WEBVTT - Episode 11: How David Bowie Became a Financial Product 0:00:03.800 --> 0:00:07.400 I feel her intro music is ill suited for this episode. 0:00:07.400 --> 0:00:19.200 Can we play something else that's better? Okay, Welcome to 0:00:19.239 --> 0:00:23.200 odd Lots. It's Tuesday, January nineteen. I'm Tracy Allowit, executive 0:00:23.280 --> 0:00:26.680 editor at Bloomberg Markets, and I'm Joe Wisenthal, Managing editor 0:00:26.680 --> 0:00:30.000 of Bloomberg Markets. So the world lost a musical great 0:00:30.080 --> 0:00:32.800 last week. I am talking, of course, about David Bowie, 0:00:32.920 --> 0:00:35.160 who died of cancer at the age of sixty nine. 0:00:35.560 --> 0:00:39.199 This makes us all very very sad. But instead of 0:00:39.240 --> 0:00:41.519 being sad on this episode, we are going to use 0:00:41.560 --> 0:00:45.199 it to celebrate Bowie's creative genius. Sorry, just going to 0:00:45.520 --> 0:00:48.279 play Bowie music for the next half an hour as 0:00:48.360 --> 0:00:51.120 much as you might like that. No, We're actually going 0:00:51.200 --> 0:00:53.520 to talk about his financial genius. And what I mean 0:00:53.560 --> 0:00:55.560 by that is, of course, we are going to talk 0:00:55.600 --> 0:00:59.120 about Bowie bonds. Yeah, Bowie bonds. So I've heard them 0:00:59.160 --> 0:01:01.720 a lot, but what are they exactly? So they are 0:01:01.760 --> 0:01:05.480 a type of bond, to be specific, a securitization that 0:01:05.600 --> 0:01:10.000 bundles up future cash flows from the royalties from music rights. 0:01:10.280 --> 0:01:12.880 And David Bowie was the first to do them, so 0:01:12.920 --> 0:01:16.520 a pioneer in ways beyond just music and style. Oh, 0:01:16.600 --> 0:01:20.039 most definitely so. Joining us today from Los Angeles to 0:01:20.120 --> 0:01:22.839 tell the story of Bowie Bonds is David Pullman. He's 0:01:22.880 --> 0:01:25.720 the banker who helped create these in the late ninety nineties, 0:01:26.000 --> 0:01:28.959 and in fact, Bowie Bonds are sometimes known as Pullman Bonds. 0:01:29.520 --> 0:01:32.360 I'm somehow not surprised that the media for first to 0:01:32.440 --> 0:01:35.520 call him Bowie. Um. I'm really excited about that. I 0:01:35.520 --> 0:01:38.319 think it should be a great conversation. Want to quick note, 0:01:38.319 --> 0:01:41.080 We're not just going to talk about Bowie Bonds. Later 0:01:41.360 --> 0:01:44.280 in the episode, We're going to be talking about the 0:01:44.319 --> 0:01:47.680 aptly named Beige Book, seen as one of the most 0:01:47.720 --> 0:01:51.280 boring economic releases in the world, but it actually has 0:01:51.320 --> 0:01:54.680 a fascinating bad history. And just like we'll be talking 0:01:54.720 --> 0:01:57.600 to the father of Bowie Bonds, will also be talking 0:01:57.640 --> 0:02:00.360 to the father of the Beige Book. Right, Bowie Bonds 0:02:00.400 --> 0:02:12.400 and the Beige Book. Let's start. Let's do it. Yeah, 0:02:12.880 --> 0:02:16.280 David Pullman, welcome to the show. Let's maybe start at 0:02:16.280 --> 0:02:18.960 the beginning. Can you tell us how you met Bowie 0:02:19.000 --> 0:02:22.680 and how these bonds kind of came about? Sure, Initially, 0:02:22.840 --> 0:02:25.880 Bowie had a very large catalog of songs that he 0:02:26.040 --> 0:02:30.000 had fought to his manager of the time to revert. 0:02:30.800 --> 0:02:33.920 Revert means he was going to sell them or no. 0:02:34.480 --> 0:02:39.600 What happened was David as a teenager and the manager 0:02:40.280 --> 0:02:43.520 realized importance of his work. So you negotiated very hard 0:02:43.680 --> 0:02:46.480 with the record companies to make sure they got recaptured 0:02:46.680 --> 0:02:49.640 and a reversion of the record masters that he created 0:02:50.160 --> 0:02:53.520 on his original songs that he started in the sixties, 0:02:54.200 --> 0:02:56.799 and then continue that going forward, which is extremely rare 0:02:56.840 --> 0:03:00.440 for artists on their record masters. And negotiates hard that 0:03:00.520 --> 0:03:04.560 the for these and he confidence in himself in times 0:03:04.600 --> 0:03:07.360 because most artists that they'll fail, they give up their 0:03:07.440 --> 0:03:09.880 rights to the record masters, which is not at all 0:03:10.000 --> 0:03:13.720 a typical Probably ninety nine point nine nine percent of 0:03:13.760 --> 0:03:16.519 all artists don't have the record masters. And you know 0:03:16.680 --> 0:03:19.760 this publishing and its writers share and they said, well, 0:03:19.800 --> 0:03:21.320 you know, probably in the back of their minds, like 0:03:21.919 --> 0:03:23.680 you know, this kid is a teenager, you know, who'd 0:03:23.680 --> 0:03:25.440 be nothing in five years or whatever it would be 0:03:25.440 --> 0:03:28.560 going forward, So big deal to get back his record masters. 0:03:28.639 --> 0:03:31.320 And you know, obviously it was a David Bowie and 0:03:31.360 --> 0:03:33.440 his manager at the time, we're betting that that would 0:03:33.480 --> 0:03:36.160 not happen, that he had confidence himself that he would 0:03:36.160 --> 0:03:39.560 these be successful, and he took less up front to 0:03:39.640 --> 0:03:42.680 deal to to get that, which was a big statement 0:03:42.680 --> 0:03:48.440 about as a teenager, to show how savvy and sophisticated 0:03:48.480 --> 0:03:50.480 he was. I mean not many teenagers give another word 0:03:50.640 --> 0:03:54.480 recapture or version. So in the nine nineties, he still 0:03:54.560 --> 0:03:57.200 has these master rights to his music right and he's 0:03:57.200 --> 0:03:59.560 trying to decide what to do with them. Correct, So 0:03:59.600 --> 0:04:02.720 wet we passed forward to that and he's deciding was 0:04:02.880 --> 0:04:05.040 doing him and at the time everyone's coming back to him, 0:04:05.040 --> 0:04:09.840 and it was also an opportunity for David Ticket not 0:04:09.880 --> 0:04:12.120 only back his record masters, but he also had a 0:04:12.160 --> 0:04:16.160 publishing administration neal for his publishing, his writers, Shore, every 0:04:16.279 --> 0:04:18.039 all the rights were coming back to him that he 0:04:18.040 --> 0:04:20.800 would have a hundred percent control over. Okay, So how 0:04:20.839 --> 0:04:23.680 did you meet him and come up with this idea? 0:04:23.920 --> 0:04:26.640 What happened was at that point when he had all 0:04:26.680 --> 0:04:28.880 these rights coming back, and there's also some there was 0:04:28.920 --> 0:04:32.520 some tax advantages and estate planning advantages, David and his 0:04:32.520 --> 0:04:35.680 business manager were looking to sell his catalog and that 0:04:35.760 --> 0:04:38.000 came up because I was doing transactions with his business 0:04:38.040 --> 0:04:42.120 manager and other errors investment banking and as it turned out, 0:04:42.600 --> 0:04:45.640 he mentioned to me in passing, so I thought, okay, 0:04:45.640 --> 0:04:48.080 well it's not something we're looking at doing a sales catalogs. 0:04:48.120 --> 0:04:50.200 That's that's nice you're working on. Then he realized that 0:04:50.279 --> 0:04:53.919 David wasn't gonna sell because these were his babies. So 0:04:54.040 --> 0:04:56.799 this turned out to be a smart move. So instead 0:04:56.800 --> 0:05:00.240 of selling the entire catalog, what he did was base 0:05:00.360 --> 0:05:02.960 and what you did was basically a securitization of the 0:05:03.040 --> 0:05:06.320 future cash flows from the rights to that catalog. Correct. 0:05:06.360 --> 0:05:09.400 What happened was, I will ask some questions how much 0:05:09.400 --> 0:05:12.400 has it earned this as a David's business manager, And 0:05:12.640 --> 0:05:14.279 at the time he told me what was earned, and 0:05:14.279 --> 0:05:16.280 he earned as much what it was earning as much 0:05:16.279 --> 0:05:20.400 as a large corporation. So the next the question was 0:05:20.440 --> 0:05:22.360 did he have three years of financials? They said they 0:05:22.360 --> 0:05:24.920 had five? I said where they already said yes. I said, 0:05:25.080 --> 0:05:26.840 are they by Big six at the time whould be 0:05:26.839 --> 0:05:29.440 big four accounting firms at the time. He said yes, 0:05:29.720 --> 0:05:31.960 