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Investor Alert

Innovation and Efficiency Drive U.S. Oil Supply and Demand
March 27, 2015

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Innovation and Efficiency Drive U.S. Oil Supply and Demand

Oil mounted a strong surge yesterday as Saudi Arabia-led forces carried out a series of airstrikes against Houthi militants in Yemen, part of which is bordered by the Bab el-Mandeb strait, an important shipping “chokepoint.” For the first time in three weeks, Brent oil prices rose to $59 while West Texas Intermediate (WTI) crude closed above $51 after an incredible seven-day rally.

However, the conflict wasn’t enough to sustain the uptrend, and prices slipped today—WTI to $48.41.

“The significance of the conflict was overblown, at least in terms of its effect on oil,” says Brian Hicks, portfolio manager of our Global Resources Fund (PSPFX). “There’s still too much supply.”

Indeed, U.S. crude oil supply is noticeably on the rise. As you can see in the chart below, the weekly crude reserves are significantly above the five-year average and sharply headed higher. 

U.S. Crude Oil Reserves
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This week we also learned that storage at Cushing, Oklahoma, reached 54.4 million barrels, a new high. Cushing is important to monitor because it’s the nation’s largest storage facility and serves as the pricing point for WTI. Since it was upgraded in 2011, maximum capacity now stands at 85 million barrels.

But if the current fill rate keeps up—2.12 million barrels a week—the cap could be reached as soon as this June, however unlikely that seems. Vehicle sales are up, as is the number of miles being driven on U.S. highways, and the busy summer travel season is fast approaching.

American Innovation to Thank

Simply put, technological advances such as hydraulic fracturing, or fracking, have made the oil-extraction process much more efficient than anything we’ve seen before. Amazingly, output continues to climb even as the number of rigs in operation has dropped for the fifteenth week.

U.S. Rig Count Falls for Fifteenth Week, but Oil Production continues to Climb
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“Productivity is up 50 percent over the last five years,” Brian says. “There’s already been some slowdown, but we’re still seeing the strong momentum from last year.”

That momentum could be enough to propel us toward 10 million barrels a day, something we haven’t seen in this country since 1970.

This incredible rise in efficiency has led some analysts to foresee a possible “storage crisis” in North America. It’s possible—though, again, unlikely—that we’ll eventually reach a point when there just isn’t any more commercial storage space. “Crisis” is certainly a loaded word, but such an event could serve as the catalyst that forces companies to make meaningful production cuts.

In the meantime, energy storage and transportation companies such as Kinder Morgan and Tsakos Energy Navigation are profiting in a world of abundant oil. Tsakos recently saw strong trading after it announced a dividend, and last week Morgan Stanley gave the company a “buy” rating.

Another area that’s benefited in this climate is the plastic packaging and container industry. Since oil prices began to go off the cliff last summer, returns for Graphic Packaging have climbed more than 20 percent; Sealed Air, 39 percent; and Berry Plastics, 42 percent.   

Demand Not Dissipating

At the same time that fracking has pushed daily U.S. oil output to 32-year highs, improvements to our vehicles’ internal combustion engines have increased the number of miles we can drive on a tank of gas to all-time highs.

Fuel Efficiency in U.S. Cars and Trucks is Trending Upward
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Requiring less fuel to get farther doesn’t mean demand is slipping. Quite the opposite, actually. Car and truck sales are expected to climb for the sixth straight year in 2015, a winning streak we haven’t seen in over 50 years.

U.S. Car and Light Truck Sales Return to Pre-Recession Levels
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Automobile pricing and information website TrueCar predicts that 17 million light-weight vehicles will be driven off car lots by the end of 2015, a 10-year high.

Since 2009—when sales plummeted to roughly 10 million units, their most depressed state since 1982—year-over-year sales growth has surged as the U.S. has pulled itself out of the recession. In each of the past 12 months, 200,000 or more new jobs were made available to Americans, the most since 1977.

Americans are not only buying more vehicles—some as new additions, others to replace aging clunkers—but they’re also taking them on the road more, especially now that national average fuel prices have fallen more than 31 percent from a year ago.

In fact, Americans drove a record 3.05 trillion miles on U.S. highways in January for the 12-month period, breaking the previous record set in November 2007. And with the busy summer travel season ahead of us, we should expect to see this number rise even more.   

