Speaker 1: I feel her intro music is ill suited for this episode.
Speaker 1: Can we play something else that's better? Okay, Welcome to
Speaker 1: odd Lots. It's Tuesday, January nineteen. I'm Tracy Allowit, executive
Speaker 1: editor at Bloomberg Markets, and I'm Joe Wisenthal, Managing editor
Speaker 1: of Bloomberg Markets. So the world lost a musical great
Speaker 1: last week. I am talking, of course, about David Bowie,
Speaker 1: who died of cancer at the age of sixty nine.
Speaker 1: This makes us all very very sad. But instead of
Speaker 1: being sad on this episode, we are going to use
Speaker 1: it to celebrate Bowie's creative genius. Sorry, just going to
Speaker 1: play Bowie music for the next half an hour as
Speaker 1: much as you might like that. No, We're actually going
Speaker 1: to talk about his financial genius. And what I mean
Speaker 1: by that is, of course, we are going to talk
Speaker 1: about Bowie bonds. Yeah, Bowie bonds. So I've heard them
Speaker 1: a lot, but what are they exactly? So they are
Speaker 1: a type of bond, to be specific, a securitization that
Speaker 1: bundles up future cash flows from the royalties from music rights.
Speaker 1: And David Bowie was the first to do them, so
Speaker 1: a pioneer in ways beyond just music and style. Oh,
Speaker 1: most definitely so. Joining us today from Los Angeles to
Speaker 1: tell the story of Bowie Bonds is David Pullman. He's
Speaker 1: the banker who helped create these in the late ninety nineties,
Speaker 1: and in fact, Bowie Bonds are sometimes known as Pullman Bonds.
Speaker 1: I'm somehow not surprised that the media for first to
Speaker 1: call him Bowie. Um. I'm really excited about that. I
Speaker 1: think it should be a great conversation. Want to quick note,
Speaker 1: We're not just going to talk about Bowie Bonds. Later
Speaker 1: in the episode, We're going to be talking about the
Speaker 1: aptly named Beige Book, seen as one of the most
Speaker 1: boring economic releases in the world, but it actually has
Speaker 1: a fascinating bad history. And just like we'll be talking
Speaker 1: to the father of Bowie Bonds, will also be talking
Speaker 1: to the father of the Beige Book. Right, Bowie Bonds
Speaker 1: and the Beige Book. Let's start. Let's do it. Yeah,
Speaker 1: David Pullman, welcome to the show. Let's maybe start at
Speaker 1: the beginning. Can you tell us how you met Bowie
Speaker 1: and how these bonds kind of came about? Sure, Initially,
Speaker 1: Bowie had a very large catalog of songs that he
Speaker 1: had fought to his manager of the time to revert.
Speaker 1: Revert means he was going to sell them or no.
Speaker 1: What happened was David as a teenager and the manager
Speaker 1: realized importance of his work. So you negotiated very hard
Speaker 1: with the record companies to make sure they got recaptured
Speaker 1: and a reversion of the record masters that he created
Speaker 1: on his original songs that he started in the sixties,
Speaker 1: and then continue that going forward, which is extremely rare
Speaker 1: for artists on their record masters. And negotiates hard that
Speaker 1: the for these and he confidence in himself in times
Speaker 1: because most artists that they'll fail, they give up their
Speaker 1: rights to the record masters, which is not at all
Speaker 1: a typical Probably ninety nine point nine nine percent of
Speaker 1: all artists don't have the record masters. And you know
Speaker 1: this publishing and its writers share and they said, well,
Speaker 1: you know, probably in the back of their minds, like
Speaker 1: you know, this kid is a teenager, you know, who'd
Speaker 1: be nothing in five years or whatever it would be
Speaker 1: going forward, So big deal to get back his record masters.
Speaker 1: And you know, obviously it was a David Bowie and
Speaker 1: his manager at the time, we're betting that that would
Speaker 1: not happen, that he had confidence himself that he would
Speaker 1: these be successful, and he took less up front to
Speaker 1: deal to to get that, which was a big statement
Speaker 1: about as a teenager, to show how savvy and sophisticated
Speaker 1: he was. I mean not many teenagers give another word
Speaker 1: recapture or version. So in the nine nineties, he still
Speaker 1: has these master rights to his music right and he's
Speaker 1: trying to decide what to do with them. Correct, So
Speaker 1: wet we passed forward to that and he's deciding was
Speaker 1: doing him and at the time everyone's coming back to him,
Speaker 1: and it was also an opportunity for David Ticket not
Speaker 1: only back his record masters, but he also had a
Speaker 1: publishing administration neal for his publishing, his writers, Shore, every
Speaker 1: all the rights were coming back to him that he
Speaker 1: would have a hundred percent control over. Okay, So how
Speaker 1: did you meet him and come up with this idea?