to which I said, I could securitize that, to which 0:05:31.960 --> 0:05:35.320 his business manager said, what securitization? And I wanted to 0:05:35.360 --> 0:05:37.680 just correct that only because so they got it right 0:05:37.760 --> 0:05:42.120 the quotes, but in terms of uh. David, then he 0:05:42.200 --> 0:05:45.960 got the information in terms of this deal, and he 0:05:46.040 --> 0:05:48.960 decided within a split second and said, why haven't we 0:05:49.000 --> 0:05:52.719 started yet? So he basically, even though this concept of 0:05:52.800 --> 0:05:57.440 securitization maybe unusual, as soon as it was explained to 0:05:57.520 --> 0:06:00.200 him that he could sell the cash flows of the 0:06:00.279 --> 0:06:03.760 songs rather than the songs himself, he instantly understood the 0:06:03.760 --> 0:06:06.440 appeal of it. Yeah, And what's amazing is he got 0:06:06.480 --> 0:06:10.960 the concept faster than other investment bankers and ast ors, 0:06:11.120 --> 0:06:14.040 other people in the financial markets. He grasped new ideas 0:06:14.040 --> 0:06:17.680 and concepts and was willing to take a chance and 0:06:18.120 --> 0:06:20.200 was wasn't afraid to fail. And that's why he was 0:06:20.200 --> 0:06:23.760 so successful in terms of trying these things. So we 0:06:23.800 --> 0:06:25.839 went ahead with it. We did a deal in rockets seed. 0:06:25.880 --> 0:06:28.839 Now what's interesting when when when when David's hearing this 0:06:28.920 --> 0:06:31.120 for the first time and making a decision to go 0:06:31.240 --> 0:06:34.040 forward within less than a second, not a second, less 0:06:34.040 --> 0:06:38.360 than a second. There's no is not a written word 0:06:38.960 --> 0:06:41.480 in the history of the world prior to that meeting 0:06:41.880 --> 0:06:44.680 on anyone even thinking about doing this, much less than 0:06:44.720 --> 0:06:47.280 doing it. What was it like actually going out and 0:06:47.400 --> 0:06:50.320 selling these bonds? Because they're brand new things. Lots of 0:06:50.320 --> 0:06:52.680 people haven't heard about them before. How did you do 0:06:52.760 --> 0:06:54.520 the sales pitch and who did you end up selling 0:06:54.600 --> 0:06:56.800 them to? Okay, Well, first of all, during those it's 0:06:56.839 --> 0:06:58.960 like a couple of months. Usually new deals even today 0:06:59.000 --> 0:07:02.280 they take a year of the market. They were investment grade, 0:07:02.279 --> 0:07:05.440 they were disingul a level rated by multiple rating agencies 0:07:06.200 --> 0:07:10.720 and the national recognized rating agencies as well, and they 0:07:10.720 --> 0:07:13.920 were twenty year legal finals, fifteen year expective maturity, and 0:07:13.920 --> 0:07:16.400 a price off the US ten year treasury the average 0:07:16.440 --> 0:07:19.760 life of the bonds. And what we did, they were 0:07:19.800 --> 0:07:21.920 done as a true private fasting, so that the charms 0:07:21.960 --> 0:07:25.040 of the deals are confidential proprietories that others couldn't see 0:07:25.360 --> 0:07:27.920 what the deal was other than the actual the rating 0:07:27.920 --> 0:07:31.280 agencies and the investors in the bonds. So they went 0:07:31.440 --> 0:07:33.880 to go to Life Insurance Company because they typically buy 0:07:34.040 --> 0:07:38.000 long term investing gray bonds and that was a perfect 0:07:38.000 --> 0:07:41.720 fit for them. They never missed a payment, they never triggered, 0:07:41.760 --> 0:07:44.640 they never they paid off in full. And what was 0:07:44.760 --> 0:07:48.840 interesting is that the first they actually just ran the 0:07:48.880 --> 0:07:51.440 actual cover, which is interesting to me. In the article 0:07:52.480 --> 0:07:56.360 about David Bowie, the cover story that broke, uh when 0:07:56.640 --> 0:07:59.000 David had done this deal with me and they got out, 0:07:59.040 --> 0:08:00.440 which was at the end of nine six in a 0:08:00.480 --> 0:08:03.280 close in the beginning of so at the very end 0:08:03.320 --> 0:08:05.360 of the year. So the story breaks and they quote 0:08:05.400 --> 0:08:08.120 these