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What America Can Learn from China’s Infrastructure
May 22, 2015

As one of the greatest nations on the planet, the United States excels in a number of areas, innovation and entrepreneurship foremost among them. But something you might be hard-pressed to find at the top of anyone’s best-of list is infrastructure—specifically roads, rail and mass transit.

Quality, dependable infrastructure is essential for strong economic growth

In this department at least, the U.S. has some catching up to do with other parts of the globe. The World Economic Forum’s Global Competitiveness Report 2014-2015 ranks the U.S. 16th in “quality of overall infrastructure”—15th in quality of its rail system and 16th in quality of its roads.

Heavy news indeed for the country known for building the first-of-its-kind transcontinental railway and interstate highway system.

But if you’ve been keeping up with current events, this shouldn’t come as a shock. The recent and very tragic Amtrak derailment in Philadelphia is a somber reminder that America needs stronger infrastructure policies at every level of government. This will not only help save lives but also create jobs, boost the economy and make transportation more safe and efficient.

Civil engineers have been making this case for years. Following its most recent assessment of all forms of infrastructure, from energy to schools to drinking water, the American Society of Civil Engineers (ASCE) gave the U.S. a depressingly low overall grade of D+. Levees and inland waterways were the worst offenders, both slapped with a D-. According to the group, which releases its report every four years, a staggering $3.6 trillion will be necessary by 2020 to bring the nation’s infrastructure up to ideal conditions. Short of this investment, the ASCE says, $1 trillion in U.S. business sales could be lost every year, along with millions of jobs.

The mayors of some of the largest U.S. cities emphatically acknowledge the relationship between quality infrastructure and strong economic growth. In a recent poll taken of several mayors, Politico magazine found that infrastructure sits atop their list of concerns. Thirty-five percent cited “better infrastructure” as the one thing that could help their city’s economy grow the most; 31 percent said that “deteriorating infrastructure” was the city’s greatest challenge.

U.S. Mayor Emphasize the Importance of Infrastructure and Education
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But public spending on infrastructure, at every level, has declined pretty rapidly as a percentage of GDP since the recession, falling well below its lowest point in the last 20 years.

total Public Construction Spending in the U.S. as a Percentage of GDP
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And now, some emerging regions, most notably China, are chugging ahead with large-scale construction projects, both domestic and international, that promise to kick-start business, strengthen trade routes and safely connect people from all corners or their borders.

One Road, One Belt… Big Opportunity

Whereas the U.S. spends less than 2 percent of its GDP on infrastructure, China currently spends around 9 percent on both domestic and foreign projects. Back in December, I pointed out that China has the most extensive network of high-speed rail in the world—approximately 7,000 miles’ worth, all told—with thousands more miles of track under construction. This will require untold amounts of natural resources.

And with China’s grand “One Road, One Belt” initiative underway, even more resources will be needed. The strategy, which harkens back to the famed Silk Road, is intended to open up new trade routes to Southeast Asia, the Middle East and Eastern Europe.

The flagship project of One Road, One Belt is the China Pakistan Economic Corridor, an elaborate series of roads, rail and pipeline that will cut lengthwise through Pakistan, giving China convenient access to ports on the Arabian Sea. Along the way, several energy projects are slated to be built.

the Proposed $46-Billion China Pakistan Economic Corridor
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If everything goes according to plan, the entire 2,000-mile corridor, expected to take 15 years to complete, should come in at around $46 billion, making it one of the most expensive infrastructure projects in human history.

It’s certainly the most China will have ever spent in another country. If you recall, it’s now investing more money outside its borders than it is domestically, having exceeded $100 billion for the first time in 2014. The country is investing so heavily in Africa, in fact, that some economists have nicknamed it “China’s Second Continent.”

One of the ways our China Region Fund (USCOX) is participating in the massive One Road, One Belt endeavor is through China Railway Construction, a top-10 holding.

Here’s hoping China sees huge returns on their investment.

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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.

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 Global Competitiveness Index, developed for the World Economic Forum, is used to assess competitiveness of nations. The Index is made up of over 113 variables, organized into 12 pillars, with each pillar representing an area considered as an important determinant of competitiveness: institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the China Region Fund as a percentage of net assets as of 3/31/2015: China Railway Construction Corp. 2.22%.

