http://www.usfunds.com/investor-resources/frank-talk/ A Blog by Frank Holmes, CEO and Chief Investment Officer for U.S. Global Investorsen-us Mon, 01 Jan 1900 06:00:00 GMTFri, 20 Nov 2009 21:43:19 GMT http://www.usfunds.com/investor-resources/frank-talk/?i=1763You can add gold demand to the list of items being supported by China. China was the sole market to see positive growth in consumer demand for gold, rising 12 percent from a year ago the World Gold Council reports. Total gold demand in China reached 120 tonnes, nearly double the amount from just four years ago. Overall, gold demand was off 34 percent from 2008 but that is largely the result of exceptionally high demand increases during the darkest time of the financial crisis. On a year-to-date basis, gold demand is only down 6.3 percent. China’s improving economy has made consumers less price sensitive than those in India and the Middle East who have not fully adjusted to gold prices at current levels. Jewelry demand in India fell 42 percent on a year-over-year basis but Indians haven’t abandoned their strong cultural connection to gold. Exchange activity among consumers—where old pieces are swapped for new ones—has spiked. The WGC says this “suggests a strong desire by consumers to remain attractive in the [gold] market.” BMO doesn’t believe that the downtick in demand is a symptom of a long-term trend. In a research note, they write that “the combination of a strengthening economy, modest supply growth, central-bank buying and concerns surrounding the U.S. dollar and inflation should continue to support gold demand and prices into 2010.” All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-819Fri, 20 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/ChinaGoldDemand112009.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1763Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1752While the Indian government buys its gold in the hundred of tons, a growing number of people around the world are buying by the ounce. For years I’ve been saying on TV and elsewhere that one-ounce coins like the American Eagle and the Canadian Maple Leaf make excellent gifts that the recipients will always remember and treasure. The same goes for 24-karat gold jewelry. The U.S. Mint seems to be thinking the same thing – it plans to restart the sale of half-ounce, quarter-ounce and one-tenth-ounce gold coins on December 3, just in time for Christmas gift-giving. Last year, the Mint ran out. Coin sales have been impressive this year – the Mint has sold more than 1.1 million of the one-ounce American Eagles and 140,000 American Buffalo coins, also one ounce. In Britain, the Royal Mint quadrupled its gold-coin output in the third quarter of 2009 to meet demand. The World Gold Council says gold demand overall was up 10 percent in the third quarter of 2009 compared to the second quarter. The council says jewelry demand was up 17 percent to 473 metric tons, and that 81 tons worth of gold bars were purchased, up 30 percent from the previous quarter. Even at the current record prices, gold in the form of coins and jewelry may prove to be gifts of good value. If someone offered to sell you a one-ounce gold coin for $50, would you buy it? It may seem like a silly question, but apparently not everyone would make that deal. Watch this humorous video to see. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-816Thu, 19 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/goldGift%2D111909.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1752Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1733An article this week from Morningstar analyst Greg Wolper “Give Small Fund Shops a Chance” argues that investors who ignore small fund complexes may be missing out on growth opportunities. It’s long been hard for small fund companies to get attention – they don’t have the money to spend on advertising that the giants have. But Wolper writes that “lesser-known firms, and funds, have advantages that make it worth the time to seek them out.” He also makes a good point when he says that small fund managers can struggle when they try to cover too many asset classes and sectors. He says “a good small firm often focuses on one thing it does well.” We recently revamped our company site—USFunds.com—to make it easier for new and returning visitors to quickly learn about U.S. Global Investors and its focus on the global growth theme, which is at the intersection of emerging markets and natural resources. Wolper finishes by giving his readers some sound advice: When you come across an intriguing fund in one of your screens, or in a media report, don’t ignore it just because the name is unfamiliar. Some investigation through Morningstar and on the fund’s Web site might lead you to conclude that this obscure fund is worth serious thought. Read the Full Article By clicking the link to the Morningstar story, you will be directed to Morningstar.com. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for 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. #09-812Wed, 18 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/bigFishLittleFish%2D111809.