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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Bitcoin Cracks Record High Due to Institutional Investors
December 18, 2020

Press Release: U.S. Global Investors Funds to Pay Year-End Distributions

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

Still Plenty of Gas in the Base Metal Rally Tank

If I asked you how many hospital beds the U.S. has, what would you say? Two million? Five million?

Try 924,000. That’s right: The U.S. currently has under 1 million hospital beds for a population of approximately 330 million, according to the American Hospital Association (AHA). By my calculation, that comes out to 28 beds per 10,000 people.

This is the real threat posed by the pandemic, as I see it. Supply-demand imbalances can often be favorable when we’re talking about asset prices, but they’re not ideal during a global health crisis.
 
As of today, more than a third of Americans live in areas that are critically short on intensive care unit (ICU) beds. All of Southern California—a region that’s home to around 25 million people—is now at 0% availability.

And it’s not just beds. Hospitals in half of the states are reporting severe shortages in nurses, doctors and other staff.

I have only admiration for our nation’s frontline medical workers, many of whom have not seen any respite this holiday season. On behalf of everyone at U.S. Global Investors, I extend my sincerest gratitude. The greatest gift we can give them is for us to remain safe and follow precautionary recommendations.

Fed Commits to Keep Buying at Least $120 Billion of Bonds Each Month

This week the Federal Reserve left interest rates near zero and committed to continue its bond-buying program until “substantial progress” has been made regarding employment and inflation. Initial jobless claims increased for the second straight week, hitting 885,000 in the week ended December 12—the most since early September.

I was floored to see just how much the Fed is buying—and will continue to buy—each month. The central bank is gobbling up as much $120 billion of debt, split between $80 billion of Treasuries and $40 billion of mortgage-backed securities (MBS).

The size of the Fed’s balance sheet now stands at a staggering $7.36 trillion, or 34% of gross domestic product (GDP).

Federal reserve vows to continue bond-buying program
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Fed policy has crushed the U.S. dollar, now on track to record its worst year since 2017. On Thursday, the U.S. Dollar Index, which measures the currency against those of other major economies, traded below 90 for the first time in more than two years.

U.S. dollar set for its worst year ever since 2017
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This has all been very supportive of hard asset prices and haven demand. Gold notched its third straight week of gains and is currently poised to have its best year since 2010, when the yellow metal advanced nearly 30%. Copper, meanwhile, has now advanced for seven straight weeks and is trading at its highest price in close to eight years.

This Time It’s Different: 2020 Crypto Rally Driven by Institutional Investors

And then there’s Bitcoin. The world’s biggest cryptocurrency has surged nearly 220% this year, touching an all-time high of $23,717 in intraday trading on Thursday.

Ethereum, meanwhile, has shot up almost 400% this year to around $640, which is still down 31% from its record high.

Cryptos have caught a bid on Haven demand
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I’ve seen numerous market “experts” declare this another crypto bubble similar to 2017. But unlike then, the current run-up is driven not just by retail investors but also big-name investors, institutions, hedge funds and more.

Those include people like billionaire investor Paul Tudor Jones, who’s buying Bitcoin in response to unprecedented money-printing, as well as firms like Massachusetts Mutual Life Insurance (MassMutual), which purchased $100 million of the digital currency earlier this month.

Although $100 million is a relatively small position for the insurance company, it was enough to turn some heads.

“MassMutual’s Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors,” JPMorgan strategists wrote in a recent note to clients. “One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example.”

Another Bitcoin bull is Scott Minerd, chief investment officer of Guggenheim Investments, which has $233 billion in total assets under management (AUM).

Speaking to Bloomberg on Wednesday, Minerd said he believes Bitcoin should be worth—are you sitting down?—$400,000. HIs outlook is based on Bitcoin’s scarcity and relative valuation to gold as a percent of GDP.

“Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions,” he said.

Crypto miners and blockchain firms have likewise done well this year. I’m pleased to tell you that HIVE Blockchain Technologies is up nearly 2,800% as of today, which has pushed its market cap above C$950 million. This puts it on a trajectory to hit a C$1 billion valuation before the end of 2020.

HIVE Blockchain is on its way to a C$1 Billion Valuation
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Keep in mind that cryptos is still extremely volatile. Bitcoin, for instance, has a daily standard deviation of plus or minus 5%. They may not sound like a whole lot until you compare it to gold, which has a daily standard deviation of only 1%.

