Embracing the Bond Market: Masters in Business with Robin Wigglesworth

Barry speaks with Robin Wigglesworth, editor of Financial Times' Alphaville blog and author of the new book 'A Fabulous Debt: The Epic Story of How Bonds Built the Modern World'. They discuss the bond market as the engine of the global economy, why the 30-year mortgage is "a miracle of the modern world," and when we should actually start worrying about US debt. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 2:35Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest returning to us, Robin Wigglesworth, editor of FT Alfaville, one of my favorite sites on the web. Financial, it's the Financial Times Finance Blog, which he runs from Oslo, Norway with a team of writers both in London and New York. He co-hosts The Story of Money, a financial history pod, and writes the newsletter Buy the Dip. His new book, A Fabulous Debt: The Epic Story of How Bonds Built the Modern World, is out. It frames bonds as the world's largest, most powerful financial engine.

• 3:19Barry Ritholtz?

  I'm halfway through it and I've been loving it. The conversation was fascinating. I think you'll really enjoy it. With no further ado, my interview of Robin Wigglesworth.

• 3:40Barry Ritholtz?

  Robin, welcome to Bloomberg.

• 3:42Speaker 04

  Well, it's a massive honor to be here, so thanks for that, Barry.

• 3:46Barry Ritholtz?

  So before we talk about the book, I want to spend a little time discussing your very interesting background. You get a bachelor's in journalism and contemporary history from City University and then a master's in history of international relations from the London School of Economics focused on political Islam. Was the original career plan always journalism?

• 4:11Speaker 04

  No, I always dreamt of being a physicist, maybe specifically astrophysicist.

• 4:16Barry Ritholtz?

  There is zero physics in international rela-, I guess that's really intergalactic relations.

• 4:23Speaker 04

  Well, weirdly, you know, when you try to self-analyze, it always gets a little bit weird, but I liked figuring out how the world worked. I liked physics. I loved understanding and learning about the galaxies and I realized I was pretty good at maths and physics. Up until a point, I realized I would be nothing other than a mediocre physicist.

• 4:39Barry Ritholtz?

  It's amazing you can be great at the secondary level and suddenly in college, oh, those guys are really good.

• 4:45Speaker 04

  Yeah, those guys are really good.

• 4:46Barry Ritholtz?

  I had that same experience, yeah.

• 4:47Speaker 04

  And it's fine, it's kind of knowing your limitations is what you're good at. But journalism in many ways, I've kind of come to see is similar in that you're just figuring out the world from a different perspective. And financial journalism has at least a little bit of math, albeit not quite at the level of PhDs.

• 5:03Barry Ritholtz?

  So, so am I correct in saying your first gig out of LSE was Bloomberg News? Is that right?

• 5:10Speaker 04

  No, I had a, I had one intermediate step. I was a financial journalist for a small trade mag in Dubai and it was, they just ingest journalists and then spit them out if they're bad. And I didn't know anything, but it was kind of this first awe-inspiring moment where like, oh my God, I get paid to ask smart people about stuff. And it was so fun. I knew nothing and luckily I didn't embarrass myself, so they kept me around and, but I quickly moved to Bloomberg because I knew that was a great place to learn.

• 5:36Barry Ritholtz?

  So the Middle East and Dubai is a theme that comes up. You're the Gulf correspondent in Abu Dhabi covering the Arab Spring from both Bahrain and Libya. How do you go from that to covering finance?

• 5:51Speaker 04

  Well, so the first job had been covering bonds, Islamic bonds, actually, Sukuk. And I worked at Bloomberg as an economics and politics reporter, but also kind of you get roped into everything. Bloomberg's a great place if you want to spread your wings, so I covered like FX and rates a lot as well. So the FT was a Middle East correspondent, Gulf correspondent, but you kind of do a bit of everything then. And it was a lot of Dubai going bankrupt. This was 2008, Dubai was going, having a hard time. It was fascinating. I was also covering things like labor movements in Bahrain and Saudi Arabia. But when the Arab Spring happened, I did get to cosplay as a war correspondent for a bit and it was a wild time. I'm actually interviewed for a financial journalist job at the FT back in London from the army barracks of the rebel government in Benghazi.

• 6:36Barry Ritholtz?

  Oh my God.

• 6:37Speaker 04

  Yeah.

• 6:38Barry Ritholtz?

  So, so how do you end up covering capital markets in New York for the Financial Times?

• 6:44Speaker 04

  Well, I went to London. I did get that job despite the slightly bad backdrop of Benghazi army barracks. Got the job covering capital markets for the FT in Europe and it was a Eurozone crisis and it was an incredible time. You learn, as you know, you learn so much more, so much quickly in a crisis. So it's terrible for the world, great for us. And after a few years, I got moved to New York to head up the markets team there. And that's kind of, for me, that's, that's the, that's the Premier League or the World Series, you know, you, it's New York, finance, it doesn't really get better.

• 7:18Barry Ritholtz?

  You know, I love quoting Robert de Vol and Apocalypse Now during the financial crisis to some young analysts. There's a line, "Some days on, this war's going to end." He says wistfully, and in the middle of a crisis, there's very much that experience, like, you better appreciate this because these only come along every 20 years or so and they're amazing learning experiences.

• 7:44Speaker 04

  Yeah.

• 7:45Barry Ritholtz?

  You, you experience that repeatedly.

• 7:47Speaker 04

  Yeah.

• 7:48Barry Ritholtz?

  First with the Arab Spring, then with the Great Financial Crisis. What was the next big economic crisis that really affected how you saw the world?

• 7:59Speaker 04

  I'd say COVID is the obvious one. There were lots of little mini things in the, in the, I remember all the brouhaha about the first time the Fed was going to raise interest rates. That was a big deal, but it actually ended up being a bit of a nothing burger. But COVID was, was, it was incredible just on the personal but also professional level. I remember talking to one of our best young promising journalists who was, she was feeling quite stressed out at the time and I said, look, it's tough, it's difficult, but this will make your career. This is, if you, if you just throw yourself into it, you will grow by leaps and bounds over the next days, weeks, months. We don't know how long this is going, but just try to enjoy it, get enough sleep and just try to almost revel in it. Try to turn around.

• 8:44Speaker 04

  This isn't just stress, it's, it's something that will shape you. And it shaped me as well and it was incredibly exciting.

• 8:50Barry Ritholtz?

  So your last book was about index funds. This book is about bonds and debt, which occasionally blow up and cause a crisis. I'm curious, how fundamental was the Dubai debt crisis you mentioned to how you frame the world of debt and credit and how you think about the bond market, which you've described as the most powerful financial engine in the world?

• 9:17Speaker 04

  That's a great question, actually. I'd always thought, my, my first job was covering these Islamic bonds and had to learn about the bond market that way. And they're really quite funky, they're kind of structured.

• 9:27Barry Ritholtz?

  No interest rates, right?

• 9:28Speaker 04

  No interest rates in theory, because it walks, talks and quacks like a fixed income bond.

• 9:33Barry Ritholtz?

  You're buying it at a discount, so it's like a zero coupon bond, so there is interest.

• 9:36Speaker 04

  Yeah, they do it with lease backs, basically like that. I'll lease, you buy a house, the bank will buy it for you and lease it for you at fixed payments for the next 20 years, for example.

• 9:46Barry Ritholtz?

  And then you own it.

• 9:47Speaker 04

  Yeah, and then they own it and then you own it. Then in, for Bloomberg, I covered most of the rate space. So it was quite exciting because Iceland was part of it and you remember Iceland really blew up during the financial crisis.

• 9:58Barry Ritholtz?

  Oh, it was completely wiped out, yeah.

• 10:00Speaker 04

  It was, it was, and again, it's terrible because obviously, you know, terrible people in Iceland had a terrible time.

• 10:05Barry Ritholtz?

  But fantastic at the same time.

• 10:07Speaker 04

  So interesting. But yes, Dubai, I think, was the first time I really covered kind of distressed debt and realized the full panoply of crazy stuff that can happen with fixed income and, and how much it pays to read the bond docs. Lots of investors don't really read the documentation, as, as we've seen again and again. There was one Islamic bond issued by Dubai, it was backed by land that was actually supposed to be reclaimed from the sea, but it literally was just the seabed. And good luck trying to seize that if you're a creditor, right?

• 10:38Barry Ritholtz?

  It's underwater, both literally and figuratively.

• 10:41Speaker 04

  So it was, it was a wild time and the characters in that world, they were just very different, the credit investor, the special situations people, from the rates people I'd kind of mostly known. So it was fascinating. So it definitely kind of deepened my love affair with fixed income.

• 10:58Barry Ritholtz?

  And we're going to talk more about the book, but I love all the examples you pull and these great narrative tales throughout history to illustrate. I, I found the book really fascinating. You must have studied, I want to say centuries, but maybe it's millennia, maybe it's a thousand years of, of government borrowing, of bond issuance, of debt, of credit.

• 11:27Barry Ritholtz?

  Why do we see the same patterns happen over and over again? There, there's credit. Sometimes you have people creating frauds. Sometimes there's a mania. Like, who would have imagined, wait, railroad bonds? Why is that sexy? And yet, we see the same things over and over and over again. Is it just, this is our nature? We, you have to accept it?

• 11:51Speaker 04

  I think that's exactly it. I mean, there's, there's a famous quote, I never remember which British philosopher said it, but from the crooked timber of mankind, never a straight thing was made. And, you know, the technology changes, society changes. Human nature doesn't change that much. And we can see the patterns again and again. And, you know, that's great for financial journalists like, like us, but uh, less bad for society. But, you know, broadly speaking, that still, despite those big crises, those big cycles, those huge mess ups basically along the way, we're still better off now than we were before, right? So I think that's part of the magic of maybe even modern capitalism.

• 12:32Barry Ritholtz?

  No longer living in caves.

• 12:33Speaker 04

  Yeah.

• 12:34Barry Ritholtz?

  Indoor plumbing.

