. He 298 00:16:12,440 --> 00:16:15,640 Speaker 1: wouldn't talk to anyone about it. And then my third 299 00:16:15,720 --> 00:16:18,360 Speaker 1: part was to go to the conferences on the asset 300 00:16:18,440 --> 00:16:21,120 Speaker 1: doc stories like the biggest investors in the world on 301 00:16:21,400 --> 00:16:25,080 Speaker 1: where they be, the raiding agencies, the institution, investors, UH 302 00:16:25,240 --> 00:16:28,000 Speaker 1: attorneys at work on the transactions, trustees, whoever was there 303 00:16:28,200 --> 00:16:31,440 Speaker 1: at these conferences, and the thing that was statistical that 304 00:16:31,440 --> 00:16:35,040 Speaker 1: you could actually securitize with the questions, the very first question. 305 00:16:35,240 --> 00:16:39,040 Speaker 1: Every single conference is spoke at with the keynote, various ones, 306 00:16:39,080 --> 00:16:41,160 Speaker 1: and there are dozens of them over the over where 307 00:16:41,200 --> 00:16:44,440 Speaker 1: it was did you meet David? Every single conference is 308 00:16:44,480 --> 00:16:47,760 Speaker 1: the same question. All right, David Pullman, thank you so 309 00:16:47,840 --> 00:16:59,080 Speaker 1: much for joining us to thank you, thank you. All right. 310 00:16:59,280 --> 00:17:01,440 Speaker 1: Now we're going to turned to something that most people 311 00:17:01,520 --> 00:17:04,439 Speaker 1: probably think is far less interesting than David Bowie but 312 00:17:04,760 --> 00:17:06,760 Speaker 1: I think you should stay with us because there's a 313 00:17:06,800 --> 00:17:09,359 Speaker 1: story here that's really fascinating. We're going to talk about 314 00:17:09,400 --> 00:17:11,960 Speaker 1: the Beige Book, what it is, how it came into being, 315 00:17:12,000 --> 00:17:14,639 Speaker 1: and where it's going. So the Beige Book is this 316 00:17:14,720 --> 00:17:18,400 Speaker 1: thing that the FED releases every month where it's basically 317 00:17:18,560 --> 00:17:22,280 Speaker 1: anecdotal color about the state of the economy from all 318 00:17:22,359 --> 00:17:25,280 Speaker 1: the FED districts. So they produced this big document that 319 00:17:25,359 --> 00:17:29,200 Speaker 1: has things like wage pressure is rising in Kansas, and 320 00:17:29,680 --> 00:17:32,679 Speaker 1: Broadway theaters in New York are weakening due to the 321 00:17:32,720 --> 00:17:35,280 Speaker 1: fact that the dollar is strong and keeping tourists away, 322 00:17:35,400 --> 00:17:38,399 Speaker 1: and shipping is doing really well in the Port of 323 00:17:38,400 --> 00:17:40,480 Speaker 1: Miami and stuff like this, And it's sort of a 324 00:17:40,560 --> 00:17:44,320 Speaker 1: very non numerical way of looking at the economy. I 325 00:17:44,400 --> 00:17:47,120 Speaker 1: generally find it quite interesting, but I guess a lot 326 00:17:47,160 --> 00:17:50,480 Speaker 1: of people think of it as very very boring. It is. 327 00:17:50,520 --> 00:17:53,640 Speaker 1: I mean, people say, well, it's perfectly named the Beisian 328 00:17:54,160 --> 00:17:57,400 Speaker 1: and it's funny. The reason I got interested this is 329 00:17:57,440 --> 00:18:00,359 Speaker 1: back in December, I was thinking that a really good 330 00:18:00,520 --> 00:18:04,199 Speaker 1: novelty sort of holiday gift or Christmas gift for a 331 00:18:04,240 --> 00:18:07,320 Speaker 1: banker would be an old physical copy of the Beija Book. 332 00:18:07,440 --> 00:18:10,160 Speaker 1: Because now of course, everyone just looks at it electronically. 333 00:18:10,920 --> 00:18:12,920 Speaker 1: I was reading about the history of the Beige Book, 334 00:18:12,960 --> 00:18:17,440 Speaker 1: and I discovered something fascinating on the Wikipedia page, which 335 00:18:17,480 --> 00:18:19,679 Speaker 1: is that the Beige Book didn't always used to be 336 00:18:19,760 --> 00:18:22,840 Speaker 1: released to the public, and it wasn't until the mid 337 00:18:22,960 --> 00:18:27,040 Speaker 1: eighties when a Wall Street Journal reporter named Paul Cox 338 00:18:27,640 --> 00:18:30,800 Speaker 1: asked the Federal Reserve to make the Beige Book public. 