Speaker 1: What happened was at that point when he had all
Speaker 1: these rights coming back, and there's also some there was
Speaker 1: some tax advantages and estate planning advantages, David and his
Speaker 1: business manager were looking to sell his catalog and that
Speaker 1: came up because I was doing transactions with his business
Speaker 1: manager and other errors investment banking and as it turned out,
Speaker 1: he mentioned to me in passing, so I thought, okay,
Speaker 1: well it's not something we're looking at doing a sales catalogs.
Speaker 1: That's that's nice you're working on. Then he realized that
Speaker 1: David wasn't gonna sell because these were his babies. So
Speaker 1: this turned out to be a smart move. So instead
Speaker 1: of selling the entire catalog, what he did was base
Speaker 1: and what you did was basically a securitization of the
Speaker 1: future cash flows from the rights to that catalog. Correct.
Speaker 1: What happened was, I will ask some questions how much
Speaker 1: has it earned this as a David's business manager, And
Speaker 1: at the time he told me what was earned, and
Speaker 1: he earned as much what it was earning as much
Speaker 1: as a large corporation. So the next the question was
Speaker 1: did he have three years of financials? They said they
Speaker 1: had five? I said where they already said yes. I said,
Speaker 1: are they by Big six at the time whould be
Speaker 1: big four accounting firms at the time. He said yes,
Speaker 1: to which I said, I could securitize that, to which
Speaker 1: his business manager said, what securitization? And I wanted to
Speaker 1: just correct that only because so they got it right
Speaker 1: the quotes, but in terms of uh. David, then he
Speaker 1: got the information in terms of this deal, and he
Speaker 1: decided within a split second and said, why haven't we
Speaker 1: started yet? So he basically, even though this concept of
Speaker 1: securitization maybe unusual, as soon as it was explained to
Speaker 1: him that he could sell the cash flows of the
Speaker 1: songs rather than the songs himself, he instantly understood the
Speaker 1: appeal of it. Yeah, And what's amazing is he got
Speaker 1: the concept faster than other investment bankers and ast ors,
Speaker 1: other people in the financial markets. He grasped new ideas
Speaker 1: and concepts and was willing to take a chance and
Speaker 1: was wasn't afraid to fail. And that's why he was
Speaker 1: so successful in terms of trying these things. So we
Speaker 1: went ahead with it. We did a deal in rockets seed.
Speaker 1: Now what's interesting when when when when David's hearing this
Speaker 1: for the first time and making a decision to go
Speaker 1: forward within less than a second, not a second, less
Speaker 1: than a second. There's no is not a written word
Speaker 1: in the history of the world prior to that meeting
Speaker 1: on anyone even thinking about doing this, much less than
Speaker 1: doing it. What was it like actually going out and
Speaker 1: selling these bonds? Because they're brand new things. Lots of
Speaker 1: people haven't heard about them before. How did you do
Speaker 1: the sales pitch and who did you end up selling
Speaker 1: them to? Okay, Well, first of all, during those it's
Speaker 1: like a couple of months. Usually new deals even today
Speaker 1: they take a year of the market. They were investment grade,
Speaker 1: they were disingul a level rated by multiple rating agencies
Speaker 1: and the national recognized rating agencies as well, and they
Speaker 1: were twenty year legal finals, fifteen year expective maturity, and
Speaker 1: a price off the US ten year treasury the average
Speaker 1: life of the bonds. And what we did, they were
Speaker 1: done as a true private fasting, so that the charms
Speaker 1: of the deals are confidential proprietories that others couldn't see
Speaker 1: what the deal was other than the actual the rating
Speaker 1: agencies and the investors in the bonds. So they went
Speaker 1: to go to Life Insurance Company because they typically buy
Speaker 1: long term investing gray bonds and that was a perfect
Speaker 1: fit for them. They never missed a payment, they never triggered,
Speaker 1: they never they paid off in full. And what was
Speaker 1: interesting is that the first they actually just ran the
Speaker 1: actual cover, which is interesting to me. In the article
Speaker 1: about David Bowie, the cover story that broke, uh when
Speaker 1: David had done this deal with me and they got out,
Speaker 1: which was at the end of nine six in a
Speaker 1: close in the beginning of so at the very end
Speaker 1: of the year. So the story breaks and they quote
Speaker 1: these large investors that are in music, some bonds and
Speaker 1: other asset classes may say, are you kidding me? Are
Speaker 1: you crazy? And that was that the written reactions when
Speaker 1: this the first article it comes out. Now what happens
Speaker 1: when that article runs. It was on the cover that
Speaker 1: morning at the Wall Street Journal, and we had already
Speaker 1: placed and had the right of the bonds. No one
Speaker 1: knew that, and they were already placed. There's already sold.