• 12:35Speaker 04

  Yeah, I like indoor plumbing.

• 12:36Barry Ritholtz?

  I'm a big fan, to say nothing of Japanese toilets, which is just next level. But all these things, all these infrastructure things, um, electricity, light, uh, internet, it made possible, um, from the fixed income markets. You note, bonds financed infrastructure and innovation, but also conquest and slavery.

• 13:01Speaker 04

  Yeah.

• 13:01Barry Ritholtz?

  How do you assess their contribution to progress while simultaneously acknowledging some of the destruction that bond underwriting has funded?

• 13:12Speaker 04

  No, it was something I struggled with, but to what extent do I sort of, I mean, this is unquestionably my love letter to the bond market.

• 13:20Barry Ritholtz?

  Clearly.

• 13:21Speaker 04

  Yeah, the, the, the working title was The Greatest Show on Earth: An Affectionate Biography of the Bond Market.

• 13:26Barry Ritholtz?

  And the Fab, A Fabulous Debt is, is an even better title. It's a great quote from, somebody will get to that in a bit. Um, but, but as I read through the book and that, that, uh, uh, construction and destruction, the bond market is essentially a tool.

• 13:44Speaker 04

  Yeah.

• 13:44Barry Ritholtz?

  You could build something with a hammer, you could collapse someone's skull. It's the same.

• 13:48Speaker 04

  Exactly. So basically, any big project in mankind, whether it's wars of conquest, wars of liberation, slavery, hospitals, they have all at their heart actually had debt. And it's almost overwhelmingly the bond at their center. Uh, you know, there have been plantation-backed bonds. The first investment fund ever in history is a Dutch fund. It was literally a steel chest or an iron chest, sorry, locked with three locks with little bond certificates inside that. That, some of those bonds were slavery bonds, basically, plantation bonds. There are also highway bonds in Sweden and Denmark. There are also Dutch, uh, perpetual bonds as well. So it, it goes both ways. Like, America financed its war of revolution by the sale of bonds to foreign investors.

• 14:32Speaker 04

  You know, the wars, World War II, World War I. And one of the large reasons why the Allies won in the end was because they were able to finance themselves more efficiently. So, yes, I think.

• 14:43Barry Ritholtz?

  To say nothing of Napoleon, to say nothing of the US Civil War. Well, again, we'll, we'll get into the details. You know, I, I have a friend I speak to all the time, and once a week, uh, they always ask me, who, who are you going to sit down? Who are you talking with this week? Uh, and I said, oh, Robin Wigglesworth, uh, who's he? FT reporter. Uh, he's like, oh, I, I know the name. What, what's the book about? Um, and I mentioned, I go, well, his first book was about index investing, called Trillions. This book is called A Fabulous Debt About Bonds. And the immediate answer was, why is he so attracted to the most boring aspects of finance? But when you read the book.

• 15:24Speaker 04

  Yeah.

• 15:25Barry Ritholtz?

  It is not, it, it, it's everything from catastrophe to war to innovation. Bonds sound boring, but they really aren't.

• 15:34Speaker 04

  Yeah, I mean, bonds are kind of designed to be boring. But yeah, this is my attempt to reclaim that kind of that, or, or revive its, its reputation for being where the real stuff happens. I mean, I always joke, and this is slightly me, because I do love the stock market as well, and some of my best friends are equity investors. But it's like trading Pokemon card. Like, it doesn't really matter. The overwhelming amount of activity in the stock market is secondary market stuff. It's one person buying or selling a stock from another person. It doesn't matter the company whatsoever.

• 16:03Barry Ritholtz?

  Right.

• 16:03Speaker 04

  We talk a lot about the theory, about the signal it sends, but really, it isn't that important. The bond market, every single day, there is a bond being sold, financing sewage plants, wars, companies.

• 16:14Barry Ritholtz?

  Not just traded, but, but the underwriting.

• 16:17Speaker 04

  Yes, exactly. It just, that's where, if you want to see where capital actually flows, like capitalism, at its most primal, that's the bond market.

• 16:26Barry Ritholtz?

  And, and to put some numbers on this, the bond market is a multiple of the size of the equity market.

• 16:31Speaker 04

  Oh, yes, yeah.

• 16:32Barry Ritholtz?

  Three X, four X, something like that?

• 16:33Speaker 04

  Well, it depends on how you cut and how you define the equity market. In the US, certainly. Globally, the, the bond market actually is bigger than the entire banking system as well. That's one of the reasons why I wrote it, because, look, I love the stories and I think it's fascinating. I love history and the bond market is blessed with some incredible characters. But the reason why I think something warrants being a book isn't just that it's navel-gazing, backward-looking history, it's because it's relevant to the present day. And the bond market is now the engine of the global economy, more than the stock market, more than the banking system. It's the bond market that, to paraphrase the Wu-Tang Clan, bonds rule everything around us.

• 17:09Barry Ritholtz?

  That's, that's exactly right. But I, I have to ask one question. Why eight and a half centuries of bond history?

• 17:17Speaker 04

  Well, I, I studied even more, as you said, I studied over millennia. I studied a few millennia, in fact, and I wasn't quite sure where I was going to start. Uh, the, the Mesopotamians, four thousand years ago, traded clay tablets of loans, where they had their little thing called the tankerum clause almost, where basically you'd, rather than give a loan to, you know, Barry, uh, just write it to a merchant. So that person could sell the loan to somebody else. That's what we think they did.

• 17:42Barry Ritholtz?

  So that's a few thousand years ago. I want to say about 1,500 years ago, you could buy Japanese rice futures. And there was an underwriting on that also. That was transferable. It, it's really fascinating how far back this goes.

• 17:56Speaker 04

  Yeah, finance and credit has actually a far longer, more vibrant history than most people realize. But the reason why I decided to start in Venice in 1171 is because, really, when I see, I want to see intellectual genealogy, as it were, like what really was the stuff that led to B, to C, the D. And, you know, the Mesopotamian invention, they invented credit, they, they invented, they discovered, they used credit. They had a very vibrant system of credit, in fact. But really, when you see what, like, what the icon was that everything grew from, it was this humble, accidental war loan in Italy in, uh, 1171. Uh, because that's what you can see then copied in the other Italian city-states.

• 18:38Speaker 04

  Then France and Spain, the Netherlands really jacked it up, they really cranked it up by six notches. And the British copied that, then the Americans, Alexander Hamilton copied that again, and that's basically where it all came from.

• 18:51Barry Ritholtz?

  Really fascinating. Coming up, we continue our conversation with Robin Wigglesworth, discussing his new book, A Fabulous Debt: The Epic Story of How Bonds Built the Modern World. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

• 19:10Speaker 00

  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity, and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined, long-term investing, uncovering value, and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

• 19:44Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 20:26Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

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• 23:03Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Robin Wigglesworth, whose name is fun to say. You should try it at home. He is not only the editor of FT Alfaville, he is the author of a fabulous new book, A Fabulous Debt: The Epic Story of How Bonds Built the Modern World. His first book was trillions, all about index fund investing. That was published in 2021. So you mentioned earlier, you start in Venice in 1172. Tell us a little bit about what was going on in Venice with the spice trade, what was

• 23:47Barry Ritholtz?

  happening with sort of city-states and local wars, and how the idea of doing an underwriting really came about.

• 23:57Speaker 04

  Yeah. Have you been to Venice, by the way, Barry?

• 23:59Barry Ritholtz?

  I've been all over Italy. I have never been to Venice.

• 24:02Speaker 04

  Well, I definitely recommend it. I want to go back there because it's now, it has extra emotional resonance for me now. I went there as a feckless teenager many years ago, and it's beautiful.

• 24:13Barry Ritholtz?

  Got to see it before it sinks beneath the sea.

• 24:17Speaker 04

  Exactly. Venice is just an incredible place. The history of the place is incredible. So it was actually founded, not by some royal offshoot of the family, as it were, but it was actually refugees fleeing the vandals. The vandals were actually just German tribes, barbarians that would periodically raid into northern Italy. And they fled to Venice because it was a swampy hellhole that nobody else wanted to live in. It had no natural resources, no farmland, no metals, nothing. All it had was essentially being anonymous. Because of that, they had to learn off their wits. So they became kind of Europe's preeminent traders, their most mercantile city-state, kind of like Singapore on steroids, maybe.

• 25:00Speaker 04

  And they were technically ruled by the Byzantine Empire in Constantinople, in today's Istanbul, because Charlemagne never managed to conquer Venice and really didn't really care that much about it. But they were Catholics, they were part of Italy as well. So it was kind of, they were caught between east and west, and there were the main, some intermediaries there. But the Byzantines really thought they were an uppity bunch of nouveau riche arses, basically. They didn't like them at all. And they argued and argued until basically Constantinople quietly said, we're going to arrest every single Venetian. They just were fed up. We're going to arrest every single Venetian in the Byzantine Empire. So when this came out, the Venetians were outraged. They decided to send a fleet to teach their liege a lesson.

• 25:44Speaker 04

  But they needed money, lots and lots of money because wars were expensive. They normally had borrowed money from some of the bankers that started to crop up in Italy. They're called bankers because they literally had like wooden tables in the square called the Rialto, which were called bankey. But they needed too much money. So they basically forced everybody in the city to pay a proportional war tax according to their wealth. And to soften the blow, they said, well, it's not going to, everybody has to pay it, but we're going to make it a loan, and we'll pay you 5% the year until we've taught Constantinople a lesson and freed our citizens and exacted reparations, and we'll also make the receipts tradable. And that bit was revolutionary.

• 26:28Speaker 04

  So we don't know how much they raised. We do know they actually lost that war. And because of that, and the Doge who engineered all this, he was murdered by his own citizens, who was outraged. The bond was kind of made permanent because they couldn't pay it back, but they could pay the 5%. And actually, quite quickly, the Venetians discovered that actually it was pretty cool being able to buy an income stream. You could actually then make money from your savings. And in fact, you can use that receipt as collateral. And for merchants like the Venetians, this was revolutionary. Suddenly, this was a whole new use case for it.

