Getting a Grip on Macro Helps With Micros!
I use Don Coxe as my guiding light for the Macro Economic Picture. I then use VMC boards to help identify undiscovered micros in those areas. Right now I am focused on Agriculture, Energy, and Precius Metals emphasizing Silver. Most of my stocks are Canadian listed with a couple Oslo listings.
Here is what Coxe is saying:
Basic Points Recommendations
INVESTMENT RECOMMENDATIONS
1. Remain heavily underweight banks, particularly investment banks that
have displayed monumental stupidity. Do not assume that a change at the
top will automatically convert them into temples of wisdom, (unless it is
accompanied by demands for the departing to repay bonuses based on bets
that turned out disastrously). Better to assume that, like subprime-based
CDOs, there are layers of rot that can make the entire product dangerous
to your financial health.
2. Remain overweight Emerging Markets, emphasizing those that are oil, gas,
and/or food exporters.
3. Soaring food costs threaten stability for some Third World economies. We
have been ardently endorsing India since we returned from our leave of
absence a year ago. We are now more cautious, because a weak monsoon
could be politically and economically destabilizing at a time of $4 corn
and $10 wheat.
4. Remain heavily overweight gold—both stocks and the ETF. Gold is almost
as good a protection against banking problems as SKF—the UltraShort
Financials ETF—a security which may not be a suitable investment in
some portfolios.
5. We continue to believe that the Agricultural stocks are the pre-eminent
investment class of our time. Farm incomes are rising rapidly, and, in the
US, farms and farm land are the real estate assets that are rising in value
and are virtually immune to foreclosures. That means the leading Ag
companies have great pricing power and minimal credit problems. We
now hear suggestions that because food inflation has finally made it to
the cover of The Economist, it is time to start moving toward the exits. Not
so: We think that fine cover story could be the atonement—At Last!—for
the magazine’s famous 1999 cover: $5 Oil.
6. Remain overweight oil and gas producers, including the Alberta oil sands
producing companies. As disappointed as we are with the new royalty
schemes in that province, Alberta certainly remains more attractive than
Nigeria or Angola—and much more attractive than Russia, Kazakhstan,
or Venezuela.
7. We think it is time to begin accumulating the refiners that are equipped
to handle heavy high-sulfur crude. The collapse of the crack spread has
savaged refiners’ earnings, but that will eventually rebound. The Saudis
have virtually turned out the Light, and less and less of the oil that the
Gulf states will be lifting will be of the most desirable grades.
8. Retain the base metals stocks that have long-life unhedged reserves in
secure areas. Even if there is a global recession caused by global collapses
of subprime paper and LBO loans, it will not be deep enough to drive
base metal prices back to 2004 levels—but would be worrisome enough
to push further mine development even farther into the future.
9. When borrowing, borrow where possible in dollars. When investing, invest
where possible in other currencies.
10. Stagflation is a bad backdrop for bonds—and for non-commodity stocks.
The central bankers could have headed it off had Wall Street behaved
with a modicum of morality, but the Fed and its brethren are forced into
sustained reflation because of the global solvency crisis. Corporate earnings
for most sectors will not meet current optimistic Street forecasts, and rising
inflation will reduce the market’s P/E.