Coinbase Files for IPO; Robinhood IPO Could Come as Early as Q1 of 2021

Soon there may be another way for investors to participate in cryptocurrencies besides buying them outright or investing in miners like HIVE. In a press release this week, the North American crypto trading platform Coinbase said it submitted paperwork with the Securities and Exchange Commission (SEC).

The Silicon Valley unicorn is valued at an estimated $28 billion, according to data firm Messari, and sees around $1 billion in trading volume every day.

Coinbase isn’t the only online exchange that’s weighing a public offering. Robinhood, the six-year-old trading app favored by younger, less experienced investors, is eyeing the first quarter of 2021 as a potential IPO target. After stocks collapsed in March and April of this year, the number of people who downloaded and started using Robinhood surged to 13 million, up from 2 million three years earlier. These millennial investors beat Warren Buffett at his own game, buying up distressed airline stocks at a time when the Berkshire Hathaway chief was selling.

Before listing, Robinhood will need to deal with recent complaints brought against it by regulators in Massachusetts, which allege the brokage firm “lured” inexperienced investors by turning investing into a game. This week, Robinhood agreed to pay $65 million to settle SEC investigations into how it generates revenue from business deals with high-speed trading firms.

A Banner Year for IPOs

Robinhood’s potential listing in Q1 of 2021 would follow a banner year for companies going public, particularly tech companies. As of December 18, there have been 470 IPOs on the U.S. stock market, a little more than double the amount last year. Three of the 10 biggest U.S. tech IPOs of all time, in terms of capital raised, occurred in 2020. In September, data management firm Snowflake raised $3.36 billion on its opening day, a sum beaten slightly by DoorDash ($3.37 billion) and Airbnb ($3.50) in December.

Airbnb valued more than the combined market caps of hotel leaders
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These have been monster deals that demonstrate just how valuable intangibles really are. Take a look at Airbnb. The company, which does not own any hotels or properties of its own, now has a higher valuation than the combined market caps of Marriott, Hyatt and Hilton combined.

As others have pointed out, this trend of valuing intangibles ahead of tangibles is only accelerating. Facebook, the world’s biggest content purveyor, produces little to no content of its own. Alibaba, the world’s biggest retailer, has no inventory. Uber, the world’s biggest taxi service, owns no taxis.

Is gold overbought or oversold? Trace the metal’s moves by watching my latest video – click here!

Gold Market

This week spot gold closed at $1,881.35, up $41.50 per ounce, or 2.26 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 4.51 percent. The S&P/TSX Venture Index came in up 4.60 percent. The U.S. Trade-Weighted Dollar fell 1.17 percent.

Date Event Survey Actual Prior
Dec-14 China Retail Sales YoY 5.0% 5.0% 4.3%
Dec-16 FOMC Rate Decision (Upper Bound) 0.25% 0.25% 0.25%
Dec-17 Eurozone CPI Core YoY 0.2% 0.2% 0.2%
Dec-17 Housing Starts 1535k 1547k 1528k
Dec-17 Initial Jobless Claims 818k 885k 862k
Dec-22 GDP Annualized QoQ 33.1% -- 33.1%
Dec-22 Conf. Board Consumer Confidence 97.0 -- 96.1
Dec-23 Initial Jobless Claims 780k -- 853k
Dec-23 Durable Goods Orders 0.6% -- 1.3%
Dec-23 New Homes Sales 990k -- 999k

Strengths

  • The best performing precious metal for the week was silver, up 7.77 percent as hedge funds raise their bullish positioning to 21-week high. Gold gained after the Federal Reserve strengthened its commitment to supporting the economic recovery and as U.S. lawmakers make progress to pass a stimulus package. Bloomberg notes gold had its third weekly gain and is on track for its biggest annual increase in 10 years.

Gold holds gains as dollar nears 2018 low after fed meeting
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  • Goldman Sachs Asset Management (GSAM) completed its previously announced acquisition of the sponsorship of the Perth Mint Physical Gold ETF, which has been renamed the Goldman Sachs Physical Gold ETF (AAAU) and will continue to trade on the NYSE Arca. “We are pleased to complete this transaction and enter into this market, where we believe our size, scale and expertise can provide considerable value to investors,” said Michael Crinieri, GSAM’s Global Head of ETFs.
  • Silver has outperformed gold so far this year. The white metal has advanced nearly 40% so far this year and is on track for its biggest annual gain in 10 years.

