Don Coxe Conference Call 12.2.11

· Thinks some fundamental changes have occurred this week which could help avert a financial disaster.

· Don admits that he has been a EURO skeptic. Problem has been that a set of countries have lived by the rules and a set of countries that have not so that there has been a fracture along these lines.

· It is significant that the Central Banks (including China) have aligned this week.

· Huge loans that banks have made to other areas of the world that are denominated in dollars that could not be supported. If this could not be resolved than what we would have is a full blown crisis. What’s happening now is that this is being resolved by the swap lines. Fed and the Bank of England, Bank of Canada and Bank of Switzerland are all lending out dollars at reduced interest rate. Swap arrangements are a great break through which will take a lot of pressure off of the European banks. Leaves then the question of the bonds. A new master plan has been agreed upon. Countries that allow their financials to be controlled by Eurozone will then get support. In Greece and Italy they put technocrats in power. This then takes a lot of pressure off of those governments because they can say this is the only way they can get support. Result is a significant drop in bond interest rates. Averts the chance of a crash occurring just before Christmas with negative consequences for banks year end statements.

· It is “terribly significant” what just happened this week.

· New situation is that these countries must have their fiscal policies monitored/under supervision at the top by the elites. The elitists don’t much trust democracy all that much and would rather just deal with each other.

· European Central Bank now has a mandate similar to the Federal Bank to fight not only inflation but now also deflation (2nd of which is a major change). This is “truly momentous” and no wonder gold is up above 1750 as this allows for money printing. They are saying the near term challenges comes from deflation not inflation.

· Food inflation has been outpacing fuel inflation but this will not go on that much longer (have had great crops). There is a reasonable prospect that in the next few months we may have less food inflation which will be great for everyone especially 3rd world countries.

· All of this is a big change from where we were just a week ago except there are so many chances for mis-steps. Still lots of challenges but never the less as David Brooks put it in his recent article, in a crisis you do what you have to which is to bail out the banks.

· Bless Bloomberg for the lawsuit that now allows us to see what the Feds did for the big banks. Don seems quite disturbed with how the banks operated and how they used these “gigantic subsidies” for their own benefit. Had it not been for the Freedom of Information lawsuit we would never have known this as the banks never revealed all the benefits they received from the Fed.

· What could go wrong? The Germans could feel that this is being pushed at them too hard.

· Don is relieved about this recent action as it does raise a sector of hope that we could end up with a decent year next year. Make or break meeting set for Dec. 9th. December could be one of the most interesting month for investors in years. Perhaps we will see that the elites will be able to enforce policy that the markets can believe in by taking things away from the rioters in the streets.

· Europeans have very short duration for their debt roll overs which means huge roll overs will be here shortly. What will happen to the “roll overs” is of real concern especially with the latest small bond failure in Germany. But what we do have for the first time is a strategy that if it can be implemented would protect the Eurozone which means also that the American banking system will be protected because they have huge exposure to the Eurozone.

· Don was pleased to see that Mark Carney was there with the Bank of Canada. Means all of these things will be coordinated outside of the political zone. So far Germans seem to be standing behind Merkel which could make it work.

· So not only do we have the Eurozone/banking crisis, then we have the Iranian situation which took a turn for the worse with an attack on the UK Embassy. This was in fact an attack on Europe. This could lead to a more widespread boycott on Iranian oil.

· Oil security will be a much bigger concern which is obviously good for oil stocks in N. America. The Canadian oil got hurt by the Keystone debacle but thinks that may be mitigated by this Iranian crisis.

· What should you as an investor do? We now have more printing from the Euro zone and still going in the US so that means the inflation concerns will be much bigger than we thought just a few months ago. Just like in the ‘70’s you invest first in gold and oil.

· “No question about it….all of this is gold bullish.”

· But what could go wrong? We should know within the next 2 weeks. It doesn’t look like the global recession will be as bad as we thought. In the interim we should still use caution but whereas the situation just a week ago was really grim, what’s happened now is just like what happens in fairy tales, the Central banks have come in like a fairy godmother to help avert a disaster.

· Don’t know how it will play out except it no longer makes any sense to sell into any rallies. We should be buying any assets that we need which should include the gold and oil sector. We could have a sell off on Monday but investment committees should be looking at what has to be one of the consequences of this latest situation ….has to be significantly higher gold prices. Look at the values in the mining stocks. This may be the biggest event of the year.

· Question for Don – in our industry the hedge funds are way underinvested as are so many others. Are you Don thinking that could mean a great December? Don said this guy is pointing out another reason why the move in the stock markets could be really dramatic…the cash on the sidelines.