Don Coxe's Basic Points April 2010: A Slow Boat to China

Market Strategist Don Coxe is out with the latest edition of his Basic Points publication. His commentary entitled, 'A slow boat to China' focuses on his latest view on the markets and how he would position portfolios accordingly. As we've covered before, Coxe has been a long-time commodity and agriculture bull so it should come as no surprise that many of his recommendations center around that theme. To get a better idea as to the rationale behind a bullish agriculture bet, we recommend heading to hedge fund Passport Capital's case for agriculture.

Turning to Coxe's most recent market commentary, we see some of his main viewpoints summarized below:

- Underweight integrated oil companies ('big oil' stocks like Exxon Mobil, Chevron, etc).
- Increase equity exposure via mining stocks.
- Overweight oil producers and underweight gas producers.
- Continue to overweight oil sands companies.
- If running a US based portfolio, focus on cyclical equities.
- Within agriculture, add to companies in the equipment and logistics.
- Overweight precious metals (gold & silver).
- If you're investing in bonds, focus on Canadian bonds if you're Canadian and TIPs if you're American.

Lastly, he also lays out some ideas to 'hedge' yourself against a possible double-dip recession after the market stops receiving its heroin fix from Ben Bernanke. If you are holding high exposure to cyclicals, Coxe argues to hold some long-duration bonds as a hedge. We've obviously simplified his viewpoints here so of course read Donald Coxe's April set of Basic Points in its entirety below:



You can directly download a .pdf here.

Overall, it seems Coxe remains a staunch commodity bull, or dare we say super-bull. For a technical look at how some of his favorite commodities have been trading as of late, check out an analysis of gold as well as an analysis of crude oil.

Don Coxe's Basic Points: December 2009

Thanks to zero hedge for posting up Don Coxe's Basic Points for December 2009. He is a strategist for BMO Capital Markets and has been a big proponent of the agriculture and commodities trade, much like fellow ag-bull Jim Rogers.

We've covered a solid question and answer session with Coxe but haven't posted much else of him so it's about time we played some catch-up. Here is Coxe's Basic Points for this month (Email readers come to MarketFolly to read them):




For related reading, we highly recommend hedge fund Passport Capital's case for agriculture as well as Jim Rogers' thoughts on commodities and agriculture.

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):

Publish at Scribd or explore others: Finance Non-fiction money bush

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)

Publish at Scribd or explore others:

Don Coxe Question & Answer Session

Recently, Donald Coxe sat down with The Globe and Mail's new section 'Globe Investor' and answered reader submitted questions. Since we've covered some of Coxe's thoughts in the past, we thought it would be prudent to let readers become more acquainted with him.

If you're unfamiliar with Coxe, he is the former global strategist for BMO Financial Group and writes a monthly journal entitled 'Basic Points.' (We recently posted up his March 2009 Basic Points). He likes to invest in stories that are "on Page Sixteen of publications" rather than the front-page story, under the assumption that the story in question could very well become the front-page story, allowing you to ride the wave. 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).

Coxe brought up some interesting insight in his Q&A session:

"Question: Why will printing more money be inflationary in a deflationary environment? In the past year the world has lost an immense amount of wealth, tens of trillions of dollars. If governments print money, to start replacing that which has been lost, why is this inflationary to the currency printed? If there is an enormous hole in the ground, and governments are just starting to fill it up again, why will money lost its value?

Don Coxe: Inflation is primarily a transactional issue, although it usually eventually translates into asset pricing of assets deemed to be hedges against inflation. In the 70s, there was a deep recession, accompanied by high inflation because of excess monetary expansion at a time of soaring food and fuel prices. It could happen again.

Question: With reference to his famous quote “never invest in a page 1 story, invest in a page 16 story” why did he go against his own counsel with an IPO largely based on food/fertilizer stocks in May, 2008 – AT THE TOP OF THE MANIA – when food riot stories were plastered all over page 1?

Don Coxe: Good question. It took us some months to get the prospectus cleared so the timing was clearly suboptimal. That said, because we kept large amounts of cash and only deployed it over 8 months, we’ve got a portfolio that should perform well over the time horizon we chose: five years.

Question: We are getting very diverse opinions lately on the direction of gold, I’m starting to wonder if the opinions are based people’s own self interest. On one hand we hear that gold prices are going down because gold, being a safe haven, as the markets improve investors are pulling their money out of gold and driving down the price. Also as the US markets improve the US dollar will rise and drive down the price of gold even further. On the other hand we hear that because the US government has embarked on a plan of quantitive easing this will eventually result in inflation, devaluing the dollar and rising the price of gold. We hear gold future prices anywhere from $700 to $2000. Can you give us your opinion.

Don Coxe: Gold is buffeted by the economic and demographic deflations on the one hand, rising financial risk and humungous monetary expansions on the other. We see it gradually taking a large role in global monetary policies---which implies significantly higher prices. Its haven aspects show up in day-to-day trading: gold tends to climb when broad stock indices are weakening.

Question: Bond Markets are anticipating severe recessionary conditions. What areas would seem to offer the best opportunities at present?

Don Coxe: Bond markets are sharply divergent from equity markets in recent weeks. Such disjunctions in the past have more often than not validated the bondbuyers’ views. If that isn’t the case this time, it will probably be because of stagflationary conditions.

Question: Today copper inventories at the LME went up 2300 tons, while the price of copper went up .07 cents. How can copper continue to go up in the face of a global recession?. Is this short covering, or real demand for copper from China or elsewhere??

Don Coxe: I am skeptical of copper’s surge at a time that other non-food commodities—notably oil—are so weak. It wasn’t that long ago that Japanese traders tried to corner copper—with disastrous results. That said, China’s stimulus package seems to be working, which means there’s real demand out there. I like the food commodities better.

Question: What is your view on silver bullion vis-a-vis gold bullion? Thanks

Don Coxe: I haven’t been a real bull on silver since we cashed out my son’s hoard of silver coins at the peak of the silver mania. It’s not truly a monetary metal, and it tarnishes, which means it isn’t a pure precious metal—and its main industrial use was photography, which has been rendered obsolete by technology. Gold is the pure play, but it will doubtless drag silver along. I like simple concepts."

As you can see, Coxe continues to be a long-term (5 years) bull on commodities and on agriculture in particular. We've only highlighted a few of the questions from the session, so make sure you check out the entire transcript at Globe Investor.