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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Tracy Alloway. My co host Joe Wisenthal is away. However,

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Speaker 1: I have a replacement co host for this very special episode.

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Speaker 1: We're going to be joined by Matt Levine. He is,

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Speaker 1: of course, a columnist over at Bloomberg Opinion. Matt, Welcome

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Speaker 1: to the show. Thanks for having me. So. I have

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Speaker 1: been covering bond markets for many, many years now, and

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Speaker 1: when you're covering bond markets, it feels like, at one

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Speaker 1: point in time there was no escape from a certain

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Speaker 1: bond investor, and that was a guy called Bill Gross.

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Speaker 1: If you were covering bond markets, at one point or another,

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Speaker 1: your path would cross with Bill Gross in some way.

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Speaker 1: It was either something he was doing, something that he

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Speaker 1: had said that you would inevitably have to write up.

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Speaker 1: And I don't know if you feel the same way, Mat, Oh, yeah,

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Speaker 1: I mean, in particular, he would write these monthly investment

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Speaker 1: outlooks that were always both widely covered because they were

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Speaker 1: the outlook of an important bond investor about the bond market,

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Speaker 1: but also because he had, like he began them with

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Speaker 1: embarrassing personal anecdotes, and you'd read them and be like,

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Speaker 1: did did this? Did this professional investor really just say that?

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Speaker 1: And every every month it would like he would top himself,

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Speaker 1: This guy in charge of billions of dollars worth of

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Speaker 1: people's money. Did he actually just write several hundred words

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Speaker 1: about his cat and things like that cat watching him

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Speaker 1: in the shower? I think was yeah? Okay. So Bill

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Speaker 1: Gross loomed large in financial journalists imaginations end over the

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Speaker 1: bond market. And then, of course we all remember when

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Speaker 1: he actually left the company that he had founded, which

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Speaker 1: is Pimco, and that just exploded into the headlines. You

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Speaker 1: remember that, oh yeah, he went to Janis, which I

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Speaker 1: think to this day remains a joke on financial Twitter

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Speaker 1: when anyone leaves a job that we say that they

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Speaker 1: went to Janis. That's that's sorry, that's exactly right. Um okay.

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Speaker 1: So when Bill Gross left Pimco, there were all these

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Speaker 1: questions swirling around both the man and the strategy and

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Speaker 1: the company. And I remember writing at the time that

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Speaker 1: there were still all these unanswered questions around who Bill

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Speaker 1: Gross was, what he was actually doing at PIMCO, And

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Speaker 1: I guess someone stepped up to try to answer all

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Speaker 1: those questions. And I am very very pleased to say

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Speaker 1: that today we're going to be speaking with Mary Childs.

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Speaker 1: She is, of course, the co host of nprs Planet

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Speaker 1: Money podcast and also the author of a new book.

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Speaker 1: It's called The Bond King. How One Man made a market,

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Speaker 1: built an empire, and lost it all And it's been

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Speaker 1: many years in the making. And uh, I'm thrilled to

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Speaker 1: have her on the show. So Mary, welcome to all thoughts.

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Speaker 1: Thank you so much for having me. I'm excited to

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Speaker 1: be here. So one of the things that always struck

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Speaker 1: me about Bill Gross, and maybe this is why you know,

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Speaker 1: you sort of took an interest in the story. But

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Speaker 1: when people think about bond investing, they normally think about

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Speaker 1: while you buy a bond and you know, you hold

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Speaker 1: it to maturity and it's really really boring. But the

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Speaker 1: thing about Bill Gross, and you go into this in

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Speaker 1: some detail in your book, is that he was doing

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Speaker 1: really complex things in the fixed income world. You know,

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Speaker 1: his funds were full of derivatives, full of future swaps,

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Speaker 1: lots of repo transactions, things that you wouldn't necessarily think

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Speaker 1: of when you think about traditional plane vanilla bond investing. Definitely,

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Speaker 1: and you're exactly right that That's one of the main

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Speaker 1: reasons why I got interested in this in the first place.

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Speaker 1: I feel like there is this misconception that, oh, my

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Speaker 1: bond fund is managed by like some dork in Boston

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Speaker 1: who doesn't do you know, Banana's stuff, And that's just

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Speaker 1: kind of not the you know, so many of our

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Speaker 1: retirement dollars do go to him, go and end up

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Speaker 1: doing very exciting things. And yeah, there's there's so much

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Speaker 1: room to to look into, you know, what Buil did

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Speaker 1: and the kind of extremely complicated trades that he put

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Speaker 1: on and the trade structures that I just find it

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Speaker 1: really kind of it's interesting both because of that misconception

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Speaker 1: but also just by virtue of being really elaborate and

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Speaker 1: smart and and fun trades. So one of the most

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Speaker 1: fun trades. And I feel like we could spend the

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Speaker 1: whole odd lots on this because it's like very odd.

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Speaker 1: In like the mid eighties, he did this trade on

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Speaker 1: Jenny May futures that basically break that market forever. Can

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Speaker 1: you describe that in enormous detail for the odd thoughts listeners?

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Speaker 1: So this is my Yeah, this is my favorite trade. Basically,

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Speaker 1: there was this futures contract that, um, I think was

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Speaker 1: you know, extremely popular in and people were trading it

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Speaker 1: with a lot of assumptions, you know, the mortgage markets,

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Speaker 1: and nearly very few people feel like they are actually

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Speaker 1: like can get into the particulars and the details and

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Speaker 1: then kind of expand that into the way these things

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Speaker 1: should be traded perfectly, Like like a lot of people

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Speaker 1: trade on models that they got from someone else or whatever.

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Speaker 1: And I think in this case, PIMCO just really read

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Speaker 1: into the details of the contract and they heard that

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Speaker 1: it was flawed, but they read into it and they

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Speaker 1: were like, wait, this is really flawed. There were two

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Speaker 1: kind of separate parts of it, two trades basically, where

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Speaker 1: one trade relied on the ability to demand physical delivery

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Speaker 1: and one trade relied on the fact that this this

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Speaker 1: contract had the option for a perpetual so you could

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Speaker 1: ask for it to be converted into a perpetual security

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Speaker 1: that paid you eight percent forever. That makes no sense,

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Speaker 1: I know. So I tried to talk to the guy

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Speaker 1: who built the contract and he was kind of like, no,

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Speaker 1: it's a great it's a great one. Love that one,

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Speaker 1: by which I understand. But I think, you know, they

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Speaker 1: were trying to make it attractive and rates were really

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Speaker 1: high at the time, So I think there was some

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Speaker 1: sense of like trying to entice people to play in

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Speaker 1: this market in the first place, because again, mortgages were

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Speaker 1: pretty poorly understood. I mean, there is a real explanation,

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Speaker 1: but also they were still figuring stuff out, you know,

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Speaker 1: like these were new contracts and this is kind of

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Speaker 1: a new frontier, so trying to find out what would work.

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Speaker 1: It was a little bit of trial and error. So

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Speaker 1: what exactly did PIMCO do in this situation? So you

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Speaker 1: have this new contract and this seems to be a

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Speaker 1: bit of a hallmark of pimco's strategy at that time,

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Speaker 1: but they actually read all the terms, did all their

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Speaker 1: due diligence and research, and basically figured out a way

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Speaker 1: to make lots of money out of it. That's exactly right.

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Speaker 1: So they basically realized that the market was, you know,

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Speaker 1: trying to account for the negative convexity of mortgage backed

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Speaker 1: securities in that that you know, would show up in

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Speaker 1: these Jenny May bundles. But what they weren't accounting for

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Speaker 1: was the kind of optionality and the fact that if

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Speaker 1: you accrued enough of the underlying the cheapest to deliver,

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Speaker 1: there just weren't that many in the world, and raids

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Speaker 1: had started to go down, so they were going to

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Speaker 1: be fewer and fewer, right, So Pimco realized this kind

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Speaker 1: of before anyone else, and they amassed a huge position

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Speaker 1: in these contracts, and then they demanded physical settlement of

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Speaker 1: the futures, which is to say, they will give me

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Speaker 1: your cheapest to deliver. Jenny May's right, and they didn't

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Speaker 1: have to demand physical settlement, right, They could have just

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Speaker 1: let the futures roll off, exactly, And that was what

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Speaker 1: everyone kind of expected everyone else to do. So part

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Speaker 1: of what they're playing with here is expectations everyone else's

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Speaker 1: normal behavior, and Pimco seems to always find that there's

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Speaker 1: just a little bit extra performance if you don't act normal.

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Speaker 1: Trade is just like you. These futures are priced assuming

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Speaker 1: that you deliver the cheapest to deliver security. And they

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Speaker 1: bought so many futures that that they sort of had

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Speaker 1: stripped the cheapest to deliver and like they were getting

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Speaker 1: much more valuable securities. That's exactly right. So yeah, they

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Speaker 1: would go to these people, you know, the counterparties, and

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Speaker 1: say give me your you know, I'm settling now, please

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Speaker 1: to give me the all of the you know, cheapest

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Speaker 1: deliver that you have, and the counterparty will be like, oh,

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Speaker 1: we don't we don't have enough. You have more than

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Speaker 1: we can satisfy, and they would have to hand over

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Speaker 1: much more valuable Jinny May's just to satisfy the delivery,

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Speaker 1: but the settlement. So basically, yeah, PIMCO was able to

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Speaker 1: outsize the market, which is actually something that you'll see later.