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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Wall Street Underestimates the Great American Earnings Machine
May 19, 2015

We’re only halfway through the month, but so far the old trading adage “Sell in May and go away” seems a little premature.

Last Thursday, the S&P 500 Index closed at new consecutive record highs, topping the previous record set on April 24 and further extending the six-year bull run. The surge came on the heels of weaker economic data last week, leading investors to believe that the Federal Reserve will refrain from raising interest rates this summer, if not this year.

All 10 sectors ended Thursday’s session in the black, with technology leading the rally. Apple, held in both our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX), and Facebook, held in MEGAX, made the widest gains.

Friday’s close came within just a few points of another new high, suggesting that a top has not yet been reached but that instead the market is looking to break out.

Lots of blue sky! Delta announced a 50-percent dividend raise and $5-billion  stock buyback program.

Dividend Growth at 15 Percent

With a little over 90 percent of S&P 500 companies having reported, average first-quarter earnings for the index rose a modest 2 percent. That might not seem significant, but as LP Financial’s Chief Investment Officer Burt White points out in a recent Barron’s piece, “given the steep uphill climb that corporate America faced due to the twin drags of the oil downturn and strong U.S. dollar, this is actually a good result.”

Indeed, when the earnings season began, economists were expecting to see a 3-percent drop because of depressed oil and the strong dollar. Of course, we’re now seeing a price reversal in both the commodity and currency.

Dividends from S&P 500 companies also rose, jumping about 15 percent in the first quarter, defying lackluster estimates. Delta Air Lines, also in MEGAX, announced this week that it would be raising its dividend 50 percent as well as buying back $5 billion in stock over the next couple of years.

What’s important for investors to recognize here is that the S&P 500 dividend yield is currently at 1.92 percent, ahead of the 1.50-percent yield on a 5-year government bond. And unlike the government bonds, equities give you potential growth. It’s these high dividend-paying companies that GBTFX and MEGAX seek to invest in.

Investors Shrug Off Weak Economic News

The week’s economic data suggests that the U.S. economy is growing at a slower rate now than in previous months.

According to the U.S. Census Bureau, retail and food service sales in April were little changed from March. Inventories are steadily creeping up.

On Friday, economists trimmed their forecast for the rate of jobs growth this year from 3.2 percent to 2.4 percent. Meanwhile, the University of Michigan consumer confidence index fell pretty dramatically from 95.9 in April to 88.6 in May.   

This soft economic news appears not to have dampened investors’ spirits too much, however, as it means the Fed will be more likely to keep rates low for at least the short-term.

You can see that the M1 money supply, the most liquid form of capital, began to ramp up with the first round of quantitative easing (QE) in late 2008, pulling the S&P 500 up with it. We called the bottom of the market in an Investor Alert from December 2008.

Follow the Money: Quantitative Easing and the S&P 500 Index
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After three cycles, QE officially wrapped up last October, but money continues to flow into the market, lifting all boats.

Lately, investors have been moving more of their money out of domestic equity funds and into internationally-focused funds, especially those focused on Europe, according to a Credit Suisse report. This is in line with the results of a Bloomberg survey I shared earlier in the month which shows that global investors are most bullish on the eurozone than any other region, a good sign for our Emerging Europe Fund (EUROX).

Significant Inverse Relationship Between the U.S. Dollar and Gold/Oil

The U.S. dollar lost more ground for the fifth straight week, falling to its lowest level since January. This has allowed crude oil to begin its recovery—it’s currently trading just below $60 per barrel—while gold marks time in the $1,200 range.

Year-Over-Year Percent Change Oscillator: U.S. Dollar vs. Oil Prices
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As you can see, the dollar reverted back to its mean after rising to close to three standard deviations as recently as mid-March. There’s plenty of momentum for the dollar to drop even further, which should help oil’s recovery.

Gold remains in a three-year bear market. In an interview with Jim Puplava on the Financial Sense Newshour, I explained that the domestic equity bull market has lately overshadowed the yellow metal as an asset class, but that when gold’s down, as it is now, it might be time to put money in gold and gold stocks.