Speaker 1: The phone is ringing off the hawk to buy the
Speaker 1: bonds from the biggest investors in the world at the
Speaker 1: institutions that buy asset attacks and one uncarrelated asset. The
Speaker 1: new assets is uncarlas the stock market risk diversified. So
Speaker 1: it was the reaction was at that moment I knew
Speaker 1: that we had really hit something in terms of the
Speaker 1: reaction was so positive on the market. They weren't going
Speaker 1: to find out about it. They were going to buy them.
Speaker 1: How big was the offering It was fifty million dollars
Speaker 1: and it is right at the single A level. I
Speaker 1: want to go back real quickly to the first when
Speaker 1: you first brought the Bowie bonds to the ratings agencies,
Speaker 1: because here you were, you had created this new type
Speaker 1: of product. What kind of questions did they ask since
Speaker 1: obviously they had never rated one of these excellent questions. Well,
Speaker 1: we're sitting there with one of the major range and
Speaker 1: I always k who it was exactly, and we're sitting
Speaker 1: there and uh, you know, it's it's sad now in
Speaker 1: terms of everyone's morning, the death of David Bowie. And
Speaker 1: now this is almost twenty years ago where this first
Speaker 1: meeting in right approximately almost almost exactly yet period a
Speaker 1: few months short of it, so an I llegal final
Speaker 1: maturity of the deal. So they say, a question comes up,
Speaker 1: says what happens if David dies? So as he asked
Speaker 1: the question, and the person of the range was very
Speaker 1: stu we worked with on that and other deals. He
Speaker 1: he thought about it and answer his own question as
Speaker 1: if he asked so if he was there where business
Speaker 1: now is just a meeting with us success right now,
Speaker 1: there's on the deal. You no, we're we're signed. Well,
Speaker 1: you know it's it's actually it's a good thing. My
Speaker 1: response was, because there's no new product right now, we
Speaker 1: won't And then they got you got an understanding that
Speaker 1: the catalog would soar as it is now in terms
Speaker 1: of value and the interest. And then I followed with,
Speaker 1: but we won't tell David that because David's very young man.
Speaker 1: So the idea that in terms that they thought about that,
Speaker 1: in terms of they understood that the royalties would continue
Speaker 1: and actually increase if something would have happened, they were not.
Speaker 1: The question was really that a lot of people do
Speaker 1: ask at the time and even after, we're gonna understand
Speaker 1: the concept that it's not tied to the artists. These
Speaker 1: songs have a life of their own, and separately that
Speaker 1: it states and airs and successors and a science continue
Speaker 1: to get the royalties, whether the author of the songs,
Speaker 1: the artists as songwriter, or any other intellectual proper or
Speaker 1: creative assid entry masses is living or not. I question
Speaker 1: in terms of the structure of the Bowie bond, they
Speaker 1: paid a regular coupon, would they did the price that
Speaker 1: they got or that the payment the investors got, did
Speaker 1: they fluctuate and go up like you know, say, in
Speaker 1: the event that David had died during the period of
Speaker 1: the bond and people started buying more and more of
Speaker 1: his c d s, would the end investor have received
Speaker 1: a higher coupon those months? Good question, and you know
Speaker 1: I do a number interviews on this and I wanted
Speaker 1: your respected David. I respond to everyone because I want
Speaker 1: to make sure that you know his legacy has preserved
Speaker 1: and in the transaction. What was I was uncomfortable with
Speaker 1: a couple of things that your listeners and view is
Speaker 1: really good. Is the deal always maintain its invest in
Speaker 1: grade rating? The deal deal paid off early as well,
Speaker 1: so the bonds holders and bonds of time the seven
Speaker 1: point and I present interest, which was a higher interest
Speaker 1: rate than US chargeries, which is normal. There was the
Speaker 1: spread over yours treasures at the time was in the
Speaker 1: mid hundred basis point range over US treasuries, so the
Speaker 1: deal was obviously the interest rates were much higher and
Speaker 1: then that part of time than nineties. So we're looking
Speaker 1: at spread in the mid hundreds over the U. S
Speaker 1: Treasury and the tenure treasurers used to price it. So
Speaker 1: your question is as more cash flow came in two
Speaker 1: from the royalties, the bonds were paying down faster, which
Speaker 1: was better for the investors. But separately, now you have
Speaker 1: more collateral and assets, it's worth more over time because
Speaker 1: cycle our deals were self liquidating, so the balance is
Speaker 1: getting lower and lower. The cash reserve were having deals
Speaker 1: is getting higher and higher as a proportion of the
Speaker 1: outstanding blans and the casuals increasing from the royalties as
Speaker 1: they are now. As an example, assertated is that the
Speaker 1: royalties will be soaring, so the bonds holders now have
Speaker 1: more collateral and having securities that actually should have a
Speaker 1: higher rating. We were capped by the rating of the
Speaker 1: payers or is in a deal, including companies like E
Speaker 1: M I at the time publishing Catalogust and sold UH
Speaker 1: to a joint tenship with Sony. But the example is
Speaker 1: that we're limited just like in the transaction with a country.