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Speaker 1: You know, they do this trade in different kind of

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Speaker 1: flavors over the years. So this is something that I've

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Speaker 1: been thinking about a lot, and I've thought about a

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Speaker 1: lot over the years. You know, I said earlier that

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Speaker 1: PIMCO and Bill Gross loomed large over the market, and

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Speaker 1: that is literally true. There was such a massive investor

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Speaker 1: that at times it seemed like their success was sort

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Speaker 1: of mixed up with their size. How much of Bill

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Speaker 1: Gross's strategy and the success that he enjoyed, how much

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Speaker 1: of that came from simply being bigger than everyone else.

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Speaker 1: I think that's such a good and astute question because

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Speaker 1: people often get that backwards, where they're like, oh, did

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Speaker 1: he underperform because he was too large for the market,

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Speaker 1: And you're right that that it actually was an asset.

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Speaker 1: You know, I guess in equities it's harder to maneuver

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Speaker 1: or or something, but in bonds it definitely can be

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Speaker 1: an advantage, especially in you know, anchoring a new issue

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Speaker 1: bond as it comes to market, you're gonna get more

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Speaker 1: of the allocation. And those always basically always outperform, you know,

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Speaker 1: pop when they when they hit the market. So I

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Speaker 1: think it's hard to say how much of the outperformance

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Speaker 1: was due to size and thinking of this paper that

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Speaker 1: to researchers did in that kind of teased out the

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Speaker 1: reasons for Bill Gross and pimcoes out performance over the decades,

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Speaker 1: and that was one of their kind of grab bag items,

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Speaker 1: you know, they were like, this is not something that

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Speaker 1: they were able to strip out as a factor, but

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Speaker 1: it's basically present throughout pimcoes total returns history, where they

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Speaker 1: were always a bit big for the market and for

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Speaker 1: the mortgage backed market, but we're the big factors. So

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Speaker 1: it's interesting. There are three main ones that those researchers found,

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Speaker 1: and it actually aligns pretty well with what so a

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Speaker 1: source told me, gosh five years ago, because I've been

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Speaker 1: working on this for too long, that there were only

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Speaker 1: four things you needed to know to do well at PIMCO.

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Speaker 1: Theres there are four things at PIMCO does long duration,

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Speaker 1: the curve, focusing more on like the four or five

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Speaker 1: year part, going long credit, and short ball. That's it.

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Speaker 1: And you know, short ball means selling volatility and finding

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Speaker 1: other ways to kind of embed optionality and leverage in

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Speaker 1: in your kind of everyday life if you will, and

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Speaker 1: avoid buying options to write like like, one thing that

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Speaker 1: he says in some of the outlooks is that he

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Speaker 1: like doesn't want to pay up for bonds with a

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Speaker 1: lot of convexity because like, optionality is not worth anything

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Speaker 1: to him right right. He wants to be selling it,

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Speaker 1: not buying it because he realizes that people want to

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Speaker 1: sleep at night and he doesn't care. Everyone else wants

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Speaker 1: the optionality and unless he can get compensated over and above.

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Speaker 1: It's in contrast to the Jenny May where there was

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Speaker 1: a lot of optionality, but it was stuff that they exercised.

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Speaker 1: They don't want options just to be able to do

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Speaker 1: what they want to actually do it if they want them,

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Speaker 1: you know. So he like he was the bond king.

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Speaker 1: He had a great run for decades and then he

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Speaker 1: left to go to Janice. You know, I think it

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Speaker 1: would be fair to say did not continue to have

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Speaker 1: a great run. So like when you when you list

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Speaker 1: those factors, it's like long duration, long credit, you know,

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Speaker 1: short ball that describes a sort of placid market of

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Speaker 1: generally declining that's a strategy for a placid market of

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Speaker 1: generally declining rates, which is kind of what he had

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Speaker 1: for like thirty years. Did he just like miss a

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Speaker 1: regime change? Was he like a really good investor for

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Speaker 1: like a particularly long bond bull market and then he

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Speaker 1: couldn't adapt? You know what's going on? I think to

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Speaker 1: some extent, yes. And there's this um famous at least

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Speaker 1: to me, investment outlook from April where he asks, am

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Speaker 1: I a great investor? No? Not yet, because he was

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Speaker 1: basically seeing the same thing that you are. That he'd

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Speaker 1: had a long bull market to invest in. He'd done

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Speaker 1: really well over that time period, but he felt that

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Speaker 1: he was pretty untested, he and all of his peers, right,

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Speaker 1: and you know when he went to Janice. It's it's

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Speaker 1: hard to say because over the longer term, you know,

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Speaker 1: interest rates are lower now than they were then, or

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Speaker 1: they you know, were lower now than they were then.

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Speaker 1: So they've walked around a little bit, right, But from

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Speaker 1: his start date at Janice through his retirement date, you know,

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Speaker 1: it actually did interest rates date go up. So I

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Speaker 1: do think you're right. I think that that over that period,

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Speaker 1: over his long career, he did have the benefit of

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Speaker 1: a bullmark it. And yes, his strategies I think did

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Speaker 1: perform better in those in that environment, you know, like

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Speaker 1: buying credit, focusing on duration, like all of these things

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Speaker 1: absolutely perform better when you have the wind at your back.

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Speaker 1: Cash and cash equivalent arbitrage kind of is that an

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Speaker 1: abuse of that word? Are you upset? I think it's okay,

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Speaker 1: this is a safe space. You're allowing that. Okay, thank you.

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Speaker 1: There's a colloquial arbitrage and then a real one, and

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Speaker 1: I'm using the colloquial thank you all accept But basically,

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Speaker 1: they you know, when they had a position that required cash,

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Speaker 1: required them to hold cash against it, a lot of

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Speaker 1: their competitors would be like, okay, cash, great, I shall

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Speaker 1: hold cash, and PIMCO was like, okay, great, and cash equivalence,

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Speaker 1: what do you mean? You know, how how can we

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Speaker 1: what does that mean? Exactly? And they would go as

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Speaker 1: far as they humanly could to the extent of risk

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Speaker 1: taking in that cash equivalent bucket. So that means, you know,

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Speaker 1: short dated corporate floating notes and making sure that they're

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Speaker 1: getting every last potential a basis point out of that

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Speaker 1: and equivalence bucket, where everyone else is just getting whatever

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Speaker 1: cash is yielding and not sweating it, not kind of

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Speaker 1: going that extra marginal mile to to get the extra

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Speaker 1: basis point. So I love that. Like he's like this

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Speaker 1: renowned bond investor who becomes a billionaire and at the

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Speaker 1: end of like a bunch of the years in the book,

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Speaker 1: you know, when he's like performing the market, it's like

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Speaker 1: he had a blowout yere in youth asand eight he

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Speaker 1: saw the crisis and no one else did. He outperformed

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Speaker 1: his peers by thirty five basis point. Okay, it was

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Speaker 1: two percentage points actually, as like, but this is like

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Speaker 1: we're like, you know, John Paulson is like tupled his

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Speaker 1: funder or whatever. Right, like people who like called the crisis, right,

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Speaker 1: you know, the sort of stereotype is that they like

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Speaker 1: started with a little bit of money, ended at a billionaires,

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Speaker 1: but like Bill Grass started with trillions of dollars and

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Speaker 1: like added like two to it um. How does that like,

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Speaker 1: how should we think about that performance? I don't know.

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Speaker 1: The fundamental thing that I think you're hitting on there

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Speaker 1: is the structure of the trade where a lot of

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Speaker 1: the people that were you know, big short type crisis callers,

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Speaker 1: they structured trades based more on time, where if they

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Speaker 1: had messed up the time horizon, and many of some

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Speaker 1: of them did and didn't make it into the kind

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Speaker 1: of pantheon, the whole trade wouldn't work. So there was

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Speaker 1: a lot of that was extremely risky. So the Pimco

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Speaker 1: view was, yeah, we think this thing is coming, we

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Speaker 1: have no ability to say when exactly, and we're going

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Speaker 1: to structure a long, a longer term trade around this.

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Speaker 1: Where they both pulled back on risk going into the crisis,

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Speaker 1: and then we're able to scoop things up when things

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Speaker 1: were healing. You know, everyone else was selling it a

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Speaker 1: discount because they're panicking, and they weren't, you know, hadn't

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Speaker 1: had the same foresight. Pim goes able to buy those

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Speaker 1: assets at an extreme discount and then outperformed for more years.

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Speaker 1: So if you look over the longer time horizon, and

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Speaker 1: this is also Indiana Iversonce Fund and PIMCO income where

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Speaker 1: you see that they not only did well stepping back

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Speaker 1: and not taking the same risks as everyone going into

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Speaker 1: the crisis, but then in the years after. So it's

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Speaker 1: more of a cumulative over many years. But also, yeah,

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Speaker 1: it's just mutual funds. You're going to have less exciting

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Speaker 1: or you're supposed to have less exciting. You're not supposed

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Speaker 1: to have a blow out like that. Just on that point,

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Speaker 1: here's a slightly weird question, but do you think that

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Speaker 1: Bill Gross, either knowingly or perhaps by accident, missold what

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Speaker 1: bond investing actually was, because I remember in the early

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Speaker 1: two thousands, you know, he was talking about this idea

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Speaker 1: that if you do it the right way, you can

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Speaker 1: get stock like returns on on bonds which are supposed

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Speaker 1: to be safer, and the way you do it is

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Speaker 1: you use lots of volatility selling strategies and use lots

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Speaker 1: of leverage and things like that. Is that is that

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Speaker 1: what bond investing should be or is there inherently, you know,

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Speaker 1: a discrepancy between stocks and bonds and the returns that

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Speaker 1: are possible there. I love that. I think there's probably

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Speaker 1: you know, he always got this ding. I think where

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Speaker 1: people called him a hedge fund manager and a mutual

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Speaker 1: fund rapper, and I think that's probably true. You're exactly right.

