The Bond Market vs The Stock Market

Th€ $hear size of the global capital markets is incredible, and when hears the size of the US National debt ($14 Trillion), getting ones head around the size of an economy can prove hard.
The power and control of the Bond Mark£t is what I find more thought provoking. Governments can be brought down by the bond market.

However a good way to understand numbers, is to compare, so I thought I would undertake some research (Asad Karim style) into the size of the Stock Market (equity market) and then Bond Market (debt market).

The world’s Stock and Bond markets in total have a market value in U.S. dollar terms of more than $125 Trillion, [£77 Trillion] or approximately two times the value of the world’s total economic output (GDP), estimated at approximately $61 Trillion. [£38 Trillion]

Total value of the Stock(equity) & Bond markets (debt)
$126,449 Billion or $126.449 Trillion. [£77.601 Trillion]
That is made up of  $44,223 Billion in Stock (Shares) [£27,139 Billion or £27.139 Trillion]
So you would need to have £27,139 Billion to buy all the shares in all the companies listed around the world.

[Apple has a very large market capitalisation of £352 Billion, (352/44223 x 100) equates to 0.79% of the Global Stock Market]

[BT has a market capitalisation of £13.759 Billion which equates to 0.05% of the Global Stock Market]

[HSBC has a market capitalisation of £99.558 Billion which equates to 0.36% of the Global Stock Market]
$82,226 Billion is Bonds. [£50,461 Billion]
So today there is £50,461 Billion (£50.461 Trillion) in debt that is outstanding. A note to remember is that this debt is gathering interest too. It is the fact that the global bond market nearly exceeds the world stock market in size by a factor of nearly 2 to 1 really puts things into perspective for me.
Yes, the debt market is nearly twice as large as the stock market. So that is why when you see such a major financial crisis in banking, the credit markets and governments in danger of not paying there obligations, you see this massive turmoil.
When one looks at the mechanics of banking, apart from raising cash from deposits, banks raise cash from the bond market, by bond issuance, and then use the cash to fund themselves like creating mortgages or loans from the cash raised from the bonds issued.
Governments are the same, raising funds from the international money markets, and pension funds. So when these bonds are at risk of not being paid, that is when you have such horrific market turmoil and lack of confidence. Remember if you borrow, you have to pay back, thus the term bond. My word is my bond, or in global terms a £50.461 Trillion Pound Bond or $82,226 Billion Dollar Bond !!
(and it is paper after all…..as Paul Krugman has said)

The serious issue is these bonds must be honoured, as who buys them ? Pension funds. Pensioners deserve good pensions.
……but then as Pink Floyd said in ‘Money’ from Dark Side of the Moon from the wonderful year 1973 (a critical year for Asad Karim….), in the 3rd verse “Money, It’s a crime, Share it fairly, But don’t take a slice of my pie, Money, So they say, Is the root of all evil today”…..

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