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1733Odds & Ends http://www.usfunds.com/investor-resources/frank-talk/?i=1730In TV commercials and across the Internet, managers of exchange-traded funds tout the tax advantages of their products. But according to a story in the latest issue of Barron’s, many investors in precious-metals ETFs have to deal with an unwelcome surprise come April 15. The issue is that gold and silver fall under the heading of “collectibles” in the eyes of the Internal Revenue Service, making these metals similar to artworks, antiques, vintage wine and rare baseball cards. This status means that profits from gold and silver investments do not qualify for the 15 percent maximum on long-term capital gains that pertain to stock and mutual fund investments. These profits are instead taxed at a 28 percent maximum if held for more than a year, and at ordinary income rates if held for less than a year. With the rapid appreciation of gold in recent years – the current price is nearly double where it was in early 2007 — many investors who cashed out their gains in gold ETFs may be hit with unexpectedly big tax bills. The same liability may hold true for investors who didn’t sell a single share of their gold ETF. That’s because when the ETF itself sells physical gold or silver, any gains or losses are passed along to investors, who then face the maximum 28 percent tax liability even if they didn't actually realize the gain. Not all gold–related ETFs are considered collectibles, but for those that are, investors should be aware of the rules so they can weigh the advantages and disadvantages of their investment options. Here is a link to the Barron’s story (subscription required): Gold Is Precious to the IRS, Too By clicking the link to the Barron’s story, you will be directed to Barrons.com. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for 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. Information provided is neither tax nor legal advice and is general in nature. You should consult your tax advisor, financial advisor or local taxing authority for specific information regarding your tax situation as every tax situation is different. The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 9/30/09: SPDR Gold Trust #09-809Tue, 17 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/UncleSamGold%2D111709.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1730Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1726This analysis is from Romeo Dator, co-manager of the China Region Fund (USCOX). A year ago, nobody thought China could manage 8 percent GDP growth in 2009. With year-to-date growth coming in at 7.7 percent through the first three quarters and getting stronger, China is poised to break that 8 percent mark rather easily. The success of the stimulus and the lofty economic numbers China has managed to produce amidst a global crisis has led many to claim China is the next great bubble. We see five reasons China is not a bubble and believe that its prospects remain strong for at least the next 20 years. 1) Consumption Continues to be Strong China is transitioning to a consumption-based workforce. Retail sales rose 16.2 percent in nominal terms during October and have been accelerating. The retail sales figure isn’t a perfect proxy, but it is the best available indicator of overall consumption because it does include sales to consumers and not just purchases made by the government. We also saw strong growth in industrial production (IP) and power generation both were up more than 16 percent on a year-over-year basis in October. Housing starts were up more than 50 percent (yoy) for the second straight month. 2) Structural Changes to Domestic Economy We’re seeing a transition to a service-related economy. The service industry is the fastest-growing sector (roughly 20 percent faster than construction) and now accounts for one-third of China’s workforce. In general, the size of the service sector is directly correlated to the amount of goods and services an economy consumes. This is why the government has spent such a large amount of the stimulus on areas that benefit the domestic market—that’s where it thinks the economy is headed. 3) Stimulus Exit Strategy in Place China’s stimulus exit strategy is simple--create a strong economic base that the private sector can launch from. After private investment surpassed that of state-owned enterprises in September, the two flip-flopped during October. Given the environment, month-to-month fluctuations like this are to be expected since private investment is dependent on how willing Chinese citizens are to put their own money at risk. Even though Beijing is determined to wean China’s economy off of government stimulus, the government will not hesitate to ramp up activity should the private investors become risk-averse. 4) Government Controls on Flow of Money After lending more money over the first five months of 2009 than all of 2008, we’ve seen loan numbers come down.  There’s a longstanding pattern of new loans slowing down during the second part of the year as banks have historically rushed to meet government-mandated loan quotas. The magnitude of this year’s slowdown—trillions of yuan—is evident of Beijing’s dedication to prevent a bubble from forming. Once the figures grew too large, the government moved quickly to hit the brakes. While U.S. regulators have many holes to plug in order to keep the economy afloat, the limited number of investment options available to Chinese citizens—basically stocks, bank savings and property—makes it easier for the government to institute controls. This is what happened in 2007 when the government forced a slowdown in the housing market before it overheated. After its economy grew 12.6 percent in the second quarter of 2007, China took more aggressive actions to cool its economic growth.  The government raised lending rates and also raised reserve requirements to shrink the pool of money available for lending. 5) China’s Long-Term Goals Match Up With Short-Term Goals In the U.S., the Federal Reserve and policymakers are faced with conflicting goals. They need people to spend in order to get the economy rolling again, but their end game is to have the American people spend less and save more. It’s the opposite for China. The problem in China is excess savings and not enough spending.  