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Investor Alert

Please note: The articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

5 of the Biggest Financial Stories From 2019
December 27, 2019

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

5 of the Biggest Financial Stories From 2019

According to the Chinese Zodiac Calendar, 2019 was the Year of the Pig. Investors and traders, I believe, will likely also remember it as the year of the bull.

Every asset type, it seems—from large-caps to small-caps, from foreign to domestic, from gold to oil—finished not just up for the year, but up.

multiple asset types ended the year up in 2019
click to enlarge

A significant share of the appreciation—in equity prices anyway—occurred in the second half of the year, following the Federal Reserve’s first rate cut in more than a decade. Coupled with signs that trade tensions between the U.S. and China were finally beginning to cool (or at least not escalate), a third annual downward adjustment in October was enough to convince some investors that we were looking at not just a pause in monetary policy, as Fed Chair Jerome Powell insists, but full-blown quantitative easing (QE).

This has helped the market soar to new record highs, debunking persistent calls that the more than 10-year-old bull run was getting short of breath.

What else happened in 2019? To answer that question, I looked back at my five most visited articles from the year that was, ranked below starting with number five.

5. How to Unrig the Gold Market, According to GATA’s Chris Powell

Over the years, I’ve had the pleasure of interviewing some of the most fascinating and knowledgeable figures in the gold sector. Among them is Chris Powell, secretary/treasurer at the Gold Anti-Trust Action Committee (GATA). For more than 20 years, Chris and others at GATA have sought to expose the actions of central banks, which are believed to have intervened, or are still actively intervening, in the gold market in an effort to suppress prices.

My May interview with Chris is a must-read for anyone seeking information on the gold market that traditional financial news agencies won’t touch. It’s an eye-opening conversation, and Chris remembers to bring receipts.

4. Is the Fed Gearing Up for a New Round of Quantitative Easing?

All the signs seem to point to a new round of Fed easing right now. The bank not only trimmed rates three times this year, most recently in October, but it also began to expand its balance sheet at the fastest pace since the financial crisis.

Even if you believe Fed Chair Powell that this is simply a pause in monetary normalization, there’s no denying that most of the rest of the world is in easing mode. That includes developed as well as emerging markets. November, in fact, marked the 10th straight month of net rate cuts among a group of 37 developing economies. That’s the longest-running cycle easing cycle since 2013.

net number of emerging market central banks in rate cutting mode
click to enlarge

3. These Are the Five Wealthiest Self-Made Texans

Everything’s bigger in Texas, they say, and that includes the number of billionaires. According to Forbes, the Lone Star State has the third-most billionaires in the U.S., following only California and New York.

One of the things I love about Texas, home to U.S. Global Investors, is that it rewards hard work and innovation, which is why it regularly ranks as the best state in the nation for business. I thought it would be interesting to find out who were not just the wealthiest Texans, but the wealthiest self-made Texans—those who, after coming from humble backgrounds, found fortune through persistence and gumption alone.

You may not be surprised to learn that Michael Dell, founder and CEO of Dell Technologies, sits at the top of the list, worth an incredible $31 billion ($27.6 billion at the time I wrote this Frank Talk nearly a year ago). Click the link above to find out who else made the list!  

2. This AI Company Is the Future of Gold Exploration

Denis Laviolette had a dream to help producers stop wasting time and money by finding the very best spots to explore for metals and minerals. That’s why he named his company GoldSpot Discoveries, though Denis admits that he’s “commodity agnostic.”

And how does GoldSpot manage to locate underground minerals for its clients? Through extreme data aggregation and artificial intelligence (AI), of course.

“We have more data at our fingertips than ever before, yet new discoveries have been on the decline despite ever increasing exploration spending on data collection. We believe GoldSpot can change that,” Denis explained to me during an interview back in February. “Harnessing a mountain’s worth of historic and current global mining data, AI can identify patterns necessary to fingerprint geophysical, geochemical, lithological and structural traits that correlate to mineralization.”

Learn more about GoldSpot—which began trading on the TSX Venture Exchange in February—by clicking the link above.

1. Hard Truths in Resource Investing, According to Bob Moriarty

The financial news story that caught the greatest number of visitors’ attention in 2019 had to do with the release of my friend Bob Moriarty’s latest book, Basic Investing in Resource Stocks: The Idiot’s Guide. Many readers are no doubt familiar with Bob as founder and editor-in-chief of the popular resource websites 321Gold.com  and 321Energy.com, and Basic Investing is the culmination of his years educating investors on how best to navigate the gold, metal and mining markets.

Like me, Bob is a firm believer that it’s crucial to have a small percentage of your portfolio in hard assets such as gold.

