Frank Talk 2007 Archives
December 2007
» Big thinking on infrastructure in South Korea
» A Tale of Two Gold Producers
» Global Infrastructure: An Enduring Trend
» Learn the World and Have Fun Doing It
» From General To Good Doctor
» Warren Buffett’s Asia Trip Offers Lessons
» Thinking Like a Contrarian
» Chávez On the Margin
» Falling Labor Costs Deflate Inflation Risk
» Letters From India Part 2: The Talent Group
» Russian Resolve
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December 31, 2007
Big thinking on infrastructure in South Korea
We have been writing and talking a lot lately about the opportunities being created by the global infrastructure build-out, so it’s fitting to end 2007 with a tale of an ambitious construction project.
Even better, this project is not in China or Dubai, where all of the attention seems to be focused.
A carefully planned city is being built on a 1,500-acre expanse not far from Seoul, South Korea, according to a fascinating article in the December 30 edition of the New York Times.
How ambitious is this project, known as New Songdo City? The article begins with two sentences comparing it to Venice, New York, Paris, Sydney and other prominent locales, all rolled into one. And on top of that, this new city aspires to be the financial capital of northeast Asia.
New Songdo City is a $40 billion public/private collaboration that is scheduled to open in mid-2009 and to be fully finished in 2015. This city will be built as a free economic zone, where foreigners can own land and enjoy certain tax exemptions. This is a very smart move—think of the wealth now enjoyed by Ireland after similar moves in the 1980s. One of New Songdo City’s developers is Posco Engineering and Construction—Warren Buffett’s Berkshire Hathaway this year bought a sizable stake in Posco, its parent company and one of the world’s largest steelmakers.
Judging by his recent moves, Mr. Buffett seems to see the potential for infrastructure-related investment around the world. We like the way Mr. Buffett thinks so much that Berkshire Hathaway is one of the largest holdings in our Global MegaTrends Fund (MEGAX) which is focused on the global infrastructure theme.
We see infrastructure as a strong investment theme for many years to come, albeit with occasional periods of volatility. From an investment perspective, we believe this theme bodes well for natural resources (like steel and metals, cement, energy and water) and other sectors (utilities, telecommunications and construction) for years to come.
The full story about the important new project in South Korea can be found at www.nytimes.com, archive search “New Songdo City.”
Thanks for being a Frank Talk reader this year, and I hope you’ll keep reading in 2008 for our observations and insights.
We at U.S. Global Investors wish you and yours a happy and prosperous New Year.
Total Annualized Returns as of 9/30/07| Fund | One-Year | Five-Year | Ten-Year | Gross Expense Ratio |
| Global MegaTrends Fund (MEGAX) | 22.34% | 13.45% | 5.65% | 2.61% |
Gross expense ratio as stated in the most recent prospectus. (Include expense cap disclosure if applicable.) Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any fees described in the fund’s prospectus (e.g. short-term trading fees) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS, option 5.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
As of October 1, 2007, the Global MegaTrends Fund, formerly the MegaTrends Fund, is no longer subadvised by Leeb Capital Management and is solely managed by U.S. Global Investors.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Holdings in the Global MegaTrends Fund as a percentage of net assets as of 9/30/07:
Posco - 0.00%
Berkshire Hathaway - 4.02%
December 24, 2007
A Tale of Two Gold Producers
Ralph Aldis, co-manager of the U.S. Global Investors World Precious Minerals Fund (UNWPX) and the Gold and Precious Metals Fund (USERX) recently visited two gold operations in Brazil. Here are some of his observations.
My trip to Brazil took me to two very different gold mining properties. Both Jaguar Mining Inc. and Peak Gold Ltd. offer opportunities, but each has its own set of strengths and challenges.
Jaguar came as a pleasant surprise, given that most of its properties are an hour’s drive from Belo Horizonte, Brazil’s third-largest city. Being in an accessible location gives the company a real edge over competitors with properties in more remote areas. Some companies first have to build the costly infrastructure to support a mine and its workers. Jaguar is able to focus almost exclusively on the mines themselves.
I had a chance to see how much infrastructure already is built near the mines. The area is lush, but there’s a great deal of development, along with paved roads and adequate electricity.
Jaguar has two operating mines—Sabará and Turmalina—and a clear plan to add two more. The same construction team that sequentially built the existing two mines is scheduled to build the next two. Construction already has begun on one of them, called Paciência.
All of this should result in a strong ramp-up in production for Jaguar: Projected at 76,000 ounces in 2007, production is expected to reach 170,000 ounces in 2008, when Paciência goes into operation. By 2011, projections call for production to reach 420,000 ounces of gold per year.
Jaguar has had the same management team for several years. It gains strength from local Brazilians who know the region well and have prior work experience with companies like AngloGold Ashanti and Companhia Vale do Rio Doce.
Jaguar is making the transition from junior to mid-tier producer. In that regard, Peak Gold is among its peers, but Peak faces different challenges.
Peak’s Ampari mine is in northern Brazil near the mouth of the Amazon River, and there are a lot more associated costs compared to Jaguar’s mines. To get to the Ampari site, we flew across remote rainforests—paved roads are not common, and access to electric power is not a given.
While Jaguar has a mill that grinds the ore, Peak stacks it on leach pads and sprinkles it with a weak cyanide solution to recover the gold. The damp rainforest climate and the high clay content in the ore can interfere with the chemistry of the leach pad, but to build a mill, Peak would need to spend additional capital and secure a reliable source of electricity.
Peak projects that the Ampari mine will produce 110,000 ounces of gold in 2008. By 2012, Peak estimates that gold production will hit 324,000 ounces per year.
Each company poses an opportunity. We believe Jaguar is on a fairly clear growth projection, and Peak can greatly increase the value of its property by upgrading its processing methods to improve gold recovery.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in gold or gold stocks.
The following securities mentioned in the article were held by the Gold and Precious Metals Fund or the World Precious Minerals Fund as of Sept. 30, 2007:
Jaguar Mining Inc.: Gold and Precious Metals (1.22%), World Precious Minerals (1.26%).
Peak Gold Ltd.: Gold and Precious Metals (1.03%), World Precious Minerals (1.01%).
AngloGold Ashanti: Gold and Precious Metals (0.61%), World Precious Minerals (0.00%)
Companhia Vale do Rio Doce: Gold and Precious Metals (0.00%), World Precious Minerals (0.00%)
December 21, 2007
Global Infrastructure: An Enduring Trend
Jack Dzierwa, co-manager of U.S. Global Accolade Global MegaTrends Fund (MEGAX), recently appeared on CNBC’s “Street Signs” to discuss investment opportunities in global infrastructure. Here are excerpts from that interview.
Michelle Caruso-Cabrera, host: Infrastructure certainly is a big megatrend. In fact, everybody seems to know about it. We’ve been talking about it for a long time. … Can it continue at this pace?
Jack Dzierwa: Yes, we believe it can continue, indeed, for the next 20 or 30 years. In fact, we believe the topic is only beginning to be discussed on a wider scale.
Caruso-Cabrera: Now I see here that you think some of the risks to infrastructure are delays, the overrunning of costs, corruption. What about, though, a global slowdown in growth?
Dzierwa: What is important to know about this infrastructure is that, regardless of what is going to happen in the credit conditions, some of these projects are funded by the federal or state government. So I think with the majority of them, it’s likely that they are going to be undertaken.
Caruso-Cabrera: So governments like China, which we know has piles and piles of money, or in the Middle East, where they’ve got piles of money that they have to put to work—so you think it happens no matter what?
Dzierwa: I really believe that the majority of it is going to happen, yes. The numbers are so big that, quite frankly, even though there is some slowdown, I think we are still talking about a great opportunity.