Weaknesses

  • The worst performing precious metal for the week was palladium, but still up 1.80 percent. Swiss exports of palladium rose fourfold in November while platinum exports fell 50 percent.
  • Japan sold 80 tons of bullion used for minting coins to fund part of its massive stimulus package to combat the virus crisis. Reuters reports the country had public debt twice the size of its economy and is seeking a non-tax revenue to cover rising spending as tax revenues have been hit by a recession. The government gained $4.84 billion from the sale of gold.
  • According to the Union of Gold Producers of Russia, nine-month gold output fell by 1% to 269.9 tons. Although gold mining output increased, production from gold scrap fell 20%.

Opportunities

  • Jeff Currie, global head of commodities research at Goldman Sachs Group, said in a Bloomberg Television interview that commodities have “all the telltale signs” of a super cycle and are entering a structural bull market. Currie says the lower U.S. dollar will help drive prices higher.
  • According to Andrew Garthwaite, global strategist at Credit Suisse, gold miners are about as cheap in relative terms as they have been in 20 years. Garthwaite said in a report this week that based on projected earnings, he predicts a “strong bull market” for precious metals. Data compiled by Bloomberg shows the forward price-earnings ratio for an MSCI global gold mining index was 36% lower as of Wednesday than the ratio for the MSCI All-Country World Index.
  • Equinox Gold will acquire all outstanding shares of Premiere Gold Mines in what is reported as a “friendly acquisition.” Aya Gold & Silver reported an “all-time best” drill result from its exploration program at the Zgounder Silver Mining in Morocco. Alamos Gold announced it completed an agreement to acquire Trillium Mining Corp for cash consideration of C$25 million.

Threats

  • Bitcoin continues its meteoric rise, rising above $20,000 for the first time this week. The debate continues over whether the growing mainstream adoption of bitcoin and cryptocurrencies will sway investors away from gold.
  • An index of South African gold stocks slipped on Tuesday as a new wave of virus restrictions could hit the nation and as demand for haven assets waned. Bloomberg reports DRDGold dropped 3% for the day, Gold Fields was down 1.2% and AngloGold Ashanti lost 0.9%.
  • Caterpillar, a leading manufacturer of construction and mining equipment, said November total machine sales were down 11% globally. Worldwide sales in the resource industries segment fell 13%, with North America seeking the sharpest drop of 25%. Sales in Latin America were up 2%.

top 10 global luxury brands ranked - watch the video

Index Summary

  • he major market indices finished up this week. The Dow Jones Industrial Average gained 0.44%. The S&P 500 Stock Index rose 0.99%, while the Nasdaq Composite climbed 3.05%. The Russell 2000 small capitalization index gained 3.14% this week.
  • The Hang Seng Composite gained 0.80% this week; while Taiwan was down 0.08% and the KOSPI rose 0.08%.
  • The 10-year Treasury bond yield rose 5 basis points to 0.944%.

Domestic Economy and Equities

SP 500 Economic Sectors weekly performance
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Strengths

  • U.S. new home construction rose more than forecast to a nine-month high in November, highlighting the strength of a residential housing market that’s been supported by strong demand amid low interest rates. Residential starts rose 1.2% to a 1.547 million annualized rate from a downwardly revised 1.528 million a month earlier, according to government report released Thursday. The median estimate in a Bloomberg survey of economists called for a 1.535 million pace. The unexpected strength, bringing new home construction nearly back to February’s level, underscores robust buyer interest in new homes thanks to record-low mortgage rates and Americans looking for bigger spaces during the pandemic.
  • The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.6 percent in November to 109.1, following a 0.8 percent increase in October and a 0.7 percent increase in September.
  • Alexion Pharmaceuticals was the best performing S&P 500 stock for the week, increasing 29.57 percent. The biotech firm's shares rallied in response to a $39 billion buyout agreement with British and Swedish pharma giant AstraZeneca. The cash and stock merger agreement reportedly values Alexion at $175 a share, which represents a 45% premium compared to where the company's shares closed last Friday.

Weaknesses

  • U.S. retail sales declined in November by the most in seven months, raising concerns that the resurgence of coronavirus and new restrictions brought in to curb it are undermining the economic recovery. Retail sales fell 1.1 per cent last month from October, the second consecutive monthly decline, the commerce department said on Wednesday. The drop was steeper than the 0.3 per cent decline that economists had forecast, following a 0.1 per cent dip in October. Several economists warned that the weaker-than-expected figures — released as retailers prepared for the peak of the holiday shopping season — were an ominous sign for U.S. consumer spending trends.
  • Initial weekly jobless claims rose to 885,000, reflecting the escalating economic toll of cities and states struggling to contain surging COVID-19 numbers — and prompting starkly worded calls for Congress to pass another round of fiscal stimulus to help keep millions of Americans financially solvent. The latest number, an increase of 23,000 from the previous week's revised levels, does little to allay economists’ concerns about the combination of renewed business closures and lockdowns, weakening retail spending and the looming cutoff of federal financial support programs for borrowers and unemployed workers.
  • Apartment Investment & Management was the worst performing S&P 500 stock for the week, decreasing -17.89 percent. Shares traded lower after the company announced it completed the separation of its businesses, making Apartment Income REIT a separate, publicly-traded company. The company is also being replaced by Tesla in the S&P 500, which weighed on the stock lower as well.

