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If You're Not Following this Energy Trend, You're Being Left in the Dust

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.

April 15, 2016

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

Investor and author Gianni Kovacevic visited USGI office this week. My Electrician Drives a Porsche book

This week our office was visited by my friend, investor and author Gianni Kovacevic, who is at the halfway point of a cross-country book tour to promote the latest edition of “My Electrician Drives a Porsche?” As part of the tour, he’s driving a Tesla Model S from Boston to Palo Alto, California—Tesla’s hometown—to demonstrate the potential of green energy and spread his message that “the future is now.”

His book features a successful young man—the titular electrician, and an analogue of Gianni himself—who instructs his older family doctor on how to invest in the rise of the new spending class. Not only is “Electrician” a fact-filled, convincing treatise on the importance of following long-term trends in China, copper and other “financial soap operas,” it’s also a real page-turner. I urge you to grab a copy and check it out.

Copper: Beneficiary of Unprecedented Number of New Consumers

Central to the book’s thesis is a concept that is both simple and yet profound: As the size of the world’s middle class continues to grow, demand for “things that come with an electrical cord” will surge. Below is a brief excerpt:

My point is that once a group of people make the move from rural to urban, from peasant to worker and on to consumer, their way of life changes. Subsistence disappears from their vocabulary and their lives begin to revolve around the three Cs: comfort, convenience and communication. And in order to achieve any of those things, it takes a whole lot more stuff than ever before. We get a dishwasher to free up time and a television to waste it. We get an air conditioner to stay cool and a heater to stay warm. Then later on, we get other luxuries like solar panels on our roofs and newer, more modern cars. When a society achieves its very own consumer revolution, as China and the developing world are undergoing right now, life becomes less about needs and more about wants. With an unprecedented number of new consumers, these luxuries need way more stuff to make them possible.

Back in 2014, Microsoft founder and philanthropist Bill Gates predicted that by 2035, there will be “almost no poor countries left in the world.” You might scoff, but for a moment let’s imagine this turns out to be the case. What effect would that have on energy demand? Millions more people joining what Gianni calls the spending class will increase the demand for millions more things—dishwashers, air conditioners, smartphones, cars—and necessitate the production of thousands more megawatts of electricity than the world currently generates.

All of which is a boon for copper. However energy is produced, the red metal is needed for conductivity. In fact, even more copper wiring is used in new energy technologies than in traditional sources. An electric car such as the Tesla Model S uses three times as much copper wiring than an internal combustion engine vehicle.

Each New Generation of Car Needs More Copper Wiring
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It was reported this week that China imported 39 percent more copper (and 13 percent more crude oil) in March than in the same time last year, a sign that the Asian giant’s appetite for commodities and energy remains strong. Despite a slowdown in GDP growth, China is still the number one importer of metals and number two consumer of oil.

Shipments out of China also rebounded the most in a year, rising 11.5 percent in the first quarter. This suggests its economy fared much better than what analysts were predicting.

China Exports Surge 11.5 Percent in First Quarter
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The country’s manufacturing industry saw very welcome improvement last month as well, with the purchasing managers’ index (PMI) coming in at 49.7—still below the key 50 threshold, but the highest reading since February of last year. The PMI was also above its three-month moving average for the first time since October.

Chinese Manufacturing Edges Close to Expansion
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The Rise of the Chinese Spending Class

Consider the dramatic difference in size between college graduates in older and younger Chinese generations. According to Gianni’s book, there are 160 million people aged 56 to 65, yet this cohort has only one million graduates. Meanwhile, millennials are 415 million strong—100 million more than the entirety of the U.S. population—and of those, 107 million have college degrees. So far. As this number rises, so too will incomes as well as the desire to live a more “Western” lifestyle filled with stuff.

This new generation is not only big in size, but also big in aspirations

You can check out the entire Visual Capitalist infographic on Gianni’s website.

The Asian country’s middle class is already larger than America’s. In October, Credit Suisse reported that there are more than 109 million middle-class consumers in China, compared to 92 million in the U.S.

109 Million. For the first time, the size of China's middle class has overtaken the U.S., 109 million compared to 92 million.