“If you don’t own some gold (or silver or platinum or palladium or rhodium) that you can lay your hands on, you may regret it,” he writes in Basic Investing. “Precious metals are the most secure insurance policy that you can buy to protect your financial house, even as it begins to burn down.”

While I’m here, I should say that Bob has done a lot over the years to introduce his readers to U.S. Global Investors and what we offer investors. We’re very grateful for his endorsements and influence.

I hope 2019 delivered health, wealth and happiness, and I wish for 2020 to be even better. To all of my friends, family, shareholders and investors, and behalf of everyone at U.S. Global Investors, Happy New Year!

Happy New Year 2020 from U.S. Global Investors

Gold Market

This week spot gold closed at $1,510.56, up $32.34 per ounce, or 2.19 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 6.99 percent. The S&P/TSX Venture Index came in up just 2.69 percent. The U.S. Trade-Weighted Dollar fell 0.70 percent, with the bulk of fall on Friday.

Date Event Survey Actual Prior
Dec-23 Durable Goods Orders 1.5% -2.0% 0.2%
Dec-23 New Home Sales 732k 719k 710k
Dec-26 Initial Jobless Claims 220k 222k 235k
Dec-30 Hong Kong Exports -6.2% -- -9.2%
Dec-31 Conf. Board Consumer Confidence 128.5 -- 125.5
Jan-1 Caixin China PMI Mfg 51.6 -- 51.8
Jan-2 Initial Jobless Claims 222k -- 222k
Jan-3 Germany CPI YoY 1.4% -- 1.1%
Jan-3 ISM Manufacturing 49.0 -- 48.1

Strengths

  • The best performing metal this week was platinum, up 3.85 percent, with silver and palladium just trailing. Gold traders and analysts were overwhelmingly bullish on their outlook for the yellow metal in the weekly Bloomberg survey. Sentiment was bolstered as gold cracked back above $1,500 per ounce. Gold hit a seven-week high despite comments by President Trump that a trade deal signing with China would be imminent.
  • Gold had its biggest weekly advance in more than four months, and with only a few days left in 2019, the metal is headed for its best year since 2010, reports Bloomberg. Margaret Yang, analyst at CMC Markets Singapore Pte, says investors are betting that gold is poised for a rebound after three months of price consolidation. Turkey’s central bank increased its gold holdings by $446 million from the previous week.
  • Gold’s rally this week was largely driven by an unexpected drop in U.S. durable goods orders, which overshadowed rising new home sales, reports Bloomberg. Silver also rose and crossed above its 50-day moving average. Tai Wong, head of metals derivatives trading at BMO Capital Markets, said bullion “has momentum that is a little mysterious and no one wants to stand in the way.”

Weaknesses

  • The worst performing metal this week was gold, up 2.19 percent. According to the National Bureau of Statistics, China’s gold imports were 57 percent lower in November than the same period a year ago. Although higher from a month ago, total imports of non-monetary gold were just 45,817 kilograms. China is the world’s top consumer of the metal.
  • China had another record year of corporate bond defaults in 2019, but it seems on purpose. Rebecca Choong Wilkins reports for Bloomberg that rising defaults are now a plan, as the government no longer steps in as frequently to help bail out troubled companies by buying bonds. In 2017 there was around 25 billion yuan worth of bond defaults and this year the figure is closer to 125 billion yuan. “It’s getting more dangerous to count on some companies being, in essence, too connected to fail.”
  • Bloomberg News reports that AngloGold Ashanti and joint venture partner Iamgold Corp. will sell their interests in the Sadiola Mine in Western Mali to Allied Gold Corp. for $105 million in cash. Allied Gold is a private company, so there little other information on the deal.

Opportunities

  • Gold could rise 20 percent to $1,800 an ounce next year due to growing recession fears. According to the median estimate of economists surveyed by Bloomberg, the likelihood of a recession in the next 12 months is 30 percent. The National Trucking Association puts the likelihood much higher at 80 percent. Extreme positioning in the futures market has been pared back, which could open the path for another rally close to $1,800.
  • Stocks have had their Santa Claus rally, while the Three Wise Men have been good to gold. According to Bloomberg data, in eight of the years this decade, gold prices have advanced from December 23 to January 3 with returns averaging 1.4 percent. This annual gold rally is largely due to jewelers restocking supplies after the busy Christmas season.
  • Palladium has soared more than 40 percent this year and could move even higher in 2020 due to the auto industry adjusting to meet new emission standards, reports Bloomberg. Morgan Stanley analysts project a palladium deficit of 1.06 million ounces. Higher emission standards globally could boost palladium loadings by 5 percent to 7 percent next year, according to TD Securities. Ryan McKay, a TD Securities analyst, says “2020 will be the year in which the largest number of emissions-legislation changes will be adopted.” Palladium is a key component in autocatalysts that cut emissions in gasoline-powered vehicles.

