Monopoly Is Going Cashless. Could We Be Next?

Author: Frank Holmes
Date Posted: February 19, 2016 Read time: 42 min

Nearly everyone can recall playing Monopoly as a child, and for many, the game served as their first exposure to handling different denominations of cash. It was exhilarating to have someone land on your Park Place property, complete with hotel, and in turn receive a fistful of $50s and $100s.

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

Monopoly is going cashless could we be next

Nearly everyone can recall playing Monopoly as a child, and for many, the game served as their first exposure to handling different denominations of cash. It was exhilarating to have someone land on your Park Place property, complete with hotel, and in turn receive a fistful of $50s and $100s.

A new generation of players might never get the chance to experience this, however, as Hasbro Gaming just released an “Ultimate Banking” version of the popular board game that nixes the funny money in favor of play credit cards and an electronic scanner.

You could argue it’s just a game, but Monopoly has always had a reputation for being a reflection of capitalism as it operates in the “real” world (which is why it was banned in communist states such as the Soviet Union). The cashless version of the game is no exception, as it comes at a time when calls to limit—or in some cases eliminate—the use of cash are intensifying. And to be clear, “cash” here means cash in your pocket, not cash in the bank.

Just this week, former treasury secretary Larry Summers published an op-end in the Washington Post arguing it’s time to “kill the $100 bill,” the reason being that it’s preferred by those involved in money-laundering, corruption and other illegal activity. (One million dollars denominated in $100 bills weighs 2.2 pounds, he points out, whereas the same amount in $20 bills weighs a much more cumbersome 50 pounds.) The European Union, he argues, should also consider getting rid of the 500-euro note, a position that’s echoed by European anti-fraud officials.

Bye-Bye Benjamin?

Having had the opportunity to hear Secretary Summers speak when I visited Harvard a couple of weeks ago, I respect his opinion and believe his intentions are good. But ultimately the argument to eliminate the $100 bill is based on the presupposition that anyone using such a note is a drug trafficker or money launderer. This seems to go against one of the main tents of common law, namely, that we’re innocent until proven guilty.  

The risks far outweigh the benefits when you consider where this anti-cash sentiment is leading us—a cashless society. As I discussed back in December regarding Sweden’s own trend toward a cashless economy, every transaction could be monitored, not to mention taxed and charged a fee. Accounts could be frozen, which, in a cashless world, would leave you with nothing.

I’ve experienced the inconvenience that sometimes comes with electronic transactions, as I’m sure many of you have. Occasionally my credit card couldn’t be read for one reason or another, and if you’re not carrying cash, what do you do? When I’m traveling, domestically or abroad, I always carry cash with me, and $100 bills are much more convenient than a pound of $20s.

Capital controls are nothing new, but they would be much easier to impose. In Colombia, a tax is levied on every transaction, whether it is a direct deposit from your employer, transfer of funds between accounts or a purchase. Since 2003, Venezuela’s government has significantly regulated the amount of money citizens can take with them on trips abroad, in effect blocking access to foreign travel. Currently the limit is $2,000, but for travelers headed to the U.S., it drops to $700. This, along with a labyrinthine exchange rate (there are three), has only created a black market currency exchange. And since credit cards in Venezuela are issued by state-run banks, there’s no stopping the government from restricting payment on any goods or services, or from any vendor, it wishes.

Colombia and Venezuela are extreme cases, and there’s no reason to expect the same would ever happen in the U.S. At the same time, scrapping the $100 bill would further debase Americans’ economic liberty.

Gold Shines on this Week’s Stellar Consumer Price Index (CPI) Reading

These concerns might be part of the reason why gold and silver coin sales are doing so well right now. The U.S. Mint began selling out of its popular American Eagle coins late last year, and demand is exceeding the mint’s weekly allocation of 1 million ounces. In Australia—where four out of five respondents to a recent poll said the country would be cash-free by 2022—gold coin sales surged 106 percent in January 2016 from a year earlier; silver coin sales, 151 percent.