339 00:18:31,280 --> 00:18:34,000 Speaker 1: Imagine a life without the Beige Book. And what's even 340 00:18:34,040 --> 00:18:37,840 Speaker 1: cooler is that Paul Cox now works for Bloomberg and 341 00:18:37,920 --> 00:18:40,879 Speaker 1: sits about two rows away from us in the newsroom. 342 00:18:41,280 --> 00:18:44,119 Speaker 1: And so I and I was like, oh my god, 343 00:18:44,320 --> 00:18:48,200 Speaker 1: we worked two rows away from a celebrity, the father 344 00:18:48,359 --> 00:18:51,000 Speaker 1: of the Beijia Book, the men without whom this report 345 00:18:51,040 --> 00:18:53,520 Speaker 1: would never have seen the light of day. And now 346 00:18:53,600 --> 00:18:55,640 Speaker 1: I want to get the story. Look, there aren't too 347 00:18:55,640 --> 00:18:59,040 Speaker 1: many people walking among us they can say if it 348 00:18:59,080 --> 00:19:02,040 Speaker 1: weren't for me, this economic data point would be relieved. 349 00:19:02,400 --> 00:19:04,000 Speaker 1: It's something to be proud of, all right. So we 350 00:19:04,040 --> 00:19:06,480 Speaker 1: have Paul Cox here with us today. We also have 351 00:19:06,520 --> 00:19:09,719 Speaker 1: Bloomberg Economics reporter Matt Bosler, who's going to be talking 352 00:19:09,760 --> 00:19:12,520 Speaker 1: a little bit about how people use the Beige Book. 353 00:19:12,600 --> 00:19:15,800 Speaker 1: Today some twenty five years later. All right, let's get started. 354 00:19:20,800 --> 00:19:26,040 Speaker 1: That's so we're here with Bloomberg News as Paul Cox, Hello, 355 00:19:26,400 --> 00:19:28,520 Speaker 1: how are you doing? And we're also here at Bloomberg 356 00:19:28,560 --> 00:19:32,159 Speaker 1: Economic reporter Matthew Bosler. I thank you both so much 357 00:19:32,240 --> 00:19:36,239 Speaker 1: for joining us. So, Paul, you are the father of 358 00:19:36,280 --> 00:19:39,600 Speaker 1: the Beige book. Explain to us how you got into 359 00:19:39,600 --> 00:19:41,640 Speaker 1: this position. What were you doing at the time. It's 360 00:19:41,680 --> 00:19:44,720 Speaker 1: always fun to go back and relive your wins, and this, 361 00:19:44,720 --> 00:19:47,199 Speaker 1: this was this was a good win. UM I was 362 00:19:47,359 --> 00:19:50,760 Speaker 1: a reporter for Dow Jones News Service and based in Washington, 363 00:19:51,359 --> 00:19:55,080 Speaker 1: was part of their economic policy team. UM. There in Washington, 364 00:19:55,320 --> 00:19:57,520 Speaker 1: I was based at the Treasury Department, and you cover 365 00:19:57,560 --> 00:20:00,640 Speaker 1: the economic indicators. You cover Treasury by on issue once 366 00:20:00,640 --> 00:20:02,960 Speaker 1: and that sort of thing, but also Federal reserve and 367 00:20:03,000 --> 00:20:06,920 Speaker 1: monetary policy. At some point one of my editors decided 368 00:20:07,000 --> 00:20:11,040 Speaker 1: we should write previews for Federal Open Market Committee meetings 369 00:20:11,160 --> 00:20:13,440 Speaker 1: or curtain raisers as they call them in the business. 370 00:20:13,560 --> 00:20:16,440 Speaker 1: So already this is kind of weird because we think 371 00:20:16,520 --> 00:20:19,720 Speaker 1: of a preview for an f o MC decision as 372 00:20:19,920 --> 00:20:22,240 Speaker 1: just standard. Everyone always writes a preview. But that wasn't 373 00:20:22,240 --> 00:20:25,080 Speaker 1: always the case that this was something that got hyped up. Well, 374 00:20:25,160 --> 00:20:27,760 Speaker 1: they were previews like you did. But just like now 375 00:20:27,800 --> 00:20:29,600 Speaker 1: that I'm an editor in Bloomberg and I lean on 376 00:20:29,640 --> 00:20:32,600 Speaker 1: my reporters to break news. Um, my editors then leaned 377 00:20:32,600 --> 00:20:34,720 Speaker 1: on me to break news, and I was under pressure 378 00:20:34,760 --> 00:20:36,880 Speaker 1: to get more than that, get scoops, if you will, 379 00:20:37,359 --> 00:20:40,480 Speaker 1: And that's how this came about. So and