For more on global infrastructure, view a research report authored by Dzierwa here
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Total Annualized Returns as of September 30, 2007| Fund | One-Year | Five-Year | Ten-Year | Gross Expense Ratio |
| Global MegaTrends Fund | 22.34% | 16.97% | 5.65% | 2.61% |
Gross expense ratio as stated in the most recent prospectus. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any fees described in the fund’s prospectus (e.g. short-term trading fees) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS, option 5.
As of October 1, 2007, the Global MegaTrends Fund, formerly the MegaTrends Fund, is no longer subadvised by Leeb Capital Management and is solely managed by U.S. Global Investors.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
December 20
Learn the World and Have Fun Doing It
Sure, you can find New York, London, Paris and Tokyo on the map. But how about Cairo, Kingston, Cape Town or Christmas Island?
There’s a new online game called the “Traveler IQ Challenge” from TravelPod.com that tests your knowledge of world geography. A place name pops up, and you try to click the cursor as close as possible and as quickly as possible to that target.
Like so many video games, you start with the easy stuff and each round gets harder. By Round 8, you may be doing a lot of guessing and just hoping that you’re on the correct continent or in the middle of the right ocean.
The portfolio team at U.S. Global Investors travels to many out-of-the-way places in search of opportunities, but even we were stumped by the location of Bouvet Island, Norway (hint: it’s not in Europe) and many of the tiny islands in the South Pacific.
At the end of the game, you get an IQ score reflecting your skill and speed.
It’s a fun way to learn the world, but a word of warning—you just might find this an addicting challenge as you try to grow your Traveler IQ.
Just click the red Start button below to play.
Enjoy the trip, and let us know what you think of the game.
Click here to send us your feedback
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Frank Holmes recently traveled to India for the first time in 10 years. This is a six-part series offering some of his thoughts and experiences.
December 14, 2007
From General To Good Doctor
Delhi is a metropolis of 15 million people. New Delhi, India’s capital city, is located within the metropolis. We saw slums in New Delhi with open sewage, flies everywhere and a horrific stench. Yet, everyone was smiling.
Our tour was especially worthwhile because of our charismatic tour guide, General O.P. Malhotra. Now 85, General Malhotra is the former head of India’s army. The general speaks Punjabi, Urdu, Hindi, Russian and English with a British accent.
A former governor of Punjab, he created a Non-governmental Organization to help the poor by setting up schools and three mobile medical centers. Today, he cares for 300 patients per day about 25 days a month and keeps records on 43,000 patients.
He has no administration, and the funding comes from his daughter and son-in-law through the Young Presidents’ Organization (YPO). The cost of providing the free medical care is $4,000 per month. The school educates kids as young as 4 years old and costs about $30,000 per year to run.
It is amazing that he is able to recruit free doctors and teachers for his causes. The tour was simply an astonishing and sobering experience that helps me reflect on how blessed we are in North America.
All opinions expressed and data provided are subject to changes without notice. Some of these opinions may not be appropriate to every investor.
December 12, 2007
Warren Buffett’s Asia Trip Offers Lessons
From Frank Holmes, CEO and chief investment officer
CNBC’s “Warren Buffett Going Global” (re-airing tonight at 9 p.m. Eastern) is a significant achievement in that it unites the world’s greatest investor with the world’s most powerful investment theme.
CNBC traveled with the Oracle of Omaha to China and South Korea and recorded his first-hand reaction to the enduring economic boom under way in Asia.
What he and the camera saw is exactly what I have been talking about for years. The growth of emerging nations, led by China and India (40 percent of the world’s population) is the most powerful theme for investors, both now and going forward.
Many Americans are skeptical about global investing, even as the international sector continues to post far higher returns than domestic stocks and funds. Mr. Buffett’s common-man outlook makes him “The Billionaire Next Door,” and of course, few in history can match his incredible long-term success as an investor that has brought him so much well-deserved admiration and imitation.
A great example of skepticism about international investing: many pundits warned investors to avoid China in 2007, saying its run was over. What happened? China had another outstanding year, with accelerating economic growth.
Here’s another example: more than one market “expert” predicted that oil prices would be more likely to fall to $40 per barrel than rise to $80. This forecast was based on past behavior of oil—it did not reflect that the market fundamentals for oil have changed due to global growth.
People who listened to this skepticism and sold their China and natural resources funds missed a huge opportunity in 2007. The average China region fund had gained more than 51 percent and the average natural resources was up 29.5 percent through the first 11 months of 2007. By comparison, the S&P 500 posted a 4.4 percent return.
Many of these market watchers and some cynical media outlets have been talking down the global boom from the beginning. They seem to lack the ability to think contextually about the profound market impact of the major emerging economies. Those who blindly cling to historic supply-and-demand models are missing a pretty compelling story.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
December 10, 2007
Thinking Like a Contrarian
From Frank Holmes, CEO and chief investment officer
I recently visited Europe, where all of the financial newspapers had articles on why the U.S. dollar was going to sink further and how to become a currency trader or investor as a way to make money in these volatile markets.
I generally consider it an opportunity to become contrarian to whatever asset class is featured on the front page of The Economist, or any other major publication for that matter. As I have said during recent interviews on CNBC, we are due for a rally in the dollar and a correction in oil and commodities. This is healthy and normal.
Below is a 60-day oscillator showing the dollar, with the red circle showing the recent lows. The dollar has rebounded some, but it is still down nearly one standard deviation from its five-year mean.
For those who are wise, this provides an opportunity to buy on weakness. I have always advocated that investors follow Roger Gibson’s thought process and limit their natural resources and emerging markets exposure to 25 percent and rebalance annually.
It is important to not chase performance and to allow the laws of mean reversion to help manage a balanced portfolio. The gut reaction of most people following the coverage of The Economist and other publications would be to convert out of the dollar into euros or other currencies.
Being contrarian means going opposite the media-driven cascading of extreme bullishness or bearishness for any asset class.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Diversification does not protect an investor from market risks and does not assure a profit.
December 7, 2007
Chávez On the Margin
Commentary from Charlemagne Capital, subadviser to the U.S. Global Accolade Global Emerging Markets Fund (GEMFX), which has investments in Latin American equities.
Voters in Venezuela—the fourth-largest supplier of petroleum to the United States—handed President Hugo Chávez his first significant electoral defeat over the weekend by rejecting constitutional changes favoring the president.
In the short term the result of the referendum matters little. Over the longer term, there is the possibility that this singeing of the president’s fingers could be followed by other mishaps, which taken together could ultimately be Chávez's downfall.
What we can say with some certainty, however, is that there are no implications for the major Latin American economies. Although Chávez may still have some influence in marginal countries, such as Bolivia and Ecuador, he has never been a significant factor elsewhere despite his efforts.
In countries such as Brazil, Mexico and Chile, governments have been successful at promoting both economic and political stability and spreading the benefits of growing prosperity more widely. Against such a backdrop, Chávez’s brand of socialism never stood much chance of taking root.
We believe that investors in stocks and funds with Latin America exposure have little to fear from the latest developments in Venezuela. Continuing economic development across the region appears likely to help generate further investment gains over the medium to long term.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
December 6, 2007
Falling Labor Costs Deflate Inflation Risk
More data is coming out to support the idea that the Fed has less to worry about when it comes to inflation.
The U.S. Labor Department says worker productivity showed a sharp increase in the third quarter of 2007, with the result that labor costs came down at the fastest pace since 2003.
Labor tends to be one of the largest costs for employers, so if those costs are coming down, it means that companies feel less pressure to raise their prices.
This scenario lowers the risk of inflation, thus making it easier for the Fed to justify cutting interest rates next week to shore up the economy during these turbulent times.
The weak housing market is a big part of that market turbulence.
For many Americans, their home is their largest single asset, so if that asset is losing value, we see greater likelihood that the economy will see disinflation (a declining inflation rate) rather than growing inflation.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Frank Holmes recently traveled to India for the first time in 10 years. This is a six-part series offering some of his thoughts and experiences.