large investors that are in music, some bonds and 0:08:08.200 --> 0:08:11.360 other asset classes may say, are you kidding me? Are 0:08:11.400 --> 0:08:14.040 you crazy? And that was that the written reactions when 0:08:14.040 --> 0:08:17.680 this the first article it comes out. Now what happens 0:08:17.680 --> 0:08:20.440 when that article runs. It was on the cover that 0:08:20.520 --> 0:08:23.240 morning at the Wall Street Journal, and we had already 0:08:23.240 --> 0:08:24.720 placed and had the right of the bonds. No one 0:08:24.800 --> 0:08:27.800 knew that, and they were already placed. There's already sold. 0:08:28.720 --> 0:08:31.280 The phone is ringing off the hawk to buy the 0:08:31.320 --> 0:08:34.120 bonds from the biggest investors in the world at the 0:08:34.120 --> 0:08:38.000 institutions that buy asset attacks and one uncarrelated asset. The 0:08:38.040 --> 0:08:42.800 new assets is uncarlas the stock market risk diversified. So 0:08:43.120 --> 0:08:45.800 it was the reaction was at that moment I knew 0:08:45.800 --> 0:08:48.360 that we had really hit something in terms of the 0:08:48.360 --> 0:08:51.520 reaction was so positive on the market. They weren't going 0:08:51.600 --> 0:08:53.360 to find out about it. They were going to buy them. 0:08:53.400 --> 0:08:56.160 How big was the offering It was fifty million dollars 0:08:56.160 --> 0:08:57.720 and it is right at the single A level. I 0:08:57.720 --> 0:09:00.959 want to go back real quickly to the first when 0:09:01.000 --> 0:09:03.760 you first brought the Bowie bonds to the ratings agencies, 0:09:03.800 --> 0:09:07.160 because here you were, you had created this new type 0:09:07.160 --> 0:09:10.240 of product. What kind of questions did they ask since 0:09:10.280 --> 0:09:13.960 obviously they had never rated one of these excellent questions. Well, 0:09:14.120 --> 0:09:16.319 we're sitting there with one of the major range and 0:09:16.360 --> 0:09:20.360 I always k who it was exactly, and we're sitting 0:09:20.400 --> 0:09:24.200 there and uh, you know, it's it's sad now in 0:09:24.280 --> 0:09:28.120 terms of everyone's morning, the death of David Bowie. And 0:09:28.200 --> 0:09:31.920 now this is almost twenty years ago where this first 0:09:31.960 --> 0:09:38.800 meeting in right approximately almost almost exactly yet period a 0:09:38.840 --> 0:09:41.360 few months short of it, so an I llegal final 0:09:41.400 --> 0:09:44.600 maturity of the deal. So they say, a question comes up, 0:09:44.640 --> 0:09:49.960 says what happens if David dies? So as he asked 0:09:49.960 --> 0:09:52.960 the question, and the person of the range was very 0:09:53.040 --> 0:09:56.760 stu we worked with on that and other deals. He 0:09:56.760 --> 0:09:59.120 he thought about it and answer his own question as 0:09:59.160 --> 0:10:00.760 if he asked so if he was there where business 0:10:00.760 --> 0:10:02.320 now is just a meeting with us success right now, 0:10:02.360 --> 0:10:04.760 there's on the deal. You no, we're we're signed. Well, 0:10:04.880 --> 0:10:08.680 you know it's it's actually it's a good thing. My 0:10:08.760 --> 0:10:12.240 response was, because there's no new product right now, we 0:10:12.280 --> 0:10:15.319 won't And then they got you got an understanding that 0:10:15.360 --> 0:10:17.920 the catalog would soar as it is now in terms 0:10:17.920 --> 0:10:20.240 of value and the interest. And then I followed with, 0:10:20.559 --> 0:10:23.400 but we won't tell David that because David's very young man. 0:10:24.120 --> 0:10:26.720 So the idea that in terms that they thought about that, 0:10:27.000 --> 0:10:29.560 in terms of they understood that the royalties would continue 0:10:29.600 --> 0:10:32.360 and actually increase if something would have happened, they were not. 0:10:32.559 --> 0:10:34.880 The question was really that a lot of people do 0:10:35.080 --> 0:10:38.200 ask at the time and even after, we're gonna understand 0:10:38.240 --> 0:10:41.440 the concept that it's not tied to the artists. These 0:10:41.480 --> 0:10:45.440 songs have a life of their own, and separately