Australians Load Up on Gold and Silver Coins
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Buying gold in times of uncertainty and instability is not just tradition—it’s rational behavior. The yellow metal has a long history of acting as an effective store of value.

This is especially the case with nominal interest rates turning negative around the globe. More than a fifth of the world’s GDP is now produced in countries with subzero rates, and Federal Reserve Chair Janet Yellen recently stated that the Fed will not take such rates off the table for consideration.

Key Negative Interest Rates
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Negative rates are essentially a tax on your bank deposits, intended to discourage saving. And if hard cash were no longer available to squirrel away in your mattress, gold might be the only other option.

But nominal rates aren’t the only driver. Numerous times I’ve written and spoken about gold’s relationship with real interest rates, which is what you get when you subtract headline inflation from the government bond yield. When inflation rises, real rates are pushed lower, and when they turn negative, gold becomes more attractive. And today the Labor Department reported that core inflation in January increased 0.3 percent, its largest monthly gain since August 2011, when gold hit its all-time high of $1,900 per ounce. For the 12-month period, the consumer price index (CPI) hit an impressive 2.2 percent, its strongest showing since June 2012. Both of these readings beat analysts’ estimates and should be constructive for gold.

Bye-Bye Benjamin?Also helping the metal’s appeal this week was the uncertainty surrounding whether the United Kingdom would exit the European Union. Momentum had been growing behind the “Brexit” campaign to end economic control from Brussels, with a majority of respondents to a British poll saying they were in favor of leaving the 28-member bloc. Today, however, Prime Minister David Cameron managed to secure a deal giving the UK “vital protections” to its economy, including never having to bail out any other EU member if it chooses not to. Gold ended the trading day up 2.3 percent to settle at $1,228.60 per ounce.

Oil Prices Aligned with Seasonality Trade

Oil was up this week with prices rising above their 50-day moving average, mostly on a production cap agreement between the world’s two largest producers, Russia and Saudi Arabia. Historically, oil bottoms every February, and today it’s right on cue. We are now due for a rally until Easter at least, possibly until the beginning of summer.

West Texas Crude Oil Historical Patterns
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Another factor to consider is money supply. Based on our own regression analysis, there’s a high correlation between money supply growth in the seven most populous countries and commodity prices. If you look back to 2011, when oil averaged $100 per barrel and gold peaked at $1,900, money supply was strong. Since then it’s been falling, particularly in China, as you can see below. But with money supply on the upswing, we might have a good chance for a rally here.

Will Commodity Prices Continue to Track China's Money Supply Growth?
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Besides continued oversupply, oil’s most significant headwind remains the U.S. dollar. As it has gained in strength, emerging market currencies have declined.

U.S. Dollar's Uptrend Still Intact, Emerging Markets Weaken
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As always, it’s important to follow the smart money. Just as influential “Shark Tank” investor Mark Cuban went long on gold last week, we’ve seen big-name investors place their bets that oil prices will climb. It was widely-reported this week that billionaires Warren Buffett, George Soros and hedge fund manager David Tepper all disclosed buying shares of Kinder Morgan, the Houston-based oil and gas pipeline company. Buffett’s stake alone amounts to 26.5 million shares, currently valued around $450 million.

In the meantime, low oil prices continue to give a lift to transportation stocks such as airlines, many of which reported record net profits for the fourth quarter.  Be sure to subscribe to my blog, Frank Talk, to learn more about oil and other commodities.

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Index Summary

  • The major market indices finished up this week. The Dow Jones Industrial Average rose 2.62 percent. The S&P 500 Stock Index jumped 2.84 percent, while the Nasdaq Composite rose 3.85 percent. The Russell 2000 small capitalization index climbed 3.91 percent this week.
  • The Hang Seng Composite Index rose 6.14 percent this week; while Taiwan finished up 3.25 percent and the KOSPI climbed 4.41 percent.
  • The 10-year Treasury bond yield fell 0.11 percent to 1.75 percent for the week.

