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U.S. Ousted as Most Competitive Economy
September 09, 2009
The global recession claims another victim - the United States is no longer the world's most competitive economy.
Switzerland, a beacon of relative stability during the past 18 months of worldwide economic turmoil, toppled the topsy-turvy U.S. from the No. 1 spot in the latest update of "The Global Competitiveness Report" from the World Economic Forum.
The WEF uses a wide range of metrics to measure competitiveness, which it defines as "the set of institutions, policies and factors that determine the level of productivity of a country" as a means to produce prosperity for its citizens.
The U.S. was panned in the report for too-close relationships between government regulators and the private sector, and for "the perception that the government spends its resources wastefully." Specifically mentioned were the massive additions to the federal deficit made by the Bush and Obama administrations, used to finance the Iraq war and economic stimulus.
Singapore ranked third, with Sweden, Denmark, Finland, Germany, Japan, Canada and The Netherlands rounding out the top 10.
At the other end of the list, corruption- and inflation-plagued Zimbabwe - a prime example of how not to run an economic or political system - somehow managed to move up one spot from the bottom. It was replaced by Burundi at No. 133.
The WEF said in its report that the three largest BRIC countries - Brazil, India and China - are among the few countries likely to improve their global competitiveness as a result of the recession. Some of the reasons: focus shift from export to domestic markets, greater efficiency by thinning out non-competitive producers, and more emphasis on improving education and other foundational issues.
Each of these three also have challenges. For China (ranked 29th in the WEF report), they include lack of technology and rigid labor markets. India (49th) has to deal with huge prosperity gaps between its thriving cities and its rural areas. Brazil (56th) also has inequality issues, along with upgrading its public and private institutions.
Russia, the fourth BRIC, is seen as one of the economies most likely to see negative ramifications from the recession. Its dependence on oil and natural gas exports expose it to more economic risk than the other BRIC components, which are far more diversified and have better financial markets. Weak property rights and government favoritism issues also hurt Russia (63rd, down 12 spots from a year earlier) in the rankings.
Emerging Europe on the whole saw its competitiveness fall as a result of the financial crisis after years of booming consumption paid for by borrowing from foreign banks.
All 492 pages of "The Global Competitiveness Report" for 2009-10 are available *here.
*This link goes to the World Economic Forum Web site. U.S. Global Investors does not endorse any information supplied by this website and is not responsible for any of its content. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Marc Faber's Bullish Case for Commodities
September 03, 2009
In the latest issue of the Gloom Boom Doom Report, Dr. Marc Faber tells readers why he sees good times ahead for commodities.
The reason is the exploding federal deficit - a record $1.6 trillion in 2009 and the White House estimates another $9 trillion between 2010 and 2019.
The U.S. government now pays around $350 billion each year just on interest, Dr. Faber says, and it will soon get to the point where new debt will have to be issued just to cover interest payments on the massive federal debt.
It's like using one credit card to pay off another credit card. It might be your only option in a pinch, but it's not a viable long-term strategy.
Dr. Faber calls this a "Ponzi scheme" that will further debase the U.S. dollar.
A weak dollar is good for gold, oil and other natural resources, and this is why Dr. Faber favors commodities. He does caution that the U.S. dollar could see a short-term bounce - negative sentiment for the dollar has pushed it so low that a brief correction is statistically likely.
We'll have a lot more from Dr. Faber when he joins me for a webcast next Wednesday, September 9 at 11:00 a.m. Eastern. It's become a special annual event to have Dr. Faber share his thoughts with our listeners, and he never disappoints.
There's still time to register to listen live or have a notification sent to you when the replay is available. Visit the link below for details on what we'll cover and how to sign up.
Natural Resources: What's Ahead?
January 08, 2009
What a year 2008 was for the natural resources sector. Oil soared to $147 by July, and then crashed when domestic demand collapsed, dragging natural gas and other commodities down to their lowest levels in years.
But one year’s price action doesn’t change the fact that the global population continues to grow, and the earth’s supply of natural resources remains constrained.
So what’s in store for natural resources this year? Will energy prices rise again? What about demand for metals, industrial materials and other commodities during a global economic slowdown? What impact will the financial crisis have on long-term growth prospects?
We’ll offer our views on key drivers for natural resources and what’s ahead in 2009 during our exclusive webcast, Outlook for Natural Resources 2009, on Thursday, January 15 at 12:00 noon ET.