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Speaker 1: I kind of wanted my bonds to be managed my

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Speaker 1: bond funds to be managed by a Doric in Boston.

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Speaker 1: Like I'm trying to stay calm here. I don't necessarily

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Speaker 1: want you to be doing Like one guy told me

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Speaker 1: that the consultants used to call this gross cash. They're like,

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Speaker 1: I don't know what you're doing with this cash and

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Speaker 1: cash equivalent stuff and lamb to cash and all these

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Speaker 1: other strategies that they used. It. It was like it's working,

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Speaker 1: so I don't mind. But I'm like, whatever, you're doing,

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Speaker 1: this like weird magic in the market, Like thank you great.

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Speaker 1: I'm not going to look too closely. And I'm sure

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Speaker 1: you know they're all fiduciaries. Everyone looked closely. I'm sure

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Speaker 1: they did that. But there is an element of like

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Speaker 1: not examining it when it's working and it worked for

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Speaker 1: a long time. You know, it was obviously to your

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Speaker 1: benefit for a very long time. But at the same time,

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Speaker 1: it's like, is this good risk that we're taking? Is

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Speaker 1: this what I want to be doing there? This is

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Speaker 1: kind of funny. To me where like the cash equivalent thing,

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Speaker 1: there was apparently a pretty robust debate at times about

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Speaker 1: whether or not Russian owners should count in the cash

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Speaker 1: equivalent bucket, saying that right now today it feels bananas, right,

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Speaker 1: like that shouldn't be a conversation. But in other times

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Speaker 1: you can imagine that that's like, it's probably fine, it's

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Speaker 1: probably fine, we can get away with it. And is

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Speaker 1: that what you want as a mutual fund investor, like

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Speaker 1: with your retirement money, you want to get away with

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Speaker 1: Russian floaters. I don't know. I feel like it's odd

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Speaker 1: lots we should talk about the bond market, but like

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Speaker 1: your book is like partially about the bond market, but

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Speaker 1: it's also a lot about like the human drama of

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Speaker 1: Bill Griss's overthrow. His character is sort of like he's

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Speaker 1: a genius investor who is not good with people, and

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Speaker 1: he works at this institution where he's not the CEO,

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Speaker 1: he's the chief investment officer, he makes the trading calls,

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Speaker 1: and someone else in charge of management, and yet his

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Speaker 1: managerial style is sort of what pervades the place and

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Speaker 1: what ends up I think getting him outsted. How can you, like,

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Speaker 1: you know, have that guy, run your investments and not

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Speaker 1: drive everyone crazy. Yeah, I think. I mean it worked

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Speaker 1: for a long time in part because there were people

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Speaker 1: in the CEO position that Bill trusted and respected, and

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Speaker 1: if that's the case, he kind of can or could

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Speaker 1: allow them to do their job and manage people and

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Speaker 1: make executive choices, and he wasn't really going to interfere.

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Speaker 1: He might like snark around a little bit and give

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Speaker 1: them the silent treatment for hiring too many people or whatever,

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Speaker 1: but he's not gonna He generally let them do their jobs.

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Speaker 1: And I think that's part of it is, you know,

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Speaker 1: in the seventies and eighties and nineties, this was a

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Speaker 1: bit easier because a lot of the people came up

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Speaker 1: with him and were his peers and he respected them.

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Speaker 1: And then when you get Muhammadalarian in the door. You know,

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Speaker 1: there are multiple reasons why that that relationship didn't really

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Speaker 1: work out. Um one being that their personalities are just

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Speaker 1: so different and their managerial instincts and investing instincts are

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Speaker 1: so different. One reason being that, you know, Bill, you know,

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Speaker 1: there's this this sense that Mohammed at the eleventh hour

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Speaker 1: asked to be co c i O and co CEO Um,

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Speaker 1: you know, he was supposed to just be kind of

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Speaker 1: Bill's air. But I think you know, having that, having

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Speaker 1: someone in that role who he mistrusted, was probably to

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Speaker 1: some extent always going to be a cursed outcome. If

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Speaker 1: you're able to keep the lanes clean and able to

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Speaker 1: to let him just do his job, Yes, it creates

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Speaker 1: this culture. But I think you I think they were

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Speaker 1: able to navigate around that culture for a long time.

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Speaker 1: Is that there's an open questions to whether that would

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Speaker 1: have been successful even with the optimal chief executive in

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Speaker 1: today's climate where we've done a lot of kind of

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Speaker 1: renegotiation of what we ask from our employers. But but yeah,

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Speaker 1: I think it's it's a matter of like respect and

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Speaker 1: trust and allowing people to to give each other space. No,

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Speaker 1: I think it's safe to say no. They were kind

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Speaker 1: of trying to project that for a while, and I

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Speaker 1: asked folks on the street, and I asked people inside,

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Speaker 1: and they were like, no, if anything gets worse. So

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Speaker 1: I don't know, take that as you will. So just

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Speaker 1: on that note, I mean reading your your notes as

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Speaker 1: an author, and there's a very funny but also disturbing

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Speaker 1: anecdote about the rumors um swirling around you as you

393
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Speaker 1: reported out this book for many, many years. But one

394
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Speaker 1: of the things you talk about is this idea of

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Speaker 1: the toxicity of that work environment kind of rubbing off

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Speaker 1: on you as you interview all these people who all

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Speaker 1: have their own agendas, who all want to tell their

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Speaker 1: own versions of the history. What was that like. I

399
00:20:42,600 --> 00:20:44,760
Speaker 1: don't know if this happens to every reporter, but I

400
00:20:44,800 --> 00:20:47,359
Speaker 1: feel like when I talked to a particularly paranoid source,

401
00:20:47,400 --> 00:20:50,760
Speaker 1: I come away just totally rattled. Like I internalize a

402
00:20:50,800 --> 00:20:53,720
Speaker 1: lot of their anxiety and paranoia, and I just it

403
00:20:53,800 --> 00:20:57,560
Speaker 1: just stays with me. And these people, the people I

404
00:20:57,600 --> 00:20:59,520
Speaker 1: talked to you you for this book were largely all like that.

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Speaker 1: I mean, there are some exceptions, people who had got

406
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Speaker 1: out with their head on straight and retired and whatever.

407
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Speaker 1: But to a very large extent, the people that I

408
00:21:05,800 --> 00:21:10,520
Speaker 1: that I dealt with were very competitive, very petty, very

409
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Speaker 1: score subtly. And one thing that I kind of didn't

410
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Speaker 1: appreciate the magnitude of this, but like a lot of people,

411
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Speaker 1: the events of messed up their profit sharing. Even if

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Speaker 1: they were retired, you know, they had this kind of

413
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Speaker 1: profit sharing slice of PIMCO, and because of the ridiculousness.

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Speaker 1: You know, Muhammadalarian leaving Bill Girls leaving. It hurt the

415
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Speaker 1: kind of forward profits for the firm, and people were

416
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Speaker 1: really mad because it affected, you know, the payments that

417
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Speaker 1: they expected to be get anyway. So there was a

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Speaker 1: lot of financial anxiety that came to bear as well,

419
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Speaker 1: which is like funny because you know, I'm a public

420
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Speaker 1: radio journalists, so that contrast was a bit sharp at times.

421
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Speaker 1: There was Matt Knows this story. There was one person's

422
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Speaker 1: wife who was like, so, what are you going to

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Speaker 1: do with the proceeds from the book? And I was like, um,

424
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Speaker 1: eat them, Like I don't understand, Like it's my I

425
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Speaker 1: was like, naughty. I didn't have a day job at

426
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Speaker 1: the time. It was literally and and let me be clear,

427
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Speaker 1: you know this comes in in chunk, so I was

428
00:22:05,960 --> 00:22:09,439
Speaker 1: living on not a lot of money, and and she

429
00:22:09,560 --> 00:22:11,560
Speaker 1: was like, well, if you need suggestions for charities, just

430
00:22:11,640 --> 00:22:14,240
Speaker 1: let me know. And I was like, thank you. I

431
00:22:14,280 --> 00:22:17,320
Speaker 1: do know of charities personally, but I appreciate the offer

432
00:22:17,359 --> 00:22:20,520
Speaker 1: and I will consider it. Um, but yeah, there was

433
00:22:20,560 --> 00:22:25,880
Speaker 1: definitely I don't know that insecurity can can rub off

434
00:22:25,880 --> 00:22:29,479
Speaker 1: on you for sure, Like I'm not unfamiliar with rumors.