The short-term and long-term challenges are the same—to get people to spend more. Recent signals that China will begin letting the yuan appreciate against the U.S. dollar are not new. For several years, Beijing has stated a gradual appreciation of the yuan will benefit the economy, and CLSA expects Beijing to resume a 5 to 7 percent annualized appreciation process about midway through 2010. Rapid economic growth may be common in emerging economies, but there’s only one China. Already the world’s third-largest economy on a nominal GDP basis and second-largest based on purchasing power parity, the Chinese aren’t making a break from the back of the pack—they’re leading it. Domestic consumption, the rise of the service sector and increased private investment won’t make China immune to economic bubbles, but these strengths will provide some protection from external forces. 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. All 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. 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. #09-803Mon, 16 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/ChinaBubble%2D111609.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1726Chindia http://www.usfunds.com/investor-resources/frank-talk/?i=1704With President Obama scheduled to make his first presidential trip to Beijing this weekend, China Region Fund (USCOX) co-manager Romeo Dator appeared on CNBC’s “Power Lunch” today to discuss the U.S.-China relationship. The other guest in the segment was former U.S. Secretary of Commerce Carlos Gutierrez, who stressed that the U.S. relationship isn’t the only one that’s important to China. [Obama] won’t be able to give them a public lecture. He’s going to find a more assertive, a more confident China. The only thing playing in our favor this time is that the whole of Asia is up in arms about the dollar. Since the Chinese peg their currency to the dollar, it’s giving them a benefit versus the rest of Asia. The only real chance we have here is for Asia to convince China (to let the yuan appreciate). Romeo predicted that Asia on the whole will grow in importance for investors. I think going forward the Asian countries are going to show stronger growth than we’ll have here in the United States and as a result, that’s where money is going to flow. So I think [investors] need to make some sort of allocation toward these markets. 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. All 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. 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. Holdings in the China Region Fund as a percentage of net assets as of 9/30/09: Baidu 2.12%, Ctrip.com International 1.68%. The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange. #09-806Fri, 13 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/YinYang%2D111309.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1704Chindia http://www.usfunds.com/investor-resources/frank-talk/?i=1675I often say that money goes to where it’s treated best, and a Bloomberg News story this week shows that I’m not the only one who believes that. The CEO of Emerson Electric, which makes a wide range of industrial and technology products, says the U.S. government’s plans for greater regulation and higher taxation are pushing his company to move more of its business operations overseas. David Farr, who heads the $21 billion company, didn’t pull any punches: “Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing.” And Farr predicts he will have plenty of company in the exodus to China, India and other places “where people want the products and where the governments welcome you to actually do something… I'm not going to hire anybody in the United States. I'm moving.” Government policies for peace and prosperity are a key component in determining a country’s growth prospects and attractiveness for investors. Worries about the unintended consequences of Washington’s policies have been growing – David Farr’s blunt assessment speaks for those concerned about the risks of governmental overreaching. Read the Bloomberg Story Here By clicking the link, you will be directed to Bloomberg.com. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for 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. None of U.S. Global Investors family of funds held any of the securities mentioned in this article as of 9-30-09. #09-798Thu, 12 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/Washington%2D111209.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1675Emerging Markets http://www.usfunds.com/investor-resources/frank-talk/?i=1670Twenty years ago this week, the Berlin Wall fell and in doing so, set off a string of momentous events that in short order saw the reunification of Germany, the collapse of the Soviet Union, and freedoms and democracy spread across a long-oppressed part of the world. Few events in modern history have had such a significant impact on the lives of so many people, but momentum for the wall’s fall began years earlier. A member of our investment team who grew up in Poland points out the important role played by Polish leader Lech Walesa, the shipyard electrician who led the Solidarity labor movement that drew support from around the world. Solidarity’s success in creating the first free trade union behind the Iron Curtain weakened the region’s Communist governments and won Walesa the Nobel Peace Prize. Walesa, later Poland’s first post-Communist president, was in Berlin this week to tip over the first in a series of artistic dominos representing pivotal events from that time. A member of our team who grew up in Azerbaijan during the Soviet era describes the Berlin Wall as the line in the sand for the Soviets. Once it was gone, it was a natural next step for the former Soviet republics to pursue their own independence. Prior to the wall’s fall, defiance of Moscow was rare in the Soviet republics, but that changed quickly. By the early 1990s, the Soviet Union was no more – an outcome that few would have believed possible just a couple of years earlier. As global investors, we watch government policies for peace and prosperity as part of our investment process. The dramatic changes in the former Soviet bloc, for example, led us to create our Eastern European Fund (EUROX) in 1997 – this was one of the first funds focusing on this region. Having a diverse investment team is a tremendous asset in helping us to spot opportunities arising from important global events. 