gathering for 380 00:20:40,520 --> 00:20:43,119 Speaker 1: one of those curtain raisers, I was talking to a 381 00:20:43,160 --> 00:20:46,560 Speaker 1: FED official on background, of course, and we were sort 382 00:20:46,600 --> 00:20:48,520 Speaker 1: of bantering back and forth, and he was doing his 383 00:20:48,600 --> 00:20:51,040 Speaker 1: best to not tell me anything, and I sort of 384 00:20:51,119 --> 00:20:53,359 Speaker 1: jokingly said, well, well, can can you give me the 385 00:20:53,359 --> 00:20:57,640 Speaker 1: Blue Book, which is the internal staff monetary policy recommendations 386 00:20:57,640 --> 00:20:59,919 Speaker 1: and he said no. I said, okay, how about the 387 00:21:00,000 --> 00:21:02,600 Speaker 1: Green Book? And the Green Book is the Internal Economic 388 00:21:02,680 --> 00:21:05,159 Speaker 1: Forecast and he said no. I said how about the 389 00:21:05,160 --> 00:21:07,920 Speaker 1: Beige Book? And he goes, there's a pause, and he said, 390 00:21:08,480 --> 00:21:11,200 Speaker 1: let me think about that, and we continued our conversation 391 00:21:11,280 --> 00:21:13,520 Speaker 1: and hung up. A couple of days later, he called 392 00:21:13,560 --> 00:21:15,760 Speaker 1: me back and he said, we've decided to give you 393 00:21:15,800 --> 00:21:18,639 Speaker 1: the Beige Book. Now you know, the Beige Book is 394 00:21:18,680 --> 00:21:21,679 Speaker 1: the summary of economic conditions and the twelve Federal Reserve banks. 395 00:21:21,760 --> 00:21:24,760 Speaker 1: It's not everything, but it's something. That day, a courier 396 00:21:24,800 --> 00:21:27,960 Speaker 1: showed up at the Treasury Department and dropped off envelope 397 00:21:28,000 --> 00:21:30,840 Speaker 1: with my name on it, and I opened it up 398 00:21:30,880 --> 00:21:33,680 Speaker 1: and there it was the Beige Book. So what had 399 00:21:33,680 --> 00:21:36,720 Speaker 1: they actually been using that book for before it was 400 00:21:37,000 --> 00:21:40,080 Speaker 1: kind of public? Well, I believe for as long as 401 00:21:40,119 --> 00:21:43,320 Speaker 1: the Federal Reserve has been in business and FMC meetings 402 00:21:43,320 --> 00:21:45,800 Speaker 1: that they always they have twelve regional banks that are 403 00:21:45,800 --> 00:21:48,399 Speaker 1: full of smart economists who interface with the local banks, 404 00:21:48,400 --> 00:21:52,240 Speaker 1: the business communities and have this wealth of knowledge. And 405 00:21:52,280 --> 00:21:55,480 Speaker 1: I understand that in the past they would give their 406 00:21:55,480 --> 00:21:57,280 Speaker 1: information to their president, he would come to the f 407 00:21:57,480 --> 00:22:00,359 Speaker 1: MC meeting and they would in essence read it out. 408 00:22:00,880 --> 00:22:04,359 Speaker 1: M Arthur Burns, I believe from history, decided that that 409 00:22:04,440 --> 00:22:07,040 Speaker 1: was kind of a waste of time, and so he asked, 410 00:22:07,040 --> 00:22:09,520 Speaker 1: could you summarize that and put it in a document 411 00:22:09,520 --> 00:22:11,840 Speaker 1: and sent it in and we'll we'll compile this into 412 00:22:11,880 --> 00:22:14,480 Speaker 1: a book and distribute it before the meeting so everybody 413 00:22:14,480 --> 00:22:17,280 Speaker 1: can digest it. It was a speed process and thus 414 00:22:17,400 --> 00:22:19,439 Speaker 1: was born the Beige Book. But it was it was 415 00:22:19,480 --> 00:22:22,000 Speaker 1: one of those private documents until that day. And I 416 00:22:22,080 --> 00:22:24,679 Speaker 1: just want to make something clear. This is literally a 417 00:22:24,720 --> 00:22:26,480 Speaker 1: book with a beige cover. So when you talked about 418 00:22:26,520 --> 00:22:28,959 Speaker 1: the Blue Book and the Green Book, these were books 419 00:22:29,119 --> 00:22:32,200 Speaker 1: documents that were handed out internally, and they had the 420 00:22:32,200 --> 00:22:34,240 Speaker 1: they were of different colors. Well, I never got my 421 00:22:34,280 --> 00:22:36,040 Speaker 1: hands on the