Don Coxe 10.7.11 Conference Call

· Wants to talk about this situation of very low interest rates. Treasury bond chart from a yield perspective is getting back to where it was at the worst of 2008. S&P now is at the same level it was 13 years ago when 30 year yield was 5.82%. Back then gold was $302 an ounce.

· This suggests that we have to look differently then we used to when considering how to deal with our own retirements, etc. Now even modest dividend paying stocks have yields much better than T bills which was not the case 13 years ago.

· US Economy according to _______ not technically in a recession. But there are so many things now different from past cycles that we must be cautious about that. Just a few months ago people were confidently predicting 3.5% growth. The drop in the stock market recently is a financially driven sell off versus an economically driven sell off.

· Dexia (sp?) saga should be looked at carefully. Dexia is a large European bank that was ranked highly just recently. Came through the Euro bank test in great shape. But only weeks later that bank is gone. What dragged it down was the collapse of the capital pricing model due to bank’sr exposure to Greek bonds which were trading at 46% of their face value. Makes you wonder how is this possible? How could a bank be levered up more than 70% more than its assets? This is a horror story that can educate us to what the real risks are out there. Fact remains that these problems infect so many other banks. These bonds were originally prices as if they contained no risk.

· US Banking systems is in better shape if only because the Treasury bonds have performed so beautifully with many banks showing improvements in equity. Problem is multi national banks with vast loans out to Europe. Had a conversation with one of his very illustrious clients this week who said that if the banks are going to survive they needed to apply the Volker rule. The rule basically says that banks are not to use funds from their general accounts for proprietary trading. Banks are battling to prevent this Rule from applying. Don said you cannot have an economic recovery when the banking system continues to drag you down.

· How do you put together an investment portfolio when there’s zero % yields? Canada banking system is a different animal entirely where it continues to exercising discipline. (Mentioned that Jamie Dimon “savaged” Carney on the Canadian banking system recently. Don indicates that he is just amazed at the arrogance of these big US bankers after what they put the US economy through….they seem to have no sense of shame.) We have to hope that the Volker rule will come into play to save us from banker’s poor decisions.

· Concept of a dividend portfolio is gaining strength and more and more are becoming interested in it. Feels companies should focus on dividends and not stock buys backs which reward those officers with stock options. When we get around to new Capital Asset Model, those with dividends will be valued higher. This will be much easier then to decide what one asset should be valued versus another.

· What’s interesting is to look at what happened to gold during all this time when it was $300 an ounce. Believes that gold will eventually work its way back into the monetary system. E.g., announcement made yesterday that gold would be used in some type of clearing house systems. I mean after all what can you use when the bank paper itself is suspect? Need to ask yourself what it is out there that you can trust. Feels this is a sign that other things that could be happening. At $1600 an ounce and all the gold some of these Euro countries, something could happen here. When gold was down at $500/ounce there was no incentive to use it. Stated clearly that he feels that everyone must have some exposure to gold whereas in the past gold was only for those with fears of runaway inflation. This is another symptom of going back to the way evaluation systems used to be. (Gold used to be considered the purest means of cash and Don suggests we might be on this road again.) Believes valuation models will be rewritten and risk free assets will be reconsidered. It could end up being gold.