Few obituaries published following Jimmy Buffett’s passing this September found space to note his 2013 duet with Toby Keith, “Too Drunk to Karaoke.” That’s for the best. The song captured the tuneless incoherence often associated with drunk karaoke - “sing off key” at one point rhymed with “theory of drunketivity” - but none of the fun. Link in the footnotes for the morbidly curious.1
It’s hard to imagine anyone but a Parrothead completist voluntarily listening to this song, but harder still to begrudge Jimmy for recording it. The Mayor of Margaritaville was a famously savvy businessman,2 and would have seen it as a sort of fiduciary duty to maximize the value of his boozed-up brand of bonhomie by exploring a joint venture with the artist who gave the world “Beer for My Horses” and “I Love This Bar.”
We’ll never get the chance to hear what a less contrived Jimmy and Toby collaboration might have sounded like.3 For two guys known for singing about kicking back, they both are surprisingly perceptive chroniclers of the labor market.
There’s a case to be made that Keith’s 2011 chart topper “Made in America”' foretold today’s revival in industrial policy and re-shoring, though I’ll leave that close reading to an even more niche finance and country music adjacent Substack. What’s easier to discern is how the signature Toby Keith mix of combative swagger and nostalgia-tinged vulnerability that reached its apogee somewhere between 1999’s “How Do You Like Me Now?” and 2005’s “As Good As I Once Was,” is already present in his earliest single, “Should’ve Been a Cowboy.” A yodeling lament to temporal mismatch between the supply and demand for a certain type of human capital, “Should’ve Been a Cowboy” is a spiritual successor to Jimmy Buffet’s 1974 classic, “A Pirate Looks at Forty.”
Yes, I am a pirate, two hundred years too late
The cannons don't thunder, there's nothin' to plunder
I'm an over-forty victim of fate
Arriving too late, arriving too late.
-Jimmy Buffet, “A Pirate Looks at Forty”
In real life, Jimmy Buffett arrived at the exact right time. Born in 1946, he entered the workforce along with the first Baby Boomers - the definition of “workforce” being stretched here to include irregularly employed beach bums - and spent the 1970s building a portfolio of enduringly popular songs / long duration assets whose value would steadily rise through the long bull market of the late 20th and early 21st century. The Baby Boomers accumulated enough wealth to fill a flotilla of Spanish Galleons, Jimmy was there to take it one branded salt shaker or condo at a time. No cannons needed.
In 1971 Jimmy Buffett left Nashville for Key West. That same year on the opposite coast, another quirky if significantly less easy-going twenty-something launched a firm that would come to play a key role in the machine that churns global capital round and round like a hundred trillion dollar margarita machine.
Before Bill Gross’s PIMCO was the largest fixed income management company in the world, it was a side project at a regional insurer. Back in the day, insurers would use policyholders' premiums to buy fixed income assets (i.e. bonds) with contractually specified cash flows (i.e. semi-annual coupons and the principal at maturity) that matched the actuarial projections for when claims would need to be paid (i.e. when policyholders die, or crash their cars, or otherwise experience a covered loss).
Insurers still do this of course. What’s changed is that they are less inclined to simply buy and hold bonds. Now they buy and sell bonds (and buy and sell again and again), hoping to realize profit on the sales in addition to the fixed payments. After a while, an insurer might get pretty good at this investing thing and decide that it could charge a fee to do it for others. Thus does the Pacific Mutual Life insurance company give birth to PIMCO, the Pacific Investment Management Company.
Bill Gross wasn’t the first person to actively manage a fixed income portfolio. But he turned out to be the best at it, an uncontroversial if inherently subjective assessment based on the value of the funds he came to manage, his multi-decade record of beating relevant benchmarks, and vibes. (There can only be one Bond King).
You can point to a lot of interconnected explanations of how he did it:
Early to invest in hot areas like emerging markets and junk bonds.
Correct macro calls, most notably around the GFC.
The popularity of his monthly Investment Outlook memos helped shape consensus views and attract funds.
Exceptional / maniacal firm culture meant PIMCO sweated gallons of sweat over “small stuff” like aggressively managing cash yields and leveraging scale to get the best quotes from banks. It was a demanding place to work, where one manager joked that the new-hire interview should consist of two questions. “Were you abused as a child?” and “did you like it?”
But this isn’t a piece about why PIMCO grew into a huge business. It’s a piece about Jimmy Buffet. And also about why PIMCO grew into a huge business when it did.4
1971, the year of PIMCO’s founding was also the year Nixon severed the convertibility of dollars to gold. Two years later came the OPEC embargo, then a second oil shock six years after. Inflation through the 1970s was high (6.8%, triple the rate of the previous two decades) and highly volatile, eroding the value of the bonds that had been stocked away in Pacific Life Mutual’s vaults and creating big market swings that a trader could profit from.
Other factors helped. Millions of Baby Boomers were entering the workforce. (Entering their peak household formation years too, adding some demand side pull to the inflation rate). To help ensure these former flower children would be able to afford Jimmy Buffett concert tickets in their golden years, Congress passed the Employee Retirement Income Security Act (ERISA) in 1974. With clear standards around pensions and other employer provided retirement plans, funds flowed to investment management firms like PIMCO.
The yield Treasuries at 10 year constant maturity peaked at over 15% in 1981. The next 40 years were a slide down towards zero that had some bumps, but generally was a very fun ride for the Bill Grosses of the world. The first step to being history’s greatest bond investor is having your bond investing career take place during one of history’s greatest extended bull markets.
That bull market is over. 10 year Treasury yields are at their highest levels in 16 years. PIMCO’s flagship fund was down -14.09% in 2022 - slightly better than the Lipper average, though that would be scant consolation amidst record fund outflows.
Perhaps the return of volatility might be consoling to an active fixed income manager. It wasn’t so long ago that the Bond King himself was giving interviews about how Fed’s quantitative easing had suppressed volatility, and with it, the probability of “generating historic alpha.”
It was fun while it lasted. In the words of Jimmy Buffett:
I made enough money to buy Miami, but I pissed it away so fast
Never meant to last, never meant to last…
Mother, mother ocean, after all the years I've found
My occupational hazard being my occupation's just not around
Re. the business of Jimmy Buffett. For reasons that are both too complicated to explain and also very simple (interest rates were at zero), my dipshit college friends and I were once invited into a conference room on Sand Hill Road so we could ask the folks at Sequoia Capital for money. (Reason prevailed, no funding was extended.) My clearest memory of the day is that during the preliminary chit chat, a man in a vest was introduced as "the guy who came up with the idea for the Margaritaville blender."
OK, that’s not quite true: they also teamed up for 2004’s “Piece of Work” and 2015’s “Sailboat for Sale.”
In an earlier draft it was also a piece about why the Russian organized crime grew into a huge business when it did. How a culture of "thieves in law," or vory formed in the Stalinist gulags, then seeped out into wider society during the Khrushchev thaw. How the stagnant Brezhnev years were a breeding ground for gray market entrepreneurs and protection rackets that fed off of them. How a Gorbachev era public health campaign to fight endemic alcoholism sparked a bootlegging boom. How a generation of soldiers returning from Afghanistan amounted to a sort of exogenous positive supply shock in the market for hitmen. And ultimately how the collapse of the Soviet Union created a power vacuum of the most abhorrent, and for some, lucrative, kind.
I want to see the piece described in footnote #4!