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India the Best-Performing Emerging Market
March 3, 2015

India the Best-Performing Emerging Market - Happy Indian People

India had an incredible banner year. The world’s largest democracy, home to 1.25 billion people, was the best-performing emerging market in 2014, delivering over 29 percent. It was followed by the Philippines in second place and Indonesia in third.

This continues India’s story as an increasingly attractive market for global investors, a story which became even more pronounced with the May election of Prime Minister Narendra Modi, whom CLSA’s Asian market strategist Chris Wood has called “the most pro-business, pro-investment political leader in the world today.”

You can see how other emerging markets ranked in our Periodic Table of Emerging Markets, now available in its interactive version.

India the Best-Performing Emerging Market - Happy Indian People
click to view the interactive periodic table

Last year we saw a strong bifurcation between emerging markets in Asia and those in Eastern Europe and South America. Asian countries led the pack largely because they tend to be net importers of oil, and as such it came as a huge windfall for them when prices began to head off the cliff in the back half of the year.

Brent oil prices now stand just above $61 per barrel, down from $110 per barrel in July.

The following chart, last shared in October, shows which countries profit and which stumble when oil prices decline, based on 2013 data. With few exceptions, the results look similar to the periodic table: Asian countries on top, South American (and Russia) on bottom.

Asian Markets Benefit Most from Lower Oil Prices
click to enlarge

It should come as no surprise that Russia—weighed down not only by falling oil prices but also geopolitical turmoil, international sanctions and a shrinking currency—fell to last place in 2014. But since then we’ve seen the federation’s market turn up, and we’ve begun the process of gaining limited exposure to Russian equities.

“The situation is Ukraine is not pretty, but global investors understand it and are getting comfortable putting their money in Russia again because it’s inexpensive,” John Derrick, portfolio manager of our Emerging Europe Fund (EUROX), said during our recent webcast.

“The bad news has been priced in, and it looks as if the market is willing to move higher.”

Colombia had its second consecutive down year as a result of low oil prices and socialist-type policies—heavy punitive taxation and redistribution of wealth—that have led to an anti-business environment.

Hungary tumbled pretty sharply because of its government’s siding with Russia on several issues. It’s moved much closer to the federation than the rest of Europe and staunchly opposes the international sanctions.

As for India, it continues to impress. Year-to-date, the S&P BSE SENSEX has returned over 6 percent, compared to the S&P 500 Index’s 2.3 percent.

You can read more about India in the digital version of our newly-released Shareholder Report.

Please consider carefully a 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.

Past performance does not guarantee future results.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

The S&P BSE SENSEX Index is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Could Apple Buy a Third of the World’s Gold?
March 2, 2015

Is there anything Apple can’t do?

Thing gold. AppleFirst it revolutionized the personal computing business. Then, with the launch of the iPod in 2001, it forced the music industry to change its tune. Against initial market reservations, the company succeeded at making Star Trek-like tablets hip when it released the iPad in 2010. And in Q1 2015, a record 75 million units of its now-ubiquitous iPhone were sold around the globe. The smartphone’s operating system, iOS, currently controls a jaw-dropping 89-percent operating profit share of all systems worldwide, pushing the second-place OS, Google’s Android, down to 11 percent from 30 percent just a year ago.

As you might already know, the company that Steve Jobs built—which we own in our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX)—is history’s largest by net capitalization. In its last quarterly report, Apple posted a record $75 billion in revenue and is now sitting pretty on a mind-boggling $180 billion in cash. Many analysts believe the company will reach a jaw-dropping $1 trillion in market cap.

So what’s Apple’s next trick?

How about moving the world’s gold market?

iGold

Apple Watch Edition sporting a 18-karat gold caseThis April, Apple will be venturing into the latest wearable gadget market, the smartwatch, joining competitors such as Samsung, Garmin and Sony. All of the models in Apple’s stable of watches look  sleek and beautifully designed—just what you’d expect from Apple—and will no doubt be capable of performing all sorts of high-tech functions such as receiving text messages, monitoring the wearer’s vitals and, of course, telling time.

But the real story here is that the company’s high-end luxury model, referred to simply as the Apple Watch Edition, will come encased in 18-karat gold.

What should make this news even more exciting to gold investors is that the company expects to produce 1 million units of this particular model per month in the second quarter of 2015 alone, according to the Wall Street Journal.

