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Don Coxe Recommends Investors Read Lenin to Understand the Markets

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From Casey Research

Don Coxe Recommends Investors Read Lenin to Understand the Markets

China and India have always been crazy for gold, and the yellow metal remains the choice store of value in those two countries, says Don Coxe, a strategic advisor to the BMO Financial Group. In an exclusive interview with The Gold Report, Coxe explains how demographic shifts are affecting the price of gold and delves into the logic of investing in gold as a long-term strategy. Coxe also draws an important lesson in economics from his reading of Lenin.

The Gold Report: What fundamentally attracts you to gold?

Don Coxe: There are many serious reasons why I like gold, but one very important reason has to do with the shift in the share of world gross domestic product away from the highly industrialized nations toward emerging economies in Asia. For thousands of years, people in China and in India have respected gold. The Western countries, on the other hand, were captivated some decades ago by economists who claimed that gold had become irrelevant as money. But the Chinese and Indian people hoard gold as a store of value and trade it as a treasured commodity.

TGR: Are the pricing mechanisms for gold shifting toward control by the East?

DC: Consider an art auction: If a bidder who 10 years ago only bought one painting suddenly buys 50 paintings, that bidder will greatly influence subsequent bids for the art. In China and India there are suddenly many more wealthy people than they've had for millennia. In a culture that values gold, newly rich middle-class people will buy the yellow metal not only for personal adornment, but also as a form of savings that is safer than paper money.

"In a culture that values gold, newly rich middle-class people will buy the yellow metal not only for personal adornment, but also as a form of savings that is safer than paper money."

On a trip to India a few years ago, I was fascinated to see poor peasant women wearing armbands of gold as they toiled in the fields. I asked my guide, "Is that actually gold on their arms?" And he said, "Oh, yes, that's gold." I said, "Well, aren't they at risk? I mean, these are really poor peasants, and here they are brandishing all of this gold!" He looked at me in horror and said, "No criminal would be so evil as to steal gold from a poor woman, because that's her dowry." There are some pretty powerful taboos in Hinduism, apparently.

Intrigued, I found out that under Indian law, when there's a Hindu marriage, whatever personal possessions, real estate, and investments the woman has become the husband's except for her gold. That remains hers. So if you're marrying off your daughter, whom you love, you're going to make sure that she has some gold in her possession because if the husband turns out to be a wastrel, the dowry might save her from starvation.

As a result, the Indians are the biggest consumers of gold in the world. The Chinese are moving up fast, though. Plus, there are simply more rich people in the world. Hundreds of millions of people now have some form of savings. The best single investment anyone could have made, since the year 2000 – apart from buying Apple stock – was in gold. It has gone from $300/oz to $1,650/oz. It's gone up every year, including this year. So every year in this millennium, the price of gold has gone up.

TGR: Let's talk about the Eurozone problems. How does the euro crisis affect the commodity space in general?

DC: Probably the only commodity that can benefit from the euro meltdown is gold, because the euro is the first currency ever to be backed by no government, no tax system, no army, and no navy. It is backed only by a theory and a set of rules, and the people behind it have violated the theory and the rules. I doubt there is any intrinsic value behind the euro. But take the exact opposite extreme from the euro and go to something that's been a store of value for as long as there has been civilization, gold.

TGR: Do you think we're in a triple-dip recession in North America?

"The best single investment anyone could have made, since the year 2000 – apart from buying Apple stock – was in gold."

DC: I don't think so. We have zero interest rates. Every recession we've had has always been preceded by a situation of tightening monetary policy because there was just too much spending going on, the yield curve inverted, and credit problems developed. In this case, we've been getting along with zero interest rates now for more than four years. What we have is lassitude, but I don't think there is going to be a recession.

That said, it's going to look like a recession a lot of the time because – particularly as a result of the presidential election campaigns – the Democrats who are against developing power plants, against the oil industry, and against the mining industry are going to feel that they have more room to carry out their crusades. That could prove to be a negative for the economy. But in general, we're going to bump along. We're going to be better off than the Eurozone is, for sure.

