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King Bond Approximately

Below the fold is a bit of bosh by me. I read this story about Bob Dylan’s music being securitized in order to capture the royalties in a fixed-income chimera; I laughed and my mind just naturally drifted in idle conjectures about the opportunities for good jokes, which might be made among unabashed fans of Dylan, of finance parody of the Troubador's lyrics.

If you know nothing, care nothing or only detest Dylan’s music, pay no attention to the rubbish below. The element of humor is never far from Dylan songs, even the most dire and squalid, so it stands to reason that his lyrics might easily adapt to the jape and sarcasm of caricatures. I’ll stick to well-known songs.

But even if you know nothing and care nothing about Dylan, do take note of the hilarity of trying, by arcane financial sorcery, to convert those lyrics set to that music -- all that wild amalgam of Americana sung by a dude with a mediocre voice at best -- into some reliable future revenue stream and thus liquid security.

The question arises, though: How do we price that Dylan security against government securities? That’s how finance prices all debt securities -- a comparison or “spread” between the interests rates at any given maturity. Do fractional claims on the credit of Bob Dylan’s output stand a better chance of holding value and liquidity than a Treasury bond thought to resemble that credit? How do they compare with mortgage debt assets, now a half decade of into the doldrums? Is Dylan more speculative than Facebook stock? Would Dylan securities protect against currency devaluation?

No one really knows, but maybe Goldman thinks they’ve found a new class of suckers -- Dylan fans.

"The Bond in Me"

The bond in me will do nearly any task
As for compensation, here's your senior tranche fast
Take a broker like you
To get through to the bond in me.

Interest rates are raging all around my door
I think to myself I might not take it anymore
Take a discount like your kind
To find the bond in me.

But, oh what a wonderful feeling
Just to know that you are near
It sets my heart a-reeling
From my toes up to my ears.

The bond in me will hide sometimes to keep from being seen
But that's just the Goldman Sachs fixed-income machine
Take a securitizer like you
To get through to the bond in me.

Just Like Asset-Backed Dylanesque Security Blues

When you’re lost in the rain near Barclays
And it’s Eastertime too
And your LIBOR fails
And negativity don’t pull you through
Don’t put on any airs
When you’re down on City of London avenues
They got some hungry broker-dealers there
And they really make a mess outta you

Now if you see Saint Usury
Please tell him thanks a lot
I cannot move
My HFT is all in a knot
I don’t have the strength
To get up and make another trade
And my best friend, my market-maker
Won’t even say what it is I’ve got

King Bond Approximately

When your banker sends back all your invitations
And your broker to your banker he explains
That you’re tired of plain vanilla and all of those creations
Won’t you come see me, King Bond?
Won’t you come see me, King Bond?

Now when all of the creditors want back what they have lent you
And the yield of their paper does not remain
And all of your clients start to resent you
Won’t you come see me, King Bond?
Won’t you come see me, King Bond?

Now when all the promoters you have commissioned
Have died in battle or in vain
And you’re sick of all this securitization
Won’t you come see me, King Bond?
Won’t you come see me, King Bond?

When all of your advisers heave their losses
At your feet to convince you of your pain
Trying to prove that your conclusions should be less exotic
Won’t you come see me, King Bond?
Won’t you come see me, King Bond?

Now when all the hucksters that you turned your other cheek to
All lay down their prospectus and complain
And you want somebody you don’t have to lie to
Won’t you come see me, King Bond?
Won’t you come see me, King Bond?

Comments (4)

We desperately need a numerus clausus for securities law.

That is all.

Titus, sounds good. How about 10. Nationwide.

" How about 10."

Paul's example is a sign of a qualitative not a quantitative problem. Why would anyone buy a BBB- bond that pays off lawyers and hedge funds?

Yet another reason why we need a tax code with a 70% top marginal rate and provisions that eliminate tax arbitrage and yet another sign that the financialization of our economy has been unwise.


"This is the fourth time Sesac is issuing bonds. Nearly a third of the proceeds would go toward paying a dividend to shareholders, which include investment bank Allen & Co. and hedge fund Och-Ziff Capital Management Group LLC (OZM). The balance is being used to refinance existing debt, pay for transaction fees and set aside money for ongoing litigation."

"Warren Schlumpf, Sesac's chief financial officer, declined to comment."

"... Sesac is fighting a 2009 antitrust lawsuit in Manhattan federal court brought by owners of local television stations, who allege Sesac's licensing practices eliminate competition by preventing them from accessing rights to an artist's music through other means. Another risk, cited by S&P, is Sesac's relatively small share of the market for performance rights. They are third behind the American Society of Composers, Authors and Publishers, a not-for-profit organization, and Broadcast Music Inc. Neither Ascap nor BMI have any debt outstanding."

Last night we heard this business model described many times over by its victims. If the pattern holds, Bob and Neil may need to go elsewhere.

"Last night we heard this business model described many times over by its victims."

What, in between all the panegyrics on buggery and baby-killing?

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