Americans Drove a Record Number of Miles on U.S. highways in January
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Three trillion miles, by the way, is the equivalent of taking more than 200 round trips to Pluto.

Airlines improving their fuel efficiency

That’s a lot of fuel being consumed—even if our vehicles are more fuel-efficient.

According to the Energy Information Administration (EIA), gas consumption in 2015 will rise 1 percent over the previous year to reach 9 million barrels a day—a little under the number of barrels of oil the U.S. now produces daily.

Add to that the fuel consumption coming from U.S. airlines, which are also working on improving fuel-efficiency. As I pointed out earlier this month, the number of miles flown on both domestic and international carriers is flying higher, along with the number of seats per flight.

Down Under

Currently I’m in Melbourne, Australia, attending a conference for chief executives from all over the world. It’s inspiring and exhilarating to meet and share ideas with so many other global innovators, thinkers and problem-solvers. This is ultimately what’s needed to cultivate the ideas that can lead to the sorts of life-changing advancements I discussed above.

Have a blessed weekend, and happy investing! 

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Index Summary

  • The major market indices finished lower this week.  The Dow Jones Industrial Average fell 2.29 percent. The S&P 500 Stock Index fell 2.23 percent, while the Nasdaq Composite fell 2.69 percent. The Russell 2000 small capitalization index fell 2.05 percent this week.
  • The Hang Seng Composite gained 0.46 percent; Taiwan fell 2.52 percent this week and the KOSPI fell 0.86 percent.
  • The 10-year Treasury bond yield rose 3 basis points to 1.96 percent.
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Domestic Equity Market


S&P 500 Economic Sectors
click to enlarge


  • Markit’s flash U.S. composite purchasing manager’s index (PMI) rose to 58.5 in March, the best reading since September. The services sector gauge climbed to 58.6, also the best since September, while the manufacturing index moved up to 55.3, its highest point since October.
  • Sales of newly built single-family homes surprised the market with a third month of solid gains, rising 7.8 percent to 539,000 units on an annualized basis in February. Analysts had been expecting to see a decline. The brisk pace of sales contributed to inventory on the market shrinking from 5.1 to 4.7 months.
  • Kraft Foods was the best performing stock in the S&P 500, up 43.85 percent for the week on the announcement of a $46 billion merger with Heinz. It is the largest merger so far in 2015 and is being led by Berkshire Hathaway and Brazilian firm 3G Capital Partners. Heinz shareholders will own 51 percent of the combined firm, while Kraft shareholders will hold a 49 percent stake.


  • The S&P 500 experienced its second-worst week this year. The financials sector was the worst performer, falling 2.99 percent for the week.
  • Reports showed U.S. durable goods orders declined a seasonally adjusted 1.4 percent in February. The core measure of non-defense capital goods excluding aircraft also dropped 1.4 percent. January’s orders were revised down to -0.1 percent from the previously reported 0.5 percent.
  • SanDisk was the worst performing stock in the S&P 500, down 25.82 percent for the week on a statement from the company that said it would record revenues of close to $1.3 billion in the current quarter, down from its previous projection of $1.4 billion or more. The company also withdrew its previously released guidance for 2015.


  • The U.S. dollar finished the week lower ahead of jobs data next week and after Federal Reserve Chairwoman Janet Yellen reiterated on Friday that she is giving “serious consideration” to start reducing the Fed’s accommodative monetary policy. Yellen also noted that a rate hike may be warranted later this year. If the dollar continues to decline, concern over companies with a high percentage of foreign sales may abate.
  • With record low bond yields in the U.S. and abroad, stocks with a better dividend yield continue to offer good value.
  • Yellen announced on Friday that the labor market is “likely to improve further in coming months.”


  • Turmoil in Yemen caused heightened volatility as tensions erupted into a regional conflict. Saudi Arabia and its allies bombed Shiite rebels allied with Iran and Egyptian officials said a ground assault will follow the airstrikes. Iran denounced the Saudi-led air campaign, calling it "a dangerous step."
  • The Citi Economic Surprise Index, which measures economic data surprises relative to consensus expectations, remained at new multi-year lows. This does not bode well and could point to further negative economic surprises.
  • The University of Michigan Consumer Sentiment Index had a final reading of 93, above forecasts but below the final February reading of 95.4. As a leading indicator, further dips could signal underlying weakness in the economy.

