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On the 12th August 2016, VCL published its monthly note. This included the publication of VCL's CEO, Martin Wood's monthly comment, as well as this month's five resource stocks of interest, which can be seen on the Short Note page, plus a topical cartoon.

"I was always told the market is never wrong long term, but can be wrong longer than you can afford to bet against it.

So what is going on now?

It seems to be that the market has either gone into such a deep sleep over summer that it risks not being able to wake up (Coma?) or in the words of my friend Jim Taylor - 'complacency has overwhelmed volatility'.

Perhaps I should stop reading the Daily Mail and the Economist or watching the Fox Channel because it seems to me that the world is in pretty bad shape politically, economically, and environmentally. Chuck in some systemic banking risk, Brexit, the 'dammed if you do and dammed if you don't' US election choices and those pesky jihadis and you have a worrying place to raise kids. But the VIX and S&P 500 (SPX) show complacency in the equity market is as low as it has been for ten years - which should only really happen when all is swimming along nicely right? - go figure.

Add to this the issue that Central Bankers seem to be taking a page from the EU play book of Long Term Strategic Management (if the patient doesn't improve on the medicine you prescribe, don't change the medicine, just berate the patient for not getting better and up the dose), and you have a recipe for malaise and decline, not equity stability.

Those central bankers eh – what’s all that about. They have this theory that they can cure lack of demand by taking away all incentive to save. Sounds plausible enough to me, on paper. But it is backfiring in the real world because people look at their savings of Y and say - 'it used to generate X a year, now it only generates 1/2 X. So instead of obediently spending it all, they save towards 2Y, to get back to X! - It seems this is not the reaction the Central Bankers want – We’re all just such naughty free willed spirits - not meekly complying to the theoretical model. We don't know what’s good for us and surely it will end in tears. No one could have seen that coming!


Martin

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