TGR: Do you have thoughts about why so much corporate cash is sitting idle and what might change that?

DC: One of the biggest arguments used against gold is that gold does not pay any interest. The monetarists said you might as well keep your money in a bank account. OK, so now that we are getting zero interest on short-term deposits, the single biggest argument against owning gold is gone. As an asset class, gold has gone up every year of this millennium, and it seems to me that investing in gold makes much more sense than holding on to a lot of idle cash.

TGR: Do you think that bullion or gold stocks are the best bet?

DC: Gold stocks are the best investments, but if you want to put your savings into bullion, the easiest way to do it is to buy the SPDR Gold Trust (GLD) listing on the stock exchange, which is backed by the World Gold Council. It's very convenient, and you can sell the bullion at any time, because it trades during the day. Bullion is a good substitute for having extra cash in hand, but as an investment, I believe you're better off owning stocks of the well-managed gold companies that do not have political risk. It takes a lot of research to pick out the best ones, but that's one of the things we do.

TGR: Are there any junior firms involved in these spaces that you would recommend to our investors?

DC: I'm not allowed by the Securities and Exchange Commission rules to be specific about individual stock, but I am bullish on the gold space in general.

TGR: A lot of the larger gold mining companies are moving into politically risky zones like the Democratic Republic of the Congo, Eritrea and Haiti, trying to replace their reserves.

DC: We don't invest in companies like that, and I don't recommend that anybody who doesn't have a very high risk profile do so.

TGR: In terms of investing in junior mining companies, whether it's energy or gold, do you think that we're looking at a period of mergers and acquisitions coming up, or are explorers going to be able to make it on their own for a while?

DC: Both will happen. There will undoubtedly be lots of mergers and acquisitions. We look at which of the juniors are most likely to be acquired. So far, we've had some pretty good success with doing just that. There will be more of them. But right now, it's pretty desperate for a lot of the juniors. There is no capital available. They can't float stock. Their shares are selling at discounts to net asset value on the exchanges. However, if we get to $2,000/oz gold again, which probably won't be too far off in the future, you'll be amazed at how much these little gold and mining stocks will suddenly go up. They come back fast.

TGR: China has its own precious and base metal resources and it has growing demand. Do you think in a global sense China is going to start looking more internally to satisfy its metal resource needs, or will it keep looking outward?

DC: After thousands of years living on their land mass, the Chinese understand the limits of their own natural resources. China will reach out to find commodity resources wherever it can in the world. The Nexen acquisition in Canada is a recent example.

TGR: That sounds like a kind of reverse imperialism.

DC: Speaking of which, I highly recommend that investors interested in natural resource commodities read one of the most important books of the 20th century, which is V.I. Lenin's Imperialism: the Highest Stage of Capitalism, written in 1915. It analyzes World War I as being caused by cartels set up in the capitalist nations. It's a brilliant analysis of the way the world was divided up into empires prior to WWI.

"Bullion is a good substitute for having extra cash in hand, but as an investment, I believe you're better off owning stocks of the well-managed gold companies that do not have political risk."

It's also a textbook for the Politburo, because it sets out the Chinese strategy for economic domination, which is not to be reliant on the big capitalist corporations, but to go into the countries where those companies cannot operate.

For example, BHP Billiton Ltd. (BHP; OTCPK.OTCPK) and Rio Tinto (RIO; ASX.RIO) tried to merge their Australian iron-ore operations. That would have meant that two-thirds of all Chinese iron-ore imports would have emanated from one organization, which is precisely what Lenin had predicted. The Chinese were horrified by this possibility. They found a way of getting a block on that merger. They are prepared to fight cartelization.

"Imperialism is the final stage of capitalism," Lenin said. So the Chinese are saying, "We're going to go out there and do capitalism better than ever during the final stage. We're going to places around the developing world where American companies can't go." When the Chinese dig copper out of the Congo, that copper competes with the copper being produced in Arizona by American companies. And it is cheaper.

TGR: You're one of the speakers at the upcoming Casey seminar, talking about navigating the politicized economy. Could you give us a preview of what you'll be focusing on in your presentation that relates to gold?