Opportunities

  • The Federal Reserve sees U.S. GDP fully rebounding by the end of 2021. The central bank revealed new economic estimates on Wednesday that see the U.S. economy staging a healthy recovery through next year.
  • Coinbase filed paperwork to go public. The cryptocurrency platform confidentially filed IPO paperwork to the Securities and Exchange Commission (SEC), the company announced Thursday, officially setting off the process to go public in the future.
  • Twitter was named “top pick” of the internet sector. JPMorgan said Twitter will show the biggest rebound in online advertising given its sharper pandemic-driven ad decline.

Threats

  • CD Projekt Red shares plunged as much as 22% to a nine-month low on Friday as the Polish game studio suffered fresh backlash to its release of a bug-ridden Cyberpunk 2077 video game last week. Sony announced on Friday that it was pulling the video game from its PlayStation Store and offering full refunds to players following a wave of complaints about the long-awaited title. The news erased the equivalent of $1.8 billion from CD Projekt's market capitalization.
  • VMware fell more than 5% after a cybersecurity expert said a flaw in the company’s products was partly responsible for the SolarWinds breach that is roiling U.S. companies and government agencies. A vast number of investigations are underway inside federal agencies and private-sector companies to determine the extend of a broad cyber-attack by suspected Russian hackers.
  • Facebook and Google have been accused of colluding. In an antitrust suit filed Wednesday, state attorneys general accused Google of giving Facebook unfair advertising advantages to stop it from getting into an area of adtech called "header bidding."

Energy and Natural Resources Market

 

Strengths

  • The best performing commodity for the week was crude oil, up 5.26 percent on optimism over a potential stimulus package. Iron ore continues to hit new record highs. The raw material price has increased more than 20% so far in December and futures rallied to the highest since trading began in 2013. Bloomberg notes that sustained demand from China and a supply cut out of Brazil are fueling the rally.
  • Copper stockpiles have hit the lowest in six years as demand booms. Prices for the red metal are rallying toward $8,000 a tonne as the economy recovers and the U.S. dollar falls. Copper has surged more than 25% so far this year. Goldman Sachs says the metal’s deficit will open the way for prices to test $10,000.
  • BMO upgraded SQM and raised its price targets on lithium stocks, citing more room for gains even after a strong 2020, analyst Joel Jackson wrote. Bloomberg notes Jackson upgraded SQM to outperform from market perform. BMO remains bullish on lithium in the medium-term due to adoption in electric vehicles

Weaknesses

  • The worst performing commodity for the week was wheat, down 1.06 percent perhaps on mention the European Union’s (EU) planned wheat production is set to rise by 10 percent next year. SolGold, a copper miner with a large Ecuadorian deposit, is facing a possible shareholder revolt as backers grow increasingly frustrated with management and setbacks in mine-planning, reports Bloomberg. Heavyweights BHP Group and Newcrest Mining are SoldGold’s top two shareholders, and neither were happy with the decision to sell a royalty stream. Major investors are considering whether to vote again re-election certain board members.
  • After facing investor criticism, Exxon Mobil announced a new emissions target of reducing intensity by as much as 20% by 2025. The energy giant also plans to cut flaring and methane leaks. Exxon’s goals appear much weaker than those made by European oil giants that have set net-zero goals.
  • The average yield on the Bloomberg Barclays High Yield Energy Index has dropped to just 6.2% since spiking to 24% in March. Allison McNeely reports that the yield is no longer high yield, as the name implies. About $144 billion of energy bonds were trading at distressed levels in the middle of March then receded to $37 billion by the end of November. The reduction was due to some oil and gas companies filing for bankruptcy while others have seen their fortunes rebound, according to Bloomberg Intelligence. The distress may ease in the coming months since so many companies have already resolved their stresses.