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. 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. All 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. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking 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. #09-795Wed, 11 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/BerlinWall%2D111109.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1670Eastern Europe http://www.usfunds.com/investor-resources/frank-talk/?i=1661I appeared on CNBC’s “Squawk Box” this morning to discuss gold’s bullish run. One point I tried to stress to host Carl Quintanilla was that countries are intentionally weakening their currencies to benefit their export sectors, and this is one of the key factors driving gold higher. There’s a competitive currency devaluation taking place with many of the Western currencies, and countries like India don’t want to dump the dollar – they just want to diversify (their foreign reserves) and they don’t want to buy the euro…We’re seeing some really fascinating currency devaluations going around and I think that this bodes well for having gold as a component of your portfolio. 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 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 Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. #09-785Tue, 10 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/FrankSimon111009.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1661Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1650India’s deal to buy 200 metric tons (6.4 million troy ounces) of gold from the International Monetary Fund (IMF) is a huge deal – not just the fact that the New Delhi government is handing over $6.7 billion for the metal, but what it may mean for gold going forward. India, the world’s largest gold jewelry market, is making a rational and bullish call on gold. The supply of gold continues to decline - the biggest supply is from governments with socialist policies that are selling their gold to pay for social welfare and bailout programs. The IMF is a classic case of this. What’s particularly interesting in this case is that the buyer is a developing economy that’s the largest democracy in the world. I see this as another sign of the wealth shift away from the developed markets of North America and Western Europe toward the emerging world. A decade ago, many of the major emerging markets were in shambles, with contracting economies and huge current account deficits – now many of them have large surpluses to deploy, and they’re thinking beyond Treasuries. Energy analysts at Merrill Lynch came out with a research note predicting the price of gold will top $1,500 an ounce within the next 18 months. The rationale – a lack of confidence in major currencies will push investors toward gold as a hedge against competitive devaluation by the world’s largest economies. The chart below lays out this scenario in a succinct way. Annual gold production is on a downward trend while the growth in money supply in both the United States and the Eurozone is bent almost straight up. Economics 101 - more money competing for a declining resource tends to drive up the price of that resource. The note goes on to say that if gold prices rise, the price of energy and other commodities will rise as well.  The chart below from Merrill Lynch shows the strong capital inflows into emerging markets starting in the second quarter of 2009 have both strengthened their currencies and boosted commodities demand. You also see that dynamic at work in the relationship between gold and oil over more than a century. Historically there is a strong positive correlation between gold and oil, and with 2009’s global monetary expansion, that correlation is being further strengthened. We’ve been writing about this correlation for many years. It’s significant that, on an inflation-adjusted basis, all of the natural resources except gold and silver have surpassed their previous all-time highs. Gold is only approaching the halfway mark to $2,300 an ounce, which would be its 1980 high when adjusted for inflation. Just like in the U.S., money supply is exploding in China, as you can see in the chart above.  Greg Weldon, who analyzes money supply in the Weldon Money Monitor, had this to say recently: “September’s +29.5 percent year-over-year pace of monetary expansion represents the fastest ever recorded in China… Against a U.S.