DC: I tell people as rule number one of investing in any commodity, do not invest in companies that produce what China produces or is likely to produce. Rule number two: Invest in companies that produce what China needs to buy. I've been saying that for 14 years, and it hasn't changed. China needs gold.

TGR: Good advice. Thank you very much.

Read Don Coxe's advice on investing in the energy sector.

 

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Thu, 09/06/2012 - 12:33 | 2768613 slewie the pi-rat
slewie the pi-rat's picture

slewie suggests they read slewie  L0L!!!

Thu, 09/06/2012 - 12:55 | 2768675 vast-dom
vast-dom's picture

our favorite living Russkie buying up gold:

 

http://www.marketwatch.com/story/why-is-putin-stockpiling-gold-2012-09-0...

 

 

Thu, 09/06/2012 - 14:00 | 2768898 Stoploss
Stoploss's picture

The best way to destroy capitalism is to debauch the currency. By a continuing and ongoing process of inflation, governments can confiscate, secretly, and unobserved, an important part of the wealth of it's citzens. there is no subtler or surer way of overturning the existing basis of society than to debauch the currency. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that which not one man in a million years is capable of diagnosing............. -Lenin.

 

      DON'T EVER FORGET THAT... EVER..

 

You are living this quote whether you realize it or not.

This is what is happening right now.

Thu, 09/06/2012 - 14:17 | 2768956 Gadocat99
Gadocat99's picture

The Blog
W.H. Retweets: 'WORKING PEEPS SLAVES 2 WALL ST!'
Then deletes the message.
1:24 PM, Sep 6, 2012 • By DANIEL HALPER

According to the Sunlight Foundation, the White House retweeted a message that stated, "@HildaSolisDOL WE NEED NATIONAL WORKERS UNION! LABOR LAWS 2 FEW 2 WEAK! WORKING PEEPS SLAVES 2 WALL ST! #HappyLaborDay #un ..."

Thu, 09/06/2012 - 17:00 | 2769448 TheGardener
TheGardener's picture

I read Lenin on Imperialism and found it most striking
that the United States of Europe as an imperialistic
project already got mentioned !

Thu, 09/06/2012 - 12:33 | 2768616 midtowng
midtowng's picture

Most people forget (or never knew) that almost everything Marx and Lenin wrote about wasn't communism, but capitalism.

Thu, 09/06/2012 - 12:55 | 2768690 bank guy in Brussels
bank guy in Brussels's picture

And Lenin's book on 'Imperialism', was heavily 'borrowed' and cribbed from the book of a 'liberal' economic historian (i.e., somewhat free market, in European parlance) J. A. Hobson's 1902 book 'Imperialism'.

« Hobson argued that an Empire impoverishes the ordinary citizens of the Imperial nation, while funnelling money to small governing elites and what we would now call the military-industrial complex. »

- From a review of Hobson's work by the courageous whistleblower and former UK Ambassador Craig Murray

Thu, 09/06/2012 - 13:01 | 2768714 fourchan
fourchan's picture

 

 

true. the 10 planks of the communist manifesto was a blueprint for destroying a capitolist country.

 

all ten planks are now installed in america, we are communists.

 

http://www.libertyzone.com/Communist-Manifesto-Planks.html

Thu, 09/06/2012 - 13:13 | 2768754 john39
john39's picture

communism was created by fascists....  america is a fascist state, run by corporations...   most of the world is now fascist.

Thu, 09/06/2012 - 12:35 | 2768629 fonzannoon
fonzannoon's picture

i am curious if zh still has the theory that 2012 is 2011 all over again.

Thu, 09/06/2012 - 12:36 | 2768633 sabra1
sabra1's picture

seriously, what does john lenin have to do with these markets? 

Thu, 09/06/2012 - 12:44 | 2768662 buzzsaw99
buzzsaw99's picture

imagine there's no markets

no crony crapitalism too...