• 27:03Barry Ritholtz?

  Giant spice trading, a lot of international trade.

• 27:07Speaker 04

  Spice, gold, iron, silks, everything. They were, like Marco Polo was from Venice. There's no, that's no coincidence. Shakespeare name checks the Rialto Square and the merchants of Venice many centuries later. It became famous. It was, it was kind of, I mean, the New York and Chicago and Amsterdam and Singapore of its era. It was the beating heart of the Mediterranean. And this kind of unfortunate accident, kind of relic of one of their lowest points as a city-state, actually became kind of a testament to their commercial ingenuity, their financial ingenuity, that it actually became a super valuable thing. People wanted to buy this stuff.

• 27:49Speaker 04

  And they'd pay it back gradually, and then occasionally if they fought another war, which always happened in Italy around then, and they were expensive, they'd sell more of these presti, as it was called. And yeah, and other people copied it, and it spread from there.

• 28:02Barry Ritholtz?

  So let's talk about the next group that copied it. There's a stretch in the book about the Netherlands and the Dutch waterboards, and you know, most of Holland and that region is below sea level. So building dikes and managing the infrastructure of keeping the sea at bay is a giant part of what the government does. Explain how flood controls become a milestone in fixed income history.

• 28:32Speaker 04

  Well, you don't know exactly when the Dutch started to use bonds. So they spread from Italy northwards around Europe, where they're called like a Rance in France and Renton in Germany and the Netherlands. But the Dutch really discovered the potential of mobilizing the savings of its own industrious people. They were kind of the successors to Venice as the most commercially minded people in Europe at the time.

• 28:57Barry Ritholtz?

  The Dutch?

• 28:58Speaker 04

  The Dutch, yeah. And they kind of invented modern capitalism, I'd say. They used them because, you know, building dikes, these incredibly elaborate, intricate waterworks and dikes and flood guards is super expensive. It's capex expensive, essentially. So they sold bonds to do this. Every single local waterworks, hundreds of them, spread across the entire country, that high region, the low countries, the Netherlands. And bonds were the way they did it. And that kind of started what was probably the first true proper bond market by lots of different issues that would sell bonds fixed rate, often at a fixed maturity, but

• 29:42Speaker 04

  mostly perpetual, and at market set interest rates.

• 29:46Barry Ritholtz?

  And there are still some perpetual bonds from the 1600s that are still generating yields.

• 29:52Speaker 04

  Yes. So there's eight in particular, you should buy one waterworks, they sell outstanding. One of them is owned by the New York Stock Exchange. It celebrated its 400th birthday party in early December 2024. I actually was invited to that birthday party, and my wife thought I was mad, but luckily she's used my madness, so she let me go. And I had a blast. It was, I got to meet the world's oldest living bond that still pays interest, 13 euros a year, to the New York Stock Exchange.

• 30:20Barry Ritholtz?

  That's very funny. So that's the 1600s. Let's fast forward a century and change. Napoleon is running roughshod all over Europe. He hasn't quite yet stumbled into Russia, which doesn't work out. But he dismisses Britain. I love the quote, "A nation of shopkeepers." But at the same time, London's bond market and the ability to collect all of the savings of those shopkeepers and combine it into "the largest pool of capital the world has ever seen," to quote you.

• 30:54Barry Ritholtz?

  Arguably is what defeated Napoleon. Explain how shopkeepers brought down the greatest general maybe in European history.

• 31:02Speaker 04

  Yeah, well, France was the superpower of the era, huge country, bigger country than England. They controlled everything. They had Napoleon. And Britain was able to fight for so long because it could finance itself almost indefinitely. I mean, not indefinitely. It's felt like that to the French and send material and subsidize its allies like the Prushens for years and years and years because they could use the bond market. They had created, they'd basically seen what the Dutch had done. The Dutch had kind of surpassed them, and that was very embarrassing for the Brits. So they basically, they imported a Dutch prince, imported things like the Bank of England or a central bank. They imported lots of the way they sold the bonds. They consolidated all the state debts into something called the consolidated annuities market.

• 31:46Barry Ritholtz?

  Consols.

• 31:47Speaker 04

  Consols. And that really is the better one. That's the world's first true free risk free rate. It was the erd treasury market, as it were. That's what people bought around the world. The Dutch bought it, the Germans bought it, the French bought it even. And that meant that England could finance itself almost forever in this war to the immense frustration of the French, who, you know, Napoleon was actually quite an able administrator, but France's creditworthiness was was was pretty feeble. So they paid, you know, two, three times the interest rates that that England did.

• 32:19Barry Ritholtz?

  And so it was much more expensive. Really, you know, the modern world, we're seeing this war of attrition between thousand dollar drones versus million dollar missiles. It's very parallel to Napoleon. So so there were a number of people, some of whom opposed the war, some of whom were just, more of whom were were kind of puritanical about the debt. The title of the book comes from Thomas Babington Macaulay's dismissal of predictions of disaster due to Britain's enormous accumulation of debt. Fabulous debt is how he described it. Explain.

• 32:58Speaker 04

  Well, so I was looking into the history and how the British were talking and thinking about the debt, especially that they had accumulated after the Napoleonic wars. It is still the biggest debt burden, as debt to GDP burden we've ever seen in history, pretty much. But obviously, England, as we know, managed to grow out of it. It was completely fine. But there were periodic freakouts over the expense of wars. And the discussions were incredibly strikingly modern, as in what I call the repeated protestations of the debt scolds. And not to say that these aren't things that we are fair to worry about. But Babington Macaulay, not the Macaulay of Macaulay duration, unfortunately, which I was disappointed to learn, but Babington Macaulay, he wrote this phenomenal polemical

• 33:43Speaker 04

  book on the history of Britain around this time. And he pointed out that every time people said after this war, after this war, after this war, the British debts kept growing and growing and growing. And actually, no, rather than leading to ruin, it was not just not impeding Britain's wealth and growth, it was actually helping catalyze it, capitalize it. The fact that Britain had a vibrant bond market, because these console could be used as security for loans, you could buy an income stream. It was, in fact, a fabulous debt. It was a blessing. And I thought that was just when I stumbled over it, I thought that, that's it. That's my title. Love it.

• 34:22Barry Ritholtz?

  The shocking parallel, and I don't recall if this is Macaulay or not, they erroneously imagined there was an exact analogy between the case of an individual who was in debt to another individual and the case of a society which is in debt to a part of itself. That analogy leads to endless mistakes. Was that, first, was that Macaulay? And second, isn't that the argument?

• 34:47Speaker 04

  Yeah.

• 34:47Barry Ritholtz?

  The deficit scolds have been having both here and abroad for, I don't know, the past 50 years?

• 34:52Speaker 04

  Yeah. No, it's it's over 200 years ago, Macaulay, Babington Macaulay pointed exactly that issue, that you cannot consider government debts in the same way you do the household. It is a seductive, but wrong assumption, a metaphor, and it will lead you astray, essentially.

• 35:11Barry Ritholtz?

  It's really quite amazing. Let's stay with some history and fast forward a little more. You have Alexander Hamilton, who decides to take the mess that is just a run of of Revolutionary War debt and all sorts of different state debts and create a sort of more modern basis for financing a government. I'm curious, what did he do that was so smart? And how much does the modern treasury owe to Hamilton?

• 35:48Speaker 04

  I mean, an immense amount. I mean, I had to have a dot ham in the book. But even I was surprised at how coruscatingly brilliant the guy was. I mean, how far ahead of his time. And reading between the lines of what he says, and some of his speeches, and his writings, and his thinkings, and his this first credit report that he presents to Congress about what to do with all these defaulted state bonds after the revolution, I think is, I mean, incredible. I mean, it is as almost like a founding document for the United States of America. So he realizes he's, when he was a soldier and before that, he'd studied

• 36:31Speaker 04

  the British financial system. He'd studied the console market. He realized that consoles actually were not a public curse, as people like James Madison would say, they were national blessing, that this was actually a key source of Britain's financial strength. And he realized after the war, because they can become like money, like essentially bonds, especially when the word physical object, you could use them as collateral, also use them as money. And in a country or a very newborn country that had a desperate lack of specie of coins, gold, silver, and things like that, that could be incredibly powerful. So he proposed to take all the state debts that were bank defaulted on, all the external debts, but everything else, domestic bondholders, they'd be restructured, but they'd get some

• 37:14Speaker 04

  paper, they'd get some money back. The external debt would be turned into these new treasuries. They would, the federal government would assume responsibility for all those bankrupt states and their debts. And by doing so, the argument was that this was about restoring America's creditworthiness, her credit, making her stand upright among the other nations of the world. But really, I think it's because he realized a new treasury bond market would be incredibly powerful and catalytic for the US economy that was still struggling after the revolution, after just suddenly being cut off from its single biggest trading partner. And also, and this is something the Venetians discovered almost by accident, if you make

• 37:56Speaker 04

  your credit, if you make your citizens creditors as well, they have a vested interest in your good governance. So suddenly, by making all these American soldiers and Wall Street speculators and farmers creditors to this new federal government, they had a vested interest in it sticking together and in holding. That actually was very powerful glue at incredibly wildly chaotic time for the republic.

• 38:21Barry Ritholtz?

  And soon after, and Napoleon plays, comes back into the story, he needs to raise some capital to continue funding his world. And was it Madison sends somebody over to negotiate? Or was it Madison who went over to negotiate with the French to essentially buy everything west of the Mississippi that the French owns from Louisiana west?

• 38:50Speaker 04

  Well, Louisiana was important. I mean, it was big, of course.

• 38:53Barry Ritholtz?

  And it's at the mouth of Mississippi from which all commerce in the middle of the country traveled, or at least most of it. And having the French control that was strategically problematic.