blue Book of the Green book. I'm 422 00:22:36,040 --> 00:22:37,800 Speaker 1: only told that that's what color they are. But the 423 00:22:37,800 --> 00:22:40,399 Speaker 1: Beige Book was in fact beige. It was about twenty 424 00:22:40,400 --> 00:22:43,880 Speaker 1: pages long and mostly pros, not a lot of numbers, 425 00:22:43,920 --> 00:22:46,359 Speaker 1: but it was good information and I wrote a pretty 426 00:22:46,359 --> 00:22:49,040 Speaker 1: good story off it. And you know, of course, my 427 00:22:49,080 --> 00:22:52,600 Speaker 1: competitors were furious. Um. I took great fun as a 428 00:22:52,640 --> 00:22:55,919 Speaker 1: good reporter for the Associated Press named Marty Krutzinger. Hey Marty, 429 00:22:56,320 --> 00:22:59,360 Speaker 1: um that when I would scoop him, he would come over, 430 00:22:59,359 --> 00:23:01,920 Speaker 1: because we at twenty ft apart, he would come over 431 00:23:01,960 --> 00:23:04,320 Speaker 1: and kick my chair. A few times. I got a 432 00:23:04,400 --> 00:23:06,600 Speaker 1: chair kick out of that one. So so, what did 433 00:23:06,640 --> 00:23:09,000 Speaker 1: your first story actually say about the Paige Book. Well, 434 00:23:09,080 --> 00:23:12,600 Speaker 1: I believe at the time that um, that was when 435 00:23:12,640 --> 00:23:14,760 Speaker 1: you know, Paul Volker had run interest rates up to 436 00:23:15,040 --> 00:23:17,200 Speaker 1: very high and they were in the process of ringing 437 00:23:17,200 --> 00:23:20,280 Speaker 1: inflation out of the economy. But hoping not to do 438 00:23:20,480 --> 00:23:22,800 Speaker 1: you know, too much, too much damage to it. And 439 00:23:22,840 --> 00:23:25,760 Speaker 1: I believe at the time it showed sort of slightly 440 00:23:25,800 --> 00:23:29,679 Speaker 1: better economic conditions, which led them to believe that they 441 00:23:29,680 --> 00:23:32,159 Speaker 1: can continue on this path of of you know, keeping 442 00:23:32,160 --> 00:23:34,320 Speaker 1: interest rates high and trying to get inflation back to 443 00:23:34,320 --> 00:23:38,080 Speaker 1: where it was supposed to be. So now every month 444 00:23:38,119 --> 00:23:40,439 Speaker 1: when the Beige Book comes out, it's something people know 445 00:23:40,600 --> 00:23:44,800 Speaker 1: that the Beige Book comes out. News organizations like Bloomberg 446 00:23:44,800 --> 00:23:48,000 Speaker 1: get ready to read the headlines very quickly. At what 447 00:23:48,200 --> 00:23:51,280 Speaker 1: point did this go from something that a few reporters 448 00:23:51,320 --> 00:23:54,520 Speaker 1: got to oh, today's Beige Book day, let's pay attention. 449 00:23:54,560 --> 00:23:56,800 Speaker 1: Well that was a surprise to me because I was 450 00:23:56,880 --> 00:23:58,840 Speaker 1: on that beat. I went on to some other things. 451 00:23:58,920 --> 00:24:02,479 Speaker 1: I eventually left Washington and did other things. And it 452 00:24:02,560 --> 00:24:04,760 Speaker 1: was just at that time of the policy was if 453 00:24:04,760 --> 00:24:06,240 Speaker 1: you wanted and ask for it, they would give it 454 00:24:06,280 --> 00:24:08,560 Speaker 1: to you. But it was it wasn't an economic indicator, 455 00:24:08,560 --> 00:24:11,320 Speaker 1: as you will. It was sometime many years later I 456 00:24:11,359 --> 00:24:14,359 Speaker 1: either saw the listing of this week's economic indicators in 457 00:24:14,359 --> 00:24:17,399 Speaker 1: the Wall Street Journal or heard somebody on radio or 458 00:24:17,480 --> 00:24:19,399 Speaker 1: TV saying, and this week is coming out, And I 459 00:24:19,440 --> 00:24:22,040 Speaker 1: was like, Huh, when did that become an economic indicator? 