Investment Recommendations


Don Coxe: Investment Recommendations (November 2011)


Thursday, November 24th, 2011

In his latest Basic Points, “It’s the Economy Banks, Stupid!,” dated November 18, 2011, Donald Coxe, Coxe Advisors LLP, makes the following recommendations, in the context of the full body of the issue. Here they are, Don Coxe’s investment strategy recommendations, in summary, paraphrased:

1. Increase commodity stocks positions held within equity portfolios to large overweights, focusing particularly precious metal miners/producers, oil producing companies, and agricultural commodity companies.

2. Investors in European bonds  should scale back their exposure to euro-denominated bonds, and companies should try to raise money and/or borrow in euros. The euro is on its way down to much lower levels.

3. Trim positions in non-Canadian bank stocks to minimiums. ‘B5′ bank stocks seem to be cheap, when they may indeed be greatly overvalued. Dexia’s troubles are not exclusive – Remember the ‘cockroach’ principle.

4. Build positions in high-quality “bullet-proof” dividend-paying stocks. We don’t mean utilities, which represent some of the more obvious high yielding stocks – though owning these as part of a overall equity portfolio strategy is appropriate. By bullet-proof, we mean the high quality dividend-paying equities of financially strong, well-managed companies focused on delivering total return to shareholders by providing dividend growth in the context of sustainably rising profits.

5. Recession risk is not the important ball to keep an eye on, when considering endogenous risk to major equity indices; banking/bank risks are. The next recession is more likely to be mild compared to that of 2008, on account of interest rates remaining near zero percent.

6. Most central banks have lost pride in their own currency. As a group, they are competing with each other, in the ‘race to the bottom,’ the goal being to see whose is the most competitive. Outside of the global Depression, this course of events is without precedent, and inflation risks are escalating.

7. Replace overvalued government bonds with high-quality corporate bonds, in bond portfolios. Ignore the Capital Asset Pricing Model.

8. If the eurozone takes tough and dramatic policy changes to end the terminal struggling and/or sinking of bank stocks, there may be a buying opportunity for non-financial equities ‘surprisingly’ soon. Keep some cash available, be prepared, and be on the lookout for a opening in the market, in the midst of a flurry of sea changes in Europe. Soaring bank stocks too would be a sign.

9. The chance of an attack on Iran’s nuclear facility is unlikely, however, global, critical, pressure on Israel may make those in its government to move forward on its own accord, in spite of those countries who have never had a true relationship with Israel. Most of the great oil companies’ shares are cheap anyway, so you get the insurance against a raid for free. Keep good exposure to to oil stocks, but don’t speculate on an airstrike.

10. We continue to recommend that its better to invest in oil producing companies as compared to investing in shale gas companies. It remains to be seen what the political outcome/risk – though still remote – over this development will be.

11. Our favourites continue to be the Canadian oil sands stocks, since they have achieved our two most important criteria: they are long duration reserves, and they’re location is low risk, politically speaking. Political (activist) enemies of the U.S. will go to great lengths to constrain their output, and have a President who seems to be more concerned about pleasing them, rather than the oil industry – whom is his main ‘whipping boy,’ as he idealistically promotes ‘Green Energy.’

Canada needs to realize that the folks in Washington D.C.’s inner circle do not feel the same way about its friendship with the U.S., and to take on new initiatives regarding pipelines and other export strategies. Until then, institutional investors who have holdings in oils sands stocks can expect to continue to be unfairly roughed up in discussions with their green clients.

Source: Donald Coxe, Basic Points, November 18, 2011

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Donald Coxe: Investment Recommendations (September 2011)


Thursday, September 22nd, 2011

In his latest Basic Points, “The Deficient Frontier,” dated September 16, 2011, Donald Coxe, Coxe Advisors LLP, makes the following recommendations, in the context of the full body of the issue. Here they are in summary, paraphrased:

1. Stay away from shares of European banks, if you can.

With a candor that is nothing less than commendable, Deutsche Bank’s Josef Ackerman says that the state of the European banking system looks just like it did in 2008. Their total portfolio risks are high – and continuing to rise, as a result of the collapse of risk-free sovereign rate of return among so many EU Member countries.

