Don Coxe 11/19/10

· Supports what Bernanke is doing because of the questionable banking system in the US. Feels criticism of him are way off base. He is the only thing that is keeping this US economy from a double dip. Critics are being too narrow focused by saying he is deliberately deleveraging the dollar.

· Need solid support from banking system if we are ever going to grow as an economy

· Banks instead of building up their capital are using the fed’s money to buy back their stock. Bernanke then is trying to protect the system by lowering the interest rates but we are not getting a deleveraging that is needed. In 1995 bank assets were 35% of GDP but just before the crash those assets were 85% of GDP and they are not down yet very much. Past fed stimulus have been spread abroad into emerging markets instead of staying within the US. This creates a problem for Bernanke.

· The next big boot to drop is the state and municipal debts. Municipal bond market is in “remarkable trouble.” Not sure how Bernanke will be able to deal with this. Not sure that the Fed can take these state debts on its books. If for example, he decides to take on the rescue of California and Illinois that would cause the Republicans to scream.

· He is walking a fine line as he also cannot sound alarms to the extent of scaring people out of the stock markets. He needs to have a strong equity market to allow for refinancing and deleveraging.

· Meanwhile we have somebody even worse off than US is – Ireland. Their debt is absolutely astounding.

· The one economic statistic that causes him the most concern is that of Cisco which in a matter of months lowered their growth projections from 13 – 15% to 3% or so. This is due to lack of or slow growth in government spending. E.g., states are not paying their bills on time. Cisco when it doesn’t get paid on time, suspends shipments. New challenge now is that state and local governments are no longer a support to the economy as they had been during the latest crisis.

· As to investment thesis need to look to countries that do not have all those problems. E.g., Brazil. Historic change is that the emerging markets have less risk than those like US.

· Food inflation is really hitting China’s population. This supports Don’s thesis where he has the greatest confidence in anything tied to the production of grains.

· US, Yen and EURO all have their own problems.

· Investment Recommendation - If you overweight the emerging markets to include Canada and Australia, overweight commodities that are tied to supply and demand and keep exposure to PM to insure against concerns about paper money, you should be able to ride out whatever will come.