6/10/11 Don Coxe Conference Call

Big Picture Overview – His call today was about the differences today from anything we saw in the past and how this is making it very difficult for folks to construct an effective investment strategy. That leaves us with agriculture and possibly oil.

· Stagflation is what is now emerging and poses a dilemma for investors. Headline CPI numbers are not at all scary but then when you look at food and fuels, we see a different story. The effect of inflation is skewed toward the emerging economies because their costs are increasing significantly. We don’t have the kind of union power this time to stage wide spread strikes to get the wage increases as we did in the ‘70’s.

· What we don’t have then is the kind of inflation which automatically means surging increase of interest rates.

· There have been spectacular increases in foods and fuels and yet falling interest rates. That didn’t happen the last time in ‘70’s. Investment challenges are different. Economic risks are rising.

· One of the other problems for investors is that there are so few investment winners. One thing we do know is that we do not have the surpluses of grains like we did in the past. It is a different world and therefore more difficult to construct an investment strategy.

· Euro has taken another hit today due to Robert Gates (who is retiring) feeling free to tell the Europeans how he sees it. He told the Europeans that they are making NATO into a virtual shell by not allocating money and other expertise needed to make it effective. For years NATO has denounced the US for not going through them. This time, Obama gave Libya over to NATO to handle and its clear they are not able to do so.

· Thinks there is a possibility that we could have a technical default in the US over the debt ceiling given the current state of US politics but even with this possibility, yet the dollar and Treasuries are still strong. These are things you couldn’t foresee at the beginning of this year.

· So what can we believe in? Looking at the grains it is clear there is no surplus making the grains even more strong. If the rains continue could be even more shortages and price increases.

· As to fuel, there was disarray in OPEC this week. Saudi’s are producing more but can only produce heavy crude. It doesn’t replace light crude normally produced by Libya. However, this Saudi news is a source of downward pressure on oil prices. Saudi’s are making sure that other nations can’t use the price of oil to cripple the west. So this means that it looks like there may be a cap on oil prices.

· This is different than the grains where there is no cap. Therefore recommend that we have the highest investments in agricultural stocks. Raw foods related sectors and then upstream oils.

· What’s going on with the economy calls into question whether S&P has any reason to be at 1277.

· Looks like we will have low interest rates for some time. The balance sheets of banks are looking bad. In Eurozone we have many banks that look like they could collapse.

· How to construct an investment strategy? Let’s not waste our time worrying about a depression. That’s not going to happen because even though the unemployment is high we still have 90% of people working. Plus we are not like Spain where youth unemployment is at 40-50%.

· In bond market, need to revise your views as to what is a risk free asset class. There is no longer such thing.

· Don won’t be having these calls for a couple of weeks as he will be in Spain.