2. Stay away from the shares of U.S. banks with questionable balance sheets, particular those which give senior executives substantial stock options, and are wasting the Fed’s (read Bernanke’s) supplied funds to buy back their own shares.

The performance of U.S. bank stocks has been deteriorating. In the meantime, tort lawyers have been given carte blanche to sue the large banks-possibly for triple the damages. Incidentally, after trade unions, tort lawyers (read ‘raptors’) are the second largest contributor to Democratic candidates.

3. Investors should continue to maintain their positions in Canadian Oil Sands shares, exercising caution however, about adding to these commitments.

The Keystone XL Pipeline, which is destined to carry Alberta Oil Sands oil to Oklahoma and Texas, will be decided upon this year by the Obama Administration. It remains to be seen if he will prevail over enviro-fanatics, and although he has been disappointing them of late, the possibility exists that he might let them have this ‘big’ one. On the other hand, there are 100,000 jobs at stake, which may override his political concern, leading to a green-lighting of the project.

Its astonishing that the world’s second or third largest oil reserves, held by America’s long-time friend and ally, could actually be a political hot potato.

4. Continue overweight (read ‘heavy’ weight) in precious metals, with a bias towards miners (gold stocks).

For ten years, they have been good, and should continue being so.

5. Continue overweight (read ‘heavy’ weight) in shares of agricultural companies.

Although they possess surprisingly high betas (to us, that is), the endogenous risk in the earnings of these companies is substantially better than those of many cyclical stocks, whether you’re considering commodity stocks or otherwise.

6. Keep holding a strong exposure to U.S. oil producers, particularly those operating on land.

West Texas and Brent Oil spreads have stayed at levels that must anger European governments. That goes for the spread between North American Natural Gas and European prices for the same. For the time being, this is the greatest economic advantage the U.S. has going for it, and on another note, it is the most reviled sector, as far as the Left goes.

7. Copper and Iron Ore prices indicate, or rather, appear to negate concerns of a slowdown in the global economy. Natural disasters and labour strikes have kept metals prices stable, however, only demand will be able to keep them there in time. Because we can’t see that in the near future, underweight base metals.

8. It has become necessary for bond investors to make sure the yields on their positions are in line with the risks they have been seemingly forced to assume, particularly in this time of unbelievable low (read’surreal’) interest rates.

Why are government bonds – for example, those of countries responsible for delivering the worst investment shocks – allowed to get away with paying investors, record-low interest rates (i.e. ten year yield at 60-100-year lows)?

What is the point of lending money to poorly managed governments who pay laughable rates?

It would better to count on income from great companies via their dividends.

9. The Canadian Dollar appears to have weakened.

Except for the fact that the Canadian economy has stuttered as a result of a slowdown in exports to the U.S., Canada still is, as far as we’re concerned, a haven nation for global investors.

Canadian banks continue to be substantially more attractive than their U.S. or European conterparts – even if that’s merely on a relative basis, which might not be saying much.

Canadian Government Bonds offer slightly higher yields, though they are higher quality than U.S. Treasurys.

American corporate bonds pay higher yields and are more attractive than Treasurys – and some even have higher ratings.

10. For Income-Oriented investors, High-quality (read ‘bullet-proof) dividend paying stocks should be the core investment class in investors asset allocation, for as long as interest rates continue to be forced down by central banks, and for as long as the ‘Deficient Frontier’ is relevant.

In a somewhat stagflationary world, earnings growth forecasts are less important a market consideration. For the time being, take the money (dividends) and try not to get caught up in the day-to-day price performance of your holdings.

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Top 20 AdvisorAnalyst.com Stories in May-June 2011


Wednesday, June 15th, 2011

Here are this month’s top 20 stories during May-June, according to you.

