Thanks Rex - hopefully the rocket from Kenneth Hayne gets ASIC on the right path. If not, someone will need to write that article!

On 7 things ASIC needs to fix now -

Thanks for the question Andrew. The Australian Government Bond Index has a duration of around 6.5 years. If we extrapolate a 1% cut in the cash rate, that would lead to a roughly 6.5% increase in bond index, plus say another 2% for running yield. That's a total of 8.5% over 12 months. It looks much better than equities would, but for a typical balanced fund running around 80% in equity like assets and very little in government bonds, it won't help much. It's also a one in seven to ten year event, with substantial under performance likely in the rest of the years. The example also shows the volatility that comes with long duration government bonds. If the RBA was to normalize the cash rate over a year, the government bond allocation could be staring down a 15-20% loss. Unlisted infrastructure and property could be getting belted as well.

On Why Bother Investing in Government Bonds? -

Thanks for your comments Jeff. Industry super funds do make it very easy to switch between asset classes which is good for the individual but potentially bad if it happens to illiquid assets en masse. Australian Super recently gave itself the power to freeze investments in its property fund, other may follow this. I agree with the late cycle positioning you have suggested, but put forward some low risk alternatives that deliver better returns in the article. I'd rather earn 4% preserving my capital than 2%.

On Why Bother Investing in Government Bonds? -

Thanks Michael - you are right, this isn't a new issue. Complexity is a killer with cash investments. I think this issue is popping up again as super funds are increasingly taking management of cash and vanilla debt in-house, perhaps without the expertise that is assumed.

On What is “Cash” and Why it Matters -

Hi Mr T. Last cycle Aussie hybrids say their prices drop 30-40%, peak to trough, so that should be a starting assumption for buyers today of what can happen. In Europe several banks have zeroed their hybrids so there is certainly precedent for this to happen. Difficult to say whether that will happen here in the future, but easy to say that there is better value elsewhere in the Aussie debt markets. Some of the new issue Aussie high yield bonds are turnaround stories that need to "grow into" their debt loads. It is inevitable that some will not perform. Some Aussie infrastructure debt is about as risky as it was before the crisis, and there was a good batch of defaults last time from Babcocks, Allco, toll roads and others. Be wary of assets dependent upon Chinese demand for commodities, whether that be mines, mining services or ports.

On The Dirty Dozen Sectors of Global Debt -

Thank for reading and commenting Emanuel. We are just starting to see a weakening of the long held position that student loans remain after bankruptcy. See this WSJ article for instance. https://www.wsj.com/articles/judges-wouldnt-consider-forgiving-crippling-student-loans-until-now-1528974001 Student loans are typically wiped after 20-25 years of qualifying payments. One way or another, US taxpayers are going to see a lot of this "asset" go uncollected.

On The Dirty Dozen Sectors of Global Debt -

Thanks James. Europe, Asia and Emerging Markets have all seen a decline in lending standards since 2009. Cov lite lending in Europe is not far behind the US. In Asia, many markets remain overbanked and China continues to be on a borrowing and malinvestment binge. Venezuela, Argentina and Turkey are EMs in tricky situations.

On The downturn in high yield will be big, long and ugly -

Thanks Ron, it is late stage for credit globally and a time to be careful with all asset classes. If credit markets do suffer a downturn, highly leveraged equities will follow soon after. Centro, Allco, Babcock and Brown, Rams are some examples from last time.

On The downturn in high yield will be big, long and ugly -

Thank you all for the comments. I share the sentiment that politicians are not acting in the interests of all Australians and are not spending our taxes efficiently.

On The Economics of Population Growth -