Buyers of Junk-rated energy must settle for single-digit interest
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Opportunities

  • Fortesque Metals Group formed a consortium called Global LH2 with Japan’s Iwatani Corp and Kawasaki Heavy Industries to supply Japan with hydrogen made using renewable sources. The group will develop projects in Australia and overseas to build liquid hydrogen supply chains to serve the country’s rising demand as it looks to a carbon neutral future, reports Bloomberg.
  • Banks and investment funds appear bullish on residential solar with over $9.4 billion in deals so far this year. Goldman Sachs has allocated at least $1.8 billion in various structures to residential solar while Credit Suisse has invested $1.6 billion. Bloomberg reports traditional lenders like Citibank and BNP Paribas were involved in over $5.7 billion worth of deals.
  • IAG-owned British Airways announced it will work with hydrogen plane startup ZeroAvia to speed the transition to hydrogen power for commercial aircraft. Bloomberg Green reports the project is part of IAG’s start-up accelerator program that allows small companies a chance to test their technology on a global scale. Airbus had laid out its own plans for developing hydrogen aircraft by 2035.

Threats

  • A tentative recovery in oil demand is reversing due to renewed lockdowns, especially in Europe as virus cases surge. The International Energy Agency (IEA) said “the market remains fragile” after cutting demand forecasts for world fuel consumption in 2021 by 110,000 barrels a day. However, the agency expects bloated crude inventories to subside within 12 months.
  • GreenTrees calls itself the largest carbon reforestation project in North America. But in reality, it is selling fake climate progress for corporate America – including Bank of America, Microsoft, United Airlines, Walt Disney Co. and more, reports Bloomberg. The company says it combats climate change by reforesting acres of farmland by paying landowners to convert croplands into fields. GreenTrees then sells credit for the carbon reductions from new trees to big corporations that want to offset their own emissions. Interviews with participating landowners revealed that GreenTrees usually takes credit for trees that were already planted or would have been planted anyway. This means corporations can buy the credits and say it helps their operations become “carbon neutral.”
  • An oil tanker was hit by an explosion at the Saudi Arabian port of Jeddah as attacks in the Red Sea mount, reports Bloomberg. The U.S., a Saudi ally, has ramped up sanctions against Iran, which backs the Houthis in the civil war in Yemen. 

Frank Holmes' tips for buying airline stocks - wathc the video on YouTube

Airline Sector

 

Strengths

  • The best performing airline for the week was Turkey’s Pegasus Airlines, up 15.55%. Airline stocks rose on Tuesday after a pandemic relief bill was put forth by the U.S. Senate that includes $17 billion in aid for carriers. The aid would help recall furloughed workers and cover payrolls through March. Trade group Airlines for America (A4A) said carriers “enthusiastically support” the proposal.
  • The European Commission will continue to suspend airport slot-use obligations until late March to give carriers relief. The bloc requires carriers use at least 80% of their takeoff and landing positions at airports or risk losing them the following year. Bloomberg notes the goal is to avoid airlines flying empty aircraft just to retain their slots, which cost millions of dollars.
  • Jetstar, Qantas Airways’ low-cost carrier, said it will operate a record number of flights in Australia in 2021 as demand rebounds to higher than pre-pandemic levels. Bloomberg reports that Australia has fewer than 50 active virus cases and is seeing a domestic holiday travel boom. Jetstar plans for 850 return flights a week on 55 routes by the end of March, more than 100% of its schedule prior to the pandemic.

Australia's airline industry poised to fully recover due to shrinking virus cases
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Weaknesses

  • The worst performing airline for the week was Air Canada, down 11.81%. The U.K. Competition and Markets Authority (CMA) is investigating airlines over a potential violation of consumer rights for failing to offer passengers their money back for flights they couldn’t lawfully take during virus lockdowns, reports Bloomberg. Refunds have been controversial this year as airlines are cash strapped and encourage fliers to take credit or rebook flights instead of accepting a refund. “We recognize the continued pressure that businesses are currently facing, but they have a responsibility to treat consumers fairly and abide by their legal obligations,” said CMA Chief Executive Officer Andrea Coscelli.
  • Hong Kong-based Cathay Pacific Airways said November traffic was down 98.6% from a year earlier, serving just 37,815 passengers for the month. The carrier warned its second half losses will be far worse than the $1.3 billion loss in the first six months of the year. Bloomberg reports Cathay’s passenger traffic has been down around 99% every month since April and that passenger capacity will average just 8.4% of pre-pandemic levels compared with 34.3% in the first half of 2020.
  • Southwest reduced the number of Boeing 737 MAX jets it will take delivery of through next year to just 35. The largest operator of the aircraft joined the chorus of other airlines reducing their orders for new jets as travel remains subdued. Bloomberg notes that at one point the carrier was set to get 123 jets through 2021.

