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Economy

The Strange Billionaire Who Revolutionized The Bond Market

WASHINGTON - AUGUST 17: William H. Gross of PIMCO participates in a conference on the future of housing finance at the Treasury Department on August 17, 2010 in Washington, DC.
Mark Wilson
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Getty Images

I never gave much thought to Bill Gross, the peculiar billionaire investor who transformed the world of finance. That is, until a couple years ago, when my partner, Evelyn, told me a wild story about him. Evelyn grew up in Laguna Beach, California. Her family still lives there. As it happens, Bill also lives there.

The story begins in 2019, when Bill and his partner, Amy, bought a $1-million lawn sculpture, which they placed on the edge of their property — right near their neighbor's house.

The 22-foot-long, 10-foot-high sculpture by artist Dale Chihuly — which is worth about 25 times more than what the typical American makes in a year — was made of blue glass. And, apparently, it began getting damaged by the elements or by passersby throwing rocks, or something like that, so Bill and Amy covered the sculpture with a net.

Their neighbors didn't like the look of this net-covered sculpture. They said it obstructed their view and asked Bill and Amy to remove the sculpture. Bill and Amy refused. So the neighbors complained to the city of Laguna Beach, and the city ended up telling Bill and Amy they needed permits for the sculpture (apparently, Laguna Beach has a lot of regulations).

After this, Bill and Amy started messing with their neighbors. They began blasting loud music at all hours of the night — with speakers pointed right at their neighbor's house. Over the course of several months, they cranked up the volume on songs by Led Zeppelin, 50 Cent, and theme songs from old TV shows. Most frequently, they played the theme song from Gilligan's Island.

Each side ended up suing each other in court. You know, rich people stuff. I laughed when I heard this story, and it made me more curious about this oddball lord of finance. What sort of person is willing to engage in a petty feud with his neighbors like this? And how did someone like that become a billionaire in the first place?

Fast forward a few months, and one of my colleagues at Planet Money, Mary Childs, told me she was writing a book. "What is it on?" I asked. She told me, the guy who revolutionized the bond market: Bill Gross. "No way!" I said. I couldn't wait to read it.

Well, the book is now out. It's called The Bond King: How One Man Made a Market, Built an Empire, and Lost It All. And I gotta say: It's amazingly good. It cuts through all the mind-numbing jargon of the finance world to provide an accessible and illuminating look at the rise of the multitrillion-dollar bond market. It's beautifully written. It's meticulously researched and reported. It's eye opening. And it centers on a fascinating and entertaining character whose journey takes us right to the heart of the story of high finance over the last half century.

The Bond King

When normal people talk about investing, they tend to focus on stocks. Those, of course, are shares of companies, which rise and fall with the profitability of those companies (and beliefs about the profitability of those companies). Bonds are different. They are a form of debt. Companies and governments sell them, promising to pay back the money to bondholders with interest.

When Bill Gross co-founded the investment management company PIMCO back in 1971, the bond market was a pretty dull place. Bonds were basically just IOUs that were "living in vaults under insurance companies," as Mary writes in her book. Bill and his team had the brilliant idea that they could trade bonds — and in the process they pioneered new ways that corporations could raise money and investors could make gobs of money.

The Bond King explains how Gross created and managed Pimco's Total Return Fund, which for many years was the largest mutual fund in the entire world; how he pioneered investing in derivatives and other financial instruments made infamous during the financial crisis; how he lobbied and advised the federal government through the crisis, playing a role pushing the government to bail out financial institutions; and how his quirks and prickly personality led to his downfall at PIMCO.

Lucky for me, The Bond King provided some vivid details about Bill and his partner's feud with their Laguna Beach neighbors, over their million-dollar lawn sculpture. The court drama that followed was particularly riveting.

"One critical exhibit" in court, Mary writes, was "a video of Gross crouching in his shorts behind the wall abutting the two properties; 50 Cent's 'In Da Club' is audible. Gross is dancing, pointing his fingers, swaying, as his neighbor films him. After a while, Gross crouches, apparently hiding. The 50 Cent song peters out. The music changes to the Gilligan's Island theme. Gross looks up, beyond the wall, to his neighbor's camera."

"We're gonna subpoena that, boy, so you'd better erase it," Gross says, peeking through some palm trees. "That's harassment. Harrrrrrrrassment!"

In December 2020, the court ruled against Bill and Amy, finding that the two had harassed their neighbors when blasting music at all hours of the night. The court, Mary writes, "barred Bill and Amy from coming within five yards of the neighbors (except when they were on their own property) and banned them from playing music (above sixty decibels) outside their home when no one was in the backyard pool area. She tossed Gross's claim of harassment."

The court battle may be over, but we assume things are awkward — albeit quieter — in their neighborhood.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

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