December 5, 2007
The Talent Group
We spent an afternoon walking the streets of Old Delhi with the children of the Talent Group and Mr. Sohal Hashmi as our guides.
The Talent Group is a Non-governmental Organization working to get young kids a basic education. Sohal Hashmi has his master’s in regional development from the Jawaharial Nehru University, one of India’s leading universities. He has worked both among slumdwellers and in the media world as a consultant and producer.
I witnessed chaos and bedlam. Small shops, offices, temples, mosques and homes all were stacked together like matchboxes in an orderly disorder.
I had tea at the home of Masoor Ahmed Khan, whose lineage traces back to Hakim Mohammed Shareed Khan, who translated the Quran into Urdu and Persian. He also authored many books on medicine that still form the basics of the Unani syllabus. Unani is a system of medicine that originated with Greek philosopher-physician Hippocrates and was further developed by another Greek physician, Galen. Brought to India by the Arabs, it teaches that each body has a unique balance of substances in its healthy state and that disease results from imbalance.
All opinions expressed and data provided are subject to changes without notice. Some of these opinions may not be appropriate to every investor.
December 3, 2007
Russian Resolve
Commentary from Julian Mayo, co-manager of the U.S. Global Accolade Eastern European Fund (EUROX), on President Vladimir Putin’s United Russia Party’s win in parliamentary elections:
Russia’s ruling party, which has presided over a commodity-driven economic boom, won a landslide victory in the Dec. 2 parliamentary elections, capturing 64 percent of the vote. The election results, which give the United Russia Party an overwhelming majority in parliament, come as no surprise.
Many viewed the elections as a referendum on President Vladimir Putin and the economic progress made under his leadership. To that extent, the results cement Putin’s authority and move the focus of attention onto the upcoming presidential election.
The precise nature of Putin’s continuing authority once he steps down from the presidency next year remains unknown, though the results of the parliamentary elections leave open the possibility that he may become prime minister (and even potentially president again, after a short period).
Such maneuverings are of little relevance to the economy, which remains in robust health with bright prospects. It may be that the financial markets prefer to wait until closer to the March presidential election before this encouraging fundamental backdrop is more fully reflected in share prices, but we believe the long-term outlook is bright, based on compelling economic fundamentals and political continuity.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
November 2007
» Letters From India Part 1: Organized Chaos
» Putin’s Popularity Is a Positive for Russia Investors
» Credit Crunch: Inflationary or Disinflationary?
» Outlook for Metals Rremains Bullish
» Frank Holmes Sees Deflationary Pressures and Gold Correction
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Frank Holmes recently traveled to India for the first time in 10 years. This is a six-part series offering some of his thoughts and experiences.
November 29, 2007
Organized Chaos
I arrived in Bangalore at 5 a.m., slept three hours and left on a tour with six other CEOs. Bangalore is the IT and telecom capital of India.
We flew in a single-prop plane an hour north of Bangalore to see the ruins of the historical city of Hampi and what will be the largest steel plant in the country.
We drove on highways and dirt roads, and sometimes it was hard to tell which was which. There is a substantial difference from our highway standards. We traveled on roads that had more potholes than pavement and no streetlights or signs. Along with vehicle traffic, there were many barefoot people walking or riding bikes.
The ancient city of Hampi
The tour of Hampi was mind-blowing. Our tour guide has a mechanical engineering degree and an MBA. The ruins are amazing, the size of Manhattan, and built in the 14th century by a society of 1 million people. It has become a World Heritage Site.
In Bangalore, the poor are definitely poor. Homes for average people are made of sticks, brick, cement and straw for roofing. Women wear saris, kids wear shorts or nothing at all, and men wear loincloths.
The terrain is red due to the oxidation of iron in the soil, which also makes the water soupy. Trees are dull, and there are no flowers in sight. Cows, pigs and dogs all roam free along roads and alleys. It’s great to be back in the thick of chaos that works…India.
All opinions expressed and data provided are subject to changes without notice. Some of these opinions may not be appropriate to every investor.
November 27, 2007
Putin’s Popularity Is a Positive for Russia Investors
Julian Mayo, co-manager of U.S. Global’s Eastern European Fund (EUROX), recently appeared on CNBC’s “Street Signs” to discuss investment opportunities in Russia as that country prepares for parliamentary elections on Dec. 2. Here are excerpts from that interview:
Erin Burnett, host: Is there such a thing as an election in Russia? Don’t we already know who’s going to win?
Julian Mayo: Well it’s a kind of bizarre situation in Russia, because I think one of the things that people in the West don’t really get is quite how popular Putin is at home. Yes, it’s a flawed system in some respects. The media isn’t the freest in the world, for example. But Putin is generally popular. He’s been in power for seven-and-a-half years. Russia’s GDP has quadrupled in dollar terms, which is a massive increase. And, you know, people wanted stability, they wanted economic strength, and he’s given them both of those.
Burnett: Every time I talk to U.S. executives about investing in Russia, they say ‘Well, in a certain sense we need to be there because it’s growing and there’s a lot of money, but we hate being there because it’s capricious, we don’t know what the rules are, if we make money they’ll take it from us, we don’t know what’s going on.’ How can an average investor make money in an environment where the most sophisticated CEOs in the world don’t know how to do business?
Mayo: I think there is a bit more stability in Russia from a CEO/international investor’s direct perspective. You’re starting to see some big inflows now of foreign investors taking part in the Russian economic boom, which I think is a change from three or four years ago. But also, from a stock market perspective, I mean, the stock market is one of the cheapest in the world. It’s trading at … 11 or 12 times next year’s earnings, which is a discount to emerging markets, which in turn, even now, are trading at a discount to the U.S. market. You’ve got stronger earnings growth, you’ve got an economy growing at seven-and-a-half percent, falling inflation and a big fiscal surplus. I think the story for Russia is still very, very positive.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
November 14, 2007
Credit Crunch: Inflationary or Disinflationary?
Commentary from John Derrick, U.S. Global’s director of research.
The mortgage headache just won’t go away.
The most recent problems relate not to subprime mortgages, but to some AAA-rated mortgages that have fallen by 25 percent over the last month. Hopes of a recovery any time soon seem overly optimistic, given that the major rating agencies appear ready to downgrade more mortgage-related debt.
The news media have focused mainly on the immediate impact on the balance sheets of financial companies and on the housing market.
Left largely undiscussed has been the impact on inflation. The conventional wisdom is that inflation is heading higher, based on higher commodity prices for food, energy and other basics. This outlook, however, overlooks the disinflationary impact created when the average American family’s largest asset (their house) is depreciating in value.
Some market commentators are comparing current conditions to the 1970s, a period marked by high commodity prices and rising inflation, but there are key differences. The rise in commodity prices back in the 1970s was due to supply shocks, while the current price strength is a result of increased global demand. In this environment, inflationary pressures will subside when demand slows, which is different from the stagflation experienced three decades ago.
Wage inflation is another factor that distinguishes then and now. Until 15 years ago, a large percentage of the world’s population had little interaction with the global economy. The glut of labor created by the fall of the Soviet Union and the economic development of China, India and other countries has held wages down.
Along with lower-cost labor, technology enables the outsourcing trends we are experiencing and also helps facilitate worldwide trade. These factors are likely to keep costs contained and inflation relatively low into the foreseeable future.
The implications of this favorable inflationary scenario would include continued interest rate cuts from the Fed and other central banks around the world, continued favorable operating environment for most U.S.-based businesses and a favorable backdrop for the financial markets.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
November 12, 2007
Outlook for Metals Remains Bullish
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Photos from the Visit:
Brian Hicks
Brian Hicks, co-manager of the U.S. Global Investors Global Resources Fund (PSPFX), recently attended the London Metals Exchange Week conference in London and took a side trip to visit a copper smelter in Germany. Here are some of his observations.
