Goldwatcher More Sunshine, Less Stormy Weather

Transcription

1 Goldwatcher More Sunshine, Less Stormy Weather 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 Generating Alpha Performance and Results Oriented 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 Chindia Rising Middle Class 2020 Source: padanisaa.blogspot.com 11

12 Government Policy Model Precursor for Change Ben Bernanke, Chairman of the Federal Reserve President Barack Obama 12

13 It s Not the Political Party, It s the Political Policies 13

14 Presidential Election Cycle Follow the Money Government Policy Is a Precursor to Change March

15 Trying to Stop a Bull Market Has Risks Government Policy Is a Precursor to Change March 2009 /subscribe 15

16 Emerging World Holds 50% of the Global Population, Just 22% of GDP 16

17 Compare E7 vs G7 Money Supply Growth Emerging World s Money Supply is Robust 17

18 China/India has 40% of the World s Population but only 20% of World GDP 18

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

20 Global Resources Fund (PSPFX) Outperformed ETFs 10 year PSPFX ETF ETF Past performance is no guarantee of future results. 20

21 Warren Buffett vs. Gold Warren Buffett 21

22 Tech Stocks Lost More Than Lipper Gold Equity Funds Combined, Yet Major Business Media Stars Detest Gold 22

23 Two Stocks Lost $61 Billion, Almost as Much as Is Invested in SPDR Gold Shares (GLD) 23

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25 Redemptions by Investors from Equity Funds to Bond Funds Appear Excessive and They Have Missed a Spectacular Stock Market Rebound 25

26 Long Term Bonds Seem Expensive, Overvalued and More Risky than Equities 26

27 Wilshire 5000 Index Making New Highs Follow the Money 27

28 Follow the Money Equities and Gold Have Outperformed Bonds 28

29 Follow the Money Gold Price Surged With Increase of U.S. Monetary Base 29

30 Follow the Money Global Liquidity Boom Good for Gold and Emerging Markets 30

31 Bullion Has Outperformed Gold Stocks Over the Last Four Years 31

32 Seasonality Fluctuations Appear Poised to Rebound XAU Gold Stock Index 32

33 U.S. Presidential Election Year is Traditionally a Weak Year XAU Gold Stock Index 33

34 Managing Expectations But 2013 Should Post Better Comebacks for Gold Stocks? Past performance does not guarantee future results. 34

35 Gold Demand Drivers Elvis Presley 35

36 Great Super Cycle Debt Bust Contagion Unionized government workers and social entitlements delay growth. 36

37 Gold Fear Trade for Gold Investors Developed Countries Rolled Over a Massive $8 Trillion in 2012 (Below Inflation Rate) 37

38 Great Roll Over or Rip Off Creates Opportunity 38

39 Low Real Interest Rates Historically Fuel Gold, Silver and Oil +2% 2% Tipping Point for Gold Gold & silver perform well in low or negative real interest rate environments 39

40 Follow the Money Unprecedented Cash Injections from Central Banks 40

41 Central Banks Remain Net Buyers of Gold 41

42 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 42

43 Gold Would Need to Be Much Higher to Cover U.S. Money Supply 43

44 Fear Trade: Aligning Gold Price to Bretton Woods II $46,000/oz? 44

45 Driver: The Love Trade 45

46 Holidays Drive Gold Demand 46

47 Managing Expectations Gold Seasonality Past performance is no guarantee of future results. 47

48 Gold Love Trade Strong Correlation Between Rising Incomes and Gold Price 48

49 China s Increasing Jewelry Demand 49

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

51 Money Supply Reversal 51

52 Prices of Spot Iron Ore in China and Shanghai Rebar Futures Have Edged Up on the Back of Better Economic Activity 52

53 Tipping Point Impact is About to Be Felt Quite Soon 2014 High Speed Train, China 53

54 High-Speed Rail is a Growth Opportunity for U.S. Companies 54

55 Europe s Banks Need More Capital Postponed by Basel III Follow the Money 55

56 Gold Fundamentals Remain Strong With Central Bank Net Purchases 56

57 Total Global Gold ETF Holdings Small Decline as Hedge Funds Sell Gold to Short Yen 57

58 Gold in Yen Terms Hits New Highs with Competitive Currency Devaluation 58

59 Predicting Attractive Tops and Bottoms Easier in South Beach vs. Markets Priority She Is Reading Money Magazine 59

60 Managing Expectations Gold Oversold in the Year-over-Year Rolling Oscillator 60

61 Gold Exploration Spending Has Skyrocketed Without True Success At $9 billion/year plus replacement requirements of 90 Million oz/year a discovery cost of $100/oz is needed. This is low. 61

62 +3 Million Ounce Discoveries Becoming Scarce and Expensive 62

63 Gold Grades Fall 63

64 Gold Stock Costs Rise 64

65 Changes For Cash Taxes Per Ounce Of Production Over Time Interview with Ralph Aldis and Frank Holmes: Talking Gold Stocks November 30, 2012 Source: CIBC 65

66 The Replacement Cost for an Ounce Of Gold is $1500 with $1700 as a Sustainable Number (2012) So Under $1500 Many Projects Will Not Come on Stream 66

67 Gold Undervalued Compared to Rise in Other Asset Classes of U.S. Economy Since 1980, Gold Is Undervalued Relative to Other Asset Classes 67

68 Merrill Lynch is Calling $2,400 by 2014 Fear Trade 68

69 Reasons for Active Management Annual Rotation in Leadership

70 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 70

71 Fund Performance 71

72 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. 72

73 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 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 MSCI China Free Index is a capitalization weighted index that monitors the performance of stocks from the country of China. 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 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. The Wilshire 5000 Index is a price appreciation index where dividends are reinvested. The index measures the performance of all U.S. headquartered equity securities with readily available price data. 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. 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%; 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%. 73

74 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. 74