that 0:10:45.840 --> 0:10:49.600 it states and airs and successors and a science continue 0:10:49.640 --> 0:10:52.439 to get the royalties, whether the author of the songs, 0:10:52.679 --> 0:10:56.640 the artists as songwriter, or any other intellectual proper or 0:10:56.640 --> 0:11:00.960 creative assid entry masses is living or not. I question 0:11:01.480 --> 0:11:04.840 in terms of the structure of the Bowie bond, they 0:11:04.880 --> 0:11:08.600 paid a regular coupon, would they did the price that 0:11:08.679 --> 0:11:11.360 they got or that the payment the investors got, did 0:11:11.440 --> 0:11:14.400 they fluctuate and go up like you know, say, in 0:11:14.480 --> 0:11:17.560 the event that David had died during the period of 0:11:17.559 --> 0:11:20.120 the bond and people started buying more and more of 0:11:20.200 --> 0:11:23.319 his c d s, would the end investor have received 0:11:23.320 --> 0:11:26.240 a higher coupon those months? Good question, and you know 0:11:26.400 --> 0:11:28.600 I do a number interviews on this and I wanted 0:11:28.720 --> 0:11:31.199 your respected David. I respond to everyone because I want 0:11:31.240 --> 0:11:33.959 to make sure that you know his legacy has preserved 0:11:34.040 --> 0:11:37.199 and in the transaction. What was I was uncomfortable with 0:11:37.280 --> 0:11:39.040 a couple of things that your listeners and view is 0:11:39.120 --> 0:11:41.640 really good. Is the deal always maintain its invest in 0:11:41.640 --> 0:11:45.960 grade rating? The deal deal paid off early as well, 0:11:46.280 --> 0:11:48.880 so the bonds holders and bonds of time the seven 0:11:48.880 --> 0:11:51.640 point and I present interest, which was a higher interest 0:11:51.760 --> 0:11:55.000 rate than US chargeries, which is normal. There was the 0:11:55.360 --> 0:11:58.440 spread over yours treasures at the time was in the 0:11:58.480 --> 0:12:03.920 mid hundred basis point range over US treasuries, so the 0:12:03.960 --> 0:12:06.559 deal was obviously the interest rates were much higher and 0:12:06.960 --> 0:12:09.760 then that part of time than nineties. So we're looking 0:12:09.760 --> 0:12:12.520 at spread in the mid hundreds over the U. S 0:12:12.559 --> 0:12:15.440 Treasury and the tenure treasurers used to price it. So 0:12:15.760 --> 0:12:20.080 your question is as more cash flow came in two 0:12:20.280 --> 0:12:24.400 from the royalties, the bonds were paying down faster, which 0:12:24.520 --> 0:12:29.440 was better for the investors. But separately, now you have 0:12:29.640 --> 0:12:33.600 more collateral and assets, it's worth more over time because 0:12:33.960 --> 0:12:37.079 cycle our deals were self liquidating, so the balance is 0:12:37.080 --> 0:12:40.079 getting lower and lower. The cash reserve were having deals 0:12:40.120 --> 0:12:42.320 is getting higher and higher as a proportion of the 0:12:42.360 --> 0:12:46.199 outstanding blans and the casuals increasing from the royalties as 0:12:46.200 --> 0:12:48.160 they are now. As an example, assertated is that the 0:12:48.640 --> 0:12:52.400 royalties will be soaring, so the bonds holders now have 0:12:53.080 --> 0:12:56.400 more collateral and having securities that actually should have a 0:12:56.480 --> 0:12:59.200 higher rating. We were capped by the rating of the 0:12:59.240 --> 0:13:02.599 payers or is in a deal, including companies like E 0:13:02.760 --> 0:13:06.200 M I at the time publishing Catalogust and sold UH 0:13:06.360 --> 0:13:09.600 to a joint tenship with Sony. But the example is 0:13:09.640 --> 0:13:13.560 that we're limited just like in the transaction with a country. 0:13:13.600 --> 0:13:17.600 As sovereign debt dealing, you're limited by the major payer 0:13:17.640 --> 0:13:21.439 in your deal out there rating. So that's why we're 0:13:21.480 --> 0:13:23.800 limited to the investment grading rating that we had. But 0:13:23.840 --> 0:13:26.360 they every single deal, including the first deal for David 0:13:26.400 --> 0:13:30.240 Bowie Boye bond, every we maintain their investing grade ratings, 0:13:30.240 --> 0:13:33.400 never missed a payment and paid off in full. All right, David. 