Opportunities

  • IAG-owned British Airways announced it will work with hydrogen plane startup ZeroAvia to speed the transition to hydrogen power for commercial aircraft. Bloomberg Green reports the project is part of IAG’s start-up accelerator program that allows small companies a chance to test their technology on a global scale. Airbus had laid out its own plans for developing hydrogen aircraft by 2035.
  • Electric planes are also gaining momentum. Iceland plans to move toward carbon-free domestic flights by the end of the decade. The Nordic Network for Electric Aviation, founded in 2019, ties together airport authorities and airlines in the region including Finnair, Icelandair Group and SAS AB, to emphasize cleaner air travel. Bloomberg notes the group has received $1.4 million in funding from its members and the governments of Sweden, Denmark, Norway, Finland, Iceland and Greenland.
  • San Miguel Corp., one of the Philippines’ largest conglomerates, awarded Royal Boskalis Westminister a $1.73 billion contract to develop land for its $15.4 billion airport project north of Manila. “Our selection of a global giant in dredging shows how ready, willing, and committed we are to do everything necessary to make sure this airport project is developed properly and sustainably,” San Miguel President Ramon Ang said in a statement.

Threats

  • After reporting no virus cases for more than a month, Sydney is battling to contain a COVID-19 outbreak after 17 new cases were reported in the past two days, reports Bloomberg. Australia had been hailed for largely controlling the virus’ spread from the beginning and domestic air travel was expected to recover quickly. The outbreak is concerning as Christmas travel is just around the corner.
  • London’s Heathrow Airport was given the green light for a third runway after the U.K. Supreme Court ruled the expansion does not violate climate-change policy. Although positive news to build more capacity, it might be too late. The airport has seen a dramatic fall in passengers since the pandemic and there are fears travel could take years to recover back to pre-virus levels.
  • With a COVID-19 vaccine rolling out, it has sparked questions of whetherl it be required to travel. Gloria Guevara, head of the World Travel and Tourism Council, said “I don’t think governments will require vaccination next year… if they do that, they will kill their sector.”

Emerging Markets

 

Strengths

  • The best performing country in emerging Europe for the week was the Czech Republic, gaining 4.2%. The best performing country in Asia was Pakistan, gaining 3%.
  • The Turkish lira was the best performing currency in emerging Europe this week, gaining 2.6%, while the Thailand baht was the best performing in Asia, gaining 96 basis points.
  • Eurozone purchasing manager’s index (PMI) readings exceeded expectations. Manufacturing PMI for December came in at 55.5 versus consensus of 53.0 and a prior reading of 53.8. The service sector PMI also saw the pace of contraction slowing at 47.3 versus consensus of 41.9 and a prior 41.7. The composite PMI hit a two-month high of 49.8.

Weaknesses

  • The worst performing country in emerging Europe for the week was Russia, losing 43 basis points. The worst performing country in Asia this week was Malaysia, losing 1.9 percent.
  • The Russian ruble was the worst performing currency in emerging Europe this week, losing 63 basis points, while the South Korean won was the worst performing currency in Asia, losing 60 basis points.
  • A growing number of companies are unable to repay their debts or make interest payments due to the economic impact of the coronavirus. Corporate bond defaults are spreading in China especially. Since November, the total amount of corporate bonds that have been postponed or canceled is over 200 billion yuan (about $30.5 billion).

Opportunities

  • Passenger electric vehicle (EV) sales in Southeast Asia grew fivefold between 2015 and 2019, according to Bloomberg. 94% of the vehicles were sold in just two markets: Thailand and Malaysia. The EV sales accounted for just 0.5% of new passenger vehicle sales in 2019. More governments in the region are ramping up incentives to promote local manufacturing and adoption.

Passenger electric vehicle sales in southeast Asia
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  • The European authorities are pushing for a quick approval for the Pfizer/BioNTech COVID-19 vaccine. Should the vaccine win the backing of a key drugs oversight committee on Monday, the European Commission is planning to approve it the same day. This would enable the first shots of the vaccine to be shipped to vaccine centers as early as Wednesday, two days before Christmas.
  • Emerging Europe equites, as measured by the MSCI Emerging Market Europe Index (MXMU), have gained more than 30% since the end of October. Despite this strong recent performance, there is more upside potential as the performance gap to the pre-pandemic level is only about half-way closed.  