460 00:24:22,119 --> 00:24:24,520 Speaker 1: But it did, So I want to bring in a 461 00:24:24,680 --> 00:24:28,600 Speaker 1: med Bosler into the conversation. Met you covered the economy, 462 00:24:28,760 --> 00:24:31,280 Speaker 1: you cover the FED. One of the things that you 463 00:24:31,320 --> 00:24:34,160 Speaker 1: always look at is the Beije Book. So as an 464 00:24:34,200 --> 00:24:36,639 Speaker 1: economic indicator, what do you look at? How do you 465 00:24:36,680 --> 00:24:42,800 Speaker 1: digest it? Well, it's interesting because it's not hard economic data, right, 466 00:24:42,840 --> 00:24:45,720 Speaker 1: and it gets sort of it's lots of an it's 467 00:24:45,720 --> 00:24:48,440 Speaker 1: a it's a book of anecdotes, right, So it's interesting. 468 00:24:48,440 --> 00:24:50,760 Speaker 1: It sort of colors all of the numbers that you 469 00:24:50,880 --> 00:24:52,919 Speaker 1: work with every day and look at, you know, and 470 00:24:52,960 --> 00:24:56,000 Speaker 1: it kind of gives you a regional perspective on what's 471 00:24:56,000 --> 00:24:59,240 Speaker 1: happening in the economy, you know, not just um, you know, 472 00:24:59,359 --> 00:25:02,280 Speaker 1: total agg get consumption or whatever. But here's what's happening 473 00:25:02,280 --> 00:25:05,320 Speaker 1: in the Boston district, or here's what's happening in the 474 00:25:05,359 --> 00:25:10,520 Speaker 1: Philadelphia district or whatever. Um. And now it seems like 475 00:25:10,600 --> 00:25:13,160 Speaker 1: the biggest thing that people do with it is they 476 00:25:13,160 --> 00:25:16,600 Speaker 1: try to do like linguistic or textual analyzes, you know, 477 00:25:16,720 --> 00:25:19,080 Speaker 1: sort of if you remember a few years ago, when 478 00:25:19,119 --> 00:25:21,480 Speaker 1: we had those really bad winters, we would count the 479 00:25:21,560 --> 00:25:24,760 Speaker 1: number of times the word weather appeared in the Beige Book, 480 00:25:24,800 --> 00:25:27,240 Speaker 1: and that was like the big thing that everybody wanted 481 00:25:27,280 --> 00:25:29,400 Speaker 1: to see. There wasn't much more to it than that, 482 00:25:30,040 --> 00:25:33,800 Speaker 1: and um, I was just putting together, Um, just before 483 00:25:34,200 --> 00:25:37,480 Speaker 1: this recording, I was looking at the number of times 484 00:25:37,480 --> 00:25:40,159 Speaker 1: that the word dollar has showed up in the Beige 485 00:25:40,160 --> 00:25:42,639 Speaker 1: Book recently. And so if you go back to summer, 486 00:25:42,680 --> 00:25:46,560 Speaker 1: often there were literally no mentions of the word dollar 487 00:25:46,720 --> 00:25:49,520 Speaker 1: in the Beige Book, and now as of the latest 488 00:25:49,920 --> 00:25:52,840 Speaker 1: Beige Book, there were twenty one mentions of the word dollar. 489 00:25:53,040 --> 00:25:55,640 Speaker 1: So it's really you know, all over the thing now 490 00:25:55,960 --> 00:25:59,800 Speaker 1: talking about different regional you know, manufacturing getting hurt by 491 00:25:59,800 --> 00:26:02,600 Speaker 1: this strong dollar recently. So so now we even have 492 00:26:02,800 --> 00:26:06,280 Speaker 1: indexes or indices based on the Beige Book, right, trying 493 00:26:06,320 --> 00:26:09,680 Speaker 1: to translate the Beige Book into actual numbers. Yeah, exactly. 494 00:26:09,720 --> 00:26:11,840 Speaker 1: So that's like the same sort of textual analysis, but 495 00:26:11,880 --> 00:26:14,720 Speaker 1: it's a little more sophisticated. There's one um that Stone 496 00:26:14,760 --> 00:26:18,480 Speaker 1: and McCarthy Research Associates puts together, And basically the way 497 00:26:18,520 --> 00:26:23,560 Speaker 1: they do it is they look for words like expanding, contracting, growing, slowing, 498 00:26:23,720 --> 00:26:25,600 Speaker 1: and they sort of have different scores for each of 499 00:26:25,600 --> 00:26:27,800 Speaker 1: those words, and then they average them, you know, they 500 00:26:27,840 --> 00:26:30,080 Speaker 1: add them all up and average them together, and they 501 00:26:30,119 --> 00:26:32,720 Speaker 1: sort of come up with this Beige Book Activity index 502 00:26:32,760 --> 00:26:34,919 Speaker 1: they call it that. If you look at it kind 503 00:26:34,960 --> 00:26:37,320 Speaker 1: of does look like a lot of other economic data series, 504 00:26:37,359 --> 00:26:39,720 Speaker 1: which is pretty interesting