  1. Inside Donald Trump’s Sleazy Empire
  2. Bill Gross: Investment Outlook (May 2011)
  3. Don Coxe: Investment Recommendations (May 26, 2011)
  4. Breakdown: Commodities Tumble for Good? (Sonders)
  5. Bill Gross: Investment Outlook (June 2011)
  6. Niels Jensen: Investment Outlook (May 2011)
  7. Jeremy Grantham: Time To Be Serious (and probably too early) Once Again
  8. Howard Marks: “How Quickly They Forget”
  9. Prepare for a Fed Hike… in 2018. So Says Goldman Sachs?
  10. Mobius Says “Financial Crisis Around the Corner”
  11. Jim Rogers: “Bernanke Is A Disaster” Who Will “Bring QE Back”
  12. Does Unreal GDP Drive Our Policy Choices? (Arnott)
  13. Stocks Aren’t Necessarily Best for the Long Run
  14. Why Jim Rogers is Bullish Gold
  15. Goldman: “QE 3 Optimism Is Excessive”
  16. Bill Gross: “No QE 3″
  17. Efficient Markets? (Saut)
  18. John Taylor: “The Nice Risk Rally Since The First Half Of 2009 Is Ending” And Will Be Replaced By A “Scary Descent”
  19. David Tepper Tells CNBC QE3 Will Come Only if Stock Market Falls Substantially
  20. “The Big Interview” – Jim Rogers on debt, China, energy and gold

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The Complexity of Persian Gulf Unrest (Stratfor)


Thursday, March 3rd, 2011

While the world’s attention was (and still is) on the fighting in Libya, George Friedman—founder of a global intelligence company called STRATFOR—told his employees to watch the tiny island of Bahrain. Libya’s protests are more violent, but the unrest in Bahrain, he said, will have much stronger strategic implications.

It’s easy to look at the news event that makes the most noise (and makes for good television). It’s much more critical to pay attention to the event that, depending on its outcome, could disrupt the world economy. If unrest in Bahrain gets out of hand, Saudi Arabia’s Shiite minority could follow suit with protests of their own, and the Iranian-Saudi balance in the Persian Gulf could teeter heavily toward Iran. Imagine if Iran fully controlled the area through which 40% of the world’s seaborne oil must pass daily. Does Bahrain have your attention now?

You can <<click here to watch a video>> on this very subject from STRATFOR. If you have an older browser, you may not be able to see the video—but in that case you can simply read the transcript below it. I strongly recommend you also follow the link to sign up for their free intelligence reports. Their paid subscription is well worth the investment, but the free product is a good way to get your feet wet.

John Mauldin, Editor
Outside the Box

The Complexity of Persian Gulf Unrest

STRATFOR

Play Video

Disclaimer

John Mauldin is president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions.

Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC and InvestorsInsight Publishing, Inc. (InvestorsInsight) may or may not have investments in any funds, programs or companies cited above.

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Some less than rosy views from Themis’ Joe Saluzzi and Jim Rogers


Wednesday, May 12th, 2010

This article is a guest editorial contribution by Tyler Durden, ZeroHedge.com.

Themis Trading’s Joe Saluzzi, who still has oddly not be asked to discuss his perspectives on the flaws in not only HFT but broader market structure and topology issues before a congressional commission, is interviewed by Bloomberg (and amusingly Carol Massar, after mocking him the last time around, finally gives him props for having been right all along). Fans of A. Joseph Cohen would be better advised to look elsewhere for their daily dose of Vitamin Hopium. The take home message “It’s gonna crumble, it’s just a matter of when.” Alas, with gold now at $1,241 even lifelong Keynes fanatics are finally throwing in the towel. The time when we could have done something to fix the system is now long gone, courtesy of the administration’s waffling for the past two years as instead of getting to the root cause of the last and future crash, it was focused on bailing out bankrupt banks.

And in related news, Jim Rogers, joins the Euro death squads, and says that the $1 trillion bailout is the “Nail in the coffin for the euro.” As Rogers said in discussing the now failed bailout: “I was stunned. This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue. It’s a political currency and nobody is minding the economics behind the necessities to have a strong currency. I’m afraid it’s going to dissolve. They’re throwing more money at the problem and it’s going to make things worse down the road.”

Rogers’ investment recommendations: “Investors should buy precious metals including gold or currencies of countries that have large natural resources.” We still would recommend staying away from the Chinese imminently popping bubble, which will likely reprice industrial commodities by 30-50%.

Source: ZeroHedge.com

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Bill Gross: Investment Outlook (March 2010) “Don’t Care”


Monday, March 1st, 2010

Bill Gross has released his newly penned investment outlook letter, titled “Don’t Care.” The intro is aptly hilarious, a must read, and of course the body of this month’s investment outlook makes for interesting reading.

