Billions and Billions Pour into India and China

Author: Frank Holmes
Date Posted: June 5, 2015 Read time: 41 min

It’s been a little over a year since Narendra Modi took office in India, and so far the results have been mostly positive for the South Asian country and the surrounding region.

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U.S. Global Investors Continues GROW Dividends

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


It’s been a little over a year since Narendra Modi took office in India, and so far the results have been mostly positive for the South Asian country and the surrounding region. Among other achievements, Modi’s government has managed to enact important policy reforms, increase public investments in infrastructure, lower food inflation and generally open India up to business on a global scale.


CLSA’s chief equity strategist, Christopher Wood, gives the country accolades in his most recent newsletter. Wood writes that while “the halo effect has come off the Modi phenomenon” somewhat, India nonetheless remains “the most promising major emerging market story on a five- to 10-year view globally.”


Looking ahead, analysts forecast that India’s economy will expand between 7.5 percent and 8.5 percent for the 2015 and 2016 fiscal years, faster than any other G20 nation, including China.

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This is growth that can be sustained for the long-term, a topic I wrote about last October. According to the International Monetary Fund, within the next decade and a half, “India will have the largest, and among the youngest, workforces in the world, and will need to create jobs for the roughly one hundred million young Indians who will enter the job market in the coming decade.” By 2050, India is expected to be the world’s second-largest economy based on purchasing power parity, following China.


Global investors recognize these positive data points and are piling into Indian equities, especially now that aggressive monetary easing in the country seems likely. CLSA’s Wood points out that $737 million a month on average have flowed into India-focused mutual funds since Modi took office last May, a dramatic reversal from the amounts seen prior to that.


Historically Low Interest Rates Help Push Chinese Equities Higher


Indeed, rate cuts have been constructive for not only Indian equities but also the Chinese market. As you can see below, easing cycles have historically coincided with strong market rallies in the MSCI China Index, a proxy for China H-shares, or stocks of Chinese companies listed on foreign exchanges. H-shares are one of the principal ways our China Region Fund (USCOX) has participated in the current bull market.

Chinese-Easing-Cycles-Have-Been-Bullish-for-Chinese-Stocksclick to enlarge

After three cuts in the most recent easing cycle, Chinese rates now stand at their lowest point ever, helping the index move higher in its quest to regain its November 2007 highs.


H-Shares Half as Cheap as Chinese Domestic Equities


Judging from the rally in H-shares, some investors might be concerned that the market is too expensive right now. On the contrary, H-shares, expressed below by the Hang Seng Index, are trading at a much cheaper multiple of 8.9 times estimated earnings to A-shares’ 17.4, a discount of 48 percent.

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You can also see that both H-shares and A-shares have traded at much higher multiples, evidence that the rally is not yet overdone.


When we compare this trading cycle with the previous major rally that occurred from June 2005 to October 2007, we see that the run-up has plenty of room to climb higher.

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“We might be in the middle of a bull market, not the end,” says Xian Liang, portfolio manager of USCOX. 

Like Indian equities, Chinese equities are attracting massive amounts of fund inflows. For the week ending May 27, global investors reallocated $4.6 billion to A-shares ahead of FTSE indexing.

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Last Thursday, the Shanghai Composite Index fell 6.5 percent, probably due to profit-taking. This represented the most significant correction since January, when the Chinese government curbed margin lending. It’s important for investors to look beyond the short-term noise and recognize that a correction this cycle could be seen as an opportunity to accumulate.


Again, USCOX continues to participate in this bull market through China H-shares and A-share exchange-traded funds. This helped the fund achieve a “golden cross” in January, which occurs when the 50-day moving average crosses above the 200-day moving average.

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Such technical indicators are seen as harbingers of strong growth. This particular move shows that the Chinese market has the support it needs to maintain upward momentum.

American Companies Buy Back $71 Billion of Stock in May Alone

As for American equities, they continue their trend of rewarding shareholders in the form of dividends and stock buybacks. Last week I mentioned that the amount in buybacks is expected to reach a staggering $1.2 trillion by year’s end, surpassing the all-time high of $863 billion set in 2007.


Stock market research firm Birinyi Associates reports that U.S. companies repurchased over $71 billion of shares in May alone.

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One more compelling reason we find the domestic market so attractive, and offer investors the opportunity to participate with our All American Equity Fund (GBTFX). All of the holdings in GBTFX either pay a dividend or are currently buying back their stock.