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The Economy and Bond Market


Spread Between U.S. Five-year Yield and German Five-year Yield
click to enlarge


  • German inflation expectations have risen substantially since the start of the European Central Bank’s (ECB’s) bond purchasing program. The German five-year breakeven inflation rate reached its highest point since May 2014. Furthermore, business climate expectations are on the rise as the IFO Business Climate Index exceeded analyst expectations.

click to enlarge

  • The University of Michigan Consumer Sentiment Index remains highly elevated in the United States. Consumers are feeling their purchasing power rise as energy prices remain depressed and the U.S. dollar remains strong.
  • The dollar retreated for the second week in a row this week. The recent stance from the Federal Reserve, which came across more dovish than many expected, is the primary culprit for the pull-back in the currency.


  • China’s manufacturing purchasing managers index (PMI) fell below 50 this week to 49.2. While the reading may be viewed as bullish, to the extent that it causes further stimulus from China, it still signals a slowdown in this economic powerhouse.
  • U.S. equities retreated this week, giving back nearly all the gains we saw during the previous week. The S&P 500 Index fell 2.24 percent this week.
  • German stocks finally retreated this week after a 10-week streak of consecutive positive gains. The Deutsche Boerse AG German Stock Index fell 1.42 percent this week. The German index has hit 26 record-closing highs this year, according to FactSet.


  • The Eurozone’s manufacturing, services and composite purchasing managers indices (PMIs) all exceeded economists’ expectations this week. It’s become clear that the European economies have the right momentum behind them following the official start of the ECB’s bond purchasing program.
  • Geopolitical tensions within Eastern Europe remain muted for the time being. Furthermore, any de-escalation in the region remains a positive.
  • The Federal Reserve’s dovish tone in last week’s meeting is long overdue according to some. It appears that if interest rates do rise this year, it will be later and at a slower pace than expected.


  • Portuguese, Spanish, Italian and Irish yields on 10-year government bonds are all lower than U.S. 10-year Treasuries. Highly irregular and without much fundamental support, this price distortion could fuel asset-price bubbles in Europe.
  • Despite the dovish tone from the Fed, there is still a possibility that they may raise rates too soon, undermining the recovery and erasing the gains seen through the first rounds of quantitative easing (QE).
  • The U.S. dollar remains as the spotlight currency. While the dollar’s rise has subsided for the time being, it shows no clear sign of a reversal as of yet.
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A Blog by Frank Holmes, C.E.O. and Chief Investment Officer

Gold Market

For the week, spot gold closed at $1,198.75 up $16.12 per ounce, or 1.36 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 1.82 percent. The U.S. Trade-Weighted Dollar Index slipped 0.53 percent for the week.

Date Event Survey Actual Prior
Mar-23 HSBC China Manufacturing PMI 50.5 49.2 50.7
Mar-24 U.S. CPI YoY -0.10% 0.00% -0.10%
Mar-24 U.S. New Home Sales 464K 539K 481K
Mar-25 U.S. Durable Goods Orders 0.20% -1.40% 2.80%
Mar-26 Hong Kong Exports YoY 3.00% 7.20% 2.80%
Mar-26 U.S. Intial Jobless Claims 290K 282K 291K
Mar-27 U.S. GDP Annualized QoQ 2.40% 2.20% 2.20%
Mar-30 German CPI YoY 0.30% -- 0.10%
Mar-31 Europe CPI Core YoY 0.70% -- 0.70%
Mar-31 U.S. Consumer Confidence Index 96.5 -- 96.4
Mar-31 HSBC China Manufacturing PMI 49.3 -- 49.2
Apr-1 U.S. ADP Employment Change 224K -- 212K
Apr-1 U.S. ISM Manufacturing 52.5 -- 52.9
Apr-2 U.S. Initial Jobless Claims 285K -- 282K
Apr-3 U.S. Change in Nonfarm Payrolls 250K -- 295K


  • Deutsche Bank said that after seven consecutive days of gains in the gold market, it has become increasingly difficult to dismiss the rally as merely a function of the recent weakness in the U.S. dollar. Additionally, Saudi Arabia-led bombings in Yemen this week boosted demand for safe-haven assets. The Saudi government pledged to continue the strikes against Shiite rebels to prop up the allied government.
  • Bank of America believes the euro/dollar squeeze is not over, meaning the dollar should continue to correct lower. Given this outlook, BofA recommended buying any dips in the gold price and set a target of $1,307 per ounce.
  • Shanghai Gold Exchange withdrawal volume through March 13 was 51.5 metric tons (mt). If this pace continues, withdrawals this year would exceed last year’s 2,102 mt.


