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Big Cities, Big Opportunities
October 23, 2009
One of the biggest drivers of global infrastructure is the rapid rate of urbanization experienced in the developing world.
The reason is simple – roughly 70 million people per year in developing countries are moving to cities, so there will need to be more roads, water systems, housing and electrical generation.
Nowhere is this trend more apparent than in China, which already has 100 cities with more than 1 million people. It is expected to eventually have 30 cities with more than 10 million people.
As you can see in the chart from UBS, Asia will be the main source of this urban growth. The United Nations says that over 1 billion Asian people will move to urban areas by 2030. Another 500 million people are expected to migrate to urban areas in Africa.
While this trend has picked up in pace in recent years, the growth of urban centers in the developing world has already been an established trend. Of the 20 largest urban areas in the world in 2005, only four were in the developed world (Tokyo, New York, Los Angeles and Osaka, Japan).
The infrastructure build-out truly is a global opportunity. As much of the infrastructure focus in the developed world centers around repair and replacement, the focus in the developing world is around providing people with basic needs taken for granted by many of us.
We believe emerging-market governments that commit to ambitious infrastructure programs will be the ones with the best economic growth prospects in the coming years.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-740
A Quick Look at Gold Trends
October 20, 2009
With the price of bullion at all-time highs, there’s a raging debate on gold as an investment – is it overbought or can it go still higher? What’s the inflation risk to the dollar? Should we be more worried about deflation?
Every Friday we try to address the factors affecting gold in our award-winning Investor Alert, which recaps the week just ended and also looks forward to provide insights on what might lie ahead. Along with gold, the Investor Alert covers energy and natural resources, global emerging markets, domestic equities and the bond market.
We encourage everyone with an interest in our key sectors to join the 23,000-plus individual investors who now subscribe to the Investor Alert and the 10,000 investment professionals who receive its sister publication, the Advisor Alert. Signup is free and easy – just follow the appropriate link.
To give you an idea of the Investor/Advisor Alert’s value, here are a few of the gold-related items from the latest issue:
- International Monetary Fund data shows that currency holdings among reporting central banks reduced the U.S. dollar’s weight to 62.8 percent as of June 30, the lowest on record. The shift in reserves to euros and yen confirm that world leaders are acting on threats to diversify out of the dollar based on lagging performance on U.S. assets and a weakening dollar.
- According to UBS, investment growth is not coming from the world’s largest bullion-backed exchange-traded fund, but rather from private purchases of bullion and Indian buying during the festival season. COMEX net long positions stood at a record high of 23.5 million ounces.
- Macquarie Bank said exchange-traded funds backed by physical supplies of industrial metals may potentially drive prices higher than index funds that buy futures contracts because there are currently talks of regulatory measures being imposed in the futures markets.
- An analysis by the Bank Credit Analyst shows gold and silver markets to be fairly overbought, but BCA expects that any correction should prove short-lived in the absence of a reversal in the dollar and/or deterioration in liquidity conditions. The Bureau of Labor Statistics says the consumer price index for jewelry in the U.S. rose to its highest level since January 1996.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The COMEX is a commodity exchange in New York City formed by the merger of four past exchanges. The exchange trades futures in sugar, coffee, petroleum, metals and financial instruments. 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. #09-728
A New Way of Thinking About Infrastructure
October 19, 2009
We don’t often talk about the U.S. Global Investors mutual funds in this blog, but this time it’s warranted because we believe we’re at the front end of a wider trend.
BusinessWeek’s web site has posted a good story today about how infrastructure investment is being redefined – as the world grows and technology changes, no longer is this sector limited to the traditional plays of construction and engineering companies, utilities and the like.
Jack Dzierwa, one of the managers of our Global MegaTrends Fund (MEGAX), was among the fund managers interviewed for this informative story.
Jack discussed how the fund’s management team takes a wide view of what constitutes global infrastructure – privatized airports, alternative energy, water and telecommunications are among the investment possibilities.
He also focused on the U.S. Global view that the infrastructure opportunity is especially attractive in emerging markets, given their higher growth rates and their need to build out their infrastructure to be globally competitive.
Read the Global Infrastructure Story
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
| Fund | One-Year | Five-Year | Ten-Year | Gross Expense Ratio |
|---|---|---|---|---|
| Global MegaTrends | -11.00% | -0.28% | 1.50% | 2.28% |
Gross expense ratio as stated in the most recent prospectus. 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 (e.g., short-term trading fees of 0.25%) 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.