I was recently in Hamburg to visit the primary smelter of Norddeutsche Affinerie, the largest copper producer in Europe. The day trip was organized as part of the annual London Metals Exchange Week.
Experiences like this one have great value to me as an active money manager, offering first-hand knowledge and a global perspective.
I’ve visited other smelters, but this one stands out for its size and sophistication. Even the large copper and nickel smelter in Norilsk, Russia, had nowhere near this level of technology.
As we drove through the massive plant in a bus, we watched the various stages of copper refining. In addition to producing copper, Norddeutsche Affinerie is the world’s largest copper recycler. About 40 percent of its feedstock comes from scrap, with the other 60 percent supplied by global copper mines under long-term contracts.
Norddeutsche produces about 800,000 metric tons of copper and copper products annually. The company has a market cap of about $1.4 billion.
Past visitors remember seeing Norddeutsche’s warehouse almost filled with finished copper products. Now it’s about 80 percent empty, an indication of strong global demand. Norddeutsche representatives said the smelter is running at full capacity.
We spent the rest of LME Week in London, where we met executives from major mining companies, including Rio Tinto, BHP Billiton and Xstrata. They don’t often make it to San Antonio, so this was a good opportunity to find out what they’re thinking.
The market for copper remains tight, and the mining executives don’t see that changing any time soon. Demand for copper is still strong, particularly from China.
The general view from the conference is that the copper market will remain tight. Aluminum is a longer-term play—it will probably stay in relative balance for the next year or two, but it could get tight by late 2009. Zinc also is in balance, while nickel has fallen off.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Holdings in the Global Resources Fund as a percentage of net assets as of Sept. 30, 2007: Norddeutsche Affinerie AG (0.0%), Rio Tinto PLC (2.38%), BHP Billiton Ltd. (0.0%), Xstrata (0.0%).
November 9, 2007
Frank Holmes Sees Deflationary Pressures and Gold Correction
Frank Holmes, CEO and chief investment officer, appeared this week on “Bloomberg on the Economy” to discuss deflationary pressures and gold. Here are excerpts from that interview:
Kathleen Hays, host: So tell me about gold over $800 an ounce. We debated this at the top of the show, the extent to which it is a signal of rising inflation concerns.
Frank Holmes: What I believe long term is massive deflation. This subprime debt is huge write-downs and write-offs, and the government helping out is not going to do 100 percent. So we’re not going to get that monetary inflation like everyone keeps calling. However, what’s interesting to note is that in the ‘70s, we didn’t have Chindia. They were basically countries that were isolated with very low GDP. Today they are 40 percent of the world’s population, and there is significant outsourcing, so you have low cost of labor, low cost of manufacturing, outsourcing even for software, technology, etc. So the world’s changed drastically since the ‘70s.
Hays: But what about gold and oil? Actually, we were just showing a chart that depicts gold and oil, the correlation. And we can see that the correlation with oil is actually 90 percent over five years, and with the dollar it’s 70 percent negative.
Holmes: Correct. And so you can get short-term inflation because the dollar is weak and we have to import more products. But then our exports should pick up because America has high-quality manufactured products. So I’m really not caught up in short-term inflation. Like short-term volatility, it’s not a big issue…We’re still in what we call these secular moves, and right now it’s a secular move that is deflationary, with these huge write-offs.
Hays: Frank, what’s your ultimate target for gold?
Holmes: Well, we try to take a look at what the price of oil is doing for the average for the past 60 days, and it’s times 10 that price. So if oil is going to average $90 a barrel, then gold has a high probability of running to $900. If oil stays over $100 for 90 days, then you’re going to see gold at $1,000. Roughly that’s the math – it’s important. But right now, mathematically, we’re due for a correction. So I like to tell people we are due for a good, healthy correction, for the dollar to get a rally, for gold to correct. But that doesn’t mean all of a sudden you jump out. In fact you use these corrections to buy.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
October 2007
» Turkish Tensions
» Infrastructure in America
» Marc Faber on the Global Growth Trend
» China Spreads the Wealth
» Global Growth Continues to Support Demand for Natural Resources
» Frank Holmes on Current Markets and Interest Rates
» Putin’s Power Play
» Beginning Our Final Lap of 2007
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October 30, 2007
Turkish Tensions
Julian Mayo, co-manager of the U.S. Global Accolade Eastern European Fund (EUROX), recently appeared on CNBC’s “Street Signs” to discuss why he remains bullish on Turkey, despite recent tensions along the Turkish-Iraqi border. Here are excerpts from that interview:
Melissa Francis, host: Turkey’s prime minister urging the U.S. to join in its action against Kurdish rebels along Turkey’s border with Iraq, the Turkish parliament having given the go-ahead for troops to cross the border to fight the rebels. With a GDP growing at 6 to 7 percent per year, Turkey had previously looked like a prime investment target. But have recent developments made it too risky? … What do you think about Turkey now, in light of all of these recent developments? Have you changed your mind?
Julian Mayo: Yes, it is interesting, what’s going on at the moment. But no, we haven’t changed our mind, and we’re still very committed to this market. … we need to separate what’s going on politically with what’s going on economically. What’s going on politically is affecting, clearly, what’s happening in the eastern, the more sparsely populated part of the country where there’s relatively little economic activity. The economic activity’s concentrated in the west, in Istanbul, north around the capital of Ankara, and elsewhere in the more densely populated part of the country. It is a country of 70 million people, and the economy is still growing, as you mentioned, by 6 or 7 percent per annum. So it’s a very strong-growing economy. It’s also very supported by the United States and by the European Union. It’s a very key strategic country for the West as well.
Francis: And you’re not worried about a spillover?
Mayo: We are obviously a little bit concerned. When there is political risk, there’s always the chance of short-term volatility. But I think in this case, the economic fundamentals are very strong. There’s very strong foreign direct investment flows into Turkey at the moment, and we expect those to be unaffected by what’s going on at the moment. I think the other point one must remember is that the ruling party, the AKP, which was recently re-elected with a substantial majority of seats in the parliament, is very, very popular. So there is, clearly, political support for the administration of Prime Minister (Recep Tayyip) Erdogan.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
October 23, 2007
Infrastructure in America
Frank Holmes recently visited with Aaron Task from TheStreet.com on his daily market recap show, Real Money. Frank shares his thoughts on the world’s infrastructure needs, how the current bull market in commodities continues to defy skeptics and how the struggle for proven reserves has ignited M&A activity among resources companies. Below is an excerpt from the interview.
Aaron Task: Well you’ve certainly beaten many indices over the years and many different timeframes and it’s been impressive…if you were putting money to work today, where would you be putting money to work?
Frank Holmes: I think the big theme for next year’s election is going to be “Infrastructure in America”. If you take a boat and go around Manhattan and look at the bridges from underneath, not driving over-the-top but underneath, it’s third-world. The Civil Engineers of America did an audit and they rated us with a D-rating. They said for America to go to an A-rating in infrastructure, we would have to spend $1.6 trillion.
Aaron Task: It’s interesting when I hear you talk about infrastructure because when I think of you, I think of you more as a commodities guy, you know, buying into gold when it was $200 an ounce and being early on copper, etc. and buying the producers, do you still like the commodity producers, the mining companies?
Frank Holmes: Absolutely. Freeport-McMoRan is the best performing stock on the XAU because of its copper…You’re looking at supply restrictions around the world. At the same time, the tipping point was in the year 2000, when everyone was focused on Y2K, the tipping point was that the world hit 6 billion people. Those people every day eat and every day those people can go online and look at the Internet and look at your program, they can watch television, they love the American Dream. So governments, to maintain jobs, are creating policies for infrastructure because it creates jobs for 20 years.