Palladium price climbs throughout 2019
click to enlarge

Threats

  • JPMorgan is bullish on 2020 and is advising clients to short gold via the options market, overweight equities and underweight bonds, reports Bloomberg. This is in big contrast to Goldman Sachs, which sees gold soaring next year. JPMorgan sees recession risks subsiding while Goldman sees recession risks arising from the trade war.
  • The U.S. corporate bond market is largely upheld by strong foreign demand. Investors globally are hunting for higher-paying assets in the face of over $11 trillion of negative-yielding securities around the world, reports Bloomberg. According to Federal Reserve flow of funds data, money managers outside of the U.S. have bought $114 billion of corporate bonds on a net basis this year through the third quarter.
  • Two U.S. Senators introduced a bill that would move the headquarters of 10 federal departments to outside of Washington D.C. The Senators say benefits to moving agencies to other parts of the nation would boost local economics, lower costs and spread federal jobs out across the country, rather than concentrate most in D.C. Ten different states would each see a different department relocate there. Opponents to the bill say that moving headquarters is a way to weed out older and legacy employees who aren’t willing to move, leading to a brain drain of knowledge, and could make it harder for agencies to work together with Congress.

S&P 500 A Decade in Review - Take Our Latest Quiz!

Index Summary

  • The major market indices finished mostly up this week. The Dow Jones Industrial Average gained 0.67 percent. The S&P 500 Stock Index rose 0.58 percent, while the Nasdaq Composite climbed 0.91 percent. The Russell 2000 small capitalization index lost 0.17percent this week.
  • The Hang Seng Composite gained 1.36 percent this week; while Taiwan was up 1.11 percent and the KOSPI was flat.
  • The 10-year Treasury bond yield fell 4 basis points to 1.874 percent.

Domestic Equity Market

SP 500 Economic Sectors weekly performance
click to enlarge

Strengths

  • Consumer discretionary was the best performing sector of the week, increasing by 1.48 percent versus an overall increase of 51 basis points for the S&P 500.
  • Apache Corp was the best performing S&P 500 stock for the week, increasing 15.52 percent.
  • According to one Bloomberg headline this week, Tesla is the decade’s best-performing auto company. In fact, anyone who bought the stock when it went public back in 2010 has a “bonanza of 1,190 percent.

Weaknesses

  • Utilities was the worst performing sector for the week, decreasing by 44 basis points versus an overall increase of 51 basis points for the S&P 500.
  • Perrigo Co Plc was the worst performing S&P 500 stock for the week, falling 5.23 percent.
  • Macy’s ranks as one of the worst retail stocks of 2019, reports Forbes, joining other names like Gap and L Brands. Investors sold the stock in drovers this year, causing shares to lose 46 percent and making it the worst performing retail stock in the S&P 500.

Opportunities

  • As reported by Bloomberg, Apple Inc.’s first batch of 5G-enabled iPhones will “open up the floodgates” on device upgrades, Wedbush Securities Inc. predicted. About 350 million iPhones within the company’s 900 million installed user base are currently in the window of an upgrade opportunity, analyst Dan Ives wrote in a note to clients on Monday. The analyst reiterated his outperform rating, while lifting his price target to $350 a share from $325.
  • DraftKings Inc.is going public in a three-way deal with gaming technology provider SBTech, along with an acquisition fund founded by former Hollywood executive Jeff Sagansky, writes Bloomberg. This values the new firm at about $3.3 billion.
  • Apache Corp. shares rose as much as 13 percent after the company tapped Total SA to jointly develop a large but still unproven oil tract off the coast of Suriname. The 50-50 venture will give Apache $100 million in cash up front and reduce its exposure to the costs of developing Block 58, which covers 1.4 million acres.

Threats

  • U.S. oil and gas producers have raised the least funds from share sales this year in over a decade, writes Bloomberg, as investors lose their appetite for shale. Sources of funding are likely to be scarce in 2020 too, the article explains. Industry stock sales plunged about 70 percent in 2019, and debt issuance was largely flat from a year ago as companies face a wall of maturing bonds.
  • Lyft slid the most in more than two weeks as KeyBanc said stagnating new customer growth suggests the ride-share market is growing saturated and the benefit the company has gotten from rival Uber’s issues may be waning. Lyft fell as much as 5.6 percent at the start of the week, the biggest intraday decline since December 5.
  • Cowen is forecasting trouble for Wells Fargo & Co. through next year, reports Bloomberg Law, with mounting risk as Democrats aim for the bank. “Wells Fargo does not appear close to putting its Washington troubles behind it,” analyst Jaret Seiberg wrote in a note. Given the tension, he said it’s hard to see how the Federal Reserve could vote to lift the asset cap it imposed on the bank next year.