That’s a lot of gold, if true. It also proves that the Love Trade is alive and well. Apple chose to use gold in its most expensive new model because the metal is revered for its beauty and rarity.

To produce such a great quantity of units, how much of the yellow metal might be needed?

For a ballpark estimate, I turn to Apple news forum TidBITS, which begins with the assumption that each Apple Watch Edition contains two troy ounces of gold. From there:

If Apple makes 1 million Apple Watch Edition units every month, that equals 24 million troy ounces of gold used per year, or roughly 746 metric tons [or tonnes].

That’s enough gold to make even a Bond villain blush, but just how much is it? About 2,500 metric tons of gold are mined per year. If Apple uses 746 metric tons every year, we’re talking about 30 percent of the world’s annual gold production.

India's Sripuram Golden Temple, the world's largest golden structure, is made out of 1.5 tonnes of goldTo put things in perspective, the Sripuram Golden Temple in India, the world’s largest golden structure, is made from “only” 1.5 tonnes of the metal.

TidBITS acknowledges that the amount of gold is speculative at this point. Two troy ounces does seem pretty hyperbolic. But even if each luxury watch contains only a quarter of that, it’s still an unfathomable—perhaps even unprecedented—amount of gold for a single company, even one so large as Apple, to consume.

Ralph Aldis, portfolio manager of our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX), likens the idea of Apple buying a third of the world’s gold to China’s voracious consumption of the metal. As I mentioned last week, China is buying more gold right now than the total amount mined worldwide.

“If the estimates of how much gold each watch contains are close to reality, and if Apple’s able to sell as many units as it claims, it really ought to help gold prices move higher,” Ralph says.

But Can Expectations Be Met?

Here’s where this whole discussion could unravel. Although we don’t yet know what the Apple Watch Edition will retail at, it’s safe to predict that it will fall somewhere between $4,000 and $10,000, placing it in the same company as a low-end Rolex.

With that in mind, are Apple’s sales expectations too optimistic?

Possibly. But remember, this is Apple we’re talking about here. Over the years, it has sufficiently proven itself as a company that more-than-delivers on the “if you build it, they will come” philosophy. Steve Jobs aggressively cultivated a business environment that not only encourages but insists on “thinking different”—to use the company’s old slogan—risk-taking and developing must-have gadgets.

“Our whole role in life is to give you something you didn’t know you wanted,” says current Apple CEO Tim Cook. “And then once you get it, you can’t imagine your life without it.”

A perfect case study is the iPhone. When it launched in June 2007, the cell phone market was decidedly crowded. Consumers seemed content with the choices that were already available. Why did we need another phone?

Yet here we are more than eight years later, and as I pointed out earlier, 75 million iPhones were sold in the last quarter alone.

Apple iPhone Sales Reach Record Number in Q1 2015
click to enlarge

So it’s not entirely out of the realm of possibility for Apple to move 1 million $10,000 Apple Watch Editions per month.

Early in January I shared the following chart, which shows various analysts’ Apple Watch shipment forecasts for 2015, ranging from 10 million to 60 million units. Of course, all models are included here, not just the luxury model.

Estimated 2015 Apple Watch Shipments
click to enlarge

Looking at it now, many of the predictions seem a little understated. After all, Apple hasn’t released a dud product in at least two decades (remember the Newton?). Come April, we’ll see for sure what the demand really is—for the Apple Watch as well as gold.

Global Metals & Mining Conference

Last weekend I attended the BMO Metals & Mining Conference in Hollywood, Florida, along with Ralph, Brian Hicks, a portfolio manager of our Global Resources Fund (PSPFX), and junior analyst Alex Blow.

“Generally speaking, companies have streamlined operations and are focused on shareholder returns,” Brian said.

Alex came away from the conference with renewed conviction that the global climate is conducive for gold, citing central bank easing policies and increasing volatility in world currencies, both of which support the yellow metal’s performance.

“It looks as though gold has technical support and that a bottom has been reached,” he said. “If the eurozone really picks up, gold demand should rise, which would also benefit China since its primary gold export destination is the eurozone.”

Mark Your iCalendar

I invite everyone to join us during our next webcast, to be held this Wednesday, March 4, at 4:30 PM ET/3:30 PM CT. The discussion will center on our Near-Term Tax Free Fund (NEARX), which has delivered 20 straight years of positive returns. We hope you can make it!

