Old lady judges watch people in pairs, limited in sex, they dare
To push fake morals, insult and stare, money doesn’t talk, it swears
Obscenity, who really cares, propaganda, all is phony
— Bob Dylan (brought to you without first checking with The Universal Music Group)
Shame on those who have actually asked me whether I would write about this. Have I not a duty, a solemn obligation, to weigh in on this thing?
So, Bob done went and sold off his entire catalogue – some 600 songs – to Universal Music Group – now a wholly owned subsidiary of Vivendi, SA, but with history that is arguably relevant to this digressive, wit-wandering narrative. It draws its origins from the formation of Decca Records, the first recording label of The Rolling Stones. Signing the Stones was a lucky break for Decca — insofar as it occurred just months after their having rejected, yes, The Beatles.
These trades went down in late 1962, and one wonders, 58 year later, whether Dylan recognizes the irony of the announcement of the sale of his songs transpiring on the day prior to the 40th anniversary of the murder of John Lennon. I suspect he does.
I want y’all to know that I’m down with this transaction. There was a time, not too many years ago, when it might have disturbed me. But that time is not now. Because if 2020 has taught us anything, it’s that our most deeply held assumptions and convictions do not rest on as strong a foundation as we have, heretofore, assumed they did. This does not mean that they are wrong/inappropriate; only that they might not stand, Gibraltar-like against the tides, as we had previously surmised.
Or, as Bob put it in our theme song (It’s Alright, Ma (I’m Only Bleeding)):
Disillusioned words like bullets bark, as human gods aim for their mark
Made everything from toy guns that spark, to flesh-colored Christs that glow in the dark
It’s easy to see without looking too far, that not much is really sacred
No, not much is really sacred, but is nothing sacred? Not even “Rainy Day Women #12 and 35”? The subsequent ~$300M question is as follows. Why would he do such a thing? Well, first off, one must bear in mind that if there was a Mount Rushmore for “no f_cks given about what anyone thinks”, Dylan’s image might occupy all four spots. So, the answer, my friends, may not even be blowing in the wind.
I’m pretty convinced, though, he didn’t do it out of a need for the filthy lucre. From everything I have been able to discern, he has coined a maharajah’s fortune across his career, and banked almost all of it. Stevie Nicks needed that trade; David Crosby still needs it. Bob does not.
My guess is that it has more to do with estate and tax planning. He currently pays the government 39% (ordinary income) for the privilege of collecting his royalties; selling them outright only costs him only 23.7% (capital gains). And that presupposes the geniuses in Washington don’t decide to jack tax rates in the middle of a global economic crisis. For additional reasons, the timing is right. He’s gonna be eighty in May. He’s got six children and five grandchildren and probably doesn’t want them squabbling.
To wit, he has no doubt watched in horror as his buddy/(lesser) bandmate Petty’s progeny have fought over the economics of his catalogue and wanted to avoid that pig circus. And Petty was not alone. It was worse with Zappa, so bad in fact that his poor son Dweezil (quite a shredder in his own right) was once forbidden by his brother and his mama to even use his own last name while touring or recording.
Why not instead just punt the songbook to the guys with the spreadsheets at Universal?
And, in terms of the latter, I have two observations. First, I think that UMG got a helluva deal. And beyond this, I will allocate some prayerful moments to the hope that the Company treats the material with the respect it so richly deserves. I suspect that Bob put in some guardrail clauses to ensure this.
I should also state that this here transaction went down somewhere in the midst of what will certainly be remembered as a deal season for the ages. And, like most affairs of this nature, it features winners and losers. The former group includes just about anybody who bought anything this last little while – stocks, bonds, Bitcoin, Real Estate. Heck, even commodities have had their best run since the ’08 crash.
But special recognition must certainly go out to high profile IPOs, most notably Airbnb, whose (let’s just say) generously priced offering set off a public market trading frenzy that caused the new stock to double on the first day of trading. In the first 24 hours of its existence, and before backing off rather ignominiously on Friday, ABNB reached the (you gotta admit) impressive market cap threshold of $100B. Not to worry, though, Airheads, your company – with $6.6B of assets and $3.7 B of liabilities – currently sports a valuation of $84B. As such, it’s worth more than Hyatt, Hilton, Marriott combined; could buy these chains – lock stock and barrel, and still have about $40B of market cap (enough to acquire all of Vivendi – including UMG) with which to play around.
