11:45 [Comment From Don Coxe]/b>
It is true that we are living through a concatenation of front page bad news stories. Economic progress needs a fair degree of political stability and that doesn't seem to be on offer at the moment. However, to date, even the Japanese disaster doesnt look like an event that couold derail the global economic recovery. But each new crisis while its predecessor shocks remain unresolved raise questions about the durability of economic progress.
11:46 Darcy Keith - Don, I'd like just for a moment to discuss The Coxe Commodity Strategy closed end fund. It's been climbing steadily for a while and is now close to the IPO price in 2008 of $10. But it took a huge tumble after its premier. If you could re-live the past, would you have done things differently in terms of the timing or composition of it? Do you feel this was one of the biggest mistakes of your money management career?
11:53 [Comment From Don Coxe]/b>
Good question. We knew commodity prices were elevated but we also knew that as long as the global economy kept growing, commodity prices would keep rising. We were worried about the banking system, but we underestimated just how rotten it turned out to be. The collapse of that Fund's price wasnt due to the busting of a commodity bubble but the bursting of a banking bubble that turned out to involve the US and Europe. I spent a weekend with a group of central bankers just at the time the Fund was in distribution and, although they were from six different countries, not one thought that there was a financial crisis on the horizon. Had I known how bad the banks were in the industrial world outside Canada, I'd certainly not have suggested people but equities of any kind. I thought that the authorities would be able to manage the implosion of a few banks--but it turned out that hundreds were in trouble. Even the Basel Committee didnt foresee anything of the magnitude that occurred. The mania was in the financial communities--not the commodity markets. But the real got destroyed by the unreality of the biggest banks and the failure of central banks to intervene in their colledtive follies in time to prevent disaster.
11:55 Darcy Keith - Thanks Don. Now, here's Nel with a question related to future risks that could impact commodities.
11:55 [Comment From Nel ]/b>
Do you have a list of early warning signs you look at that would lead you to become bearish on commodities?
12:00 [Comment From Don Coxe]/b>
From the bitter experience I discussed in repsonse to the previous question, I'd say that this time I'll spend more time following the financial institutions' problems because the supply/demand situation for most commodities is still favorable for strong performnce of commodity stocks. What we also learned from the Crash was that Gold was the best-performing commodity and it went to a new high while much of the world was in recession and central banks were still pumping furiously to prevent a depression. I'm not sayng that all commodities are roughly selling in line with demand. I'm saying that a financial crisis is horrendous news for most commmodities other than precious metals. In fact, because investors saw how fast the precious metals recovered and entered major bull markets, if another recession looms, we could see major new highs for the major alternatives to paper money--which will be utterly discredited by a new crash
12:02 Darcy Keith - And, related to that, we've had quite of few questions today on where you see precious metals heading. Any specific forecasts you can share on gold and silver?
12:06 [Comment From Don Coxe]/b>
What is unfolding is a gradual loss of faith in paper money in much of the world. The epicenter of the current bull market for gold and silver is the eurozone. the euro is the only paper money in history that has no specific backing by a government, a tax system an army or a navy. It is the first currency to be issued not by a government but a theory. So the underpinning for themonetary metals is the continued deterioration in the fundamentals of the PIIGS in the eurozone, and of the banks across the eurozone which lent egregiouos amounts to the PIIGS. Ireland was bailed out mostly to save banks in europe, not because of a deep love for the Irish people. So investors need to have exposure to the historic stores of value now that the central banks and governments in so many countries are being discredited by events.