Emerging Europe stocks recovered half of it losses from COVID sell-off
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Threats

  • The European Central Bank (ECB) recommends banks not to pay or limit dividend payouts until September 2021, capping them at 15% of cumulative net profits. Romanian, Czech, Hungarian, Polish, Turkish and Russian banks will issue their local regulations and most likely they will follow the ECB’s decision. The lack of dividend returns may affect the sentiment toward the European banking sector.
  • Europe once again is imposing more measures across the continent to stop the spread of the coronavirus. The Czech Republic once again closed schools, shopping malls and restaurants. Poland announced a nationwide lockdown from December 28 to January 17. The Italian Prime Minister said new restrictions are needed in the country in order to avoid devastating third wave.
  • Under a deal signed by Belarus and Russia on Friday, Russian National Guard troops can be deployed to Belarus to secure public order. Belarus had been experiencing mass protests for five months, demanding the resignation of President Lukashenko as Europe and the people of Belarus refuse to recognize him as a current president, saying the August 9 election was “neither free not fair.” When Russian troops enter Belarus more geopolitical tensions will likely follow.

Blockchain and Digital Currencies

 

Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended December 18 was Keep Network, up over 111,398%. On Wednesday, bitcoin surpassed $20,000 for the first time – another milestone for the popular digital currency.
  • JPMorgan believes that a recent investment in bitcoin by MassMutual Life Insurance highlights the potential for additional institutional demand for the cryptocurrency in coming years, writes Bloomberg. The purchase suggests that adoption is moving from family offices and wealthy investors to insurance firms and pension funds.
  • Although bitcoin dipped a bit after hitting a record at the start of the month, the digital asset still remains in sight of higher levels, reports Bloomberg. Some say it is gaining more recognition as a portfolio diversifier, too. In fact, cryptocurrencies and bitcoin have outperformed global stocks so far this year. What will 2021 bring?

Cryptocurrencies like bitcoin outperformed global stocks this year

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Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended December 18 was rbase.finance, down 96.25%.
  • Co-founder of cryptocurrency trading firm Centra Tech, Robert Farkas, was sentenced to a year in prison after pleading guilty to tricking investors out of more than $25 million, reports Bloomberg. The investment scam was promoted with the help of celebrities including Floyd Mayweather and musician DJ Khaled.
  • Massachusetts securities regulators were reportedly preparing to file a complaint against crypto-friendly trading platform Robinhood, writes CoinTelegraph. As reported by the Wall St. Journal, the enforcement arm of the Massachusetts Securities Division said that Robinhood exposed investors to “unnecessary trading risks” by “falling short of the fiduciary standard.” As of Thursday, however, Robinhood staved off a suit from the SEC by agreeing to pay $65 million.

Opportunities

  • Fidelity-backed trading platform OSL, has been officially licensed by the Securities and Futures Commission of Hong Kong, writes CoinTelegraph. The new license allows OSL to operate regulated brokerage and automated trading services for digital assets, according to the December 15 announcement.
  • Best-selling author of “Rich Dad Poor Dad,” Robert Kiyosaki, says that the price of bitcoin is heading to $50,000 in 2021, writes CoinTelegraph. His reasoning points to the “wall of institutional money” coming into the digital asset.
  • As reported by CoinDesk, the German government cabinet passed new legislation on Wednesday allowing all-electronic securities to be recorded using blockchain technology. A Reuters report explains that the new law does away with the previous requirement for a paper-based certificate.

Threats

  • This year’s Form 1040 requires all U.S. taxpayers to answer a question about whether they traded or acquired “virtual currency” during the year, writes CoinTelegraph. However, one question about virtual currencies on this year’s tax return form is leaving crypto users in the U.S. confused and frustrated, as they have expressed on Twitter. The question causing concern is: “At any time during 2020, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
  • Mark Cuban has doubled down on his view that bitcoin is more like a collectible than a reliable financial instrument, writes CoinTelegraph. “Bitcoin is a store of value like gold that is more religion than a solution to any problem,” Cuban said in a Forbes interview. The billionaire also claimed that commodities like bananas offer more benefits than bitcoin.
  • According to analysis portal DeFi Prime, DeFi platform Warp Finance was exploited for $8 million on Thursday night due to a flash loan attack. Flash loans allow users to borrow funds without collateralization because the lender expects the fund would be returned instantly, reports CoinDesk.