-focused macro-monetary backdrop that is defined by intensifying risk to reflation, the pressure on the (U.S. dollar) against the Chinese currency, in line with the highly expansionary monetary dynamic dominant in China, makes us more willing to explore the bullish side of global equities and commodities.” Along with India, China has also been a major gold buyer – its reserves have nearly doubled since the start of 2003, when the price was about $345 an ounce. And, of course, now there’s talk that China may buy the remaining 203 metric tons that the IMF is seeking to sell. Another thing about India or China is that their governments won’t be criticized for buying gold because as a nation, they have a strong cultural affinity toward it. It’s how they store their wealth, and they can wear it as jewelry. If the U.S. government went out and spent nearly $7 billion for the IMF’s gold, there would be no end to the howling. The disconnect amazes me – the U.S. holds virtually all of its foreign reserves in gold. We are the world’s largest gold holder, with more than double the amount as #2 Germany, but as a nation Americans are gold skeptics. Just this week, I was interviewed twice on television by two old-timers who are still clearly anti-gold. It appears they would prefer to live in a state of denial. But in emerging Asia, the citizens get it. They say it’s a good move because they are buying gold, too - they believe in it. And with this purchase from the IMF, India has gone from being a price taker as a jewelry consumer to being a price maker as an investor. This is the sort of change in government policy that we watch for in shaping and maintaining our investment models. It is significant that India, the second largest country in the world by population and the largest gold jewelry consumer, may have created a new floor for gold at $1,000 per ounce. The presence of a big bullish buyer tends to create a big bullish buzz for gold. We’re seeing it now – gold on Friday surpassing $1,100 an ounce – and history suggests it may last a while. Around this time in 2005, for example, Russia announced that it was doubling its gold holdings from 5 percent to 10 percent of its reserves. At that time, gold was selling for about $490 an ounce. A year later, the price was up 30 percent. Of course, Russian purchases weren’t the only thing that drove up gold – back then the dollar was dropping, federal deficits were colossal, markets were volatile and investors faced negative real interest rates.  We have the same conditions now, but on an even greater scale following the credit crisis, steep recession and the massive economic stimulus programs created around the world. Our consistent suggestions is that investors consider a maximum 10 percent allocation to gold – half of the exposure in bullion and the other half in gold equities. The factors we’ve described above tend to be positive for gold and gold investing – the vote of confidence by a serious buyer like India may make a good situation even better. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-781Mon, 09 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/IndiaGold%2Dthumb%2D110909.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1650Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1616Another week, another major resource deal announced by China. This week it was Petrobras, Brazil’s national oil company, which announced a $10 billion loan from China in exchange for up to 200,000 barrels of oil per day for the next 10 years. This is the latest in a year that has seen China make $20 billion worth of overseas deals to acquire natural resources (left chart) and issue an additional $50 billion in loans backed by oil. China’s overseas activity has picked up considerably over the past two years. All told China it has made about three dozen mining deals and another 32 energy deals since 2000. All this activity has made some nervous, but when you put the deals into context it’s easy to see that Beijing isn’t taking over the world of resources. This year’s oil deals have given China access to an additional 1.2 million barrels per day (right chart). That may seem like a lot, but China’s oil use is expected to increase from about 8 million barrels now to as much as 33 million barrels a day by 2025. To keep its economy cooking, China has to find those additional barrels overseas – even now, its domestic production satisfies only 45 percent of its demand. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. None of U.S. Global Investors family of funds held any of the securities mentioned in this article as of 9/30/09. #09-779Fri, 06 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/ChinaProsperous%2D110609.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1616Chindia http://www.usfunds.com/investor-resources/frank-talk/?i=1598I’m often asked my view on the best way to play the current runup in gold, and typically my answer to that question includes a suggestion to look at silver. Silver has long been called “the poor man’s gold,” and in the safe-haven trade since the start of 2009, its price has appreciated nearly 60 percent, though there have been a lot of ups and downs along the way. Over the same period, the price of gold has risen about 25 percent to an all-time high, also with a fair bit of volatility. At the beginning of the year, the gold-silver price ratio was 79 to 1—it would take 79 ounces of silver to buy one ounce of gold. As of yesterday’s close of $1,090 per ounce for gold, that ratio was down to 62 to 1. This narrowing trend might be seen as a negative for silver, but that’s not necessarily the case. This week, I saw a technical article from Lorimer Wilson on Financial Sense University’s Web site pointing out that, over the past five years, the gold-silver ratio has ranged from 43.6 to 1 in April 2006 to 84.4 to 1 in October 2008, and that the 28-year support line is 58 to 1. Applying the five-year ratio range at yesterday’s closing gold price would yield a silver price range of $25 per ounce (+43 percent from yesterday’s close) to $12.91 per ounce (-26 percent). The 28-year support line suggests a silver price of $18.79 per ounce, which is 7.5 percent higher than yesterday’s close. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-777Thu, 05 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1598Energy & Natural Resources http://www.usfunds.com/investor-resources/frank-talk/?i=1568India’s deal to buy 200 metric tons (6.4 million troy ounces) of gold from the International Monetary Fund is a huge deal – not just the fact that the New Delhi government is handing over $6.7 billion for the metal, but what it may mean for gold going forward. India is making a bullish call on gold. The supply of gold continues to decline – the biggest supply is from governments selling their gold to pay for social programs. The IMF is a classic case of this. What's particularly interesting in this case is that the buyer is a developing economy. I see this as another sign of the wealth shift away from the developed markets of North America and Western Europe toward the emerging world. China has also been a major buyer – its gold reserves have nearly doubled since the start of 2003, when the price was about $345 an ounce. Another thing about India is that its government won't be criticized for buying gold because as a nation, Indians have a cultural affinity toward it. It's how they store their wealth, and they can wear it as jewelry. If the U.S. government went out and spent nearly $7 billion for the IMF’s gold, there would be no end to the howling. But in India, the citizens say it's a good move because they are buying gold, too – they believe in it. The presence of a big bullish buyer may create a big bullish buzz for gold. We’re seeing it today – gold is nudging close to $1,100 an ounce – and history suggests it may last a while. Around this time in 2005, for example, Russia announced that it was doubling its gold holdings from 5 to 10 percent of its reserves. At that time, gold was selling for about $490 an ounce. A year later, the price was up 30 percent. Of course, Russian purchases weren’t the only thing that drove up gold – back then the dollar was dropping, federal deficits were colossal, markets were volatile and investors faced negative real interest rates.  We have the same conditions now, but on an even greater scale following the credit crisis, steep recession and the massive economic stimulus programs created around the world. These factors alone tend to be positive for gold and gold investing – adding a vote of confidence by a serious buyer like India may make a good situation for gold even better. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-773Wed, 04 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1568Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1564What happens in markets in the first 10 months of the year can shed light on what might happen in November and December. The statistic-minded folks at Bespoke Investment Group crunched some numbers going back more than a century and came up with this interesting tidbit – when the Dow Jones Industrial Average is up 10 percent or more through October, the next two months have yielded positive Dow returns 87 percent of the time. 2009 marks the 47th time since 1901 that the Dow has topped 10 percent through October. When that occurs, Bespoke says, there has been an average Dow gain of 4.2 percent and a median gain of 3.6 percent through the end of the year. Here’s another factoid – regardless of performance through October, the Dow has averaged a 65-basis-point gain in November over the past century. The results are better over the past 50 years and 20 years – monthly gains of 1.21 percent and 1.79 percent, respectively. You can see in the yellow bar on the chart above that November is the second-best month for the Dow (trailing only April) over the past 20 years, and the reddish bar shows that November and December are two of the best months over the past 50 years. There are, of course, no assurances, that this year will follow the strong November-December historical trend. In 2007, for instance, the Dow dropped nearly 5 percent in the last two months of the year as the U.S. and other countries slipped into recession. But for what it’s worth, Bespoke says all of the other five November-Decembers with negative Dow performance came before the end of World War II (1912, 1918, 1919, 1925 and 1943). All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. #09-772Tue, 03 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1564Economy & Markets http://www.usfunds.com/investor-resources/frank-talk/?i=1543This analysis is from Evan Smith and Brian Hicks, co-managers of the Global Resources Fund (PSPFX). Oil prices have bounced more than 150 percent off of December 2008 lows but inventory levels remain at historically high levels despite a healing global economy. However, Goldman Sachs says robust 2010 oil demand growth will deplete these inventories over the next 12-to-18 months and diminishing production rates in key areas around the world will create a supply/demand imbalance. The above chart shows the decline in production from the world’s top 230 projects. After peaking in 2009, production from these projects is set to fall for the next several years. Excluding OPEC countries (right chart), the decline rates quadruple from 2007 to 2012 (est). Over that time period, non-OPEC production is expected to fall by 2.5 million barrels per day. Only Brazil, Canada and the former countries of the Soviet Union are expected to see production growth. One of the largest contributing factors for this is chronic decline rates from some of the world’s top mature fields. Mexico’s Cantarell field, one of the largest oil fields in the world, produced 30 percent less oil in 2008 than it did in 2007—a trend that’s expected to continue. Norway, the world’s 11th largest oil producer in 2008, saw its oil production peak in 2001 and is down 27 percent since. Another big producer, Venezuela’s state-owned oil company PdVSA has seen annual decline rates of more than 25 