We were saddened to hear the recent news about Bruce Willis’s retirement from acting due to declining health. Old enough to remember when Moonlighting was must-see TV, we’ve been fans of his work for years, including of course, his breakout role as plucky Detective John McClane in 1988’s Die Hard. Central to the plot of this action movie classic is an almost forgotten financial instrument that once featured prominently in the American marketplace – bearer bonds.
After his crackerjack team of criminals take over Nakatomi Corporation headquarters, the nefarious movie villain Hans Gruber tells its president at gunpoint that his team is “interested in the 640 million dollars in negotiable bearer bonds that you have locked in your vault.” But what exactly are bearer bonds? Well, they are fixed income securities issued by businesses or governments that differ from traditional bonds by the fact that they are unregistered – there is no record kept of the security’s owner nor transactions involving ownership. They became popular in the United States in the late 1800s as a means to fund Reconstruction efforts during the post-Civil War era. Produced in denominations much greater than common currency, bearer bonds were an efficient way to transfer large sums of money before the digital age. The scheduled payments were given to the bearer of the bond certificate, there was no squabbling over ownership rights – possession of the paper was considered ownership. After World War I, the anonymity of bearer bonds made them a popular means of dodging the new income taxes. In the 1925 novel, The Great Gatsby, the protagonist schemed to sell bearer bonds of questionable origin.
By the early 1980s with the vast improvements in the ability to keep records on computers, record-less bearer bonds were seen more and more as the domain of money launderers, tax evaders, and crooks. The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 basically stopped new issues of domestic bearer bonds by eliminating favorable tax treatment on the interest of these instruments. However, bearer bonds issued before TEFRA were still circulating in the financial world decades later, and they became a plot point in several action movies, most notably Beverly Hills Cop and Die Hard.
The bearer bonds kept by the Nakatomi Corporation in Die Hard were issued in 1979 in $100,000 denominations with 8% interest according to pictures of the movie props (one shown below):
The total of Nakatomi’s bearer bonds would be valued at 1.5 billion in 2022 dollars. It seems unbelievable that a real-world corporation would have so much invested in such a precarious asset whose value could disappear so quickly, yet companies like MicroStrategy and Tesla have larger investments in volatile cryptocurrencies. But could Gruber and his gang have really gotten away with all that money if their plans weren’t foiled by Bruce Willis? It’s debatable. By the 1970s, even bearer bonds had identifying numbers called CUSIPs that might have been able to prevent thievery on such a scale. However, just the perception of plausible pilfering is what made bearer bonds the financial focus of so many villains in action movies of the era.
Finally, a quick story illustrating that real life is not quite so bleak as portrayed in the movies. According to the New York Times, in 1983 a pensioner unknowingly left a $100,000 bearer bond used to fund his retirement in a copy machine. Fearing the worst after realizing he lost the valuable piece of paper, the man was surprised to receive the bond certificate by registered mail only a few days later. Instead of fleeing to a Caribbean island with ill-gotten gains, two store employees returned the security as soon as they could find an address for the owner. Truth maybe stranger than fiction, but it can also be kinder too.
Performance is no guarantee of future results. Trend signals are proprietary research of EWM Investment Solutions, a wholly owned subsidiary of Executive Wealth Management, LLC. Data source for returns is FactSet Research Systems Inc. This chart is not intended to provide investment advice and should not be considered as a recommendation. One cannot invest directly in an index. Executive Wealth Management does not guarantee the accuracy of this data.
Model Updates
There were no trades in the EWM Investment Solutions models during the week ending on April 9th, 2022. Domestic equity market sectors still maintain their long-term favorable trend and their overweight position versus international stocks in EWM’s Asset Allocation models.
Quote of the Week
The theme of this week has pretty much been “Elon Musk is real bad at filling out SEC forms.”
Bloomberg Opinion columnist Matt Levine commenting last week on Tesla CEO Elon Musk’s repeated inability to file the proper paperwork with the Securities and Exchange Commission before the required deadline in regards to his recent purchase of a substantial equity stake in the social media platform Twitter.
EWM News
All Executive Wealth Management offices along with the domestic security markets will be closed April, 15th, in observance of Good Friday. We hope all of our clients have a happy Easter and joyous Passover.
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Returns are calculated as indicated below with reinvested dividends not considered except for the Barclays U.S. Aggregate Bond Index. Data source for returns is FactSet Research Systems Inc. The London Gold PM Fix Price is used to calculate returns for gold.
1 Week = closing price on April 1, 2022 to closing price on April 8, 2022
1 Month = closing price on March 8, 2022 to closing price on April 8, 2022
3 Month = closing price on January 7, 2022 to closing price on April 8, 2022
YTD = closing price on December 31, 2021 to closing price on April 8, 2022
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