If Don Coxe is losing any sleep over this week's sudden pullback in commodity prices, he's not showing it. As the portfolio manager of the Coxe Commodity Strategy Fund sees it, any drop in prices presents a buying opportunity in a long-running bull market. But Mr. Coxe, who is one of the world's best known commodity bulls, is concerned about whether huge inflows into commodity ETFs could eventually fuel a vicious selloff - and for the first time in a decade, he's turning sour on India's growth prospects.
Mr. Coxe joined Globe Investor for a live online Q&A Tuesday with our readers. The following is a full transcript:
10:56 Darcy Keith - Good morning everyone and welcome to this live discussion with Don Coxe.
11:00 [Comment From Don Coxe]/b>
Good morning everyone.
11:02 Darcy Keith - I'm Darcy Keith, a web editor here at the Globe, and looking forward to this two-hour discussion. We got lots of ground to cover. Thanks for joining us Don. Just to start things off, Goldman yesterday issued a report suggesting commodities, especially oil, may be getting overvalued and suggested investors take profits. What are your feelings on this Don?
11:04 [Comment From Don Coxe]/b>
There's no doubt that the extremely low short term interest rates mean that lots of loose cash is floating around the world. But there's also no doubt that the Mideast crises and the shortages of key commodities are major factors in the performance of commodities and commodity stocks
11:07 [Comment From JP Taillon ]/b>
Hi Mr. Coxe, I was going to wait a little bit before asking this but you did touch on the subject. When assessing the current run in commodities, what proportion would you say is driven by releveraging of investors vs actual growth and supply issues especially in ags and softs?
11:08 [Comment From Jeremy Clarkson ]/b>
Isn't the Mideast crisis also a short-term factor?
11:11 [Comment From Don Coxe]/b>
At any given time, it's hard to say what are the most important factors in commodity pricing and the behavior of stocks. We know that the FAO says tht global food prices are now at or near all-time highs and those prices imperil economies and governments in many third world countries. The crop carryovers are so close to multi-decade lows at a time that many millions of people in emerging economies are increasing the protein contents of their diets. That is a potentially explosive situation. As for oil the spread between WTI and Brent means that demand for light, sweet crudes is outpacing the supplies--at least in the short term. Then when you add in rising inflation rates across the whole world, you have a situaton eerily reminiscent of the 1970s
11:12 [Comment From Don Coxe]/b>
The Mideast crisis looks to be more than a short-term factor as the governments fall and there are no clear-cut successors who offer the kind of freedom and tolerance that the dreamy demonstrators sought. Best guess is that we're going to be living in a crisis or near-crisis atmosphere for many months--if not years.
11:13 Darcy Keith - A few questions now directly related to ag, our featured topic for last month's Investor All-Stars package:
11:14 [Comment From Tony ]/b>
What are the best Canadian instruments to invest in Ag?
11:14 [Comment From Mark ]/b>
In your opinion, what is the best investment in the fertilizer sector for 2011? I am looking benefit from the expected rise in crop prices through nutrients, and was wondering whether a diversified company such as Agrium is best option, or whether you had specific pure-plays in mind (ex. PCS, CF-Industries)... Thank you.
11:15 [Comment From Don Coxe]/b>
There are many alternatives, but securities compliance rules forbid me from making stock-specific recommendations. The last time we had grain prices at these levels there were fewer alternatives, and no ETFs, so investors have excellent choices and thats something I applaud
11:17 Darcy Keith - Without naming specific stocks Don, do you have any specific investment vehicle recommendations, ETFs perhaps? I know MOO has done quite well over the last couple of years
11:17 [Comment From Don Coxe]/b>
As noted above, I cant name a best pick. But the list of well-financed and operated fertilizer companies is short and the only real complexity in evaluation comes with the gradual unwinding of the Mosaic distributions and alignments. The other choice is between emphasis on potash and phosphorus and emphasis on nitrogen. Nitrogen isnt needed for soy, but is needed in size for corn
11:18 [Comment From John H ]/b>
Don, I wonder how much current copper price is due to speculation? What impact of the 20% copper price increase to the world economy will be?
11:18 [Comment From Don Coxe]/b>