• 39:03Speaker 04

  Yes, even Jefferson, who was fairly sort of non-interventionist, talked about, you know, this would be like somebody holding the juggler of the American economy. The Mississippi was so important, they couldn't let another big, potentially hostile country own it. And the French had basically taken it from from Spain. And it was, what do they do about it? Well, it turns out Napoleon was desperately short of money, and he didn't really want to spend, expand in the Western Hemisphere, so that a deal could be made. It was Monroe, James Monroe, also another future president, that was sent to negotiate. And it was because of Alexander Hamilton's restoration of American credit that a British

• 39:43Speaker 04

  investment bank, Behrings, together with its allied shop in Amsterdam called Hope and Co., was able to engineer what I think is probably one of the most remarkable financial deals in the history of the planet.

• 39:55Barry Ritholtz?

  $15 million. That's the original sum, which was over his, I think, what was the budget, nine or $10 million originally?

• 40:03Speaker 04

  Yeah. And and he just said, I'm, yes, I'll hit it. I don't care. This is a good deal. And he was right to do so. And I mean, can you imagine if you, I mean, investment bankers now are always worried about hung deals and deals going bad. There's no limited liability in this day. So Behrings is taking the entire risk. Because basically, the US didn't have the money, so they had to sell bonds.

• 40:23Barry Ritholtz?

  Right.

• 40:24Speaker 04

  And basically sell those bonds to France. And Behrings would have to underwrite and manage the whole thing. And they were getting paid, at the time, generational wealth to do so. In fact, if you look at it, if you look at the fee they got paid versus what they paid for Louisiana, it's like getting paid all of North Dakota. But it's, there's no limited liability. And the letters between the Behrings partners keep talking about like how they tremble at the size of this American business. This is not make or break. This is literally dying in debtors' prison or the deal going through.

• 40:54Barry Ritholtz?

  Amazing. And then let's fast forward a couple, a quick century.

• 41:00Barry Ritholtz?

  The argument in the book is that the North won over the South in the US Civil War. Because because the North had all the banks and bankers in Wall Street. And they were able to finance uh Lincoln and and the North's ongoing um battle to to reign in reign in the South.

• 41:22Speaker 04

  Yeah.

• 41:23Barry Ritholtz?

  Uh how accurate is that?

• 41:25Speaker 04

  Well, I'm no civil war historian, so I'm not an expert on that. Uh but I do know that many people in the South felt it was the North's superiority to finance themselves. That was decisive.

• 41:36Barry Ritholtz?

  That's a theme throughout this, throughout history is hey, if you're gonna go to war.

• 41:40Speaker 04

  Yeah.

• 41:40Barry Ritholtz?

  Yeah, you need guns and bullets, but but you need some bankers making sure you can pay for those guns.

• 41:46Speaker 04

  Exactly. I mean, Ulysses S. Grant also thanked. So it was actually a private banker that engineered this because Sam and Chase, the Treasury Secretary at the time, was not an enormously um competent Treasury Secretary, probably. So he essentially um privatized the role of selling all these war bonds to a private banker called uh Jay Cook. And and he did a phenomenal role and actually it was the first time you really see bonds mass marketed to people with like propaganda and flyers and advertising and newspaper articles. Because they had to teach people what even a bond was. He also touched upon that. A bond is not like a government bond is not like a household finance. You should you need to think about this differently.

• 42:29Speaker 04

  Britain is strong because of its large console market, we can do the same. And and he sold a prodigious amount of of bonds to help finance the North's victory.

• 42:38Barry Ritholtz?

  Now, Cook, if I'm remembering correctly, big on the railroad bonds as well. So so I love this line. The bond market was the track on which the trains truly ran. That that's a a huge statement. How giant was the appetite for for railroad bonds? And and how huge was laying intercontinental rail? How big a deal was this?

• 43:04Speaker 04

  Yeah, I mean, we think of rail as such as an ordinary means of tra- transport now, right? It's so old world, uh but it was unimaginably revolutionary at the time. People were genuinely concerned that the human mind couldn't handle those kind of speeds, that people would go mad. The newspapers would write horror stories about people going mad when they drove when trains that drove faster than twenty thirty miles an hour. At one point, some people genuinely thought that maybe over forty fifty bodies might get might get vaporized. We we weren't built for those kind of unimaginable speeds.

• 43:38Barry Ritholtz?

  Amazing.

• 43:38Speaker 04

  And and in the Euro- Europe, I mean railways, there were railway manias everywhere, lots of them. They were almost like a series of mini booms and busts around the world. Uh but in Europe, you know, rails connected one town to the other. In the US, rail built towns, they built states essentially. It really created America as we know it. Uh they, the US embraced railways with more zeal, with more mad abandon than anywhere else. And Jay Cook was at the center at first before he before the Civil War. He that was where he made his first fortune as a banker. And then afterwards, well, he kind of stepped away. It was clearly a mania, he wasn't sure about it.

• 44:19Speaker 04

  But the transcontinental railways were so exciting, they were like the Apollo programs of the era. And especially symbolically important after the Civil War, binding the country together. Binding western eastern coast together. So he got sucked into this belatedly. And it ended very, very badly for him.

• 44:37Barry Ritholtz?

  Well, he he he was briefly, or maybe not so briefly, the wealthiest person in the country before it all went went belly up. You know, we call the nineteen thirties the Great Depression, but before that.

• 44:50Speaker 04

  Yeah.

• 44:51Barry Ritholtz?

  The panic of eighteen seventy three, driven primarily by railroad bonds, was originally known as the Great Depression. How did all of this blow up? What is it? It sounds vaguely familiar. A debt fueled infrastructure build out uh bigger than anything. Why? Why does that sound so familiar?

• 45:11Speaker 04

  Yeah, it does feel a little bit uncannily familiar. Uh no, I mean, it is complex and it's actually kind of almost seems a little bit more modern where the real trigger was a financial crisis in Europe, in Germany and Austria of all things. It was a big mass of stock market mania in Germany, Austria, a tech bubble, basically. It was called the founder, uh the founders bubble. And it became the founders crash, the Grundkrack in German. Uh but unfortunately, lots of European investors who had lost money on German and Austrian stocks also had lots of money invested in Europe, in US railways. So they pulled their money out, classic like, you know, you lose money in one area, then you have to pull it back somewhere else. And that hammered railway bonds in the US, just as people were getting worried because there were all sorts of

• 45:55Speaker 04

  dodgy scandals, there were so much bribery going on at the time. And it implicated even the vice president.

• 46:01Barry Ritholtz?

  Mm hmm.

• 46:02Speaker 04

  Also, you know, uh corruption high up in administrations also.

• 46:06Barry Ritholtz?

  Couldn't happen today.

• 46:06Speaker 04

  No, no, of course not. And um so then Jay Cook was stuck with all these bonds he'd promised to sell for the Northern Pacific Railway on his balance sheet. Uh there's no Federal Reserve.

• 46:18Barry Ritholtz?

  In other words, when you say on his balance sheet, he's gonna syndicate this.

• 46:22Speaker 04

  Yeah.

• 46:22Barry Ritholtz?

  But essentially, he's assuming all the responsibility and the liability.

• 46:26Speaker 04

  Exactly. There is no limited liability. So the bank is basically buy the bonds and at a discount from the seller. And then sell them ideally, hopefully at a higher price. But if you can't sell them at all, you're on there, you're on the hook. And he personally advanced money to the Northern Pacific.

• 46:43Barry Ritholtz?

  Repeatedly.

• 46:44Speaker 04

  Control, yes, many times. He just kept doubling down. And the Northern Pacific was plagued by all sorts of problems because it was crossing straight through Suhland, for example.

• 46:53Barry Ritholtz?

  Meaning hostile Indian territory.

• 46:55Speaker 04

  Yeah, basically, it was it was um, yeah, it was a a very troubled project from the get go. And and he somehow, this brilliant, brilliant man, he was undoubtedly brilliant, was blinded somehow. And suddenly, with no Federal Reserve, no other way of supplying liquidity, they abruptly have to close their doors on eighteen seventy three, in eighteen seventy three. And this is unimaginably shocking. I mean, this is like, suddenly if we wake up tomorrow and and JP Morgan says they're bankrupt. This is not just the biggest bank in America at the time. It's Jay Cook, the the dominant financier of the era. He was John Pierpont Morgan before John Pierpont Morgan was anybody.

• 47:37Speaker 04

  Uh so it's such a psychological shock that this shock that first maybe starts in Europe and ricochets over to the US, then ricochets back to Europe and it starts feeding on itself. It just becomes an epic financial crisis, one of the biggest we've seen in the world. And it leads to this very long, nasty recession and.

• 47:55Barry Ritholtz?

  Which became known as the Great Depression for until fifty years later, a bigger Great Depression.

• 48:00Speaker 04

  And we call it now the Long Depression because it's still the longest economic contraction in US history.

• 48:06Barry Ritholtz?

  So before we move into the twentieth century, um you've mentioned bearings and you've mentioned hope. We haven't talked about Rothschild.

• 48:15Speaker 04

  Yeah.

• 48:16Barry Ritholtz?

  Which was by far the biggest, most powerful bank and banker, not just in Europe, but in the whole world. Tell us a little bit about Rothschild and how he managed to become such a dominant figure in the world of bonds and banking.

• 48:33Speaker 04

  Well, so the Rothschild family started as a merchant family, like many things. But it was Nathan Myer Rothschild that morphed that into a bank. And that was not uncommon for the era. But he was also, I mean unquestionably, a corrosatingly smart man. Um and he kind of single-handedly created what I call the first international, truly international bond market, something that looks, walks and talks and quacks a bit like what we see today. So he was shut out from some of the Napoleonic financing. For example, bearings was very close to the US government. So he didn't get any of those mandates uh and.

• 49:08Barry Ritholtz?

  Shut out also because he was Jewish and and they weren't happy.

• 49:12Speaker 04

  Yeah, and the bearings was a a proper English family and uh they like, I mean, it's just it's amazing what people with chips on their shoulders can do, right? Like, I'm gonna prove them wrong.

• 49:22Barry Ritholtz?

  It's motivational.