 

Yes, sign me up for the webcast!

 

Please consider carefully a 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.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are 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 these sectors.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The tax free funds may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the All American Equity Fund, Holmes Macro Trends Fund, Gold and Precious Metals Fund, World Precious Minerals Fund, Global Resources Fund and Near-Term Tax Free Fund as a percentage of net assets as of 12/31/2014: Apple, Inc. (3.52% All American Equity Fund), (5.37% Holmes Macro Trends Fund); Google, Inc. 0.00%; Samsung Electronics Co. 0.00%; Garmin Ltd. 0.00%; Sony Corp. 0.00%.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Why We Invest in Royalty Companies
February 26, 2015

600 Million Reasons to Keep Our Eyes on India“Much of the gold mining industry is underwater and can’t make money with these prices. We’ve seen capital programs being significantly cut back, in terms of companies looking to expand and build new mines.”

That’s according to Ralph Aldis, portfolio manager of our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX), who was interviewed recently for the latest edition of our Shareholder Report.

He continues:

“Those companies have been sufficiently scared enough that, even when gold prices do recover, they’re going to hold off on expansions because they might have lost the appetite to risk capital on new projects.”

This is where royalty companies come in.

As a refresher, royalty companies basically serve as specialized financiers that help fund cash-strapped miners’ exploration and production projects. In return, they receive either royalties on whatever the mine produces or what’s known as a “stream,” which is a commitment to an agreed-upon number of ounces of gold or other precious metal per year.

From an investors’ point of view, royalty companies just have a superior business model. I’ve discussed this on numerous occasions, most recently during this week’s Gold Game Film, which we shot in Fort Lauderdale following the 2015 Gold Stock Analyst Investor Day.

Attractive Risk/Reward Profile

Royalty compannies enjoy many of the upsides of being in the precious metals industry but face very few of the risks There are several reasons why Ralph and I find these companies so attractive.

For one, they’ve typically remained well-diversified. Whereas any given mining company might own only one or two mines—which may or may not be operational—royalty companies can stay profitable by receiving regular streams of revenue from multiple sources. Toronto-based Silver Wheaton, the world’s largest precious metals streaming company, has secured the right to purchase silver at a very low fixed cost from 18 operating mines in North and South America and Europe.

Another reason why these companies have outperformed is because, simply put, they’re not the ones getting their hands dirty. Their only obligation is to lend capital. They don’t build the mine’s infrastructure; they’re not responsible for cost overruns or maintenance; they don’t experience capital cost inflation; and they don’t have dozens of miners and other personnel on their payrolls. Royalty companies, therefore, enjoy many of the upsides of being in the precious metals industry but face very few, if any, of the risks.

To elaborate on one of the points already made, these companies have extremely low overhead compared to miners. Silver Wheaton is run by 30 people at most, and yet it generates around $500 million in revenue. On average, that’s $16 million per employee! It’s very possibly the world’s most profitable company on a revenue-per-employee basis.

Other royalty companies that have been good to our precious metals funds are Royal Gold and Franco-Nevada. Both have huge cash flow, wide profit margins and pay dividends. Since Franco-Nevada went public in December 2007, it’s torn past both spot gold and most gold equity benchmarks.

Franco-Nevada Ahead of the Curve
click to enlarge

As of now, royalty companies make up about 13 percent of USERX and 12 percent of UNWPX.

Diversify and Rebalance

As always, I recommend a 10-percent weighting in gold: 5 percent in gold jewelry or bullion, the other 5 percent in gold mining stocks. Remember to rebalance once a year.

“You might also get some additional benefits by rebalancing quarterly,” Ralph says. “That’s like playing chess with the market as opposed to rolling craps.”

In the meantime, look for the Shareholder Report, arriving soon in mailboxes all across the nation! Inside you’ll find articles not just on gold but also topics ranging from growth in India and Turkey to our Near-Term Tax Free Fund (NEARX), which has delivered 20 straight years of positive returns.

NEARX, in fact, is the focus of our next webcast, to take place next Wednesday, March 4. We hope you’ll join us!

 

Sign me up for the webcast!