0:13:33.760 --> 0:13:37.079 One last question before we let you go, Uh, what 0:13:37.160 --> 0:13:39.520 was it like working with David Bowie? And do you 0:13:39.559 --> 0:13:42.160 have maybe a fun anecdote from the times when you 0:13:42.200 --> 0:13:44.120 were putting these things together? And I just want to 0:13:44.160 --> 0:13:47.360 also combine with that question, what did David Bowie think 0:13:47.400 --> 0:13:51.199 about the fact that this musician, he was an artist 0:13:51.280 --> 0:13:55.160 avant garde? Was he was he surprised that he became 0:13:55.440 --> 0:14:00.440 also famous for in part becoming a financial market innovator. 0:14:01.760 --> 0:14:05.720 I mean, I'm you know, actually it makes and it 0:14:05.720 --> 0:14:08.200 makes sense that if you look at the news overall. 0:14:08.280 --> 0:14:11.960 I mean, this is a huge component of how David 0:14:12.040 --> 0:14:14.320 is remembered. I mean it's it's in terms of around 0:14:14.320 --> 0:14:17.560 the world, in terms of the press. What it was 0:14:17.640 --> 0:14:21.320 interesting about it which really stuck out for me, It 0:14:21.560 --> 0:14:25.360 was he was the perfect person to have for the 0:14:25.400 --> 0:14:29.080 first deal ever. It's kind not only just because he 0:14:29.160 --> 0:14:33.120 was known as an innovator, but how he handled himself. 0:14:33.280 --> 0:14:36.000 He was the word is your genius has used in charms. 0:14:36.040 --> 0:14:38.320 There's no questions of genius in terms of his music 0:14:38.360 --> 0:14:40.680 abilities and artists He's someone's gonna remember this. If you 0:14:40.760 --> 0:14:43.840 walk into museums, you see works that are priceless. That's 0:14:43.880 --> 0:14:46.400 what David Bowie is created. But the difference is David 0:14:46.440 --> 0:14:50.200 bowiees prices, works have casual royalties that come from them, 0:14:50.240 --> 0:14:54.040 so that's unique. So what is special about him was 0:14:54.400 --> 0:14:58.800 he never ever question me in terms of whether deal 0:14:58.880 --> 0:15:01.080 is going to happen or not, how long was taking. 0:15:01.200 --> 0:15:03.640 He was the most supportive person to work with and 0:15:03.640 --> 0:15:05.880 he wasn't afraid to fail, which was the key to 0:15:05.920 --> 0:15:08.760 the success. So I'm doing this deal for the very 0:15:08.800 --> 0:15:11.120 first time no one's ever done in the world before, 0:15:11.560 --> 0:15:14.320 and he's not worried. I'm thinking, though, is this going 0:15:14.360 --> 0:15:16.360 to be able to happen? Right? And we're doing it 0:15:16.560 --> 0:15:18.960 and he's not nervous at all. On top of that, 0:15:19.120 --> 0:15:22.760 the deal happens, there's a cavalcator press, over five thousand 0:15:23.280 --> 0:15:29.680 articles in the press, radio, TV magazines and David which 0:15:29.720 --> 0:15:31.840 was you know, I didn't realize that going into this deal. 0:15:32.200 --> 0:15:35.280 My favorite song by him not knowing at the time 0:15:35.320 --> 0:15:39.680 there was his number one first number one was same. 0:15:40.480 --> 0:15:45.120 So David understood that and he gave that to me. Right. 0:15:45.280 --> 0:15:49.800 He understood he wouldn't do any interviews, which created a 0:15:49.880 --> 0:15:52.600 bigger mystique and legend for David on this deal. So 0:15:52.800 --> 0:15:55.960 I just on this deal, David samus. Most artists would 0:15:55.960 --> 0:15:59.920 want all the attention for themselves, right, David, It gives 0:16:00.120 --> 0:16:02.760 me in terms of any report of the calls and 0:16:02.880 --> 0:16:05.400 one wants to talk about the deal. Any artists, other 0:16:05.480 --> 0:16:07.920 famous artists at the time that are friends of his 0:16:08.360 --> 0:16:12.400 asked him talk to David Pullman, every single one. He 0:16:12.440 --> 0:16:15.640 wouldn't talk to anyone about it. And then my third 0:16:15.720 --> 0:16:18.360 part was to go to the conferences on the asset 0:16:18.440 --> 0:16:21.120 doc stories like the biggest investors in the world on 0:16:21.400 --> 0:16:25.080 where they be, the raiding agencies, the institution, investors, UH 0:16:25.240 --> 0:16:28.000 attorneys at work on the transactions, trustees, whoever was there 0:16:28.200 --> 0:16:31.440 at these conferences, and the thing that was statistical that 0:16:31.440 --> 0:16:35.040 you could actually securitize with the questions, the very first question. 