• 49:23Speaker 04

  Yeah, and he had, obviously, the whole family had wealthy little outposts in Paris, in Frankfurt, in Vienna. So strategically positioned, they're quite capital rich, they made a lot of money in the Napoleonic Wars, mostly smuggling gold on behalf of the British, but they're good British contacts then. Good British contacts among British investors. So when Prussia, Spain, even France, uh Italy, all these new states or older states started wanting to issue bonds to rebuild after the Napoleonic Wars, he became the go to person to do so. And and that really stated, he made them explicitly bearer bonds, so they'd be stateless and became portable wealth, essentially, and you could go to any of the Rothschilds houses and collect the interest.

• 50:07Barry Ritholtz?

  In in cities dotting all of Europe. You you show up with a bearer bond.

• 50:11Speaker 04

  Yeah.

• 50:12Barry Ritholtz?

  And you could present it and get paid in a local currency.

• 50:15Speaker 04

  And that was hugely powerful, investors loved it. He also got a lot of these countries to open up a little bit their books because he said, well, British investors, who were the biggest in the world then, uh they want to see a bit of transparency. That's what they've gotten used to. So he told them, there's lots of these remarkable letters that Neil Ferguson, the historian, has found going between the Prussian Finance Minister, getting almost told off by a Jewish banker in London, saying, dude, you have to open up your books, you have to be accountable, you have to do this and that, otherwise, like, I've done what I can. And and gingerly is able to coax them into doing a little bit of that because generally speaking, investors like countries that are credible, that are trustworthy and transparent and well governed. And the bond market has rewarded those with lower borrowing costs.

• 51:01Speaker 04

  And then it becomes a positive feedback loop.

• 51:03Barry Ritholtz?

  Who knew bond vigilantes existed a couple hundred years ago? Uh Rothschild eventually uh becomes like a peer in British society. He's given some official rank because he's just been so helpful to the British government.

• 51:19Barry Ritholtz?

  And the Rothschild fortune, that still exists in some form today, doesn't it?

• 51:24Speaker 04

  Yes, so he had a lot of sons and cousins of the family. It was kind of royal, Jewish royal family of Europe for a long time. The immediate generation was actually also incredibly talented, if not maybe as talented as Nathan Myer Rothschild. But also the family started spreading. But still, to this day, there are, you know, there are prominent investment banks that are smaller these days called the Rothschilds, and it's a very wealthy family. They own a Chateau Lafitte, for example, I think they still own. So they're still a very prominent family today, albeit not as titanically, dynastically wealthy as they were back in the 1800s.

• 52:01Barry Ritholtz?

  Even still, two centuries later, it's still, you know, it used to be three generations from shirts, sleeves to search leashes. They've beaten that. So now, let's move forward to the 1980s. And I have to talk about Louis Raniere, who really pioneered securitization, converting individual residential mortgages into collateralized mortgage-backed obligations, CMOs. This traces back to an earlier form from Fannie Mae, that part of the post-depression era financing. I'm fascinated by this area because I don't think many Americans understand

• 52:45Barry Ritholtz?

  how unusual and rare a 30-year fixed mortgage is. And I also think people don't realize how productive and powerful that tool is.

• 52:56Speaker 04

  Yeah. No, I think he, because of what happened in 2008, securitization and mortgage-backed securities became a dirty word. But it is generally one of the most fascinating and important financial innovations of the past half-century. And Louis Raniere, you've seen the The Big Short, right?

• 53:14Barry Ritholtz?

  Of course.

• 53:15Speaker 04

  Yeah. Well, he introduces this big loud mouth, and he changed your life more than the iPod. And that's true. He really did. And, you know, my view of financial history, having studied a lot of this now over the years, is that, you know, we take stuff too far. But the bad inventions, they die, and they don't always come back. The good ones are reforged, reinvented, rebuilt on, and they stick. And securitization is still a massively powerful force, thanks to, you know, some of the work that Larry Fink at First Boston as well, did his team there, and Louis Raniere at Solomon Brothers. And the 30-year mortgage that we have today, or we, you guys here, have today, it's kind of a miracle of the modern world.

• 53:58Barry Ritholtz?

  Yeah, no, very much so. But I want to stay with the idea of some of these things blowing up. When you look at most of the giant financial masses of the past 50 or 800 years, it's not usually stocks. I mean, the dot-com implosion was kind of mild. Yeah, the Nasdaq fell over 81%. But most of the big blowups, the GFC, long-term capital management, portfolio insurance in 87, maybe not a true bond. But it always seems that bond underwritings that go bad do much more damage than a stock that blows up.

• 54:38Speaker 04

  Yeah. No, I mean, I think there are many reasons. I'm glad you raised the dot-com, because that's a great example. I mean, the stock market fell, what, 50% from peak to trough, pretty much?

• 54:47Barry Ritholtz?

  That's about right.

• 54:48Speaker 04

  Yeah.

• 54:49Barry Ritholtz?

  I think the Dow only fell about 36, 37%.

• 54:52Speaker 04

  Yeah, because it's a bit more industrial, it had as much tech stuff. Well, I mean, economically, it was a nothing burger. That was like one of the shortest, shallow recessions in US history. And I think that shows that, you know, obviously, it wasn't fun for people that lost money. And it was a big event, even I remember that pretty well. But economically, it doesn't matter as much as when the bond market even slows down, it's quite painful. And when it breaks bad, it's horrifically bad, because it's kind of, the bond market represents money, and the bond market breaking, it's like money dying. It's, you know, there's this famous quote from Mark Twain, he said, "It's not what you know for sure." No, it's not what you don't know, that's the problem. It's what you know for sure that just ain't so. Is when you take something that you think is safe and solid and good, and it blows

• 55:37Speaker 04

  up in your face, that's when you get shocked. That's when the big nasty economic outcomes happen. Because if you invest money in stocks, or even like junk bonds, you kind of know it can go bad.

• 55:47Barry Ritholtz?

  It's right there in the title.

• 55:48Speaker 04

  Exactly, yeah.

• 55:49Barry Ritholtz?

  If you're gonna call it junk.

• 55:50Speaker 04

  Yeah, exactly.

• 55:51Barry Ritholtz?

  You can't be surprised when it goes bad. But at the same time, you think of treasuries, you think of conservative, A-rated, even corporate bonds, investment-grade bonds, they're called investment-grade, you don't expect them to go belly up. So there's so many things I want to talk about with this. You trace the ancestry, since we're talking about junk and high investment grade, you trace the ancestry of credit ratings to Louis Tappan, an abolitionist who built a credit reporting business more than a century ago. How did

• 56:35Barry Ritholtz?

  gathering information about borrowers become not only an industry, but an industry with huge authority?

• 56:43Speaker 04

  No, that was one of the more delightful chapters to write, actually, and it surprised me, because I didn't think it was going to be that interesting. There were lots of abolitionists, actually, in various stages of this story, I was pleased to see. So Louis Tappan, him and his brother ran a classics of merchanting business. They were ardent, hardcore abolitionists. They were for not just abolishing slavery, they were for, for example, full equal treatment, which even for some abolitionists would have been a step too far at the time. So the famous Amistad case, they were the ones that bankrolled that on the abolitionist side. So if you see the film, he's played by Stellan Skarsgård, Louis Tappan. But at one point, the business,

• 57:27Speaker 04

  because they're boycotted by the South, they're hated broadly in the South, they're boycotted, they have a hard time in one of this periodic downturns. And, you know, they come through, but they almost go bankrupt. They still eventually manage to pay back every creditor. But they learn to distaste it and also be wary of clients going bankrupt. So they buy, basically, Louis Tappan buys from a bankrupt law firm, a big registry of basically like judgments of how credit-worthy various businesses in America, or in New York primarily, on the East Coast are. And they build this into something called the Mercantile Agency, which some people almost historically call like a private spy ring. But really, what it was, it was like agents who worked for mostly part-time, who would report on like which

• 58:12Speaker 04

  people were seen to be trustworthy, which were fine-upstanding citizens and worthy of credit. And for anybody merchants, because a lot of this, actually, all happens, commerce has always happened on credit and trust, and merchant advances and things like that. So who you trust is was a hugely valuable thing. And among those people were a young, all these reporters that worked for the Mercantile Agency were young Abram Lincoln, Ulysses S. Grant, a few other future presidents. And I think Harding as well worked for one of them. And, you know, that morphs into like this credit reporting side, morphs eventually into statistical analysis, and into ratings eventually, the actual, the famous letters

• 58:56Speaker 04

  that we know that John Moody invented to build on. First, there was the credit reporting agencies, then you had Standard and Poor's, that was Henry Varan and Poor, that actually kind of cajoled bond issuers, primarily railways, to give him data. He said, "Look, if you guys are going to sell bonds to the public, you should give us information." So he really pushed that quite hard, that transparency. And John Moody took that information and did it with a bit of marketing flair, turned them into grades that have, over time, kind of become what I call the language of credit. And rating agencies get a lot of, you know, bad press. And Lord knows, they can make mistakes, but so can everybody else. And in

• 59:39Speaker 04

  fact, there's this other great saying, I love, that all models are wrong, but some are useful.

• 59:44Barry Ritholtz?

  George Box.

• 59:45Speaker 04

  Yeah. And the ratings can be wrong, but it's just a very handy shorthand. And if they didn't exist, we'd have to probably invent something like it.

• 59:56Barry Ritholtz?

  There's being wrong, and then there's selling your ratings to the highest bidder.

• 1:00:00Speaker 04

  Yes.

• 1:00:00Barry Ritholtz?

  Which we saw during the financial crisis. And they gave up a lot of their financial authority and credibility. I have to be honest, I don't really think bond investors give a whit anymore about rating agencies, because they proved, hey, you're not trustworthy if you're willing to sell yourself to the highest bidder, why should I care what you have to do?