Indeed, domestic consumption in China is following a staggering upward trajectory. In 2015, total retail sales touched a record, surpassing 30 trillion renminbi, or about $4.2 trillion. By 2020, sales are expected to climb to $6.5 trillion, representing 50 percent growth in as little as five years. This growth will “roughly equal a market 1.3 times the size of Germany or the United Kingdom,” according to the World Economic Forum.

By 2020, Chinese Private Consumption Will Have Grown $2.3 Trillion
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The new Chinese spending class is still very concentrated along the country’s highly-urbanized eastern coast, in megacities such as Shanghai, Beijing, Guangdong and Shenzhen. But this is changing rapidly, with 39 percent of middle-class growth shifting inland toward more rural areas by 2022, according to McKinsey & Company. This will introduce new investment opportunities as these areas will require modern roads, railways and—most important—energy infrastructure.  

Chinese Middle-Class Growth is Shifting Inland

It’s estimated that between 2010 and 2025, 300 million Chinese citizens—a little less than the entire population of the U.S.—will migrate from rural areas to cities. As Gianni points out, lifestyles drastically change when this occurs, shifting from one of subsistence to one that revolves around convenience and comfort.

Tesla Disrupts the Auto Market

Key to this migration is transportation. In 1979, there were only 60 privately-owned automobiles in China. (That’s according to a 2006 report by legendary Canadian investment strategist Don Coxe, and cited in “My Electrician Drives a Porsche?”) Fast forward to today and China is now the world’s largest auto market. More than 21.1 million passenger cars were sold in the country last year, a 7.3 percent increase from 2014. Compare that to the U.S., the number two car buyer, where sales totaled 17.5 million, an all-time record.

By the way, 2015 sales of the Toyota Corolla, one of the top-selling sedans in the U.S., were a little over 350,000. That’s slightly more than the number of preorders for the Tesla Model 3, the company’s first mass-produced vehicle, within a single week of its unveiling on March 31. In a blog post, Tesla promptly proclaimed it “the week that electric vehicles went mainstream.”

The future, as Gianni says, is indeed now.

MoneyShow Las Vegas Frank Holmes

Index Summary

  • The major market indices finished up this week.  The Dow Jones Industrial Average gained, 1.82 percent. The S&P 500 Stock Index rose 1.62 percent, while the Nasdaq Composite climbed 1.80 percent. The Russell 2000 small capitalization index gained 3.06 percent this week.
  • The Hang Seng Composite gained 4.55percent this week; while Taiwan was up 1.86 percent and the KOSPI rose 2.16 percent.
  • The 10-year Treasury bond yield rose 3 basis points to 1.75 percent.

Domestic Equity Market

S&P 500 Economic Sectors
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  • Financials was the best-performing sector for the week, increasing 3.95 percent compared to an overall increase of 1.62 percent for the S&P 500 Index.
  • Chesapeake Energy was the best-performing stock for the week, increasing 60.37 percent. Climbing oil prices helped lift the struggling energy stock, but investors were also willing to do follow-through buying after news about a favorable debt restructuring for the company. Analysts now believe the threat of an imminent bankruptcy has diminished substantially, and that has investors more optimistic about Chesapeake—at least in the short run.
  • After the worst start ever to a trading year, the U.S. stock market has reversed and is now up for the year. The S&P 500 is up close to 2 percent year-to-date after having lost 10 percent at one point in early February.


  • Consumer staples was the worst-performing sector for the week, falling by negative 0.78 percent compared to an overall increase of 1.62 percent for the S&P 500.
  • Seagate Technology was the worst-performing stock for the week, falling negative 22.99 percent. Shares of the hard drive manufacturer tumbled after the company issued preliminary third-quarter results, lowering its expectations for both revenue and gross margin. Seagate now expects to report third-quarter revenue of $2.6 billion and a non-GAAP gross margin of 23 percent, down from previous guidance of $2.7 billion and 25.6 percent.
  • Amid increased antitrust scrutiny from the Obama administration, Canadian Pacific Railway ended its attempt to acquire Norfolk Southern. Late last week, the U.S. Department of Justice said it opposed the voting-trust structure that Canadian Pacific proposed.