Countless Jets Will Need to Be Replaced in the Coming Years


A final note I’d like to end on is the sheer number of jumbo jets that will need replacing in the coming years as domestic airlines seek to incorporate smaller, more efficient aircraft. Manufacturers Boeing and Airbus certainly have their work cut out for them and, in fact, face years’ worth of backlogs.


Business Insider recently shared a slideshow that reveals what happens when airlines retire older models in their fleet. Many of them end up at the Southern California Logistics Airport, where they wait to be resold, dismantled or put back into commission. You can view the slideshow here.

Total Annualized Returns as of 3/31/2015:
Fund One-Year Five-Year Ten-Year Gross Expense Ratio Expense Cap
China Region Fund 6.63% 0.52% 5.14% 2.97% 2.55%

Expense ratios as stated in the most recent prospectus. The expense cap is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, extraordinary expenses, taxes, brokerage commissions and interest) that U.S. Global Investors, Inc. can modify or terminate at any time, which may lower a fund’s yield or return. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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 0.05%) which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at or 1-800-US-FUNDS.

Time-Tested History of No Drama. Explore NEARX

Index Summary

  • The major market indices finished mixed this week.  The Dow Jones Industrial Average fell 0.90 percent. The S&P 500 Stock Index fell 0.69 percent, while the Nasdaq Composite fell just 0.03 percent. The Russell 2000 small capitalization index gained 1.16 percent this week.
  • The Hang Seng Composite fell 1.01 percent this week; while Taiwan lost 3.72 percent and the KOSPI fell 2.21 percent.
  • The 10-year Treasury bond yield gained over 28 basis points to 2.405 percent.


Domestic Equity Market

S&P 500 Economic Sectors
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  • Financials outperformed this week as the 10-year yield climbed to its highest level since October of last year.  The S&P 500 Financials Sector Index rose 0.77 percent this week.
  • The consumer discretionary sector advanced as the economy made further progress creating new jobs in May.   The S&P 500 Consumer Discretionary Index gained 0.22 percent on the week.
  • Industrial stocks weathered rising rates and a steeper yield curve better than most of the broader market and on expectations of further expansion in the economy.  The S&P 500 Industrials sector increased by 0.5 percent on the week.


  • Bond proxies sold off this week as the 10-year government yield breached the 2.40 percent level.  Accordingly, the S&P 500 Utilities sector fell 4.11 percent on the week.
  • Investors rotated from consumer staples stocks on expectations for a stronger economy into cyclical sectors.  The S&P 500 Consumer Staples sector decreased by 2.6 percent.
  • High dividend paying telecommunications stocks were also a casualty of higher treasury yields this week.  The S&P 500 Telecommunication Services Sector Index fell 2.4 percent this week.


  • MBA mortgage applications data to be released next week could lift housing stocks as more evidence mounts concerning a recovery in real estate.
  • Core retail sales for May could improve based on lower year-over-year fuel costs and stronger job growth.
  • The University of Michigan Consumer Sentiment survey results for the month of June will be released next week. If this indicator remains strong then consumer-oriented stocks should benefit.


  • The May producer price index (PPI) is scheduled for release next week and could show a pickup in wholesale prices, which would help push yields higher and compress equity valuations.
  • European stocks posted their worst losses of the year this week.  Further credit market instability and lack of clarity surrounding the Greek debt situation could continue to derail recent equity market gains. 
  • Next week’s business inventory data may signal a further deterioration in economic activity if stockpiles build.  

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The Economy and Bond Market



  • Nonfarm payrolls expanded by 280,000 in May with average hourly earnings increasing 2.3 percent year-over-year, both higher than market expectations and accelerating from April, a reflection of continued strengthening of the U.S. labor market.
  • The ISM Manufacturing Index rose to a higher-than-expected 52.8 in May from 51.5 in April, ticking above its three-month moving average for the first time since October, flashing initial signs of the U.S. economy recovering from the first-quarter lull.
  • Trade balance in April improved to a deficit of $40.9 billion from a deficit of $51.4 billion in March, better than consensus estimates, thanks to an almost 4 percent depreciation in the trade weighted dollar during the month. 


  • The U.S. 10-year treasury yield jumped by more than 28 basis points to 2.40 percent on Friday, largest weekly advance since early February and breaking above the downtrend line established since September.  The market was spooked by initial signs of inflation from the eurozone and a pickup in U.S. wage growth to the high end of the past four-year range.