Domestic Equity Market

S&P 500 Economic Sectors
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  • Consumer discretionary was the best performing sector this week, increasing 4.28 percent versus an overall increase of 2.84 percent for the S&P 500.
  • The ADT Corporation was the best performing stock for the week, increasing 48.86 percent. Shares skyrocketed following an agreement for the company to be acquired by Apollo Global Management.
  • Chinese companies continue to expand aggressively overseas. The latest announcement was this week’s acquisition of U.S. based Ingram Micro by China’s HNA Group for $6 billion. In 2015 Chinese firms spent more than $100 billion on overseas acquisitions, according to Fortune.


  • Telecommunications was the worst performing sector for the week, increasing 1.07 percent versus an overall increase of 2.84 percent for the S&P 500.
  • Southwestern Energy was the worst performing stock for the week, falling 20.60 percent. The company’s stock sank on Friday along with oil prices due to investors’ concerns about the global oversupply of oil.
  • The IPO market seems to be dented by market turmoil. There were no initial public offerings in the United States in January and there have been only four in February, according to the Wall Street Journal. Nine of last year’s 10 largest IPOs are now trading below their initial sale price.


  • In relative terms, defensive sectors continue to outperform cyclical sectors. This is unlikely to reverse until evidence of a reacceleration in global economic growth materializes.
  • BCA has a favorable outlook on electrical equipment and components companies. The research group reiterates this is not a call on an imminent resurgence in global manufacturing or business investment, but a judgment that an easing in the U.S. dollar has the potential to cause a meaningful re-rating in overly depressed profit expectations and relative valuations.
  • Global bank equities now appear to be pricing in an overly pessimistic global growth outlook.


  • Data-processing stocks are trading at a historically high forward price-to-earnings premium to the overall market, and 12-month forward earning expectations are close to the peaks hit during prior recessions. As such, the sector’s outperformance looks primed to wane.
  • The anticipated recovery in railroad freight volumes may be more distant than anticipated. Domestic economic disappointment is a rising threat, owing to tightening financial conditions.
  • The M&A backdrop for the semiconductor sector is becoming more hostile as cost and access to capital become more restrictive. Once M&A euphoria fades, a renewed focus on fundamental profit drivers could trigger a de-rating.

Which Industrial Metal Are You? Take our personality quiz.

The Economy and Bond Market



  • Consumer prices in the U.S. were unchanged in January versus December, but the core Consumer Price Index, which strips out volatile food and energy prices, rose 0.3 percent, its fastest rate in over four years.
  • Recent market turmoil has not led to large-scale layoffs, according to weekly jobless claims data. Initial claims for state unemployment benefits fell to 262,000 from 269,000 the previous week. That is only 6,000 above the low for the cycle and a sign that the labor market continues to improve. Claims have been below 300,000 for 50 straight weeks, the longest such streak since the early 1970s, according to Reuters.
  • Industrial production for January came in at 0.9 percent, above the expected 0.4 percent. This marks resumption in growth and reverses the prior month’s contraction of -0.4 percent.


  • The Japanese economy shrank an annualized 1.4 percent in the final quarter of 2015. Data shows a slump in consumer spending led the decline. Corporate profits fell 10 percent with renewed yen strength acting as a headwind. Investors are increasingly concerned that Abenomics, the package of economic policies undertaken by Prime Minister Shinzo Abe, may be faltering. 
  • Housing starts for January came in at 1,173,000, below the expected 1,099,000.
  • The Empire Manufacturing Index came in at -16.64, below the expected -10. The main worry is that the contraction in the manufacturing sector will spill over to the services sector.


  • As seen in the chart below, using the historical relationship between the Atlanta Fed GDP Now estimate and U.S. 10-year Treasury rates shows that 10-year rates today should not be 1.82 percent, but instead 2.3 percent. In fact, using this relationship shows that 10-year rates are currently pricing GDP in the first quarter to be -1.5 percent. Thus, markets are currently pricing a deep recession, which is simply not what the data is showing. Jobless claims, industrial production and capacity utilization, along with consumer spending suggests that things are actually getting better. As such, rates markets seem significantly mispriced at the moment.