  • JPMorgan Chase, Barclays, Goldman Sachs, HSBC, Bank of Nova Scotia, SocGen and UBS will be the participant banks in setting the LBMA Gold Price benchmark. Several of these banks have been involved in commodities price-fixing scandals. China, now a major player in the global gold trade, was not granted representation. Commentators have speculated that had Chinese banks been included, there would be less room for manipulation.
  • Reports have been circulated speculating that Nevsun’s Bisha mine had been bombed by the Ethiopian Air Force, in retaliation for an Ethiopian helicopter being held by Eritrea, earlier in the week. So far Nevsun has only reported an “act of vandalism” at the mine which caused no significant damage, affecting only the base of a tailings thickener.
  • Platinum non-commercial Nymex shorts have more than doubled since the beginning of February and last week rose another 13.2 percent to their fourth successive all-time high. Several factors have weighed on the metal recently including an ongoing weak demand outlook due to constrained diesel auto catalyst consumption in Europe, poor jewelry demand for platinum in China, and South African supply recovering much more quickly than expected after last year’s five-month-long strikes.


  • HSBC analysts, some of the earliest adopters of a bullish view on the U.S. dollar back in 2013, now believe the dollar rally may be at or nearing its end. The analysts point out that past dollar rallies of this type have mostly seen a dollar appreciation of around 20 percent and lasted from under a year, meaning the current rally is already extended. Furthermore, they pointed out that disappointing U.S. economic data is mounting and being largely ignored. Valuations suggest that the U.S. dollar may now be the world’s most overvalued currency, only being overshadowed by the strength in the Swiss franc since its tie to the euro was cut.
  • The Philadelphia Gold and Silver Index, made up of the largest gold stocks, is at around a 73 percent discount to the bullion price, with the index more than 60 percent lower than the start of 2008. Gold, on the other hand, is still more than 40 percent higher. The index’s total price/cash flow has almost halved from 2008, to around 7.5x from 14.3x even though it is expected to post its first positive operating income this year since 2012.
  • TD Securities published a precious metals outlook in which the firm questions the sustainability of the supply/demand balance in the gold market due to declining reserves. 2014 marked the third straight year of reserve declines, with exploration spending being reduced as miners focused on capital preservation. Total reserves for the large-cap producers are down around 24 percent from the 2011 peak. The decline highlights that existing exploration budgets are not sufficient to keep pace with current mining depletion. In contrast, Integra Gold announced it recently intersected 14.8 grams per tonne (g/t) gold over 10 meters and 11.5 g/t gold over 8 meters in a step-out drilling up to 330 meters from triangle.  Discoveries like Integra could make it of interest as a takeover target.


  • Analysts at SocGen published a report in which they forecast that the gold price, having given away all its early year gains, is headed sharply lower, as they see a continuation in the dollar’s strength. They see the price of gold falling to an average of $925 per ounce between 2016 and 2019. The timing of the report was perhaps unfortunate in that it predated the events of the past few days, which has seen the reverse occur.
  • CPM Group sees gold falling for a third straight year in 2015 as concern eases that global economies will falter, curbing demand for the metal as a haven. CPM Group forecast gold will average $1,208 per ounce in 2015.

Gold Has Typically Risen in Price When Real Rates are Negative
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  • Under the auspices of fighting terrorism, France’s Minister of Finance has rolled out a series of eight new restrictions aimed specifically at minimizing the use of cash. In reality, these are capital controls designed to keep individuals’ savings trapped in the banking system. Many banks in Europe have already dropped their deposit rates into negative territory and as interest rates become even more negative, more people will realize that they’re better off holding physical cash instead of paying their banker to hold it for them.

600 Million Reasons to Keep our Eyes on India

Energy and Natural Resources Market


Global Oil Demand Continues to Rise
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  • Canadian energy stocks rebounded during alongside a bounce in crude oil prices. The S&P/TSX Capped Energy Index rose 2.08 percent this week.
  • Construction materials stocks outperformed once again this week. Their rally remains intact due to the relative strength seen from the U.S. economy. The S&P Supercomposite Construction Materials Index and Martin Marietta Materials rose 1.43 and 2.33 percent, respectively.
  • Oil and gas equipment and services stocks rose with the bounce in oil this week. The S&P Supercomposite Oil & Gas Equipment & Services Index rose 0.93 percent.