435
00:22:29,480 --> 00:22:31,240
Speaker 1: You know, I was in a sorority. Like it felt

436
00:22:31,320 --> 00:22:35,840
Speaker 1: very familiar to me, but it was also so unsettling

437
00:22:35,840 --> 00:22:37,480
Speaker 1: because I'm just there to do a job. I'm not

438
00:22:37,520 --> 00:22:40,119
Speaker 1: trying to hurt anybody. I'm not trying to like take sides,

439
00:22:40,119 --> 00:22:42,439
Speaker 1: which they all always thought. I'm not trying to like

440
00:22:42,480 --> 00:22:44,200
Speaker 1: pick favorites. I don't have a dog in the fight.

441
00:22:44,280 --> 00:22:46,400
Speaker 1: I just want to tell the truth in this sort

442
00:22:46,440 --> 00:22:49,920
Speaker 1: of like fight over pushing grass out, like everyone was

443
00:22:50,000 --> 00:22:53,399
Speaker 1: kind of using the press, where like you know, Gross

444
00:22:53,480 --> 00:22:56,040
Speaker 1: is obsessed that like his enemies were leaking to the

445
00:22:56,080 --> 00:22:58,920
Speaker 1: press about him, and then he would call into TV

446
00:22:58,960 --> 00:23:01,600
Speaker 1: shows or call reporters and say things that in hindsight

447
00:23:01,640 --> 00:23:06,760
Speaker 1: were really embarrassing. Um, was that fun? I yeah. I

448
00:23:06,800 --> 00:23:10,440
Speaker 1: mean it's tough because, as you know, I hate being

449
00:23:10,480 --> 00:23:13,440
Speaker 1: a conduit. I really hate when my entire role in

450
00:23:13,480 --> 00:23:16,920
Speaker 1: a situation is simply conduiting someone's thoughts. Obviously, as a

451
00:23:16,960 --> 00:23:19,919
Speaker 1: journalist that happens a lot. But I like to be

452
00:23:19,960 --> 00:23:22,520
Speaker 1: able to use my brain and participate and you know

453
00:23:22,920 --> 00:23:25,159
Speaker 1: the way things myself and come to a judgment. You know,

454
00:23:25,160 --> 00:23:27,639
Speaker 1: I like to be kind of an active participant in

455
00:23:27,640 --> 00:23:30,160
Speaker 1: in my job. So to some extent it was it's

456
00:23:30,160 --> 00:23:32,800
Speaker 1: really annoying to be used as a tool for score settling,

457
00:23:33,240 --> 00:23:36,080
Speaker 1: and I think it's it's interesting because it's so not

458
00:23:36,200 --> 00:23:39,320
Speaker 1: that emotional. It's so not that like, I just don't

459
00:23:39,320 --> 00:23:42,480
Speaker 1: have a team, and that seems very hard for a

460
00:23:42,560 --> 00:23:45,359
Speaker 1: lot of people to grasp. Do you feel like after

461
00:23:45,400 --> 00:23:48,040
Speaker 1: finishing this book you have a better handle on what

462
00:23:48,359 --> 00:23:52,040
Speaker 1: drives people like Bill Gross and at some of the

463
00:23:52,080 --> 00:23:54,520
Speaker 1: other executives at PIMCO. So, I know you talked in

464
00:23:54,520 --> 00:23:58,280
Speaker 1: the book a lot about Gross emphatically said he wanted

465
00:23:58,320 --> 00:24:00,720
Speaker 1: to become famous. He wanted to I'm a very very

466
00:24:00,760 --> 00:24:04,640
Speaker 1: famous bond investor, and obviously he wanted to get rich

467
00:24:04,720 --> 00:24:06,920
Speaker 1: and he seems to have been very successful at doing that.

468
00:24:07,600 --> 00:24:09,240
Speaker 1: And then you have a lot of money involved for

469
00:24:09,320 --> 00:24:11,119
Speaker 1: the other executives. I think towards the end of the

470
00:24:11,119 --> 00:24:13,520
Speaker 1: book you talked about one of the bonus um pools

471
00:24:13,520 --> 00:24:16,920
Speaker 1: being something like five million dollars between just Gross and

472
00:24:16,960 --> 00:24:19,840
Speaker 1: all area and yeah, yeah, which I mean, you know,

473
00:24:20,160 --> 00:24:23,439
Speaker 1: half of five million. I'm sure we'll motivate anyone. But

474
00:24:24,400 --> 00:24:28,800
Speaker 1: given all this revenge seeking and some of the behavior

475
00:24:28,960 --> 00:24:32,399
Speaker 1: that you wrote about and that we witnessed in and

476
00:24:32,520 --> 00:24:35,480
Speaker 1: years after that. What do you think drives these people?

477
00:24:36,320 --> 00:24:41,000
Speaker 1: Mm hmm. I think it's instructive to look at Bill's

478
00:24:41,040 --> 00:24:45,000
Speaker 1: behavior without the money management, you know, since his retirement,

479
00:24:45,680 --> 00:24:48,960
Speaker 1: there's this I get the sense that he digs in

480
00:24:49,160 --> 00:24:51,480
Speaker 1: and he's he's put it that he doesn't back down

481
00:24:51,520 --> 00:24:54,880
Speaker 1: from a fight. He can get entrenched in these bilateral

482
00:24:55,600 --> 00:24:57,960
Speaker 1: I don't know, I don't want to say wars, but

483
00:24:58,560 --> 00:25:00,760
Speaker 1: you know, in a in a dynamic, in a relationship

484
00:25:00,840 --> 00:25:05,919
Speaker 1: where he can't seem to find a graceful exit. And

485
00:25:06,200 --> 00:25:09,359
Speaker 1: I mean that who among us right that been there?

486
00:25:09,800 --> 00:25:12,399
Speaker 1: But it's it is this kind of you know, you

487
00:25:12,440 --> 00:25:15,800
Speaker 1: wish that that people can find an exit and and

488
00:25:15,840 --> 00:25:18,040
Speaker 1: you wish that people can kind of graduate beyond this

489
00:25:18,880 --> 00:25:21,280
Speaker 1: kind of um allowing themselves to get locked in a

490
00:25:21,359 --> 00:25:23,720
Speaker 1: dynamic like that. But I do think it is competition.

491
00:25:23,760 --> 00:25:28,199
Speaker 1: It's competitiveness. It's trying to prove to someone else that

492
00:25:28,240 --> 00:25:30,359
Speaker 1: you're the real deal. That's something builds out a lot.

493
00:25:30,480 --> 00:25:32,640
Speaker 1: And Bill will tell you he did this throughout his life.

494
00:25:32,680 --> 00:25:35,440
Speaker 1: You know, this is back in true in the eighties

495
00:25:35,560 --> 00:25:37,960
Speaker 1: when he got divorced. I was trying to date and

496
00:25:38,240 --> 00:25:41,000
Speaker 1: he always wanted to prove to the last person that

497
00:25:41,040 --> 00:25:43,680
Speaker 1: they missed out on a good deal. There's there's something

498
00:25:44,200 --> 00:25:46,520
Speaker 1: so normal about that. But at the same time, the

499
00:25:46,720 --> 00:25:51,679
Speaker 1: scale of the competition gets so mind boggling when you

500
00:25:51,680 --> 00:25:55,040
Speaker 1: start adding zeros and get to five million for one year, Like, yeah,

501
00:25:55,080 --> 00:26:00,440
Speaker 1: it absolutely becomes ridiculous. But it's those numbers are actually

502
00:26:00,480 --> 00:26:04,119
Speaker 1: meaningless to them, you know, except in a relative sentence

503
00:26:04,320 --> 00:26:06,800
Speaker 1: compared to the person that they're locked in a terrible

504
00:26:06,840 --> 00:26:10,200
Speaker 1: relationship with. You know. Yeah, I mean I've I've written

505
00:26:10,200 --> 00:26:12,240
Speaker 1: and talked about this, but like one of my favorite

506
00:26:12,240 --> 00:26:14,320
Speaker 1: things in the book is like, as like matters are

507
00:26:14,359 --> 00:26:17,920
Speaker 1: coming to a head, uh, you know, Bill Gross calls

508
00:26:17,960 --> 00:26:21,000
Speaker 1: him meeting and he like obsessively charts the seating plan

509
00:26:21,119 --> 00:26:23,320
Speaker 1: and puts like the people he's mad at like not

510
00:26:23,480 --> 00:26:26,199
Speaker 1: at the main table, and then they get all mad,

511
00:26:26,640 --> 00:26:29,080
Speaker 1: and like I love the idea that like these people

512
00:26:29,440 --> 00:26:32,280
Speaker 1: like Wright, the like number of zeros and their paycheck

513
00:26:32,320 --> 00:26:34,320
Speaker 1: has sort of lost its meaning and like they're just

514
00:26:34,440 --> 00:26:36,520
Speaker 1: they're just in the same like sort of like micro

515
00:26:36,640 --> 00:26:39,199
Speaker 1: status battles as everyone is all the time, and like

516
00:26:39,240 --> 00:26:41,080
Speaker 1: if they're not sitting at the right table, then they're

517
00:26:41,080 --> 00:26:44,360
Speaker 1: just mad, and like that's what is motivating them more

518
00:26:44,400 --> 00:26:46,639
Speaker 1: than like, you know, the hundreds of millions of dollars

519
00:26:46,720 --> 00:26:49,000
Speaker 1: they're making. Yeah, you put it um. When we had

520
00:26:49,000 --> 00:26:51,800
Speaker 1: our chat at McNally Jackson, you had a nice turn

521
00:26:51,840 --> 00:26:54,080
Speaker 1: of phrase where you were like, they just want to

522
00:26:54,119 --> 00:26:56,359
Speaker 1: be treated like adults, and they feel like they're being

523
00:26:56,359 --> 00:26:58,439
Speaker 1: treated like children. And I think that's so true, like

524
00:26:58,800 --> 00:27:02,560
Speaker 1: the degree of like child behavior among people that we

525
00:27:02,680 --> 00:27:05,239
Speaker 1: trust as fiduciaries, and not that they were like, you know,

526
00:27:05,359 --> 00:27:08,280
Speaker 1: not that that makes you godlike or beyond reproached, like

527
00:27:08,400 --> 00:27:10,720
Speaker 1: of course fiduciaries or human beings, but there is something

528
00:27:11,280 --> 00:27:15,440
Speaker 1: a little disorienting about that. There's a former Pimco manager

529
00:27:15,520 --> 00:27:18,080
Speaker 1: who messaged me right before we started this chat saying

530
00:27:18,080 --> 00:27:20,600
Speaker 1: that he literally he liked Bill Gross, but he used

531
00:27:20,640 --> 00:27:23,720
Speaker 1: to speak to him like he was a one year old. Um.