that you know, you would get 505 00:26:39,760 --> 00:26:43,159 Speaker 1: that out of it. Pull What is it amusing to 506 00:26:43,240 --> 00:26:46,040 Speaker 1: you that this document that you just got on physical 507 00:26:46,080 --> 00:26:49,320 Speaker 1: paper that was couriered to you is now this thing 508 00:26:49,440 --> 00:26:54,160 Speaker 1: that people are diving into a deep textual analysis. It does, 509 00:26:54,280 --> 00:26:56,440 Speaker 1: but it's I guess I put it in the category 510 00:26:56,560 --> 00:26:59,399 Speaker 1: of the economy matters, and the economy matters and the 511 00:26:59,400 --> 00:27:02,000 Speaker 1: FED matter and it was just that, you know, you 512 00:27:02,000 --> 00:27:04,359 Speaker 1: you work hard at something and you think you're making 513 00:27:04,359 --> 00:27:07,399 Speaker 1: a difference. Um, sometimes you get a lot of feedback, 514 00:27:07,480 --> 00:27:10,600 Speaker 1: sometimes you don't. But it's yes. Bottom line is that 515 00:27:11,359 --> 00:27:13,199 Speaker 1: it was one of one of those successes. And I 516 00:27:13,200 --> 00:27:15,480 Speaker 1: would like to think that if you if you press 517 00:27:15,520 --> 00:27:18,280 Speaker 1: hard on this craft and get information about the economy, 518 00:27:18,359 --> 00:27:21,879 Speaker 1: it all works. Paul, you brought us a photograph, right 519 00:27:22,640 --> 00:27:26,440 Speaker 1: was this showing uh that shows the Treasury press room 520 00:27:26,640 --> 00:27:29,800 Speaker 1: from that era, and it's a picture of Donald Reagan 521 00:27:29,840 --> 00:27:32,760 Speaker 1: who was the Treasury secretary under Ronald Reagan, wh what 522 00:27:32,920 --> 00:27:35,480 Speaker 1: occasionally stopped by and talked to us. It was it 523 00:27:35,560 --> 00:27:39,119 Speaker 1: was a different era in terms of um uh security 524 00:27:39,400 --> 00:27:43,040 Speaker 1: and access to people and things like that. But I 525 00:27:43,080 --> 00:27:45,159 Speaker 1: decided I brought that along. I found out my basement 526 00:27:45,200 --> 00:27:47,679 Speaker 1: cleaning out some boxes. So Paul's in the back of 527 00:27:47,720 --> 00:27:52,119 Speaker 1: this photo rocking some very very eighties hair with a 528 00:27:52,200 --> 00:27:57,320 Speaker 1: mustache and sunglasses. They're they're just tinted glasses. But I've 529 00:27:57,359 --> 00:28:00,159 Speaker 1: I've long since gone to contact lenses. So what's the 530 00:28:00,600 --> 00:28:04,760 Speaker 1: what's the Beige Book showing these days? Well, modest to 531 00:28:04,840 --> 00:28:09,119 Speaker 1: moderate growth, subdued wage growth. Um. You know, that's one 532 00:28:09,119 --> 00:28:10,920 Speaker 1: of the things that's kind of funny, is the only 533 00:28:10,960 --> 00:28:13,399 Speaker 1: place you really see wage growth these days is in 534 00:28:13,440 --> 00:28:15,840 Speaker 1: the Beige Book because it hasn't really come through and 535 00:28:15,920 --> 00:28:18,960 Speaker 1: like the hard, hard data yet. But even in this 536 00:28:19,119 --> 00:28:21,720 Speaker 1: latest Beige Book that we got last week, didn't really 537 00:28:21,760 --> 00:28:24,760 Speaker 1: show much in the way of a lot of wage pressure. 538 00:28:25,160 --> 00:28:27,639 Speaker 1: But it is interesting because you know, sometimes that's like 539 00:28:27,680 --> 00:28:30,800 Speaker 1: you get those anecdotes like, um, you know this district, 540 00:28:31,160 --> 00:28:34,840 Speaker 1: this particular sector in this district, you know, there was 541 00:28:34,920 --> 00:28:38,880 Speaker 1: some signs of increasing wage pressures, but just not enough 542 00:28:38,920 --> 00:28:41,400 Speaker 1: to like move the needle in terms of like the 543 00:28:41,400 --> 00:28:44,160 Speaker 1: whole economy. Well, you're kind of you you're on a 544 00:28:44,280 --> 00:28:46,360 Speaker 1: in a different role. You're an editor, you're on a 545 00:28:46,520 --> 00:28:49,240 Speaker 1: more markets focused beat. Do you still check out the 546 00:28:49,240 --> 00:28:52,360 