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Leaders and Laggards

Weekly Performance
Index Close Weekly
Change($)
Weekly
Change(%)
10-Yr Treasury Bond 0.94 +0.05 +5.12%
Oil Futures 49.00 +2.43 +5.22%
Hang Seng Composite Index 4,178.89 +33.07 +0.80%
S&P Basic Materials 452.71 +8.52 +1.92%
Korean KOSPI Index 2,772.18 +2.12 +0.08%
S&P Energy 293.33 -13.05 -4.26%
Nasdaq 12,755.64 +377.77 +3.05%
DJIA 30,179.05 +132.68 +0.44%
Russell 2000 1,971.68 +59.98 +3.14%
S&P 500 3,699.62 +36.16 +0.99%
Gold Futures 1,886.30 +42.70 +2.32%
XAU 144.90 +6.29 +4.54%
S&P/TSX VENTURE COMP IDX 815.59 +35.29 +4.52%
S&P/TSX Global Gold Index 323.90 +13.02 +4.19%
Natural Gas Futures 2.71 +0.12 +4.52%
 
Monthly Performance
Index Close Monthly
Change($)
Monthly
Change(%)
Korean KOSPI Index 2,772.18 +226.54 +8.90%
10-Yr Treasury Bond 0.94 +0.07 +8.38%
Gold Futures 1,886.30 +7.10 +0.38%
S&P Basic Materials 452.71 +16.15 +3.70%
S&P 500 3,699.62 +131.83 +3.70%
DJIA 30,179.05 +740.63 +2.52%
Nasdaq 12,755.64 +954.04 +8.08%
Oil Futures 49.00 +7.18 +17.17%
Hang Seng Composite Index 4,178.89 +3.74 +0.09%
S&P/TSX Global Gold Index 323.90 +0.09 +0.03%
XAU 144.90 +8.19 +5.99%
Russell 2000 1,971.68 +202.36 +11.44%
S&P Energy 293.33 +28.73 +10.86%
S&P/TSX VENTURE COMP IDX 815.59 +89.21 +12.28%
Natural Gas Futures 2.71 -0.00 -0.15%
 
Quarterly Performance
Index Close Quarterly
Change($)
Quarterly
Change(%)
XAU 144.90 -9.16 -5.95%
S&P/TSX Global Gold Index 323.90 -59.36 -15.49%
Gold Futures 1,886.30 -71.00 -3.63%
DJIA 30,179.05 +2,277.07 +8.16%
S&P 500 3,699.62 +342.61 +10.21%
Nasdaq 12,755.64 +1,845.36 +16.91%
Korean KOSPI Index 2,772.18 +366.01 +15.21%
Natural Gas Futures 2.71 +0.67 +32.62%
S&P Basic Materials 452.71 +33.53 +8.00%
Russell 2000 1,971.68 +429.08 +27.82%
Oil Futures 49.00 +8.03 +19.60%
Hang Seng Composite Index 4,178.89 +366.68 +9.62%
S&P/TSX VENTURE COMP IDX 815.59 +72.37 +9.74%
S&P Energy 293.33 +39.75 +15.68%
10-Yr Treasury Bond 0.94 +0.25 +36.81%

 

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This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (09/30/2020):

Equinox Gold Gold Corp
Aya Gold & Silver Inc
DRDGold Ltd
Gold Fields Ltd
AngloGold Ashanti Ltd
BHP Group Ltd
Microsoft Corp
United Airlines Holdings Inc
Qantas Airways Ltd
Southwest Airlines Co
Tesla Inc
CD Projekt S.A.
Facebook Inc
Hilton Worldwide Holdings Inc
Alibaba Group Holdings Ltd

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index. The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The MSCI All-Country World Index is designed to represent performance of the full opportunity set of large- and mid-cap stocks across 23 developed and 27 emerging markets. As of November 2020, it covers more than 3,000 constituents across 11 sectors and approximately 85% of the free float-adjusted market capitalization in each market. The MSCI Emerging Markets (EM) Eastern Europe Index captures large and mid-cap representation across 4 countries in Eastern Europe. With 45 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE. Effective 8/31/2018, Frank Holmes serves as the interim executive chairman of HIVE. The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity. The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.

Share “Bitcoin Cracks Record High Due to Institutional Investors”

Net Asset Value
as of 01/15/2021

Global Resources Fund PSPFX $6.26 -0.19 Gold and Precious Metals Fund USERX $12.89 -0.44 World Precious Minerals Fund UNWPX $5.01 -0.18 China Region Fund USCOX $10.49 -0.12 Emerging Europe Fund EUROX $6.36 -0.13 All American Equity Fund GBTFX $24.65 No Change Global Luxury Goods Fund USLUX $20.24 -0.32 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change