Speaker 1: As sovereign debt dealing, you're limited by the major payer
Speaker 1: in your deal out there rating. So that's why we're
Speaker 1: limited to the investment grading rating that we had. But
Speaker 1: they every single deal, including the first deal for David
Speaker 1: Bowie Boye bond, every we maintain their investing grade ratings,
Speaker 1: never missed a payment and paid off in full. All right, David.
Speaker 1: One last question before we let you go, Uh, what
Speaker 1: was it like working with David Bowie? And do you
Speaker 1: have maybe a fun anecdote from the times when you
Speaker 1: were putting these things together? And I just want to
Speaker 1: also combine with that question, what did David Bowie think
Speaker 1: about the fact that this musician, he was an artist
Speaker 1: avant garde? Was he was he surprised that he became
Speaker 1: also famous for in part becoming a financial market innovator.
Speaker 1: I mean, I'm you know, actually it makes and it
Speaker 1: makes sense that if you look at the news overall.
Speaker 1: I mean, this is a huge component of how David
Speaker 1: is remembered. I mean it's it's in terms of around
Speaker 1: the world, in terms of the press. What it was
Speaker 1: interesting about it which really stuck out for me, It
Speaker 1: was he was the perfect person to have for the
Speaker 1: first deal ever. It's kind not only just because he
Speaker 1: was known as an innovator, but how he handled himself.
Speaker 1: He was the word is your genius has used in charms.
Speaker 1: There's no questions of genius in terms of his music
Speaker 1: abilities and artists He's someone's gonna remember this. If you
Speaker 1: walk into museums, you see works that are priceless. That's
Speaker 1: what David Bowie is created. But the difference is David
Speaker 1: bowiees prices, works have casual royalties that come from them,
Speaker 1: so that's unique. So what is special about him was
Speaker 1: he never ever question me in terms of whether deal
Speaker 1: is going to happen or not, how long was taking.
Speaker 1: He was the most supportive person to work with and
Speaker 1: he wasn't afraid to fail, which was the key to
Speaker 1: the success. So I'm doing this deal for the very
Speaker 1: first time no one's ever done in the world before,
Speaker 1: and he's not worried. I'm thinking, though, is this going
Speaker 1: to be able to happen? Right? And we're doing it
Speaker 1: and he's not nervous at all. On top of that,
Speaker 1: the deal happens, there's a cavalcator press, over five thousand
Speaker 1: articles in the press, radio, TV magazines and David which
Speaker 1: was you know, I didn't realize that going into this deal.
Speaker 1: My favorite song by him not knowing at the time
Speaker 1: there was his number one first number one was same.
Speaker 1: So David understood that and he gave that to me. Right.
Speaker 1: He understood he wouldn't do any interviews, which created a
Speaker 1: bigger mystique and legend for David on this deal. So
Speaker 1: I just on this deal, David samus. Most artists would
Speaker 1: want all the attention for themselves, right, David, It gives
Speaker 1: me in terms of any report of the calls and
Speaker 1: one wants to talk about the deal. Any artists, other
Speaker 1: famous artists at the time that are friends of his
Speaker 1: asked him talk to David Pullman, every single one. He
Speaker 1: wouldn't talk to anyone about it. And then my third
Speaker 1: part was to go to the conferences on the asset
Speaker 1: doc stories like the biggest investors in the world on
Speaker 1: where they be, the raiding agencies, the institution, investors, UH
Speaker 1: attorneys at work on the transactions, trustees, whoever was there
Speaker 1: at these conferences, and the thing that was statistical that
Speaker 1: you could actually securitize with the questions, the very first question.
Speaker 1: Every single conference is spoke at with the keynote, various ones,
Speaker 1: and there are dozens of them over the over where
Speaker 1: it was did you meet David? Every single conference is
Speaker 1: the same question. All right, David Pullman, thank you so
Speaker 1: much for joining us to thank you, thank you. All right.