The Economy and Bond Market

 

Strengths

  • Third-quarter GDP showed personal spending increased an annualized 3.2 percent after a 4.6 percent pace -- the best back-to-back quarters in almost five years. While some moderation can be expected in the fourth quarter, income growth remains relatively solid and should continue to fuel the outlays that make up the biggest part of the economy, reports Bloomberg.

U.S. personal shopping posts best consecutive quarters in nearly five years
click to enlarge

  • Sales of new U.S. homes increased in November, writes Bloomberg, capping the best three months for demand since 2007 and reflecting sustained momentum in a residential real estate market that’s helping to underpin the economy.
  • Filings for U.S. unemployment benefits fell to a three-week low, reflecting a solid labor market.

Weaknesses

  • U.S. durable goods orders fell 2 percent in November, reports MarketWatch, which is the biggest decline since May. Economists were expecting a 1 percent rebound in orders during the month, as a result of the General Motors strike. However, numbers were dragged lower by a major decline in defense aircraft combined with a small drop stemming from Boeing’s 737 MAX woes, the article explains.
  • The Richmond Fed’s regional factory index posted the second negative reading in three months in November as new orders and shipments contracted. The order backlog also contracted, which is a sign of weaker demand. The overall business activity index for mid-Atlantic region factories fell to minus 5 in December, according to the latest report from the Federal Reserve Bank of Richmond.
  • U.S. retail traffic is expected to remain soft in the last shopping window in December despite generally favorable weather conditions, according to a Cowen report published Thursday. The outlook for retail traffic in the fourth week in December is negative 7 percent to negative 9 percent versus a gain of 5.6 percent in the same period a year ago.

Opportunities

  • The global stock of debt with sub-zero yields has fallen to $11 trillion, the least since June, as a thaw in U.S.-China trade tensions brightens the world economic outlook. Earlier this year, a third of all investment-grade bonds—$17 trillion—had rates below 0 percent, meaning that buyers holding the securities to maturity are guaranteed to make a loss.
  • The Chicago Fed’s national activity index rose in November to the highest since February 2018. That brings the three-month average reading to -0.25, moving away from the recessionary threshold of -0.7.
  • China cut import tariffs on a wide range of goods including food and parts for manufacturing smart-phones, writes Bloomberg, continuing Beijing’s drive to spur domestic demand and demonstrating its desire to open its economy as it pursues a trade deal with President Donald Trump.

Threats

  • The ISM Manufacturing Index next Friday is expected to improve from the prior month. However, given the recent weakness in durable goods, there is room for disappointment amid continued weakness in industrial goods.
  • UBS put its fourth-quarter GDP estimate at 1.7 percent, below the third quarter’s 2.1 percent. The company said the new and existing home sales data of the past two weeks, along with equipment investment figures, were marginally weaker than previously estimated.
  • According to S&P Global, slowing economic growth and deteriorating confidence has taken their toll on corporate credit quality. The non-financial ratings net outlook bias is at its weakest since 2016.

Energy and Natural Resources Market

 

Strengths

  • The best performing major commodity for the week was palm oil, which gained 5.53 percent on its brighter outlook for biofuel use, but production estimates in Malaysia dropped about 15 percent for the first 20 days of December, leading to the recent spike in prices. Oil is set for its biggest monthly gain in almost a year. Prices are up almost 12 percent in December as of Thursday, according to Bloomberg. Reuters reported that U.S. stockpiles fell 7.9 million barrels last week and optimism grows for a U.S.-China trade deal. Oil has had a stellar 2019, up nearly 27 percent just days before year end.
  • Copper in New York rose to its highest level in more than seven months on Christmas Day, buoyed by progress on the U.S.-China trade deal, reports Bloomberg. The metal also rose on news that China’s biggest copper smelters agreed they should cut production due to shrinking margins and an oversupply of sulfuric acid. Ten major smelters met on Thursday in Fuzhou for their quarterly gathering. Nickel has been one of the best performing non-precious metals of 2019. Despite falling in the third quarter, prices began to rebound on speculation that an Indonesian export ban will drive prices higher in 2020.

Nickel price year to date
click to enlarge

  • Bloomberg reports that China’s economic performance improved in December for the first time in eight months, according to the earliest-available indicators. This is positive news for commodities, as China is the world’s top consumer of many metals, minerals and fuels.