Thu, 09/06/2012 - 12:50 | 2768678 Temporalist
Temporalist's picture

I didn't mean to hurt you

I'm sorry that I made you poor

I didn't mean to hurt you

I'm just a central banking whore

Thu, 09/06/2012 - 13:00 | 2768710 buzzsaw99
buzzsaw99's picture

coo coo ca choo bitchez

Thu, 09/06/2012 - 15:28 | 2769169 The Wizard of Oz
The Wizard of Oz's picture

I AM THE WALRUS

Thu, 09/06/2012 - 18:58 | 2769770 Biosci
Biosci's picture

Shut up, Donnie

Thu, 09/06/2012 - 12:39 | 2768643 ParkAveFlasher
ParkAveFlasher's picture

Apple has "precious envy".  They even make their iPhone look like a 10oz .9999 bar, with a screen.  I don't care what anyone says, the higher it flies the harder it lands.  PM is earth.   

Thu, 09/06/2012 - 12:41 | 2768645 oldfruit1
oldfruit1's picture

yes but hasnt zh been talking about the china slowdown recently tyler? this guy sounds like an all out china bull .. makes jim o neil aka essex university fuck wit done good ..look like hes got a well balanced view on china (& buying anything not nailed down linked to it) ?!

Thu, 09/06/2012 - 12:47 | 2768666 Dr. Engali
Dr. Engali's picture

He lost me at buying GLD.

Thu, 09/06/2012 - 13:04 | 2768727 duo
duo's picture

why no "GLD, bitchez"?

Thu, 09/06/2012 - 13:33 | 2768821 ParkAveFlasher
ParkAveFlasher's picture

That gets you sent to the junk gulag.  That's one very important "O" that physically needs to be present.

Thu, 09/06/2012 - 16:22 | 2769306 Dr Benway
Dr Benway's picture

Advocating GLD? Fail. Advocating miner shares instead of bullion? Fail. Just overall fucking fail.

Thu, 09/06/2012 - 20:24 | 2770003 samcontrol
samcontrol's picture

some miners are f heap and outperforming Phys easy latly.

Thu, 09/06/2012 - 12:56 | 2768693 Lost Wages
Lost Wages's picture

It's important not to avoid the writings of Lenin and Marx. They were either defining the actual problems of Capitalism which cannot be ignored... or they were defining the chosen path of the London bankers who funded them. My guess is for the latter. Bankers love the new Communism.

Thu, 09/06/2012 - 13:02 | 2768705 Bam_Man
Bam_Man's picture

Aside from cultural reasons, Indians have a huge appetite for Gold because almost continually since independence, they have had chronic inflation and hugely negative real interest rates. For those Indians that have even a small amount of wealth, owning Gold is an absolute MUST.

Thu, 09/06/2012 - 13:08 | 2768711 slewie the pi-rat
slewie the pi-rat's picture

still this is quite "orderly" as the money is vacuumed from the shorts the put-holders, and the call-sellers

a while back someone asked me what "stability" meant and how the FED was "doing it"

i replied with the analogy about the governor on a steam engine keeping it from going on "runaway";  as it spins faster, the circular velocity of the governor throws the "arms" out and slows it down, exactly like a spinning skater does with his/her arms to regulate the circular velocity and end the spin

this may be part of the governor on the "financial system" which the FED is now lawfully required to stabilize (dodd/frank) and keep stable (= not on runaway at the minimum, ok?) :> INO.com Markets - Chart for U.S $ INDEX (NYBOT:DX)

also the "Markets" tab on this page (below the gold price at the top) shows a ton of data if like many [including slewie] you have gotten "out" and don't have a broker-feed

and also :> while germany awaits the pastryChefCourt verdict angela said yesterday or the day before she had no propblemo w. marioECB monetizing the short bonds for spain for a while till others looked more deeply at the issues and the boilerplate involved

it was reported on zH

no one should be surpriZed at this help for spain;  we had been warned!

prez0 gonna look like daMan tonite, ain't he?  are ya SURE things haven't gotten just a teeny bit better than when gBushII and hankyPanky & friends absconded w/ the Treasury a few years ago?  do we really need another neoCon in here to "fix" everything?

i think those are the 2 main question for the USA heading into november

Thu, 09/06/2012 - 13:40 | 2768845 aerojet
aerojet's picture

Where the fuck did you learn to write?

