Don Coxe Update
(Aug 27th, 2011)
- update on banks, focus on Eurozone but impact on US banks
- he’s highly sceptical of Buffett’s investment in Bank of America given their problems aren’t simply balance sheet based.
- all 50 states have litigation against Bank of America, will be in the courts for years
- he doesn’t know how bad this will be but doesn’t see the BNK and CRE indexes as being at a bottom
- he believes 1900 gold was simply the next stage in an increasing gold price.
- see’s gold having a long way to run
- on pullbacks investors should be adding, thru stocks not bullion, due to hedge fund manipulation of bullion
- bullion miners are the cheapest he’s seen in his lifetime.
- BMO report out on showing how gold stocks are cheap
- historic return to gold as an asset and currency
- the gospel according to Keynes is dead
- gold isn’t a greed story but an investment vehicle for those with the most to loose.
- when you can buy unhedged reserves cheap in the ground via the miners it gives you enormous leverage to higher gold prices
What could go right?
- too risky to take a bet on the economically sensitive stocks, you need a hedge for things going badly
- if (when) we slide into a new recession it will be hard for the government to find resources to help this time
- with Merkel shutting down Eurobonds he doesn’t see how Europe can deal with events when the rest of the PIIGS squeal
- the risk remain unquantifiable
- Eurozone banks are only well capitalized as long as the Euro bonds they hold continue to be viewed as risk free
- S+P is priced for good growth not pain
What to do?
- much more difficult for asset managers to figure out the risks in their portfolio’s
- what people learned under CFA programs won’t likely apply anymore, new formula’s required and gold must be factored in going forward
- the efficient frontier has become the deficient frontier
- there is a more level playing field between bonds and gold with interest rates so low, unlike the 70′s
- don’t be distracted by bullion itself but view the miners as having the best earnings potential
- we won’t discover something like the oilsands that changes the gold supply going forward
1. Any comments on base metal prices here?
A: Iron ore and copper seem strongest due to Asia but if problems continue in the US this may not continue.