Speaker 1: Now we're going to turned to something that most people
Speaker 1: probably think is far less interesting than David Bowie but
Speaker 1: I think you should stay with us because there's a
Speaker 1: story here that's really fascinating. We're going to talk about
Speaker 1: the Beige Book, what it is, how it came into being,
Speaker 1: and where it's going. So the Beige Book is this
Speaker 1: thing that the FED releases every month where it's basically
Speaker 1: anecdotal color about the state of the economy from all
Speaker 1: the FED districts. So they produced this big document that
Speaker 1: has things like wage pressure is rising in Kansas, and
Speaker 1: Broadway theaters in New York are weakening due to the
Speaker 1: fact that the dollar is strong and keeping tourists away,
Speaker 1: and shipping is doing really well in the Port of
Speaker 1: Miami and stuff like this, And it's sort of a
Speaker 1: very non numerical way of looking at the economy. I
Speaker 1: generally find it quite interesting, but I guess a lot
Speaker 1: of people think of it as very very boring. It is.
Speaker 1: I mean, people say, well, it's perfectly named the Beisian
Speaker 1: and it's funny. The reason I got interested this is
Speaker 1: back in December, I was thinking that a really good
Speaker 1: novelty sort of holiday gift or Christmas gift for a
Speaker 1: banker would be an old physical copy of the Beija Book.
Speaker 1: Because now of course, everyone just looks at it electronically.
Speaker 1: I was reading about the history of the Beige Book,
Speaker 1: and I discovered something fascinating on the Wikipedia page, which
Speaker 1: is that the Beige Book didn't always used to be
Speaker 1: released to the public, and it wasn't until the mid
Speaker 1: eighties when a Wall Street Journal reporter named Paul Cox
Speaker 1: asked the Federal Reserve to make the Beige Book public.
Speaker 1: Imagine a life without the Beige Book. And what's even
Speaker 1: cooler is that Paul Cox now works for Bloomberg and
Speaker 1: sits about two rows away from us in the newsroom.
Speaker 1: And so I and I was like, oh my god,
Speaker 1: we worked two rows away from a celebrity, the father
Speaker 1: of the Beijia Book, the men without whom this report
Speaker 1: would never have seen the light of day. And now
Speaker 1: I want to get the story. Look, there aren't too
Speaker 1: many people walking among us they can say if it
Speaker 1: weren't for me, this economic data point would be relieved.
Speaker 1: It's something to be proud of, all right. So we
Speaker 1: have Paul Cox here with us today. We also have
Speaker 1: Bloomberg Economics reporter Matt Bosler, who's going to be talking
Speaker 1: a little bit about how people use the Beige Book.
Speaker 1: Today some twenty five years later. All right, let's get started.
Speaker 1: That's so we're here with Bloomberg News as Paul Cox, Hello,
Speaker 1: how are you doing? And we're also here at Bloomberg
Speaker 1: Economic reporter Matthew Bosler. I thank you both so much
Speaker 1: for joining us. So, Paul, you are the father of
Speaker 1: the Beige book. Explain to us how you got into
Speaker 1: this position. What were you doing at the time. It's
Speaker 1: always fun to go back and relive your wins, and this,
Speaker 1: this was this was a good win. UM I was
Speaker 1: a reporter for Dow Jones News Service and based in Washington,
Speaker 1: was part of their economic policy team. UM. There in Washington,
Speaker 1: I was based at the Treasury Department, and you cover
Speaker 1: the economic indicators. You cover Treasury by on issue once
Speaker 1: and that sort of thing, but also Federal reserve and
Speaker 1: monetary policy. At some point one of my editors decided
Speaker 1: we should write previews for Federal Open Market Committee meetings
Speaker 1: or curtain raisers as they call them in the business.
Speaker 1: So already this is kind of weird because we think
Speaker 1: of a preview for an f o MC decision as
Speaker 1: just standard. Everyone always writes a preview. But that wasn't
Speaker 1: always the case that this was something that got hyped up. Well,
Speaker 1: they were previews like you did. But just like now
Speaker 1: that I'm an editor in Bloomberg and I lean on
Speaker 1: my reporters to break news. Um, my editors then leaned
Speaker 1: on me to break news, and I was under pressure
Speaker 1: to get more than that, get scoops, if you will,
Speaker 1: And that's how this came about. So and gathering for
Speaker 1: one of those curtain raisers, I was talking to a
Speaker 1: FED official on background, of course, and we were sort
Speaker 1: of bantering back and forth, and he was doing his
Speaker 1: best to not tell me anything, and I sort of
Speaker 1: jokingly said, well, well, can can you give me the
Speaker 1: Blue Book, which is the internal staff monetary policy recommendations
Speaker 1: and he said no. I said, okay, how about the
Speaker 1: Green Book? And the Green Book is the Internal Economic
Speaker 1: Forecast and he said no. I said how about the
Speaker 1: Beige Book? And he goes, there's a pause, and he said,
Speaker 1: let me think about that, and we continued our conversation
Speaker 1: and hung up. A couple of days later, he called
Speaker 1: me back and he said, we've decided to give you
Speaker 1: the Beige Book. Now you know, the Beige Book is
Speaker 1: the summary of economic conditions and the twelve Federal Reserve banks.
