Episode #399: Mary Childs, NPR’s Planet Money – Bond King Bill Gross

Episode #399: Mary Childs, NPR’s Planet Money – Bond King Bill Gross


Guest: Mary Childs is a co-host and correspondent for NPR’s Planet Money podcast. Before joining the team in 2019, she worked at Barron’s magazine, the Financial Times and Bloomberg News. She’s also the author of The Bond King: How One Man Made a Market, Built an Empire, and Lost It All.

Date Recorded: 8/1/2022     |     Run-Time: 46:23

Summary: In today’s episode, we kick it off with Mary’s time with Planet Money, one of the most fun and popular finance and econ podcasts around. We talk about some of her favorite stories, like why a publicly traded deli in New Jersey was worth $100 million, how Citibank accidentally paid out $900 million, and why you’re giving your boss a loan without realizing it.

Then we dive into her new book, which took seven years to complete and garnered rumors that she was paid $10 million to not publish it! She walks through the history of Pimco and Bill Gross and the irony of a bond manager becoming famous.

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Transcript of Episode 399:

Welcome Message: Welcome to the “Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

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Meb: Welcome, friends. We’ve got a great episode for you today. Our guest is Mary Childs, co-host for NPR’s “Planet Money” podcast and author of “The Bond King” which shows how PIMCO and Bill Gross change finance forever. Today’s episode, we kick it off with Mary’s time with “Planet Money,” one of the most fun and popular finance and econ podcast around. We talk about some of our favorite stories like why a publicly-traded deli in New Jersey is worth 100 million bucks, how Citibank accidentally paid out $900 million, and why you’re giving your boss a loan without even realizing it. Then we dive into our new book, which took 7 years to complete and garnered rumors she was paid 10 million bucks to not publish it. She walks us through the history of PIMCO and Bill Gross and the irony of a bond fund manager becoming super famous. Please enjoy this episode with NPR’s “Planet Money” Mary Childs.

Meb: Mary Childs, welcome to the show.

Mary: Hi, thank you for having me.

Meb: It’s great to have a fellow podcast host on here. Where do we find you today?

Mary: I’m in Richmond, Virginia in my little home studio porch situation.

Meb: I’m looking at the background. That plant is not looking so hot, Mary, is that…or am I just…?

Mary: No, that’s not you. I have killed more plants in the past year. I don’t know what I’m doing wrong. They’re biting the dust left and right.

Meb: Well, all right. A Virginia girl, W&L. You graduated sort of in the teeth of the financial crisis. Do I have the time timeline right? Were you a GFC product? What happened right in the financial world? Just spit you out and said, “Here you go.” What did you start covering because you were a journalist undergrad, right?

Mary: That’s correct. Yes. That’s exactly right. So I actually had taken an internship with “Bloomberg News” and was supposed to start that September of 2008, which is the right time to, like, cut your teeth as a journalist intern. However, I then got this fellowship travelling the world and painting. It’s called the Watson Fellowship, and it’s just this amazing opportunity to pursue your passion for a year. And I was like, “Oh, no.” And so, eventually, I actually turned down that internship. Bloomberg was super cool about it, which was a miracle for me, and I was actually able to come back a year later and start them. But then I was like watching the financial world melt down and I was like, “There are typos in like “Wirestore.” Like, “Let me add it.” Like, “What am I doing painting?” I mean, I loved it but it was also stressful.

Meb: Where did travels take you in that period?

Mary: Oh, a lot of places. I spent, let’s see, two months in Brazil, one month in China, two months in Japan. I went to Dubai. I went to Ghana, Rwanda, France, a lot of places. It was wonderful.

Meb: My goodness. Yeah, that doesn’t seem like that hard of a decision, Bloomy/travelling the world. All right. So you decided to come back into the financial world fold. You’ve been at some of the top shops. I’ve been a long time listener of NPR “Planet Money.” You got a new book out, which we’re going to talk about in a little bit, “The Bond King.” You’ve had so many great stories over the year. I thought we’d talk about a few because I feel like there’s a few common threads, and you’ll see if you agree what the common threads are as you talk about it, but a lot of esoteric topics. Before we talk about a couple, what’s your process? Or you’re just kind of like looking around the world and say, “Man, what is this weird thing going on over here? Let’s dig in and study it.”

Mary: That’s basically it. I talk to people in the market. I follow everyone on Twitter, and from kind of just poking around, you’ll see things across that you’re like, “That’s a little funny. That’s a little weird,” or, “There’s something in here that’s off.” We always say at “Planet Money,” you need to have a yarn. You need to have a fun caper and adventure where people are interested to follow along and there’s, like, something surprising. More than that, you kind of need to actually learn something about the world. There are sometimes stories like the Citigroup $900 million mistake in payment is a good example of a story that was, like, wild and totally fun to talk about but it was hard to tease out for a while the, kind of, larger learning from it.

Meb: Tell the listeners what that was if you hadn’t heard.

