In F. Scott Fitzgerald’s Masterpiece “The Great Gatsby” the narrator Nick Carraway was in the bond business. We learn that Nick, “decided to go east and learn the bond business. Everybody I [Nick] knew was in the bond business so I supposed it could support one more single man.”
We don’t learn much more about Nick’s career aspirations. In 2013’s movie adaptation of the novel he’s got a stack of finance books piled-up in his cottage, but who has time to read about financial analysis when there are fabulous parties going on next door all summer. I enjoyed this book so much that I named my first dog Gatsby. He was a lanky, reddish golden retriever that I got my senior year in college and was lucky to have with me for 12 years. There’s a picture of him at the end of the post.
Further into the book we hear Nick lammenting, “Up in the city I tried for a while to list the quotations on an interminable amount of stock, then I fell asleep in my swivel chair.” Obviously, Nick is having a hard time focusing on work while his personal life continues to dominate his New York existence. Maybe the issue is that bonds are boring particularly compared to Nick’s social life. This is an appropriate metaphor for bonds for most investors. They may be boring, but what sort of role should the play in our financial lives and what was going on in the bond market when the book was written?
In the chart below, courtesy of Ben Carlson we see a history of bond interest rates from 1903-2011. Ben has a treatise on bonds available on the site that is just excellent for a deeper dive.
The Great Gatsby was originally published in 1925 and the story was set in 1922 at the beginning of The Roaring 20s. We can see below that rates during the early part of the 20th century were their highest in about 1920 following WWI and then went on a protracted decline during the 1920s with events including 1929’s The Great [Stock Market Crash] and The Great Depression. Rates didn’t really moderate until WWII where they started increasing as the economy produced strong results in the subsequent decade.
So, are bonds boring?........MUCH MORE
That decline in rates from the post-WWI peak to the end-of-the-depression lows twenty years later made for one heck of a bull market in bonds.