Also, mark your calendars for January 26 at 12 noon Eastern—our infrastructure team will host a webcast to discuss the opportunities arising from President-elect Obama’s plans for domestic infrastructure development.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Opportunity in Municipal Bonds
December 29, 2008
By John Derrick, Director of Research
We all know that 2008 has been a rough year for virtually all investors, and the municipal market has not been immune. Municipals, however, have weathered the storm better than most asset classes.
Over the long term, municipals have “provided strong taxable-equivalent returns with lower volatility relative to their taxable counterparts,” according to Barclays Capital. The chart below shows the relative risk and after-tax performance of major equity and fixed income asset classes.
Tax-exempt municipals (marked as “TE Muni” on the chart) have provided higher levels of after-tax returns than Treasuries or corporate bonds over the past 10 years, and these returns have come with lower volatility, as measured by annual standard deviation of returns.
The current market environment has witnessed numerous market dislocations that have led to extreme moves due to fear and greed. These dislocations produce both opportunities and threats, but now a significant opportunity appears to be at hand for municipals.
The chart below shows the historical relationship between the 10-year Treasury and high-quality municipal bonds of the same duration. Since 1991, 10-year municipals have traded within a range of 70 percent to 100 percent of the equivalent Treasury, with the average around 83 percent. Historically, the lower yield of municipals compared to Treasuries is due to credit quality characteristics and federal income tax exemption.
Ten-year municipals are currently trading at roughly double the yields that can be found in 10-year Treasuries, and this is occurring in a safety-minded market in which they would normally trade at a discount.
As of last Friday, 10-year municipals were yielding 4.27 percent, compared to 2.13 percent for the equivalent Treasury. On a tax-equivalent basis, the municipal yield is comparable to a taxable bond yield of 6.57 percent for investors in the highest tax bracket.
We have witnessed many firsts over the past year, and this appears to be yet another one. For those who appreciate history and understand the current market dynamics, this unusual situation could represent an investment opportunity worth considering.
| Fund | 1-Year | 3-Year | 5-Year | 10-Year | Gross Expense Ratio | Capped Expense Ratio |
|---|---|---|---|---|---|---|
| Near-Term Tax Free (NEARX) | 1.82% | 3.06% | 2.40% | 3.35% | 1.87% | 0.45% |
| Tax Free (USUTX) | -1.13% | 2.40% | 2.37% | 3.43% | 1.92% | 0.70% |
Gross expense ratio as stated in the most recent prospectus. The Adviser for the Near-Term Tax Free Fund and the Tax Free Fund has contractually limited total fund operating expenses (as a percentage of net assets) to not exceed 0.45% and 0.70%, respectively, through September 30, 2009, or until such later date as the Adviser determines. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus, which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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. Bond funds are subject to interest-rate risk; their value declines as interest rates rise.
China As an Energy Play
December 11, 2008
Evan Smith, co-manager of the Global Resources Fund (PSPFX), recently appeared on Bloomberg’s “Taking Stock with Pimm Fox” to discuss energy stocks.
During the discussion, Evan was asked whether a reduction in gasoline and other energy subsidies by the Chinese government will hurt energy companies in China.
“[They’re] going to try and reduce the subsidies and let prices rise to free market global prices. Can the economy handle that? Well, it can probably handle that a lot better at $40 oil than at $100 oil, so we don’t see it as too much of a concern. If anything, we see it as an opportunity to enhance the profitability of these large oil companies in China.”
*View a Replay of the Interview Here
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
ll 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. 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.
*By clicking the link you will be redirected to the Bloomberg website. U.S. Global Investors does not endorse any information supplied by this website and is not responsible for any of its content.
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Net Asset Value
as of 09/02/2010
- Global Resources Fund
PSPFX $8.72 +0.08 - Gold and Precious Metals Fund
USERX $17.25 +0.18 - World Precious Minerals Fund
UNWPX $19.21 +0.13 - China Region Fund
USCOX $8.50 No Change - Eastern European Fund
EUROX $9.05 +0.03 - Global Emerging Markets Fund
GEMFX $8.15 +0.01 - Global MegaTrends Fund
MEGAX $7.67 +0.03 - All American Equity Fund
GBTFX $19.86 +0.15 - Holmes Growth Fund
ACBGX $15.79 +0.19 - Tax Free Fund
USUTX $12.61 No Change - Near-Term Tax Free Fund
NEARX $2.27 No Change - U.S. Government Securities Savings Fund
UGSXX $1.00 No Change - U.S. Treasury Securities Cash Fund
USTXX $1.00 No Change