Atlanta Fed GDP vs. 10-Year Treasury Rate
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  • The firming of deep cyclical sectors such as materials and industrials in recent trading sessions could be signaling that the U.S. dollar bull market may be going on pause.
  • Economic momentum in the Euro-area has been stronger than elsewhere over the past several quarters. The flash purchasing managers’ indices (PMIs), the German IFO report, and money and credit data releases next week will provide some insight into whether it is sustainable.


  • As government bonds have outperformed corporate bonds, the ratio between the two now stands well above the 2011 high. This reinforces that credit conditions have tightened enough to worry about economic prospects and corporate profit health.
  • The latest readings from the OECD’s global leading economic indicator are still pointing down, confirming the message from the meltdown in the equity-to-bond ratio.
  • The Core PCE price index will be released next Friday. With the one-month trend below the three-month trend the odds are stacked against a positive surprise.

Gold Market

This week spot gold closed at $1,227.67, down $10.25 per ounce, or -0.83 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, fell 0.67 percent. Junior miners fell for the week as the S&P/TSX Venture Index dropped 1.68 percent. The U.S. Trade-Weighted Dollar Index rose 0.71 percent for the week.

Date Event Survey Actual Prior
Feb-16 Germany ZEW Survey Current Situation 55.0 52.3 59.7
Feb-16 Germany ZEW Survey Expectations 0.0 1.0 10.2
Feb-17 US Housing Starts 1175k 1099k 1143k
Feb-17 US PPI Final Demand YoY -0.6% -0.2% -1.0%
Feb-18 US Initial Jobless Claims 275k 262k 269k
Feb-19 US CPI YoY 1.3% 1.4% 0.7%
Feb-23 US Consumer Confidence Index 97.5 98.1
Feb-24 US New Home Sales 520k 544k
Feb-25 Hong Kong Exports YoY -3.5% -1.1%
Feb-25 Eurozone CPI Core YoY 1.0% 1.0%
Feb-25 US Initial Jobless Claims 270k 262k
Feb-25 US Durable Goods Orders 2.6% -5.0k
Feb-26 Germany CPI YoY 0.1% 0.5%
Feb-26 US GDP Annualized QoQ 0.5% 0.7%


  • The best performing precious metal for the week was gold, down 0.77 percent. According to Kitco News, despite the precious metal’s four-week rally coming to an end this week, analysts still see volatile equity markets supporting the metal’s prices.
  • Gold’s rally is holding steady as investors are losing faith in central banks’ ability to deal with economic challenges, reports Bloomberg. “If they’re not going to put up U.S. rates as fast as the market had been anticipating, then that’s going to send the U.S. dollar lower, “ David Lennox from Fat Prophets in Sydney said. “That will be beneficial to the gold price.” Inflows into bullion-backed ETPs this year have also topped outflows in all of 2015, as seen in the chart below.

2016 Inflows Into Bullion-Backed ETPs Top Total Outflows in 2015
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  • In combination with continued strong cash flow from operations, St. Barbara is anticipating it will pay out the Red Kite debt facility in full by the end of June,  12 months ahead of the amortization schedule. Other positive news comes from Argentina, where a national newspaper reported on Friday that the newly elected president, Mauricio Macri, repealed the export mining tax in the country.


  • The worst performing precious metal for the week was palladium, down 4.57 percent. This marks the second week for the metal’s poor performance among its peers, with platinum ending the week down 1.64 percent and silver down 2.46 percent.
  • Asian physical gold demand slowed this week, reports Reuters, with consumers opting to wait out the metal’s biggest rally in years. In India, discounts surged to a record high of $50 an ounce, widening from the $35 discount last week, dealers said. “When there’s volatility in gold, people tend to shy away from making a purchase,” Rajesh Khosla, managing director at MMTC-PAMP India, said.
  • In a statement on Thursday, Gold Fields announced that production will drop to 2.05 million ounces to 2.1 million ounces in 2016 (from 2.16 million last year), leaving the company reliant on its delayed South Deep operation. Gold Fields fell the most on record following the statement but has recovered much of the initial price weakness. According to Bloomberg, the outlook for Kinross Gold also looks a bit dim, after the company was cut to junk by Standard & Poor’s last week. Kinross is the latest mining company to join the “junk bin.”