 

Please consider carefully a 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.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are 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 these sectors.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

The S&P/TSX Global Gold Index is an international benchmark tracking the world's leading gold companies with the intent to provide an investable representative index of publicly-traded international gold companies.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Gold and Precious Metals Fund, World Precious Minerals Fund and Near-Term Tax Free Fund as a percentage of net assets as of 12/31/2014: Silver Wheaton Corp. 1.36% Gold and Precious Metals Fund, 0.45% World Precious Minerals Fund; Royal Gold, Inc. 5.99% Gold and Precious Metals Fund, 1.51% World Precious Minerals Fund; Franco-Nevada Corp. 6.97% Gold and Precious Metals Fund, 1.32% World Precious Minerals Fund.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Why Bad News Is Good News in Europe—7 Charts Showing What You Really Need to Know
February 23, 2015

There’s little denying that the U.S. economy is on the upswing since the recession. Manufacturing is strong, jobless claims are falling and wages are rising. Delta Air Lines, which we own in our Holmes Macro Trends Fund (MEGAX), recently announced that it will be giving its 80,000 employees $1.1 billion in profit sharing, while Wal-Mart, held in our All American Equity Fund (GBTFX), unveiled plans to hike its minimum wage to $9 an hour in April.

Indeed, things are shaping up here in the U.S., but unfortunately this has not been the case in Europe. From Greek drama to Russian aggression, bad news seems to be the order of the day.

Until now.

Because of central banks’ monetary easing, weakening currencies and low fuel costs—courtesy of the American fracking boom—Europe is finally showing signs that it’s ready to turn the corner and set a path toward lasting economic recovery.

Europe-Recovery-Globe

1. Emerging Europe PMIs Swinging Up

The Purchasing Managers’ Index (PMI), as I’ve often said, is a highly effective tool that we use to forecast manufacturing activity six months out. Any reading above 50 indicates growth in manufacturing; anything below, contraction. This allows us to manage our expectations and get a good sense of where to position our funds.

As you can see, the European Union (EU) as a whole has recently improved, but emerging countries such as the Czech Republic, Poland and Hungary are posting very solid numbers in the mid-50s range. Much of this is due to low fuel costs and weaker currencies, which make exports more attractive.

Purchasing-Managers-Index-PMI-European-Union-vs-Emerging-Europe-Countries
click to enlarge

2. Growth in the Eurozone Is Good for the Globe

Our investment team’s research has shown that when the one-month reading for the global PMI crossed below the three-month moving average, there was a significant probability that materials, energy and commodities would fall six months later. Conversely, when it crossed above, manufacturing activity would ramp up, which greatly improved the performance of commodities such as copper and crude oil, not to mention the materials and energy sectors.

Commodities-and-Commodity-Stocks-Historically-Rose-Fell-Six-Months-After-PMI-Cross-Above-Below
click to enlarge

It’s very welcome news, then, to see growth in the eurozone, since its PMI readings are factored into the global score. Last week we learned that the preliminary Flash Eurozone PMI advanced to 53.5 for the month of February. This is huge. Not only is it a seven-month high for the eurozone, but it’s also nearly in line with the U.S. reading, which came in at 54.3. Even France—a perennial and disappointing laggard in manufacturing—posted its best results in three-and-a-half years.

3. Surprise! Europe Is Beating Expectations

The Citi Economic Surprise Index, simply put, tells you if a country or region’s economic news is beating—or, conversely, falling below—analysts’ expectations. The higher the number, the more it indicates that economic data is exceeding forecasts.

Eurozone-Economic-News-Beating-Expectations-While-the-US-Trailing-Expectations
click to enlarge

You can see above where the eurozone has surprised consensus. For most of 2014, the region was in a declining trend, whereas the U.S. was headed higher. More recently, though, we’ve seen a huge advancement in Europe, despite negative news coming out of areas such as Greece—which last week managed to strike a deal with its euro-partners to extend the Mediterranean country’s bailout program by four months.

4. GDP Growing

If you look at Europe’s GDP as a whole, it’s expected to grow slightly over 1 percent in 2015. But the GDP in Eastern European countries such as the Czech Republic, Romania, Poland and Hungary is expected to grow double that or more.

Central-Eastern-European-CEE-Countries-GDP-Growth-Outperforms
click to enlarge

These countries are benefiting from the broad recovery, for sure, but they also have their own dynamics. As emerging markets, they have more room to run and grow. 