Thu, 09/06/2012 - 13:12 | 2768751 lsbumblebee
lsbumblebee's picture

I recommend Don Coxe read the SPDR Gold Trust Prospectus.

http://www.fgmr.com/where-is-the-etfs-gold.html

Thu, 09/06/2012 - 13:16 | 2768773 No Euros please...
No Euros please we're British's picture

OK so India just loves gold. But why then is Indian gold buying down 30% this year? Can't be just price, last year it was even more expensive.

Thu, 09/06/2012 - 14:13 | 2768942 BlackVoid
BlackVoid's picture

No, it wasn't. Gold is at a record high in rupees.

Thu, 09/06/2012 - 13:38 | 2768836 aerojet
aerojet's picture

The problem with Marx is that those ideas are a wetware version of a computer virus that takes over someone's brain and never lets go.  It's a cult, and like all cults, it makes utterly no sense, but is incredibly alluring to certain types of minds.  It's the fucking dark side of the force.

Thu, 09/06/2012 - 14:58 | 2769087 AurorusBorealus
AurorusBorealus's picture

Marxism is dogmatic... much the same could be said for Keynesiasm, the Austrian School, libertarianism, and every other "school" of political economy, which is why adherents of each camp fight one another with blind faith and few facts, while the world suffers the torments of one ideology supplanted for another.

Thu, 09/06/2012 - 13:46 | 2768856 Winston of Oceania
Winston of Oceania's picture

"For example, BHP Billiton Ltd. (BHP; OTCPK.OTCPK) and Rio Tinto (RIO; ASX.RIO) tried to merge their Australian iron-ore operations. That would have meant that two-thirds of all Chinese iron-ore imports would have emanated from one organization, which is precisely what Lenin had predicted. The Chinese were horrified by this possibility. They found a way of getting a block on that merger. They are prepared to fight cartelization."

They are also well prepared to engage in it; rare earth minerals anyone? I would invest in whomever is producing these outside of China say perhaps Japan. The Theory of Money and Credit by Ludwig von Mises will better serve you to read.

Thu, 09/06/2012 - 13:49 | 2768871 Totentänzerlied
Totentänzerlied's picture

If imperialism is the final stage of capitalism, there will never be any imperialism, but there has been much imperialism, many times, in many places, without a trace of capitalism. Reading Lenin is only recommended for those without severe economic and political-economic illiteracy, as a tour around the world of banker-created totalitarian propaganda. As for Marx, start here, it's the same story, one or two degrees removed from the overt reactionary totalitarianism of Lenin.

PS: Lenin's overarching excuse for Soviet totalitarianism was also his strongest tie to Marxism - the notion of international socialism following a proletarian revolution which must begin in the world's most advanced (capitalist) economy (at the time, that was Germany). Leninism, according to Lenin, was a bridge to Marxist international socialism; in reality it was a bridge to hell.

Thu, 09/06/2012 - 15:16 | 2769128 LMAOLORI
LMAOLORI's picture

 

Ben is using Marx's Theory of Reflexivity if anyone has any doubts about how the global elites want the world to be run that alone should give them a clue.

"QE (quantitative easing) is essentially the printing of money and the addition of liquidity into the markets so that stock (and other asset) prices are given an artificial boost. Federal Reserve Chief Ben Bernanke believes that by pulling up stocks, the masses will feel richer and spend more on consumer goods, thus lifting up the economy. This is based on Karl Marx's reflexivity theory (George Soros essentially paraphrased Marx) that states by turning the small wheel (stocks), you can turn the big wheel (economy), which in turn will come back and turn up the small wheel (stocks). Bernanke subscribes to such a theory, and he wants QE to lift up the small wheel (stocks), which he hopes will lift up the big wheel (the economy)."

If S&P stays above 1,200, Obama re-elected: charts

snip

"“But it is important not to confuse correlation with causation. Obama’s election chances and the S&P 500 are actually both being driven by the incoming news on the health of the economy,” he wrote."