  • The spreading global shift to negative deposit rates is creating a significant amount of uncertainty, as the unintended consequences of this unorthodox policy remain unknown. In the meantime, real interest rates, the opportunity cost of holding a zero-yielding asset like gold, have slipped back into negative territory. That is a plus for both gold bullion and gold shares. While gold and gold shares might look overbought on a short-term basis, it is important to keep the longer-term context in mind. Gold is still far below its 2011 highs, while gold share relative performance is barely above its secular lows.
  • Earnings season kicked off this week. While only a small fraction of S&P 500 companies have reported first-quarter earnings, early results have been solid. Thus far, 5 percent of companies have reported. Of the 24 companies that have reported, 79 percent reported earnings that exceeded analyst expectations, while 21 percent reported earnings below expectations.
  • Halliburton and Baker Hughes are attempting to divest more than $7 billion in assets to preserve a merger that has been in the works since late 2014. Last week, the U.S. Justice Department filed suit to halt the proposed $35 billion merger, saying the deal could lead to price increases and reduce innovation in the oil services industry. Private equity firm Carlyle Group and General Electric are in the running to buy the assets being divested.


  • U.S. banking regulators gave failing grades to five of the eight largest banks in the United States on their bankruptcy and liquidation plans in the event of the banks' failure. The plans were a requirement of the 2010 Dodd-Frank Act. The five banks have until October to amend their plans to the satisfaction of the U.S. Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).
  • The latest rebound in risk assets raises the question of whether small caps have become more attractive compared with large caps. However, fundamental analysis signals little chance of a sustained recovery. There is a large and growing gap between small and large company profit margins. The latest National Federation of Independent Business (NFIB) survey of the small business sector showed that planned labor compensation continues to grind higher, even though reported price changes are falling and CEO confidence is diminishing. Typically, labor compensation plans and price changes move hand-in-hand, but the gap this cycle is indicative of small cap-profit margin pressure. As a result, small-cap valuations are likely to move to a steep discount to those of large caps.
  • Despite steady employment growth and falling energy prices, U.S. consumer spending remains lackluster. In many ways, consumers have had the wind behind their backs. Employment growth has averaged more than 200,000 per month in the first quarter, gasoline prices have declined sharply since mid-2014 and unseasonably warm weather lowered heating costs this winter. Nonetheless, consumers are reluctant to spend. Retail sales fell 0.3 percent month-over-month in March, and while there were some upward revisions to February and January, core retail sales are growing just 2.7 percent year-over-year. Moreover, U.S. auto sales have started to buckle. The more than doubling of auto sales from the lows of 2009 was a key factor driving the growth in consumer spending. As auto sales plateau or decline, this will now become a drag on growth.

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The Economy and Bond Market



  • In a further sign that the U.S. labor market remains robust, claims for state unemployment insurance fell to their lowest level since 1973, when the U.S. population was significantly smaller than it is today. Only 253,000 first-time claims were filed in the latest week. Weekly jobless claims for this business cycle peaked at 652,000 in the spring of 2009.
  • The Empire State Manufacturing Survey bounced up to 9.56 in April from 0.62 in March. The ISM Manufacturing Index showed improvement as well, ticking up to 51.9 from 51.1.
  • In China, industrial production, retail sales and fixed-asset investment all rebounded in March following disappointing reports in February. Last month's drop-off may have been a function of the extended Lunar New Year holiday period. Gross domestic product for the first quarter of the year rose 6.7 percent, as expected.


  • The International Monetary Fund (IMF) trimmed its global growth outlook. The global economy is expected to grow 3.2 percent in 2016 and 3.5 percent in 2017, according to recent projections. The prior forecast was for 3.4 percent growth in 2016 and 3.6 percent in 2017. The spring IMF and World Bank meetings will conclude on Sunday, April 17.
  • U.S. industrial production fell 0.6 percent month-over-month in March. The University of Michigan Consumer Sentiment Index inched lower from 91.0 in March to 89.7 in the preliminary April report.
  • The Producer Price Index (PPI) final demand reading inched down 0.1 percent month-over-month in March, while core core PPI was flat. Health care PPI also fell 0.1 percent, pointing to a soft core personal consumption expenditures (PCE) price index this month.


