The Global Scene: More Sunshine, Less Storms

Transcription

1 The Global Scene: More Sunshine, Less Storms Frank Holmes, CEO and Chief Investment Officer US.FUNDS March

2 Go to To Sign Up for the Investor Alert Today Subscribe to the weekly, free e-newsletter at /subscribe And for advisors Subscribe to Advisor Alert at /AAsubscribe 2

3 We Focus on Fund Performance at Investment leadership results in performance Winner of 29 Lipper performance awards, certificates and top rankings since 2000 (Four out of 13 U.S. Global Investors Funds received Lipper performance awards from 2005 to 2008, six out of 13 received certificates from 2000 to 2007, and two out of 13 received top rankings from 2009 to 2010.) 3

4 We Focus on Education at 43 MFEA STAR Awards for Excellence in Education 4

5 Fund Recognition: 4 Funds in the Top 4 Percent for 10-Year Period 5

6 U.S. Global Investors is Mobile Get Investor Alert and Frank Talk On the Go Visit 6

7 Understanding the Benefits of the S-Curve The S-Curve is a type of curve that shows a rapid, exponential increase in growth for a period of time, followed by a tapering or leveling off. 7

8 Metaphor: Tipping Points, Melting Points H 2 O is Like Money Ice Turns to Water at 32º, but Still H 2 O 8

9 7 Billion People Tipping Point Centuries to Decades to a Decade for a Billion People

10 Demographics is the Key Super Shift Rural to Urban 1978 Deng Xiaoping Half of the global population (>3 billion) is estimated to live in urban areas Projected urban population is larger than the entire world population in

11 American Dream Trade Massive Urbanization Trend in India and China

12 Chindia Rising Middle Class 2020 Source: padanisaa.blogspot.com 12

13 Huge Pent-Up Demand for Automotive Transportation in the Developing World S-Curve 13

14 Super Shift Energy S-Curve Oil Consumption per capita: 1 to 25 1 to 16 Oil Consumption and Industrialization, 1900 to present Oil per capita rises rapidly during early industrialization, then levels to rapid real income growth. Rising world trade actually stimulates the industrialization phase. Lower U.S. labor costs versus Europe and the U.K. drive American industrialization, enrichment and energy consumption Japan U.S. S. Korea 1 to 15 1 to 2 Lower Japanese labor costs do the same to the U.S. Lower Korean labor costs do the same to Japan China & India 0.9 Source: Dr. Marc Faber 14

15 Super Shift Electricity S-Curve Intensity of electricity consumption Source: BHPB Power consumption has been growing faster than the rate of GDP growth. 15

16 Emerging High-Speed Rail Hub Cities 2014 Frank Holmes High Speed Train, China 16

17 High-Speed Rail is a Growth Opportunity for U.S. Companies

18 +$4 Trillion Infrastructure Spending Globally 18

19 China/India is 40% of the World Population but Only 20% of World GDP 19

20 Government Policy Model Precursor for Change Ben Bernanke, Chairman of the Federal Reserve President Barack Obama 20

21 It s Not the Political Party, It s the Political Policies 21

22 It s Not the Political Party, It s the Political Policies Declining Value of the U.S. Dollar Since 1970 Richard Nixon Alan Greenspan Ben Bernanke 22

23 Emerging World Holds 50% of the Global Population, Just 22% of GDP 23

24 Compare E7 vs G7 Money Supply Growth Emerging World s Money Supply is Robust 24

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26 Redemptions by Investors from Equity Funds to Bond Funds Appear Excessive and They Have Missed a Spectacular Stock Market Rebound 26

27 Follow the Money S&P 500 Quantitative Easing Ignites Market Rallies Ben Bernanke, Fed Chairman 27

28 Follow the Money Equities and Gold Have Outperformed Bonds 28

29 Presidential Election Cycle Follow the Money 29

30 Compare 2007 and 2013 Follow the Money Dow Jones Industrial Average 14, ,164.5 Political Leadership George W. Bush Barack Obama Consumer Confidence Gas Price (per gallon) $2.75 $3.73 Gold Price (per ounce) $748 $1, Year Treasury Yield 4.64% 1.89% Government Debt $9 trillion $16 trillion NYSE Daily Trading Volume 1.3 billion shares 545 million shares U.S. Debt Rating AAA AA+ 30