Click here to listen to the full interview
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in gold or gold stocks.
Holdings in the Global Resources Fund and Gold Shares Fund as a percentage of net assets as of September 30, 2007:
Freeport-MacMoran: Gold Shares 4.21%; Global Resources 2.17%
Schlumberger: Global Resources 3.78%
Nucor: Global Resources 1.03%
Newmont Mining: Gold Shares 1.86%
Northern Orion: Gold Shares 10.71%; Global Resources 1.29%
TheStreet.com: 0.00%
Washington Group: 0.00%
Shaw Group: 0.00%
ATT: 0.00%
Cisco: 0.00%
Miramar: 0.00%
BHP: 0.00%
The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.
October 22, 2007
Marc Faber on the Global Growth Trend
Prominent economist and author Marc Faber was featured in a recent webcast “Gloom, Doom or Boom? An Analysis of the Global Economic Expansion,” hosted by U.S. Global Investors. Never one to pull his punches, here are a few sharp observations by Dr. Faber, whose “Gloom, Boom and Doom Report” newsletter has a large global readership.
“If you look at the whole history of capitalism, we are actually now for the first time in the last 200 years in a truly globalized synchronized boom.”
“Frequently overlooked in the analysis of the oil market is that OPEC countries are also, aside from producing oil, very good at producing babies. So the population increases and their own oil requirements go up dramatically. So there is less oil for export available.”
“In Switzerland for the typical household, the standard of living today is about the same it was 20 years ago. But if you go to Asia, you go to China, the whole population has improved its standard of living dramatically over the last 20 years. You go to Vietnam, 15 years ago they were in ultra poverty. Now they are all on motorcycles and a lot of people have already cars and they are buying apartments.”
“I can only think of one country that is in recession. It is Zimbabwe that is run by Mr. Mugabe, who actually should give economic and policy lessons to Mr. Bernanke because the U.S. is currently doing what Mr. Mugabe has been doing for years: mainly, printing money.”
WANT TO HEAR MORE?: The “Gloom, Doom or Boom” webcast is available for replay at the U.S. Global Investors website: www.usfunds.com/webcast.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
October 17, 2007
China Spreads the Wealth
Romeo Dator, co-manager of the U.S. Global Investors’ China Region Opportunity Fund (USCOX), on China’s qualified domestic institutional investor program and its effect on Hong Kong:
The Hong Kong stock market has gotten a major boost in the last couple months, thanks to a rule change in mainland China.
Chinese officials recently decided to allow mainlanders to invest in foreign stocks under a qualified domestic institutional investor, or QDII, program.
Since mid-August, $24.8 billion in liquidity has been injected into Hong Kong’s market, according to Asian Investor magazine. The Hang Seng Index is setting all-time highs.
Analysts had predicted that Hong Kong’s market would be the first to benefit because Chinese investors likely would buy stocks of mainland companies listed there.
That has proven accurate. Meanwhile, investors from Hong Kong and abroad—anticipating the flood of liquidity—have been putting their money into Hong Kong, too.
Since September, three Chinese fund houses have launched QDII products. Chinese regulators granted the funds quotas totaling $13 billion, but the funds raised far more. Each fund closed itself to new subscriptions after a single day.
Several more QDII funds are expected to launch this year.
China’s QDII program was intended to help absorb excess liquidity in China. In that regard, it has not had a meaningful effect yet. But its impact should grow as Chinese regulators increase QDII quotas.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Total Annualized Returns as of September 30, 2007Fund |
1-Year |
5-Year |
10-Year |
Gross Expense Ratio |
China Region |
90.85% |
37.67% |
7.62% |
2.51% |
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. The Hang Seng Index is a capitalization-weighted index of 33 companies that represent approximately 70 percent of the total market capitalization of The Stock Exchange of Hong Kong.
October 10, 2007
Global Growth Continues to Support Demand for Natural Resources
Frank Holmes, CEO and co-manager of the U.S. Global Investors Global Resources Fund (PSPFX), recently appeared on CNBC’s “Squawk Box” to discuss the key drivers contributing to the strong performance of the fund. The following are excerpts from that interview.
Becky Quick, anchor: We keep asking this, we’ve been asking this for years: Can these stocks continue to run like this?
Frank Holmes: What’s important to realize is that 80 percent of the world’s population is in emerging markets. There’s a high correlation between emerging markets and the price of commodities… China and India combined have over 10 percent growth rates and they’re over 40 percent of the world’s population. The demand for commodities is going to continue. What we see is this massive infrastructure government policies in these countries, which is putting a huge demand on all commodities from basic materials, to copper, to gold, to oil.
Becky Quick: Frank, all of that makes sense to me, but what if you talk about China slowing to, let’s say, nine percent growth, … [and] the U.S. economy starting to slow down as well?
Frank Holmes: Money supply worldwide has been growing at eight percent and foreign reserves are growing at 20 percent, so the world is awash with lots of cash due to economic activity…What happened in the 70s, when we had the spikes in oil, is very different because we had communism. Today, we have this sort of globalization event that is taking place … This mindset is pervasive and it’s profound and I believe it is going to be very significant. We’ll get short-term corrections but the demand for commodities is going to continue because of a lack of exploration and development.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Total Annualized Returns as of September 30, 2007| Fund | 1-Year | 5-Year | 10-Year | Gross Expense Ratio |
| Global Resources Fund | 47.32% | 47.57% | 14.03% | 1.03% |
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
October 8, 2007
Frank Holmes on Current Markets and Interest Rates
Frank Holmes, CEO and chief investment officer, was recently interviewed by Kate McBride of Investment Advisor Magazine on current market conditions and the effects of the Fed’s recent interest rate cuts.
Now that the Fed has cut the Fed Funds Rate by 50 basis points to 4 and 3 quarter percent and once again cut the discount rate by 50 basis points to 5 and 1 quarter percent, investors ask, “What’s next?”…
According to Frank Holmes, CEO and chief investment officer of US Global Investors, the current economic climate has been punctuated by movements in the gold markets, changes in oil prices, the value of the dollar, China, and the effects of the Presidential Cycle.
Gold has seen its recent rally due in part to the triangulation of gold prices to that of oil and the value of the dollar. Historically when oil rises, gold too will rise 90% of the time; and when the dollar falls, gold rises 70% of the time. Recently the price of oil has seen an increase primarily due to demand out of China and other emerging markets. At the same time the U.S. dollar is extremely undervalued and is likely to continue on that path.
In addition to oil prices and the value of the dollar, the sub-prime debt debacle had a massive impact on the global economy. The effects of a shaken global economy had investors turning toward gold.
Mr. Holmes summarizes the macro-economic state of the current economy in his explanation of the Presidential Cycle. One hundred years of historical data will tell you that on the third year of a president’s election cycle odds favor rates will drop and the administration will do everything it can to keep the economy going for this year and the next. If you look at this overarching pattern, then the day-to-day fluctuations in the market amount to noise--noise that long-term investors might want to tune out.
To listen to the complete interview, click here.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 07-684
October 5, 2007
Putin’s Power Play
Commentary from the portfolio management team for the U.S. Global Accolade Eastern European Fund (EUROX) on Russian President Vladimir Putin’s possible run for prime minister next year:
It should come as no surprise that Vladimir Putin will try to keep his grip on Russia’s reins after his second term as president ends in early 2008.
Back in June, we commented on Mr. Putin’s strategic maneuvering to make sure he retained power in the government by positioning one of his loyalists to be his successor. Mr. Putin’s suggestion this week that he may run for prime minister merely reveals another of the many possible ways he can hold onto influence after leaving the presidency.
This development is a positive for the Russian economy.