Mary: So Citibank accidentally sent out a payment for Revlon bonds and they were like, “Oh, no. Sorry. We checked the wrong box. Can you just send that right back?” And it just so happened that Revlon was in this big dispute with a bunch of the hedge funds and the hedge funds were like, “No, we’re owed this money. This is our money. We get to keep it. Thank you so much for the prepayment.” And Citibank was like, “No, no, no, no.” So it sparked this whole legal battle and it turned out that the hedge funds indeed could keep it because they were owed that debt. And it was wild to watch. It all went down basically through the pandemic when everyone was in quarantine and it was just like talk of the town and so interesting. And you don’t think that banks, like enormous banks, would make these mistakes because you forget that they’re staffed by human beings who, like, might push the wrong button, but, of course, all of that is true.

And the story was really fun but we ended up kind of…You have to stay with these stories sometimes and think about like, “Okay, what is the bigger picture here?” If you’re in the moment and you’re like in the weeds and you’re, “Oh, my God, I can’t believe this happened. Oh, this other wild new development.” It can be distracting from a larger issue and a larger lessons from it. And so, taking that step back is, I think, one of the main strengths of the team at “Planet Money” where people are like, “I don’t follow this. I haven’t been following this. Is this what happened? Is this why this was able to happen?” And that’s what happened when we did the episode was that my teammates were like, “Is it that banks have less power now that people can’t say, ‘Hey, no. You know what? I’m keeping the money. You do you. This is my money now?'” Because in the past you can’t imagine that.

Meb: Before any listeners get any ideas, you know, I’ve certainly seen a bunch of stories where individuals will get like a deposit and then they just go spend it all and then they’re on the hook for it because you probably don’t have all the team of lawyers the hedge funds do. So what does your team look like? Is this just you working on these stories? Do you have a bunch of W&L interns that you’re sending out in mass? How does something like this get produced?

Mary: I wish. People are always like, “Have your researchers do a better job next time,” and you’re like, “No, that’s me. You’re talking to me.” How many are there? I think there are five co-hosts right now. Usually, there might be seven other times. I’m not really sure what the actual numbers are. I think we’re a team of about 20 total. I think that’s about right. And we have producers who help book guests and help fact check. And I think we’re hiring a fact-checker, which is so exciting because, again, when you’re in the weeds it can be really hard to make sure you have all your Ts crossed and Is dotted. And then we have two editors who are fantastic and, again, help you stay out of those weeds and get that bigger picture.

Meb: Part of the challenge you guys do a great job, of course, is making economics, investment, personal finance, whatever may be entertaining. Although, when you dig into some of the stories that you write about, some of these are so weird and obscure and different that…or maybe just needs a different lens that the stories write themselves. I like when you guys dig in. Like J.Crew to me was…from someone who had some J.Crew clothes certainly over the years. Tell me a little bit about what that story was, if you recall, for the listeners.

Mary: Oh, that one was wonderful. That one is, like, imprinted on my heart. It was probably my first episode that I did from A to Z. I was probably, I don’t know, eight months into the job and I was totally new to audio, so I kind of, to this day, say that I have no idea what I’m doing. I should probably stop saying that, though. The editor of “Planet Money” at the time was like, “Mary, this J.Crew thing seems important. A lot of people have owned J.Crew clothes but it’s a financial story. Like, it’s a very interesting story of financial engineering and kind of a story of our times. Can you tell it? Just go try.” Again, at the time, I had no clue what I was doing, and this one seemed actually relatively straightforward because it’s such a caper and you’re kind of propelled forward by the story. You know, you have this, like…I call it the trap door two-step. I don’t think that’s caught on, but this IP, intellectual property transfer that at the time was this radical and very offensive to a lot of people maneuver of financial engineering. And now I believe people think it’s cool and fine. It became kind of a blueprint that other people followed in the footsteps of.

So I think the challenge of “Planet Money” is you do have a mass audience and that’s also the opportunity, right? So you want to say, “Okay, you had a pair of J.Crew pants. Did you like those pants? Did they stay the same quality for you over the years, or did you notice a deterioration?” Because a lot of people noticed a deterioration in the quality of their clothing.

Meb: By the way, the famous thing that I remember J.Crew had great jeans when I was in high school but they lasted like a week.

Mary: No way.

Meb: But I’m older than you. This would have been in the late ’90s. So, really comfy jeans, but that was it. Anyway, keep going.

Mary: I mean, that’s actually interesting because that’s a bit counter to the narrative. The narrative is that they used to make really quality stuff, and then there was a degradation in the quality of materials when TPG took over. So that was the, “My sweaters are fitting weird. The cut is weird. These shoes are clearly just glued together.” And you’re paying the same prices or more and it’s just the quality isn’t there anymore. So that was part of the story, and then it became also the story of trying to rescue a company from the brink of bankruptcy and trying to figure out how to…Well, if we move this over here or move that over there we can get new debt and we can keep this thing going for a little longer.

And explaining all of that, you know, I was up at 1:00 a.m. trying to put documents together to figure out how to explain the trap door two-step. And I was like, “This is just insane.” Trying to communicate the levels. And what’s the right level of complexity versus clarity? That’s always a balance that we talk about is you want to come away feeling like someone told you the truth, like you know what actually happened. So getting that specificity is critical, but also, at the same point, it’s do you need to know? You don’t really need to know. So there’s yadda, yadda, yadda versus a wanting to walk away from the episode feeling like you really know what happened.