• 1:00:26Speaker 04

  And those incentives haven't changed. That is unquestionably problematic. I still remain concerned about that. But I would say investors have never really, unless you were the proverbials of idiots in Dusseldorf, buying AAA CDOs unquestionably. Most investors have traded ratings at the starting point. No self-respecting bond analyst would treat it as the ending point. And actually, look, I studied a lot of financial crisis postmortems, because there's an entire chapter on like how that all played out. The ratings were, I was staggered to see, pretty good.

• 1:01:02Barry Ritholtz?

  Oh, really?

• 1:01:03Speaker 04

  Yes. So the price action was awful, because obviously, people didn't trust anything. So the prices, even AAA tranches of these CDOs just tumbled, and lots of the synthetic stuff completely blew up. But most of the stuff, like if you look at the actual RMBS and CMBS markets, they track pretty much. There were losses in AAA's, which there shouldn't be. That's supposed to be like as good as gold. But broadly speaking, they definitely like weren't massively out of whack, when the final losses were counted out. And I was shocked as well.

• 1:01:38Barry Ritholtz?

  I would love to see that data, because I am absolutely on the other side of that trade, for sure. Coming up, we continue our conversation with Robin Wigglesworth, author of a fabulous debt, looking at how the history of bonds compare to the current bond market. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

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• 1:05:55Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Robin Wigglesworth. Not only is he editor at FT AlphaVille, one of my favorite sites, and the author of Trillions about the history of indexing, his new book, A Fabulous Debt: The Epic Story of How Bonds Built the Modern World, is out now. So I'm curious, there are so many fascinating characters throughout the book, and we've mentioned a few. I'm curious, who kind of surprised you? This is almost a thousand years of research. Who surprised you as someone who maybe isn't well remembered, but perhaps should be?

• 1:06:39Speaker 04

  Well, it's hard to, I mean, people often ask my favorite, and that's always so difficult. It's like choosing your favorite child, yeah.

• 1:06:45Barry Ritholtz?

  Well, the other question is simply, so many fraudsters.

• 1:06:49Speaker 04

  Oh, yeah.

• 1:06:49Barry Ritholtz?

  And so many, I don't know, is the phrase financial adventurers a real thing? Who in the book do you think would be a great movie character?

• 1:07:00Speaker 04

  Yeah, well, I mean, McGregor McGregor, I mean, he's like, obviously not a hero and shouldn't be rehabilitated, but just delightful scoundrel who invented an entire country to sell bonds in the 1800s in England. And he's just, his entire life is just, I'm astonished that somebody hasn't made a movie about him already, because, I mean, he's like, he fought with Simba Bolivar in Venezuela, he was a soldier in the Napoleonic Wars, and then he did this, one of the most outrageous financial scams in history. Though he might have actually ironically somehow believed this country, it might be he was essentially trying to do a 19th century version of fake it till you make it.

• 1:07:41Barry Ritholtz?

  Right.

• 1:07:41Speaker 04

  Like, he wasn't just trying to scam people, he was trying to will a new country into existence, and he was just incompetent, essentially. We don't know exactly, but he was incredible. But Jay Cook was like, he was a guy who hugely admired Native Americans. He named his palatial estate after a chief he befriended in his youth in Ohio. But obviously, his railways just trampled through a lot of Native American lands. He hated graft. He hated graft. He always says that, I think corruption is awful, it's the root of all evil, but he was pretty good at it.

• 1:08:17Barry Ritholtz?

  Sometimes you want to get something done, you gotta keep it fair, a little something on the side.

• 1:08:21Speaker 04

  And he had this incredible palatial mansion, one of the biggest houses in America at the time built. It was just like fake Roman ruins, his own private cinema radio, it's a whole works, incredible. But really, the only thing he really enjoyed was talking about theology with priests, and he'd let the priests run, a poor priest could come and stay with him whenever they wanted in his holiday home and discuss theology, and fishing. So his biography, he has an entire chapter about fishing, but his wife gets mentioned, I think, two or three times. So he's just an incredibly complex character and was clearly quite, he looks also in pictures, he looks like kind of an evil Santa Claus, like very intense eyes, bigger, big bushy white beard. I think he was fascinating, and

• 1:09:04Speaker 04

  also maybe because he's now so synonymous with the crash of 1873, his genuinely valuable role that he played in America, and I think maybe deserves recognition as well, I guess.

• 1:09:17Barry Ritholtz?

  So I'm legally obligated to ask a question about AI these days.

• 1:09:24Speaker 04

  Yes.

• 1:09:24Barry Ritholtz?

  You were quoted saying you were profoundly relaxed about the possibility of an AI bubble, but then piling on all of this debt changes things. So what changed your mind?

• 1:09:38Speaker 04

  Well, I'm profoundly relaxed about bubbles, just because I'm not an efficient market zealot, but I just, I can't spot them, certainly. I don't really believe anybody can. And in fact, I think bubbles are an essential part of how the world works. They are an important part. They're even a valuable part. We want people to occasionally take leave of their senses and chuck money at stuff, to hope and dream, rather than just kind of be a boring journalist who always thinks everything's gonna go badly. That is how quite often big leaps of progress happen. But I do think that bubbles, when they burst, they tend to burst in more violent, nasty ways when they are driven primarily by credit. So we talked about the dot com bubble as a classic example that was primarily in the

• 1:10:22Speaker 04

  equity landscape, didn't really matter economically. That's how I felt about the AI bubble for a long time. Yes, it's great. I mean, I'll write about things, this is mad, or this is good, or who cares? Nobody cares. I don't know. I'm a journalist. But I do see the signs that it is becoming increasingly fueled, not just by the cash flows of these incredibly successful companies, tech companies, but also by credit and now increasingly off-balance sheet liabilities. And I'm not saying that we should freak out now, but I think if there is, but soon, eventually. And I think it's a classic thing that if we talk in a few

• 1:11:01Speaker 04

  years this time about the big AI crash of 2027, or eight, or nine, 29, we'll point to this as symptoms. Obviously, we saw this coming. It was this, and that, and that.

• 1:11:12Barry Ritholtz?

  You remind me, there's a wonderful book that if you haven't read, you should absolutely put in the top of your list, which is, it's by Dan Gross, Pop: Why Bubbles Are Great for the Economy. My favorite chapter is all of the fiber that was laid.

• 1:11:29Speaker 04

  Yeah.

• 1:11:29Barry Ritholtz?

  Global Crossing, Metro Media Fiber, $1,000 a mile, and afterwards, after it comes out of bankruptcy and it's bought for pennies a mile, you know, no one would pay $300 a month for YouTube, but, you know, $10 a month is affordable, because all, so I'm assuming you believe there's a giant misallocation of capital to AI, and on the other side, it'll work to everybody's benefit?

• 1:11:56Speaker 04

  I don't know. I don't know whether it's misallocated. I mean, if it is, if it's going to cure cancer, bring peace to the Middle East, and make us an interplanetary species, maybe this isn't misallocation. I don't know. And I think we all have to be humble, given what's going on about how much we do know. I'm just inherently cynical and a journalist. It's kind of a professional requirement, but I tend to be happy about, I think, like, this is a good thing. And yes, maybe we'll just have, if essentially the future is a small language models, that actually stuff that you can run on the phone. I mean, most people, most ordinary people that use AI today, as far as I can see, they, it's like a souped-up Google search. They want to pair a wine with their dinner or whatever, and you don't need.

• 1:12:40Barry Ritholtz?

  That's not AI. That's not.

• 1:12:42Speaker 04

  Well, basically, if ChatGPT, if you look at what people are actually using ChatGPT and Claude for, we hear about the cutting-edge examples, but really, the vast majority of usage, I suspect, is that very low-level stuff, that you don't need massive data centers to run.

• 1:12:57Barry Ritholtz?

  Right. The best description I heard is, if you're doing it on a transactional basis, it's the same as Google search, but if you're using it on a collaborative basis, you're gonna make your own work. Um, deeper, broader and potentially better.

• 1:13:15Speaker 04

  Yeah.

• 1:13:16Barry Ritholtz?

  As long as you don't cut and paste AI generated text, which continues to be garbage. But that's.

• 1:13:22Speaker 04

  It's getting a lot better. I think people, I mean, some of the newer frontier models. We've kind of had this crystallized view of what it looks like because we've tested ChatGPT two or three or something. It is getting incredibly good. And I've been an AI nut since, look, I've spent part of my paternity leave here in New York in March twenty sixteen. Watching AlphaGo beat Lee Sedol at Go.

• 1:13:45Barry Ritholtz?

  Mm hmm.

• 1:13:46Speaker 04

  Uh.

• 1:13:46Barry Ritholtz?

  Which was a big deal.

• 1:13:47Speaker 04

  It's a huge deal. It was one of those first, it was the last game.

• 1:13:50Barry Ritholtz?

  First you had chess.

• 1:13:51Speaker 04

  Yeah.

• 1:13:51Barry Ritholtz?

  Then you had Jeopardy.

• 1:13:53Speaker 04

  Yeah.

• 1:13:53Barry Ritholtz?

  And for reasons inherent in the rules of Go.

• 1:13:56Speaker 04

  Yeah.

• 1:13:56Barry Ritholtz?

  It's even harder than all of, both of those, because those are so predefined.

• 1:14:01Speaker 04

  Yeah, it it is so difficult. And in, I mean, AlphaGo is now almost trivial for for what these models can do. But for me, it was, I I cover quantitative hedge funds. I could see how they're using things that we don't talk that much about. But machine learning and neural nets, I mean, neural nets obviously are coming back now. And and um, natural language processing and I, it was super cool. And I could see how quan, there was some quantitative hedge fund that in their holiday. Downloaded lots of like heart scans from the Cleveland Clinic, I think it was, as a a Cagle competition. And were able to design something that better uh, more quickly identified heart disease than human doctors. And that's just, so for me, it was mind blowing. I'm a huge optimist on all these things, but I think.

• 1:14:46Speaker 04

  We just, we do, I also know the pattern that we get overly optimistic and we talk about human extinction and.

• 1:14:53Barry Ritholtz?