You can also listen to it by pressing the play button below:
Bill Gross, Don’t Care, March 2010
Don’t Care, by Bill Gross, PIMCO

“I haven’t gone to a cocktail party in over 10 years. Granted, perpetually watching Seinfeld reruns on Friday and Saturday nights makes for a dull boy, but the alternative is excruciating. Uh, which would I prefer – solitary confinement or water boarding? I lean strongly in the direction of a warm bed and peace as opposed to a glass full of tinkling ice cubes and a room resonating with high-decibel blather. I suppose the parties wouldn’t be so bad if there was something original to be said, or if “you” had a genuine interest in “me” as opposed to “you,” but let’s face it folks, no one does. The only reason any of us really cares about cocktail conversations is to quickly redirect someone else’s stories into autobiographies that we assume to be instant bestsellers if only in print. If not, if the doe-eyed listener seems simply fascinated by what you’re saying, you can bet there’s a requested personal favor coming when you finally shut up. “Say Bill, I was wondering if you knew somebody at…that could…” Yeah right! But, as my chart shows, 90 seconds into a typical conversation, no one gives a damn about you and your problems – maybe those shoes and that dreadful eye shadow you’re wearing, but not anything audible coming out of your mouth.

During that unbearable minute-and-a-half, however, you’re likely to have covered some of the following topics:

  1. Where are you from? (If it’s not a place where I’ve been or have a distant second cousin – don’t care.)
  2. How’s the family? (If Johnnie is in advanced placement courses and my kids aren’t – don’t care. Don’t care about your kids’ soccer games either or that upcoming wedding.)
  3. Medical problems. (Unless you’re dying from cancer – don’t care. Your artificial hip and kidney stone stories are important only to let me tell you about mine.)
  4. How’s work? (Forgot where you work, but it’s a good lead in. Don’t really care though unless you can direct some business my way.)
  5. Can you believe Tiger? (Now there’s something I care about, but the wife is only five feet away.)

Actually, the “afterparty” is the best party of all – driving home with your partner and dissing all of the guests. Still, give me a home where Seinfeld roams, I suppose. Boring is better – cocktail parties are so 1990s.

In contrast to those cocktail parties, I‘ve got so much to say in this Investment Outlook that I don’t know where to start. Don’t be lookin’ around for something more important though, like you do at a cocktail party; I need your undivided attention for the full 90 seconds allotted me.

To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today: (1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn’t the wallet. Vigilantes – bond market or otherwise – took away the credit card like parents do with a mall-crazed teenager. (2) The cancellation of credit cards led to the Great Recession and private sector deleveraging, the beginning of government policy reregulation, and gradual deglobalization – a reversal of over 20 years of trade policies and free market orthodoxy. In order to get us out of the sinkhole and avoid another Great Depression, the visible fist of government stepped in to replace the invisible hand of Adam Smith. Short-term interest rates headed to 0% and monetary policies of central banks incorporated new measures labeled “quantitative easing,” which essentially involved the writing of trillions of dollars of checks to replace the trillions of dollars of credit that disappeared after Lehman Brothers. In addition, government fiscal policies, in combination with declining revenues, led to double-digit deficits as a percentage of GDP in many countries, a condition unheard of since the Great Depression. (3) For awhile it seemed that all was well, that the government’s checkbook could replace the private market’s wallet and credit cards. Risk markets returned to normal P/Es as did interest rate spreads, and GDP growth resumed; it was only a matter of time before job growth would assure the world that we could believe in the tooth fairy again. Capitalism based on asset price appreciation was back. It would only be a matter of time before home prices followed stock prices higher and those refis and second mortgages would stuff our wallets once again. (4) Ah, but Dubai, Iceland, Ireland and recently Greece pointed to a potential flaw in the model. Shaking hands with the government was a brilliant strategy in 2009 when it was assumed that governments had an infinite capacity to leverage themselves.”

Read the whole letter here.

PDF VERSION

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Donald Coxe: Investment Recommendations (December 2009)


Sunday, December 20th, 2009

The December edition of Donald Coxe’s Basic Points research report (subtitled “Financial Heroin”) has just been published.

You may read it here.

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Donald Coxe’s Latest Recommendations (Nov. 2009)


Tuesday, November 17th, 2009

Donald Coxe’s latest investment recommendations are out. You may read them here.

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