  • ABN AMRO Group, a longtime gold bear, has changed its tune and sees the precious metal rising from $900 to $1,300 an ounce by year end, reports Bloomberg. “Our new scenario sees a longer period of weaker global growth,” Georgette Boele of ABN AMRO said. Credit Agricole analysts seem to be in agreeance; the bank projects gold will be at $1,250 an ounce in December, citing that the U.S. dollar is unlikely to generate the same upside momentum as in 2015.
  • According to Mad Money’s Jim Cramer and commodity strategist Carley Garner, gold prices aren’t in the depths of despair anymore. “I’ve always been a big believer that you should own a little gold,” Cramer said. A few fundamental changes from Garner include a more dovish Federal Reserve policy along with negative interest rates being a commonplace. In a note from UBS, the group states that even after Monday’s flurry of selling following last week’s risk-on theme, the urgency to liquidate has slowed substantially and buyers have started to emerge once again.
  • Nearly a quarter of the world economy is now experiencing negative rates and gold bulls are thriving in reaction, reports Bloomberg. As central banks around the world move toward new and untested strategies, such as negative rates or the prospect of widespread debt forgiveness, analyst Kenneth Hoffman says that gold is the natural beneficiary.

Key Negative Interest Rates
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  • Goldman Sachs recommends shorting gold, according to a report released Monday, with a three-month target of $1,100 an ounce. Goldman believes that as China has been, and will likely continue to be, a net seller of U.S. treasuries, this will be negative for gold, reports Bloomberg.
  • A closer look at Goldman’s view on the precious metal shows that the bank still expects rates to rise, putting the odds of a U.S. recession at just 15 to 20 percent, also rejecting the notion that a re-run of the crisis was likely. “We believe that these new fears, like past fears, are not justified,” Goldman analysts wrote. “Systematic risks stemming from the collapse in oil and commodity prices are extremely small.”
  • Barrick Gold says it plans to cut its debt by another $2 billion in 2016, reports Bloomberg, seeking to shore up its balance sheet following three annual declines in the price of gold. The producer may sell additional non-core assets and create new joint ventures and partnerships.  Potential investors should also be aware that Barrick’s share price has surged this year and there is higher likelihood that an equity raise could be part of the plans to pay down debt, much like it did in 2013.

Curious About The Gold Market? Read Frank Holmes' Latest Insight.

Energy and Natural Resources Market



  • Gold prices rebounded late in the week as the rally in stocks faded, denting optimism that the rout in oil has eased. Gold is off to its best start since 1980 on signs that weakness in the global economy will require further expansionary monetary policies, thus boosting its appeal as a store of value.
  • The best performing sector for the week was base metals. Mining shares rallied as copper prices posted the longest stretch of gains since December. Copper strengthened as investors became optimistic that recent declines in warehouse inventories, as well as production cuts announced by major miners, will finally start to erode global gluts.
  • The best performing stock for the week in the broader natural resource space was Freeport McMoRan. Shares of the U.S. based miner rose 25 percent for the week after the company bolstered its liquidity position by announcing it agreed to sell a 13 percent ownership stake in its Morenci mine. The $1 billion sale was to Freeport’s joint venture partner, Japan-based Sumitomo.