Speaker 1: Beige Book each month? Absolutely is that. I'm on the 547 00:28:52,400 --> 00:28:55,120 Speaker 1: team that covers treasuries and foreign exchange and what the 548 00:28:55,120 --> 00:28:57,440 Speaker 1: Fed does is a is a huge factor on that 549 00:28:57,560 --> 00:28:59,360 Speaker 1: and just you know, we looked at it as it's 550 00:28:59,400 --> 00:29:03,080 Speaker 1: sort of this combination thing where employment is pretty good, 551 00:29:03,120 --> 00:29:05,880 Speaker 1: we're almost at full employment depending on your definition. But 552 00:29:06,000 --> 00:29:08,040 Speaker 1: as Matt was pointing out rightly that you know, the 553 00:29:08,080 --> 00:29:11,080 Speaker 1: wage pressure hasn't come. There's no inflation, and that was 554 00:29:11,120 --> 00:29:12,880 Speaker 1: one of the other things that the Fed wanted to 555 00:29:12,880 --> 00:29:16,440 Speaker 1: see in justifying continued wage increases. So as we walk 556 00:29:16,560 --> 00:29:20,640 Speaker 1: up to this January f MC meeting, it gives you 557 00:29:20,680 --> 00:29:23,120 Speaker 1: a piece of information to try to discern what's the 558 00:29:23,160 --> 00:29:25,800 Speaker 1: Fed going to do along with all the other market 559 00:29:25,800 --> 00:29:28,760 Speaker 1: participants were keeping close touch with. Plus you're the father 560 00:29:28,840 --> 00:29:30,480 Speaker 1: of the Beige Book. You have to you know, check 561 00:29:30,520 --> 00:29:33,720 Speaker 1: in on your baby, right, no doubt. Do you get 562 00:29:33,880 --> 00:29:36,360 Speaker 1: real quickly do you get do you think every time 563 00:29:36,400 --> 00:29:39,480 Speaker 1: it comes out? Do you think about that or have you. 564 00:29:39,480 --> 00:29:41,440 Speaker 1: You've gotten used to it. I've gotten used to it 565 00:29:41,480 --> 00:29:44,080 Speaker 1: is that, you know, depending on what role is obviously 566 00:29:44,080 --> 00:29:46,040 Speaker 1: in this role at Bloomberg, I'm a little closer to 567 00:29:46,080 --> 00:29:48,560 Speaker 1: it than I was. I've done some other things. I 568 00:29:48,720 --> 00:29:50,640 Speaker 1: um was, you know, sort of more of an Internet 569 00:29:50,680 --> 00:29:53,600 Speaker 1: generalist and some other things. I work for, some things 570 00:29:53,640 --> 00:29:58,360 Speaker 1: called newspapers. You guys have heard of newspapers, right, Okay? Yeah, 571 00:29:58,560 --> 00:30:02,080 Speaker 1: some thing that even I had were the responsible for 572 00:30:02,080 --> 00:30:05,440 Speaker 1: an economic data point. Even decades later, I would be 573 00:30:05,480 --> 00:30:07,680 Speaker 1: pointing that out to people. But I didn't know about 574 00:30:07,720 --> 00:30:09,720 Speaker 1: that until I saw I went and looked at the 575 00:30:09,720 --> 00:30:11,960 Speaker 1: Wikipedia entry for beige book and I saw your name. 576 00:30:11,960 --> 00:30:14,360 Speaker 1: Otherwise I never would have known. I'll speak to my 577 00:30:14,400 --> 00:30:18,360 Speaker 1: marketing department about that, all right, Paul Cox of Bloomberg News, 578 00:30:18,520 --> 00:30:21,400 Speaker 1: Matt Bosler, thank you guys so much for joining. Thank you, 579 00:30:21,600 --> 00:30:29,280 Speaker 1: thank you. Okay, Well, that was Bowie, Bonds and beige Books. 580 00:30:29,280 --> 00:30:31,160 Speaker 1: So I guess our theme for this episode was really 581 00:30:31,200 --> 00:30:35,320 Speaker 1: alliteration the letter B. Yeah. I love both of those conversations, 582 00:30:35,360 --> 00:30:38,360 Speaker 1: and I love you know. I still it is absolutely 583 00:30:38,400 --> 00:30:41,880 Speaker 1: amazing from just from the Bowie perspective that he was 584 00:30:41,960 --> 00:30:45,200 Speaker 1: this huge innovator and it's not just in terms of 585 00:30:45,760 --> 00:30:49,400 Speaker 1: music or sort of musical securitizations, but all kinds of 586 00:30:49,440 --> 00:30:54,520 Speaker 1: intellectual property securitizations, which became a key corp of finance. 