Mr. Putin has overseen a remarkable period of economic growth, which is reflected in his 70 percent approval ratings by the Russian people. Much of that growth can be attributed to the strong upward trend in commodity and energy prices, so Mr. Putin has benefited from market actions outside his control.
Mr. Putin has, however, steered the ship in the direction of this windfall and his policies have been market-friendly. If he remains in charge, it would be reasonable to expect these policies to continue.
Uncertainty about political policy generally causes market volatility. Having more detail on Putin’s post-presidency intentions removes a degree of uncertainty surrounding Russia’s economic future.
| Total Annualized Returns as of September 30, 2007 | ||||
|---|---|---|---|---|
| Fund | One-Year | Five-Year | Ten-Year | Gross Expense Ratio |
| Eastern European Fund | 47.59% | 44.96% | 19.90% | 1.99% |
Gross expense ratio as stated in the most recent prospectus. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any fees described in the fund’s prospectus (e.g. short-term trading fees) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS, option 5. High double-digit returns are attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
October 3, 2007
Beginning Our Final Lap of 2007
We’ve just entered the final quarter of 2007, which has historically outperformed other quarters. This is also the last leg of year three for President Bush’s term. This year has followed a pattern that dates back to Franklin D. Roosevelt in 1939. Even though world markets have had both ups and downs this year, total returns for major indices around the world have been positive year-to-date. Through the end of the third quarter, the Hang Seng Composite Index has increased 43.90 percent, the MSCI World Index has increased by 12.26 percent and the S&P 500 Index has increased by 9.13 percent.
Source: USA TODAY research
A recent USA Today article by Adam Shell highlighted the pattern of strength for the fourth quarter.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The MSCI World Index is a capitalization weighted index that monitors the performance of stocks from around the world. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
September 2007
» Opportunities in Infrastructure
» Straight talk from Dr. Marc Faber
» Looking forward on China growth
» Global Growth Keeps Luster on Copper
» Late Summer Opportunities in Gold
» China Recalls
» Investment Opportunities In The Persian Gulf
» New opportunity for China region investors
Return to top
September 28, 2007
Opportunities in Infrastructure
The MegaTrends Fund is getting a new name and a broader focus.
The fund’s name will be changed to the Global MegaTrends Fund to reflect its expanded investment strategy. It will now seek to invest in equities that stand to benefit from dominant trends within the global economy.
One such trend is worldwide infrastructure, which will be a major theme for the Global MegaTrends Fund (MEGAX).
Here’s what Frank Holmes, CEO and chief investment officer, had to say:
“The largest emerging markets—China, India and others—have committed to building out their infrastructure to support their rapid economic growth and to create more growth opportunities in the future.
“Compared to the developed world, these countries have a long way to go when it comes to highways, airports, seaports, railroads, water systems, power generation and other critical infrastructure. Catching up with their needs will consume huge amounts of energy and commodities, and it will produce market opportunities for many companies that can help with that work.
“There will also be many opportunities as the United States and other developed nations address their vast needs.
“The recent bridge collapse tragedy in Minneapolis prompted U.S. cities and states to assess the condition of their infrastructure, and many of those assessments found that massive expenditure is necessary for road and bridge repairs. Those conclusions were in line with a 2005 study by the American Society of Civil Engineers estimating that $1.6 trillion was needed over a five-year period to address current needs.
“Warren Buffett is among the investors who has spotted the infrastructure opportunity. He has been making investments in pipelines, utilities and railroads for several years now.”
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
September 26
Straight talk from Dr. Marc Faber
Prominent economist and author Marc Faber was featured in a September 19 webcast “Gloom, Doom or Boom? An Analysis of the Global Economic Expansion,” hosted by U.S. Global Investors. Never one to pull his punches, here are a few sharp observations by Dr. Faber, whose “Gloom, Boom and Doom Report” newsletter has a large global readership.
ON REAL INFLATION
“I doubt that anyone has the rate of inflation of less that 5 to 6 percent per annum. Some will have 9 percent and some even 10 percent. Nobody has a rate of inflation of 2 percent.”
ON THE VALUE OF GOLD
“I wanted to emphasize the point when people say gold is useless. I assure you if you give your girlfriends copper earrings and I give them gold earrings, I keep them longer than you do.”
ON CENTRAL BANKERS
“I would always do the opposite of central bankers. The central bankers sold their gold below $300 (per ounce). They are totally brain-damaged. But to these brain-damaged people, the people listen. That is what really gets me. I just can’t believe that anyone would listen to a speech or even read a book that has been written by someone like Mr. Greenspan.”
ON CHINA’S GROWING REACH
“The Chinese can build whole infrastructure in Africa. It costs less for Chinese to send 5 million Chinese to Africa to build bridges and infrastructure than to keep them at home.”
WANT TO HEAR MORE?: The “Gloom, Doom or Boom” webcast is available for replay at the U.S. Global Investors website: www.usfunds.com/webcast.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
September 25
Looking forward on China growth
We think many “China skeptics” have underestimated the effectiveness of the Chinese government’s response to the food and product safety issues.
These critics overlook the fact that Beijing has a good record of averting potential disasters in a quick and flexible fashion. In 1998, for instance, a serious financial crisis was predicted when state-run banks faced insolvency and in 2001, a similar prediction was made when the U.S. economy slowed. In both cases the forecasts turned out to be off base because of the central government’s prompt actions.
Not only does the government react to problems, it also tries to keep problems from forming in the first place. A case in point is growing concern about the possibility of a post-Olympics slowdown in investment. There’s been so much talk from worried economists in the local Chinese media that the government has taken notice and is considering possible actions to prevent that from happening.
Looking at the foundations of growth, we are cautiously bullish on the Chinese economy in the long term because the labor and capital have been growing fast, and production efficiency has vastly improved in the past 20 years. On top of that, while unforeseen challenges may arise like anywhere else, the Chinese government has the financial resources and experience to stimulate the economy if it needs to.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
September 17, 2007
Global Growth Keeps Luster on Copper
Evan Smith, co-manager of the U.S. Global Investors Global Resources Fund (PSPFX), recently appeared on CNBC’s “Squawk on the Street” to discuss investment outlook and opportunities for copper. Here are excerpts from that interview.
Erin Burnett, host: Hot commodity amid this volatile time of trading is copper. It’s the orange metal bringing in shiny profits so far this year, up nearly 20 percent with booming construction in emerging countries like China and Russia… Joining us for his insight on the future of copper: Evan Smith, portfolio manager of the U.S. Global Investors Global Resources Fund. Evan, your performance this year has been great. You’re up about 20 percent. Copper, obviously, everyone talks about it as basically the proxy for the global economy.
Evan Smith, U.S. Global Investors: The global economy looks much healthier than many people would say, just based on the price of where copper is right now, just under three-and-a-half dollars a pound. But I think one of the key drivers to the price of copper has really been the Chinese growth story. That’s the way it’s been this decade, and I think with continued growth in the Chinese economy, that’s what will continue to be the demand driver of copper.
Jim Cramer, host: Evan, you like Freeport, FCX … It is amazing: Every time we get a negative housing number in the United States, FCX goes down. But 30 percent of the world’s demand for copper is China. Is that just a great opportunity every time someone sells it down because Toll Brothers says something negative?
Smith: That’s a great point. You know, in 2002, the Chinese … exceeded the U.S. as the largest consumer of copper. They’ve since gone on to nearly double what the U.S. consumes. The price of copper is much more correlated with Chinese industrial production than it is with housing starts in the U.S.
Burnett: Over the next decade you’re fairly bullish for copper. Are you watching any particular indicator?
Smith: It’s really going to be the Chinese economy. It’s emerging markets overall, but particularly the Chinese economy and Chinese industrial production. If we saw a decline there, we would be concerned.
| Fund | One-Year |
Five-Year |
Ten-Year |
Gross Expense Ratio |
Global Resources Fund |
20.94% |
38.44% |
15.44% |
1.03% |
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Holdings in the Global Resources Fund as a percentage of net assets as of 6-30-07: Freeport-McMoRan Copper & Gold Inc. (0.0%), Toll Brothers (0.0%).