  • The global oil supply will move closer to being balanced late this year, according to the International Energy Agency (IEA). Lower prices are trimming production outside of the OPEC countries, the agency reports. The oversupply is expected to fall to 200,000 barrels per day from 1.5 million barrels per day in the first half of 2016.
  • The housing market is shaping up to be one of the bright spots for the U.S. economy this year. Related indicators to monitor include National Association of Home Builders (NAHB) sentiment (Monday) and housing starts (Tuesday).
  • The European Central Bank (ECB) is unlikely to come out with major announcements at its Thursday policy meeting. Unless there is a sudden change in the economic outlook, the ECB will probably adopt a wait-and-see approach in the coming months as it will take time to assess the impact of the most recent round of stimulus. On a related note, the next week's bank lending survey (Tuesday) and flash Purchasing Managers’ Indices (PMIs) (Friday) will provide an update on the growth momentum in the euro area.


  • Treasuries appear overbought in the near-term, given excessively bullish sentiment and some evidence of a rebound in global manufacturing. The global manufacturing PMI has ticked higher, led by rebounds in the U.S. and Chinese indices back above the 50 boom/bust level. This potential for a window of global reflation makes the current bullish sentiment toward U.S. Treasuries appear poorly timed. According to the JPMorgan All Clients Survey, investors have not been so aggressively long for such a length of time since late 2013. Meantime, the Active Clients survey currently shows the largest net long positioning since its inception in 2003. Similarly, bullish sentiment toward U.S. Treasuries is at its highest level since early last year.

U.S. Treasuries Look Overbought
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  • OPEC and non-OPEC oil producers like Russia will meet on April 17 to discuss a possible deal to freeze production at current levels and shore up prices. Given the rally since the beginning of year, a failure to reach an agreement on limiting production could temporarily push down oil prices and risk assets.
  • Four potentially destabilizing events are gearing for June, which could influence the Federal Reserve's decision on interest rates. The U.K. referendum on EU membership is set for June 23. California's primary election, which is likely to determine whether Donald Trump is the GOP candidate for president (and perhaps, though far less likely, whether Bernie Sanders will join him on the Democratic side), will take place on June 7. Greek debt relief negotiations are likely to heat up in June, with 4.3 billion euros due on July 20. Lastly, Spain might hold new elections by the end of June, although the result of the election is not likely to produce an antiestablishment-led government.

Gold Market

This week spot gold closed at $1,234.15, down $5.20 per ounce, or -0.42 percent. However, gold stocks, as measured by the NYSE Arca Gold Miners Index, rose by 3.49 percent. Junior miners outperformed seniors for the week as the S&P/TSX Venture Index traded up 4.95 percent. The U.S. Trade-Weighted Dollar Index gained 0.49 percent for the week.

Date Event Survey Actual Prior
Apr-12 Germany CPI YoY 0.3% 0.3% 0.3%
Apr-13 U.S. PPI Final Demand YoY 0.3% -0.1% 0.0%
Apr-14 Eurozone CPI core YoY 1.0% 1.0% 1.0%
Apr-14 U.S. Initial Jobless Claims 270k 253k 266k
Apr-14 U.S. CPI YoY 1.1% 0.9% 1.0%
Apr-14 China Retail Sales YoY 10.4% 10.5% --
Apr-19 Germany ZEW Survey Current Situation 50.8 -- 50.7
Apr-19 Germany ZEW Survey Expectations 8.0 -- 4.3
Apr-19 U.S. Housing STarts 1168k -- 1178k
Apr-21 Eurozone ECB Main Refinancing Rate 0.000% -- 0.000%
Apr-21 U.S. Initial Jobless Claims 265k -- 253k


  • The best performing precious metal for the week was silver, up 5.66 percent. Silver has overtaken gold as the year’s best performing precious metal, reports Bloomberg, extending its gains to 17 percent on the back of a stabilizing Chinese economy. The precious metal, which is used in a variety of industrial products, is now trading at a five-month high.
  • Following a strike that lasted nearly six weeks, a majority of gold sellers in India have finally reopened their doors. This is positive news for the global gold sector, which has been missing its largest buyer of the precious metal. Good news was reported in China as well, where gold demand picked up to 183.2 tonnes in March, according to Lawrie Williams. Gold demand surged in Japan too, with sales climbing 35 percent in the three months ended March 31 with the imposition of negative interest rates.
  • Deutsche Bank, one of four banks accused of manipulating silver futures prices, reached a settlement this week, reports Bloomberg. Lawyers for traders said the bank signed a binding agreement and arranged to expose other banks’ rigging as well. Interestingly enough, Reuters reported Thursday that DB also reached a settlement in U.S. litigation alleging that it conspired to fix gold prices too, according to an article on ZeroHedge.


