FT’s Robin Wigglesworth: Why Bonds, Not Stocks, Rule Everything Around Us | #650

Meb Faber (0:00)

Why are most people not up to speed on how big of a deal bonds are?

Robin Wigglesworth (0:05)

It's kind of seen as like the boring bit of finance, but I'd say it's certainly by far the most important. Like it is the bedrock to the entire financial system. The price of bonds is kind of the price of money. Everybody thinks Horatio Nelson and the Duke of Wellington beat Napoleon.

I'd argue it was actually the console market. The fact that Britain was able to even fight for so long was because it could fund itself almost infinitely at 3%.

S&P 500 dropped almost 20% and Trump didn't really care. And then we had like two bad days on the bond market and Trump was like, okay, no, no, no, no, we'll put a pause on Liberation Day. The bond market was getting yippy, was his amazing word that he used. In the UK, the bond market managed to dump out of prime ministry in 50 days. Generally, bond markets, we always think of as boring stuff. The stuff that should be functioning fine is where you hide when things are on fire elsewhere. Well, that's become a little bit more unsafe.

Meb Faber (0:58)

Welcome back, everybody. School is officially back in session. Today we got an awesome episode. Today's guest is Robin Wigglesworth, editor of FT Alphaville at the Financial Times, author of Trillions, which was the definitive history of index funds. He's out with a new book called A Fabulous Debt, The Epic Story of How Bonds Built the Modern World.

It's a thousand year history of the market that quietly sets the price of everything else. Robin, welcome to the show.

Robin Wigglesworth (1:26)

Well, I'm great to be here, Meb, thanks for the invitation.

Meb Faber (1:29)

Why are most people kind of not up to speed on how big of a deal bonds are and why are they so interesting? What inspired this book?

Robin Wigglesworth (1:40)

Well, I mean, the stock market is more glamorous. I disagree, but like that seems to be the popular conception. You can watch even mainstream TV and they'll tell you what the Dow did on any given day. Nobody's going to tell you what like the AG did. It's kind of seen as like the boring bit of finance. But I'd say it's certainly by far the most important. Like it is the bedrock to the entire financial system.

The price of bonds is kind of the price of money and it kind of rules everything around us to paraphrase the Wu-Tang Clan. I just think it's an amazing story. Actually, I knew a little bit of bond market history before I dug into this and decided to write an entire bloody book about it.

But it's wild how many times bonds played a huge pivotal role in big turning points in history, especially in the US, which has for centuries embraced the power of the bond market more than any other country on the planet. It kind of actually explains why the United States is today the world's hyper power. It's not really the stock market and yet the stock market gets all the attention. But yeah, I'm going to just try and correct that a little bit because bonds are cool.

Meb Faber (2:47)

And bonds, you know, listeners, if you look at the global market portfolio, bonds are a bigger asset class than stocks. That surprises people. So we're now getting into the hundreds of trillions, but bonds globally. And last I checked, I'm going to have to look, but bonds ex-US were actually bigger than the bond market in the US, if you include foreign and emerging. But all this reminds me of a quote from Bill Clinton's strategist, James Carville. And you know what I'm going to say here, but I'll read it. He says, and I'm not going to do his accent, y'all. He's got that New Orleans, I think. He says, I used to think that if there was reincarnation, I wanted to come back as the president or the pope or a 400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.

And you can choose to talk about Besant today. You can talk about maybe it was about a year ago.

You know, Jamie Dyson was out and said, you know, recession might happen. Trump's like, whatever. And then all of a sudden, the treasury goes from 3.8 to 4.5. And most listeners like, that doesn't sound like that much. But actually, it does.

Robin Wigglesworth (3:57)

Well, especially when it's not supposed to happen, right? When like stocks are crapping out, hopefully, you know, treasuries, especially, they're going to rally, yields are going to fall. And it wasn't like that because of all sorts of reasons. And it was really telling that, like, I mean, I think S&P 500 dropped almost 20% and Trump didn't really care. And then we had like two bad days on the bond market and Trump was like, okay, no, no, no, no, no.