This week we expect to see preliminary purchasing manager’s index (PMI) numbers for not only the U.S. and Europe but also China. Perhaps we'll see if the U.S. economy has really softened or if it’s simply taking a breather after months of steady growth.

Happy investing!

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.

M1 Money Supply includes funds that are readily accessible for spending. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

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

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

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. Note that stocks and Treasury bonds differ in investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features.

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 3/31/2015: Apple Inc. 4.03% in All American Equity Fund, 5.34% in Holmes Macro Trends Fund; Delta Air Lines Inc. 1.93% in Holmes Macro Trends Fund; Facebook Inc. 3.23% in Holmes Macros Trends 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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“Wrestling with Something Else”: Why this Gold Bear Market Is Different
May 14, 2015

Earlier this week, I had the pleasure to appear on Jim Puplava’s Financial Sense Newshour radio program and discuss the state of the gold market. Along with my peers John Doody of the Gold Stock Analyst and Ross Hansen of Northwest Territorial Mint, I shared my thoughts on how we arrived in the current bear market, what factors might help us get out of it and the role real interest rates play in prices.

Below I’ve highlighted a few of my responses to Jim’s questions.

Q: Let’s begin with the bear market that began in 2011. Two questions I’d like you to answer. Number one: What do you believe caused it? Number two: Do you think this is cyclical or a secular bear market?

A: As I often say, two factors drive gold: the Love Trade and the Fear Trade.

In 1997 and 1998, the bottom of the emerging market meltdown took place. Four years later, we saw China and Asia starting to take off and GDP per capita rise. This is an important factor in this whole run-up that I would characterize as the Love Trade. A strong correlation is rising GDP per capita, and in China, India and the Middle East, they buy gold and many gifts of love.

We saw the Fear Trade starting to take place after 9/11. The biggest factor behind the Fear Trade is negative real interest rates. So when you had both—negative real interest rates and rising GDP per capita in the emerging countries—you had gold demand going to record numbers.

At the very peak of 2011, the dollar had just been basically downgraded by Moody’s and we had negative interest rates on a 10-year government bond. It was a record negative real rate of return, like in the ‘70s. You saw this spending from the Fear Trade, but this Love Trade was in negative real interest rates.

Negative Real Interest Rates Have Had a Positive Impact on Gold
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Since then, the U.S. has gone positive. But we’re seeing that in Europe, gold is taking off in euro terms, and in Japan it’s taking off in yen terms. They’re running at negative real interest rates the way we were on a relative basis up to 2011.

Gold Returns in Euros and Japanese Yen vs. U.S. Dollars
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Q: So would you define this bear market as a cyclical bear market, a correction in a long-term trend, or would you define it as secular very much in the way that we experienced the price of gold between, let’s say, the 1980s and 1990s?

A: I think that we’re wrestling with something else. When we look at the other basic metals, what drives the demand for iron, copper, anything that makes steel? It’s fiscal policies. Huge infrastructure spending and fiscal policies. What’s happened since 2011—and after the crash of 2008 but particularly in 2011—is that when the G20 central bankers get together, they don’t talk about trade. It’s all about tax and regulation. They have to keep interest rates low to try to compete, to try to get exports up, to drive their economies. That is a big difference on the need for all these commodities, and it seems to have ended the bull market. Until we get global fiscal policies up and increase infrastructure building, then I have to turn around and look the other way, and say it’s going to take a while.

I do think that gold is going through a bear market. A lot of it has to do more with the central bankers and everything they try to do to discredit gold as an asset class, at the same time try to keep interest rates low to keep economic activity going strong. That’s been a much different factor in driving the price of gold.

The other thing that’s been fascinating is this shift of gold from North America to Switzerland to China. The Chinese have a strategy for the renminbi. Not only do they have 200 million people buying gold on a monthly program throughout their banking system, but the government is buying gold because it needs to back the renminbi to make it a world-class currency of trade.

The Great Tectonic Shift of Physical Gold From West to East

Q: Explain two things: one, why we never saw the hyper-inflation that people thought we were going to see with the massive amounts of quantitative easing (QE), and two, investor preferences changing from hard assets into stocks.

