don coxe 1/6/12 call
posted on
Jan 06, 2012 12:30PM
Edit this title from the Fast Facts Section
Don Coxe 1/6/12 Call
· Sent out regional banks (CREE) chart which indicates that the healing process may have begun
· He turned negative on the market back in May. He stayed on the sidelines even though it started to rally because he believes that you need 3 months worth of info to see if a trend is in place and is self sustaining
· Rally in big banks is nowhere near what the CREE shows.
· What we want to know is whether the banks that actually make loans are actually doing business which looks from this chart like they are
· What we will need before we really feel confident about a market rally is whether monetary growth is actually increasing….in otherwords is all this money that is being made making its way into the systems via banks
· Goldman said it was expecting a flat S&P this year
· We had a really rare event this year in that of the 190 IBD groups, the top 10 on the reopening day of the market were all commodity oriented (e.g., agriculture, oil services group, gold, oil, etc.) Don’s theory all along has been that if there will be a sustainable stock market rally, it will be the commodity stocks that will have to lead it. So it looks like the only group that has some pricing power has started the year right. What we have here is the beginnings of a recovery which means that major investors like pension funds could be positioning themselves into the stocks that have the best pricing power which is the commodity stocks.
· But we must remember that the Eurozone problems have not gone away and we always live one day away from a crisis somewhere in the world.
· We need to figure out what our point of re-entry in the stock market is if this turnaround is really starting.
· The level of monetary and fiscal stimulus that has been pumped into the system is beyond anything we have ever seen although admittedly most of Obama’s was wasted by going to public unionized folks. Then we have record amounts of cash sitting in corporate coffers earning nothing. Does not think interest rate will be rising as Bernanke said will not raise them until 2013. (Usually rising interest rates choke off a recovery and this doesn’t seem to be a risk here.)
· Hopefully we will have a bottoming out of the housing market.
· Overnight gold traded up and bumped up right against its 200 day average (1613 level). When it broke through this level awhile ago this was the key for many technicians to say that the gold bull was over.
· Agriculture stocks are looking good. Ethanol subsidies expired in the US yearend. It isn’t needed and in fact US is now exporting ethanol to Brazil.
· As for energy sector, the Iran fears did give it a pop but Iran will not be able to close the Straits. But Iran is now getting squeezed by this bill in Congress that says countries that trade in Iran will not be able to trade in dollars. Since energy purchases are made using dollars this may scare a few countries. Refineries are closing but doesn’t think this will negatively impact oil prices. We are still using more oil than we are producing.
· There is a difference between a liquidity crisis and solvency crisis. Liquidity will immediately lock up markets. Eurozone will continue to be a drag on the global economy but the ECB has shown that it can create enough liquidity to deal with a crisis.
· Question – has he changed his view on the base metals? He thinks 3.10 on copper may be bottom but doesn’t yet know. Then when you look at aluminum, companies are shutting down their plants due primarily due to rules on carbon tax. This will draw out significant amounts of aluminum on markets. At the moment believes that base metals should still be under weighted in commodity portfolio.
· Question - What are the realities of dollar based inflation? We do need to have the dollar resume its bear market before we get a sustained rally. Dollar hasn’t gone up because the US is such a great place to invest but because of what’s happening in Euro. The dollar this morning reached a new high which is negative for us.