Abet Chichi2

[bob3]

Don Coxe: weekly audio program / Notes

http://events.startcast.com/events/199/B0003/#

Courtesy ... glenn_a @ SI

Here's my notes from Coxe's call:

1 - Leverage is at record levels in the system, and levered players are having trouble rolling over their leverage, you have the makings of a panic unwinding of positions. In all Coxe's time in the business, he's never seen a time where leverage was so great. ... So we are taking out a gigantic amount of support.

This unwinding is triggered by the unwinding of "structured" financial asset products created around the US mortgage market.

2 - China economic activity over the next few years should be generally supportive of firm commodity prices.

3 - Coxe doesn't see China going into a major economic funk, because it has the ability to self-finance its growth needs.

4 - No signs out of China that they will change their fundamental growth strategy, which is to do the greatest urbanization the world has ever seen. Their target, by the year 2025, is to have more cities above 1,000,000 persons than exist in Europe and North America put together. ... This means tremendous demand for Metals and Energy.

5 - Coxe foresees higher prices for energy over the next 3 years.

6 - Russia's recent behavior will changes the world's view of itself - that we're going to be going back to some sort of situation where countries will hoard their food and energy.

7 - Positive recommendation of Paul Krugman's Friday article in the NY Times, where he compares today's world with the world prior to WWI, citing a great quote from Keynes. Recall the last experiment in global free trade was the late 19th century. Krugman compares Britain of the late 19th century with the America of today. Where late 19th century Britain saw its resources that had been supplied by "free trade" cease to be in such available supply. Coxe thinks this is the basis for higher commodity prices going forward. Commodity companies that HAVE productive facilities in geopolitically safe areas are going to be worth more.

8 - We are seeing a big, big change in the world's power structure, in the sense that we're going to have more and more decisions made on a strategic basis by countries, as opposed to "free trade", where we could count on production done in one place as being freely available elsewhere. It is going to be a much more insecure world.

9 - That kind of world is one where ownership of secure production - not just reserves in the ground, but secure production capacity - is going to be worth more and more for the ability of countries to pursue independent foreign policy.

10 - So in terms of the great commodity bull market, the answer is it's going to go on, but it's going to go on with some different kind of drivers to it, as peoples start to reassess security, as opposed to just having the availability of commodities at reasonable prices.

11 - One of the things that's clear about Putin, is that this man is personally incorruptible. And he's determined to restore Russian to the kind of power it had when he was a KGB officer.

12 - The more there is a sell-off in commodity stocks with secure production assets now, the more we're going to have consolidation being done.

13 - Now we come back to gold. What is gold's role in all this. Well, when you have paper currencies of all kinds being more and more suspect because of inflation rates going far above Central Bank targets, what you have is a situation where you have to ask yourself "what is your store of value?" It's not just jumping nimbly from one currency to another; it's got to be something more than that. And the secure production facilities for gold in the world are shrinking too, as globalization begins to crumble.

14 - Coming out of the current correction, the productive mining and agricultural operations are going to be even more valuable because they are going to have a strategic and security aspect to them, which is over and above their sheer earnings power.

15 - All across the world, real yields are still negative, which points towards future stagflation.

16 - Coxe feels it is unlikely that we will have a deep global recession, when we've got negative yields everywhere.

g