Don Coxe of BMO with one of his last classic ‘basic points.’ His last BP’s will be Dec 2012. Sad day. Summary and conclusion followed by the full document below:
Don Coxe’s Basic Points- 20th Anniversary edition
ValueWalk's Raul Panganiban interviews JP Lee, Product Managers at VanEck, and discusses the video gaming industry. Q4 2020 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview With VanEck's JP Lee ValueWalk's ValueTalks ·
1. The US election matters. If Barack Obama wins, the Democrats should also hold the Senate, but the Republicans would probably still maintain control of the House. Virtually the only concrete budgetary proposal Obama has made in two years is that the rich must pay more. That will have only a tiny impact on the deficit. Therefore, the asset that wins from an Obama-win is gold. If Mitt Romney wins, he will attempt, and probably succeed, in negotiating a deal with the Senate, which the Democrats would barely control—if at all. If a credible budget deal were done, it would be good for stocks and bonds, but bad for gold.
2. The outlook for demand for agricultural inputs from row crop farmers is probably the best of all time. Grain prices are high, and carryovers are at record lows. Crop insurance has prevented most US grain farmers from losing heavily from the drought. Expect farmers to invest heavily. Meat producers are being skinned alive at the moment, but by midyear will be benefiting from much higher prices for hogs and steers.
3. If Mitt Romney wins, Keystone gets approval on Day One. If Barack Obama wins, there is no guarantee he will approve it in timely fashion—or at all. Ideology and big donations from tax-exempt NGOs will weigh heavily on his decision. Defer further commitments to oil sands shares until the election is over.
4. The area of Africa and the Middle East, in which Islamic terrorism is intensifying its activities, keeps setting new records by the month. Never has it been so strong and defiant. Assume increasing problems for Mali and Nigeria, and increasing risks for mining and oil companies across that vast region.
5. The US has been experiencing the biggest deficits and lowest interest rates of all time. Both the Keynesian and Friedmanesque stimulus policies are being employed on a scale never seen outside banana republics, or the Weimar Republic, yet the economy moves at the speed of an arthritic octogenarian. The eurozone’s biggest contribution to the global economy is to make the US economy look good in comparison, thereby justifying the S&P’s lofty valuation. We grow increasingly doubtful. Caution is in order.
6. We believe that gold will break through the $2,000 level within the next year. Picking gold stocks without regard to political risks becomes somewhat more challenging as bullion prices rise, because many governments see higher prices as a justification for higher taxes and/or royalties.
7. The Canadian dollar is driven up by fears of Obama and/or Bernanke, and down by fears about future rate reductions, fostered by Bank of Canada Governor Carney. Canadian bonds look very attractive compared to the Treasury’s.
Within a super-cycle there will be ups and downs. What’s backing this one is billions—not of dollars or collateralized debt obligations—but of people emerging from poverty and becoming measurable participants in the global economy. That process—on a scale which makes it the most momentous in human history—is the most significant investment opportunity of our time.
Their nations’ rising competitive power is the second-biggest challenge to the sustained economic supremacy of North Americans and Europeans. The biggest is the deterioration in the realism of politics and economics of North Americans and Europeans. Any strategist who ridicules the idea that China, India, Indonesia et al. will continue to grow their GDPs far faster than the US and Europe, is implicitly assuming that the kind of dynamism behind the growth of the US, Britain, and Northern Europe in the five decades after World War II still exists among today’s soaring debts, deteriorating demography, and putrescent politics.
Don Coxe October 2012