  • The U.S. Energy Information Administration cut its 2016 Brent oil forecast to $38 a barrel in its latest short-term energy outlook. The price forecast appears sensible when considering a recent report from consultancy group Wood Mackenzie that shows only 3.4 million barrels per day, or less than 4 percent of global oil supply, is unprofitable at oil prices below $35 per barrel.
  • The worst performing sector for the week was paper and forest. News that housing starts in the U.S. dropped to the lowest level in three months compounded the already negative sentiment triggered by news last week showing pulp and paper railcar loadings had declined 3 percent year-on-year.
  • The worst performing stock for the week in the S&P Global Natural Resources Index was Devon Energy. The natural gas producer dropped 14 percent for the week after reporting weak quarterly results, including a 75 percent cut to its dividend. Further to this, the company announced a secondary share offering to raise nearly $1.3 billion in equity capital.


  • Metals posted their strongest rally so far this year after China boosted stimulus for the economy. Chinese money supply rose 14 percent in January, ahead of its three month moving average. Meanwhile, China’s chief planning agency is making more money available to local governments to fund new infrastructure projects while the People’s Bank of China governor Zhou Xiaochuan broke a long silence to talk up confidence in the Chinese yuan.
  • The American Petroleum Institute’s (API) Monthly Report for January showed an encouraging trend of supply declines and demand upticks, which, if maintained, could help the market rebalance sooner. For the month of January, the lower 48 states’ crude production fell to 8.6 million barrels per day, the lowest since November 2014. Meanwhile, total petroleum demand rose to 19.4 million barrels per day, the highest since 2008.
  • Smart money is looking into energy stocks for value. Warren Buffet disclosed a new investment in pipeline operator Kinder Morgan, initiated late last year after shares fell 65 percent. In addition, the 10 largest U.S. hedge funds bought $1.5 billion in energy stocks during the fourth quarter, making the sector the top buy of the final 2015 quarter.


  • The Russia-Saudi Arabia proposal to freeze oil production at January levels would have no impact on supply/demand balances for the year and would leave the global surplus in place, according to Goldman Sachs analysts. January OPEC and Russian output of 43.1 million barrels per day would only be 115,000 barrels lower than Goldman Sachs’ 2016 production forecasts.

Freezing Oil Production at January 2016 Level Would Have Limited Impact on 1H2016 Oil Surplus
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  • Iron ore prices have crossed into bull market territory but the chance of a sustained price rally is unlikely, according to Capital Economics. Chinese restocking after the Lunar New Year and temporary port closures in Brazil have recently supported prices. However, iron ore is in “significant backwardation,” meaning large supply cuts are needed to bring the oversupplied market back into balance.
  • The rally in mining stocks faded on Thursday as Anglo American was cut to junk by a third credit-rating firm this week. Further to this, analysts speculated that valuations are stretched, especially considering a report that showed China’s Producer Price Index dropped 5.3 percent last month, extending declines to a record 47 months.

China Region



  • Chinese markets bounced back after Lunar New Year holidays, lifting Hong Kong alongside them. The Hong Kong Stock Exchange Hang Seng China Enterprises and Hang Seng Composite Indices had particularly strong showings over the last five trading days, rising more than 8 and 6 percent respectively.
  • Credit growth in China for the January period soared to new record highs, encouraging investors still somewhat concerned about the Chinese economy. New yuan loans rose to 2.51 trillion yuan, handily beating expectations of 1.9 trillion. Aggregate financing also rose to new highs, coming in at 3.42 trillion yuan, surpassing expectations of 2.2 trillion yuan. 
  • Retail sales in China also improved year-over-year for the Lunar New Year holiday period, rising 11.2 percent, ahead of last year’s 11 percent. New car sales data for China beat as well, coming in stronger year-over-year at 9.3 percent.


  • January trade numbers in China disappointed after their release this week, with both import and export data missing analysts’ expectations.
  • The Korean won fell to 52 week lows against the U.S. dollar. The weaker currency helps keep Korean exporters competitive, however.

Weak Won is Good for Korean Exporters
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  • Chow Tai Fook Jewellery Group reported much lower Lunar New Year sales numbers, down some 29 percent year-over-year. Its stock fell 12.16 percent for the week, garnering the unfortunate distinction of being the worst performer in the HSCI over the last five trading days.