Speaker 1: It's not everything, but it's something. That day, a courier
Speaker 1: showed up at the Treasury Department and dropped off envelope
Speaker 1: with my name on it, and I opened it up
Speaker 1: and there it was the Beige Book. So what had
Speaker 1: they actually been using that book for before it was
Speaker 1: kind of public? Well, I believe for as long as
Speaker 1: the Federal Reserve has been in business and FMC meetings
Speaker 1: that they always they have twelve regional banks that are
Speaker 1: full of smart economists who interface with the local banks,
Speaker 1: the business communities and have this wealth of knowledge. And
Speaker 1: I understand that in the past they would give their
Speaker 1: information to their president, he would come to the f
Speaker 1: MC meeting and they would in essence read it out.
Speaker 1: M Arthur Burns, I believe from history, decided that that
Speaker 1: was kind of a waste of time, and so he asked,
Speaker 1: could you summarize that and put it in a document
Speaker 1: and sent it in and we'll we'll compile this into
Speaker 1: a book and distribute it before the meeting so everybody
Speaker 1: can digest it. It was a speed process and thus
Speaker 1: was born the Beige Book. But it was it was
Speaker 1: one of those private documents until that day. And I
Speaker 1: just want to make something clear. This is literally a
Speaker 1: book with a beige cover. So when you talked about
Speaker 1: the Blue Book and the Green Book, these were books
Speaker 1: documents that were handed out internally, and they had the
Speaker 1: they were of different colors. Well, I never got my
Speaker 1: hands on the blue Book of the Green book. I'm
Speaker 1: only told that that's what color they are. But the
Speaker 1: Beige Book was in fact beige. It was about twenty
Speaker 1: pages long and mostly pros, not a lot of numbers,
Speaker 1: but it was good information and I wrote a pretty
Speaker 1: good story off it. And you know, of course, my
Speaker 1: competitors were furious. Um. I took great fun as a
Speaker 1: good reporter for the Associated Press named Marty Krutzinger. Hey Marty,
Speaker 1: um that when I would scoop him, he would come over,
Speaker 1: because we at twenty ft apart, he would come over
Speaker 1: and kick my chair. A few times. I got a
Speaker 1: chair kick out of that one. So so, what did
Speaker 1: your first story actually say about the Paige Book. Well,
Speaker 1: I believe at the time that um, that was when
Speaker 1: you know, Paul Volker had run interest rates up to
Speaker 1: very high and they were in the process of ringing
Speaker 1: inflation out of the economy. But hoping not to do
Speaker 1: you know, too much, too much damage to it. And
Speaker 1: I believe at the time it showed sort of slightly
Speaker 1: better economic conditions, which led them to believe that they
Speaker 1: can continue on this path of of you know, keeping
Speaker 1: interest rates high and trying to get inflation back to
Speaker 1: where it was supposed to be. So now every month
Speaker 1: when the Beige Book comes out, it's something people know
Speaker 1: that the Beige Book comes out. News organizations like Bloomberg
Speaker 1: get ready to read the headlines very quickly. At what
Speaker 1: point did this go from something that a few reporters
Speaker 1: got to oh, today's Beige Book day, let's pay attention.
Speaker 1: Well that was a surprise to me because I was
Speaker 1: on that beat. I went on to some other things.
Speaker 1: I eventually left Washington and did other things. And it
Speaker 1: was just at that time of the policy was if
Speaker 1: you wanted and ask for it, they would give it
Speaker 1: to you. But it was it wasn't an economic indicator,
Speaker 1: as you will. It was sometime many years later I
Speaker 1: either saw the listing of this week's economic indicators in
Speaker 1: the Wall Street Journal or heard somebody on radio or
Speaker 1: TV saying, and this week is coming out, And I
Speaker 1: was like, Huh, when did that become an economic indicator?
Speaker 1: But it did, So I want to bring in a
Speaker 1: med Bosler into the conversation. Met you covered the economy,
Speaker 1: you cover the FED. One of the things that you
Speaker 1: always look at is the Beije Book. So as an
Speaker 1: economic indicator, what do you look at? How do you
Speaker 1: digest it? Well, it's interesting because it's not hard economic data, right,
Speaker 1: and it gets sort of it's lots of an it's
Speaker 1: a it's a book of anecdotes, right, So it's interesting.
