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“Following the British referendum to exit the European Union, the paper value of global assets briefly fell by about $3 trillion. This decline in the market capitalisation immediately garnered headlines, suggesting that some destruction of “value” had occurred. No. The value of a security is embodied in the future stream of cash flows that will actually be delivered into the hands of investors over time. What occurred here was a paper loss” John Hussman, weekly comment, 4/7/16.

Duration is an important concept in the world of Bonds. It measures the sensitivity of a bond to changes in interest rates. Thus, a bond (or a portfolio of bonds) that has a duration of 5 will be expected to move 5% in price for a change of 1% in the discount rate (i.e .the market rate of interest). A bond/portfolio with a duration of 10 would see a 10% rise/fall in price for a given 1% move in rates etc,etc. Ceteris Paribus, the longer the maturity, and the lower the coupon, the longer the duration of a bond – think of it in terms of how long it takes to get your money back; the lower the coupon payment on a bond, the longer an investor must wait before his/her investment is fully returned.

“Live everyday as if it were your last because someday you’re going to be right.” – Muhammed Ali There appears to be trouble ahead – the Brexit Vote, the US Presidential election, and the tensions arising therein, have created a dangerously entrenched set of opposing sides. It is happening across the globe, with potentially de-stabilising effects on markets. There are a number of flash-points which bear close attention.

“The secret of success is sincerity. Once you can fake that you’ve got it made.” Jean Giraudoux We have seen a series of big rises and scary falls in the last year. Since the April 2015 highs, the market has gone nowhere, but very fast. As the market continues its most recent ascent, participants are getting increasingly nervous. As the chart below shows, Fund Managers have been hoarding cash, and according to Bank of America’s regular client survey, so-called “smart money” have been net sellers for 17 consecutive weeks ![Up Date: According to Lipper Fund Flow data, the selling continues, especially of equities:

“As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones” -Donald Rumsfeld 12/2/2002. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so”- Mark Twain

In theory there is no difference between theory and practice. In practice there is. – Yogi Berra There has been increasing talk recently about the advent of “Helicopter Money” (HM). Even mainstream academics and economists are now starting to advocate it’s use to arrest the continued slump in demand, most recently noted here. But what is it, what does it do and does it work? …