31 Net Shrinkage of Equity vs. S&P 500 Index Stock Buybacks and M&A 31

32 Long Term Bonds Seem Expensive, Overvalued and More Risky than Equities 32

33 Great Super Cycle Debt Bust Contagion Unionized government workers and social entitlements delay growth. 33

34 Buy Stocks When There s Blood in the Streets Rothschild Spain Greece Spain Greece 34

35 Perpetual Global Central Bank Stimulus 35

36 Follow the Money Global Liquidity Boom Good for Gold and Emerging Markets 36

37 More Sunshine, Less Stormy Weather 37

38 Implications of Global Easing Policies Higher commodity prices Housing & auto rebound Fund flows into risky assets 38

39 Not Just the Fed: There s Been a Global Easing Cycle 39

40 Follow the Money Unprecedented Cash Injections from Central Banks 40

41 Price Reversal Chinese Stocks Undervalued Chinese Stocks Looking Like a Bargain October 22,

42 China s GDP Growth Tends to Stabilize in Fifth Year of Leadership Transition Cycle 42

43 Money Supply Reversal 43

44 Good News U.S. Businesses and Households Are Deleveraging 44

45 Consumers Conquering Debt 45

46 Equities Climb Wall of Worry Despite Low Bullish Sentiment 46

47 G7 Easy Money, Inflation in Check 47

48 E7 Emerging Markets Remain Attractive 48

49 E7 Emerging Market Equities Offer Attractive Valuations 49

50 Europe s Banks Need More Capital Postponed by Basel III Follow the Money 50

51 Housing Major Price Reversal Good for Employment and Commodity Demand Collateral Stimulation Cars, Appliances 51

52 Construction Steel Stocks Experienced Deeper Drawdown in 2012 Opportunity for Restocking? Chevy Volt 52

53 Prices of Spot Iron Ore in China and Shanghai Rebar Futures Have Edged Up on the Back of Better Economic Activity 53

54 Tipping Point Impact is About to Be Felt Quite Soon 2014 High Speed Train, China 54

55 Gold Demand Drivers Elvis Presley 55

56 Gold Fundamentals Remain Strong With Central Bank Net Purchases 56

57 Tech Stocks Lost More Than Lipper Gold Equity Funds Combined, Yet Major Business Media Stars Detest Gold 57

58 Two Stocks Lost $61 Billion, Almost as Much as Is Invested in SPDR Gold Shares (GLD) 58

59 Driver: The Love Trade 59

60 Gold Love Trade Strong Correlation Between Rising Incomes and Gold Price 60

61 China s Increasing Jewelry Demand 61

62 Holidays Drive Gold Demand 62

63 Bullion Has Outperformed Gold Stocks Over the Last Four Years 63

64 Gold Undervalued Compared to Rise in Other Asset Classes of U.S. Economy Since 1980, Gold Is Undervalued Relative to Other Asset Classes 64

65 Merrill Lynch is Calling $2,400 by 2014 Fear Trade 65

66 Managing Expectations Yearly Volatility The Math Standard Deviation (as of 12/31/12) based on 10-Year Data Rolling 1 Year NYSE Arca Gold BUGS Index (HUI) 35.3% WTI Crude Oil 35.2% MSCI Emerging Markets (MXEF) 31.2% S&P 500 Index (SPX) 18.2% Gold Bullion 14.0% 12-month rolling volatility of price action over 10 year period View the presentation Anticipate Before You Participate at 66

