Hey I am glad you are with us, I am excited about this, every once in a while I get lucky and get Don Coxe to agree to come on this show. He is a Canadian investment advisor for BMO Financial out of Chicago but he has a tremendous track record and he is really widely read by institutions around the English Speaking World. Don is the guy who was absolutely accurate in predicting, and it sounds so funny so early in advance after a 20 year bear market in commodities, he said you know what, we are just about to have this magnificent Bull Market in Commodities in 2000-2001. Another thing he also said that anything that China wants to buy he is going to buy first, and that of course is part of that commodity boom.
Don what I want to know from you is the bull market in commodities ended or are we just seeing a correction in the commodity boom?
Don Coxe: Well we have gone through the easy part of it, which is adjusting to the knew world order in which China, and then others, Indonesia, then India and then others like Brazil that came into the scene, who weren’t included in the scene I would call the white mans club plus Japan. It seems so long ago that those were the only countries that you needed to talk about economic progress. And where companies, the major corporations were focusing most of there foreign investment and their operations. But the world has been transformed in that time so that the pause that we are having now people are saying this must be the end of the China story which began in 1985 when Deng Xiaoping processes began to work in China and they have not had anything like a recession in all that time. Now you are entitled if you have been going for 27 years with gains of more than 9% a year in that time, you are entitled to have some readjustment and realignment of the economy because you started off as a virtual subsistence economy and are now the 8th wonder of the world in terms of cities, transportation systems, all these things. So we are entitled to have some adjustments here and this comes at a reasonable time because they have a 10 year plan and they are transferring their leadership as of this fall.
So yes, there was bound to be a slowing there and we collectively in the west have managed to blow away a large portion of the money we have made in the tech bubble, then the real estate bubble, then we discovered our banking system (thank heavens not in Canada) turned out to have vastly bloated balance sheets and had to be bailed out. Despite the things we have done wrong the world has continued to progress. So I can say that the commodity story can hardly be over when the country that has generated the growth is still growing at a rate that is maybe 6 times the rate of the US economy. So it is absurd to say it is over but the consumption patterns are going to change and it is still the most amazing story on earth.
Don, the big question is will the European Currency survive, will the European Union Survive?
Done Coxe: Well I don’t think the Euro will be around 3 years from now, but I would like the story to end sooner. If you’ve got an extremely medically sick person around who has a severe illness you want to keep them alive as long as possible but if you find out that it was going to cost $100,000 a day for 3 years to keep someone alive from a disease that they are never going to recover from, you might say gee, can the health care system afford this. And we are all part of the health care system for keeping the Euro afloat. I was certainly glad that Prime Minister Harper didn’t want to become to involved in this for which he was denounced by the European Union, but you know he is on the right track if he is being denounced by them for saving their own currency. I don’t think the Euro can make it. Now that is not the majority opinion, and I wish frankly the would get it over with. Go through the adjustment process which will be a wrenching one. I do not see how a currency which puts together a group of competitive northern economies with traditions of hard work and honest public service can work putting together in the same currency a group of economies which are best at having relics of past civilizations, having good tourist attractions and having a dolce vita lifestyle. You just can’t expect to subsidize it forever. These countries should never have been put into the same currency, and it is bound to fail, and the sad thing is it will take a long time to come to a conclusion because they keep being able to get money from other parts of the world. Now I hope the IMF doesn’t give them too much. I am glad Canada isn’t, the US can’t afford to because its struggling, so its going to fail. But its also one of the reasons Gold is at $1,550 instead of $750 which is where it was when the first signs came about that the Euro wasn’t going to make it.
Don, the question I want to ask you is what should be be doing to protect ourselves in this environment?
Don Coxe: The first thing you do is avoid taking pure financial risk by investing in banks that are hugely tied into Euros. That’s one of the reasons I recommend people stick with Canadian Bank Stocks. What we don’t know is how exposed US banks are but we can remember that one relatively small bank Lehman Brothers in 2008 nearly brought the whole system down. A lot of people think that they are going to be able to protect themselves by having money in bank accounts abroad, but that is just not a safe trade right now thanks the the Euro Currency Crisis.
The other thing is that China is still doing relatively well and you want to be investing in things that the Chinese and those countries that are following China’s model want to buy.