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  • Mortgage applications fell for a sixth straight week, declining a further 7.6 percent this week from 1.6 percent decrease the prior week.  The absolute number of applications hovers around the low range in the last six years.
  • The ISM Non-manufacturing Index fell to a lower than expected 55.7 in May from April’s 57.8, the weakest in 13 months, reflecting a sluggish recovery in U.S. consumer spending.


  • If the release of retail sales for May next week shows an uptick from April as the market expected, an improvement in the U.S. economic growth in the second quarter is more likely to materialize given the significance of consumer spending.
  • If next week’s release of Small Business Optimism Index shows further recovery in May from April, it should bode well for a potential rebound in second quarter GDP and continued improvement in hiring trends.
  • The International Monetary Fund’s (IMF) advice this week for Federal Reserve Chair Janet Yellen was not to raise interest rates this year on the back of its lower forecast for 2015 U.S. GDP growth could be a sign of global leaders’ attempt to synchronize monetary policy towards reflation.


  • If next week’s release of import prices and producer price index (PPI) confirms the recently higher pricing trends, market concerns over a comeback of inflationary pressure might push treasury yields even higher in the near term.
  • Should fuel prices bounce back in the summer, it may negatively affect discretionary consumer spending from still-cautious U.S. households.
  • Should the infectious Middle East Respiratory Syndrome spread to the U.S., it might cause U.S. consumers to reduce vacation trips over the summer and therefore, vacation related spending.

What's gold's touchdown pass this week?

Gold Market

For the week, spot gold closed at $1,171.82 down $18.73 per ounce, or 1.57 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 3.76 percent. The U.S. Trade-Weighted Dollar Index slipped 0.58 percent for the week.

Date Event Survey Actual Prior
June -1 CPI YoY 0.70% 0.70% 0.50%
June -1 U.S. ISM Manufacturing 52 52.8 51.5
June -2 CPI Core YoY 0.70% 0.90% 0.60%
June -3 ECB Main Refinancing Rate 0.05% 0.05% 0.05%
June -3 U.S. ADP Employment Change 200K 201K 165K
June -4 U.S. Initial Jobless Claims 278K 276K 284K
June -5 U.S. Change in Nonfarm Payrolls 226K 280K 221K
June -11 Retail Sales YoY 10.1% 10.0%
June -11 Initial Jobless Claims 276K 276K
June -12 PPI Final Demand YoY -1.1% -1.3%


  • For the past two months, gold has traded in a fairly tight trading range, though Friday’s weak intraday price action pushed the limits of the lower band to $1,162.75, with the stronger-than-expected jobs report. The yellow metal closed nearly $10 above the lows of the day.

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  • Shanghai Gold Exchange withdrawal volume came in at 37.1 metric tonnes for the week, reaching 982.7 metric tonnes for the year. The U.K. Royal Mint announced that its Signature Gold online service will allow investors to buy part of 400-ounce bars, to be stored in its vault. Customers will be allowed to buy and sell throughout the day but cannot take physical delivery as the Mint will remain the custodian for the bars.
  • Although we highlighted last week that mine productivity is down 28 percent over the last decade according to McKinsey & Company, a closer look at the data shows this trend may be reversing. The overall 28-percent decline reflects a 3.5-percent drop per year. But as the chart above shows, the first portion of the decade saw a fall of 6.0 percent per year while the last four years only showed a 0.4-percent decline. In the last year for which data is presented, productivity actually rose.


  • Bloomberg’s survey of gold traders shows a bearish outlook for next week with 11 Bearish, five Bullish, and two Neutral, citing signs of weakening demand on the horizon.
  • Gold futures fell to an 11-week low after data on U.S. payrolls showed they climbed by the fastest rate in five months, bolstering the argument that the Federal Reserve will raise interest rates sooner rather than later. Retail sales of gold by the Perth Mint and the U.S. Mint have been declining as investors have been chasing returns in the stock market. This has also affected gold holdings in the largest gold exchange-traded fund in the U.S. Assets in the fund dropped to six-year lows, pulling the fund out of the top 10 largest ETFs in America.
  • ANZ Research has a bullish gold forecast of $1,400+ per ounce for 2016 and beyond, but in the near-term they think gold could fall as low as $1,100 per ounce, citing the potential for a strong U.S. dollar.