  Right.

• 1:14:53Speaker 04

  Cure and, I mean, we'll see. All I know is there's a lot of money going into this. It's increasingly debt financed, it's increasingly off balance sheet financed. And historically, that has not ended well. And rail, like you say, rail is a great example of a capex boom. That ended badly economically and financially, but still was a huge societal being for America, a cable as well, all the cable we laid. But that lasts longer than a GPU chip.

• 1:15:20Barry Ritholtz?

  That, that's for sure.

• 1:15:21Speaker 04

  So that's what I'm a little bit worried about.

• 1:15:23Barry Ritholtz?

  So what's the bigger issue? Is it the size of the debt that's being issued? Is it the circularity or is it just the overall quality with that off balance sheet stuff? Which ultimately, I I I believe the reason Lehman wasn't rec, wasn't rescued is REPO one oh five. They were pretty much insolvent and had spent a good couple of years hiding it.

• 1:15:47Speaker 04

  Yeah. No, I I think that's very right. And and also that when you don't see, it's the stuff you don't see, like that old Mark Twain quote. The stuff you don't know about. I'm not actually worried because I mean, so AI hyperscalers, I think have issued around five hundred billion dollars worth of debt this year. After two hundred billion or so last year, but it's like big numbers. But these are incredibly large, successful big companies. YouTube still prints money. Amazon still prints money. Facebook, WhatsApp still prints money. It's it's fine. They could even issue lots more. And the rating agencies, God bless them, they are actually looking past these and into these off balance sheet uh, commitments. It is getting integrated. And despite all those liabilities, these are still pretty strong companies. There are asterisks around, let's say.

• 1:16:31Speaker 04

  An oracle that is looking like the the weaker member of the herd, but even that doesn't look like an imminent disaster. But, you know, it's, we are still in the foothills and and we can see where things are going. So right now, I I I struggle to see this ending horrifically badly, but. You know, I've been wrong before and we might be talking in a year's time. And it's like, oh my God, that that that broke pretty bad.

• 1:16:55Barry Ritholtz?

  So, so let's talk about uh, US debt and and US Treasury. Um, uh, we, we discussed earlier how the debt deficit scolds. You know, everything they've been warning about, uh, the US won't be able to finance its debt. It'll crowd out private capital, cause hyperinfla, all those things, none of them come true. At what point do you begin to get worried about US debt? You, you said you've gone from one percent worried to three percent worried. What would take you up to fifteen, twenty percent worried?

• 1:17:32Speaker 04

  Yeah, I I've been thinking, I mean, this is the big subject. It's the forty trillion dollar question, I guess. Or really, given the importance of the US economy, it's the the biggest question in the, in the world right now. Um, I'm not that worried. I mean, the numbers are staggering. I came across a stat that the US celebrated uh, its two hundred and fiftieth birthday this year. Happy birthday, Valerie, Barry. Um, in its first two hundred and forty years, the US borrowed around twenty trillion dollars. And it's borrowed another twenty trillion dollars in just the past ten years.

• 1:18:02Barry Ritholtz?

  Yeah, it's, it's really a story of unforced errors this past decade.

• 1:18:07Speaker 04

  Yeah, I mean.

• 1:18:08Barry Ritholtz?

  Giant tax cuts, wars of choice, tariffs, you can go down the list.

• 1:18:12Speaker 04

  Yeah.

• 1:18:13Barry Ritholtz?

  All these things were decisions, not, hey, sometimes.

• 1:18:17Speaker 04

  Yeah.

• 1:18:18Barry Ritholtz?

  Sometimes there's a catastrophe or a pandemic and it requires a response. Other times we just make bad decisions.

• 1:18:25Speaker 04

  Yeah, no, completely. I mean, you and I, we remember the late nineties. There were genuine concerns that what would happen if the US has paid down all its debts? Because it was running such big bad budget surpluses, it stopped issuing thirty year treasuries for a period.

• 1:18:37Barry Ritholtz?

  That's right.

• 1:18:38Speaker 04

  I mean, you tell kids that these days, it's kind of, that sounds like Fantasyland. But there were genuine concerns about what would the world, global financial system look like if there were no treasuries? And now that is not the thing we're worried about.

• 1:18:51Barry Ritholtz?

  Not a concern. I spent the better part of the twenty teens begging the Treasury Department to issue fifty or a hundred year debt. And by the way, refinance everything, rates are at record lows. And the response was, well, if we lower our interest rate, we'll just spend more money. No, you're gonna spend more money anyway. The question is, what's it gonna cost to service it?

• 1:19:12Speaker 04

  Yeah.

• 1:19:13Barry Ritholtz?

  And uh, just, just generational idiocy. Uh, since you quoted Twain, I'll quote Twain. He is an idiot and a congressman, but I repeat myself. I mean, that is just the greatest observation about politicians.

• 1:19:29Speaker 04

  Yeah, I mean, Mark Twain had a way with words. He should have written some books.

• 1:19:32Barry Ritholtz?

  He should have. He absolutely should have put some pen to paper.

• 1:19:35Speaker 04

  Yeah.

• 1:19:35Barry Ritholtz?

  So, so let's, let's stay with, let's stay with.

• 1:19:37Speaker 04

  When do I worry?

• 1:19:38Barry Ritholtz?

  Yeah.

• 1:19:39Speaker 04

  Well, okay, so, so people focus on debt to GDP, but it's, that's a nothing indicator. It doesn't say anything about a country's ability to carry debt. I mean, Japan is a great example of that.

• 1:19:48Barry Ritholtz?

  It should argue that if you have a a a big, a robust GDP. You can afford servicing that debt, right?

• 1:19:56Speaker 04

  Yeah.

• 1:19:56Barry Ritholtz?

  The doom mongers who you talk about in the book, they only look at the debt. They don't look at the other side of the ledger.

• 1:20:03Speaker 04

  The asset.

• 1:20:03Barry Ritholtz?

  Hey, it's called double entry accounting for a reason.

• 1:20:06Speaker 04

  Yeah, if people want to think of it in household terms, if, imagine if you borrowed, bought a house for one time your income. Wouldn't feel very levered, would it?

• 1:20:15Barry Ritholtz?

  Right.

• 1:20:16Speaker 04

  No, exactly, yeah.

• 1:20:17Barry Ritholtz?

  And the rule of thumb is what, three or four times?

• 1:20:19Speaker 04

  Yeah, yeah. So the US has a way to go before it. I'm not saying that's good. And I have to admit, like, I cannot look at the budget situation now and think that, given the health of the US economy. Given the health of the global economy, given the lack of any major crises. That six percent budget deficit is a good thing. That is unambiguously not a good thing. But I think the US has far more capacity to carry that than most Americans certainly realize that. I look at this, if you look at debt servicing as a percent of GDP, just how much it pays, how much it costs to pay interest. As a part of the budget in the US, it looks pretty big because the US government is pretty small compared to the size of the economy, compared to most other developed countries. So the US can tax a lot more and it can spend probably a bit less as well.

• 1:21:04Speaker 04

  But if you look at this percent of GDP, it's around three and a half percent of GDP.

• 1:21:08Barry Ritholtz?

  It's really very modest.

• 1:21:10Speaker 04

  Yes, it's, it's up from around two and a half percent a few years ago, but it's actually less than most other countries, developed countries. It's really only when you get around five percent of GDP. When you can see some evidence of other countries historically struggling a bit more, so.

• 1:21:26Barry Ritholtz?

  Two thirds of the way there. We gotta, we have to do something to either lower rates or lower our deficit or some combination there.

• 1:21:33Speaker 04

  Yeah.

• 1:21:33Barry Ritholtz?

  Or we will eventually run into trouble.

• 1:21:35Speaker 04

  So the CBO, I think, the last calculations, they, I I think they indicate it will hit around five percent, all things being equal. In a decade or so, like a ten, twelve years. And even then, frankly, countries are fine. It's just that quite often we've seen countries then reverse course. So the UK in nineteen eighty is a great example under Thatcher.

• 1:21:55Barry Ritholtz?

  Yep.

• 1:21:56Speaker 04

  Uh, a country that didn't reverse course and the debt started snowballing is Canada in the nineties.

• 1:22:02Barry Ritholtz?

  Oh, really?

• 1:22:02Speaker 04

  Yeah. So the Ca- Canadian, for all sorts of fun reasons, but also they struggled to get inflation down after the eighties. They had lots of, not a huge debt stack, but it became quite onerous to service. So Canadian government debt as a percent of GDP peaked at almost ten percent of GDP in in in ninety five. Uh, but then they had a big austerity program. It was in the nineties. It was kind of fine. It was good to retrench a bit when the global economy is doing fine. Uh, I really want to study that episode because I only looked at the numbers on the IMF database because I'm a. I'm a sad person who spends my evenings looking at IMF data. But uh, I really want, that's one thing I'd love to dig into, to finding out like how Canada, how they got that far.

• 1:22:44Speaker 04

  Like, why did things start snowballing at around five percent? Why they didn't stop then and how they did eventually stop stuff?

• 1:22:51Barry Ritholtz?

  So we're talking globally, the number in the book about global debt is three hundred and forty trillion dollars. Uh, what does that mean for the world to be carrying all of this global debt?

• 1:23:05Speaker 04

  Well, I mean, uh, the book's already out of date. I think it's three hundred and seventy trillion dollars now. Uh.

• 1:23:11Barry Ritholtz?

  A trillion here, a trillion there, pretty soon it all adds up, right?

• 1:23:14Speaker 04

  Yeah, exactly. Well, look, I am both very insistent, I am not a debt scold. But debt unambiguously does make stuff more fragile. Debt is an asset as well as a liability. Uh, I think some countries could and should borrow more. I think this is a healthy thing, but it does make the system fragile. We have a lot of stuff in the world that encourages people to borrow money, whether it's like in this interest rate deduction for interest payments to. Uh, you know, it's just favorable tax break or like, if you're a private equity firm, you're always optimizing the balance sheet to increase your equity returns. Uh, I don't think that's healthy. It does mean that it's an economy that is more fragile to shocks.