  • The worst performing precious metal for the week was gold, down -0.42 percent. The yellow metal approached its longest run of declines in three weeks, reports Bloomberg. A stronger U.S. dollar and gains in equities curbed demand for an alternative investment.
  • Jobless claims in the U.S. fell unexpectedly last week, reaching a 42-year low, reports Bloomberg. For 58 consecutive weeks, claims have been below the 300,000 level that economists believe is typically consistent with an improving job market, making this the longest stretch since 1973.  While many commentators view this as a positive sign of strength, the reality is that the job picture really can’t improve much more as it has hit its lower limits based on historical data.

Jobless Claims at Multi-Decade Low
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  • The Department of Mineral Resources released a revised draft mining charter that demands a “perpetual minimum 26 percent BEE [Black Economic Empowerment] ownership per mining right,” reports Business Day. An analyst from HSBC notes that this comes despite the ongoing legal challenge to the “once empowered, always empowered debate.”  This could be a headwind for new investment in South Africa.


  • HSBC believes the gold/silver ratio (which measures how many ounces of silver it takes to by an ounce of gold) will narrow further, meaning that silver is outperforming. In a research note on Tuesday, the group stated that the ratio is back below 1:78, explaining that retail demand for coins and small bars, along with light institutional buying in the paper markets, has boosted silver. TD Securities sees gold strengthening as well, particularly on the back of a strong dollar, a dovish Federal Open Market Committee (FOMC), and equity market volatility.
  • James Rickards, chief global strategist at West Shore Funds, told Bloomberg that he thinks gold will soar 700 percent in the near future. His reasoning? Cyber threats. Rickards explained that the 21st century cyber age poses risks to digital money and wealth to all investors and savers. “The thing about gold is you can’t hack it, you can’t erase it, you can’t delete it,” he explains.
  • A number of drilling results were reported this week. Pure Gold intersected 56.2 grams per tonne (g/t) of gold over 1.3 meters at Russet South on the Madsen Gold Project. Oban Mining Corp. intersected 24.7 g/t of gold over 6.8 meters at its Windfall Lake gold project in Quebec. Roxgold provided an update for its Yaramoko Gold Project too, stating that the overall construction program is now 84 percent complete, with over 23,000 tonnes of ore now on the Run of Mine (ROM) pad. The company’s first gold production remains on target for June 2016.


  • Total U.S. commercial bankruptcy filings by corporations of all sizes (along with other business entities), jumped 24 percent year-over-year in the first quarter, reports MacroStrategy Partnership. Following 22 straight quarters of declines, there has been rapid deterioration, which suggests the credit cycle could be turning. Deutsche Bank thinks that the world is “past the point of no return” in the default cycle, according to ETF Daily News.
  • OCBC Bank’s bearish view on bullion remains unchanged, reports Bloomberg. The bank sees the precious metal falling to $1,100 an ounce by year end. UBS is also doubtful of gold’s value. Rene Buehlman, global asset management head of Asia Pacific at UBS, stated “We don’t think in the long run that’s adding value to investors’ portfolios as there is no yield to be gained.”
  • The CME reported that it received notice from the Federal Reserve that it is authorized to open an account at the Fed which would “allow it to better safeguard cash deposited by its traders,” writes Dave Kranzler on But why is a Fed custodial account any better than one held by a big bank? Is the CME preparing for an eventual Comex default?  The ratio of physical gold available for deliver is dwarfed by the size of paper contract claims on such gold.

