U.S. Global Investors Searching for Opportunities, Managing Risk

Transcription

1 U.S. Global Investors Searching for Opportunities, Managing Risk Gold: The Love Trade vs. The Fear Trade Frank Holmes, CEO and Chief Investment Officer US.FUNDS March

2 About U.S. Global Investors (GROW) A boutique publicly listed investment adviser specializing in gold, natural resources, emerging markets and infrastructure opportunities around the world. 2

3 Performance and Results Oriented 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 Focus on Education 28 MFEA STAR Awards for Excellence in Education 4

5 Fund Recognition: Three Funds Rank in Top 20 for 10 Years World Precious Minerals Fund (UNWPX) ranked #5 Gold & Precious Metals Fund (USERX) ranked #7 The Global Resources Fund (PSPFX) ranked #16 Rankings were provided to The Wall Street Journal and Barron s by Lipper and include all mutual funds and ETFs tracked by Lipper. Lipper ranked the funds based on 10-year performance data including share prices and reinvested dividends. For funds with multiple share classes, only the largest share class was included. Rankings are based on total annualized return as of 12/31/2011. Past performance is no guarantee of future results. 5

6 The S-Curve Big Question is Where Are We On The 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. 6

7 7 Billion People Tipping Point 7

8 Super Shift Energy 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 8

9 Super Shift Electricity Intensity of electricity consumption Source: BHPB Power consumption has been growing faster than the rate of GDP growth. 9

10 Huge Pent-Up Demand for Automotive Transportation in the Developing World BYD (Build Your Dreams) president Wang Chuanfu sits inside the BYD E6 Electric Car during the North American International Auto Show in Detroit, Michigan January 12, Source: REUTERS/Mark Blinch 10

11 Tipping Points, Melting Points Ice Turns to Water at 32º 11

12 Demographics is the Key Super Shift Rural to Urban 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

13 Chindia Rising Middle Class Source: padanisaa.blogspot.com 13

14 Rising Incomes in Emerging Markets Sustain Demand Love Trade 14

15 Bubble Negative Press on China 15

16 China s GDP Growth Tends to Stabilize in Fifth Year of Leadership Transition Cycle 16

17 Stay Tuned to the Big S-Curve

18 Government Policy Model Precursor for Change Ben Bernanke, Chairman of the Federal Reserve President Barack Obama 18

19 E7 and G7 Population vs GDP 19

20 Compare E7 vs G7 Money Supply Growth 20

21 Majority of G7 and E7 Countries Have Negative Real Interest Rates 21

22 China Still Experiencing Strong Growth Momentum 22

23 It s Not the Political Party, It s the Political Policies 23

24 Low Real Interest Rates Historically Fuel Gold, Silver and Oil 2% Tipping Point for Gold Gold & silver perform well in low or negative real interest rate environments 24

25 Gold Fear Trade for Gold Investors Developed Countries Must Rollover a Massive $8 Trillion in 2012 (Below Inflation Rate) 25

26 Fiscal 2010 U.S. Government Revenues & Expenses at a Glance 58% 26

27 The Shocking Cost of U.S. Regulation is an Opportunity for Emerging Markets 14% of the economy $8,000 per private sector employee and rising rapidly. 27

28 Gold No Love from Big Pension Funds 28

29 Driver: The Love Trade 29

30 Holidays Drive Gold Demand 30

31 China s Increasing Jewelry Demand 31

32 Gold Love Trade Strong Correlation Between Rising Incomes and Gold Price 32

33 $6 Trillion American Dream Trade $6 Trillion in Infrastructure Over the Next Three Years Massive Commodity Demand 33