532
00:27:23,880 --> 00:27:27,359
Speaker 1: That's the way he put it, and they got on fantastically. Apparently.

533
00:27:27,680 --> 00:27:29,439
Speaker 1: I have so many guesses as to who that is,

534
00:27:29,480 --> 00:27:32,960
Speaker 1: but no, sorry, I think you probably know. But just

535
00:27:33,040 --> 00:27:36,800
Speaker 1: going back to a point that Matt made as well

536
00:27:36,840 --> 00:27:41,399
Speaker 1: about you know, Bill Gross's managerial style, this was an

537
00:27:41,440 --> 00:27:44,199
Speaker 1: option that did come up towards the end of his

538
00:27:44,280 --> 00:27:47,919
Speaker 1: tenure at PIMCO, the idea that well, maybe they remove

539
00:27:48,080 --> 00:27:51,600
Speaker 1: him from all the managerial stuff, put him even in

540
00:27:51,600 --> 00:27:54,000
Speaker 1: a different office and just give him some money and

541
00:27:54,080 --> 00:27:56,720
Speaker 1: let him invest and not have to deal with people,

542
00:27:56,720 --> 00:27:59,200
Speaker 1: because clearly he didn't like it, and he was arguably

543
00:27:59,200 --> 00:28:02,080
Speaker 1: not very good at it. Why why couldn't that happen?

544
00:28:02,119 --> 00:28:05,040
Speaker 1: Why wasn't that an option? I think by the time

545
00:28:05,040 --> 00:28:08,200
Speaker 1: that idea was being batted around, it was just too late.

546
00:28:08,400 --> 00:28:10,880
Speaker 1: Like they had had by that point a year of

547
00:28:11,040 --> 00:28:13,760
Speaker 1: trying to negotiate an exit for Bill and trying to

548
00:28:13,800 --> 00:28:16,359
Speaker 1: figure out the best path forward, and it seems like

549
00:28:16,400 --> 00:28:18,480
Speaker 1: they were just so out of step with each other.

550
00:28:18,560 --> 00:28:20,120
Speaker 1: And by day I mean Bill Gross and the rest

551
00:28:20,160 --> 00:28:22,879
Speaker 1: of him Coast Management, where Bill would come to the

552
00:28:22,880 --> 00:28:24,680
Speaker 1: table and say, hey, I'm ready to step back. Let's

553
00:28:24,680 --> 00:28:26,280
Speaker 1: do this and this and this, and they would say,

554
00:28:26,280 --> 00:28:28,760
Speaker 1: oh great, when can we do it? And then you know,

555
00:28:28,880 --> 00:28:31,480
Speaker 1: he would, according to you know, my sources, that he

556
00:28:31,480 --> 00:28:32,879
Speaker 1: would flip flap and say, oh, no, I don't I

557
00:28:32,880 --> 00:28:35,960
Speaker 1: don't want that. I never wanted that. And this happened

558
00:28:35,960 --> 00:28:38,040
Speaker 1: in a bunch of different kind of iterations and in

559
00:28:38,080 --> 00:28:41,520
Speaker 1: different ways, and um, you know, One example that's a

560
00:28:41,520 --> 00:28:45,120
Speaker 1: little bit famous um among people that I talked to

561
00:28:45,160 --> 00:28:48,120
Speaker 1: you is the time when he agreed to meet with

562
00:28:48,200 --> 00:28:51,959
Speaker 1: a mediator for his relationship with Mohammed Hilarian, and basically

563
00:28:52,480 --> 00:28:55,600
Speaker 1: he everyone says, oh, Bill agreed to this. Okay, fine,

564
00:28:55,600 --> 00:28:57,840
Speaker 1: we're going to schedule this. They found a mediator, they

565
00:28:57,880 --> 00:28:59,640
Speaker 1: started to put it on the calendars, and Bill was like,

566
00:28:59,840 --> 00:29:02,960
Speaker 1: I never agree to this. And Bill says, you know,

567
00:29:02,960 --> 00:29:04,680
Speaker 1: people hear what they want. But I truly he to

568
00:29:04,800 --> 00:29:07,080
Speaker 1: this day maintains that he never agreed to it. And

569
00:29:07,120 --> 00:29:08,760
Speaker 1: I agree with him that people hear what they want.

570
00:29:08,880 --> 00:29:11,400
Speaker 1: But there is this sense of like, okay, but eight

571
00:29:11,440 --> 00:29:14,160
Speaker 1: people heard you say yes to this and wrote it down,

572
00:29:14,360 --> 00:29:16,800
Speaker 1: and you know, at a certain point we have to

573
00:29:16,840 --> 00:29:19,600
Speaker 1: try to move forward. By the time, the idea was

574
00:29:19,640 --> 00:29:21,520
Speaker 1: being batted around that they could maybe just give him

575
00:29:21,520 --> 00:29:23,600
Speaker 1: a pile of money, a little side car as they

576
00:29:23,600 --> 00:29:25,880
Speaker 1: called it, and let him just play with the money,

577
00:29:25,960 --> 00:29:27,880
Speaker 1: play in the market, be happy be over there and

578
00:29:27,880 --> 00:29:31,600
Speaker 1: not bothering anybody his It was almost as though, I

579
00:29:31,600 --> 00:29:33,640
Speaker 1: think this is kind of his characterization, but it's almost

580
00:29:33,680 --> 00:29:35,920
Speaker 1: as though his presence was just too toxic, that there

581
00:29:35,960 --> 00:29:37,720
Speaker 1: was too upsetting to even have him in the building,

582
00:29:37,760 --> 00:29:40,880
Speaker 1: but basically that they couldn't. They couldn't. They felt like

583
00:29:40,880 --> 00:29:43,200
Speaker 1: they couldn't trust him anymore to agree to this plan

584
00:29:43,240 --> 00:29:45,800
Speaker 1: and stick to it and carry it out, that it

585
00:29:45,840 --> 00:29:48,520
Speaker 1: would still be more drama, more chaos, more moving the

586
00:29:48,560 --> 00:29:51,160
Speaker 1: goal post. One implication of the book is that although

587
00:29:51,160 --> 00:29:54,040
Speaker 1: he was not the CEO, he was to such a

588
00:29:54,120 --> 00:29:56,680
Speaker 1: degree the star performer that he could he like had

589
00:29:56,720 --> 00:29:59,560
Speaker 1: the soft power anyway. Like at some point he tells Larya,

590
00:29:59,640 --> 00:30:03,800
Speaker 1: I'm gretariat. You don't bet agan secretary. It's interesting because

591
00:30:03,800 --> 00:30:05,640
Speaker 1: in the beginning, you know, they made such a big

592
00:30:05,680 --> 00:30:08,080
Speaker 1: deal about the three legged stool of the co founders

593
00:30:08,080 --> 00:30:10,680
Speaker 1: being equal, but the two other co founders kind of

594
00:30:10,680 --> 00:30:14,040
Speaker 1: fell away and only Bill was left. And there seems

595
00:30:14,080 --> 00:30:16,520
Speaker 1: to be this kind of institutional slap where the portfolio

596
00:30:16,560 --> 00:30:19,360
Speaker 1: managers are the most important, where you know, if you're

597
00:30:19,360 --> 00:30:22,120
Speaker 1: a client person, you serve the portfolio manager. If you're execution,

598
00:30:22,320 --> 00:30:26,840
Speaker 1: everything revolves around the performer. So I'm not sure you

599
00:30:26,880 --> 00:30:28,680
Speaker 1: know what it does sound like everyone was a bit

600
00:30:28,680 --> 00:30:31,440
Speaker 1: more collegial back in the day. I mean, still with

601
00:30:31,480 --> 00:30:34,320
Speaker 1: the same kind of um joking that I don't think

602
00:30:34,320 --> 00:30:37,960
Speaker 1: I would be able to tolerate. But they but I'm

603
00:30:38,000 --> 00:30:40,400
Speaker 1: not sure. You know, it seems like towards the end, Yeah,

604
00:30:40,400 --> 00:30:43,520
Speaker 1: there was this extreme tilt that that made him the

605
00:30:43,640 --> 00:30:45,400
Speaker 1: leader and made people want to be like him and

606
00:30:45,440 --> 00:30:47,680
Speaker 1: act like him. And certainly he's at the tone. You know,

607
00:30:47,800 --> 00:30:49,800
Speaker 1: you can't if Bill gros says no noise on the

608
00:30:49,800 --> 00:30:51,360
Speaker 1: trade floor, there's going to be no noise on the

609
00:30:51,360 --> 00:30:54,520
Speaker 1: trade floor. Do you think that's true? Like elsewhere in

610
00:30:54,520 --> 00:30:58,480
Speaker 1: the financial industry, Like, like it seems so like ingrained

611
00:30:58,600 --> 00:31:01,880
Speaker 1: that the person running the money and making the investment

612
00:31:01,920 --> 00:31:04,239
Speaker 1: decisions is the most important person and the person like

613
00:31:04,600 --> 00:31:10,320
Speaker 1: during investor relations or like managing HR is subservient to them.