Weaknesses

  • The worst performing major commodity for the week was natural gas, which fell 2.90 percent after the government’s Global Forecast System showed milder overnight freezes, limiting the intensity of the cold. Iron ore had a rough week, falling as much as 1.4 percent in Singapore on Wednesday. Prices have extended a slump into the $80s per ton as the supply outlook for 2020 looks strong.
  • China imposes year-end coal import restrictions and Australia has suffered the brunt of those policies. Australian shipments to China fell by 31 percent in November, even as China’s total purchases rose by 9 percent from a year ago. The top coal consumer instead increased imports from Russia, Mongolia and Indonesia. Bloomberg reports that Beijing adjusts import limits to balance protecting domestic miners, however, the policy lacks clarity and there is no official notice.
  • Piracy in the shipping sector has surged this year along Southeast Asia’s straits of Malacca and Singapore, one of the world’s busiest trade routes, according to data from ReCAAP ISC, a piracy information group. Incidents along the shipping route have risen to 30, up from just eight last year, which is the highest figure since 104 incidents in 2015. Bloomberg writes that the straits’ location between the Indian and Pacific oceans has made it one of Asia’s major trading and fuel storage hubs.

Opportunities

  • KKR & Co. and Alberta Investment Management Corp. are set to buy a 65 percent stake in TC Energy’s pipeline project to bring Canadian natural gas to an export facility in British Colombia, reports Bloomberg. TC Energy has been selling assets to fund projects including the expansion of its Canadian natural gas system and new pipelines in Mexico.
  • Exxon Mobile Corp., Hess Corp. and CNOOC Ltd. have begun extracting crude from their offshore project in Guyana. The small South American nation could soon see big oil revenues as the project is expected to reach full capacity of 120,000 barrels per day in the coming months, according to Bloomberg. Guyana President David Granger declared December 20 as National Petroleum Day and noted that the production began three months ahead of schedule.
  • What commodity could be a big winner from a final U.S.-China trade deal? Wheat. China has failed to meet its wheat-buying quota in the past, but speculation is mounting that this time the country will work to fill its quota of U.S. wheat, reports Bloomberg. “If Chinese purchases were to reach the quota mark of 9.6 million metric tons, it would represent a huge jump in demand. In the six years through 2017, buying has averaged less than 50 percent of allotment.”

Threats

  • China is set to reduce imports of coal as the world’s biggest buyer has boosted domestic production of the fuel. According to analysts and as reported by Bloomberg News, China will likely reduce overseas imports next year after domestic production rose to a record this year. Top miners Indonesia and Australia could be stuck with excess supply.
  • Drilling has slowed down in the Permian and natural gas is becoming more of a nuisance. Bloomberg News reports that shale wells produce oil when they’re first fracked, but then production falls and natural gas becomes a bigger part of the mix. With a huge oversupply of natural gas, many Permian producers pay to take it away or flare off the gas since there is not enough pipeline capacity to get the fuel to market.  In some portions of the basin the average well can produce 2,000 cubic feet of gas for each barrel of oil.
  • JBC Energy said in a note this week that oil production outside of OPEC and the U.S. is going to rise by the most in 2020 than at any time in the past 15 years. Supply growth could threaten the oil rally seen in the fourth quarter.

4 Reasons Why We Believe In Royalty Companies View the Slideshow

Emerging Europe

 

Strengths

  • Greece was the best performing country this week, gaining 3.19 percent. Most stock markets in Europe were closed this week in observation of the Christmas holiday, with exception of Turkey and Russia. Economic news was very light this week as well, but the Wall Street Journal did report that Greece has the world’s strongest manufacturing sector. November manufacturing PMI came in at 54.1, and December’s data will come out January 2.
  • The Polish zloty was the best performing currency this week, gaining 84 basis points. Deputy Finance Minister Leszek Skiba expects inflation in Poland will temporarily exceed the central bank’s upper bound target of 3.5 percent in 2020. Inflation above that mark may trigger the central bank to hike rates. Poland has kept its rate at 1.5 percent since March 2015.
  • Consumer discretionary was the best performing sector among eastern European markets this week.

Weaknesses

  • Romania was the worst performing country this week, gaining only 64 basis points. Romania’s Prime Minister Ludovic Orban presented on Monday, December 23, his budget for the New Year. The government expects GDP of 4.1 percent. However, the European Commission, in its autumn forecast, projects 3.6 percent GDP growth for 2020. Orban is trying to bring the country’s budget deficit lower, after it bridged the EU’s limit of 3 percent of GDP.
  • The Hungarian forint was the worst performing currency in the region this week, losing 26 basis points.
  • Materials was the worst performing sector among eastern European markets this week.

Opportunities

  • Poland is slowly switching its gas delivery from Russia to other sources by importing liquefied natural gas from the U.S., Qatar and other countries. It is also building a pipeline to take in gas from Norway. Piotr Wozniak, CEO of Poland’s natural gas company PGNiG SA, says that Poland can save about 20 to 30 percent on gas delivered to the country from other sources than Russia.