A: Well first of all, a lot of money didn’t really go directly into the economy. We never had a huge spike in credit supply in 2011, ’12, ’13. Only in ’14 did we start to see it really pick up.

U.S. Bank Loan Growth is Nearing Pre-Recession High
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We never got this big inflation some expected because the money is so difficult, outside of getting a car loan or an extension on a house. Even Ben Bernanke, after he left the Federal Reserve, had trouble refinancing his house following his own procedures. It’s extremely onerous to get a loan.

I think the biggest part is to follow the money. And where is the money going? It’s showing up in stocks. When I look at gold stocks, it’s amazing to see that the indexes are down since 2011, but a basket of the royalty companies is positive. So why is money finding its way to them? What are the factors driving that? Well, not only do they have free cash flow, but they also have a higher profit margin and they’ve been raising their dividends. Franco-Nevada again just raised its dividend. Since 2011, the dividend yield on Franco-Nevada and Royal Gold has been higher than a 5-year government bond and many times higher than a 10-year government bond. So money all of a sudden starts going for that yield and growth.

Q: What’s happened to the industry since the downturn began in 2011?

A: Well, when you take a look at the big run we had until 2006, we had very strong cash flow returns on invested capital. We had expanding free cash flow. And then a lot of the mining companies lost their focus on growth on a per-share basis. They kept doing these acquisitions, which made a company go from “$1 billion to $2 billion in revenue.” However, the cost of that meant that there was less gold per share in production and there were less reserves per share. You had this run-up in the cost for equipment, for exploration, for development. The result was you had seven majors lose their CEOs. And in the junior to mid-cap size, you probably had another 20 in which management was thrown out.

The new management is much more focused on capital returns. They have to be. Otherwise they get criticized. That will hold a lot of these managements accountable, and I think that’s very healthy. And now it’s starting to show up that the returns on capital are improving for several of these companies.

Today, gold mining company management is much focused on capital returns.

Q: What would you be doing with money right now if you were to be in the gold market? How much would you put in the gold market? How would you have that money invested.

A: I’ve always advocated 10 percent and rebalance every year. Five percent would go into gold bullion, coins, gold jewelry—you travel around the world and you can buy gorgeous gold jewelry at basically no mark-up compared to the mark-up on Fifth Avenue. The other 5 percent is in gold stocks, and if it’s a basket of these royalty companies, I think you’ll do well over time, and you rebalance.

If not, then you go to an active manager, like we have. Speaking from a buyer’s position, Ralph Aldis— portfolio manager of our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX)—is a TopGun ranked in Canada as an active manager.

Q: Explain your caution in terms of gold in the percentage you recommend.

A: I’ve always looked at gold as being a hedge from the imbalance of government policies. Having that 10-percent weighting and rebalancing every year might help protect your overall portfolio. There are many studies going back 30 years that show that rebalancing helps.

It’s also advisable to put half your money in dividend-paying blue chip stocks that are increasing their revenue. When there are great years in the stock market, people often take some profits. And when gold’s down, as it is now, it might be time to put money in gold and gold equities.

For more, listen to the entire interview.

 

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.

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.

Diversification does not protect an investor from market risks and does not assure a profit.

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. Note that stocks and Treasury bonds differ in investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features.

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

Investing in real estate securities involves risks including the potential loss of principal resulting from changes in property value, interest rates, taxes and changes in regulatory requirements.

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 and World Precious Minerals Fund as a percentage of net assets as of 3/31/2015: Allied Nevada Gold Corp. 0.00%; Barrick Gold Corp. 0.06% in Gold and Precious Metals Fund, 0.06% in World Precious Minerals Fund; The Coca-Cola Co. 0.00%; Franco-Nevada Corp. 0.10% in Gold and Precious Metals Fund, 0.01% in World Precious Minerals Fund; Market Vectors Gold Miners ETF 0.00%; Market Vectors Junior Gold Miners ETF 0.00%; Nestle SA 0.00%; Newmont Mining Corp. 1.10% in Gold and Precious Metals Fund, 0.06% in World Precious Minerals Fund; Osisko Gold Royalties Ltd. 7.13% in Gold and Precious Metals Fund, 10.29% in World Precious Minerals Fund; The Proctor & Gamble Co. 0.00%; Royal Gold Inc. 2.52% in Gold and Precious Metals Fund, 1.00% in World Precious Minerals Fund; SPDR Gold Shares 0.37% in Gold and Precious Metals Fund; Yamana Gold Inc. 0.87% in Gold and Precious Metals Fund, 0.23% in 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. 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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Clearing Up CNBC's Haze
May 13, 2015

Yesterday on CNBC, I was asked about my investment firm’s previous investment in Uranium One, “Were you in a position to benefit from approval of this deal at the same time that you were writing checks to the Clinton Foundation?” 