614
00:31:10,360 --> 00:31:13,760
Speaker 1: But like, is that is that how it works everywhere?

615
00:31:13,800 --> 00:31:16,840
Speaker 1: Because like you know, I go back to like Philip

616
00:31:16,840 --> 00:31:20,120
Speaker 1: gross is at performed by fifty basis points, right, Like meanwhile,

617
00:31:20,120 --> 00:31:23,040
Speaker 1: people are raising trillions of dollars, right, Like like maybe

618
00:31:23,040 --> 00:31:26,080
Speaker 1: those people raising trillions of dollars were actually quite good

619
00:31:26,080 --> 00:31:28,320
Speaker 1: at their jobs. No, I think you're exactly right, And

620
00:31:28,360 --> 00:31:29,840
Speaker 1: I think this is sort of like a there and

621
00:31:29,840 --> 00:31:32,120
Speaker 1: there are other like you know, big financial instititions, or

622
00:31:32,160 --> 00:31:34,000
Speaker 1: I'd be like, yeah, the investor remissions. People there are

623
00:31:34,040 --> 00:31:36,920
Speaker 1: really important completely given the perform I are people and

624
00:31:36,960 --> 00:31:38,840
Speaker 1: bad I are people. I think that's completely true, and

625
00:31:38,880 --> 00:31:42,680
Speaker 1: that's underappreciated. And I have some views on this given

626
00:31:42,760 --> 00:31:44,840
Speaker 1: that that's typically where you would find women in the

627
00:31:44,880 --> 00:31:48,560
Speaker 1: financial industry. Um, you know, for for many reasons as

628
00:31:48,560 --> 00:31:50,720
Speaker 1: to why that has turned out to be the case,

629
00:31:50,760 --> 00:31:52,440
Speaker 1: and for you know, and I think that also kind

630
00:31:52,440 --> 00:31:54,720
Speaker 1: of feeds why we think of it as I don't know,

631
00:31:54,880 --> 00:31:56,920
Speaker 1: it's kind of a chicken and egg problem. But I

632
00:31:56,960 --> 00:32:00,280
Speaker 1: have this argument that um, Pat Fisher should be you know,

633
00:32:00,360 --> 00:32:02,719
Speaker 1: this is a woman who ran operations at PIMCO. And

634
00:32:02,760 --> 00:32:05,760
Speaker 1: I strongly believe this is just me. No one has

635
00:32:05,920 --> 00:32:07,240
Speaker 1: you know, no one else is making this case but

636
00:32:07,280 --> 00:32:09,960
Speaker 1: me probably, But I shouldn't say that. Maybe some someone

637
00:32:10,000 --> 00:32:11,800
Speaker 1: out there is making the case. But I have this

638
00:32:11,840 --> 00:32:14,480
Speaker 1: strong belief that Pat Fisher should be counted as a

639
00:32:14,520 --> 00:32:17,360
Speaker 1: co founder. She ran operations at PIMCO. And I was

640
00:32:17,400 --> 00:32:19,000
Speaker 1: just talking to a guy who used to work there,

641
00:32:19,040 --> 00:32:21,360
Speaker 1: who you know, doesn't know this theory of mine, but

642
00:32:21,400 --> 00:32:23,680
Speaker 1: he was like, yeah, you know, PIMCO was so strong

643
00:32:23,720 --> 00:32:27,720
Speaker 1: in operations and trade execution, and just if you're botching

644
00:32:27,760 --> 00:32:30,080
Speaker 1: every third trade and calling Goldman and saying, shoot, I'm

645
00:32:30,120 --> 00:32:33,440
Speaker 1: so sorry, do you mind Goldman's gonna not look to

646
00:32:33,520 --> 00:32:35,560
Speaker 1: your trades that you know, they're gonna stop trading with

647
00:32:35,560 --> 00:32:37,360
Speaker 1: you as much they're this person doesn't know what they're doing.

648
00:32:37,720 --> 00:32:40,320
Speaker 1: And PIMCO wasn't that and that you know, there are

649
00:32:40,360 --> 00:32:42,080
Speaker 1: a hundred different times that I do this in the book.

650
00:32:42,120 --> 00:32:44,800
Speaker 1: But Pat Fisher helped to build the thing that made

651
00:32:44,800 --> 00:32:47,760
Speaker 1: the company run seamlessly, and that is so underappreciated because

652
00:32:47,760 --> 00:32:50,760
Speaker 1: it's back office. And again, I think there's some sexism

653
00:32:50,800 --> 00:32:53,480
Speaker 1: in there, and um, you know, we we've built a

654
00:32:53,520 --> 00:32:56,760
Speaker 1: world in which there's this like hegemony of um of

655
00:32:56,840 --> 00:32:59,880
Speaker 1: portfolio managing or like you know, in the book, there's

656
00:32:59,920 --> 00:33:02,520
Speaker 1: the scene where Bill Grows blows up at the woman

657
00:33:02,560 --> 00:33:05,800
Speaker 1: who runs product and says, you're introducing products at the

658
00:33:05,800 --> 00:33:08,520
Speaker 1: portfolio managers didn't approve and she's like, that's actually not true.

659
00:33:08,960 --> 00:33:12,440
Speaker 1: But like you know, when I think about giant financial,

660
00:33:12,640 --> 00:33:15,200
Speaker 1: like like giant asset managers, like I think more about

661
00:33:15,240 --> 00:33:18,160
Speaker 1: product than about portfolio management, right, I think, like you know,

662
00:33:18,200 --> 00:33:20,920
Speaker 1: the person is like, we've introduced a meme themed e

663
00:33:21,040 --> 00:33:23,680
Speaker 1: TF like that's how they get the money it's not

664
00:33:23,760 --> 00:33:26,320
Speaker 1: by like outperforming by ten basis points. And I'm sure

665
00:33:26,320 --> 00:33:28,880
Speaker 1: I'm exaggerating here, but like that job of like figuring

666
00:33:28,920 --> 00:33:31,600
Speaker 1: out like what sort of rapper people want things in

667
00:33:32,240 --> 00:33:35,440
Speaker 1: seems like at least as important as like at performing

668
00:33:35,520 --> 00:33:39,800
Speaker 1: se of like other you know, investment grade bond managers.

669
00:33:40,720 --> 00:33:43,320
Speaker 1: I think that's true because if you look back, you know,

670
00:33:43,600 --> 00:33:46,080
Speaker 1: at products that they were selling in like the forties,

671
00:33:46,120 --> 00:33:48,480
Speaker 1: they're not that different, like everything is the same. In

672
00:33:48,480 --> 00:33:50,200
Speaker 1: the process of reporting this book, I talked to a

673
00:33:50,200 --> 00:33:52,120
Speaker 1: pension manager who had overseen the A T and T

674
00:33:52,640 --> 00:33:54,840
Speaker 1: pension fund and he was like, yeah, you know, we

675
00:33:54,840 --> 00:33:56,880
Speaker 1: were remember being a helicopter like looking at a mall

676
00:33:56,920 --> 00:33:58,600
Speaker 1: that we were thinking about buying. And then I had

677
00:33:58,600 --> 00:34:00,840
Speaker 1: a passive strategy and I was like weak, what you

678
00:34:00,840 --> 00:34:03,120
Speaker 1: were doing a barbell in the seventies? Like where was

679
00:34:03,160 --> 00:34:05,080
Speaker 1: I on this? I just wrote this article about how

680
00:34:05,120 --> 00:34:06,560
Speaker 1: people are doing a barbell and it was like a

681
00:34:06,560 --> 00:34:09,000
Speaker 1: new thing to me, Like I did I just wake up?

682
00:34:09,080 --> 00:34:10,919
Speaker 1: Have people been doing this the whole time? And yes,

683
00:34:11,520 --> 00:34:13,399
Speaker 1: like this is we we put new names on them,

684
00:34:13,440 --> 00:34:16,400
Speaker 1: we find more tax efficient strategies or whatever. But to

685
00:34:16,440 --> 00:34:19,719
Speaker 1: a large extent, it's the same stuff repackaged, and you know,

686
00:34:19,840 --> 00:34:22,760
Speaker 1: as a person picking funds, you're kind of like, I'm clever.

687
00:34:23,040 --> 00:34:24,680
Speaker 1: I want to pick the thing that's cool right now.