0:16:35.240 --> 0:16:39.040 Every single conference is spoke at with the keynote, various ones, 0:16:39.080 --> 0:16:41.160 and there are dozens of them over the over where 0:16:41.200 --> 0:16:44.440 it was did you meet David? Every single conference is 0:16:44.480 --> 0:16:47.760 the same question. All right, David Pullman, thank you so 0:16:47.840 --> 0:16:59.080 much for joining us to thank you, thank you. All right. 0:16:59.280 --> 0:17:01.440 Now we're going to turned to something that most people 0:17:01.520 --> 0:17:04.439 probably think is far less interesting than David Bowie but 0:17:04.760 --> 0:17:06.760 I think you should stay with us because there's a 0:17:06.800 --> 0:17:09.359 story here that's really fascinating. We're going to talk about 0:17:09.400 --> 0:17:11.960 the Beige Book, what it is, how it came into being, 0:17:12.000 --> 0:17:14.639 and where it's going. So the Beige Book is this 0:17:14.720 --> 0:17:18.400 thing that the FED releases every month where it's basically 0:17:18.560 --> 0:17:22.280 anecdotal color about the state of the economy from all 0:17:22.359 --> 0:17:25.280 the FED districts. So they produced this big document that 0:17:25.359 --> 0:17:29.200 has things like wage pressure is rising in Kansas, and 0:17:29.680 --> 0:17:32.679 Broadway theaters in New York are weakening due to the 0:17:32.720 --> 0:17:35.280 fact that the dollar is strong and keeping tourists away, 0:17:35.400 --> 0:17:38.399 and shipping is doing really well in the Port of 0:17:38.400 --> 0:17:40.480 Miami and stuff like this, And it's sort of a 0:17:40.560 --> 0:17:44.320 very non numerical way of looking at the economy. I 0:17:44.400 --> 0:17:47.120 generally find it quite interesting, but I guess a lot 0:17:47.160 --> 0:17:50.480 of people think of it as very very boring. It is. 0:17:50.520 --> 0:17:53.640 I mean, people say, well, it's perfectly named the Beisian 0:17:54.160 --> 0:17:57.400 and it's funny. The reason I got interested this is 0:17:57.440 --> 0:18:00.359 back in December, I was thinking that a really good 0:18:00.520 --> 0:18:04.199 novelty sort of holiday gift or Christmas gift for a 0:18:04.240 --> 0:18:07.320 banker would be an old physical copy of the Beija Book. 0:18:07.440 --> 0:18:10.160 Because now of course, everyone just looks at it electronically. 0:18:10.920 --> 0:18:12.920 I was reading about the history of the Beige Book, 0:18:12.960 --> 0:18:17.440 and I discovered something fascinating on the Wikipedia page, which 0:18:17.480 --> 0:18:19.679 is that the Beige Book didn't always used to be 0:18:19.760 --> 0:18:22.840 released to the public, and it wasn't until the mid 0:18:22.960 --> 0:18:27.040 eighties when a Wall Street Journal reporter named Paul Cox 0:18:27.640 --> 0:18:30.800 asked the Federal Reserve to make the Beige Book public. 0:18:31.280 --> 0:18:34.000 Imagine a life without the Beige Book. And what's even 0:18:34.040 --> 0:18:37.840 cooler is that Paul Cox now works for Bloomberg and 0:18:37.920 --> 0:18:40.879 sits about two rows away from us in the newsroom. 0:18:41.280 --> 0:18:44.119 And so I and I was like, oh my god, 0:18:44.320 --> 0:18:48.200 we worked two rows away from a celebrity, the father 0:18:48.359 --> 0:18:51.000 of the Beijia Book, the men without whom this report 0:18:51.040 --> 0:18:53.520 would never have seen the light of day. And now 0:18:53.600 --> 0:18:55.640 I want to get the story. Look, there aren't too 0:18:55.640 --> 0:18:59.040 many people walking among us they can say if it 0:18:59.080 --> 0:19:02.040 weren't for me, this economic data point would be relieved. 