67 Gold Would Need to Be Much Higher to Cover U.S. Money Supply 67

68 Are You Underweight? Energy & Basic Materials 15% of S&P

69 Oil Stocks Underperform Oil Past performance is no guarantee of future results. 69

70 Energy M&A Unlocks Value + 60% Premiums to Stock Price China Canada 70

71 Record Oil Demand in China 71

72 Opportunity Compare Dividend Yields to 5-Year Government Note Past performance is no guarantee of future results. 72

73 Great Roll Over or Rip Off Creates Opportunity 73

74 Global Resources Fund Outperformed ETFs 10 year Past performance is no guarantee of future results. 74

75 Global Resources (PSPFX) $10,000 to $50,000 Over 10 Years 75

76 Global Resources (PSPFX) As of 2/28/

77 Global Resources (PSPFX) As of 2/28/

78 Reasons for Active Management Annual Rotation in Leadership 78

79 Reasons for Active Management Annual Rotation in Leadership

80 Managing Expectations Oil Seasonality Past performance is no guarantee of future results. 80

81 Managing Expectations Gold Seasonality Past performance is no guarantee of future results. 81

82 Please join me for An Update on Gold Stocks for Performance Workshops in Majestic 1B: 3:00 pm 3:40 pm 4:10 pm 4:50 pm

83 Fund Performance 83

84 Disclosures Please consider carefully a fund s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www. or by calling US-FUNDS ( ). 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. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund s performance more volatile. 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. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities. 84

85 Disclosures Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Market Vectors Junior Gold Miners Index is a market-capitalization-weighted index. It covers the largest and most liquid companies that derive at least 50 percent from gold or silver mining or have properties to do so. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The S&P 500 Oil & Gas Exploration & Production Index is a capitalization-weighted Index. The index is comprised of six stocks whose primary function is exploring for natural gas and oil resources on land or at sea. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. M1 Money Supply includes funds that are readily accessible for spending. 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. M3 money supply is the broadest monetary aggregate, including physical currency, demand accounts, savings and money market accounts, certificates of deposit, deposits of eurodollars and repurchase agreements. 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. 85

86 Disclosures Holdings in the Global Resources Fund, World Precious Minerals Fund, Gold and Precious Metals Fund and Eastern European Fund as a percentage of net assets as of 12/31/2012: Berkshire Hathaway 0.00%; Facebook 0.00%; Gold Fields (World Precious Minerals Fund 0.05%, Gold and Precious Metals Fund 0.04%); Groupon 0.00%; ishares Core Total US Bond 0.00%; SPDR Gold Shares (World Precious Minerals Fund 1.64%, Gold and Precious Metals Fund 2.70%); McDonald s 0.00%; Starbucks 0.00%; General Electric 0.00%; CNOOC 0.00%; Nexen 0.00%; Petronas 0.00%; Progress 0.00%; Apple 0.00%; Sprint 0.00%; AT&T 0.00%, Verizon 0.00%. 86

87 Disclosures Investment Objective: The Global Resources Fund is an actively managed fund that takes a diversified approach to the natural resources sector by investing in energy and basic materials. The fund invests in companies involved in the exploration, production and processing of petroleum, natural gas, coal, alternative energies, chemicals, mining, iron and steel, and paper and forest products, and can invest in any part of the world. The Select Sector SPDR ETFs are passively managed funds that seek to replicate as closely as possible, before fees and expenses, the performance of the S&P 500 Index. Each Select Sector SPDR is an index fund that invests in a particular sector or group of industries represented by a specified Select Sector Index. The companies included in each Select Sector Index are selected on the basis of general industry classification from a universe of companies defined by the S&P 500 Index. Liquidity: The Global Resources Fund can be purchased or sold at a net asset value (NAV) determined at the end of each trading day. The Select Sector SPDR ETFs can be purchased or sold intraday. These purchases and redemptions may generate brokerage commissions and other charges not reflected in the ETF s published expense ratio. Safety/Fluctuations of principal/return: Loss of money is a risk of investing in the Global Resources Fund and the Select Sector SPDR ETFs. Shares of the three securities are subject to sudden fluctuations in value. The Energy Select Sector and Materials Select Sector SPDR Funds may also be subject to bid-ask premiums or discounts to net asset value (NAV) that could adversely affect a shareholder s actual returns. Tax features: The Global Resources Fund may make distributions that may be taxed as ordinary income or capital gains. Under current federal law, long-term capital gains for individual investors in the fund are taxed at a maximum rate of 15%. For the Energy Select Sector and Materials Select Sector SPDR Funds, long-term capital gain distributions will result from gains on the sale or exchange of capital assets held by a Fund for more than one year. Any long-term capital gains distributions you receive from a Fund are taxable as long-term capital gain regardless of how long you have owned your shares. Long-term capital gains are currently taxed at a maximum of 15%. Information provided here is neither tax nor legal advice and is general in nature. Federal and state laws and regulations are subject to change. 87