My answer was clear. I said, “No.”

It would be unusual for any Chief Investment Officer to recall from memory the specific dates of ownership of an individual security among thousands of investments over a decade-long time period. I was not asked to provide this detailed information in advance. Nevertheless, while I was being bombarded with questions from three different anchors, what I said was absolutely correct:  U.S. Global Investors invested in Uranium One early and sold it long before the events in question by CNBC and other media sources. The graphic that CNBC showed on-screen during my interview included a single, incomplete factoid.

These are the facts and the timeline:

  • U.S. Global Investors, a firm that specializes in commodities and natural resources, first invested in Uranium One’s predecessor, UrAsia Energy Ltd. in 2005.
  • UrAsia was acquired by Uranium One in 2007.
  • U.S. Global Investors sold all positions in Uranium One in 2007.
  • U.S. Global Investors did not hold any positions in Uranium One in 2008, 2009 or 2010, the year the Uranium One acquisition by ARMZ was approved by the Committee on Foreign Investment in the United States.
  • U.S. Global Investors re-invested in the company in the first quarter of 2011 and sold all positions before the end of the second quarter of 2011. We exited the position when uranium prices began to decline after news of the Japanese nuclear tragedy.
  • As one can see from the charts below, our investments in uranium reflect the historical price movements of the heavy metal.

Uranium Oxide Price per Pound
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Uranium Oxide Price per Pound
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When I give educational workshops to investors I always talk about the importance of gratitude. Giving back to those less fortunate is how I demonstrate gratitude. Gratitude is the single driving force behind U.S. Global’s charitable contributions.  We have a long history of charitable contributions to many organizations. The Clinton Foundation is only one on a long and varied list.

As I said during my appearance on CNBC, our donations to Clinton charitable organizations and our investments in Uranium One are separate events. One has nothing to do with the other. Any claims to the contrary are not only offensive, but patently false.

Anyone can access public filings of our fund holdings and can confirm the facts for themselves. https://www.sec.gov/edgar/searchedgar/mutualsearch.htm

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Americans Take 3-Trillion-Mile Road Trip as Dollar Corrects and Commodities Rebound
May 11, 2015

The busy summer travel season is at our doorstep and with that comes stronger fuel demand.

Back in March I shared the fact that Americans drove a record 3.05 trillion miles on U.S. highways in January 2015 for the 12-month period, with even more expected this year. Now the International Air Transport Association (IATA) revealed that international passenger traffic in March rose 7 percent from the same time a year ago. Except for Africa, every region around the globe recorded year-over-year increases in air traffic.

Americans Driving and Flying More

Last week, West Texas Intermediate (WTI) crude oil prices reached a 2015 high, rising above $60 before cooling to just below that. It marked the eighth straight week of gains.

Investment banking advisory firm Evercore makes the case that the recent oil recovery is closely following the average trajectory of six previous cycles between 1986 and 2009. Although no one can predict the future with full certainty, this is indeed constructive for prices as well as the industry.

WTI-Crude-is-Closely-Tracking-the-Average-of-the-Previous-Bottoms
click to enlarge

Because oil remains in oversupply, the recent rally owes a lot to currency moves. The U.S. dollar, which has weighed heavily on commodities for around nine months, declined to its lowest point since mid-January. We might be seeing a dollar reset, which should finally give oil—not to mention gold, copper and other important commodities—much-needed breathing room.

The oil rig count continued to drop in April and is now at a five-year low. According to Baker Hughes, 976 rigs were still operating at the end of the month, down 11 percent from 1,100 in March and 47 percent from 1,835 in April 2014. Eleven closed last week alone. This spectacular plunge has had the obvious effect of curbing output and helping oil begin its recovery from a low of $44 per barrel in January. Production appears to have peaked in mid-March at 9.42 million barrels per day and is now showing signs of rolling over.

As I’ve mentioned before, price reversals have historically occurred between six and nine months following a drop in the rig count. The number of rigs operating peaked in October and oil started to bottom in January.

Even though domestic oil inventories still stand at near-record levels—according to the Department of Energy’s weekly report, they’re at their highest level for this time of year in at least 80 years—the rate at which storage facilities are being filled is beginning to slow.

For the first time since November 2014, stockpiles declined at Cushing, Oklahoma, the nation’s largest storage facility and the pricing point for WTI.

Net Free Credit Hits Another Record Low
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China Continues to Stimulate Its Economy with Weak PMI Trend

Like oil, select industrial metals are making a welcome resurgence. Both zinc and copper have risen above their 50-day moving averages, with copper staging its strongest rally in about a decade.

Net Free Credit Hits Another Record Low
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Besides the dollar depreciation, much of this growth derives from the hope that manufacturing in China, the world’s biggest purchaser of copper, is set to pick up. The HSBC China Manufacturing PMI fell for the second consecutive month in April to 48.9, which indicates contraction in the manufacturing sector. But global investors and commodity traders are optimistic that China’s central bank will launch a fresh round of fiscal stimulus to spur purchasing and manufacturing. I’ve observed in the past that the Asian country is quick to respond to economic indicators such as the purchasing managers’ index.

Because of its ubiquity in building construction, electronic products and transportation equipment, copper is a useful barometer of economic growth.

Several mining companies that have exposure to the red metal are performing well year-to-date. Colorado-based Newmont Mining Corporation is up 38 percent for the year; Australia-based Northern Star Resources, 40 percent. We own both names in our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX).

Agribusiness stocks have also drawn investors’ attention lately, as mergers and acquisitions (M&A) chatter has intensified.

Last Friday, Syngenta, the giant Swiss producer of not only seeds but also herbicides and insecticides, formally turned down a $45 billion takeover by rival Monsanto. As I’ve discussed before, such offers and deals have typically made the stock of the company being considered for purchase more attractive.

Which Countries Would Suffer the Most if Greece Defaulted on Its Debt
click to enlarge

We own both Syngenta, up 33 percent year-to-date, and Monsanto in our Global Resources Fund (PSPFX).

Ramped-up M&A activity has also in the past suggested that a bottom has been or will soon be reached. We saw this in the oil industry, with Halliburton acquiring Baker Hughes last November and Royal Dutch Shell taking over rival BG Group in April.

As Yogi Berra quipped: It’s déjà vu all over again.

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. Because the Global Resources Fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

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.

The Chinese HSBC Manufacturing PMI is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as an leading indicator for the whole economy. When the PMI is below 50.0 this indicates that the manufacturing economy is declining and a value above 50.0 indicates an expansion of the manufacturing economy.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund, Gold and Precious Metals Fund and World Precious Minerals Fund as a percentage of net assets as of 3/31/2015: Baker Hughes Inc. 0.23% in Global Resources Fund; Newmont Mining Corp. 1.10% in Gold and Precious Metals Fund, 0.06% in World Precious Minerals Fund; Northern Star Resources Ltd. 5.52% in Gold and Precious Metals Fund, 0.59% in World Precious Minerals Fund; Syngenta AG 3.07% in Global Resources Fund; Monsanto Co. 3.17% in Global Resources Fund; Halliburton Company 0.00%; Royal Dutch Shell PLC 2.97% in Global Resources Fund; BG Group PLC 0.00%.   

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Net Asset Value
as of 05/21/2015

Global Resources Fund PSPFX $6.14 0.07 Gold and Precious Metals Fund USERX $5.90 -0.01 World Precious Minerals Fund UNWPX $4.89 No Change China Region Fund USCOX $9.87 -0.01 Emerging Europe Fund EUROX $6.87 No Change All American Equity Fund GBTFX $28.72 0.12 Holmes Macro Trends Fund MEGAX $21.21 0.02 Near-Term Tax Free Fund NEARX $2.24 No Change China Region Fund USCOX $9.87 -0.01