0:19:02.400 --> 0:19:04.000 It's something to be proud of, all right. So we 0:19:04.040 --> 0:19:06.480 have Paul Cox here with us today. We also have 0:19:06.520 --> 0:19:09.719 Bloomberg Economics reporter Matt Bosler, who's going to be talking 0:19:09.760 --> 0:19:12.520 a little bit about how people use the Beige Book. 0:19:12.600 --> 0:19:15.800 Today some twenty five years later. All right, let's get started. 0:19:20.800 --> 0:19:26.040 That's so we're here with Bloomberg News as Paul Cox, Hello, 0:19:26.400 --> 0:19:28.520 how are you doing? And we're also here at Bloomberg 0:19:28.560 --> 0:19:32.159 Economic reporter Matthew Bosler. I thank you both so much 0:19:32.240 --> 0:19:36.239 for joining us. So, Paul, you are the father of 0:19:36.280 --> 0:19:39.600 the Beige book. Explain to us how you got into 0:19:39.600 --> 0:19:41.640 this position. What were you doing at the time. It's 0:19:41.680 --> 0:19:44.720 always fun to go back and relive your wins, and this, 0:19:44.720 --> 0:19:47.199 this was this was a good win. UM I was 0:19:47.359 --> 0:19:50.760 a reporter for Dow Jones News Service and based in Washington, 0:19:51.359 --> 0:19:55.080 was part of their economic policy team. UM. There in Washington, 0:19:55.320 --> 0:19:57.520 I was based at the Treasury Department, and you cover 0:19:57.560 --> 0:20:00.640 the economic indicators. You cover Treasury by on issue once 0:20:00.640 --> 0:20:02.960 and that sort of thing, but also Federal reserve and 0:20:03.000 --> 0:20:06.920 monetary policy. At some point one of my editors decided 0:20:07.000 --> 0:20:11.040 we should write previews for Federal Open Market Committee meetings 0:20:11.160 --> 0:20:13.440 or curtain raisers as they call them in the business. 0:20:13.560 --> 0:20:16.440 So already this is kind of weird because we think 0:20:16.520 --> 0:20:19.720 of a preview for an f o MC decision as 0:20:19.920 --> 0:20:22.240 just standard. Everyone always writes a preview. But that wasn't 0:20:22.240 --> 0:20:25.080 always the case that this was something that got hyped up. Well, 0:20:25.160 --> 0:20:27.760 they were previews like you did. But just like now 0:20:27.800 --> 0:20:29.600 that I'm an editor in Bloomberg and I lean on 0:20:29.640 --> 0:20:32.600 my reporters to break news. Um, my editors then leaned 0:20:32.600 --> 0:20:34.720 on me to break news, and I was under pressure 0:20:34.760 --> 0:20:36.880 to get more than that, get scoops, if you will, 0:20:37.359 --> 0:20:40.480 And that's how this came about. So and gathering for 0:20:40.520 --> 0:20:43.119 one of those curtain raisers, I was talking to a 0:20:43.160 --> 0:20:46.560 FED official on background, of course, and we were sort 0:20:46.600 --> 0:20:48.520 of bantering back and forth, and he was doing his 0:20:48.600 --> 0:20:51.040 best to not tell me anything, and I sort of 0:20:51.119 --> 0:20:53.359 jokingly said, well, well, can can you give me the 0:20:53.359 --> 0:20:57.640 Blue Book, which is the internal staff monetary policy recommendations 0:20:57.640 --> 0:20:59.919 and he said no. I said, okay, how about the 0:21:00.000 --> 0:21:02.600 Green Book? And the Green Book is the Internal Economic 0:21:02.680 --> 0:21:05.159 Forecast and he said no. I said how about the 0:21:05.160 --> 0:21:07.920 Beige Book? And he goes, there's a pause, and he said, 0:21:08.480 --> 0:21:11.200 let me think about that, and we continued our conversation 0:21:11.280 --> 0:21:13.520 and hung up. A couple of days later, he called 0:21:13.560 --> 0:21:15.760 me back and he said, we've decided to give you 0:21:15.800 --> 0:21:18.639 the Beige Book. Now you know, the Beige Book is 0:21:18.680 --> 0:21:21.679 the summary of economic conditions and the twelve Federal Reserve banks. 0:21:21.760 --> 0:21:24.760 It's not everything, but it's something. That day, a courier 0:21:24.800 --> 0:21:27.960 showed up at the Treasury Department and dropped off envelope 0:21:28.000 --> 0:21:30.840 with my name on it, and I opened it up 0:21:30.880 --> 0:21:33.680 and there it was the Beige Book. So what had 0:21:33.680 --> 0:21:36.720 they actually been using that book for before it was 0:21:37.000 --> 0:21:40.080 kind of public? Well, I believe for as long as 0:21:40.119 --> 0:21:43.320