688
00:34:24,719 --> 00:34:40,160
Speaker 1: I love a meme. Let's do this. You know what

689
00:34:40,320 --> 00:34:44,399
Speaker 1: is PIMCO like right now? Because of course they had

690
00:34:44,440 --> 00:34:48,880
Speaker 1: this exodus in they lost um. I think one of

691
00:34:48,880 --> 00:34:53,560
Speaker 1: their few senior women they lost were their few senior

692
00:34:54,120 --> 00:34:58,160
Speaker 1: persons of color, in the form of Muhammad l arian Um. Clearly,

693
00:34:58,480 --> 00:35:01,439
Speaker 1: Bill Gross's focus was on the total return fund and

694
00:35:01,520 --> 00:35:04,799
Speaker 1: what was going on with his portfolio management. But as

695
00:35:04,840 --> 00:35:07,360
Speaker 1: you and Matt just laid it out, products were becoming

696
00:35:07,400 --> 00:35:10,399
Speaker 1: more and more important. Um. There was more and more

697
00:35:10,600 --> 00:35:14,080
Speaker 1: of a tilt towards getting even more passive as low

698
00:35:14,120 --> 00:35:20,520
Speaker 1: cost as physically possible. Has PIMCO changed much, I'm sorry

699
00:35:20,560 --> 00:35:23,520
Speaker 1: to report that I don't think they've changed much. I

700
00:35:23,560 --> 00:35:26,040
Speaker 1: don't think it's um. You know, I think they are

701
00:35:26,080 --> 00:35:28,200
Speaker 1: working on it, much like a lot of you know,

702
00:35:28,239 --> 00:35:32,439
Speaker 1: asset managers financial firms are trying to figure out what's

703
00:35:32,480 --> 00:35:35,560
Speaker 1: gone so awry and why they simply have so few

704
00:35:35,560 --> 00:35:38,319
Speaker 1: women and people of color like so weird. From what

705
00:35:38,440 --> 00:35:42,239
Speaker 1: I'm hearing, it's it's not really going swimmingly. I think

706
00:35:42,239 --> 00:35:44,520
Speaker 1: it was last year that there was a letter from

707
00:35:44,640 --> 00:35:47,520
Speaker 1: twenty one current and former female employees saying, you know,

708
00:35:47,640 --> 00:35:51,759
Speaker 1: this is a we've experienced discrimination here at PIMCO. And

709
00:35:51,880 --> 00:35:54,319
Speaker 1: I think at the beginning of Pimco had never had

710
00:35:54,360 --> 00:35:56,920
Speaker 1: a black partner, never not one. They just simply couldn't

711
00:35:56,960 --> 00:36:01,239
Speaker 1: find one. And I just find that be on disappointing, right,

712
00:36:01,239 --> 00:36:05,160
Speaker 1: Like if it's so troubling because if you think through

713
00:36:05,880 --> 00:36:08,320
Speaker 1: what you know, they think it's a meritocracy, So what

714
00:36:08,400 --> 00:36:10,719
Speaker 1: does that mean, Like if you take that further, if

715
00:36:10,719 --> 00:36:13,680
Speaker 1: you go to the like logical extension of that, I

716
00:36:14,480 --> 00:36:19,000
Speaker 1: just it's indefensible. And I don't think. I don't know.

717
00:36:19,040 --> 00:36:21,520
Speaker 1: I think there's this kind of obviously we're having a

718
00:36:21,560 --> 00:36:25,359
Speaker 1: broad you know, pan industry reckoning with what we do

719
00:36:25,400 --> 00:36:27,000
Speaker 1: at work and how we feel about work and what

720
00:36:27,040 --> 00:36:29,680
Speaker 1: we bring to work and you know, what's allowed at work.

721
00:36:29,880 --> 00:36:33,080
Speaker 1: And I think that's especially acute at a place like Pimco.

722
00:36:33,120 --> 00:36:37,680
Speaker 1: At Pimco because those old school Wall Street cultures that

723
00:36:38,360 --> 00:36:42,799
Speaker 1: are so tough and so exclusionary are they just look

724
00:36:42,840 --> 00:36:45,200
Speaker 1: real bad right now. And to a large extent, I

725
00:36:45,239 --> 00:36:48,759
Speaker 1: think it's just not tenable anymore. Meanwhile, Bill Gross has

726
00:36:48,760 --> 00:36:55,600
Speaker 1: a book out. He's keeping busy beautiful, right, He's he's

727
00:36:55,600 --> 00:36:57,960
Speaker 1: he's got a book, got a suspended jail sentence for

728
00:36:57,960 --> 00:37:01,400
Speaker 1: playing the Gilgan's Island theme too long? Has he like

729
00:37:01,480 --> 00:37:03,920
Speaker 1: what is he having a reckoning with any of this? Like?

730
00:37:04,080 --> 00:37:07,000
Speaker 1: Is he do you think he's been into respective about

731
00:37:07,040 --> 00:37:10,719
Speaker 1: like the the last few years and and and uh

732
00:37:10,880 --> 00:37:14,640
Speaker 1: and about your book. Uh, it's funny. Yesterday I had

733
00:37:14,640 --> 00:37:19,480
Speaker 1: my first interaction with Bill in over a year. I

734
00:37:19,480 --> 00:37:21,960
Speaker 1: had tweeted the Planet Money story that we did Planet

735
00:37:21,960 --> 00:37:24,879
Speaker 1: Money episode that we did about you know, the Mond King,

736
00:37:25,280 --> 00:37:27,120
Speaker 1: and he replied to my tweet with a link to

737
00:37:27,160 --> 00:37:31,360
Speaker 1: his book, which is just stellar marketing, um and and

738
00:37:31,480 --> 00:37:34,680
Speaker 1: so on brand. But I do think so it's interesting.

739
00:37:34,800 --> 00:37:36,600
Speaker 1: I have always kind of thought of him as a

740
00:37:36,640 --> 00:37:39,920
Speaker 1: reflective person, as introspective, as a bit self aware, you know,

741
00:37:40,040 --> 00:37:42,640
Speaker 1: to a point among us. But I was talking to

742
00:37:42,680 --> 00:37:45,480
Speaker 1: a colleague who covered treasuries for ages, and he was

743
00:37:45,520 --> 00:37:49,439
Speaker 1: saying that it was a performative self reflection or self

744
00:37:49,480 --> 00:37:53,480
Speaker 1: awareness that actually Bill is It's part of that facade,

745
00:37:53,560 --> 00:37:56,040
Speaker 1: that persona that he would put on. But actually there

746
00:37:56,080 --> 00:38:00,080
Speaker 1: there isn't that much real soul searching, which I don't know.

747
00:38:00,360 --> 00:38:01,960
Speaker 1: I mean, he's been, you know, in his book, he

748
00:38:01,960 --> 00:38:04,520
Speaker 1: he talks about his ouster. In you know, a recent

749
00:38:04,760 --> 00:38:06,920
Speaker 1: interview with the FT, he talked about his auster and

750
00:38:07,239 --> 00:38:09,520
Speaker 1: what he did wrong, and he definitely has thoughts. So

751
00:38:09,600 --> 00:38:12,239
Speaker 1: it's hard to It's hard for me to gauge how

752
00:38:12,320 --> 00:38:15,040
Speaker 1: much of that is truly internalized and like from the heart.

753
00:38:15,560 --> 00:38:19,120
Speaker 1: But he does seem to find fault with his behavior

754
00:38:19,280 --> 00:38:21,279
Speaker 1: and that he you know, thinks he maybe should have

755
00:38:21,320 --> 00:38:25,960
Speaker 1: done things differently, which probably we can all agree. But yeah,

756
00:38:26,239 --> 00:38:27,799
Speaker 1: I don't know. He's been busy. He's been, you know,

757
00:38:28,000 --> 00:38:31,320
Speaker 1: feuding with his neighbor, writing this book um publishing it

758
00:38:31,360 --> 00:38:36,880
Speaker 1: two weeks before mine, and applying to tweets. What do

759
00:38:36,920 --> 00:38:40,839
Speaker 1: you think Bill Gross's legacy in terms of the bond

760
00:38:40,880 --> 00:38:47,520
Speaker 1: market or investing actually is mm hmm two answers. From

761
00:38:47,560 --> 00:38:50,600
Speaker 1: a pure investing standpoint, I think it is seeing these

762
00:38:50,680 --> 00:38:53,799
Speaker 1: market inefficiencies, these factors that he identified and was able

763
00:38:53,880 --> 00:38:58,359
Speaker 1: to ring out performance from for decades, So those were

764
00:38:58,360 --> 00:39:00,360
Speaker 1: true insights, and I do think that that is, you know,

765
00:39:00,440 --> 00:39:03,680
Speaker 1: he is the bond king in that way, and and

766
00:39:03,760 --> 00:39:06,280
Speaker 1: helped to bring about this revolution. Of active bond trading.

767
00:39:07,239 --> 00:39:11,640
Speaker 1: And then the second answer would be kind of it's

768
00:39:11,640 --> 00:39:14,120
Speaker 1: hard to say, and if if a world without Bill

769
00:39:14,120 --> 00:39:18,439
Speaker 1: Gross would have the same cultural shape, that the bond

770
00:39:18,520 --> 00:39:20,239
Speaker 1: market would look the way it does, and then that

771
00:39:20,280 --> 00:39:22,160
Speaker 1: everyone would act the way they do in the bond market.