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Energy and Natural Resources Market



  • China’s copper imports leapt 36 percent in March compared to the previous month, rising to the highest monthly amount since data became available in 2001. A Bloomberg report highlights that year-to-date numbers are also running 30 percent above last year’s levels, while warning that investors must wait to see whether higher imports translate into higher industrial demand.

China's Copper Imports Surge in March
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  • The best performing sector for the week was the FTSE 350 Mining Index. The index of major diversified miners rose 14 percent for the week as both copper and iron ore prices soared to post their best weekly advance since early March.
  • The best performing stock for the week in the broader natural resource space was Anglo American. The London-based miner rose 25 percent for the week as Reuters reported that BHP, Rio Tinto, Glencore, and large private equity firms have shown interest in purchasing all or some of Anglo American`s assets currently for sale.


  • The Energy Information Administration (EIA) reported a sharp crude inventory build ahead of the Doha meeting this weekend.  Surging waterborne imports and lower refinery utilization led to a 6.6 million barrel build for the week. The build could have been greater had Canadian imports to the U.S. not decreased sharply following an unplanned outage of the Keystone pipeline.
  • The worst performing sector for the week was the S&P 500 Oil & Gas Refining Index. The index dropped 3 percent for the week despite gasoline inventories seeing major withdrawals for the week. The biggest mover was Valero Energy Corp., which dropped after Credit Suisse analysts lowered its target price by 20 percent citing weaker margin capture.
  • The worst performing stock for the week in the S&P Global Natural Resources Index was Agrium Inc. The Canadian agricultural retailer dropped 4.5 percent for the week after Scotiabank downgraded the company`s shares citing low nitrogen prices and weak demand outlook for fertilizers.


  • China data has turned supportive of commodity prices and risk assets. Money supply growth rose to its highest since October 2010, posting a 22 percent advance from last year in March. In addition, fixed asset investments in urban China rose 10.7 percent in March and appears to have put a bottom, thus setting up a positive base for industrial demand in China.
  • Gold investors are set to benefit after Deutsche Bank settled a pricing manipulation case and offered to expose other banks. The banks abused their positions of controlling daily gold fixes to reap illegitimate profits from trading and hurting other investors, states Bloomberg. Silver and gold fixing claims have been brought against five other major investment banks.
  • De Beers increased diamond sales for a third time this year as demand recovers after a slump last year. De Beers also raised diamond prices by 2 percent, the first increase since 2014.


  • Doha will not be able to deliver a bullish surprise to crude markets according to Goldman Sachs Commodities Research. A production freeze at recent production levels would not accelerate the rebalancing of the oil market as current production levels are already elevated. In addition, any agreement that would support prices would prove self-defeating, because it will suspend the nascent non-OPEC supply pullback.
  • Alcoa kicked off the reporting season and spooked investors with its grim outlook. The aluminum giant posted a 92 percent decline in earnings, and lowered its guidance for global aerospace sales, which it described as “robust” just three months ago. Alcoa is planning to split the company to extract value out of its downstream business, precisely the segment that received the guidance downgrade.
  • The slowdown in emerging markets will result in lower oil consumption than initially forecast, says OPEC. The organization trimmed estimates for demand growth in 2016 by 50,000 barrels a day as Brazil’s economy weakens, some fuel subsidies in the Middle East are removed, and milder winter temperatures in the northern hemisphere all negatively affect demand.

China Region



  • Singapore’s Straits Times Index jumped above its 200-day moving average to multi-month highs this week as the Monetary Authority of Singapore surprised markets by narrowing its Singapore dollar policy band and announcing that the Monetary Authority of Singapore (MAS) will no longer seek appreciation of the Singapore dollar against a basket of currencies. 
  • New yuan loans and aggregate financing data for March in China beat expectations, as did retail sales and fixed asset investment (FAI).
  • China released encouraging March trade numbers this week, with exports coming in up 11.5 percent year-over-year, ahead of expectations for only 10.0 percent, and imports declining only 7.6 percent, ahead of expectations for a decline of 10.1 percent.


  • China’s first-quarter GDP came in at 6.7 percent, in line with expectations and within the government’s previous guidance of between 6.5 and 7.0 percent for the year. Nonetheless, it marked China’s weakest growth rate since 2009.