Looming divorce with Russia
click to enlarge

  • Bloomberg reports that after a decade-long debt crisis, Greece has no financial needs for 2020. The country has a cash buffer of some 32 billion euros ($35.6 billion) left over from its bailout program. Greek borrowing needs for 2020 will be 1.9 billion euros and covered by primary surplus. With yields low, Greece is planning to sell more new debt next year in order to reduce the total amount.
  • As of the end of May 2019, Poland had 5,900 electric cars registered, and its numbers grew by 100 percent year-on-year in the first five months of 2019, according to Electric Mobility Counter. The sales of EV cars might continue to grow rapidly. Last week the government approved a new bill that will allow electric car buyers to get a 30 percent rebate on EV cars. The maximum money back is limited to 37.5 PLN, on a maximum car tag of 125,000 PLN.

Threats

  • Last Friday, the House of Commons voted 358 to 234 in favor of the government’s EU Withdrawal Agreement Bill. It seems that the Prime Minister will keep his promise and take the U.K. out of the eurozone on January 31, 2020. However, he will still need to negotiate a long-term trade deal with the EU, which current proposed legislation says must be completed by the end of the next year. A hard Brexit is not completely out of the picture.
  • The Senate of Foreign Relations Committee approved sanctions of Russia for meddling in the 2016 elections. The Republican-led panel voted 17-5 to advance the bill that would sanction Russian individuals, cyber operations and liquid natural gas export facilities. The bill also calls for sanctions on Russia’s sovereign debt. It is unclear if Senate Majority Leader Mitch McConnell would bring The Defending American Security from Kremlin Aggression Act (DASKA) to vote in a full Senate.
  • Christine Lagarde is expected to significantly change the European Central Bank’s (ECB) inflation target for the first time in more than 16 years as part of next year’s strategic review, according to economists polled by the Financial Times. A handful of the economists surveyed said they expected the ECB to adopt a band of inflation as its new objective, such as between 1.5 and 2.5 percent, to give it more flexibility to accept periods of lower or higher consumer price growth. Shifting to a range-based target “would signal that the ECB will start to remove some of its stimulus once core inflation approaches 1.5 percent”, said Holger Schmieding, chief economist at German bank Berenberg.

China Region

 

Strengths

  • The best performing index in the region amid the relatively quiet week of trading (the KOSPI and the Shanghai Composite, for example, finished flat on the week!) was Hong Kong’s Hang Seng Composite Index, which rose 1.36 percent in the three days it traded since last Friday. 
  • Materials was the top performing sector in Hong Kong’s Hang Seng Composite Index for the week, bouncing back and climbing 4.43 percent over the holiday week.
  • Industrial profits in China rose 5.4 percent year-over-year, versus a prior drop of more than 9 percent last month.

Weaknesses

  • The worst performing country in the region for the week was India, where the Nifty and Sensex closed down 21 and 26 basis points, respectively.
  • Conglomerates constituted the worst performing sector in the HSCI on the week, rising only 0.44 percent.
  • Singapore’s factory output for the November measurement period dropped by 9.3 percent year-over-year, missing estimates for a much smaller drop of less than one percent. October readings were also revised down for the island city-state.

Weaknesses

  • Do you drink coffee?  Even if you don’t, surely you’ve heard of Java. And while there’s a long and complicated history of that well-known coffee origin, here’s a quick point we’d like to stress here and now for the present (and future…): Indonesia’s growing coffee craze is on set to spur record domestic demand this year amid tightening global supplies. Coffee consumption in the island nation has more than doubled over the last decade. Remember—more than 90 percent of the population is Muslim, so while bars and alcohol remain in relatively scanty supply, cafes and coffee houses are popping up quickly as Indonesia’s rising incomes and coffee culture grow. 

Indonesia's coffee consumption seen at record high
click to enlarge

  • While Bloomberg News reports that China will cut import tariffs on hundreds of items from pork to smartphone parts beginning January 1, the agency highlighted that these particular tariff cuts remain officially unrelated to trade talks. On account of African swine fever, China has experienced an ongoing pork shortage, which is part of the reason for the tariff cuts. 
  • Just days before the troop-funding deal was set to expire, the U.S. dropped its demands for South Korea to pay some five times more to host U.S. troops. Seoul promised to purchase additional American weapons and stated that it would step up its aid and presence in the Straits of Hormuz. 