5. No Lack of Confidence in Consumption

Another sign that the European recovery is underway is the recent uptick in spending habits. Not only does the consumer confidence index (CCI) for the eurozone far exceed its long-term average, but it’s also at its highest reading since soon before the financial crisis.

Eurozone-Consumer-Confidence-at-89-Month-High
click to enlarge

6. Russia, the Not-So-Bad News Bear?

Nearly every day we’re reminded of Russia’s political and financial troubles, but the worst is likely behind us. It appears as if Russia’s market and currency, the ruble, bottomed in mid-December. This is also the first time since the summer that the MICEX Index crossed above its 50-day moving average, breaking through resistance.

Russian-MICEX-Index
click to enlarge

The situation in Ukraine is not pretty, but global investors understand it and are getting comfortable putting their money in Russia again because it’s inexpensive. The bad news has been priced in, and it looks as if the market is willing to move higher.

Russian credit default swaps (CDS) are also looking better. CDSs allow sellers to assume and buyers to reduce default risk on a bond. The swap spreads improved in February, indicating the market is looking past current events such as international sanctions and the ceasefire in Ukraine and seeing Russia’s risk declining in the future.   

7. Low Valuations, High Dividend Yields

Emerging European equities, like Russian stocks, are trading at a big discount relative to those in U.S. and Western European markets. 

Emerging Europe Cheap Relative to Developed Markets
Country Index P/E Ratio Dividend Yield
Western Europe Stoxx 600 23.6 3.6%
United States S&P 500 Index 18.4 2.0%
Poland WIG 20 15.5 3.9%
Romania Bucharest BET Index 9.9 3.6%
Turkey BIST 100 Index 9.6 1.8%
Russia MICEX Index 9.0 4.1%

Many of the emerging European countries are currently trading at less than 10 times. Therefore, you get that winning combination of low valuation and high dividend yield.

We’re definitely starting to see the early signs that Europe is reflating its economy. Attractive PMI data, positive economic surprises and growing consumer confidence all point to a strong recovery, one that should bode well for global investors in general and our Emerging Europe Fund (EUROX) specifically. 

In case you missed this week’s webcast on this very topic, you can still listen to the replay on demand and download the slideshow.

Please consider carefully a 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.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

The J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The Eurozone Purchasing Managers' Index is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 companies based in the euro area manufacturing and service sectors. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The flash estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.

The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.

The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500.

The Citigroup Economic Surprise Indices are objective and quantitative measures of economic news. They are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A positive reading of the Economic Surprise Index suggests that economic releases have on balance been beating consensus. The indices are calculated daily in a rolling three-month window.

The Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.

The MICEX Index is the real-time cap-weighted Russian composite index.  It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors.  The MICEX Index was launched on September 22, 1997, base value 100.  The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange.

The STOXX 600 Banks (Price) Index (SX7P) is a capitalization-weighted index which includes European companies that are involved in the bank sector. 

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

The WIG20 Index is a modified capitalization-weighted index of 20 Polish stocks which as listed on the main market. The index is the underlying instrument for futures transactions listed on the Warsaw Stock Exchange.

The Bucharest Exchange Trading Index (BET) is a capitalization weighted index, comprised of the 10 most liquid stocks listed on the BSE tier 1. The index is a Price index and was developed with a base value of 1000 as of September 22, 1997.

The Borsa Istanbul 100 Index is a capitalization-weighted index composed of National Market companies except investment trusts. The constituents of the BIST National 100 Index are selected on the basis of pre-determined criteria directed for the companies to be included in the indices.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the All American Equity Fund, Holmes Macro Trends Fund and Emerging Europe Fund as a percentage of net assets as of 12/31/2014: Delta Air Lines, Inc. 1.28% Holmes Macro Trends Fund; Wal-Mart Stores, Inc. 1.14% All American Equity Fund.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

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Mind-Blowing: China Consumes More Gold Than the World Produces
February 19, 2015

From All of Us at U.S. Global Investors - We wish you good health and lasting prosperity

Welcome to the year 4713. Or, if you prefer, the Year of the Ram.

The Chinese New Year, which kicks off today, is the largest and most widespread cultural event in mainland China, bringing with it massive consumer spending and gift-giving. During this week alone, an estimated 3.6 billion people in the China region travel by road, rail and air in the largest annual human migration.