  • Dry ships stocks suffered this week as there has yet to be any lift off seen in iron ore prices. The Bloomberg Dry Ships Index fell 2.89 percent this week.
  • Clean energy equities retreated along with technology stocks this week. The NASDAQ Clean Edge US Liquid Series Index fell 2.54 percent.
  • Railroads stocks underperformed this week as Union Pacific Corp saw a weak first quarter due to port strikes as well as weather-related difficulties. The S&P Supercomposite Railroads Index fell 7.22 percent this week.


  • The U.S. dollar fell for the second consecutive week. While a downtrend in the currency is far from materializing, its inevitable occurrence should be exceedingly positive for resource equities.
  • The geopolitical situation between Saudi Arabia and Yemen could help boost the fear premium for energy, something that has been lacking in recent months.


  • This week we saw China’s manufacturing purchasing managers index (PMI) fall below the 50 mark to 49.2. The slowdown in China, if persistent, could have serious drawbacks for commodities.
  • Oil markets are currently being supported by heightened geopolitical factors and improved investor sentiment.  However, if these factors subside in the weeks ahead, fundamental oversupply in the market may pressure crude prices in the second quarter.

Priming the Pump for Growth in Emerging Markets Now. Watch the Webcast on Demand

Emerging Markets



  • Greek equities rebounded this week as talks continue among Eurozone officials to sort through the country’s debt problems. The Athens Stock Exchange General Index closed up 3.26 percent this week.
  • Hungarian equities outperformed this week on the back of a rate cut by the country’s central bank. Additionally, the country’s benchmark two-week deposit rate was lowered to a record 1.95 percent on Tuesday.  The Budapest Stock Exchange Index rose 3.84 percent this week.
  • Chinese equities rebounded this week as expectations of further easing rose. China’s flash purchasing managers’ index (PMI) data came in weak at 49.2 and down around 1.5 percent. The Shanghai Stock Exchange Composite Index rose 2.04 percent this week.


  • Russian equities retreated this week, despite a jump in crude oil prices. The MICEX Index fell 3.51 percent this week.
  • Brazilian equities underperformed this week as unemployment data came in higher than expected and consumer confidence weakened. Brazil’s central bank emphasized its intention to remove itself from any intervention in order to stem the real’s decline. The Ibovespa Brasil Sao Paulo Stock Exchange Index fell 3.60 percent this week.
  • Egyptian stocks also underperformed this week as geopolitical tensions in Saudi Arabia shook investor confidence throughout the region. The Egyptian Exchange EGX 30 Price Index fell 4.89 percent this week.


  • South Korea applied to join China’s initiated Asian Infrastructure Investment Bank. Upsetting to the United States, South Korea’s intention to become a founding member of the bank is potentially a response to the Korean won’s significant loss of competitiveness in the region compared to the Japanese yen.

Korean Won Loses Competitiveness Against Japanese Yen
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  • Fidelity Investments Management had its investment quota for Chinese markets raised this week. The States Administration of Foreign Exchange in China originally limited investments to $1 billion for foreign investors. Fidelity now has a quota of $1.2 billion according to the regulator, a sign that the country is well underway in opening up its capital markets.
  • China’s Finance Ministry is allowing various authorities to convert obligations into municipal bonds. This should help banks reduce their exposure to risky assets and reduce exposure to local-government financing vehicles. The move should also help mitigate the proliferation of non-performing loans and free up liquidity for banks.


  • Russia’s economy is currently dealing with its highest inflation rate since 2002 and is expecting consumer spending to fall by the largest amount in six years. The central bank is forecasting the economy to shrink by as much as 4 percent this year, while capital outflows may be as high as $110 billion and fixed investment is expected to fall by 13.7 percent.
  • South Africa warned that it may raise interest rates in response to a weaker rand along with rising inflation. This tightening could end up harming equities.
  • Consumer confidence in Turkey fell to its lowest level since 2009. This pullback in demand coincides with the continued elevated tension between the government and the central bank.