Threats

  • North Korea has stepped up its rhetoric again, and, NBC has reported, added a structure to a factory linked to the production of ICBMs. China, South Korea and Japan have all increasingly been raising concerns of late, and North Korea’s Kim Jong Un has stated the U.S. must provide some sort of relief or concessions in order to maintain talks. 
  • China sailed its first domestically produced aircraft carrier, called The Shandong, through the Taiwan Strait on Thursday just a few short weeks ahead of the Taiwan’s upcoming presidential elections.
  • The Christmas and Boxing Day holidays in Hong Kong saw a minor return to quieter streets, though it came after a weekend of tension. Some 336 people were nonetheless arrested over the Christmas holiday, with the total number of arrests since the beginning of the protests now reaching more than 7,000, the AP reported. The discontent and protests that have gripped the city for the last several months do not yet appear over.

Blockchain and Digital Currencies

 

Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended December 27 was Kahsh, up 115.63 percent.
  • Based on the GTI Global Strength Indicator, the Bloomberg Galaxy Crypto Index flashed a buy signal on Monday just before the holidays, up as much as 4.7 percent for the day. The index, which tracks upward and downward movements of successive closing prices of various coins, is in oversold terriroty and suggests it could be due for a bounce, writes Vildana Hajric for Bloomberg.
  • Bakkt, a bitcoin futures provider and intercontinental exchange subsidiary, officially has a new head, reports CoinDesk. On Monday, the company announced that chief product officer Mike Blandina has become the new CEO of the company starting December 20. Adam White, the company’s chief operating officer, will serve as the company’s president.

Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended December 27 was Fortem Capital, down 35.63 percent.
  • Ether is down massively from its record highs, reports CoinDesk, and the majority of its holders are losing money on their investments. In fact, it is currently trading at $131, which represents a 90 percent drop from the all-time high of $1,431 reached in January 2018. According to blockchain intelligence firm IntoTheBlock, the price drop has pushed 90 percent of ether addresses “out-of-the-money.”
  • Craig Wright, a man who claims he invented bitcoin, was ordered by a judge to surrender around $3 billion worth of bitcoin holdings, but said he might not be able to anytime soon, reports Bloomberg News. The judge ruled that Wright’s late business partner Dave Kleiman owned half of Wright’s bitcoins. The legal dispute is yet to be resolved and many think Wright does not have access to the coins in question.

Opportunities

  • According to the head of the People’s Bank of China’s (PBOC) digital currency research subsidiary, the country’s cryptocurrency will not need a currency basket to maintain a stable value, writes CoinDesk. “The digital yuan currency is not used for speculation. The RMB is used to spend, not for speculation,” Changchun Mu told reporters. “It does not have the characteristics of bitcoin speculation, nor does it require the currency basket assets to support the value of the currency like stanle currency.”
  • Bitcoin options trading has mostly been a niche market with average daily volume around $22 million for the past year, according to derivatives tracker Skew. However, it could become more popular as more exchanges add futures contracts. Bloomberg reports that CME Group Inc., which was one of the first U.S. regulated exchanges to offer bitcoin futures, will launch their own options on January 13.

Bitcoin Options Trading Volume
click to enlarge

  • Chinese internet giant Tencent is reportedly forming a team to explore possible new cases for cryptocurrencies, writes CoinDesk. Reports from Chinese media show that the company issued an internal notice informing employees it is searching for someone to head a new crypto research unit, which will form part of the company’s payments wing.

Threats

  • The North American Securities Administrators Association (NASAA) says that cryptocurrency investment is among the top five investor threats for the year 2020, writes CoinTelegraph. In order to write the report, the international investor protection organization surveyed state and provincial securities regulators across the U.S., Canada and Mexico. The report covers the top five products or schemes, which along with cryptos, include promissory notes, real estate investments, Ponzi schemes as well as online and social media investment schemes.
  • In March of 2018, one publicly-traded Chinese company invested 500 million yuan, worth $80 million at the time, in order to buy 100,000 bitcoin mining units, writes CoinDesk. However, as the bear market kicked in during the months that followed, so, too, did a contract dispute for the app developer Beijing Cailiang. The company was dragged into a lawsuit involving $15 million in debt and a potential criminal case with accusation of fraudulent public disclosure, the article explains.
  • Crypto YouTubers are reporting that their content appears to have been censored by the platform, writes CoinTelegraph. In one case, a screenshot of the alleged intervention by YouTube apparently indicates that the user was served a “strike” action against at least seven videos, for being “harmful or dangerous” content. As the article goes on the explain, even as YouTube does not ostensibly restrict legitimate crypto-related content, cybersecurity researchers have recently detected abuses of the platform for the purposes of spreading cryptojacking malware.