Chinese New Year Spending Double That of U.S. Thanksgiving Spending in 2014Imagine half a dozen Thanksgivings and Christmases all rolled into one mega-holiday, and you might begin to get a sense of just how significant the Chinese New Year festivities and traditions are.

According to the National Retail Federation, China spent approximately $100 billion on retail and restaurants during the Chinese New Year in 2014. That’s double what Americans shelled out during the four-day Thanksgiving and Black Friday spending period.

As I’ve discussed on numerous occasions, one of the most popular gifts to give and receive during this time is gold—a prime example of the Love Trade.

Can’t Keep Gold Down

Most loyal readers of my Frank Talk blog know that China, along with India, leads the world in gold demand. This Chinese New Year is no exception. Official “Year of the Ram” gold coins sold out days ago, and since the beginning of January, withdrawals from the Shanghai Gold Exchange have grown to over 315 tonnes, exceeding the 300 tonnes of newly-mined gold around the globe during the same period.

China, in other words, is consuming more gold than the world is producing.

What’s not so well-known—but just as amazing—is that China’s supply of the precious metal per capita is actually low compared to neighboring Asian countries such as Taiwan and Singapore.

The World Gold Council (WGC), in fact, calls China “a huge, relatively untapped reservoir of gold demand.”

This might all change as more and more Chinese citizens move up the socioeconomic ladder. Over the next five years, the country’s middle class is projected to swell from 300 million to 500 million—nearly 200 million more people than the entire population of the United States. This should help boost gold bullion and jewelry sales in China, which fell 33 percent from the previous year.

Chinese and Indian Growth Has Spurred Gold Market
click to enlarge

“I don’t see demand staying down because you have had structural changes,” commented WGC Head of Investment Research Juan Carlos Artigas in an interview with Hard Assets Investor. “One of them, emerging market demand from the likes of India and China, continues to grow, and we expect it to continue to grow as those economies develop further.”

New Visa Policy Promises Increased Chinese Tourism

The Year of the Ram has also ushered in a new visa policy, one that has the potential to draw many more Chinese tourists to American shores.

For years, Chinese citizens could receive only a one-year, multi-entry visa. Now, leisure and business travelers can obtain a visa that allows them to enter multiple times over a 10-year period. The visa application process has also been relaxed.

American companies to benefit from greater influx of Chinese touristsIn terms of overseas spending, Chinese tourists already sit in first place, just above their American counterparts. According to the United Nations World Tourism Organization, a record $129 billion was spent by Chinese travelers in 2013 alone. The average Chinese visitor spends between $6,000 and $7,200 per trip in the U.S.

This visa policy reform is an obvious boon to travel and leisure companies such as those held in our All American Equity Fund (GBTFX)—Walt Disney and Carnival Corp., for examples, not to mention retailers such as Kohl’s, Coach and The Gap.

Other beneficiaries include Chinese airlines such as Air China, which we own in our China Region Fund (USCOX). Global airline stocks are currently soaring as a result of low oil prices, increased seat capacity and more fuel-efficient aircraft. The new visa policy has the potential to give these stocks an even stronger boost.

On a lighter note, at least a couple of airports in North America are making the most of the Chinese New Year, hosting performances by Chinese musical artists and providing entertainment such as a lion dance through the terminal and calligraphy.

To our friends and shareholders here in the U.S. and abroad, I wish you all a Happy Chinese New Year!

 

Please consider carefully a 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.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the All American Equity Fund and China Region Fund as a percentage of net assets as of 12/31/2014: The Walt Disney Co. 1.16% All American Equity Fund; Carnival Corp. 1.18% All American Equity Fund; Kohl’s Corp. 1.17% All American Equity Fund; Coach, Inc. 1.18% All American Equity Fund; The Gap, Inc. 1.19% All American Equity Fund; Air China Ltd. 1.11% China Region Fund.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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Net Asset Value
as of 03/04/2015

Global Resources Fund PSPFX $6.21 -0.04 Gold and Precious Metals Fund USERX $5.55 -0.09 World Precious Minerals Fund UNWPX $4.76 -0.07 China Region Fund USCOX $8.19 -0.05 Emerging Europe Fund EUROX $6.36 -0.10 All American Equity Fund GBTFX $28.50 -0.12 Holmes Macro Trends Fund MEGAX $20.87 -0.08 Near-Term Tax Free Fund NEARX $2.25 No Change China Region Fund USCOX $8.19 -0.05