Don Coxe 12.10.11

· One thing that has emerged is a total fault line between UK and Eurozone. Decision that Tony Blair made not to join was a very good one.

· The fact that Polish dignitary has conceded that despite past with Germany, they are now willing to let Germany lead as to the Eurozone really tells you how things have shifted.

· These latest changes mean that we will get through Christmas and New Years. This is important given how everyone has to wrap up their books at year end.

· The big challenge we will have to deal in the future with is the banks…the big bad banks not the smaller regional banks. There will have to be bailouts of banks by the National banks. E.g., Germany will have to bail out some of their own banks, etc. Don has always believed that the Euro leaders weren’t so much concerned about the perils of the Greeks, etc. but about their own banks. German and French banks loaded up on the debt of these countries.

· Britain is the only country with longer debt maturities which means many of these countries will need to refinance sooner rather than later.

· US deficit is much worse from a deficit standpoint than most of the Euro countries.

· Huge really in US Treasuries whereas in Europe you had a bear market in bonds except for Germany. Looks like total incompetence of European banks.

· Let’s then look at the 3 different sectors. Government sector whose job is to redistribute wealth and financial sector is in embrace with government who needs them to buy their bonds. They have deteriorating balance sheets and are mirror images of each other. What’s left is the private sector with a very different vision. You need to throw away the capital asset model. Need to ask who it is that is actually doing it right. Corporate bonds are safer assets now than government bonds. The volatility in the stock markets of these good companies are because of what’s happening in the two bad sectors. The fact that well managed small companies are buying back their stock shows that they are doing well.

· What kind of investments should we considering in the next year?

· Shale gas is probably the most significant technological advance since the microchip. This could change the energy landscape. The companies that provide the services of getting this shale gas out of the ground should be the real beneficiaries. Could mean that energy prices may not need to rise relentlessly.

· Gold remains the simplest of all the investment themes. Remains a cornerstone of any portfolio. Commodity stocks in general look more attractive than general stock market indices.

· We should be able to enjoy the Holiday season as Europe has now kicked the can down the road a bit.