587 00:30:54,880 --> 00:30:57,600 Speaker 1: He was an important player in well so as a 588 00:30:57,640 --> 00:31:01,080 Speaker 1: finance journalist. I will say Bowie gave birth to uh 589 00:31:01,480 --> 00:31:05,240 Speaker 1: particular subset of bonds called esoteric A b s, which 590 00:31:05,520 --> 00:31:08,680 Speaker 1: bundled together all sorts of things like restaurant franchises and 591 00:31:08,720 --> 00:31:11,640 Speaker 1: the rights to comic strips like Peanuts, And they are 592 00:31:11,840 --> 00:31:17,160 Speaker 1: genuinely God's gift to structured finance journalists so people, because 593 00:31:17,160 --> 00:31:20,200 Speaker 1: people must love any headline with them of course, of course. 594 00:31:20,640 --> 00:31:22,360 Speaker 1: And then on the Beige Book, I thought it was 595 00:31:22,400 --> 00:31:24,520 Speaker 1: really interesting just to think back to a period of 596 00:31:24,520 --> 00:31:28,280 Speaker 1: time when those you know, all those anecdotes weren't public 597 00:31:28,400 --> 00:31:30,400 Speaker 1: and no one was really clamoring for them. It was 598 00:31:30,440 --> 00:31:33,200 Speaker 1: a totally different market and just the idea of getting 599 00:31:33,240 --> 00:31:37,080 Speaker 1: an economic release in physical paper having to then scan 600 00:31:37,240 --> 00:31:40,760 Speaker 1: through it. Now, people, I think, when they think of 601 00:31:40,840 --> 00:31:43,600 Speaker 1: any kind of economic data or a FED statement, they 602 00:31:43,640 --> 00:31:45,960 Speaker 1: just think of it as basically coming from coming out 603 00:31:46,000 --> 00:31:48,360 Speaker 1: of magic, out of their computer screens. But at one 604 00:31:48,440 --> 00:31:51,080 Speaker 1: point people actually had to go go get it and 605 00:31:51,120 --> 00:31:52,880 Speaker 1: look at it and then type something up. And it 606 00:31:52,960 --> 00:31:56,240 Speaker 1: wasn't nearly so automated. Of course, now they're all these 607 00:31:56,320 --> 00:31:59,640 Speaker 1: quantitative approaches, which is funny, but in the not that 608 00:31:59,720 --> 00:32:02,880 Speaker 1: long ago, really it was a much more physical thing 609 00:32:02,920 --> 00:32:07,080 Speaker 1: to get this data. That's right, Okay, Well, another episode 610 00:32:07,080 --> 00:32:09,560 Speaker 1: of Odd Lots has passed us by. I am Tracy Alloway, 611 00:32:09,600 --> 00:32:13,280 Speaker 1: Executive editor of Bloomberg Markets. I'm on Twitter at Tracy Alloway, 612 00:32:13,360 --> 00:32:16,120 Speaker 1: and I'm Joe wi isn't Thal, Managing editor of Bloomberg Markets. 613 00:32:16,160 --> 00:32:18,760 Speaker 1: You can follow me on Twitter at the Stallard. Thank 614 00:32:18,800 --> 00:32:29,800 Speaker 1: you for listening and see you next week. Joe and 615 00:32:29,840 --> 00:32:32,600 Speaker 1: I are very proud of our new podcast, Odd Lots, 616 00:32:32,640 --> 00:32:36,240 Speaker 1: but we are also very proud of Bloomberg's other growing 617 00:32:36,280 --> 00:32:39,480 Speaker 1: suite of original podcast all designed to help you navigate 618 00:32:39,520 --> 00:32:43,360 Speaker 1: the complexities of business, financial markets, and the global economy. 619 00:32:43,960 --> 00:32:46,760 Speaker 1: So in addition to our own podcast, please don't miss 620 00:32:46,840 --> 00:32:50,640 Speaker 1: Benchmark with Dan Moss, Tory Stillwell and Aki Edo and 621 00:32:50,800 --> 00:32:53,800 Speaker 1: informative jargon free look at the inner workings of the 622 00:32:53,800 --> 00:32:57,000 Speaker 1: global economy. Then there's Deal of the Week with our 623 00:32:57,160 --> 00:32:59,680 Speaker 1: m and a reporter Alex Sherman, which is a breakdown 624 00:32:59,680 --> 00:33:01,520 Speaker 1: of the against M and A deals, and gives you 625 00:33:01,560 --> 00:33:05,360 Speaker 1: an inside peak at corporate boardrooms. All three shows are 626 00:33:05,400 --> 00:33:10,280 Speaker 1: available on iTunes, SoundCloud, pocket cast for Android, Bloomberg dot com, 627 00:33:10,280 --> 00:33:11,959 Speaker 1: and of course, the Bloomberg Terminal,