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  • This past week, Mineweb featured a two-part piece written by Anthony Hart of the Perth Mint titled “12 Reasons to Own Gold Now.” One of the 12 reasons cited is “Equity market valuations,” which is particularly pertinent at this time, considering the Fed is about to embark on ending a monetary experiment unlike any other ever attempted by a central bank. The policy of free money for investors with no risk of loss is coming to an end.   
  • And how do you suppose investors are prepared for the coming grand finale? Shown above is net free credit relative to the S&P 500 Index market cap and the absolute net free credit balance. As a reminder, net free credit is the free credit balances in cash and margin accounts net of the debit balances in margin accounts. Net free credit is a measure of cash available to meet margin calls. Unlike margin debt, net free credit is at an extreme reading in absolute terms and relative to market capitalization. In April, net free credit broke below the extreme lows relative to the S&P 500 market capitalization set in February 2000, just prior to March 2000 peak and bursting of the Y2K tech bubble. 
  • Should the market drop, triggering margin calls, investors do not have cash in their accounts and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would obviously exacerbate a market selloff. That is precisely how investors are positioned for the ending of free money. They might figure they don’t need gold in their portfolio when the market could go higher.


  • Andrew Wilson, Goldman Sachs Asset Management’s chief executive in Europe, warned that the debt burden, particularly in developed countries with aging populations, is a threat to their economies. He noted we no longer have the young working populations required to sustain a debt-driven economic model in the same way we managed in the past. Governments need to consider more creative policies, such as immigration and workforce expansion in order to find ways to pay down the debt.
  • According to The Economic Times, the Hindu calendar will see nearly a 40-percent drop in the number of auspicious days for weddings in the second half of this year. This obviously could dent the demand for gold in terms of gold jewelry offtake. The spokesperson for the India Bullion and Jewellers Association noted demand could decline by 10 to 25 percent, depending on price levels later in the year. 
  • Mineweb reported that platinum miners betting on fuel cells to power electric cars in the future might be in for disappointment. Platinum miners have invested in research to fund new uses of platinum, and fuel cells for electric cars could be a significant new use for the metal in the future as electric cars gain more traction. However, if electric cars end up using energy stored in batteries as their power source, there won’t be a need for platinum in the production of catalytic converters, as vehicle emissions will be a thing of the past.

Managing Expectations: Anticipate Before you Participate in the Market

Energy and Natural Resources Market

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  • Metals and mining stocks outperformed this week as value buyers purchased copper names following a 20-day pullback. The S&P/TSX Diversified Metals and Mining Index gained 3.2 percent this week.
  • Drilling stocks rebounded despite a decline in the price of crude this week. This divergence between oil prices and the stocks is a constructive sign. The S&P Supercomposite Oil & Gas Drilling Index bounced 1.8 percent this week.
  • Iron & steel related equities improved this week on signs of better steel prices and a further recovery in iron ore.  The Bloomberg World Iron & Steel benchmark gained 2.7 percent over the prior five days.


  • Utilities underperformed this week as government treasury yields broke out to new six-to-nine-month highs. The S&P 500 Utilities Index closed down 4.1 percent this week.
  • Other bond proxies such as oil & gas infrastructure MLPs also saw selling during the week on rising government yields.  The Alerian MLP Infrastructure Index dropped 2.7 percent in the period.
  • Gold stocks underperformed in response to a stronger U.S. dollar and higher U.S. treasury yields.  The NYSE Arca Gold Miners Index fell 3.8 percent this week.


  • In addition to the next week’s crude oil inventory numbers, the Energy Information Administration (EIA) is set to release its short-term crude oil and refined product outlook next week.  Expectations are for further improvements in demand and reductions in supply.
  • China will release economic data related to Fixed Asset Investment and Industrial Production next week, which could show improvement follow the initiation of various stimulus programs.
  • Royal Dutch Shell Plc sees oil prices rising because supply from shale drilling in the U.S. isn’t sufficient to replace global demand along with global production declines of approximately 4 to 5 million barrels per day annually.


  • The dollar rose for a third consecutive week in response to development in Europe and the global bond market selloff.  If the U.S. dollar continues to strengthen above near-term resistance levels, it could signify further secular dollar strength and commodity weakness. 
  • According to weekly Department of Energy (DOE) crude oil production data, U.S. production rose for a second consecutive week, which weighed on both WTI and Brent prices.  If this trend continues, oil prices may fall significantly in the back half of the year, as inventories fail to decline fast enough from a lower rig count.
  • Net speculative length in the copper futures market moved from a net short to a net long position in the latest reporting period, which could amplify selling on a downturn as investors unwind long positioning.