Speaker 1: It sort of colors all of the numbers that you
Speaker 1: work with every day and look at, you know, and
Speaker 1: it kind of gives you a regional perspective on what's
Speaker 1: happening in the economy, you know, not just um, you know,
Speaker 1: total agg get consumption or whatever. But here's what's happening
Speaker 1: in the Boston district, or here's what's happening in the
Speaker 1: Philadelphia district or whatever. Um. And now it seems like
Speaker 1: the biggest thing that people do with it is they
Speaker 1: try to do like linguistic or textual analyzes, you know,
Speaker 1: sort of if you remember a few years ago, when
Speaker 1: we had those really bad winters, we would count the
Speaker 1: number of times the word weather appeared in the Beige Book,
Speaker 1: and that was like the big thing that everybody wanted
Speaker 1: to see. There wasn't much more to it than that,
Speaker 1: and um, I was just putting together, Um, just before
Speaker 1: this recording, I was looking at the number of times
Speaker 1: that the word dollar has showed up in the Beige
Speaker 1: Book recently. And so if you go back to summer,
Speaker 1: often there were literally no mentions of the word dollar
Speaker 1: in the Beige Book, and now as of the latest
Speaker 1: Beige Book, there were twenty one mentions of the word dollar.
Speaker 1: So it's really you know, all over the thing now
Speaker 1: talking about different regional you know, manufacturing getting hurt by
Speaker 1: this strong dollar recently. So so now we even have
Speaker 1: indexes or indices based on the Beige Book, right, trying
Speaker 1: to translate the Beige Book into actual numbers. Yeah, exactly.
Speaker 1: So that's like the same sort of textual analysis, but
Speaker 1: it's a little more sophisticated. There's one um that Stone
Speaker 1: and McCarthy Research Associates puts together, And basically the way
Speaker 1: they do it is they look for words like expanding, contracting, growing, slowing,
Speaker 1: and they sort of have different scores for each of
Speaker 1: those words, and then they average them, you know, they
Speaker 1: add them all up and average them together, and they
Speaker 1: sort of come up with this Beige Book Activity index
Speaker 1: they call it that. If you look at it kind
Speaker 1: of does look like a lot of other economic data series,
Speaker 1: which is pretty interesting that you know, you would get
Speaker 1: that out of it. Pull What is it amusing to
Speaker 1: you that this document that you just got on physical
Speaker 1: paper that was couriered to you is now this thing
Speaker 1: that people are diving into a deep textual analysis. It does,
Speaker 1: but it's I guess I put it in the category
Speaker 1: of the economy matters, and the economy matters and the
Speaker 1: FED matter and it was just that, you know, you
Speaker 1: you work hard at something and you think you're making
Speaker 1: a difference. Um, sometimes you get a lot of feedback,
Speaker 1: sometimes you don't. But it's yes. Bottom line is that
Speaker 1: it was one of one of those successes. And I
Speaker 1: would like to think that if you if you press
Speaker 1: hard on this craft and get information about the economy,
Speaker 1: it all works. Paul, you brought us a photograph, right
Speaker 1: was this showing uh that shows the Treasury press room
Speaker 1: from that era, and it's a picture of Donald Reagan
Speaker 1: who was the Treasury secretary under Ronald Reagan, wh what
Speaker 1: occasionally stopped by and talked to us. It was it
Speaker 1: was a different era in terms of um uh security
Speaker 1: and access to people and things like that. But I
Speaker 1: decided I brought that along. I found out my basement
Speaker 1: cleaning out some boxes. So Paul's in the back of
Speaker 1: this photo rocking some very very eighties hair with a
Speaker 1: mustache and sunglasses. They're they're just tinted glasses. But I've
Speaker 1: I've long since gone to contact lenses. So what's the
Speaker 1: what's the Beige Book showing these days? Well, modest to
Speaker 1: moderate growth, subdued wage growth. Um. You know, that's one
Speaker 1: of the things that's kind of funny, is the only
Speaker 1: place you really see wage growth these days is in
Speaker 1: the Beige Book because it hasn't really come through and
Speaker 1: like the hard, hard data yet. But even in this
Speaker 1: latest Beige Book that we got last week, didn't really
Speaker 1: show much in the way of a lot of wage pressure.