Consumer Confidense in Turkey Falls to Five-year Low
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Discover 9 Trends Across 19 Emerging Markets Over 10 Years

Leaders and Laggards


Weekly Performance
Index Close Weekly
XAU 67.73 -1.54 -2.22%
S&P/TSX Canadian Gold Index 160.50 -4.28 -2.60%
S&P Energy 559.23 -4.07 -0.72%
Nasdaq 4,891.22 -135.20 -2.69%
Russell 2000 1,240.41 -25.96 -2.05%
S&P 500 2,061.02 -47.08 -2.23%
Korean KOSPI Index 2,019.80 -17.44 -0.86%
Gold Futures 1,198.40 +13.00 +1.10%
Hang Seng Composite Index 3,370.37 +15.31 +0.46%
DJIA 17,712.66 -414.99 -2.29%
Natural Gas Futures 2.59 -0.20 -7.04%
Oil Futures 48.34 +2.62 +5.73%
S&P Basic Materials 305.34 -4.22 -1.36%
10-Yr Treasury Bond 1.96 +0.03 +1.55%
Monthly Performance
Index Close Monthly
Korean KOSPI Index 2,019.80 +29.33 +1.47%
Russell 2000 1,240.41 +5.31 +0.43%
Nasdaq 4,891.22 -75.92 -1.53%
DJIA 17,712.66 -511.91 -2.81%
S&P 500 2,061.02 -52.84 -2.50%
Gold Futures 1,198.40 -3.90 -0.32%
Natural Gas Futures 2.59 -0.30 -10.50%
S&P Basic Materials 305.34 -20.38 -6.26%
S&P Energy 559.23 -30.95 -5.24%
10-Yr Treasury Bond 1.96 -0.01 -0.46%
S&P/TSX Canadian Gold Index 160.50 -17.04 -9.60%
XAU 67.73 -7.67 -10.17%
Oil Futures 48.34 -2.65 -5.20%
Hang Seng Composite Index 3,370.37 -332.01 -14.83%
Quarterly Performance
Index Close Quarterly
S&P/TSX Canadian Gold Index 160.50 +19.95 +14.19%
Russell 2000 1,240.41 +25.20 +2.07%
Korean KOSPI Index 2,019.80 +71.64 +3.68%
Nasdaq 4,891.22 +84.36 +1.75%
Hang Seng Composite Index 3,370.37 +158.71 +4.94%
DJIA 17,712.66 -341.05 -1.89%
S&P 500 2,061.02 -27.75 -1.33%
S&P Basic Materials 305.34 -4.31 -1.39%
XAU 67.73 -0.67 -0.98%
Gold Futures 1,198.40 +1.70 +0.14%
S&P Energy 559.23 -33.96 -5.72%
10-Yr Treasury Bond 1.96 -0.29 -12.88%
Oil Futures 48.34 -6.39 -11.68%
Natural Gas Futures 2.59 -0.42 -13.87%

Please consider carefully a fund’s investment objectives, risks, charges and expenses.   For this and other important information, obtain a fund prospectus by visiting 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. 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 percent 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.

Because the Global Resources Fund concentrates its investments in a specific industry, 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 percent to 10 percent of your portfolio in these sectors.

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 Near-Term Tax Free Fund 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.

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.

Past performance does not guarantee future results.

Some link(s) above may 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.

These market comments were compiled using Bloomberg and Reuters financial news.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the U.S. Global Investors Funds as a percentage of net assets as of 12/31/2014:

Kinder Morgan, Inc.: 0.0%
Tsakos Energy Navigation Ltd: 0.0%
Graphic Packaging Holding Co.: 0.0%
Sealed Air Corp.: 0.0%
Berry Plastics Group, Inc.: 0.0%
Kraft Foods Group, Inc.: 0.0%
Berkshire Hathaway, Inc.: 0.0%
SanDisk Corp.: 0.0%
Nevsun Resources Ltd: 0.0%
Integra Gold Corp.: World Precious Minerals Fund, 0.40%
Martin Marietta Materials, Inc.: 0.0%
Union Pacific Corp.: All American Equity Fund, 1.25%