The patrons of the European Central Bank, particularly the Treasury Departments of constituent countries such as Italy and Germany, must also be counted among the winners. The ECB just expanded its moneyswearing pot to the tune of €500B to €1,000B, depending upon how you count your €s, with which it will buy the bonds of member jurisdictions. The program unfolds in such a way that by the end of 2021, the ECB will own more than 40% of the debt issued by the former Axis allies named above. This must be a great comfort to the monetary custodians in Berlin and Rome, who need not now sweat the prospect of finding a home for the gargantuan amount of new paper they are certain to soon issue.
If money doesn’t talk but swears, this suggest that frenzied printing machine operators swear to do their all to induce investors to buy the remaining store of investible securities, while (dwindling) supplies last.
And as for the losers? Well, small businesses – particularly restaurants in large cities – come to mind. Gonna be brutal for them folks; many won’t survive.
I feel that this is a loss for us as well. I love taking you to fancy city restaurants, and who knows when (if ever) that privilege will be restored to us? Oh well, we’ve always enjoyed ordering in anyway.
Been a tough month also for 45 and his backers. Rudy came down with the covid. He’s losing court challenges right, left and center. We can count ourselves victors on that score.
I’m particularly pleased that the Supreme Court refused to take up the case of Texas (and 17 other states) suing Pennsylvania for November 3rd shenanigans. There’s little doubt that some very shady stuff went down that day – in the Keystone State and beyond. But do we really want to set a precedent where every time one of the stars on the flag is displeased with the electoral doings of one of its fellows, the matter is settled in court? Didn’t think so.
And nothing for nothing, but I would appreciate it if all of those breathless voices warning us that Trump’s Supreme Court picks would go into the tank for him on the 2020 election would kindly shut their pieholes. None of them did: not Garland, not Kavanaugh, not Coney-Barrett. They all voted on the basis of the Constitution as they (which is their job) interpret it. Like they said they would.
It thus appears that the inauguration is gonna go down, as scheduled, on 1/20. It will be virtual, but maybe that, too, is a good thing, because, as Dylan reminds us:
Even the President of the United States must sometime have to stand naked.
And now there’s two weeks left in a year that no one will be particularly sorry to kiss goodbye. Not a great deal of particular market import is likely to transpire in what remains. Congress will pass a Continuing Resolution to fund our fabulous government. The calendar will turn. The pandemic will carry on. We will be forced to wait it out and hope those phama companies and the FDA don’t bitch up the rollout of these here vaccines. Washington will gin up a galactic helicopter drop of newly minted cash, which consumers and commercial enterprises will mostly bank rather than spend. And as long as hibernating inflation doesn’t materialize – hungry and angry (which it probably will eventually but not just yet) – there’ll be plenty of cash to go around for investors to hoover up available securities.
Yes, there are risks out there. There are folks in my universe working themselves into some sort of frenzy about looming Brexit resolution. But do investors really care? I mean, the first referendum passed 4.5 years ago. But across the Atlantic, on these here shores, the Gallant 500 is up >70% since that rather unsettling episode, and Captain Naz is a triple.
True, the FTSE is dead flat over this interval, but as the great playwright, Mr. Bernard Shaw, is reported to have said: “England and America are two countries separated by a common language”.
In my experience, he has a point – which brings us back to our original theme. The first widely institutional distributed sale of a music catalogue I can remember was done by the Thin White Duke, who securitized his royalties back in the nineties. I was working for a large hedge fund at the time and begged them to buy a slice of Bowie Bonds. They dinged me, perhaps owing to an English-speaking peoples’ culture clash, but I’ve never fully forgiven them for doing so.
Nobody other than UMG got a shot at the Dylan catalogue – unless, of course, one wants to buy some shares of Vivendi SA, which one is certainly free to do.
As a risk manager, I’m pretty indifferent on this. Buy what you want; sell what you want. Probably won’t matter much – for now. This applies even to Dylan, who never needed a weatherman to determine wind direction. To wit, he concludes our thematic, musical opus with the following observation:
“It’s alright ma, it’s just life and life only”.
You know what kind of life we want. It falls to us – mostly me – to go out and get it.
Because a few verses back, Dylan reminds us that he who’s not busy being born is busy dying. And, operating on this premise, as the dwindling embers of this difficult year burn themselves out, is the best risk management advice I can offer for the moment.
TIMSHEL