Meb: Yeah. How many times do you guys do follow-ups where it’s not like open-shut story where you’re like, “Oh, hold on a minute?” This thing a year later continued on in such a way that it’s…the ending, it’s like a part two. Does that happen a lot? You follow up on a lot of these? Is J.Crew still around? Like, I don’t even know.

Mary: I have no idea what’s been happening with J.Crew. I was just on their website. I need a new suit, but no one sells good suits, no offense to J.Crew.

Meb: What for? Why?

Mary: I was going to get a cool suit for my book party, but I think that’s asking too much of the universe right now.

Meb: Are you going to do it in Virginia or in New York?

Mary: Both, actually. I have an event here later in March and then one in mid-March in New York. So if you’re in town…

Meb: Awesome. Congrats.

Mary: Thank you.

Meb: We used to have a tradition, a little dive bar here in L.A. that I used to do mine that I’ve never been to I think otherwise besides with books, but was just in Puerto Rico and Jackson, Mississippi, which are still barbell like the two…Mississippi, of course, the most open place on the planet. Puerto Rico is, like, the most COVID-strict I’ve ever been. And so, I was just smiling as you’re talking about suits because I’m like, “I don’t even know where mine would be.”

Mary: Right. I think it’s like amusing that I would…like, what is a suit anymore?

Meb: All right. Let’s talk about one more story and then we’re going to start to shift gears a little bit, maybe. One of the ones that I liked, it’s an interesting one because as you talk about a lot of these stories, part of it is just legacy financial system, whether it’s LIBOR, whether it’s supply chain, whether it’s just esoteric stuff talking about the history of the two-week payment period, bimonthly period I thought was a really interesting story as you talked about it because there’s a lot of moving parts. There’s like this is the way it’s always been. There’s the disruption. There’s the way things are changing, but still, it’s one foot in the old world. Can you tell us a little bit about the boss and loan story?

Mary: It’s one of those galaxy brain moments where you’re like, “Wait, why do we get paid every two weeks? Why don’t I get paid daily?” And once you start thinking about it, it kind of explodes your brain in other areas too. I am so enraged now that when I, like, submit a claim to my insurance company, I have to wait for them to pay me with no interest. Like, how dare they not pay me interest? But, of course, that’s not the way the world works. So the two-week pay period just kind of was a historical relic where it used to be really hard to transfer money and you can see this across the financial system. We talk a lot about T plus zero as an aspiration, and it’s like, that would have been mind-boggling because you used to have to just carry cash. You’d have to get on your horse and drive it over. So, to some extent, we just don’t update these things as quickly as we could, and that, to your point, allows that space for that disruption and innovation and new ways to do things. And it’s hard to just move the incumbents, but it’s oftentimes to the benefit of the people.

Meb: You highlight some things that I think where Wall Street or the traditional system does itself no favors in this story. You’re talking about one of the CEOs where, you know, these banks make so much money from things that are really oddly head scratch or not particularly consumer-friendly but had a boat with the name being Overdraft, which is just like such a facepalm. It is like all the ones who was, like, EBITDA. Like, it’s just so cringe. You’re like, “That cannot be a real thing.”

Mary: Right. Did no one tell you not to do that? Like, you need to look at your friend group and think harder about who you have in there.

Meb: And that’s the thing with the finance world is like we often say there’s kind of like two Venn diagram circles and this applies kind of the asset management industry that I’m in. And I say, you know, there’s one group over here that says, “Look, we’re going to try to deliver a great product and try to charge as little as possible and stay in business.” There’s another group in here that said, “We’re going to try to charge as much as possible and see how much we can get away with.” And there’s, like, almost no overlap. There is not a whole lot of in-between, and you can kind of group a lot in those two anyway. Hopefully, the directional arrow of progress is moving in one way.

Mary: I think it is.

Meb: Do you have any particularly memorable moments from these stories, whether it’s doing due diligence, chatting? I mean, I imagine there are 1,000, but any stick out as particularly funny, sad, in-between over the years as you’ve been kind of doing the research for some of these projects?

Mary: Oh, that’s so interesting. I feel like the joy of reporting is meeting people and being surprised by what you find. We have a guiding principle at “Planet Money” of delight where we don’t really undertake a story if there’s not something delightful in it. And I think that kind of sets us apart. Like, news is really depressing a lot of the time. And we’re a little bit of a separate entity, a self-contained little thing and we have the luxury of being able to just follow our intellectual curiosity and find things that we think are surprising or delightful or offbeat in whatever way that is.

Meb: To me, the journalism is such fascinating…it’s like an endless detective story on so many of these. The $100 million deli, that story alone, it’s like in the category if you did two stories side-by-side, like, which one is getting made up, it would be, like, hard to tell what’s real and not. Can you summarize that real quick for the listeners who don’t remember that one? Because it may be a highlight of the last couple of years for me.

