Don Coxe 6/3/11 Institutional Call

· Page 1 story is the terrible economic news in the US which is far worse than expected. Job numbers were horrible. These numbers would have been enough by themselves but then we gave the ISM numbers showing manufacturing down significantly as well.

· The question then is what is the driving force for why people are buying gold? Interesting that while gold is up today, silver is down. Silver is the purest inflation play. So what this means is that fear of deflation is what is driving gold now. Gold stocks (miners) collectively are not up. The pattern is that gold in the vault has continued to outperform gold in the ground.

· PEs of the largest gold mining stocks show there is a wide range in them with Barrick at 14 and Newmont at 13.6, Goldcorp at 35. Possibly Barricks low PE is due to fact it has now invested in copper (for about 20% of its earnings) so they are not getting the gold multiple. But Barrick looks incredibly cheap if you believe the gold story.

· He is of the view that you need to be hedged both ways. (Take this to mean both bullion and miners) Already have food and fuel inflation so inflation will at some point drive investing mentality. So far there has not been cost pass throughs to meats from soaring grains. This then makes many fear more the deflation risk than inflation.

· In 70’s stagflation environment, gold did outperform the equities.

· Robert Reich had a great essay out recently where he views the focal point of leading governments which is to reduce deficits is the wrong one to take because the risk of the economy tipping over into a depression is too great. In the 70’s people bought more of a house than they needed to offset inflation risks but that won’t work for us today given the demographics. Feels that we must still have good exposure to commodities (foods, fuels, etc.). Even base metals are acting pretty well in this environment which is a bet on China stoking up again.

· Break here between gold and silver is a big sign. This means that silver correction still going on and underlines that pure inflation fear is giving way to deflation fear. It costs you to hold large amounts of cash so instead large investors are moving into gold.

· Coxe’s recent shift to move money out of equities was a really big shift for him. That was even before this week’s horror stories involving the economic numbers. But he is not about to recommend any further equity reductions given zero rates in interest rates.

· Doesn’t see any quick resolution of all the issues facing the US given the poisonous atmosphere in Washington.

· Inflation rates in CPIs will fall as prices will be reduced by stores’ price decreases given that consumers are feeling shocks and not buying.

· Euro is looking good relative to the dollar today due to new rescue package for Greece. Weakness in US is probably weaker than weakness in other G7 countries like Canada and Germany.

· Underweighting in financials for Americans is important. He received a sharply critical response from hedge fund to what Don had to say about financials in his Basic Points (about bankers cashing in for bonuses instead of taking market value on their books for all the junk they now hold.) Still feels financials is a bad place to be.

· Overweight PMs with focus on gold versus silver. This is a much better way to do it than holding cash. Does not matter where you are in the world, this is a better approach than holding local currencies. World where no one wants a strong currency has an inherent inflation bias in it. Also thinks it an arresting investing concept to be able to buy those reserves in the ground so cheaply. He may be stubborn about this but does not think this is the time to be cashing out of miners to only hold the passive investment of bullion.

Ps. Don has opened a new equity fund in Canada but I did not get is name or symbol