September 13, 2007
Late Summer Opportunities in Gold
Gold is attracting attention after closing last week above $700. But there’s another reason to give gold a look: History suggests that late summer poses a buying opportunity.
There are a number of reasons that gold prices have risen every September since 2000. Investors in Europe and North America wrap up their summer holiday season. And gold is bought for several holidays around the world.
Jewelers in India typically begin stocking up on gold ahead of Diwali, which falls in early November this year. India’s peak wedding occurs about the same time.
The Muslim holy month of Ramadan, which begins in mid-September this year, culminates with the holiday of Eid al-Fitr. Both Eid al-Fitr and Eid al-Adha, which falls 70 days later, are significant gold-giving occasions.
In the U.S., the greatest demand for gold is seen late in the year, not only from Christmas shoppers but also from Indians and other prosperous immigrant communities.
This time of year may represent a good entry point for those who want to buy gold in advance of a seasonal upswing in demand. Using historical patterns can improve chances for success but doesn’t guarantee against losses.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
September 10, 2007
China Recalls
Romeo Dator, co-manager of the U.S. Global Investors’ China Region Opportunity Fund (USCOX) on recent recalls of Chinese-made products.
This time it was Barbie accessories with hazardous levels of lead paint. Earlier product recalls targeted toys featuring other familiar characters: Thomas the Tank Engine, Curious George and SpongeBob SquarePants.
This string of recent recalls of potentially dangerous toys, baby bibs, pet food, toothpaste and other everyday products—all bearing the “Made in China” label—has Beijing defending its exports to the world.
The Chinese government will have to act quickly with a number of constituencies, from the United States and other export markets to its own people.
The government’s worst-case scenario is that product safety concerns slow the country’s export juggernaut, leading to lost jobs and economic unrest. The government also does not want domestic anxiety ahead of next summer’s Olympic Games in Beijing, where the country is very concerned about projecting a positive image.
A more immediate concern is that these recalls will inflame trade tensions between China and its trading partners, particularly the United States.
Despite these concerns, we expect that China will emerge from this episode without too much trouble and continue to position itself as the world’s next superpower.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
September 7, 2007
Investment Opportunities In The Persian Gulf
Executive Summary
The Persian Gulf is best known for the vast oil reserves that transformed a barren and isolated desert into a global economic power. Saudi Arabia, Kuwait, the United Arab Emirates and the other nations comprising the Gulf Cooperation Council account for 20 percent of the world’s oil production, 40 percent of known oil reserves and 25 percent of natural gas reserves.
The massive wealth generated by oil in recent years has given the Persian Gulf nations a chance to make its future less dependent on a single revenue stream, however lucrative it might be. The region has amassed nearly $1.5 trillion in foreign reserves, outpacing even China. Projections for the next three years call for spending $225 billion on critical infrastructure: power and water networks, roads, seaports, airports, telecommunications and healthcare.
GDP Data of Persian Gulf States
Saudi Arabia, the world’s leading oil producer, is spending some of its oil earnings to strengthen its education system, develop a high-tech sector and enhance its tourism offerings.
The culturally liberal Emirates, most notably Dubai, are an established destination for wealthy tourists. They are also moving to become a banking center and global transportation hub.
Kuwait, the first country in the Persian Gulf with a democratically elected parliament, is looking to profit from the region’s commercial expansion by manufacturing plastics, cement and other building materials.
Bahrain has leveraged its sophisticated communication system and transportation facilities to land major deals with multinational corporations. Oman, strategically positioned at the mouth of the Gulf, is courting foreign investment for its furniture, fertilizers and fiberglass industries. And Qatar, with the region’s highest gross domestic product, has become a key source of information for the Muslim world through its Al Jazeera television outlet.
The energy sector will continue to be a dominant theme in the Persian Gulf nations, but it’s clear that broader and deeper economies will emerge in the region in the years to come. The determined push to develop and diversify creates opportunities for investors in these rising emerging markets.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 07-599
September 6, 2007
New opportunity for China region investors
Romeo Dator, co-manager of the U.S. Global Investors China Region Opportunity Fund (USCOX), appeared on Bloomberg TV this week to discuss a new rule in China that for the first time will allow mainland residents to invest in Hong Kong-listed stocks. Here are excerpts from that interview.
Lori Rothman, anchor: Explain to us why China is opening its investment gates.
Romeo Dator: China is getting a lot of inflows into the country, and as a result of that they have $1.3 trillion in foreign-exchange reserves, and they have a current account surplus of over $300 billion U.S. dollars that’s growing by $20 billion each month. … They need to encourage capital outflows, and this is one way they’re doing it.
Rothman: Can a U.S. investor take advantage of this change?
Dator: I think they can. If they really want to do something here, there are a lot of Chinese ADRs that trade on the U.S. stock exchange—on the NYSE. Or they can actually buy a mutual fund that invests in Chinese or Hong Kong stocks, such as ours, to take advantage of this opportunity.
Rothman: Now, are you making changes to your fund, China Region Opportunity Fund?
Dator: Most of our fund is in there to begin with, in Hong Kong. But really, what we’re taking advantage of is what we’re calling the A-share/H-share differential in terms of valuation, where the H-shares that trade in Hong Kong are much cheaper than the same stock that’s listed on the mainland A-share market. We’re really focusing on these stocks mostly right now.
Rothman: What does all of this do for the value of the yuan?
Dator: It actually relieves the pressure for the yuan to appreciate in value … since they’re allowing money to leave the country for the first time, there’s really much less pressure for it to appreciate because they shouldn’t get such strong inflows because hopefully they can be balanced by outflows by the mainland investors investing outside the country.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
August 2007
» Turkey: Business as Usual
» Mining Opportunities in Metals Stocks
» Transportation Driving Oil Demand
» China’s rate hikes are a token move
» Weathering the ups and downs in world equity markets
» Gold: Time To Shine?
» Where is America's place in the world
» The case for copper: supply constraints and growingdemand
» Marc Faber on credit markets and the dollar
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August 30, 2007
Turkey: Business as Usual
Commentary from Charlemagne Capital
Julian Mayo, investment director at Charlemagne Capital (UK) Ltd., subadviser to the U.S. Global Investors Eastern European Fund and Global Emerging Markets Fund, on Tuesday’s election of a new president in Turkey.
The election of a new president in Turkey this week ends a political standoff that began months ago. We believe the election of Abdullah Gul is a victory for democracy.
It was Gul’s background in Islamic politics that touched off the dispute in April. Secular Turks fear gradual takeover by his Islam-dominated Justice and Development Party (AKP), which has led a moderate, pro-business government since 2002.
At the request of secularist political parties, Turkey’s high court invalidated an April parliamentary vote in favor of Gul. The Turkish army, which has overthrown four elected governments since 1960, issued a warning about straying too far from secularism.
A general election was held several months early, and the AKP won a solid majority in Parliament. That majority installed Gul as president.
The AKP win is a clear mandate from the people that they, and not the army, are in control of modern Turkey’s destiny. This victory for democracy will promote further foreign investment and economic stability.
So it’s business as usual: a stable, pro-business, pro-EU administration, elected with a huge mandate. Inflation is now well below 10 percent, and the economy is likely to grow by 5 percent this year.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
August 27, 2007
Mining Opportunities in Metals Stocks
Frank Holmes, CEO and chief investment officer, was recently interviewed on CNBC’s “Street Signs” program about mining stocks. Here are excerpts from that interview.