Mary: It’s pretty fun. And I think it kind of is emblematic of so many things going on in our world right now, confusing and interesting things. So there was this deli in New Jersey, just like a little concrete box deli, and the thing that was special about this concrete box deli is that it was publicly traded and it had a valuation of $100 million. And again, it’s a deli. It literally just sells sandwiches. So you’re like, “Why? I know a lot of delis and none of them are valued at $100 million.” My favorite moment from that show was when the professor was talking about you see a lot of SPACs out there. There are a lot of, like, special purpose acquisition vehicles. This is a snack. Get it? I’m sorry. That was my very favorite moment. I, like, still think that’s…I’m still tickled by that. It kind of rolled up a whole bunch of different things and was a vehicle for all of those ideas about, okay, what is a SPAC and why is this happening? Where’s all this money coming from?

And it was truly, to your point, a detective story. You know, we called the guy from CNBC who’d been tracking it most closely and we just went through his journey. And there’s a fun thing that I wish I had my PIMCO wall for you still where I used to have an entire wall of my house. Just like every embarrassing journalist and every great journalism trope where I was like, “Okay, in 1998, they did this,” and then I have a drawing of a car for when they used to give cars. There’s a perk. It was so intense and so extra, but when you’re needing to absorb the entirety of an enormous timeline with a ton of information, it’s kind of the best way.

Meb: But, like, I’m just picturing in my head a mash-up between Russell Crowe in “A Beautiful Mind,” and then like every detective movie where they have the chart of suspects. Is that kind of what you mean? Except their Mary Child portraits and drawings on her own.

Mary: I did cartoon a lot of it, yeah, which was necessary. It’s how I process. But yeah, it’s very like “Homeland.” I think, is it Charlie from “Always Sunny in Philadelphia” that meme? It’s all that, but that’s a real thing. We sincerely do that sometimes. But that thrill of the hunt is, like, part of why this job is so delightful.

Meb: As you think about these stories over the last few years, it’s kind of astonishing. Each one kind of gets like…I feel like it’s almost more and more ridiculous. I mean, you’ve worked through…started with a financial crisis. You’ve now been with pandemic, potential…whatever is going on now in geopolitics. But I mean Robinhood and memes. There’s LIBOR, NFTs. What do you think the threads are? Common linkages between the episodes and curiosities. Are there any, in particular, you think that stand out?

Mary: I think one thread…I’m so excited to hear your theories and answers on this front, but one thread that I think is a thing that I always find myself getting interested in is aberrations when things go sideways and especially when it’s mechanical. So if there’s something that is a complex system, it’s kind of ripe for digging in and finding out how does this thing actually work? Our job at “Planet Money,” I think, is explicating why the world is how it is, how it actually works, and how we got that system. Because a lot of times the story is a little ridiculous and weird and a lot of times we just look at it and we’re like, “Yeah, yeah, whatever.” We don’t really look closely at the details or understand why it is the way that it is, and I think if you don’t understand it, there’s no room to help agitate for change or think of a better way. So a lot of it is just like digging in and finding out, okay, where did this go wrong? If there’s like a mistake.

Earlier in my career, I was on the London Whale story and that kind of the same thing where you’re trading in the market and something goes completely sideways. Like, something goes big sideways and you’re like, “Whoa, what was that?” That, to me, is the most fun is when you have this kind of like everything just, like, flipping and not acting the way it’s supposed to for whatever reason. And that’s true, I think, you know, in the Lisa Cook episode that we did in 2020. It’s called “Patent Racism,” and basically, she’s examining this theory of innovation that Paul Romer put forward, and it’s like, “Oh, you can foster innovation in an ecosystem. You can create it. You can have people have good ideas.” And she’s like, “I don’t think it just happens like that. You have to have equal enforcement of the law. I think if people aren’t equally protected by the law, people aren’t safe to come forward with their innovations.” And then she did a whole bunch of research and basically proved that thesis. And that’s the same thing if you have this idea you think it works and like, “Yeah, Paul Romer’s theories were really good but there was something missing. And so, just advancing the ball a little bit like that, that’s a really fun thing for me.

Meb: That was one of the checkboxes I had for you. It was kind of a barbell of structure and incentives, meaning like a lot of these, whether it’s a company or whether it’s a system, obviously, the two-week payment where like you figure something that works or why the plumbing is this way. And usually, you find it, same thing with plumbing is like when something goes wrong, something gets stopped up, something like the Robinhood mess, you don’t really think about it but then you’re like, “Whoa, this is pretty weird and hysteric.” A different one that I think you guys and the universe is that topic of inequality or how our system is set up where naturally it benefits some more than others that I think is an important one that certainly deserves a lot of attention to.

So this is more of a happy hour question. It’s too early in the morning for me. It’s coffee time in West Coast. You’re East Coast so maybe you could get away with it. But as you kind of like have studied the system, as you’ve reported on it for over a decade now, when you think about the role of government, when you think about companies and kind of how they behave, what do you think about capitalism here in 2022? This is a light question. This is a softball. You mentioned softball so here it goes.