  • President Obama joined with other world leaders for two days in California this week during a meeting between the U.S. and the Association of Southeast Asian Nations (ASEAN), which was aimed at strengthening ties and bolstering trade and innovation. The meeting this year comes on the heels of last year’s Trans-Pacific Partnership (TPP) agreement, which counts several ASEAN nations as members.
  • China’s chief planning agency aims to make more money available to local governments to fund new infrastructure projects. The National Development and Reform Commission intends to offer some 400 billion yuan this quarter under a special bond program.
  • The pessimism of the first several weeks of 2016 may continue to relent as additional data come in and as investors continue to assess the pace of global and regional growth.


  • Commodity imports for January in China saw across-the-board declines.
  • The Indonesian central bank lowered its overnight to one-year monetary operations rates, a move designed to spur credit growth. However, it comes at the expense of net interest margins for Indonesian banks.
  • As U.S. and ASEAN leaders met in California this week, officials from Taiwan and the U.S. reported that China has positioned surface-to-air missiles on a technically-disputed island in the South China Sea. 

Emerging Europe



  • Greece was the best performing country this week, gaining 5.78 percent. The Athens Stock Exchange rebounded from a multi-year low with improving sentiment in emerging markets.
  • The Russian ruble was the best performing currency this week, gaining 2.5 percent against the U.S. dollar. The ruble is highly correlated with the price of Brent crude oil, however this week Brent declined 45 basis points while the ruble was able to appreciate by 2.5 percent.
  • Energy was the best performing sector among Eastern European markets this week.


  • Ukraine was the worst relative performing market this week, gaining just 23 basis points.  Western supporters are losing patience with the government as corruption stands in the way of helping the economy. GDP contracted 10.5 percent in 2015 and inflation reached 43 percent. The IMF’s managing director Christine Lagarde recently expressed concern pinpointing “Ukraine’s slow progress in improving governance and fighting corruption.”
  • The Ukrainian hryvnia was the worst relative performing currency this week, losing 2.9 percent against the U.S. dollar. Russia filed a lawsuit against Ukraine in the High Court in London after the government in Kiev defaulted on $3 billion in bonds.
  • Health care was the worst performing sector among Eastern European markets this week.


  • The Current Account released by the European Central Bank (ECB) came in at 41.4 billion euros this week, versus the prior 29.8 billion euros. Current Account is a net flow of current transactions including goods, services and interest payment into and out of the Euro-area. A Current Account surplus indicates that the flow of capital into the eurozone exceeds the capital reduction.
  • Polish stocks rebounded to the highest level this year after the government softened its stance on swapping Swiss franc mortgages into Polish zloty. On Thursday, Deputy Prime Minister Mateusz Morawiecki told reporters that the government may revise the program to convert $42 billion of loans in Swiss francs and euros, easing concern that banks will face as much as $11 billion in costs.
  • Saudi Arabia and Russia agreed to freeze oil production, with Iran supporting the agreement. Russia, the world’s biggest energy exporter, will rebound if oil price moves higher. Goldman Sachs said that the ruble may be one of the biggest beneficiaries if Brent crude oil strengthens to $54 per barrel in the next 12 months. In addition, the ruble has the potential to appreciate to 66 per dollar, according to Kamakshya Trivedi, Goldman’s chief emerging markets macro strategist. The Russian ruble closed at 76.90 to the U.S. dollar on Friday.


  • Cornerstone Macro, in its February 16 publication, revised down its eurozone GDP forecast from 1.6 percent to 1.2 percent, stating that the eurozone outlook remains complicated. Cornerstone sees the refugee crisis, a fragile banking system, fear of the Brexit in advance of the referendum, along with terrorist uncertainties as significant headwinds for eurozone growth.