34 +$4 Trillion Infrastructure Spending Globally 34

35 Next Wave of Infrastructure Spending Globally 35

36 American Dream Trade Massive Urbanization Trend in India and China 36

37 China/India Share of World GDP Increased Substantially 37

38 Managing Expectations The Math Standard Deviation (as of 12/30/11) based on 10-Year Data Rolling 1 Year NYSE Arca Gold BUGS Index (HUI) 38.1% WTI Crude Oil 35.7% MSCI Emerging Markets (MXEF) 30.6% S&P 500 Index (SPX) 19.2% Gold Bullion 13.2% 12-month rolling volatility of price action over 10 year period View the presentation Anticipate Before You Participate at /investor-resources/publications/research 38

39 Managing Expectations Anticipate Before You Participate Measuring Volatility Number of +10% Moves Number of -10% Moves Frequency of ±10% Moves GROW (U.S. Global Investors) % NYSE Arca Gold BUGS Index (HUI) % WTI Crude Oil % MSCI Emerging Markets (MXEF) % Gold Bullion % S&P 500 Index (SPX) % Calculated over rolling 20-trading day periods. Based on approximately 2,600 total occurrences over the past 10 years as of 12/30/

40 Managing Expectations Gold Seasonality Past performance is no guarantee of future results. 40

41 Managing Expectations 60 Day Rolling Oscillator 41

42 Managing Expectations Silver Was Ahead of Itself Relative to Gold 42

43 Managing Expectations Life Cycle of a Resource Stock 43

44 Managing Expectations Cause and Effect Gold Bullion to Gold Stocks 44

45 GARP Stock Picking Value Drivers for Superior Performance 45

46 Gold Stocks are Very Undervalued on Historical Basis 46

47 Gold Equities are Undervalued Relative to Gold Bullion The stocks today are almost as cheap as they were during the depths of the credit crisis. 47

48 Oil and Gold Undervalued Compared to Rise in Other Areas of U.S. Economy 48

49 No Bubble in Gold Past performance is no guarantee of future results. It is not possible to invest in an index. 49

50 Gold Would Need to Be Much Higher to Cover U.S. Money Supply 50

51 Want Alpha? 51

52 Are You Underweight? Gold Stocks 1% of S&P

53 World Precious Minerals Fund Outperformed 10 year Past performance is no guarantee of future results. GDX inception date 5/22/

54 Fund Performance 54

55 Investment Process: Knowledge Must Be Explicit and Tacit 55

56 Investment Process: A Matrix of Top-Down and Bottom-Up 56

57 Silver Wheaton Case Study 57

58 Come Visit Us at Facebook: Twitter: Frank Talk: /franktalk Investor Alert: /alert 58

59 U.S. Global Investors is Mobile Get Investor Alert and Frank Talk On the Go Visit /apps 59

60 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 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. Diversification does not protect an investor from market risks and does not assure a profit. 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. 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. 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. 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. Morningstar Ratings are based on risk-adjusted return. The Overall 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.) 60

61 Disclosures The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 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 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 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 Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The MSCI China Free Index is a capitalization weighted index that monitors the performance of stocks from the country of China. 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 index benchmark value was at the close of trading on December 20, 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 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. 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. 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. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. 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. Holdings in the Gold and Precious Metals Fund (USERX), World Precious Minerals Fund (UNWPX) and Global Resources Fund (PSPFX) as a percentage of net assets as of 12/31/2011: BYD Auto 0.00%; General Electric 0.00%. 61

62 Disclosures Investment Objective: The World Precious Minerals Fund is an actively managed fund that focuses on junior and intermediate precious metals exploration companies around the world. The Market Vectors Gold Miners ETF is a passively managed fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index. Liquidity: The World Precious Minerals Fund can be purchased or sold at a net asset value (NAV) determined at the end of each trading day. The Market Vectors Gold Miners ETF 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 World Precious Minerals Fund and the Market Vectors Gold Miners ETF. Shares of both securities are subject to sudden fluctuations in value. Tax features: The World Precious Minerals Fund intends to 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%. The Market Vectors Gold Miners ETF is designed to not generate taxable gains for shareholders. Information provided here is neither tax nor legal advice and is general in nature. Federal and state laws and regulations are subject to change. 62