Mary: I mean, what a question. First of all, I think there’s kind of a broad and even bipartisan, a partisan, like many people think that the system we have now, capitalism that we have now, so-called, is not actually fully capitalism and maybe in a sense that’s not possible to achieve. Maybe that’s a silly thing to say. But in some circles on the right, they’ll call it crony capitalism, and on the…you know. You have different names for what’s going on, but I do think the amount of incumbent power, the amount of monopolistic concentration in various sectors and just the very obvious facts of who has access to what and what works and what doesn’t. It just seems like we’re expressing a lot of our cultural problems with our dollars. And again, in some sense, that’s just obvious, of course, we would do that, but it’s disappointing. You kind of think that we build systems that are better than us and that’s just not true. That’s something that I think I thought or hoped, or, you know, when you’re a kid you’re like, “Oh, the grownups definitely have figured something out.” As we grownups know, we have figured nothing out. So, I think that’s the amorphous answer is that I certainly think that it’s not working for everyone, and therefore, it’s not working.

Meb: I mean, it’s interesting because money, in particular, is a topic that particularly for my parents’ generation, certainly, and the one before that is very taboo. Their approach and their emotions relating to money, I think having it out there in the open, whether it’s Wall Street, whether it’s personal finance, whether it’s investing, I think helps a lot. At least people are talking about it. And the fact we don’t teach any form of money or personal finance in most schools makes it hard, but hopefully, it’s headed in the right direction.

Mary: But is it really a question of education? I get so…like, okay. I’m sure you’re familiar with this book, “Where are the Customers’ Yachts?” It’s a classic of Wall Street. Truly great. Absolutely hilarious. But the things that they say in this book, this could have been published yesterday. Like, he would sound a little stodgy, but this is 100 years old or whatever. Okay. It’s not 100 but 80 years old or something. And it’s like nothing has changed. We have index funds now, which is great, and like fees have come down on a relative basis but so much of the lines have already been drawn and it’s so much harder, I think, to…I don’t know. I just think like the personal finance education like you’re still going to be outgunned to a large extent.

Meb: Yeah. I’m often conflicted on this topic and we talk publicly a lot about it. I think teaching it early and often, a lot of people kind of throw up their hands and say the research shows that it doesn’t help. I don’t think that’s true. I think that’s either a failure of the curriculum or the failure of the teacher. I mean, Lord have mercy, we can teach any other subject, Latin and geometry to high school kids. I mean, obviously, you can teach money, something they actually care about anyway. But my thesis is that you pair the education with broad-based education, talk about money, point in time protections, but also incentives and systems that I think can automate or push people in the right direction. You talk about indexing at a low cost. Certainly, in the U.S., that’s moving in the right direction. I mean, the rest of the world is even further behind than we are. It’s moving in the right direction. I think the dam hasn’t broken yet, but it’s certainly, hopefully, progressing, but there’s a lot of work to be done.

We could spend three more hours in this, but I want to get to something important, which is your book, which by the time this comes out should have just dropped. If it didn’t, you all, pre-order it. But more importantly, I don’t think if I was you I would have written it because if someone offered me 10 million bucks, I would have taken it. There’s no question. I don’t even think of any topic I would…Is that true or was it only like $5 million? Because I would take that.

Mary: True is a relative question. So I heard…What we’re referencing here is there’s a story in the…is it “The Author’s Note” about I took so long to write this book that people within PIMCO started to believe that I had been bought off, that someone had paid me to not write this book. And I thought that was funny because I was not publishing the book for free and that was just like…Obviously, I was doing something wrong. My incentives are like…I’m not responding correctly to my incentives here. But I will say that no one from PIMCO offered me any money to not write this book, to be clear. This was just a rumor. But there was a person who did offer to try to broker a deal for me. He’s like, “What? You don’t want this? I’ll go to PIMCO and, like, work this out for you.” And I was like, “Thank you so much for this generous offer, but I am a journalist. I do intend to be one. Thank you.”

Meb: So, for the people listening to this on audio, you can’t see it, but Mary is wearing a Girl Scout outfit, which is another rumor from the book that is equally as wonderful and absurd. I even wonder how some of these come to light. Can you tell us what my reference means?

Mary: Oh, God. It’s like it fills me with shame. So when I was a beat reporter at Bloomberg and Bill Gross left PIMCO abruptly, everyone was like, “What happened?” And obviously, as a beat reporter, you got to go. It’s like the sun is shining directly on your beat. You got to go get the story and there’s nothing else to do. You know exactly what to do. Except I had no sources that would talk to me. I landed in L.A. and I was just sitting there. Everyone was totally zipped up. PIMCO wouldn’t talk to me, Bill wouldn’t talk to me. Nobody. And so I was like, “Uh,” but my bosses were like, “Okay, you got to go door stop Bill Gross,” and I was like, “Oh, God,” because this means you have to go to the door of the person who is the center of this media storm and knock on the door and be like, “Hi. Hi, I’m Mary Childs from ‘Bloomberg News.’ Do you mind if I just ask you…? And it’s horrible. It’s, like, very humiliating. And I say in the book the best journalists don’t feel shame. If you do this job well, you kind of have to divorce yourself from that, but I cannot do that. I’m like not that strong. So I’m like, “Oh, my God. I have to go knock on this poor man’s door.”

