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« Dutch lessons | Main | Price point »

The bond that fell to Earth

By Dave Birch posted Mar 18 2008 at 8:54 AM

[Dave Birch] This isn't really about payments, but about the monetisation of intellectual property, which is a topic that will appear in the future of payments for sure. Anyway,

When the back catalogue of David Bowie was offered on Wall Street, the $55 million deal for future royalties on classics like The Man Who Sold The World was hailed as a new form of intellectual property securitisation and the idea of artists raising funds secured by future royalties of their work became known as Pullman Bonds, named after the banker David Pullman who drove the Bowie deal. Now, however, citing weak sales of recorded music and a downgrade to an unnamed company guarantor, Moody's Investors Service downgraded the Bowie bonds. They have gone from an A3 rating to Baa3 – one notch above junk status.

[From Bowie bonds nearing junk status | OUT-LAW.COM]

Well, his bonds may be junk but his music isn't: Aladdin Sane was the first album I ever purchased with my own money! Whenever I've seen David Bowie interviewed on TV, he's always come across as smart. I can remember him talking about music becoming a utility, like water, and he'd obviously formulated a strategy for the future of music well ahead of record companies or, for that matter, investment bankers. Having seen the writing on the wall for the artificially high price of recorded music, Bowie decided against the "farmers path" (of demanding government support to keep prices high) and instead went down the "market path" (of selling an asset with a declining future to bankers). Good for him.

Mulling over the idea of financial instruments being backed by slightly less "real" items than gold or the full faith and credit of Blizzard, I've been reformulating my "money versions" ideas since my original post and the very useful discussion that followed. I've decided to make the definitions simpler...

  • Money 1.0 was atoms.
  • Money 2.0 was bits about atoms.
  • Money 3.0 is bits about bits.
  • Money 4.0 may well be bits about relationships.

It may seem strange to imagine trading in Bowie Dollars that are simply units of Bowie bonds, but why not? How is this different from Edward de Bono's "IBM Dollar" (in that it's a claim on some future asset) or similar instruments?

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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Comments

recent post in thread about mortgage backed securities
http://www.garlic.com/~lynn/2008f.html#57

(toxic) CDOs had been invented by Milken back in the late 80s to obfuscate what they represented ... longer discussion
http://www.garlic.com/~lynn/2008f.html#53

rating houses were giving them triple-A ratings.

investment banks were buying them with leverage of 20&30 to 1 (i.e. 3-5percent actual investment, this is compared to old stories that 20percent margin investment significantly contributed to crash of '29 and subsequent rules requiring minimum of 80percent) There was comment that last summer Bear had been leveraged 44-to-1 and dropped back to only 30-to-1. Some recent analysis this market is now larger than nearly all other markets combined.

Rating houses then went thru period reverting many of these (toxic) CDOs to junk status. In the crash of '29, a drop in 20percent resulted in totally wiping out investors. With 30-to-1 leverage ... it only takes a drop of 3percent to totally wipe out the original investment.

decade old post that touches on providing transparency (confluence of risk management and information security) of the underlying values in these kind of securities.
http://www.garlic.com/~lynn/aepay3.htm#riskm

Oh-er Mr Birch.

We are both the same saddo's, although I beat you by buying Ziggy back in 1972. I ended up seeing Bowie every time he toured, and owning every item he ever recorded, including the Laughing Gnome.

I recently made mention of such on thefinanser, in a chat about the future exchange being traded on artistes future career options. Now, there's a thought,

Chris

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