Erin Burnett, host: I know Freeport McMoRan is a name you like very much … because it’s not just gold, it’s also copper. But then when I hear copper I think, ‘All right, this is another market that is fairly exposed to the economy,’ which is a topic that many people are very uncertain about right now.
Frank Holmes: Well, we think of the big picture and see the global boom taking place and the forward curve in copper is still very healthy, and the correction in companies like Freeport are much greater than the correction that took place in any type of short-term copper. The other thing we like about copper and any of these other stocks we share with you (Northern Orion and Silver Wheaton) is they have free cash flow and they have huge returns on their equity, whereas a lot of the mining companies … particularly gold-mining companies, do not have this.
Burnett: Now I wanted to ask you about one name I believe you really don’t like right now and that is Cameco.
Holmes: The danger with Cameco is their gold investments have had great difficulties. They’re in a tough part of the world (Kyrgyzstan and Mongolia), high cost structure, and then you have to add uranium prices. Spot market fell to $90 a pound but the futures market is calling for $63 a pound today. So if the futures market does prevail, then Cameco could decline further. Now, long term, I’m very, very bullish on uranium. I’m taking a look at all the nuclear reactors being built in Asia. I think any big correction like that would make it extremely attractive.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. As mentioned in the interview, the following securities were held by one or more of U.S. Global Investors family of funds as of 6/30/07: Freeport-McMoRan Copper & Gold Inc.; Northern Orion Resources Inc.; Silver Wheaton Corp.
August 23, 2007
Transportation Driving Oil Demand
Evan Smith, co-manager of the Global Resources Fund (PSPFX), on key developments affecting future oil prices.
There’s been a lot of news lately on how new cars are crowding old bicycles off China’s roadways.
OPEC has come out with its latest World Oil Outlook, and there’s a lot of emphasis on transportation growth and its impact on future oil demand. Here are some interesting data points to illustrate this trend:
- 4.3 billion people, or two-thirds of the world’s current population, live in countries with less than 50 cars per 1,000 people. Developed countries are typically over 400 cars per 1,000 people.
- Over two-thirds of the increase in car ownership through 2030 will come from developing countries. By 2020, China is projected to have more cars on the road than Japan.
- The global fleet of cars is expected to rise from 700 million in 2005 to 1.2 billion by 2030.
- Upstream oil & gas investment required to meet demand growth will total $2.4 trillion between 2006 to 2030 (in 2006 $US). When broken down this means $100 billion per year for the next 24 years will be spent on exploration and development alone; other pricey necessities such as pipelines and tankers are not included in these figures.
- Developing countries’ total oil consumption will double by 2030. China will grow at 150 percent while developed countries will grow by only 7 percent.
Source: World Oil Outlook: 2007, OPEC
For more information visit www.opec.org
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
August 21, 2007
China’s rate hikes are a token move
Romeo Dator, co-manager of the U.S. Global Investors’ China Region Opportunity Fund (USCOX) on Tuesday’s interest-rate increase by the Chinese government.
The People’s Bank of China surprised many today by raising two benchmark interest rates. Increases to the deposit and lending rates take effect tomorrow.
The move underscores the desire of the Chinese government to control breakneck economic growth. Last week, China released macroeconomic data for July showing very strong industrial production and fixed-asset investment, along with accelerating inflation.
Whatever the government hopes to accomplish in the long term, today’s move was token at best, unlikely to rein in the fast-growing Chinese economy.
By raising the interest rate on deposits by 27 basis points, China is trying to provide relief to people who save money in the bank. The move is also an attempt to discourage the withdrawal of savings for stock investing.
It’s unlikely, however, to have much impact on the country’s economic growth.
Even less likely to have an effect is the 18-basis point hike in the lending rate, although the Chinese government probably would like to see fewer loans.
The government is unlikely to take any sort of drastic action ahead of the 17th National Congress of the Communist Party of China, scheduled for this fall. The meeting is held only once every five years. After the meeting, we may see more active measures to prevent the economy from overheating.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
August 21, 2007
Weathering the ups and downs in world equity markets
Equity investors around the world, and especially those in emerging markets, should always be ready for a rocky ride. Even so, when share prices fall sharply, it comes as a shock.
Stock market investments have been shown time and time again to produce attractive returns over the long term—in other words, periods in excess of 10 or 15 years—but they also can produce substantial losses in the short term. Emerging markets fell sharply in February and March of this year. And last year, in May and June, they lost about 25 percent of their value. In each case, external events were responsible and markets soon recovered their previous highs.
As investors act to reduce the level of risk in their portfolios, they quite naturally focus on lowering their exposure to assets perceived as volatile. This, in turn, causes these volatile assets to live up to their reputation and fall more sharply than other assets. Equities are generally considered one of the most volatile asset classes. Within equities, emerging markets are seen as the most volatile of all.
This is precisely what happened over the last couple of weeks. Between July 23 and August 10, the MSCI Emerging Markets Free Total Net Return Index fell by 10.1 percent. The MSCI All Country World Index fell by 6.9 percent.
But volatility works both ways: Emerging markets outperformed developed markets by a significant margin, as markets everywhere trended higher over the first part of the year. As a result, and in spite of the recent movement, emerging markets are still way ahead of other markets over the year to date. Through August 10, the MSCI Emerging Markets Free Total Net Return Index is up 16.1 percent and the MSCI All Country World Index is up just 4.5 percent.
Of course, stock market movements themselves have little impact on the profitability of companies, although such movements do reflect the collective opinion of the market on how events will affect future profitability. In this case, the “events” are the turmoil in the U.S. subprime mortgage market, which has begun to infect credit markets more generally and has led to large losses at certain banks and investment funds. Central banks have been forced to intervene, providing liquidity on demand to ensure that the credit markets continue to function in an orderly manner.
This may seem of little relevance to a widget maker in an emerging market. But if U.S. economic growth is impaired as banks become more risk aware and perhaps more reluctant to lend, U.S. demand for the widget maker’s products may suffer. By a similar process of contagion, worldwide economic activity may not turn out to be quite as robust as had been expected up until now. Such a scenario is by no means certain to occur; indeed, the speed with which central banks acted on this occasion suggests that they will be as ready to act to ensure the ongoing health of the global economy. But the risk that it might occur is justification enough for recent share price falls. We think the chances of a significant global economic downturn as a result of recent events are quite small, the world economy is in good health and the profitability of companies in emerging markets will be largely unaffected.
Although further volatility cannot be ruled out, we would expect stock markets to recover their poise in due course and resume their upward trend.
Julian Mayo is investment director at Charlemagne Capital (UK) Ltd., subadvisor to the U.S. Global Investors Eastern European Fund and Global Emerging Markets Fund.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. The MSCI Emerging Markets Free Total Net Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in emerging market countries on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. 07-570August 15, 2007
Gold: Time To Shine?
Frank Holmes, CEO and chief investment officer, was recently interviewed on CNBC’s “Power Lunch” program about gold’s role in the current turbulent market. Also appearing in the segment was Adrian Day, president of Adrian Day Asset Management in Annapolis, Md. Here are excerpts from that interview.
Sue Herera, host: Gold’s been playing a very interesting role in this liquidity crunch. The precious metal, considered a so-called safe haven in times of uncertainty, is benefiting right now from the turmoil in the global markets. The price right now is up $9.30, at $682.10. That’s a one-and-a-third percent move. However, when some of the turmoil hit these markets, the gold market actually went down. So what’s going on here? Should you consider putting gold into your portfolio or not? Joining me now, Frank Holmes, U.S. Global Investors CEO and chief investment officer, and Adrian Day, president of Adrian Day Asset Management. Welcome to both of you.
Adrian Day: Thank you.
Herera: Frank, it’s great to see you again. I’ll start with you. Gold has not been behaving in the traditional way. Is that because its role as an instrument has really changed?
Frank Holmes: Not at all. I think gold has actual