šQuick Notes from The Bond Kingš
Brief note with some takeaways from The Bond King by Mary Childs.
Taking a break from taking a break to bring you yet another post that no one had asked for, this time in the form of a book review/reaction. More so than other posts, this one is a medium for me to write my immediate thoughts down with the intent of revisiting them at a later date to assess if and how my thinking on the matter has evolved. A bit more selfishly, Iām hoping to get my hands on advanced review copies of a few upcoming titles and may use this post to show authors that Iām capable of publishing a non-review review with only a few of you unsubscribing as a result of deviation from the usual stuff we discuss here.
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There is no shortage of praise for Mary Childsā The Bond King: How One Man Made a Market, Built an Empire, and Lost It All, and for good reason ā the book presents a well-researched account of Grossās ascent to money management hall of fame, and his equally tragic downfall. You can safely forego the reviews and dive right into the book, but if you insist on an appetizer course Iād recommend this NPR interview with the author.
While Iām partial to anecdotes of exuberant opulence in this genre, TBK artfully substitutes such tales with glimpses into the charactersā psyches as they submit to internal compulsions that remain immune to any rationale acknowledgment of the fact that, by many markers, they have āwon." If Michael Lewis and Ben Mezrich inadvertently inspired a generation of financiers with stories of untold riches (in spite of the ācautionary taleā framing of their works), one gets the sense that Childs intentionally skips through the trappings of wealth to get to the root of what has driven many to success in the industry:
āThe environment seemed to attract one particular breed of human, and those weird, intense, paranoid men (and the odd woman) seemed to thrive in direct inverse proportion to the depth of their emotional problems.ā
With that, some disjointed notes below:
Bias to Action. Grossās disdain for bureaucrats, committees, and the like is perhaps the most frequently recurring theme in TBK. In part responsible for both, his success and his losing control of the company.
People Are Worried About Bond Market Liquidity. One of the most memorable characters from mid-2010ās financial media, PAWABML, makes a guest appearance halfway through the novel. Search results for the phrase yield nearly 700 results, and itās honestly impressive that Matt Levine has kept the schtick alive for that long. TBK recounts a seemingly unrelated episode of Bill Powers meeting with a Treasury official to discuss PIMCOās trades in treasury futures ā where its activity contributed to a shortage of supply of bonds to be delivered under certain contracts; overlooking the ocean, Powers mused to himself that the āwaterās deep.ā Until I see evidence to the contrary, Iām going to assume that was a thinly veiled liquidity pun.
Introspective Nature. Noting this to take public issue with Childsā description of Grossā introspective nature as āunusual for a finance guy.ā I havenāt run the numbers, but I strongly suspect the demographic responsible for journal notebook sales is 30% teenagers, 60% fund managers, and 10% other. Can you even call yourself an āex-Tiger cub-adjacent sector analystā if youāre not writing a daily journal detailing how the weather affected your conviction in a trade recommendation?
On Benefits of Gambling Thinking. A common genre theme that, in my humble opinion, has done more harm than good to aspiring investors. It makes for catchy headlines and folksy tales, but I remain skeptical.
On Manufactured Opportunities. From the handful of highlighted trades in the book, many appear to have been āmanufacturedā by PIMCO in one way or another. By this, I mean that, even if a prior opening existed, PIMCO needed to orchestrate a series of events in order to capitalize on the opportunity. Iāve been āstanningā such trades hard, and am always pleased to read more examples.
Everything is Seating Charts. Another Levine favorite makes a handful of appearances, first in Josh Thimonsā refusal to rise for a standing ovation following Grossās speech, and again in a carefully orchestrated seating chart for an investment committee meeting.
Succession Planning. Arguably the entire story centers around the difficulties of succession planning in founder-led organizations. This passage does an incredible job of capturing this dynamic and is worth noting for meaningful leadership transition situations.
āThe young ones couldnāt see that Gross and his peers had created these beautiful machines [businessess] out of nothing, out of their ability to wring out better numbers, and from there, they had learned to shift things to their will, to pick which companies would get money and which wouldnāt. It was so much more than a game. Now, in the hands of those who had inherited it, it looked cheaper.ā
There are a few more underlines in my copy, but these were the ones that stood out and/or had some tangent relevance to this blog. The Bond King is available wherever fine books are sold, though you should consider buying from an indie bookstore.