China's GDP Growth Falls to Lowest Level Since 2009
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  • The Singapore dollar was the weakest regional currency on the week, falling 1.0 percent after the MAS announcement.
  • February exports for the Philippines fell 4.5 percent year-over-year, missing expectations for a decline of only 3.9 percent.


  • Late last week, Chinese regulators announced plans to continue to ease restrictions on brokerages, aiding brokerage shares this week and continuing to try to set the stage for stable growth in Chinese equity markets.
  • The International Monetary Fund (IMF) raised its 2017 outlook for China’s GDP to 6.5 percent.
  • If data continue to improve across the region, markets may continue climbing the proverbial wall of worry off the lows of the global selloff of 2016’s early weeks.


  • High-yield bonds in China continue to suffer as the number of defaults in recent weeks has risen, Bloomberg News reports. At least seven companies have defaulted on bond obligations this year, and if the Chinese economy continues to slow, that number will in all likelihood continue to rise.
  • The number of Chinese tour groups to Hong Kong fell nearly 60 percent year-over-year for the first quarter.
  • As the region’s only net exporter of energy, Malaysia may prove vulnerable to a decline in energy prices or negative headline risk out of Doha.

Emerging Europe



  • Turkey was the best-performing country this week, gaining 3.7 percent. With a new governor of the country’s central bank having been appointed, investors are expecting further rate cuts.
  • The Russian ruble was the best-performing currency this week, gaining 1.2 percent against the dollar. The currency continues to strengthen before the Doha meeting during which major oil producers will discuss a possible supply freeze to bolster prices. 
  • The materials sector was the best-performing sector among Eastern European markets this week.


  • Romania was the worst-performing market this week, losing 2 percent. An amendment to foreclosure laws was signed that will allow Romanian banks issuing mortgages to have their claims against the collateral itself, instead of the mortgage holder. It is negative for Romanian banks as they could be unwilling to grant mortgages with low downpayments.
  • The Romanian leu was the worst-performing currency this week, losing 1.21 percent against the dollar. Weak economic data put pressure on the country’s currency. Latest trade balance data, including current account and inflation, declined.
  • The utilities sector was the worst-performing sector among Eastern European markets this week.


  • The Turkish government is working on revising tax legislation for companies across the financial sector that will unify transaction taxes. Finance Minister Naci Agbal may announce the revised legislation, which could ease tax burden on banks, in the next two weeks.
  • Turkey’s government named the central bank’s deputy governor, Murat Cetinkaya, ending uncertainty about who would take on one of the toughest monetary policy jobs in the world. The new governor should be more growth-oriented. The next bank meeting is scheduled for April 20. A rate cut is expected.
  • Eurozone consumer confidence and Markit purchasing manager’s index (PMI) data will be reported next week. Bloomberg’s survey predicts stronger results.


  • Oil producers will meet in Doha on April 17 to discuss a possible oil production freeze. Most investors must predict positive outcomes out of the meeting as Brent crude continues to climb. Russian stocks rose to a three-week high, but if the outcome of the Doha meeting is not satisfactory, oil-driven Russian equities may sell off.

Russia and Brent Crude Oil
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  • Moody’s sees Poland’s general government deficit to exceed 3 percent in 2016, well in excess of the fiscal target of 2.3 percent outlined in last year’s convergence program. Moody’s has kept Poland at A2, the fifth lowest investment grade, with stable outlook since 2006. It will reassess the country’s ratings on May 13.
  • The International Monetary Fund (IMF) cut its global growth forecast in 2016 by 0.02 percentage points to 3.2 percent. It also cut 2017 global growth down 0.1 percentage points to 3.5 percent. IMF Economic Counsellor Maurice Obstfeld urged leaders attending this week’s spring IMF and World Bank meeting to take urgent action to revive global demand, which has been too slow for too long.