So I drive down, obviously, it’s a gated community. Obviously, one cannot knock on his door. Okay. Check that off my list. I tell my boss, “I did it. I tried. I did my very best.” I go home. But I had brought a tin of brownies because I’m from the South and you’re supposed to be cordial. I don’t want to show up empty-handed and just be like this, like, sociopathic journalist when I could have a tin of brownies. I was like, “Hey,” to the security guard who was sitting there, you know, at the entrance to the gated community. I’m like, “Do you mind? Can I just give him these brownies?” And she looks at me like, “Have you lost it?” Which I was like, “No, no, you’re right. You’re right. I’m so sorry. I get it. I’ll leave. Bye.” I left.

But the brownies, I think, provided the, like, central nugget to this rumor, and it somehow, through the game of telephone, became that I had gone to Bill Gross’s house dressed as a Girl Scout to get the story or something. And at first, when I heard this, I was just like, “I’m so embarrassed because I did go to his house, sort of, and I did have brownies.” And then I was like, just logistically, “What is the utility of that outfit? Like, what would that be doing?” He already knew me. Like, it wasn’t like he would be like, “Oh, like a very innocent 14-year-old…” I don’t understand the rumor.

Meb: It’s very Southern of you. I’m half Southern, so I can relate. Did you make them or did you buy them?

Mary: They actually were homemade by a contact in Southern California. So they’d just given me. I visited a contact and they gave me a tin of brownies.

Meb: As long as they’re homemade. Okay. That counts. If you just bought him some Vons brownies I can see why he wouldn’t open the door, but missed out on it.

Mary: I would never. For the record, I would never do that.

Meb: So when did the story begin pen to paper? It wasn’t just a pandemic project. Like, this started before that and this is a long time labor of love.

Mary: Love is such an interesting word. Yeah. It was definitely labor. Let’s see. I started covering PIMCO in April 2014, and at that time, I kind of thought that Mohamed El-Erian’s departure was the big story. And so then when Bill abruptly left in September 2014, it was very, obviously, a huge moment in financial markets. And I kind of looked around and I was like, “Why is there no book about PIMCO? They are very much at this inflexion point in the economy. They’re extremely influential, and there is just…” You can read the Financial Press about them and their take on the tenure, but where is the book saying who they are and what they do, and explaining the bond market? You know, there have been various bond market books over the years but, I don’t know, this just struck me as a very egregious omission. So, I was like, “I’ll do it,” and seven years later, here we are.

Meb: And it’s funny because, like, even in the area of bonds, which historically I feel like so many people would think are just kind of pieces of paper in a drawer somewhere. I don’t know if it was Bill Gross, maybe “Liar’s Poker,” Salomon, like, really changed that perception I feel like on Wall Street, but probably Bill Gross more than anyone. I mean, I remember, I don’t know if it was my dad’s or if I bought it, but I had a copy of his book he wrote a long time ago. I’m going to murder the title, but it’s something like “Everything You Know About the Market is Wrong.”

Mary: “Everything You Know About Investing is Wrong.” That’s it.

Meb: Okay. I remember reading that as a…I don’t know if it was college, high school, whatever it was, but this cult of personality. He really became kind of the face of that bond world more than anyone. I mean, that’s “The Bond King” reference, but man, there’s so many places to jump off here on this topic. It’s not just a story about Bill or even PIMCO really, but 10 different subplots. And, I mean, it’s great because it kind of meshes them all together and it uses Bill and his career in PIMCO as a timeline and kind of origin story but it really I think informs a lot of different topics.

Mary: Yeah. That was one central frustration of the book is Bill never stopped making headlines so I couldn’t stop writing the book. Every time I thought I was done, he would do something else. And like, at first I tried to ignore it and I was like, “This isn’t really part of the narrative. The book is about his departure from PIMCO so I shouldn’t really keep up with every single thing that he’s doing.” But after a while, it just became journalistically impossible to ignore and like it would have been malpractice to leave it out of the book. So, anyway, just kept not ending. But you hit on something. I mean, I think what you’re saying about kind of the…bonds used to be pieces of paper in a drawer, and that’s literally true. People did not trade them, and Bill Gross, more than anyone, helped to bring about that revolution and create the active bond trading market. And there’s a whole story with this guy who he calls Howie. His name is Howard, and only Bill calls him Howie, but because I wrote this book and, like, thought of him as Howie so much in my brain I just have this, like, parasocial relationship with him anyway.

So he and Howard, Howard Rakov was this guy in Southern California who actually got Bill into bond trading. He was I think, to some extent, this evangelist going around town and around the country saying, “Here is why you should trade bonds. Inflation was high. So what are you doing with them just sitting in the vault just being eroded by this inflation. Like, you should be doing something with these bonds.” So his work evangelizing and getting Bill Gross on board and helping to create that market, that was one of the, kind of, discoveries of reporting this book was that yes, Bill Gross is the bond king, is seen as the creator and the face of the bond market. I think all that is very true, but you can’t trade with just yourself. There were other people who, kind of, helped to turn the light on.

