- March 9, 2011
- Washington’s Record as Investment Manager
Think the markets are kicking you around in 2009? Be thankful your portfolio isn’t performing like that of the federal government in its role as investor of last resort.
The Government Relief Index, created by the Nasdaq OMX to measure the performance of the 21 stocks that received at least $1 billion in emergency government funding, is down a whopping 58 percent.
And that’s just since January 5, when the index started.
This index, with the ticker QGRI, started with a value of 1,000 and on Friday it closed at 418.27. Below is the steep downhill chart.
By comparison, the S&P 500 Index is down 25.9 percent over the same 60 days, the Dow Jones Industrial Average 25.4 percent and the Nasdaq 20.4 percent.
Granted, the QGRI has a bit of a disadvantage compared to the other measures – it’s loaded with shares of banks, insurance companies and General Motors.
The worst-performing holding in the QGRI is Huntington Bancshares, down 86.7 percent since January 5, followed by Citigroup, down 84.7 percent. Bank of America and AIG are both off 77.7 percent.
A single stock in the QGRI is positive during the period – Morgan Stanley, which is up 7.1 percent. Northern Trust, down 9.1 percent, and Goldman Sachs, off 10.4 percent, are next.
Ford Motor Co. is looking all the better for not taking any emergency money from Washington. Its shares have declined 31 percent, roughly half of the slide experienced by General Motors, which is down 60 percent over the 60-day period.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NASDAQ OMX Government Relief Index is an equal-weighted index designed to track the performance of U.S. listed firms participating in the TARP or other direct government invested programs. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 12/31/08: Citigroup, Goldman Sachs.
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- March 19, 2011
- A Strong Wind Is Hitting the Market’s Sails
The markets received several clear and strong positive signals from the Federal Reserve today. It is the latest round of government news that makes it appear that the current market rally is sustainable.
The Fed announced today that it will purchase $300 billion in long-term Treasury securities, with a focus mostly on the two- to 10-year maturity range. This is another example of the government literally “printing” money to stimulate the economy.
In addition, the Fed said it is increasing its purchase of mortgage-backed securities by nearly 70 percent, from $750 billion to $1.25 trillion, and that it will purchase a total of $200 billion in debt from government agencies this year.
Finally, the Fed signaled that they would keep interest rates low for an extended period.
Virtually all markets responded to this dramatic change. Stocks rallied, gold reversed early losses and finished up $26 per ounce, oil rose 4 percent to just under $50 and the dollar dropped more than 2.5 percent.
Bond prices shot up, with the yield on the 10-year Treasury bond falling by nearly 50 basis points—according to Bloomberg, it was the biggest one-day decline in yield since 1962.
The charts above show that both gold and oil are currently trading above their 50-day moving averages. Six of our nine equity funds are also above their 50-day moving averages—Global Resources (PSPFX), Gold and Precious Metals (USERX), World Precious Minerals (UNWPX), China Region (USCOX), Eastern European (EUROX) and Global Emerging Markets (GEMFX).
This rally is more than just natural resources and emerging markets. Five of the 10 sectors of the S&P 500 are also above their 50-day moving averages. Below are the charts for the Nasdaq and the S&P Financial sector.
The government has been on a winning streak since it said last week that it is considering changes to mark-to-market rules and a possible return to the uptick rule for short selling.
I was in New York last week visiting institutional investors and media outlets, and I came away amazed by the irrational pessimism everywhere I went.
The market recognized that today’s announcement creates a more friendly environment for investors.
Combined with last week’s move, we believe this strong wind hitting the sails can be sustained and push us out of the doldrums where markets have languished for too long.
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.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in gold or gold stocks. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. In particular, the fund will invest at least 25% of its total assets in the following industries: energy equipment and services; oil, gas and consumable fuels; and commercial banking. However, the fund will not invest more than 50% of its total assets in any one of those industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. 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 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. #09-209
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- March 18, 2011
- The 50 Faces of Capitalism
One of the most popular items on TIME.com recently has been their slide show of the 25 people to blame for the financial crisis.
With that task out of the way, the important question now becomes, “Who’s going to lead us back?”
The Financial Times has identified 50 people as those who will frame the debate on the future of capitalism.
The list covers broad territory and is truly global in scope, and includes government leaders (President Obama, Chinese prime minister Wen Jiabao), central bankers (Fed chairman Ben Bernanke, the European Central Bank’s Jean-Claude Trichet), bankers (Goldman Sachs’ Lloyd Blankfein, JP Morgan’s Jamie Dimon), investors (Warren Buffett, George Soros), academia (economists Robert Shiller and Nouriel Roubini) and even media voices (Rush Limbaugh, Arianna Huffington).
