Bowie: The Man Who Sold Royalties and Brought Music to Bonds

Credit : Terry O’Neil

Sure, this might be the last thing to come up when remembering Bowie, but hey—that’s genius :

The man behind “The Man Who Sold the World” was the first recording artist to go to Wall Street to tap the future earnings of his music, paving the way for a thriving market for esoteric securities backed by everything from racehorse stud rights to commercial washing machines.

David Bowie, who died from cancer at age 69 on Sunday, sold $55 million of bonds in 1997 that were tied to future royalties from hits including “Ziggy Stardust,” “Space Oddity” and “Changes.” Following his example were singers James Brown and Rod Stewart and the heavy-metal band Iron Maiden. Securities backed by royalties allow artists to raise money without selling the rights to their work or waiting years for payments to trickle in.

“Bowie’s bonds were as groundbreaking as his music,” said Rob Ford, a London-based money manager at TwentyFour Asset Management, which oversees 5.3 billion pounds ($7.7 billion). “Not only were they followed by a number of other artists, but they set the template for deals backed by a whole range of assets.”

And to conclude :

Bowie “changed the way people think about art and commerce,” Pullman said.

See you on Mars.

→ Bloomberg

Black Monday Really Did Look Like 1929 Again


A short and informative recollection of what happened roughly three decades ago, from Barry Ritholtz :

Where were you on Monday, Oct. 19, 1987?

Today is the first time since 2009 that Oct. 19 has fallen on a Monday, and that has me thinking about that day. I recall exactly where I was — in graduate school, walking between classes, when I passed a television broadcasting the collapse.

New York Magazine had a great piece too on February 2008 :

It all started, of course, on Wall Street. On Black Monday, October 19, 1987, the Dow Jones index, for reasons still being debated, fell 508 points, almost a quarter of its total. (The current equivalent, for comparison’s sake, would be a 3,200-point loss on one day.) The drop turned out to be a “black swan event,” a weirdly poetic economist’s term meaning, basically, a fluke (though few people remember it, the Dow still eked out a positive finish for the year). Still, the hiccup seemed to foretell the instability to come. Over the next two years, with the economy perceived to be overheating, the Fed repeatedly jacked up interest rates, which made bonds and T-bills sexier than stocks, which triggered an epidemic of unscrupulous bond peddling, which further destabilized the market—leading to a slowdown. (If that all sounds disturbingly like the recent subprime-debt mess, well, that’s because it is. But more on that later.) And a slowdown on Wall Street, which provides over 20 percent of the city’s cash income, spells a slowdown for New York.

→ Bloomberg View

Liquidity : Never There When You Need It

Markets are dominated by a few large investors, creating problems of concentration. Similar portfolios and strategies exacerbate risk and the problems of illiquidity if a large number of participants or very large holders wish to exit positions at the same times.

Investors are frequently market following trading the momentum, buying when prices go up and selling when they fall. They are users rather than providers of liquidity. Their buying creates the illusion of active trading when markets are rising but suck liquidity out when prices fall.

→ EconoMonitor

Black Monday, Kinda

Monday, August 24th brought you one of the weirdest trading day ever seen in the past several years.  

So to sum up what happened today, here are a few charts, courtesy of Bloomberg, ZeroHedge and NANEX — time of the events may vary :

  • It all started sometimes in China, when it’s business as usual these days :

 

  • S&P Futures followed, kissing the dirt :

 

  • Which then started a major liquidity squeeze on the US market, as seen on the following charts by NANEX :

 

  • Causing buy-sell orders to never quiet match — courtesy of ZeroHedge :

 

  • Shortly after the opening bell, something like this on the Dow Jones : 

 

  • And an impressive rise on the VIX :

 

  • In the meantime, major (mini) crashes : 

 

  • To prevent further deterioration, just press the “HALT” button across major indices, including 3 consecutive press on the NASDAQ and 1’200 times during that day :

  

  • Then the master of markets, Tim Cook, dropped an email to Jim Cramer stating the following :

I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.

  • Which caused this :

 

  • Then, all of a sudden, while unrelated from the previous event — well, who knows : 

IMG_3010

  • Oups…

 

  • …While European markets will stay stucked for a little longer :

 
There’s more to it for sure, but here are some events, mostly correlated, to show the newcomer what’s up for today on the trading side. 

Finally here’s a fun tweet from Josh  Brown :

@ReformedBroker: Look, it doesn’t matter what you bought or what you sold. The important thing is that you panicked.

Hairy Days as New Bond Shops Struggle to Dent $8 Trillion Market

In mid-July, Amar Kuchinad, a former Goldman Sachs Group Inc. banker turned bond entrepreneur, was sporting a thick beard. He refused to shave, he said, until his new company, Electronifie Inc., turned a profit.

As Electronifie competed among the dozen or more new electronic bond-trading systems to come on the scene in the last year, Kuchinad’s beard was growing conspicuously bushy. The new trading venues face the unenviable challenge of changing the behavior of bankers and investors who for decades have bought and sold corporate bonds over the telephone or by instant message.

→ Traders Magazine

It Never Rains in California

Bill Gross on liquidity :

While private equity and hedge funds have built-in “gates” to prevent an overnight exit, mutual funds and ETFs do not. That an ETF can satisfy redemption with underlying bonds or shares, only raises the nightmare possibility of a disillusioned and uninformed public throwing in the towel once again after they receive thousands of individual odd lot pieces under such circumstances. But even in milder “left tail scenarios” it is price that makes the difference to mutual fund and ETF holders alike, and when liquidity is scarce, prices usually go down not up, given a Minsky moment.

→ Janus Capital