Don Coxe: Risk of Stagflationary Bond Bear Has Arrived (Latest Investment Recommendations)

It's been a longtime since we checked in on market strategist Don Coxe. He publishes the 'Basic Points' each month and his latest rendition is entitled "Slouching Towards Stagflation?"

At the end of his commentary, Coxe lays out his latest investment recommendations, including a market weight position in Japan. Just this morning we touched on how investment manager Ruffer is seemingly overweight Japan.

Here are Coxe's latest recommendations:

1. His main advice ties into the title of his commentary regarding stagflation. Coxe writes, "Just because Stagflation of Seventies proportions is only a remote possibility doesn't mean that meaningful stagflation-style damage won't be inflicted on bond portfolios - particularly those denominated in currencies of grossly overindebted countries. We think the risk of a real stagflationary bond bear has now arrived, and have therefore reduced recommended bond durations. Unless the stagflation risks recedes, we shall be reducing those durations further in coming months. So should you."

This is a big talking point because Warren Buffett himself has reduced the duration of Berkshire Hathaway's bond portfolio as well. There is a slight difference in the reasoning, though, as Buffett was concerned about inflation whereas Coxe is concerned about stagflation.

2. Cease underweighting Japan and move to market weight (with special attention to buying global brands).

3. Underweight European financials and euro-denominated debt. Emphasize exposure to Swiss francs and Canadian dollars.

4. Overweight precious metals in commodity-focused portfolios and include exposure in balanced portfolios.

5. "Agricultural stocks remain the commodities group with the best balance of risk and reward among all the possible outcomes of the current crises in the Mediterranean region and the Arabian peninsula."

6. Overweight the oil sands companies and emphasize coal and oil names in North American energy portfolios. Fellow market strategist Jeff Saut of Raymond James was also out singing the praises of the oil sands this week. Industrial clients, Coxe says, should hedge against remote risk of catastrophe in the Middle East by purchasing far out of the money calls on crude oil.

7. Overweight offshore oil companies that "do not face continued litigation risk from Macondo." This means avoid the likes of BP (BP), Transocean (RIG), Anadarko Petroleum (APC), Halliburton (HAL), etc.

8. Continue to avoid uranium stocks (Cameco (CCJ) is a major player there).

9. Pay heed to food and fuel inflation, which are working together to dent consumers' discretionary incomes.

10. Underweight base metal stocks despite their near-term benefit of rebuilding in Japan.


For more insight from strategists, check out their market commentary we've posted up recently.

Don Coxe's Basic Points - September 2009 Market Commentary

Market strategist Don Coxe is back with his 'Basic Points' for September 2009 and we have embedded them below. Alternatively, you can download the .pdf here. We've typically covered Coxe's commentary in months prior but after a brief hiatus on our part, we're back with his latest edition. If you're interested in his past work as well, you can view his June commentary here and an excellent question and answer session with Coxe himself.

If you're not familiar with Coxe, he's a market strategist and has quite a large following due to his opinions and forecasting. He currently likes commodities, precious metals and the like. He is an agriculture bull and actually shares a lot of views with that of legendary investor Jim Rogers (we've covered Rogers' market thoughts in the past as well).

RSS& Email readers: come to the blog to view the embedded document.

Don Coxe Basic Points Sept 2009

Don Coxe Basic Points June 2009 Newsletter

After posting up market strategist Don Coxe's 'Basic Points' newsletter for April, and for March as well, we're back with his June edition. If you're unfamiliar with Coxe, he's a noted market commentator and has a very large following due to the many good points he often brings up. Coxe is an agricultural bull and has additionally focused a lot on commodities. In fact, Coxe shares a lot of views with noted investor Jim Rogers (whose portfolio we've also covered). For more of Coxe's thoughts, you can check out his question & answer session here.

Here's the slidedeck (RSS & Email readers will need to come to the blog to view it):

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Donald Coxe: Basic Points April 2009 Market Commentary

Hot off our post with market strategist Don Coxe's 'Basic Points' newsletter for March, we're here with his April edition. If you're unfamiliar with Coxe, he's a noted market commentator and has a very large following due to the many good points he often brings up. Coxe is an agricultural bull and has additionally focused a lot on commodities. In fact, Coxe shares a lot of views with noted investor Jim Rogers (whose portfolio we've also covered on the blog here). We've also covered Coxe's recent question & answer session here if you want some more insight as to his thought process and investment theses.

The entire Basic Points presentation is presented below in slide-deck form, but for those of you who want a quick summary and the highlights, here's what you need to know:

Coxe still believes that commodities will be the true winners and will outperform on a relative basis. While he is bullish on the commods, he has been disappointed by the performance in gold due to the sales by the IMF, the strong dollar, and the banking crisis as there is a flight to safety. Coxe still feels that inflationary fears will return at some point, at which Gold will return to its solid position. He also mentions copper specifically, noting the massive run-up it has seen recently. And, he cautions investors from adding to base metals here, as the economy still has real problems ahead and these metals are due for a pullback. We here at Market Folly have highlighted this very issue of base metals as a leading indicator. We've said all along that copper is due for a pullback and it is what happens after that pullback that will truly tell us if the economy is beginning to show some signs of stabilization.

Coxe also cautions investors that they'll have plenty of opportunities to buy American equities and to not rush the process. His best advice is to slowly accumulate positions in the names you want to own when a bull market returns. The sudden "return of optimism" in the markets is premature by his accounts and we still have some problems to work off before we can truly recover. Along this line of thought, he warns investors from being enticed by long-term bonds and their steep yield curves. While these instruments may be havens of safety for now, those who avoid the yields now will benefit from performance later on down the road. This is along the lines of what Jim Rogers has said as well, as he wants to be short the long-term treasuries again at some point, which we noted when we summarized Rogers' recent portfolio. (Rogers also shares some of Coxe's other viewpoints, including his bullish prospects on agriculture). While Coxe is cautious on the economy in the near-term, he notes that when that recovery does take place, he is seeing signs that technology and commodities will be the new leaders.

In terms of specific sectors, Coxe also focuses in on refiners (and also the Oil Sands plays) as he feels the refiners can do well in the current environment where Americans are driving a little less. His argument for the oil sands is that you are essentially buying production of oil from the year 2020 at very cheap levels and they will make great long-term investments.

Overall, Coxe is sticking with many of his main investment theses and just elaborating on what he is seeing in the current market environment. And now to the actual slide deck of Coxe's April 2009 edition of Basic Points:

(RSS & Email readers may need to come to the blog to view the slide-deck)

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Don Coxe's Basic Points March 2009 Edition

Wanted to post up the great commentary of Don Coxe. Here is his latest 'Basic Points' for March 2009. Make sure to also check out our post on Coxe's bullishness on agriculture. (Rss & Email readers may need to come to the blog to read the slideshow).

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