May 18, 2012 | By Tekoa Da Silva
“You become what you think about most of the time.”—Earl Nightingale
The following is a reflective commentary and highlighted segments from an interview conducted with Donald G. M. Coxe, on May 15th, 2012.
I had the chance to speak with a legend in the U.S. & Canadian Securities business on Tuesday. His name is Don Coxe, who serves as Strategy Advisor to BMO Financial Group, and Chairman to Coxe Advisors LLP.
Don makes it clear to all who listen, that a deep appreciation of history serves as his guiding investment light. His words reveal a lifetime of quiet chipping away at the pages of history, much like the artist Michelangelo, and in so doing, his achievements have become a part of history itself. To have the honor of spending an hour of my life with such a man, was certainly a chip of my own.
Items discussed during the interview included Don’s philosophical outlook toward investing, which single investment helped launch his career, plus thoughts on today’s inflation & commodity cycle. A few highlights are as follows:
Reflecting on the early days of his career, Don commented that, “When I had the opportunity to get into the investment business, I was hired by Mutual Life of Canada, as their Vice President of Special Projects…they asked me to look into their business which was group pensions..I said, ‘that business is going to die because of inflation, you need to set up an investment subsidiary’…we got that approved, and I had to have a meeting with the Minister of Finance, who later became the Prime Minister of Canada…once we got it set up and we put together a team, based on my political and historical background, realizing that inflation was going to go out of control…one of the first purchases we made was of a leading gold mining company, and we bought that with gold at $62 dollars an ounce and closed the position out just north of $700 an ounce at the end of the decade.”
In describing the value of history, Don remarked, “History is the record of human successes and failures…Things that aren’t significant don’t get recorded in history–they’re gone. So it’s the record of outsized personalities, people who had big opportunities and took advantage of them, and those who had big opportunities and completely blew [them], and then big changes that occurred throughout history in the climate of the world…which transformed civilizations…” He concluded on the subject of history by saying,“I do not come up with serious investment concepts without seeing how they are rooted in history[first].”
In sharing his thoughts on gold, Don said, “The basic way you look at gold, is to compare the value of gold to the value of paper money that’s out there. The central banks of the world are printing money at a rate never before seen (outside of the Weimar Republic disaster). So therefore, as they keep bailing out bad governments in the Euro zone with more printing of money, and as Ben Bernanke and Mervin King of the Bank of England print more money, what you see then is that paper money is not a store of value—so more and more people who have something to protect move into gold, and to a lesser extent silver.” He added that, “Gold has dramatically outperformed all the stock markets in this millennium so far, and I see no reason for it not to continue doing so, until it’s reached a value [where] the risk to the downside finally really develops as opposed to the risks to the upside, and we’re nowhere near that yet…I would say [the upside] is still enormous relative to where we are today, over the next five years.”
Commenting on the value of gold mining shares here, Don said, “What’s happened here is the shares of the great gold mining companies…have been smashed in the last eight months…on average the biggest stocks are down (from their peak) by more than 35% despite the fact that the price of gold only corrected by about 10%…it’s been devastating for the share prices of the small exploration oriented companies. When—I say not IF but WHEN—the price of gold goes through $2,000 oz. and enthusiasm comes back for the big stocks, that will create an umbrella for a terrific amount of activity among the small companies…the greatest return to investors will come from being in the little companies as opposed to the big companies.”
When asked about the reason behind his directorship position in junior gold development company, Spanish Mountain Gold, Don said, “[It's] the people behind it…we share the same sorts of views on the commodities outlook, these are gentlemen of quality, success, and not typical mining promoters of the streets of Vancouver who’d scare me off. I was interested as a historian to be part of a venture in it’s early phases to see how it unfolded—when I knew the quality of the people. When people who are splendid and reliable, and fine businessmen but also great visionaries…that was what primarily attracted me to the Spanish Mountain story…so since we’ve worked together elsewhere, this was the logical thing for me to do, and so I’ve been learning about how you actually bring on a gold mine…this is a fascinating experience…By definition they [the individuals behind Spanish Mountain] do not engage in trivial ventures, they’re record is of identifying great wealth before other people do. They are serious people.”
Concluding on the historical opportunity within commodities presented to investors today, Don said, “I believe that it makes sense for people to invest in commodity stocks as a group…I believe this is the way for investors to tap into what I call, ‘The greatest efflorescence of human liberty in human history’, which is that in a space of three decades, roughly two billion people in this world are going to move from poverty and subsistence, to a middle-class type society. It’s never been done on a scale like this before, I’m glad to be alive to see it happen, because historians 20,000 years from now will be writing about this. The interesting thing is that commodities are the way in which you can best measure all of that, because these people need more commodities to progress.”
If we are to take any lesson away from Don’s commentary, it might be that such delicate handling and attention to the pages of history, no doubt earn one the honor of inscription within those very same pages. It is of this editor’s opinion that this interview be added to the permanent libraries of all serious market students.
To listen to the interview, click the following mp3 download link and/or save the file to your desktop(please allow a few minutes for the download of this 37 minute interview):
Interview also available for listening on our: YouTube Channel
To learn more about Don visit: CoxeAdvisors.com
Enjoy the interview? Please support the site by joining our Free Mailing List and sharing this URL page link with friends, family, and your favorite chat forum.
Please Visit Our Site Sponsors!
Silver Standard Resources - Over $461mm in cash, 828k+ shares owned by Sprott Asset Management
Fortuna Silver - Over $60mm in cash, 8% owned by Sprott Asset Management
Become a Sponsor!