percent in certain fields according to the Energy Information Administration (EIA). Adding to the dilemma, many countries without decline-rate issues have been holding out production increases until projects become more cost effective; this is why we recently saw Russia overtake Saudi Arabia as the world’s largest oil producer. The Saudis have been content to sit on the sidelines while awaiting the return of higher prices. The same goes for other OPEC countries; PIRA, an oil-industry consultant, says the cost of oil will have to rise above $80 per barrel in order for the cartel to increase production. With oil prices currently hovering around that $80 level, OPEC officials have recently hinted that production increases aren’t off the table for the cartel’s upcoming December meeting. Even if we see a production increase out of OPEC, decline rates from maturing fields and high barriers of entry to bring new fields online should keep the supply/demand balance tight for years to come. Brian Hicks and Evan Smith will be co-hosting a free webcast event with U.S. Global Investors CEO Frank Holmes titled “What’s Driving Energy?” on Tuesday, November 3 at 12:00 PM ET. The presenters will be detailing the critical factors supporting long-term energy demand. Click Here to Register 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. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. #09-762Mon, 02 Nov 2009 06:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1543Energy & Natural Resources http://www.usfunds.com/investor-resources/frank-talk/?i=1527Drivers on San Francisco’s Bay Bridge were greeted by 5,000 pounds of metal on Wednesday when a recently repaired eyebar snapped under pressure from high winds. Unlike the 2007 bridge collapse tragedy in Minneapolis, no one was killed and only one motorist suffered minor injuries. A lucky break since the accident happened during rush hour on a bridge that services 280,000 commuters every day. This isn’t the first newsworthy item in the Bay Bridge’s history, as a 50-foot section of the upper level collapsed onto the bottom level during the 1989 Loma Prieta earthquake. The image was quickly beamed to millions of homes around the U.S. as they were tuning in for Game 2 of the World Series. Though a major disaster was averted this time, the clock is ticking unless measures are taken to rebuild, reinforce and restore America’s crumbling infrastructure. One in four of America’s bridges are either structurally deficient or functionally obsolete, according to the American Society of Civil Engineers. Overall, they rate America’s 600,000 bridges a "D."  The ASCE estimates there is a nearly a $7 billion gap between what is needed to be invested in order to improve conditions versus what actually is being invested. Hopefully, that and similar domestic infrastructure spending gaps will start to close before the problem becomes a crisis. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-760Fri, 30 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1527Infrastructure http://www.usfunds.com/investor-resources/frank-talk/?i=1518I visited the Wall Street Journal offices this morning to discuss gold and commodities markets with reporter Simon Constable. Simon and I discussed gold’s volatility and demand concerns. I also outlined who some of gold’s key constituents are: There are what they call the price takers and the price makers. The price takers are the jewelers...they’re a huge part of the demand equation. The price makers are the investment people who are worried and have a lack of confidence in the government’s policies about the currency. 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 interview were held by one or more of U.S. Global Investors family of funds as of September 30, 2009: SPDR Gold Trust. #09-758Thu, 29 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1518Media Appearances http://www.usfunds.com/investor-resources/frank-talk/?i=1506Our friend Andy Rothman from research firm CLSA sent out an interesting chart last week following the release of China’s macroeconomic data for the month of September. As you can see from the chart, private investment (Non State-Owned Enterprises) growth accelerated to 37 percent on a year-over-year basis, a more rapid rate than that of state-owned enterprises. This is the first time we’ve seen this happen since October of last year and it is the fastest rate of growth since November 2007. A more confident private sector should not only make China’s ongoing recovery more sustainable in a time of diminishing government-mandated stimulus, but also facilitate the structural transition of the Chinese economy toward private consumption. The private investment revival is largely driven by the real estate sector, which has seen inventory levels drop in major cities like Beijing and Shanghai. CLSA’s on the ground survey revealed that 50 percent of middle-class families surveyed said they were considering buying an apartment. Activity has also picked up in the business sector. Out of more than 100 small- to medium-sized enterprises surveyed, 32 percent added staff during this past quarter and more than that expected to do so this quarter. Even more telling is that more than two-thirds of the small- to medium-sized enterprises expect the business environment to improve over the next six months. It’s still too early to call but this could mark a shift in China in which the government’s economic assistance is reduced and economic growth is sustained by the private sector. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-756Wed, 28 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1506Chindia http://www.usfunds.com/investor-resources/frank-talk/?i=1492Ever feel like somebody’s watching you? If you’ve traveled to the UK recently, chances are somebody has. An article from Sunday’s New York Times: “Britons Weary of Surveillance in Minor Cases” details some troubling surveillance tactics being used in Britain. According to London’s Evening Standard, more than 10,000 cameras have been set up around the city at a cost of $326 million. These cameras are being used to monitor comings and goings along the streets,  and to help solve a range of crimes – from pickpocketing and loan-sharking to failing to clean up after a pet. A controversial law enacted in 2000 allows the authorities to install the cameras. The costs are tangible, both in dollar terms and loss of privacy, but the benefit is less clear: The parts of London with the most cameras have a below-average rate of solving crimes, the Evening Standard says. Read “Britons Weary of Surveillance in Minor Cases” All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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. #09-749Tue, 27 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1492Eastern Europe http://www.usfunds.com/investor-resources/frank-talk/?i=1480This analysis is from John Derrick, U.S. Global Investors Director of Research. The market has rallied dramatically since the March 9 low, with the biggest beneficiary of this rally being low-quality companies. This intuitively makes sense, given that companies with the most troubled outlooks are the ones most likely to have a strong recovery when the dire outcomes predicted at the bottom of the crisis failed to transpire. Quality may have different meanings to different investors, but in a recent research piece, Citigroup ranked performance based on multiple definitions of quality. S&P earnings quality ranking, debt-to-capitalization ratio and return on equity were used as proxies for quality. The research universe was the small-cap Russell 2000 Index, but I believe broader market conclusions can be drawn as well. Based on S&P earnings quality rankings, companies with C or D (the two lowest categories) ratings returned about 55 percent over the past six months, while the highest-rated stocks returned about 11 percent. As a whole, the Russell 2000 universe returned 30 percent over that time period. This trend is also broadly true for the other measures of quality. Generally speaking, companies with higher debt burdens outperformed companies carrying low debt, and companies with negative return on equity outperformed the broader market as well as the companies with the highest return on equity. Morgan Stanley also recently released a research report that looked at low-priced stocks as a proxy for low-quality and found that S&P 500 stocks trading below $5 dramatically outperformed. The same analysis was conducted on the MSCI Europe Index with very similar results, indicating a broad-based global phenomenon. Morgan Stanley highlighted that the recovery so far has been driven by multiple expansion – the valuation that investors are willing to pay has increased, but that has not been supported by an increase in earnings in the current period. But we are now potentially at an inflection point at which the junk rally has more or less run its course and the market is beginning to focus on earnings growth. The business cycle plays a significant role in market valuations in the sense that the market anticipates a recovery and pays up for the anticipated earnings stream. Once the recovery takes hold, however, investors focus on actual earnings power as the primary driver of valuations. One persuasive indicator that the recovery has indeed taken hold can be seen in the ISM Manufacturing Index, which moved above 50 about six weeks ago, indicating that the economy is expanding. What has worked so far in this stock market recovery will not likely carry us into 2010 and beyond, so the time could be right to reposition for the next leg of the recovery. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Russell 2000 Index is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000. The Russell 3000 Index consists of the 3,000 largest U.S. companies as determined by total market capitalization. The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of September 2002, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 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. #09-734Mon, 26 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1480Economy & Markets http://www.usfunds.com/investor-resources/frank-talk/?i=1461One 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. #09-740Fri, 23 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1461Infrastructure http://www.usfunds.com/investor-resources/frank-talk/?i=1450With 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. #09-728Tue, 20 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1450Gold http://www.usfunds.com/investor-resources/frank-talk/?i=1444We 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. Total Annualized Returns as of September 30, 2009 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% #09-726Mon, 19 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/http://www.usfunds.com/investor-resources/frank-talk/?i=1444Infrastructure http://www.usfunds.com/investor-resources/frank-talk/?i=1422This 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. #09-668Wed, 14 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/Demand101409.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1422Chindia http://www.usfunds.com/investor-resources/frank-talk/?i=1416Brian 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% #09-713Tue, 13 Oct 2009 05:00:00 GMThttp://www.usfunds.com/media/images/frank-talk-images/thumbs/BrianHicks101309.jpghttp://www.usfunds.com/investor-resources/frank-talk/?i=1416Energy & Natural Resources