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Emerging Markets



  • Chinese A-Share equities’ outperformance resumed this week, with the Shanghai Composite Index advancing 8.6 percent and finishing above the 5,000 index level for the first time in seven years.  China registered another $1.99 billion equity fund inflows for the week ending Wednesday, according to Morgan Stanley, a third straight week of influx.   Vanguard decided to add 6-percent China A-Share exposure to its emerging market ETF in the third quarter this year.
  • Hungarian equities also outperformed, as the government offered banks as much as 30 percent tax refund to incentivize lending to corporations.  The Budapest Stock Exchange Index gained 0.1 percent against an overall negative price action in emerging markets this week. 
  • The telecommunications sector was among the leaders within emerging markets this week, as investor risk appetite retrenched amid uncertainties regarding Greek debt repayment, the upcoming Turkish election, and rising infection cases of the Middle East Respiratory Syndrome. 


  • Greek equities were among the worst performers this week, as the government changed its stance within the final hours and delayed 301 million euros debt repayment due Friday to the IMF, requesting to bundle four June payments into one lump sum due on June 30.   The Athens Stock Exchange General Index declined 4.6 percent.
  • Russian equities continued their underperformance for another week, driven by a depreciating ruble as the Russian central bank kept buying U.S. dollars to boost its foreign exchange reserve, crude oil prices exhibited sluggishness in the past month, and tensions in Ukraine flared up again this week.  The Russian MICEX Index declined 4.5 percent, and the ruble weakened 7 percent.
  • Indian equities slid 4.4 percent this week, as the interest rate cut was more than offset by the central bank’s hawkish guidance, and the corporate earnings season failed to live up to investor expectations.  Foreign institutional investors continued to pull $200 million out of India this week.


  • The greater the political uncertainty in such countries as Greece and Turkey, the more likely Mario Draghi, the European Central Bank (ECB) president, will stay committed, in practice, to the quantitative easing program officially launched earlier this year, despite his sporadic rhetoric that might cause market misconceptions in the short run.
  • Ongoing global rotation out of India and Southeast Asia into Taiwan and Korea reflects a continued shift in investor style preference in favor of value.  In addition, both Taiwan and Korea are historically viewed as “China plays” via links through external trade and investment, and therefore, may attract investors who missed the rally in Chinese stocks seeking alternative ways to participate in the Chinese policy reflation cycle.

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  • Potential acceleration of mixed ownership reform in China’s banking sector, coupled with MSCI’s June 9 decision whether to include China A-share equities into its emerging market index, might offer near-term support for investor sentiment toward large-cap A-share stocks, crucial underpins of the market-cap weighted Shanghai Composite Index.  This favorable scenario provides an even stronger rationale to own the dual-listed China H-share equities in Hong Kong, which remain over 40 percent cheaper than their A-share brethren valuation-wise.


  • Binary outcomes from the Turkish parliamentary general election this weekend may contribute to rising volatility in equity and currency markets in Turkey, as it appears increasingly unlikely for the incumbent AKP party to replicate the sweeping victories of the 2011 general and 2014 municipal races.
  • The Greek drama might continue with global market participants casting doubt on the credibility of the country’s incumbent leaders upon their last minute debt repayment deferral, and local population losing confidence, evident in a cumulative 20 percent drop in bank deposits in the last five months.  Investors are likely to stay concerned over the possibility of a liquidity squeeze in Greece, a technical default followed by new elections, and the ultimate exit from the eurozone.
  • While Macau’s gross casino gaming revenue declined by a slightly better than expected 37 percent year-over-year in May, investors remain worried about negative changes in working capital at the company level and further negative earnings revisions which can prolong valuation de-rating.  With little sign of reversal in Chinese authorities’ effort to crack down on various corruption activities to earn political goodwill from its increasingly vocal middle class, it is difficult to envision that the bear market in Macau casino stocks will be over anytime soon.

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Leaders and Laggards


Weekly Performance
Index Close Weekly
DJIA 17,849.46 -161.22 -0.90%
S&P 500 2,092.83 -14.56 -0.69%
S&P Energy 565.88 -5.53 -0.97%
S&P Basic Materials 312.82 -3.90 -1.23%
Nasdaq 5,068.46 -1.57 -0.03%
Russell 2000 1,261.01 +14.48 +1.16%
Hang Seng Composite Index 3,831.85 -39.29 -1.01%
Korean KOSPI Index 2,068.10 -46.70 -2.21%
S&P/TSX Canadian Gold Index 159.27 -6.15 -3.72%
XAU 67.72 -1.98 -2.84%
Gold Futures 1,170.90 -18.90 -1.59%
Oil Futures 58.91 -1.39 -2.31%
Natural Gas Futures 2.59 -0.06 -2.08%
10-Yr Treasury Bond 2.41 +0.28 +13.34%