Eurozone GDP
click to enlarge

  • Germany’s February ZEW consumer confidence number came in at 1.0 versus the expected 0.0, and is still well below the January reading of 10.2. Data from Germany has been coming in soft recently, putting more pressure on the ECB to ease further at its next meeting in March.
  • Another tragic terrorist attack took place in Turkey’s capital. Prime Minister Davutoglu stated that the suicide bomber was an affiliate of the Kurdish separatist PKK who entered into Turkey from Syria. Recently Turkey has been discussing sending ground troops into Syria, but for now Turkish officials are lobbing for a 10 kilometer buffer zone to prevent the refugee flow.  If Turkey is dragged over deeper into the war in Syria we could see a selloff in equities.

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Leaders and Laggards

Weekly Performance
Index Close Weekly
DJIA 16,391.99 +418.15 +2.62%
S&P 500 1,917.78 +53.00 +2.84%
S&P Energy 426.77 +10.07 +2.42%
S&P Basic Materials 256.24 +4.97 +1.98%
Nasdaq 4,504.43 +166.92 +3.85%
Russell 2000 1,010.01 +38.02 +3.91%
Hang Seng Composite Index 2,632.24 +152.22 +6.14%
Korean KOSPI Index 1,916.24 +80.96 +4.41%
S&P/TSX Canadian Gold Index 177.80 -3.04 -1.68%
XAU 60.53 -0.11 -0.18%
Gold Futures 1,228.30 -11.10 -0.90%
Oil Futures 29.88 +0.44 +1.49%
Natural Gas Futures 1.81 -0.16 -7.88%
10-Yr Treasury Bond 1.75 -0.00 -0.11%


Monthly Performance
Index Close Monthly
DJIA 16,391.99 +625.25 +3.97%
S&P 500 1,917.78 +58.45 +3.14%
S&P Energy 426.77 +38.19 +9.83%
S&P Basic Materials 256.24 +19.67 +8.31%
Nasdaq 4,504.43 +32.74 +0.73%
Russell 2000 1,010.01 +10.70 +1.07%
Hang Seng Composite Index 2,632.24 +46.41 +1.79%
Korean KOSPI Index 1,916.24 +70.79 +3.84%
S&P/TSX Canadian Gold Index 177.80 +49.72 +38.82%
S&P/TSX Canadian Gold Index 177.80 +55.66 +45.57%
XAU 60.53 +20.43 +50.95%
XAU 60.53 +15.76 +35.20%
Gold Futures 1,228.30 +122.20 +11.05%
Oil Futures 29.88 +3.33 +12.54%
Natural Gas Futures 1.81 -0.31 -14.49%
10-Yr Treasury Bond 1.75 -0.24 -11.90%


Quarterly Performance
Index Close Quarterly
DJIA 16,391.99 -1,431.82 -8.03%
S&P 500 1,917.78 -171.39 -8.20%
S&P Energy 426.77 -63.09 -12.88%
S&P Basic Materials 256.24 -29.19 -10.23%
Nasdaq 4,504.43 -600.49 -11.76%
Russell 2000 1,010.01 -165.14 -14.05%
Hang Seng Composite Index 2,632.24 -506.74 -16.14%
Korean KOSPI Index 1,916.24 -73.62 -3.70%
Gold Futures 1,228.30 +151.20 +14.04%
Oil Futures 29.88 -10.51 -26.02%
Natural Gas Futures 1.81 -0.33 -15.57%
10-Yr Treasury Bond 1.75 -0.52 -22.80%

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned above were held by one or more accounts managed by U.S. Global Investors as of 12/31/2015:
Freeport McMoRan
Gold Fields
Hasbro Gaming
St. Barbara

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 JP Morgan Emerging Markets Currency Index shows the performance of emerging market exchange rates.
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.
M2 Money Supply is a broad measure of money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds.
ZEW Germany Expectation of Economic Growth is a survey on the question of economic growth in six months.
The Empire State Manufacturing Index is an index based on the monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. The index summarizes general business conditions in New York State.
The "core" PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energy 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 Global Natural Resources Index includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified, liquid and investable equity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining.