The Compound and Friends - Chasing the Bond King

Episode Date: March 21, 2022

On this special episode of Live from the Compound, Mary Childs joins Josh Brown, Michael Batnick, and Ben Carlson to discuss her new book, The Bond King. Mary Childs is an author and co-host of NPR's Planet Money podcast. Order The Bond King: https://amzn.to/37rP3Ux Check out The Compound shop: https://idontshop.com Follow The Compound on Instagram: https://instagram.com/thecompoundnews Follow The Compound on Twitter: https://twitter.com/thecompoundnews Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Check 1, 2. Compound Nation, Monday night. Another special event. We've been hitting you guys with special events like crazy all winter. This one's going to be really special. My friend Mary Childs is here. Mary, wave hi to everyone. I want everyone to know which one you are. Okay. It's that one, guys. All right. Mary is the author of the hottest book in finance right now, this spring. It's called The Bond King. Hold that up one more time. How one man made a market, built an empire, and lost it all. And yo yo none of that is an exaggeration and i've written three books mary that's all like it was an empire it was a big deal it was still a big deal just without him now exactly okay i'm so glad you agree with it we're so happy to have you and uh we're gonna we're gonna start i think we're gonna start with michael

we kind of figured out some sort of order that we want to ask questions. And a reminder for the chat, guys, ask a smart question, we'll ask Mary. She knows like everything on this topic. So Duncan's gonna be combing for questions and we'll bring him in later to ask the best couple that come out.

All right, Michael, go ahead. Okay. So Mary, first of all, congratulations. Amazing book, fun, informative, crazy stories, history. It has it all. So buy the book. Here's where I want to start. It's kind of wild to think that prior to like PIMCO and Bill Gross doing what they did, bond trading wasn't a thing. They actually kind of invented it. Back in the day, people bought bonds, they held them to maturity, they literally clipped coupons, and that was it. So why don't we start with why did bond trading even come to be? Yeah, I love that. I think it is really wild. It's like bananas that this wasn't a thing prior to the 1970s.

But you had this runaway inflation that really kind of created the right conditions for bonds to not make sense to be just sitting in vaults and like losing their value day by day, which I guess is kind of relevant now again. But basically, you know, when Bill started his job, he was clipping those coupons. He was literally sending those in for interest payments. started his job, he was clipping those coupons. He was literally sending those in for interest payments. And all of a sudden they were like, wait, wait, why don't we trade these amongst ourselves and see if we can do better than just holding them? Nobody thought that there was alpha available in bonds until, uh, was it PIMCO in those early days? It was, yeah, it was part of, it was a shell within PAC mutual, but yeah, exactly. Which doesn't make any sense. And it is kind of like hard to fathom, but it was also a hard sell at the time. People just didn't want to do it.

Well, there was like no liquidity either, right? Right. They had no one to trade them with. Exactly. If there's no market, there's no market, so. I think in New York, on Wall Street, it was bond sales. The issuer would say, we want to sell $100 million worth of whatever debenture, and here are the features. And then there would be a broker who would sell that. And the buyer had no expectation that there would be

liquidity. They were just happy with the... Okay, so actually bond trading originates on the West Coast, not on Wall Street. Yeah, that's right. Okay. That's fascinating. So he came to dominate that fairly quickly or not necessarily? What's the background on that? I think that's right. I mean, there's this guy that I talked to who's one of his very close friends, Howard Rakoff. And I sort of parasocially call him Howie, even though the only person in the world who calls him Howie is Bill Gross. I'm like, hi, Howie. Like, it's not his name.

But he was kind of an evangelist for bond trading. He got it kind of stuck like a little bee in his bonnet and went around to all the different banks and insurance companies. And he was like, we got to trade these you got. And everyone was like, who is this guy? Why is he yipping at me? But that was kind of, I mean, it was fun to kind of find. I really hadn't seen any coverage of this guy anywhere. And to find this like, I don't know, patient zero of bond trading was so fun. But he went around and created almost single handedly. You know, people people credit bill but bill was and bill will tell you he was just there when the lights went on what year is this roughly oh gosh this is like 71 two three so so there were two there were two times a long time ago there was two talents there was there was one inflation eating away the coupon payment so they

had to like get into the newer coupon issued exactly and also arisa coming around that's exactly right yeah what does that mean? So every regulation since Adam is what I'm told it stands for. That's a joke from my... That's a pension geek one. That's a good one. Thank you. I was like waiting for the laughter. It's not there. Thank you. But no, it basically opened the floodgates where it like formalized the mutual fund industry as we know it today. And everyone needed like a professional money manager to manage their money. And it just happened that PIMCO had just started this kind of trial portfolio

when the lights went on. And they were like, okay, well, we have this like, you know, two to five years, you know, they had this little short track record, but it was enough to show people that they were for real and they could manage your money. And they were, you know, they had this insurance company behind them. They had a really good position to pitch to people and that that's that's what really started the flood the other thing about that time was rates were obviously way higher well so and so I think a lot of people what probably want to say well Bill Gross was great at bond trading and all he started it but he got lucky because he had the tail window following rates and starting

right but I mean reading your book this guy was like a maniac in the best and worst way possible so like you said that the question he would ask people was when he was interviewing them would be do you want money power or fame and he said I wanted to be famous so part of me thinks like let's say growth started today in this rate world where treasuries are 2% he probably he probably would have yeah he probably would have done fine either way right like he was gonna be successful no matter what he looked like the fact that he became famous as a bond fund manager

is, like, crazier than the Kardashians becoming famous, right? Oh, you're saying the bonds are just incidental, given that that was the fat pitch at the time? I think he would have figured it out anyway, right? I agree with that. I think that's right. I think the bonds were sort of the thing that he was good at and the place where he had an edge, but it is kind of the vehicle for the overall goal, which is fame think that's totally right which is like kind of mind-blowing because we

know him as this bond legend and that's like the world that we keep him in what mary what aspect of the fame did he seem to covet so much because it doesn't seem to have gone well uh ever since he attained it after the great financial crisis, which we'll get to. But what was it about fame, do you think, that made him really want it? I mean, it's such an interesting question, and I feel like I could spend another seven years thinking about it. I'm going to try not to. You have 25 minutes.

All right. So he's a psych major from college. He thinks about this stuff a lot. But I think what he told me was, it's like, oh have this like this need from not having gotten hugged as a child. Like it's my cold Canadian parents is why I need this. Why I have this hunger for fame. It's like a proxy for being loved. And like we all know, including Bill Gross, that's not going to work.

Right. Like he knows rationally that and he says this in the book that it's not going to fill in that hole. Right. Being famous, getting headlines is not gonna make him feel loved. But I think that quick hit of like, I mean, we all love being retweeted. Like this is very, I feel like this is a very accessible and like resonant concept where like,

he wanted that adrenaline hit. He wanted that little feeling that like, they like me, they really like me. And that's obviously impossible to hold onto. And it's so addictive. So I'm not- Everyone likes the feeling but most people don't like specifically chase it that and engineer their lives around

intuitively yeah so mary i'm not finished with the book so forgive me if you cover this oh no spoilers sorry but did you get into the relationship that he had with his parents like was that was it his upbringing that like did it i mean, to some extent. I mean, isn't that true for all of us, right? But I do think he cites Mother Goose Shirley being kind of the nothing was ever good enough for her. And there's this somewhat chilling scene that he wrote about in an investment outlook where he goes to the mausoleum where they rest. And he's like, isn't that good enough? And you're like, oh, my God. What?

He holds up his Morningstar tear sheet? No, it's the billions, I think. Oh my God. Yeah. Oh my God. I know. Ben, why don't you ask about the golf thing? Yeah, so you had this great story

about how his wife at their golf club got a hole-in-one. Yes. And it was well celebrated. Yes. And that was like his goal. He's like, I'm going to get a hole-in-one as well.

Yeah. And he claims he hit a hole-in-one. No one was there to view it now. And he claims he did it, but he-in-one no one was there to view it now and he claims he did it but he was so mad cuz no one saw it I wanted 50 pull-ups but nobody was watching this is like a yes I don't know yeah do you think he did it or do you think like he would lie about that were you not oh my god I actually hadn't really thought about that yeah I feel like I feel like he made it up when I read that I was like he definitely made this up you know

why that's such a stupid thing to lie about? Because it literally has nothing to do with skill. I've seen people play golf in their first year of golfing hit a hole in one. It's not even like, oh, I won a triathlon and nobody else remembers.

There's no skill in hitting a hole in one. 72% sure he made it up. And also, who cares? Right. He cares. He cares. He cares a lot. Like there's no skill in hitting 72% sure he made it up and also who cares right? He cares a lot But you know the thing that I love about his investment outlooks is it's always his like worst Stories like I had a friend in college who would always just like corner you at a party and tell you everything Embarrassing that ever happened to her. She's like I'm kind of failing physics. Is that bad and you're like that's kind of bad Yeah, like I don't know what to but she like would tell you it and the way she told it you're like no that's fine that's great and like it's kind of that public processing which like obviously provided a ton of fodder for me as a journalist writing a

book about this guy but it's also like that makes me think that he didn't because he had so much to mine and you see him still doing it right like he's out there coming up with new stuff to just confess to you over and over like more and more and more so if he i just he's not there coming up with new stuff to just confess to you over and over, like more and more and more. So if he, I just, he's not really. It's a confessional though. It's a confessional. So one thing that the three of us have in common with Bill Gross, besides billions of dollars, is that all of us write, I think, like fairly personal accounts of being involved in the investment markets. Maybe like me to the greatest extent, Michael somewhere in the middle, and then Ben is a little bit more like Midwestern modest.

We don't get a ton on his personal life and problems, but that's probably our spectrum. But I think what resonated, one of the things that probably helped Bill Gross become famous was like Buffett, like Howard Marks. 007 008

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0025 0026 0027 0028 0030 way before most people were thinking that way. Would you agree? Completely. Absolutely agree. Yeah. I mean, I think like he would point to the Booker guy at Lou Rukeyser's Wall Street Week for like making him. And I think that's like true. Like he was the Bond guy on that show at a time when people were like, wait, what? Like, what even are you talking about? And he was really young and he was like kind of irreverent, as we know. And I do think you're right. Like his, and people loved reading those investment outlooks. You know, they start with this like kooky story that's somehow embarrassing or like very,

you know, you're just like, what did he just say? And then he pivots so hardcore to interest rates. But, you know, there aren't that many people that just like do that in our world or there weren't certainly. It was just like a confessional. So he was extremely interesting and extremely early to like branding.

So you were doing tons of, I'm sorry, you were doing tons of stories about this in real time. And I want to cut to like the post financial crisis. You come along as, can I call you a cub reporter? Is that insulting? You may, yes, no I'm not. No, you were like a kid, but you were like super excited about covering the Bond Kings,

and they were the new stock picking stars. Like probably from 2009 till 2016, it was all about Gunlock, Gross, a few others. El-Aryan, okay. So what was it about this that made you say, I'm gonna spend a few years and write a book on it? Yeah, I definitely did think it was a few, not seven. So that's part one.

Yeah, you started this in like 2014. Is that what you said to Meb? Yeah, like when he quit Fired, I was like, oh, this is interesting. I did this like big story. And once that story came out, I was kind of like, this is only 3,000 words, but I'm pretty sure I could write another hundred. Yeah, I didn't realize it would take me this long. But I do. Yeah, I think like the time, like it seemed like there just wasn't this mainstream appreciation for bonds that, and like, of course I have a structural bias there where I think that stocks are dumb,

as we've discussed. And I think that more attention writ large should be paid to bonds, I think they're so much more interesting for my money's worth. It's like where rubber meets road for like corporations and governments and all these things. Like that's where the real things happen. I agree, except for the returns. Yeah, well, fair, yeah. As a journalist, it's certainly more interesting.

But yeah, at the time it was like this kind of heyday for them. I think you're right. And it created, I was like, where's the book on PIMCO? Like, why is there no, and there is, there's like a, you know, there's another book about Bill Gross, but it's from before they were really what they are. And I just was kind of and

there's like, where's the BlackRock book? Like, I know that these these things are impossible. I kind of know now why there wasn't a book about them cucks. No one else is as dumb as I am to just go ahead and write it. But I do think that that was like, that was right. There was no like, it's just not broadly understood. And the kind of massive influence that they have is so disproportionate to that understanding and even awareness. Hey, Mary, I think we forget,

it's been like, when did he go to Janice? I don't remember what year was that. 2014. That was like the meme of maybe not even just the year, but like the years. A long time. Anytime something happened, it was to Janice. XX to Janice, yeah, completely.

For the people that are unaware of that story, give us like the synopsis of he has a falling out with Muhammad and then what? Well, so he has a falling out with Muhammad. Muhammad quits and leaves PIMCO in January 2014. And then there's this big story in the journal about how like it was a fractious divorce, you know, turmoil at the top.

And the kind of one-two punch of that, I think, really destabilized Bill. It was like much more emotional for him than I think, you know, a lot of people would have experienced it or I don't know, would have been optimal for sure. And so over the months, he starts kind of fixating on who leaked to the press and who was the mole. And he's just not showing up to work like as a professional that much. He's showing up as a person. And the other people who are managing PIMCO are like, this is not manageable. We can't do our jobs. And it starts getting worse and worse and worse.

And eventually he, I say he gets quit fired because there was some confusion over, you know, this became the subject of a lawsuit as to whether he quit or was fired. So, yeah, he just ends up abruptly, you know, no one outside really knew that this was happening. There was like this big journal article in February, there was this Morningstar conference where he seemed kind of like everyone was like, what even is going on? I was at that. I was there and the crowd was like stunned. I think we have a shot of that. I think we have a shot of that. John? What happened?*** is this about now? What is this? And the crazy thing is, is your book starts out talking about how good of a call he made before 2008. And like, I mean, I'm just imagining

he would never would have done this because of his personality. But if he walks off into the sunset then, he is, I mean, his legendary status is like, you can't touch that. He's on Mount Rushmore. And since then, he's slowly like chipped away at that. And I think that Morningstar conference

might've been one of the first things where everyone – I remember people in the crowd going like, I'm getting on the phone right now, and we're selling our stake in that fund right now. Yeah. This guy's nuts. We're selling. Hey, the subtext of that is important though. Not the subtext, the context of that. So basically, he nails the great financial crisis.

I mean, no offense if you're a bond manager Probably that's like a default, but okay fine There was not to be does the thing he does the thing let's give it Let's give it up, and that's after years of good performance It's not a fluke like Paulson or something like this guy They were calling him secretariat or he was and he thought other people would follow, but he crushed he had great returns and then when it really mattered he steered the PIMCO what was PIMCO total return mm-hmm he steered that fund the largest bond fund in the world I think at that time or he steered that thing through the

storm no question but then I think from 2011 on pretty much everything he said and did turned out to have been the wrong like I think he was like betting against Treasury bonds and they were a tire into the into the the the debt ceiling thing like I feel like there were a lot and then maybe in his eyes you could you could corroborate whether this is true. So not only now do you have a lot of dissatisfaction among investors in that fund for the first time ever, but then you've got this layer of young guns beneath him and Mohamed El-Erian who are like, why is this guy making $50 million a year? When are we ever going to get our shot? Yeah. Is there any truth to to get our shot? Yeah.

Is there any truth to that? I think there is. I mean, it's also like, that's one framing. There's also kind of a different angle to it where it's like, within PIMCO, you have no credibility. I mean, this is true in finance all across the board, but it's very true at PIMCO. If you have bad performance, like, why are you talking?

Like, who are you and why are you even here? So for that to be, that's a great culture. I like that. Like for that to be Bill Gross trying to like steer the ship and like make all these big pronouncements when he had to apologize for performance in 2011, like his armor was like, I mean, he was already wounded. Right. And so I think you're right to say that that's kind of the moment where things started to fall apart for him. And like from there, yeah, there's just, when you're talking with no credibility, especially when you're someone as like acerbic and cutting as Bill Gross seems to have been as a manager, you know, he's not going to tolerate, you know, he's just going to stay the same as he always was in investment committee, which is extremely harsh. And people were like, wait, why is this happening to me?

What gives you the right? You know? And like, he's like yelling at Iverson. Yeah, look at your numbers. Who are you? Exactly. So I think there was just, just to some extent there's no coming back from that like you can come back from a bad journal article you can just like keep going and everyone eventually forgets but i think like once you like internally at pimco he was pretty damaged by that point what about at janice like what was that reception like imagine being a janice employee knowing that bill gross is coming to town. Right. Right. No, I think some of them were stoked, right? I mean, the

share price went up a lot. Everyone was like, oh my god, we're in the big time now. And then he walks in here like, alright. You just had the glasses ready. Here's how it's going to be. Secretariat is here. And then he basically funded it all himself. The majority of the money that went in was his personal capital, right? Yeah,

$700 million of it was his personal capital, which no one did the math at the time, I don't think. But like he was paying for the privilege of that job. Can we back up though before even Janice? Does Mohamed El-Erian come out of this looking like the good guy the way that we all – I think most of us look at him and we say, he's such a nice guy. How could he have had any real fault here? But we don't, who knows, right? But in the court of public opinion, Muhammad definitely got the benefit of the doubt. Obviously, that's my point. But maybe Mary knows

something different than we all seem to think. Yeah, I think Muhammad was pretty uncomfortable with the reporting of this book, I think for this reason. You know, he has a really good reputation externally, and internally it is a different story. You'll notice in the book, he did not participate until the extremely last minute. He, and all of his comments are from a lawyer. Your story about him and his daughter, like, as a parent, crushed me. That one was like... I know, right? Me too. I know, I found that instructive. But the other thing about this that I'd read all these stories about gross before, but you going into PIMCO and the culture there, that is stuff that I had never really read much before. And my first thought was there's no way in hell my personality as a Midwestern, what did you call me, Josh?

You seem way too nice. I said you are modestly Midwestern or Midwesternly modest. It was a compliment. That's what I'm saying, but my Midwestern roots would not have worked there because you're talking about people getting nasty emails and how political it was and sleeping in your car so you could get up at 3 a.m. to work until 6 p.m. And basically you made it sound like everyone there was miserable. Because they couldn't leave. Where were they going to go? Right.

And you're saying they have this great place, but it's just an awful place to work. Like how – obviously they got paid a lot, right? That's the – How many people wanted to tell you those stories? Oh, all of them. It's a great place, but it's just an awful place to work. Like how, obviously they got paid a lot, right? That's the silver lining. How many people wanted to tell you those stories? Oh, all of them. It's so funny. So you found ex or current PIMCO people?

I talked, oh gosh, I talked to more than like 200, almost 250 people for this book. I don't know what proportion of those were like, I was a consultant versus I worked at PIMCO. I haven't actually, I should crunch those numbers. But it is really funny to me in the aftermath. You know, so I published this book. I've been working on it for way too long. Everyone was so nervous the entire time I was reporting it. I was getting all kinds of paranoid phone calls and whatever. And so it comes out and everyone's like, I have heard that people at PIMCO were just squirreled up, like, you know, like reading their little copies in the corner and like, no one was doing any work. I'm sure they were doing work. I'm so sorry. But,

but like the feedback I've gotten they're like you nailed it the assholery can I curse on this uh they were like her mic that's it I'm so sorry you guys we'll see you next book see you in 20 years um no they were like this is right this is you nailed it this is exactly how it is and the assholery the culture is exactly right and I got one guy emailed me and he was like, I had my first nightmare since leaving PIMCO after reading your book. What was the nightmare? Yeah, Bill Gross was yelling at him on the trade floor.

They called PIMCO in New York, they called PIMCO the beach. So when they had bond orders from PIMCO, they said the beach wants X hundred million in treasuries or whatever, right? Exactly. But did people back East understand what a pressure cooker it was in Newport? Because when you picture Newport Beach from lower Manhattan, you just picture golf and the ocean and like a bunch of clowns who don't really work that hard. But that's not what this was. Then you visit and like Fashion Island, like no one's wearing a suit but these guys.

Nobody looks miserable but these guys. Like everybody else is in flip-flops and T-shirts and like living their life. That place is the best. It's beautiful. Hey Mary, did you speak to his neighbor? I spoke to his neighbor's lawyer. Okay.

What a story that was. Oh my God. Yeah, I think those people are happy about it. It's ongoing, right? neighbor's lawyer. Okay. What a story that was. Oh, my God. Yeah, I think those were unhappy about it. It's ongoing, right? It's ongoing. Yeah, it's failing to end. I had to just stop the book. Explain to people what's going on there.

Not everybody is aware, but it's pretty wild. Follows it this closely? That's so weird. So Bill Gross and his new wife, Amy, they bought a house in Laguna. It's called Rockledge by the Sea. It's very beautiful. And they installed this $1 million Dale Chihuly sculpture. And it's like a bunch of blue glass tubes, you know.

And, okay, they love it. They're very happy. Amy's like obsessed with it. She's like praying to it. She loves it. Whatever. Love their art. That's great.

But it somewhat obscures the view of their next door neighbor. And the neighbor's like, can you take that down? And they're like, no. And then they put a protective net. Sorry, I'm getting the order wrong. They put a protective net over it because it got like damaged in some way and the neighbors like okay that's a soccer net and it's like I can't it's like very distracting do you mind and they're like we mind so the neighbor complain when you live there on the ocean like the view is why you live

there and why you paid that much money right this is not a regular suburban dispute between neighbors and it's these people have yeah four hundred million you live there and why you paid that much money right this is not a regular suburban dispute between neighbors and it's these people have yeah 100 million dollar properties and their houses are like weirdly on top of each other like this is a luxurious home this home these homes are gorgeous they have space but they're like weirdly kind of stacked like it's like a little bit of manhattan living but so they're like they complain to the city the city's like oh you need to get the proper permits and then bill gross and amy start playing loud music at all hours, and they start playing the Gilligan's Island theme song What was that about?

Apparently it was filmed near there Don't worry about it But yeah, so and like Green Acres and a lot of 50 Cent Which I was happy for the resurgence in 50 I mean I feel like there's been and a lot of 50 Cent, which I was happy for the resurgence in 50. I mean, I feel like there's been a lot less purchase lately. He really is the king. Right? Well, the thing is he's playing it at the legally allowable sound limit. Yeah, of course he is.

Of course he is. There's nothing illegal happening here. All right, this is all alleged. We don't know any of this for 100% fact, right? My other favorite thing that you – Like, I've always thought this. You talked about how, how like he would talk crap about stocks and like in his and he'd say like i'm selling out of my 401k and you're like

he didn't really mean it and but that's just something bond fund managers have to do right they have to kind of talk down on the stock market because that makes bonds look better in comparison right i mean yeah but i also think he had this kind of uncontrollable impulse to to talk shit about stocks just like i don't know that it was so conscious sometimes. Like in the same way that like maybe he didn't mean to antagonize his neighbor to the degree that he did. Like maybe he, like it's an impulse control question also where you're on TV and you just keep talking.

I don't know. I do think that there's like an, there's a difference between like intentional. I don't know. It's a good question. Do you think he could raise money today if he was like, I'm coming out of retirement? You think so? I mean, people are still obsessed with him. So he could raise something. I don't know about institutional capital.

Who would allocate to him? He could do like a meme raise in a heartbeat. Yeah. Should he do an NFT? Wait, what do you mean? What's a meme raise? What do you mean? He could like literally put clips of him at the morning star conference and sunglasses and he would instantly be the hottest the hottest thing on reddit for like three days the problem is that he hasn't pivoted you're right the problem is it would be bonds and people would be like okay where's the rocket when does the rocket right like when are we taking off yeah that, that is the rocket drop. Hey, Mary, what do you say to people who say that he had the wind at his back? Because my answer is like, well, there was like hundreds of thousands of other PMs that

didn't become Bill Gross. Thank you. Right. That's the first, yes, that's the first part of the answer. And the second part, because this is the number one question that I get is everyone's always like, oh, he was just lucky. And it's just, there were a lot of other lucky. That doesn't mathematically make any sense. But I think like, you know, there are a couple of papers.

Wait, wait. So hold on. In the late 70s, early 80s, 10-year treasury is yielding what? 25%? No. 15 probably. 15? I mean, the mortgage rates are.

I think it got up to 18. But anyway, everyone else had the wind at their back too. He wasn't. Hold on. So for the next 40 years, bonds go up yields go down basically almost in a straight line with a few years of exception yep and he actually questioned himself in one of his last memos like have i just been lucky all this time um but what sets him apart to michael's point what sets him apart from a thousand other bond managers over that?

Is it longevity? Is it the fact that he was writing and communicating? Like what really sets him apart? Completely all of that stuff. He had some real insights that actually were different that I think other people either didn't see as clearly or didn't structure their trades as well around. So I think one of those was like the investing in mortgages. Like I just think they were earlier and better. And then, you know, I think he took more credit risk. He was had a better kind of duration sense and selling volatility. Like these are real things

that he did. And there's like, you know, there are like kind of nuances within that. There are kind of sub strategies. Like my personal favorite is the kind of cash and cash equivalent arbitrage, where like if Michael has is holding his, you derivative position cash in cash and I'm just like hold on one second I'm going to just invest that in like short-dated corporates I'm just going to make a little bit more than Michael every day you know and that over 40 years is always going to help like there it's very rare that that's going to blow up on me now where that line is of what I'm investing in like there's apparently a robust debate as to whether or not Russian floaters should count in the cash equivalent bucket, which like today, we would say no. But there's absolutely, you know, nine times out of 10, that's going to work. So

over those time periods, yes, I think he did have those real insights. And there was a paper a couple years ago by Richard Dewey and Aaron Brown that kind of looked into this and stripped out those three factors and did find that, yes, that's actually a large kind of a reason for his performance. But I think to your point of him being good, I read that about the leverage. He was the first one to do it, basically. So he because he was the only thought about like, hey, wait a minute, we can get free returns here because we're earning higher returns on this cash. Right.

And the whole time just sticking to that. And he invented total return. That was like he did all this. He did that. So that's a good segue to the next thing I wanted to ask you, which is that just as he's imploding, there's another superstar bond manager on the rise. Who could it be? Literally works maybe two hours by car away from him, stealing his thunder, generating

amazing returns. Jeff Gundlach launches DoubleL comes out of what was a firm called before WTCW comes out brings his team with him knocking the cover off the ball I think he was involved in like non-agency MBS and he had like this very specific niche that worked really well during the crisis and he essentially steals PIMCO's thunder for the most part. And I think that that has to be a contributing factor to Bill Gross going slowly crazy, or maybe not that slowly,

because it's hard to see the new kid in town all of a sudden be anointed the new Bond King, and he's probably sitting there like, all right, I'll shave my mustache, but I'm still here, guys. So what element did that play, what element to that play? What asked, like, what role did that play in in your narrative as you got later into his career? I think that's really incisive. I think that's right. I do think I'm very good at this. You're

very good at this. I think that he absolutely like, you know, one of his defining traits is what I would call paranoia, right? It's this clinical insecurity and like beyond the point of rationality, watching your competitors and making sure that you're beating them and when it's someone like Jeffrey Gundlach coming up like you feel that I do think that that was he was watching him very closely and absolutely took money this probably absolutely 30 40 billion AUM ultimately that went from one house to the other literally they ever did they ever relationship at all did they ever talk ah they did they had this like summit this big meaning of it well i can it's in the no spoilers

it's in the book but but it's like you want a double line to hire him though yeah they were about to hire him they drafted a press release they were ready to do it which can you imagine like the content would have been that would have been amazing yeah that would have gone well that would have lasted for like three weeks from a content standpoint that should have happened right right we would all reach the benefit from that a lot of yield but i do think that would have gone well that would have lasted for like three weeks from a content standpoint that should have happened right right we would all reaped the benefit from that a lot of yield but i do think that would have been a disaster but i mean speaking of branding jeffrey gunlock is like kind of yeah the the bond king of of content for sure now um and you see bill in his in his um own personal memoir that he released a couple weeks ago he kind of took a shot at jeffrey and was like his return certainly would not justify the title.

I love that he's still petty. Still at it. Can't let go. How is Bill Gross not tweeting? I feel like he would love to tweet. He is tweeting. He is? Bill Gross?

Oh, my God. I'll send it to you. It's real underscore Bill underscore Gross. I didn't realize that either. I did not. Oh, my God. Is he verified? I don't know if he's verified.

He must not be good at it. I declined to comment. He should tweet as his cat. Oh, yeah, Bob. Is he verified? I don't know if he's verified. He must not be good at it. I declined to comment. He should tweet as his cat. Oh yeah, Bob. Rest in peace. Bill? Bob. Bob?

Yeah. Wait, this is really him? His bio is, Bill Gross is a renowned expert in the bond market and is at the forefront of thought leadership on the subject of fixed income investing. This is really him? You need to do that. He's a big third person guy. He tweeted his book two hours ago.

He's trying to one-up you, Mary. I do think he's trying to one-up me, yes. What was the process like trying to get him to talk to you? Oh, he was actually not. He was super open for many years. I think what happened was like, so in the aftermath, I heard that he pitched Michael Lewis to do this book basically. And bless his heart. While you were writing it already? Before I really started digging it.

Yeah, thank you. Michael Lewis would never. But no, Michael Lewis also didn't. And I think so over the couple years, you know, I think he was a little bit more optimistic about the book and like what I would write. A lot of people thought I was like a Bill person and like would only write from bill's perspective and bill's kind of he's not like dumb he doesn't think that he understands how journalists work just to a very large extent but like you know we had great conversations i sat down with him for hours for days in 2017 talking about his childhood his cold canadian parents you know the things that motivated him and it was like

super interesting and wonderful. We should say this. We haven't been, maybe we haven't been, before you finish, we might not have been reverent enough. He is a genius. And he was like beating Vegas at cards before he ever touched a bond fund. Yeah, Ed Thorpe. He is a brilliant man. And he's interesting.

He like does martial arts. And like, he's a very interesting and a brilliant man, and he's interesting. He does martial arts. He's a very interesting and brilliant person, and we should say that. Your first interaction with him where he kind of Jedi mind tricked you because he said you had your numbers wrong. That was great. He was playing a game with you there. Literally, with everyone. So the story, just in brief, was that I had a mistake in a story about Pimco,

and I had never met Bill, and he goes on Tom Keen's show, and he's like, Mary Childs needs to get her facts straight. And I'm like, oh, my God. I'm like 25. I don't know. And so I'm like literally vomiting at my desk, and so he calls me after, and I'm like, he said on air, you know, we're like 70 bips or something over the benchmark.

And I'm like, okay, I can replicate. Like, I can find this. I know how to use the terminal. I worked at Bloomberg. He calls me. He's like, oh, you got your numbers wrong. I'm no i'm so sorry you know i i know that i did i gotta fix them but like i can't replicate the numbers that you said i've been trying i've been trying different share classes i've been trying different time like what am i doing wrong and

he's like you got to say your numbers i got to say mine and i'm like what what all right before we get to the questions from the stream who who is playing him when HBO adapts your movie into a limited series? I love it. Who is the Bond King on prestige television? I told you this. Robert Pattinson. Terrible take.

Shut up. I love that. Oh my God. For young Bill, I love that. Okay. Thank you. I've been seeing that Pattinson looks like a young Bill Gross. I see it.

I fully see it. So, okay. What about Steve Buscemi? Oh, that's perfect. I don't hate it. What about Willem Dafoe? Say more. That's good. That's good.

That's good. Willem Dafoe is mine. Yes, yes. That's the most obvious. Okay, okay. Michael Shannon? But he's old, though. We need a young.

I know. It's a little, yeah. And William H. Macy also. We don't want that Irishman CGI shit. Like, we need a young Bill, and we need a narrator Bill who's now the current Bill playing Gilligan's Island. I think, I'm thinking you're right. We need like a young, like, we will take Robert Pattinson. We need an unknown for Bill so it doesn't distract.

You think? Right? Yeah, I feel like that always goes better. I think to sell it, you've got to get that prestige name. You need a big name, like Bryan Cranston. Bryan, okay. I know it doesn't look like him. Sorry.

What if Duncan Hill shaved his beard? Tony Shalhoub is Muhammad Al-Aryan. Literally. Have you been reading my... Literally. No, but you and I are... We're on the same wavelength. Oscar Isaac is Muhammad.

Oh, okay. I accept. I don't hate that. I don't hate that at all. Bradley Cooper is Jeff Gunlock. Okay. The Pretender. Oh, this is gonna be a huge movie.

This is going to be good. Who's Wendy Kemp? Charlie's Throne? The show is called Bips. Who's Greenspan? Who's Greenspan? I'm so happy right now. This is like my dream.

We just sold it for you. That's great. All right, Duncan, did anybody say anything or ask anything insightful before we let Mary go? Hi, young Bill Gross in the show. She's a young mom and has other things to do. So do we have anything good? Very young, extremely young. Tina?

We know this. Yeah, so I mean, we have one that's like a softball question, but I think a good one from Dave, which is, what's your favorite Bill Gross story that didn't make it into your book? Ooh, good question. Oh, man. What did you save for the sequel? What did I save? Also, can the compound produce this

series? I feel like we should do that. You have no money. How am I agent? My favorite Bill Gross story that didn't make it into the book, I mean, his book actually covered a lot of these. There's one where he shot Lou Rukeyser with a rubber band on Wall Street, like on

television, speaking of impulse control. a rubber band on Wall Street, like on television. Like as a gag? Yeah, like related to his investment thesis. You know, it was like it was indicative. It was like the elasticity of consumer demand or something. Yeah, you had a prop. And he like didn't really think that through and then he didn't get invited

back on or something. So that was a fun one. That's actually pretty good. There were a lot from like the 70s and 80s where like, I talked to so many guys from the 70s and 80s and they had such, they were like, oh, that guy used to, you know, he had a license plate that said bonds and it like pissed everybody off in Pac Mutual. And they were like, who's this guy? And he like pulls up and parks in the spot that isn't his next to the CEO. And just, you know, he was always a little, he had that swagger long before it was. I kind of love him more when I hear these thoughts.

It's kind of endearing. I know. It's really endearing. Right. I love it. Anyone else ask anything good? Just for the sake of time, we'll just do one quick one from Blair, which is a pretty funny one. She just says, remember the monthly letter where he riffed on automatic toilets and how they don't recognize him?

Yeah. Apparently that's a real thing. He called them cameras. He said that there wereed on automatic toilets and how they don't recognize him yeah apparently that's a real thing he thought he called them cameras he said that there were cameras in automatic toilets like automatic flushing toilets and you're like i don't i mean i guess i as soon as i read that one i i said i sent them seven million dollars yeah immediately immediately take my money man please yeah yeah genius yeah yeah i totally got all right mary listen to me listen to me the book is it the immediately. Take my money man, please. Yeah, yeah. That's a genius. Yeah. Yeah, I totally got it. All right, Mary, listen to me.

Listen to me. The book is a smash hit already. Thank you. But we want everybody who's watching this, we want everybody who's watching this to buy a copy. And what I promise them is that I'm gonna put your address out and you will sign all, most, limited time though. It has to be within the next six months. Listen, everybody wants this book to be a success because we want you to do the double line story in a few years.

No, we want you to. Death first. We'll get Fleckenstein involved. We'll do it right. I have a saying now, never the living. I'm never writing about living people again no smart

smart anyway we're rooting for you everyone who's read the book Ben included has had nothing but great things to say thank you

so congratulations on your first maybe last book and everybody can click on the link below follow Mary

on Twitter and all of the places. And make sure you buy a copy of the book. If you don't want to read it, buy it for the investor in your life who may want to. There's a lot of great stuff in there. I hope they do the TV show. And if they do, Michael wants an executive producer credit. Can we do that?

I'll work on it. Yes, absolutely. You're the best. Thanks for doing this with us. Thank you for having me. Congratulations again. Thank you. All right.. Yes, absolutely. You're the best. Thanks for doing this with us. Thank you for having me. Congratulations again. Thank you. All right.

Good night, everybody.