• 1:23:55Speaker 04

  And I would, in an ideal world, have a system that is a little bit more resilient because there are always shocks coming. And I think we could do a bit more to maybe buttress the sinews of the bond market, especially to help that.

• 1:24:08Barry Ritholtz?

  So when the tariffs were introduced, when there was a whole bunch of all the nonsense with Canada and Greenland and all this back and forth, and to say nothing of the Iran War, some folks talked about the end of the US hegemony, perhaps the end of the dollar as the reserve currency, or the the central role of the US Treasury in global finance. What's your take on that? Is that an overreaction? Is there an alternative to the dollar? Is there an alternative to treasuries?

• 1:24:40Speaker 04

  I think it's both an overreaction and there is no alternative. So I think even if there was an alternative, I think people underestimate the immense force of inertia.

• 1:24:54Speaker 04

  And how slowly things change. So I am on the scale of the spectrum of how worried people I am, definitely on the very relaxed side of things, maybe wrongly, who knows. But I also definitely think there is no alternative. I mean, Europeans own, I think, fifteen, sixteen trillion dollars worth of US assets. There was lots of talk and chatter about them withdrawing, pulling out. But, you know, where are you going to put that money? I mean, there is no other market.

• 1:25:22Barry Ritholtz?

  Japan, the Euro?

• 1:25:23Speaker 04

  Yeah, Beijing. Do you trust Beijing? I mean, despite the administration's foibles, do you trust Beijing more than you trust DC? I'm not so sure. So I think people will like, you know, there's some things we underestimate the rate of change on, and some things we massively overestimate. We think, almost feel innately that, yes, the US should be punished, us Europeans, even Asians. I've talked to people about this. There's almost this visceral sense there should be consequences. I just don't say it, if I'm being honest.

• 1:25:54Barry Ritholtz?

  All right, before I get to my favorite questions, I have one last question, and it's a quote that I love, that I recognized in the book, J.K. Galbraith. There can be few fields of human endeavor in which history counts for so little, as in the world of finance. Why is that? I mean, all the information is here. You can you can find these mistakes, and yet we relive them over and over again.

• 1:26:23Speaker 04

  Yeah, well, some of its human nature doesn't change. And I think also finance is, and one of the reasons why I love it, is its complexity, its nuance, its its depth. And it just means that if you are a world-class bond person, it's very, how much time do you really have to get to suck into the history or know about the equity world? You and I see this probably all the time, that people are world-class experts in this one narrow field. If you take them, if they start pining about central bank monetary policy, you realize they're over their skis. And these are very smart, intelligent people. I mean, world-class people. It's just very hard to know this. It's a very complex system, our global world.

• 1:27:03Speaker 04

  And I think history, I wish more people studied it, because it has at least helped me understand the world. I'm not saying the world makes perfect sense when you know it's history, but it has helped me enormously. I'm hoping it can help other people as well.

• 1:27:18Barry Ritholtz?

  I couldn't agree more. I'm always surprised when I'm speaking to someone and I'll reference what I think of as a well-known historical fact, and they're like, no, that's, that can't be. It's the same mistake we're made now. We couldn't have done that in 1987. Yeah, no, it's exactly.

• 1:27:36Speaker 04

  No, exactly.

• 1:27:37Barry Ritholtz?

  All right, let me jump to my favorite questions I ask all my guests, kind of revealing about who you are. Starting with, who are your mentors that helped shape your career?

• 1:27:49Speaker 04

  Well, the first guy gave me a job was in journalism, was a guy called Paul McNamara, and he was very sort of, almost performatively daub, in quite a funny way, he's a very dry person. But he was one of the first people that made me think, actually, maybe I can do this for a living. So when you're young, you're always filled with insecurity. And he was not somebody who gave praise lightly, but he said, I was not terrible. And that meant a lot coming from him. And I learned a lot from him. Here at Bloomberg, actually, since we're here, there was an editor here when I worked here called Chris Kirkham, who was my team leader when I covered economics and politics in the Nordic region. I thought he was phenomenal, very old school. He'll very happily yell at you if you screwed up. But if you'd done, if the only time I had a really big mistake, he didn't say anything.

• 1:28:32Speaker 04

  He said, he called up, said, look, I'm not going to say anything. I think you know that was not great. Go out, get drunk, I'll pay for it all. And then come back tomorrow and today, tomorrow's a new day. And I really appreciated that. He'd yell at the small stuff, but the big stuff, he knew he didn't need to beat you up. You, I beat myself up more than anybody else could. So I thought that was quite inspirational, actually.

• 1:28:53Barry Ritholtz?

  Really interesting. So you wrote two books, Trillions and A Fabulous Debt. What if, what are some of your favorite books? And what are you reading currently?

• 1:29:03Speaker 04

  Peter Bernstein, Against the Gods, classic. It's just incredible. I mean, somebody once said that I, Trillions was similar, and I, I've never blushed so, such a crimson shade ever in my life. It was incredible. And it's not true. Bernstein is a giant.

• 1:29:23Speaker 04

  Well, I mean, this, I mean, God, I mean, I always feel like I can think of all the people that I'd love to say, but like, I recently read Leakit Ahamed's 1873 book, which was spectacular, also covers some of the same ground.

• 1:29:37Barry Ritholtz?

  He's the author of The Lords of Finance, which won a Pulitzer.

• 1:29:41Speaker 04

  Yeah.

• 1:29:41Barry Ritholtz?

  I have that book next up in my queue.

• 1:29:44Speaker 04

  Oh, enjoy it.

• 1:29:45Barry Ritholtz?

  I've heard from several people, it's spectacular.

• 1:29:48Speaker 04

  Yeah, no, I love it. And I love it because it's almost like a compliment to my book, because he talks about some of the same stuff, but from that grunda crack perspective in Europe primarily, and through the prism of the Rothschild family. And I mean, Lords of Finance is, you know, I've read some Pulitzer Prize-winning books that have been disappointing. Lords of Finance is spectacular. It's one of the best narrative history books ever. It's incredible.

• 1:30:10Barry Ritholtz?

  And told from the point of view of four separate central bank chiefs.

• 1:30:15Speaker 04

  Yeah.

• 1:30:16Barry Ritholtz?

  Is such a great, such a great frame. Anything else that you've read recently that you want to mention?

• 1:30:22Speaker 04

  Well, I belated, because I spent so long studying and researching for my own book. I only read stuff that was relevant to my book until recently. So I've been catching up on some old stuff. My colleague, Dan McCrum, who took down the German company Wirecard, he wrote a book called Money Men, which is, look, I read it because like, he's a friend and a colleague, and it's an incredible story. But I thought, I knew that story. I've read about it in the FT. The book is incredible. And actually telling a, writing a narrative story about something like a German payments company is such a feat of writing. I just thought, just as, I just admire the craft. I thought it was incredible.

• 1:30:59Barry Ritholtz?

  What about streaming? Are you listening to any podcasts or watching any streaming shows that that are worth repeating?

• 1:31:08Speaker 04

  I am watching The Beer with my wife. It's making us very hungry and miss New York a lot. I mean, I know it's set in Chicago, but generally, having a food scene slightly better than the one in Oslo is something we'd appreciate. So we're about to finish that. So if you've got any good tips, I need something new. I listen to more podcasts now, certainly than I used to, because we have our own, The Story of Money, a history, financial history podcast. But yeah, the rest is history. I mean, they don't need a shout out from me. It's a juggernaut at this point.

• 1:31:39Barry Ritholtz?

  What sort of advice would you give to a recent college grad interested in a career in either journalism or finance?

• 1:31:49Speaker 04

  Probably for both, to learn basic data work. One thing I've noticed, you know, some things change and some things don't. When I joined the FT, the fact that I knew how to use Excel, and was at least I could put two and two together. No, I was an Excel wizard, because I knew how to use it. I very quickly got sort of skilled out of that side. So now, you know, not just we have a data and visualization team that is, just does astonishing work, and are extremely world-class programmers in their right, but even the average of the grad trainees that don't do this are still just, they're so much better than me. And if I had more time, but you kind of always have to run to say still, I'd really

• 1:32:31Speaker 04

  learn so much more. I'd love to learn to code properly. I'd love to really get better at that. But I think at this point, maybe I just need to defer to people younger than and smarter than me.

• 1:32:42Barry Ritholtz?

  That's shit for sales.

• 1:32:43Speaker 04

  But I think that's incredibly handy, because you don't actually maybe need to have to learn to code, but being facile with data, that I think in almost any job is going to be incredibly handy.

• 1:32:54Barry Ritholtz?

  A hundred percent. And our final question, what do you know about the world of bonds, credit, debt today? Might have been useful thirty or so years ago when you were first getting started.

• 1:33:07Speaker 04

  Yolo my student loan into Apple stock, maybe? I almost did. I mean, not the entire student loan, but I remember buying the first iPod in Norway, probably. I was told it was, but I don't know if it's true. And I was just blown away. I thought, my God, this is incredible. It's the only time I thought about buying a stock, and I didn't. And I've never dared to go. I would have sold it off.

• 1:33:28Barry Ritholtz?

  So wait, you don't have any equity investments?

• 1:33:30Speaker 04

  I do on behalf of my children. But I am extremely leveraged long Norwegian property, and a little bit London property as well.

• 1:33:37Barry Ritholtz?

  When you say leveraged long, that just means you have a mortgage?

• 1:33:40Speaker 04

  Yes, essentially, yes.

• 1:33:41Barry Ritholtz?

  Thank you, Robin, for being so generous with your time. We have been speaking with Robin Wigglesworth, editor at the FT Alpha Bill, author of Trillions, and his latest book, A Fabulous Debt, The Epic Story of How Bonds Built the Modern World, is out now. I would be remiss if I didn't thank the crack team that helps put together all of these podcasts over the past 12 years. This is six sixty-four or so. Samantha Danzinger is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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