Meb: One of my favorite parts of the book talks about Bill’s history getting started with Ed Thorp, who was actually a podcast alum. We had Ed on in the early days.

Mary: Oh, my gosh. He is the greatest.

Meb: Yeah. And his talk about card counting, and for listeners, if you haven’t heard it, Ed Thorp arguably ran one of the most successful investment funds of all time and a super nice guy. But this great irony to me of being a bond manager and then becoming super famous. It’s such a stark contrast that you would think in this sort of world, but what this book really highlights as someone who’s in this world, there’s a quote we say a lot, particularly this is usually to younger people who are seduced by the investment management world and they watch the show “Billions” or read the stories of market wizards and they see the romance and money involved in investment management. But I often say, “Look, managing money and the business of managing money are two totally different things.”

And you can kind of see this with PIMCO. As the organization grew, it becomes like its own entity with warring factions and personalities and people. So it’s not even just about the investment funds. It’s now about all these titans of industry that are clashing and how to run that organization, and what a nearly impossible task. And then seemingly it became an impossible task. One of the key parts of the story is like that sort of split between an organization and how it functions and the actual money management side. I mean, the money management side could be doing amazing but if the organization isn’t built in a certain way, it’s nearly impossible.

Mary: Yeah. And it made me think of other parallel that I think a lot about that goes to the kind of heart of the fracture between Bill and PIMCO. I think Bill took the events of 2014 personally and he reacted in this kind of personal way where it was wounding. Mohamed El-Erian’s departure was a surprise to him to whatever extent and he just really was kind of destabilized by it. And at the same time, he had to still run the company. So he had to be this professional person and show up as a professional and a leader and a business whatever, but he was still a person and he kept kind of showing up in this personal way. And it was that friction between the professional and the personal that I think was untenable for his management. They were just like, “We can’t work with this. He can’t seem to get a handle on the personal element of this.”

That was the business side reacting to trying to figure out how to manage the corporation around this individual who, at the time, his returns were fine. 2014 wasn’t his best year or a good year necessarily, but it wasn’t his worst year. And I think another big thing throughout the book is if you’re delivering performance, you can kind of do whatever. You can point things out in a meeting really rudely. You can say what you want. You can kind of parade around the halls how you want, but if your performance isn’t there, not only can you not do that, you should watch out. You don’t have any armor, basically. And at a place like PIMCO, that I think matters so, so much to people, and indeed that’s I think in part why some of his managerial decisions didn’t sit well with people because he did have two years of off performance that really I think undermined his credibility and made him vulnerable to attack. Did that even answer your question, though?

Meb: Yeah. No, I mean, look, it’s a complicated story because the arc of it becomes about certain things, I mean, for example, as investors get wealthier…and we used to talk about this many years ago, about particularly hedge fund managers. The manager who’s scrappy and young and starting out may not be the same manager who’s now 40, 50, 60 years old who’s a billionaire. They may be playing a different game. The game may be about legacy. And Bill has a quote, I think it’s from your book, where he’s like, “My desire is not to make more money. I have more money than I know what to do with. My desire is to win and win forever.” Slightly different mindset, perhaps, because in the early days it would seem much more about money.

I have a theory and I’ve written about this on Twitter years ago, but it applies very particularly to both Bill Gross and Mohamed. I said, “I have a theory that every fund manager in our world is dominated by men.” So, I said, “Every fund manager had their best performance when they had a moustache, and when they shave the moustache off, that’s when things went south.” So, Bill, I don’t know the exact year, you would probably know better than I did on when he shaved his moustache off because that could have been the sign, the end of times.

Mary: Actually. I’m so sorry, but I think Bill goes against your theory because I think he shaved it right before the crisis, and they traded the crisis arguably better than anyone. So, I’m deeply sorry.

Meb: All right. Well, I’ll have to do some journalism digging.

Mary: It looks like he shaved it in 2007. I’m so sorry.

Meb: I’m gone have to do some fact-checking. I’m gone reach out to your team and say this is fake news.

Mary: Ouch.

Meb: Does this feel to you at all like a long story you’re eventually putting to bed, or does this give some closure for you, or is this something that you feel like is going to be a part of you continuing on and on, or elements of the story? It doesn’t have to be Bill and Mohamed and the team specifically. It just could be some of the general themes.

Mary: I think I’ll never really get my feet out of the bond market. I don’t think I can leave it. I don’t find other areas very interesting. I’ve tried and it just doesn’t succeed, unlike stocks, they go up, they go down. Who cares? Like, I just can’t. So I think that, to a large extent, the bond market will just be my home. I think this is definitely a putting to bed in a large way for me because this has been such an enormous part of my life for literally seven years where…I started dating my husband in 2014, like at the same time that the whole thing was going down at PIMCO, and he’s never known our relationship without the book. So I think I used to be a fun person and I stopped being fun because I was like, “Oh, I got to focus on this book. I sold this book. I got to really buckle down. I got to do the book.” And so, I’m kind of interested to see…I’m obviously in a different life stage. I don’t go to raves anymore, but I’m at this dawn of a new era where I don’t have to do this book on nights and weekends. So that feels wild.