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

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 Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.
The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.
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 Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
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.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks.
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 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 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500.
The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500.
The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns.
The S&P Municipal Bond Index is a broad, market value-weighted index that seeks to measure the performance of the U.S. municipal bond market.
The Bloomberg USD High Yield Corporate Bond Index is a rules-based, market-value weighted index engineered to measure publicly issued non-investment grade USD fixed-rate, taxable, corporate bonds. To be included in the index a security must have a minimum par amount of 250MM.
The Bloomberg US Corporate Bond Index is a rules-based market-value weighted index engineered to measure the investment grade, fixed-rate, taxable, corporate bond market. It includes USD-denominated securities publicly issued by U.S. and non-U.S. corporate issuers. To be included in the index a security must have a minimum par amount of 250MM.
ZEW Germany Expectation of Economic Growth is a survey on the question of economic growth in six months.
BI Global Integrated Oils Valuation Peers Index is an equal-weighted index. The index is composed of major oil and gas companies.
S&P/TSX Capped Diversified Metals and Mining Index is an index of companies engaged in diversified production or extraction of metals and minerals.
The Bloomberg Global Leaders Fertilizers Index is a capitalization weighted index comprised of companies from the fertilizers industry.
The S&P 500 Construction Materials Index is a capitalization-weighted index that tracks the companies in the construction materials industry as a subset of the S&P 500.
The NAHB Housing Market Index is derived from a monthly survey, and gauges builder perceptions of current single-family home sales and sales expectations for the next six months, as well as rating traffic of prospective buyers. Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The S&P 500 Chemicals Index is a capitalization-weighted index that tracks the companies in the chemicals industry as a subset of the S&P 500.
The Architecture Billings Index (ABI) reflects the approximate nine-to-twelve month lag time between architecture billings and construction spending. The index is used as an economic indicator of construction activity.
The Bovespa Index, or Ibovespa (IBOV), is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.
The Borsa Istanbul 100 Index is a capitalization-weighted index composed of National Market companies except investment trusts.
The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange.
The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange.
The ADX General Index is a free float market capitalization weighted index of stocks listed on the Abu Dhabi Securities Exchange. For an equity to be a member of the index it must have five trading days since it was listed.
The Qatar Exchange Index (formerly DSM20) is a capitalization weighted index of the 20 most highly capitalized and liquid companies traded on the Qatar Exchange.
The Bolsa de Valores de Lima General Sector Index (IGBVL) is a value weighted index that tracks the performance of the largest and most actively traded stocks on the Lima Exchange.
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).
The IFO Business Climate Index is a widely observed early indicator for economic development in Germany.
The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University of Michigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing to spend money.
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 German Stock Index is a total return index of 30 selected German blue-chip stocks trading on the Frankfurt Stock Exchange.
The S&P/TSX Capped Energy Index is a constrained market capitalization-weighted index that consists of Canadian energy sector companies listed on the Toronto Stock Exchange.
The S&P Supercomposite Construction Materials Index is a capitalization-weighted index.
The S&P 1500 Supercomposite Oil & Gas Equipment & Services Index is a capitalization-weighted index comprised of stocks whose primary function is equipment and services for natural gas and oil resources.
The Bloomberg Dry Ships Index is a capitalization weighted index. The index was developed with a base value of 100 as of December 31, 1998.
The NASDAQ Clean Edge U.S. Liquid Series Index is a modified market capitalization-weighted index designed to track the performance of clean-energy companies that are publicly traded in the U.S.
The S&P Supercomposite Railroads Index is a capitalization-weighted index.
The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange.
The Budapest Stock Exchange Index is a capitalization-weighted index adjusted for free float. The index tracks the daily price-only performance of large, actively traded shares on the Budapest Stock Exchange.
The Shanghai Stock Exchange Composite Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.
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 Bovespa Index, or Ibovespa (IBOV), is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.
The EGX 30 Index is a major stock market index which tracks the performance of 30 most liquid stocks traded on the Egyptian Exchange.

Share “Innovation and Efficiency Drive U.S. Oil Supply and Demand”

Net Asset Value
as of 03/27/2015

Global Resources Fund PSPFX $5.84 -0.02 Gold and Precious Metals Fund USERX $5.39 -0.03 World Precious Minerals Fund UNWPX $4.53 -0.01 China Region Fund USCOX $8.32 0.05 Emerging Europe Fund EUROX $6.15 -0.06 All American Equity Fund GBTFX $27.82 0.05 Holmes Macro Trends Fund MEGAX $20.80 0.15 Near-Term Tax Free Fund NEARX $2.26 No Change China Region Fund USCOX $8.32 0.05