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Leaders and Laggards

Weekly Performance
Index Close Weekly
DJIA 17,897.46 +320.50 +1.82%
S&P 500 2,080.73 +33.13 +1.62%
S&P Energy 475.25 +9.22 +1.98%
S&P Basic Materials 289.36 +8.82 +3.14%
Nasdaq 4,938.22 +87.53 +1.80%
Russell 2000 1,130.92 +33.61 +3.06%
Hang Seng Composite Index 2,922.11 +127.16 +4.55%
Korean KOSPI Index 2,014.71 +42.66 +2.16%
S&P/TSX Canadian Gold Index 201.01 +3.91 +1.98%
XAU 77.92 +3.90 +5.27%
Gold Futures 1,235.80 -8.00 -0.64%
Oil Futures 40.47 +0.75 +1.89%
Natural Gas Futures 1.91 -0.08 -4.07%
10-Yr Treasury Bond 1.75 +0.03 +1.92%
Monthly Performance
Index Close Monthly
DJIA 17,897.46 +571.70 +3.30%
S&P 500 2,080.73 +53.51 +2.64%
S&P Energy 475.25 +9.50 +2.04%
S&P Basic Materials 289.36 +10.45 +3.75%
Nasdaq 4,938.22 +174.25 +3.66%
Russell 2000 1,130.92 +56.41 +5.25%
Hang Seng Composite Index 2,922.11 +173.73 +6.32%
Korean KOSPI Index 2,014.71 +39.81 +2.02%
S&P/TSX Canadian Gold Index 201.01 +7.15 +3.69%
XAU 77.92 +6.53 +9.15%
Gold Futures 1,235.80 +4.80 +0.39%
Oil Futures 40.47 +2.01 +5.23%
Natural Gas Futures 1.91 +0.04 +2.19%
10-Yr Treasury Bond 1.75 -0.16 -8.28%
Quarterly Performance
Index Close Quarterly
DJIA 17,897.46 +1,909.38 +11.94%
S&P 500 2,080.73 +200.40 +10.66%
S&P Energy 475.25 +66.05 +16.14%
S&P Basic Materials 289.36 +48.22 +20.00%
Nasdaq 4,938.22 +449.80 +10.02%
Russell 2000 1,130.92 +123.20 +12.23%
Hang Seng Composite Index 2,922.11 +257.07 +9.65%
Korean KOSPI Index 2,014.71 +135.84 +7.23%
S&P/TSX Canadian Gold Index 201.01 +69.47 +52.81%
XAU 77.92 +36.50 +88.12%
Gold Futures 1,235.80 +144.70 +13.26%
Oil Futures 40.47 +11.05 +37.56%
Natural Gas Futures 1.91 -0.19 -9.10%
10-Yr Treasury Bond 1.75 -0.29 -14.00%

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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 12/31/2015:
Alcoa Inc.
Baker Hughes
Microsoft Corp.
Oban Mining Corp.
Pure Gold
Rio Tinto PLC
Valero Energy Corp

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.

The Caixin China Manufacturing PMI, released by Markit Economics, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.
The Empire State Manufacturing Index is an index based on the monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. The index summarizes general business conditions in New York State.
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 Producer Price Index (PPI) measures prices received by producers at the first commercial sale.  The index measures goods at three stages of production:  finished, intermediate and crude.
The "core" PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energy prices.
The FTSE 350 Mining Index is a capitalization-weighted index of all stocks designed to measure the performance of the mining sector of the FTSE 350 Index. The index was developed with a base value of 1000 as of December 31, 1985.
S&P Oil & Gas Refining and Marketing Index tracks the market performance of downstream oil and gas companies.
The S&P Global Natural Resources Index includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified, liquid and investable equity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining.
The MICEX Index is the real-time cap-weighted Russian composite index.  It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors.  The MICEX Index was launched on September 22, 1997, base value 100.  The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange.
The Straits Times Index is a modified market capitalization-weighted index comprised of the most heavily weighted and active stocks traded on the Stock Exchange of Singapore.

Net Asset Value
as of 03/20/2018

Global Resources Fund PSPFX $6.05 No Change Gold and Precious Metals Fund USERX $7.10 -0.07 World Precious Minerals Fund UNWPX $4.29 -0.01 China Region Fund USCOX $12.41 0.28 Emerging Europe Fund EUROX $7.59 0.02 All American Equity Fund GBTFX $25.33 0.09 Holmes Macro Trends Fund MEGAX $19.76 0.09 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $1.99 No Change