772
00:39:22,200 --> 00:39:24,759
Speaker 1: You know, PIMCO is is certainly on the sort of

773
00:39:24,760 --> 00:39:26,759
Speaker 1: extreme of behavior where they're harder on the street than

774
00:39:26,760 --> 00:39:30,280
Speaker 1: everyone else. They're cut throat, they're a little meaner there whatever, um,

775
00:39:30,360 --> 00:39:34,919
Speaker 1: but and it's I don't know that everyone like necessarily

776
00:39:35,360 --> 00:39:37,000
Speaker 1: is quite as a serbic in dealing with their Wall

777
00:39:37,040 --> 00:39:39,000
Speaker 1: Street coverage. But I do think that it was a model.

778
00:39:39,080 --> 00:39:40,879
Speaker 1: It was a way, you know, people look to him

779
00:39:40,880 --> 00:39:42,800
Speaker 1: as a role model that he's like on TV talking

780
00:39:42,800 --> 00:39:45,960
Speaker 1: about his securities and talking his book, and people are like,

781
00:39:45,960 --> 00:39:50,000
Speaker 1: that is so cool, that's amazing that he can do that.

782
00:39:50,080 --> 00:39:52,640
Speaker 1: The beach does something and everybody follows, And that was

783
00:39:52,680 --> 00:39:56,200
Speaker 1: absolutely you know that that degree of influence was certainly

784
00:39:56,480 --> 00:40:28,000
Speaker 1: widely admired and emulated, you know, aspired aspirationally emulated. Mary Child,

785
00:40:28,160 --> 00:40:30,960
Speaker 1: thank you so much. The book again is The Bond King.

786
00:40:31,040 --> 00:40:33,440
Speaker 1: How one man made a market, built an empire, and

787
00:40:33,680 --> 00:40:36,120
Speaker 1: lost it. All and you should definitely check it out.

788
00:40:36,480 --> 00:40:39,239
Speaker 1: This was so fun. So Matt, obviously that was a

789
00:40:39,280 --> 00:40:42,640
Speaker 1: fun conversation. And I know you've been sort of involved

790
00:40:42,680 --> 00:40:45,239
Speaker 1: in the production of this book and acting as an

791
00:40:45,440 --> 00:40:49,520
Speaker 1: advisor on a lot of um the content, and just

792
00:40:49,960 --> 00:40:53,560
Speaker 1: I guess providing emotional support to Mary because it sounds like,

793
00:40:53,719 --> 00:40:57,279
Speaker 1: um she needed a lot of it given the personalities involved.

794
00:40:57,800 --> 00:40:59,680
Speaker 1: But one of the things that I find really interesting

795
00:40:59,680 --> 00:41:02,680
Speaker 1: about at well, one of the things I keep thinking

796
00:41:02,880 --> 00:41:05,640
Speaker 1: is that Bill Gross was sort of born out of

797
00:41:05,840 --> 00:41:08,719
Speaker 1: the nineteen seventies early eighties when you finally got a

798
00:41:08,719 --> 00:41:12,440
Speaker 1: lot of interest rate volatility, which made bonds more interesting

799
00:41:12,680 --> 00:41:16,359
Speaker 1: and then which gave rise to bond kings like him

800
00:41:16,480 --> 00:41:19,080
Speaker 1: and a few others. And I kind of wonder if

801
00:41:19,840 --> 00:41:23,239
Speaker 1: the period that we're entering now, if we're going to

802
00:41:23,280 --> 00:41:25,760
Speaker 1: see the same sort of birth of a new asset

803
00:41:25,840 --> 00:41:29,000
Speaker 1: class or a new group of investors with a slightly

804
00:41:29,000 --> 00:41:33,040
Speaker 1: different strategy who come out of it really successful. Yeah,

805
00:41:33,120 --> 00:41:35,120
Speaker 1: I think that's possible. I do think that one thing

806
00:41:35,120 --> 00:41:38,120
Speaker 1: that that is true about Bill Gross is that he

807
00:41:38,239 --> 00:41:40,640
Speaker 1: came up at a time when it was sort of

808
00:41:40,680 --> 00:41:43,600
Speaker 1: hard to be a famous investor, and he ended up

809
00:41:43,680 --> 00:41:46,040
Speaker 1: running like a like a mutual fund, which was sort

810
00:41:46,080 --> 00:41:48,680
Speaker 1: of how you became a famous investor in like the

811
00:41:48,680 --> 00:41:52,600
Speaker 1: seventies and eighties. And you know, like, certainly there's a

812
00:41:52,600 --> 00:41:54,160
Speaker 1: lot of volatility in two thousand and eight, and the

813
00:41:54,160 --> 00:41:56,640
Speaker 1: people who became famous out of that were hedgemine managers.

814
00:41:56,680 --> 00:41:58,960
Speaker 1: And I feel like that's where the where the action

815
00:41:59,080 --> 00:42:01,520
Speaker 1: is for the foreseeable future is like people who can

816
00:42:01,600 --> 00:42:05,520
Speaker 1: make really kind of bold, concentrated bets rather than running

817
00:42:05,920 --> 00:42:09,680
Speaker 1: you know, trillions of dollars for like households intentions. It

818
00:42:09,719 --> 00:42:11,920
Speaker 1: feels like that's where like the celebrities are meant to

819
00:42:11,960 --> 00:42:14,960
Speaker 1: these days. Yeah, I can't imagine that going back, you know,

820
00:42:15,160 --> 00:42:17,600
Speaker 1: but certainly there will be celebrities meanted out of this,

821
00:42:17,719 --> 00:42:20,880
Speaker 1: you know, out of out of unit today's volatility. Yeah,

822
00:42:21,040 --> 00:42:24,320
Speaker 1: but probably not your average et F manager or something

823
00:42:24,400 --> 00:42:26,480
Speaker 1: like that. But that was the other thing that I

824
00:42:26,520 --> 00:42:29,239
Speaker 1: was thinking about, was this idea of whether or not

825
00:42:29,400 --> 00:42:33,360
Speaker 1: the way Bill Gross ran a bond fund was the

826
00:42:33,400 --> 00:42:35,879
Speaker 1: sort of gold standard of running a bond fund because

827
00:42:35,880 --> 00:42:39,080
Speaker 1: when you listen to Mary talk and describe you know,

828
00:42:39,160 --> 00:42:43,440
Speaker 1: his strategy or the secrets of Pimco's success going along

829
00:42:43,480 --> 00:42:50,240
Speaker 1: credit buying duration, selling volatility, treating Russian forwards as cash equivalents.

830
00:42:50,640 --> 00:42:53,719
Speaker 1: I mean, if you think about someone doing that over

831
00:42:53,760 --> 00:42:57,000
Speaker 1: the past month or two, it's just a recipe for disaster.

832
00:42:57,200 --> 00:42:59,759
Speaker 1: And so you get that question once again whether or

833
00:42:59,800 --> 00:43:03,680
Speaker 1: not uh Bill Gross was lucky that his period of

834
00:43:03,719 --> 00:43:06,719
Speaker 1: being at the helm of a very large investor coincided

835
00:43:06,800 --> 00:43:10,520
Speaker 1: with very low interest rates in a period of generally

836
00:43:10,560 --> 00:43:14,279
Speaker 1: low volatility, or whether there was something else there. Yeah,

837
00:43:14,320 --> 00:43:16,120
Speaker 1: But it's hard to know because like it's not like

838
00:43:16,280 --> 00:43:18,719
Speaker 1: it's not like he was born to sell volatility. It's

839
00:43:18,719 --> 00:43:20,920
Speaker 1: like he came to a reason to complete identified the

840
00:43:21,560 --> 00:43:24,000
Speaker 1: right for that environment, you know, and like he's he

841
00:43:24,040 --> 00:43:26,080
Speaker 1: wrote not ites saying like this is how we expect

842
00:43:26,080 --> 00:43:27,600
Speaker 1: the next ten years to go, and so this is

843
00:43:27,600 --> 00:43:31,359
Speaker 1: why we're going to be structurally short volatility. And he

844
00:43:31,440 --> 00:43:34,359
Speaker 1: was somewhat able to adapt, right. I mean, he ended

845
00:43:34,440 --> 00:43:37,000
Speaker 1: up not doing as well in in a in a

846
00:43:37,080 --> 00:43:40,480
Speaker 1: higher rate, you know, sort of different environment than he

847
00:43:40,520 --> 00:43:42,760
Speaker 1: did during like the sort of long bond bull market.

848
00:43:43,200 --> 00:43:45,320
Speaker 1: But it's not like he just sort of said it

849
00:43:45,360 --> 00:43:47,799
Speaker 1: on autopilot for thirty years that had happened to work out,

850
00:43:48,840 --> 00:43:51,839
Speaker 1: That's true. This has been another episode of the All

851
00:43:51,920 --> 00:43:54,719
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on

852
00:43:54,760 --> 00:43:58,080
Speaker 1: Twitter at Tracy Alloway. You should definitely follow our guest

853
00:43:58,320 --> 00:44:02,319
Speaker 1: Mary Child's She's at m d C, and you should

854
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Speaker 1: follow Matt Levine. He's at Matt Underscore Levine. You should

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Speaker 1: also follow our producer Carmen Rodriguez, She's at Carmen Armant.

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Speaker 1: And you should follow Bloomberg Podcast at Podcasts and the

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Speaker 1: head of Bloomberg Podcast, Francesco Leedy at Francesco Today. Thanks

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Speaker 1: for listening.