Rabbit Hole

I actually have a role at this point in our story, too. In 1980, Access folds. I freelance around for a while, and in addition to The American Spectator and National Review, I add Barron’s to my freelance suite. It still seems like a perilous way to make a living, however, and in January of 1981, I answer an ad in the New York Times, and join a little old-fashioned family-owned newspaper called The Daily Bond Buyer, located downtown at the tip of Manhattan, as far south as you can go without getting wet, I tell friends. The newspaper was founded in 1891, a tabloid covering the municipal bond market and published on a very civilized Monday to Friday schedule. My starting pay as a copy editor is a grand $300 a week, but I also get a paid vacation and health care and a pension and a ham at Christmas and a turkey at Thanksgiving.

The editor, John Allan, a journalist who has worked for both the Wall Street Journal and The New York Times, asks me if I know anything about municipal bonds. I tell him no, and he tells me he would rather hire someone who can report and write, and teach them about the bond market, than hire someone who knows all about the bond market and try to teach them how to write. He says The Daily Bond Buyer is not a trade newspaper, but a newspaper that covers a trade. When can you start? I say: Tomorrow? Well, let’s wait until Monday. He is a nice, gentle man, a redhead, and he looks a little like Calvin Coolidge.

This is also another of those things, like getting into college, that was much different in those days. I bring in my resume and clips, and chat with the editor for – could it have been 15 minutes? Certainly no more than a half-hour. There’s no test, no endless interviewing with everyone on the masthead. I’m not even sure he checks any of my references, although perhaps he does after I leave. They would all have been glowing, I assure you.

Even so, I figure I will spend five or six weeks there before finding a job in real journalism covering cats in trees and bank robberies. I wind up staying for 13 years and would have remained longer.

I am John’s first hire. What I am joining is a very small (circulation was probably less than 2,000 at the time), very expensive (it cost almost $2,000 a year) newspaper. Unlike Access, it was also well-established, having been founded in 1891 by an ex-Civil War correspondent named William Franklin Gore Shanks. Shanks was running a press-clipping service, and he found out that the most requests he received were for stories about bonds. So he has what strikes me as a very original idea, and puts together a daily newspaper that at its heart contains new-issue bond pricings and other data, surrounded by reprints of short stories about bonds from around the nation and the occasional bit of original copy that he writes.

The paper I join is also quite small, editorially. There is a daily columnist in New York City and a couple of editors, and a Washington, D.C. bureau with about five or six people. There’s also a big group of clerks, nearly all women and nearly all from Staten Island, who spend their day calling up underwriters and bond issuers, compiling data on bond sales. This is the guts of the paper, this data, and why people subscribe. The Daily Bond Buyer, which soon after I join drops the ``Daily’’ from its name, provides them with ease of access to information they can’t get anywhere else.

I join as a third copy editor in New York. We also get to write short stories. The managing editor distributes clippings from various out-of-town newspapers, and we make calls to find out what they’re about. I think one of my first is about a county in Ohio selling bonds to build a zeppelin, or airship, manufactory.

The paper also operates a weekly edition, a weekly magazine called Credit Markets, a newswire called MuniFacts, and publishes the ``Red Book,’’ which is a telephone directory of everyone in the municipal bond market.

There’s a lot to learn at The Daily Bond Buyer, and almost all of it I learn through experience and osmosis. There is one standard textbook, called The Fundamentals of Municipal Bonds, and it is published by the Public Securities Association, a trade group. Despite its slender size, it is almost unreadable and incomprehensible. Instead, I learn by writing, and asking questions, and speaking to the people who actually do this stuff, from politicians and public officials to bankers and bond lawyers and analysts and institutional investors. And I grasp the nettle. That is, I decide after that first six weeks is up that I am really going to learn this subject, including all the dense, bondy, unpleasant stuff of prices, yields, maturities, matters that would be anathema to any sane English major.

It turns out that this is a very interesting time to be joining a newspaper that covers the municipal bond market, although of course I can’t appreciate this. New York City has narrowly avoided bankruptcy in 1975 when the city’s big banks refused to buy any more short-term debt and the state had to step in and care for its profligately wayward child. This is a big public finance story, and leads to Congress to set up the Municipal Securities Rulemaking Board, a so-called self-regulatory organization tasked with bringing the wild and woolly municipal bond market into the 20^th century.

You have an interesting dynamic going on here. When I join the newspaper, states and municipalities borrow $46 billion in the municipal market. This more than doubles by 1984 and will double again in 1985 as issuers rush to sell bonds in advance of new tax law that will prohibit them from selling certain kinds of bonds on a tax-exempt basis. So you have lots of bonds being sold. You also have Wall Street banks dreaming up lots of new ways for borrowers to save money, what with the Federal Reserve’s Paul Volcker raising interest rates to combat inflation. The banks are eager to help issuers borrow, and the politicians who run the municipalities are eager to award them the business in return for campaign contributions.

There’s a lot for a newspaper that covers a trade to write about.

Now fast forward a few years and I am reading the galleys of Bonfire, and this must be the summer of 1987. And there is a line in the book referring to some 13-year maturity United Fragrance bonds. And these are referred to as U Frag 13 ’96 102. And Sherman refers to them: ``Three million United Fragrance 13-years of ’96.’’

And something strikes me. That isn’t quite right. In Wall Street parlance, traders wouldn’t refer to the maturities – the 13, in this case, but instead the coupon, whatever it is, and then the maturity. So they would say, the 13% bond maturing in 1996, or really just the 13s of ’96, or whatever the coupon should be. But it can’t be a 13% coupon in this case, because Sherman refers to the price moving to 102, and the yield declining to 9.75%.

This is a little scary. I am so far down the rabbit-hole of the bond market that I actually understand a piece of it.

I call Tom. I tell him I would put a coupon there, not a 13 signifying the maturity, because he also has his bankers talking about those 13-year United Fragrance bonds. I say bankers would really call out the coupon and maturity, like, say, Where are the 10s of ’36, or whatever. And he says okay, well, what would it be? He can still make changes, but they have to be small, he tells me. So I grab this little machine called a Monroe calculator, and at this price and this maturity and this particular yield, the coupon has to be something like 10.10%. And there is my contribution to Bonfire.

Would anyone have picked up on that ``13-years of ‘96’’? It’s hard to say. I think so. In any case, no one ever takes exception to our little alteration.

What’s harder to gainsay is the cultural import of changing Sherman from a writer to a bond salesman.

``The Bonfire of the Vanities thrust Wall Street into pop culture in the fall of 1987,’’ says the director of the documentary Radical Wolfe, Richard Dewey. ``It was followed by Wall Street and Liar’s Poker, and those three works sparked a generation of young people to seek fame and fortune in finance.’’

He continues, ``The legacy of The Bonfire of the Vanities might be that it was really the first book that portrayed Wall Street as a fun and exciting place to work. It also captured the energy and dynamism of 1980s New York unlike any other work.’’

Bonfire presents how Sherman’s professional life actually works. ``One of the reasons The Bonfire of the Vanities feels authentic is because Wolfe spent time shadowing traders and salespeople on the legendary Salomon Brothers trading floor,’’ says Dewey. ``Some of the language and terms from the floor made it into Wolfe’s book and some of the phrases made their way back to Wall Street, where they’re still used today.’’