Monthly Performance
Index Close Monthly
DJIA 17,849.46 +7.48 +0.04%
S&P 500 2,092.83 +12.68 +0.61%
S&P Energy 565.88 -29.05 -4.88%
S&P Basic Materials 312.82 -3.99 -1.26%
Nasdaq 5,068.46 +148.81 +3.02%
Russell 2000 1,261.01 +41.65 +3.42%
Hang Seng Composite Index 3,831.85 -52.29 -1.35%
Korean KOSPI Index 2,068.10 -36.48 -1.73%
S&P/TSX Canadian Gold Index 159.27 -2.47 -1.53%
XAU 67.72 -3.82 -5.34%
Gold Futures 1,170.90 -20.50 -1.72%
Oil Futures 58.91 -2.02 -3.32%
Natural Gas Futures 2.59 -0.19 -6.81%
10-Yr Treasury Bond 2.41 +0.16 +7.17%


Quarterly Performance
Index Close Quarterly
DJIA 17,849.46 -7.32 -0.04%
S&P 500 2,092.83 +21.57 +1.04%
S&P Energy 565.88 +5.22 +0.93%
S&P Basic Materials 312.82 -3.26 -1.03%
Nasdaq 5,068.46 +141.09 +2.86%
Russell 2000 1,261.01 +43.49 +3.57%
Hang Seng Composite Index 3,831.85 +501.76 +15.07%
Korean KOSPI Index 2,068.10 +55.16 +2.74%
S&P/TSX Canadian Gold Index 159.27 -1.46 -0.91%
XAU 67.72 +0.12 +0.18%
Gold Futures 1,170.90 +4.70 +0.40%
Oil Futures 58.91 +9.30 +18.75%
Natural Gas Futures 2.59 -0.25 -8.88%
10-Yr Treasury Bond 2.41 +0.16 +7.27%


Please consider carefully a fund’s investment objectives, risks, charges and expenses.   For this and other important information, obtain a fund prospectus by visiting 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.

The Emerging Europe Fund invests more than 25 percent 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.

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These market comments were compiled using Bloomberg and Reuters financial news.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings as a percentage of net assets as of 03/31/2015:

Royal Dutch Shell PLC: Global Resources Fund, 2.97%
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Airbus: 0.00%

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

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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 Shanghai Stock Exchange Composite Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.
The Hang Seng China Enterprises Index is a capitalization-weighted index comprised of state-owned Chinese companies (H-Shares) listed on the Hong Kong Stock Exchange and included in HSMLCI index (Hang Seng Mainland Composite Index).
The MSCI China Free Index is a capitalization weighted index that monitors the performance of stocks from the country of China.
The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange.
The MineLens Productivity Index (MPI) from McKinsey&Company measures the productivity in national economies using four components which include production volume, net assets, number of employees, and non-labor-related costs going back 10 years.
The Budapest Stock Exchange Index is a capitalization-weighted index adjusted for free float. The index tracks the daily price-only performance of large, actively traded shares on the Budapest Stock Exchange.
The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange.
The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index was launched on September 22, 1997, base value 100. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange.
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 University of Michigan Consumer Sentiment Index is comprised of measures of attitudes toward personal finances, general business conditions, and market conditions or prices.
The Producer Price Index (PPI) measures prices received by producers at the first commercial sale. The index measures goods at three stages of production: finished, intermediate and crude.
The S&P/TSX Capped Diversified Metals and Mining Index is an index of companies engaged in diversified production or extraction of metals and minerals.
The S&P 500 Oil & Gas Drilling Index is a capitalization-weighted index. The index is comprised of four stocks whose primary activity is drilling for oil on land or at sea.
The Alerian MLP Infrastructure Index, comprised of 25 energy infrastructure Master Limited Partnerships, is a liquid, midstream-focused subset of the Alerian MLP Index (NYSE: AMZ). The index, whose constituents earn the majority of their cash flow from the transportation, storage, and processing of energy commodities, provides investors with an unbiased benchmark for the infrastructure component of this emerging asset class.
The Bloomberg World Iron and Steel Index is a capitalization-weighted index of the leading iron and steel stocks in the world.
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 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.
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 Small Business Optimism Index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
The FTSE Gold Mines Index Series encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year, and that derive 75% or more of their revenue from mined gold.