Well we all know what bull shit that is

Socialism's Last Stand

snip

The global warming movement is not about global warming. It is about the creation of an international political control arrangement by which bureaucrats who favor socialism can gain control over the international economy.

This strategy was stated boldly by economist Robert Heilbroner in 1990. Heilbroner, the multi-millionaire socialist and author of the best-selling history of economic thought, The Worldly Philosophers, wrote the manifesto for these bureaucrats. He did this in an article, "Reflections: After Communism," published by The New Yorker (Sept. 10, 1990).

In this article, he made an astounding admission. He said that Ludwig von Mises had been right in 1920 in his article, "Economic Calculation in the Socialist Commonwealth." Mises argued that without private ownership, central planners could not know what any resource is worth to consumers. With no capital market, the planners would be flying blind.

Heilbroner said that for 70 years, academic economists had either ignored this article or dismissed it without answering it. Then Heilbroner wrote these words: "Mises was right."

Heilbroner was one of these people. There is no reference to Mises in The Worldly Philosophers.

This admission was the preliminary section of Heilbroner's manifesto. He was cutting off all hope by socialists that there is a theoretically plausible response to Mises. The free market economy will always outproduce a socialist economy. Get used to it, he said.

Then, in the second section, he called on his socialist peers to get behind the ecology movement. Here, he said, is the best political means for promoting central planning, despite its inefficiency. In the name of ecology, he said, socialists can get a hearing from politicians and voters.

The article is not online. An abstract is. Here is the concluding thought of the abstract.

 

The direction in which things are headed is some version of capitalism, whatever its title. In Eastern Europe, the new system is referred to as Not Socialism. Socialism may not continue as an important force now that Communism is finished. But another way of looking at socialism is as the society that must emerge if humanity is to cope with the ecological burden that economic growth is placing on the environment. From this perspective, the long vista after Communism leads through capitalism into a still unexplored world that roust [must?] be safely attained and settled before it can be named.

Heilbroner did not care that a worldwide government-run economic planning system would not be called called socialism. He just wanted to see the system set up.

Thu, 09/06/2012 - 15:24 | 2769154 A POOR EATIN STEAK
A POOR EATIN STEAK's picture

do you actually believe this

Thu, 09/06/2012 - 15:40 | 2769197 LMAOLORI
LMAOLORI's picture

 

 

Do you actually believe that China is no longer Communist? Do the Chinese have freedom of speech?  Does the Chinese government tolerate dissent?  Can they arrest and imprison people who threaten stability as defined by the Communist party without trial?  Do the Chinese have civil liberties, labor unions or centers of political power outside the Communist party? The answer to all those questions is NO. Don't confuse Chinese slave labor as Capitalism. In Communism/Socialism/Fascism the end result is always the same the elites share the gains everyone else the pains.

The Macroeconomics of Chinese kleptocracy

Thu, 09/06/2012 - 17:22 | 2769525 A POOR EATIN STEAK
A POOR EATIN STEAK's picture

oh ok you just have no idea what communism is.  totalitarianism and communism are not synonyms and china liberalized their economy in 1978

Thu, 09/06/2012 - 18:49 | 2769747 LMAOLORI
LMAOLORI's picture

 

 

Liberalization of an economy doesn't speak to the conditions of the people.  

Does Tiananmen Square ring a bell or the Bunny Revolution?

Thu, 09/06/2012 - 15:04 | 2769102 AurorusBorealus
AurorusBorealus's picture

"Imperialism is the final stage of capitalism," Lenin said. So the Chinese are saying,'

Finally... someone in the West who realizes that the Communist Party in China is.... surprise... a Communist Party... Now go try to explain to all the CEOs who moved American assets and production to China what they have, in fact, done... they have handed over the assets of their "free market capitalist" society to Communists.  Now who wants to be the one to explain to the shareholders of these companies that they are holding... well... just pieces of paper?

Thu, 09/06/2012 - 15:13 | 2769125 A POOR EATIN STEAK
A POOR EATIN STEAK's picture

china hasnt been controlled by communists in over 30 years, hth

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