By clicking the link in this article, you will be redirected to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Holdings in the Global MegaTrends Fund as a percentage of net assets as of September 30. 2009: SNC Lavalin Group 1.54%, Cohen & Steers Capital Management 0.0%, Empresas ICA 0.0%, Companhia de Concessoes Rodoviarias 0.0%, Cascal NV 0.0%, Eutelsat Communications 0.0%, SES SA 0.0%, American Tower Corp. 0.0%, Vivo Participacoes SA 2.16%, Grupo Aeroportuario del Sureste SA B de CV 2.92%, Alpine Global Infrastructure Fund 0.0%, Cohen & Steers Global Infrastructure Fund 0.0% #09-726
Resources: A Demand Story
October 14, 2009
This analysis from Dr. Marc Faber is adapted from our exclusive webcast Global Investing Outlook. Dr. Faber, based in Hong Kong, is a prominent international investor and a member of the influential Barron’s Roundtable. These are some of the thoughts he shared:
If you look at the next 10 to 20 years in the West, I don’t see how the lifestyle of the average person will improve meaningfully. On the other hand, if you look at a country like Vietnam, they have a GDP per capita annually of $800 which may go to $3,000 over the next 15-20 years.
The same is true for China and India. You suddenly have a middle class of 230 million people in India who will be buying cars like the $2,500 Nano (pictured) and other goods.
Once a family moves from the bicycle to the motorcycle, it’s an improvement in their standard of living. But when you move to the car and drive your children to school in your car, it’s a huge increase in your standard of living and your social class.
The Chinese have very little crude oil, natural gas, iron ore and copper of their own. This should support commodity prices because they’re not going to stop buying these commodities.
Chinese steel production went from 10 percent of the world in 1990 to over 40 percent today. Aluminum production went from 10 percent of the world in 2000 to over 30 percent. This isn’t because of exports – it is domestic consumption which isn’t going away.
The bull market in commodities that began in 2001 and lasted until the collapse in 2008 was too short to really trigger a supply response. This is because once the market collapsed, a lot of projects were cancelled and a lot of exploration companies didn’t get the money needed to carry on with exploration.
In our lifetime, we will never again have a synchronized global boom like what we’ve just experienced. Instead, you can expect some countries will do well and others will do less well.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-668
Commodity Insights from London
October 13, 2009
Brian Hicks, co-manager of our Global Resources Fund (PSPFX), is in London this week for the London Metal Exchange’s 2009 Metals Seminar, which kicked off the annual LME Week gathering of leading commodities analysts from around the world. Here are Brian’s notes from the seminar:
Danny Quah, professor at the London School of Economics, gave a compelling presentation that centered on China and the global recovery. His main theme focused on the global economy's shifting center of gravity, which has been steadily moving eastward to China over the past decade. He also mentioned that China isn't dependent upon U.S. consumption to create growth – that notion is an old paradigm from the 1970s. Exports to the U.S. only make up approximately 15 percent of total exports, versus the 40 percent of total exports going to Southeast Asia.
Michael Jansen, director of commodities at JP Morgan, is one of a few who see a V-shaped recovery, given the rapid and unprecedented response to the financial crisis.
Jansen's Copper outlook: Imports to China may halve through the rest of the year, but should still remain at high levels. Scrap is tight, but it has improved. Copper is the "best" way to play the developed-markets recovery given a strong rebound in industrial production. Risks to mine supply remain – 3.7 million metric tons of production is up for contract negotiations in 2009.
Jansen's Aluminum outlook: While it is true there is too much inventory and capacity, Jansen still believes prices may go higher early in 2010 due to potentially large primary buying/restocking. Fabrication demand should pick up due to low inventories.
Jansen's Nickel outlook: A bit of a pick-up in European stainless steel orders has been offset by a slowdown in China. Xstrata has curtailed high cost nickel production and cut costs, bringing down its average cost to $3 per pound. Despite a 20 percent cutback in mine supply, some people I met still think there is too much capacity and more cuts are needed.
Jansen's Zinc outlook: Galvanized steel could pick up materially given that only 50 percent of global infrastructure projects are in place. Chinese auto sales also should be supportive for the zinc market. We could see a 146,000 metric ton deficit in 2010.
Jeffrey Christian, managing director at CPM Group (and author of “Commodities Rising”), highlighted that the lack of credit availability is the biggest risk to the recovery near-term, while slow growth in energy supply is the biggest risk longer-term.
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. 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. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Holdings in the Global Resources Fund as a percentage of net assets as of 6/30/09: Xstrata 0.00% #09-713
Net Asset Value
as of 11/20/2009
- Global Resources Fund
PSPFX $8.53 -0.06 - Gold and Precious Metals Fund
USERX $16.05 -0.08 - World Precious Minerals Fund
UNWPX $17.97 -0.02 - China Region Fund
USCOX $8.24 No Change - Eastern European Fund
EUROX $8.97 -0.10 - Global Emerging Markets Fund
GEMFX $7.94 -0.02 - Global MegaTrends Fund
MEGAX $7.94 -0.04 - All American Equity Fund
GBTFX $19.21 -0.10 - Holmes Growth Fund
ACBGX $15.12 -0.06 - Tax Free Fund
USUTX $12.24 +0.01 - Near-Term Tax Free Fund
NEARX $2.22 No Change - U.S. Government Securities Savings Fund
UGSXX $1.00 No Change - U.S. Treasury Securities Cash Fund
USTXX $1.00 No Change