Meb: Yeah. But I got an idea for you because there are always additional editions. There’s foreign language. I think Mary should say…You chat with your publisher and say, “You know what, I’m going to do the cover art for…”

Mary: Do you know I tried?

Meb: Oh, really? And they said no? You’re the author. You got the power, Mary. You should be like, “You know what? This is…”

Mary: It was less good. I think they saved me from myself. I had some sketches that I was like, “These are so good,” and they were like, “Thank you so much for your interest.”

Meb: It’s funny, my very first book, the cover came out. I’m like, “This cover is actually atrocious. I hate it.” So I sponsored a contest on…not Fiverr. What was it? 99designs for people to design the cover and I picked it out and I said, “You know what? I’m open.” I’d like to think that I’m open to criticism and being wrong so I said, “I’m going to let the audience decide,” and we put it out there. This was like ’07 or ’08. And sure enough, the cover I liked came in dead last with like 2% of the votes. Like, not even close. And so, I said, “Fine, you guys publish the one you want.” And looking back on it, it’s like I can’t possibly believe what I was thinking because it was awful. But maybe you do an illustrated version. We’ll see.

Mary: I was thinking about doing a raffle for people who bought the book, like, “Send me your receipt and I’ll send you your own personalized ‘Bond King’ illustrated cover.” Do you think that’s cool or sad?

Meb: Personalized on each one. You can sign and do like a cover jacket, but I love the idea. What are you working on now, now that your life is cleared? You have no raves, no more book. You got any stories that you’re thinking about? Anything on the brain post-book launch party?

Mary: I mean, at this very moment, it’s hard to think about anything other than the war. Hopefully, by the time this comes out, things will be so much better, so fingers crossed. But that’s been just a lot of sadness and a lot of kind of awful stuff going on. What’s next? I mean, there’s a world in which this gets optioned, and I’m not actually done with Bill and Mohamed. So I’ve promised that I won’t take on major projects for the next year or two, just to kind of, like, reset and let the ecosystem, my ecosystem of my mind and self kind of regenerate. But I think, you know, if this gets an option, that’s a different story. So…

Meb: Every time I tell myself I’m going to do sabbatical, or your style from ’08 I think is the right idea. Every time I love that concept and it never, never happens. Stuff gets in. We normally ask what was your most memorable investment over your career? And so, you can choose to answer that question. However, we’re going to do a slightly different one for you, so you can answer it either way because as a journalist, podcast host, author, you can answer it as what was the most memorable part of writing the book? It could be a story. It could be a moment. It could be a fact that didn’t make it in, the ghost chapter that your editors said no. So most memorable part of writing the book or most memorable investment. You can take your pick.

Mary: The most memorable investment in my career is this book. If you value my time, this book cost $1.5 million to make. So, it’s a steal at $30. I do think that there’s like a structural difference in a journalist’s brain I think than normal brains where if I get a story idea or like a little mystery lodged in there, it just doesn’t go away. Like, I’ll never be free from it. And one of those things that didn’t make it into the book is the Salomon joke bid. There was that whole treasury rigging scandal in the early ’90s with Salomon Brothers, and PIMCO was, like, sort of tangentially involved where they participated in one of those auctions. And they say that they were just playing a joke on this bond saleswoman who was leaving because she was having a baby. And it’s not clear to me that there was such a thing as parental leave at the time, so I think she just like, whoops, ugh, that’s the end. Anyway. So they were like, “Let’s have her think that she mistakenly has this enormous auction bid,” and that’s, like, funny or something.

And everyone points to this moment as like, “Oh, you really need to find out what PIMCO did.” And I called people, and I called people, and I called people, and I called people and I, like, just never found the skeletons. I didn’t find that they did anything wrong. And to my credit, the government also didn’t find that they did anything wrong. So maybe it’s one of those things where there’s just smoke and no fire, but that one stuck with me.

Meb: Well, listeners, if you’re an old PIMCO listener and you got some skeletons, you can DM Mary and tell her the real story.

Mary: Did you rig the treasury market? Call me.

Meb: Yeah. Some of these guys got to be getting on age. They’re like, “I don’t care. I’m just going to tell you the real story.” So, yeah, that’s a different time, for sure. Where do people find you? They want to keep up with what you’re doing…besides buying the book on Amazon, “The Bond King,” they want to keep up with your podcast, everything else, what’s the best spot?

Mary: Let’s see. I’m on Twitter @mdc. I have a Substack that I update at least once a year. It’s “Off the Run” is the title. And let’s see. I’m at NPR. I’m co-hosting “Planet Money” episodes, and hopefully, unpacking fun and interesting delightful adventures in financial markets.

Meb: Loved it so much. Mary, thanks so much for joining us today. Listeners, go by the book.

Mary: Thank you for having me.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.