Speaker 1: But it is interesting because you know, sometimes that's like
Speaker 1: you get those anecdotes like, um, you know this district,
Speaker 1: this particular sector in this district, you know, there was
Speaker 1: some signs of increasing wage pressures, but just not enough
Speaker 1: to like move the needle in terms of like the
Speaker 1: whole economy. Well, you're kind of you you're on a
Speaker 1: in a different role. You're an editor, you're on a
Speaker 1: more markets focused beat. Do you still check out the
Speaker 1: Beige Book each month? Absolutely is that. I'm on the
Speaker 1: team that covers treasuries and foreign exchange and what the
Speaker 1: Fed does is a is a huge factor on that
Speaker 1: and just you know, we looked at it as it's
Speaker 1: sort of this combination thing where employment is pretty good,
Speaker 1: we're almost at full employment depending on your definition. But
Speaker 1: as Matt was pointing out rightly that you know, the
Speaker 1: wage pressure hasn't come. There's no inflation, and that was
Speaker 1: one of the other things that the Fed wanted to
Speaker 1: see in justifying continued wage increases. So as we walk
Speaker 1: up to this January f MC meeting, it gives you
Speaker 1: a piece of information to try to discern what's the
Speaker 1: Fed going to do along with all the other market
Speaker 1: participants were keeping close touch with. Plus you're the father
Speaker 1: of the Beige Book. You have to you know, check
Speaker 1: in on your baby, right, no doubt. Do you get
Speaker 1: real quickly do you get do you think every time
Speaker 1: it comes out? Do you think about that or have you.
Speaker 1: You've gotten used to it. I've gotten used to it
Speaker 1: is that, you know, depending on what role is obviously
Speaker 1: in this role at Bloomberg, I'm a little closer to
Speaker 1: it than I was. I've done some other things. I
Speaker 1: um was, you know, sort of more of an Internet
Speaker 1: generalist and some other things. I work for, some things
Speaker 1: called newspapers. You guys have heard of newspapers, right, Okay? Yeah,
Speaker 1: some thing that even I had were the responsible for
Speaker 1: an economic data point. Even decades later, I would be
Speaker 1: pointing that out to people. But I didn't know about
Speaker 1: that until I saw I went and looked at the
Speaker 1: Wikipedia entry for beige book and I saw your name.
Speaker 1: Otherwise I never would have known. I'll speak to my
Speaker 1: marketing department about that, all right, Paul Cox of Bloomberg News,
Speaker 1: Matt Bosler, thank you guys so much for joining. Thank you,
Speaker 1: thank you. Okay, Well, that was Bowie, Bonds and beige Books.
Speaker 1: So I guess our theme for this episode was really
Speaker 1: alliteration the letter B. Yeah. I love both of those conversations,
Speaker 1: and I love you know. I still it is absolutely
Speaker 1: amazing from just from the Bowie perspective that he was
Speaker 1: this huge innovator and it's not just in terms of
Speaker 1: music or sort of musical securitizations, but all kinds of
Speaker 1: intellectual property securitizations, which became a key corp of finance.
Speaker 1: He was an important player in well so as a
Speaker 1: finance journalist. I will say Bowie gave birth to uh
Speaker 1: particular subset of bonds called esoteric A b s, which
Speaker 1: bundled together all sorts of things like restaurant franchises and
Speaker 1: the rights to comic strips like Peanuts, And they are
Speaker 1: genuinely God's gift to structured finance journalists so people, because
Speaker 1: people must love any headline with them of course, of course.
Speaker 1: And then on the Beige Book, I thought it was
Speaker 1: really interesting just to think back to a period of
Speaker 1: time when those you know, all those anecdotes weren't public
Speaker 1: and no one was really clamoring for them. It was
Speaker 1: a totally different market and just the idea of getting
Speaker 1: an economic release in physical paper having to then scan
Speaker 1: through it. Now, people, I think, when they think of
Speaker 1: any kind of economic data or a FED statement, they
Speaker 1: just think of it as basically coming from coming out
Speaker 1: of magic, out of their computer screens. But at one
Speaker 1: point people actually had to go go get it and
Speaker 1: look at it and then type something up. And it
Speaker 1: wasn't nearly so automated. Of course, now they're all these
Speaker 1: quantitative approaches, which is funny, but in the not that
Speaker 1: long ago, really it was a much more physical thing
Speaker 1: to get this data. That's right, Okay, Well, another episode
Speaker 1: of Odd Lots has passed us by. I am Tracy Alloway,
Speaker 1: Executive editor of Bloomberg Markets. I'm on Twitter at Tracy Alloway,
Speaker 1: and I'm Joe wi isn't Thal, Managing editor of Bloomberg Markets.
Speaker 1: You can follow me on Twitter at the Stallard. Thank
Speaker 1: you for listening and see you next week. Joe and
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