Like all such lists, of course, questions can be raised about some of those who are in and those who are left out.
Among the interesting aspects are that nearly 40 percent of the list is drawn from the United States, this despite that events originating in the U.S. are seen by many as being the root of the leverage-driven financial collapse.
Also notable is that there are as many Chinese on the list as there are British, highlighting the key role that China is expected to play in shaping the capitalism of tomorrow.
This financial facebook is a good way to put a face to names you often see in the news, or will be seeing in the future.
*50 People Shaping the Future of Capitalism
The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 12/31/08: JP Morgan, Goldman Sachs.
*You are leaving U.S. Global Investors, Inc's site. You are now being redirected to the Financial Times Website. 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. The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 12/31/08: Berkshire Hathaway, JP Morgan, Goldman Sachs 09-202
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- March 17, 2011
- Just How Much is $1 Trillion?
President Obama says his administration’s stimulus plan could cost more than $1 trillion, and this has many people throwing that number around rather casually.
That got us to thinking about just how much $1 trillion represents.
- $1 trillion is almost enough to buy a controlling interest in all 30 of the companies in the Dow Jones Industrial Average.
- $1 trillion is more than the annual state tax revenue of all 50 states combined.
- $1 trillion would be enough to buy all of the single-family and multi-family residences in the state of Texas.
- $1 trillion would cover the entire U.S. federal budget, adjusted for inflation, from George Washington’s inauguration to the end of World War I.
- A stack of 200 $100 bills is roughly an inch thick. If these stacks were set up on end like dominoes, $1 trillion would be the distance from New York City to Chicago.
- And if today you started spending $1 million a day, it would take you more than 2,700 years to spend $1 trillion. That’s right, nearly three millennia.
The administration will be spending faster than that, so let’s hope this very big number is enough to point the economy in the right direction.
Another way to grasp the size of a $1 trillion stimulus is to compare it to other projects funded by the government. The team over at Mint.com has put together an eye-catching string of posters comparing the size of the current stimulus to other major government spending efforts.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
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- September 30, 2011
- Chart of the Week - Managing Emotions in Today's Marketplace
The markets are certainly volatile these days: one week it’s an impending Greek default, followed by a European downgrade coupled with a financial banking crisis, but it’s not all doom and gloom.
The market’s many moods are difficult for any seasoned investor to manage, but we believe there are always opportunities in global markets, and while the U.S. still needs to resolve its fiscal and monetary policies, it appears there’s a sign of hope on the horizon.
One positive point is the Conference Board Index of Leading Economic Indicators, which is also known as LEI. Historically, the LEI has proven to be a reliant indicator of recessions and recoveries. The index deteriorated ahead of the 2001 global recession, and again in early 2007 and 2008 before the global financial crisis and associated recession began.
As show below, on a year-over-year basis, the LEI has remained high, indicating strong to moderate growth over the next six months.
One of ten indexes used by the LEI to make its predictions is the University of Michigan Consumer Sentiment index. The monthly publication gauges consumer confidence to help determine the potential impact on stocks, bonds and the dollar. If the most recent report is an indicator of things to come, then the engine of the American economy&mdashconsumer spending—may be preparing to shift gears.
The survey indicated that “confidence among U.S. consumers rose in September from the lowest level since 2008,” says Bloomberg. While consumer spending still appears sluggish, consumers are beginning to have a more favorable view of the economy, injecting hope that Americans will once again open up their purses and wallets and help drive the economy forward.
Another factor confirming the strength of the LEI is the strong performance of companies on the S&P Composite 1500 Index. Currently, there are 705 companies with year-over-year revenues of 10 percent or more, which is impressive in this volatile market. During the bottom of the cycle in 2009, only 179 companies grew that fast.
The LEI indicates the U.S. economy will continue to produce dynamic growth companies, which are essential to economic growth and job creation. While the current market volatility has been difficult to maneuver, the future economic situation appears to be much better than what most commentators have been saying.
Despite the negative sentiment out there, investors should remember there will always be highs and lows, peaks and troughs: the importance is remembering to be humble when you're at the peak and hopeful when you’re in the trough.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
The University of Michigan Consumer Sentiment 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 Conference Board index of leading economic indicators is an index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994.
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