Frank Holmes at VRIC

Leaders and Laggards

Weekly Performance
Index Close Weekly
Change($)
Weekly
Change(%)
XAU 105.13 7.57 7.76%
S&P/TSX Global Gold Index 258.82 14.28 5.84%
S&P/TSX VENTURE COMP IDX 564.10 15.26 2.78%
Gold Futures 1515.40 34.50 2.33%
Oil Futures 61.68 1.24 2.05%
Hang Seng Composite Index 3834.49 51.27 1.36%
Nasdaq 9006.62 81.66 0.91%
DJIA 28645.26 190.17 0.67%
S&P Basic Materials 384.50 2.43 0.64%
S&P 500 3240.00 18.78 0.58%
S&P Energy 454.96 2.48 0.55%
Korean KOSPI Index 2204.21 0.03 0.00%
Russell 2000 1669.03 -2.87 -0.17%
10-Yr Treasury Bond 1.87 -0.04 -2.29%
Natural Gas Futures 2.24 -0.17 -2.99%
 
Monthly Performance
Index Close Monthly
Change($)
Monthly
Change(%)
XAU 105.13 11.20 11.92%
S&P/TSX Global Gold Index 258.82 19.36 8.08%
Oil Futures 61.68 3.57 6.14%
10-Yr Treasury Bond 1.87 0.11 6.06%
S&P/TSX VENTURE COMP IDX 564.10 30.29 5.67%
Hang Seng Composite Index 3834.49 180.85 4.95%
S&P Energy 454.96 19.18 4.40%
Gold Futures 1515.40 54.60 3.74%
Korean KOSPI Index 2204.21 76.36 3.59%
Nasdaq 9006.62 301.44 3.46%
S&P 500 3240.00 86.37 2.74%
Russell 2000 1669.03 34.92 2.14%
S&P Basic Materials 384.50 7.54 2.00%
DIJA 28645.26 481.26 1.71%
Natural Gas Futures 2.24 -0.34 -13.71%
 
Quarterly Performance
Index Close Quarterly
Change($)
Quarterly
Change(%)
XAU 105.13 11.96 12.84%
Nasdaq 9006.62 975.96 12.15%
10-Yr Treasury Bond 1.87 0.18 10.63%
Hang Seng Composite Index 3834.49 329.36 9.40%
Oil Futures 61.68 5.27 9.34%
Russell 2000 1669.03 135.70 8.85%
S&P 500 3240.00 262.38 8.81%
DJA 28645.26 1754.14 6.52%
Korean KOSPI Index 2204.21 129.69 6.25%
S&P Basic Materials 384.50 21.53 5.93%
S&P/TSX Global Gold Index 258.82 10.32 4.15%
S&P Energy 454.96 14.51 3.29%
Gold Futures 1515.40 -6.40 -0.42%
S&P/TSX VENTURE COMP IDX 564.10 -10.73 -1.87%
Natural Gas Futures 2.24 -0.27 -11.12%
 

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (09/30/2019):

Apache Corp.
Boeing
CNOOC Ltd
AngloGold Ashanti Ltd
Iamgold Corp
 

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. 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 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/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to gauge overall economic activity and related inflationary pressure. Bloomberg Galaxy Crypto Index (BGCI) is designed to measure the performance of the largest cryptocurrencies traded in USD. The BGCI is market capitalization-weighted and includes cryptocurrencies such as Bitcoin, Ethereum, Monero, Ripple and Zcash. The index constituents are diversified across different categories of digital assets, including stores of value, mediums of exchange, smart contract protocols and privacy assets. Richmond Manufacturing Index is a gauge of broad activity in the manufacturing sector located in the Fifth Federal Reserve District, published by the Federal Reserve Bank of Richmond. This composite index represents a weighted average of the shipments, new orders and employment indexes. The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to gauge overall economic activity and related inflationary pressure. The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. The Bloomberg Commodity Index is made up of 22 exchange-traded futures on physical commodities. The index represents 20 commodities, which are weighted to account for economic significance and market liquidity. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. MSCI World Index is a capitalization weighted index that monitors the performance of stocks from around the world. Frank Holmes serves on the board of GoldSpot Discoveries Corp. as independent chairman and held common stock at March 31, 2019. The NIFTY 50 index National Stock Exchange of India's benchmark broad based stock market index for the Indian equity market. The BSE SENSEX is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.

Share “5 of the Biggest Financial Stories From 2019”

Net Asset Value
as of 01/17/2020

Global Resources Fund PSPFX $4.61 0.03 Gold and Precious Metals Fund USERX $9.70 -0.05 World Precious Minerals Fund UNWPX $3.30 -0.01 China Region Fund USCOX $9.60 0.04 Emerging Europe Fund EUROX $8.02 0.06 All American Equity Fund GBTFX $26.61 0.08 Holmes Macro Trends Fund MEGAX $17.47 -0.05 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change