More Sunshine, Less Stormy Weather Outlook 2013

Transcription

1 More Sunshine, Less Stormy Weather Outlook 2013 Frank Holmes, CEO and Chief Investment Officer John Derrick, CFA Evan Smith, CFA Brian Hicks, CFA US.FUNDS January 9,

2 Focus on Education 43 MFEA STAR Awards for Excellence in Education 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 2012 Recap Stocks & Commodities 4

5 Follow the Money Quantitative Easing Ignites Market Rallies 5

6 Not Just the Fed: There s Been a Global Easing Cycle 6

7 Implications of Global Easing Policies Higher commodity prices Housing & auto rebound Fund flows into risky assets 7

8 Long Term Bonds Seem Expensive, Overvalued and More Risky than Equities 8

9 Smart Money is Buying, so Follow the Money Goldman Sachs Estimates $200 Billion Flows Into Equities in 2013 $450 billion from corporations in form of buybacks and mergers & acquisitions but net outflows of $475 billion from retail investors 9

10 Great Rotation Back to Equities? Index Estimated 2013 P/E Estimated 2013 Earned Growth PEG Ratio Dividend Yield Morgan Stanley Commodity Related Index (CRX) MSCI Emerging Markets Index % % % % MICEX Index % % S&P 500 Index % % Source: Bloomberg 10

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

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

13 Emerging World Holds 50% of the Global Population, Just 22% of GDP 13

14 Presidential Election Cycle 14

15 Redemptions by Investors from Equity Funds to Bond Funds Appears Excessive 15

16 Follow the Money Equities and Gold Have Outperformed Bonds 16

17 Follow the Money Gold Price Surged With Increase of U.S. Monetary Base 17

18 Follow the Money Global Liquidity Boom Good for Gold and Emerging Markets 18

19 U.S. Presidential Election Year is Traditionally a Weak Year XAU Gold Stock Index 19

20 Managing Expectations But 2013 Should Post Better Comebacks for Gold Stocks? Past performance does not guarantee future results. 20

21 More Sunshine, Less Stormy Weather 21

22 Money Flowing to Asian Emerging Markets 22

23 G7 Easy Money, Inflation in Check 23

24 Good News U.S. Businesses and Households Are Deleveraging 24

25 Consumers Conquering Debt 25

26 Equities Remain Attractive Despite Low Bullish Sentiment 26

27 E7/G7 Emerging Markets Remain Attractive 27

28 E7 Emerging Market Equities Offer Attractive Valuations 28

29 Reasons for Active Management Annual Rotation in Leadership 29

30 Reasons for Active Management Annual Rotation in Leadership 30

31 Reasons for Active Management Oil and Gas Have Different Seasonal Patterns 31

32 Reasons for Active Management Copper and Lumber Have Different Seasonal Patterns 32

33 Reasons for Active Management Gold and Silver Have Different Seasonal Patterns 33

34 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 /investor-resources/publications/research 34

35 Managing Expectations Year-over-Year Rolling Oscillator 35

36 Card Counting Allowed Managing Expectations Anticipate Before You Participate Measuring Monthly Volatility Number of +10% Moves Number of -10% Moves Frequency of ±10% Moves 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 2,550 total occurrences over the past 10 years as of 12/31/

37 Europe s Banks Need More Capital Postponed by Basel III Follow the Money 37

38 Follow the Money Unprecedented Cash Injections from Central Banks 38

39 Bond Flows are Massive Yet Equities Outperform 39

40 Contrarian Commodities Underowned; Fund Flows Slow 40

41 Balances for Softs, Base Metals and Natural Gas Appear Challenged in 2013, However Weather Can Cause Reversals 41

42 Oil Market to Tighten in Second Half of 2013, Call on OPEC to Rise 42

43 Oil Supply Shut-ins Set to Persist into

44 Oil Prices Likely to Remain Volatile 44

45 Fiscal Breakeven Oil Prices for Selected Oil Producer Countries 45

46 Americas to Drive Non-OPEC Oil Supply Growth 46

47 Substantial Opportunity in U.S. Shale Gas Capital Expenditure 47

48 Oil and Gas Well Exploration Increasing Share of U.S. Economy 48

49 U.S. Shale Production Growth Extraordinary Eagle Ford Shale, Texas 49

50 Refining Support 50

51 Chinese Gasoline Demand Looks Strong China 51

52 Natural Gas Consumption Increase 52

53 Construction Steel Stocks Experienced Deeper Drawdown in 2012 Opportunity for Restocking? 53

54 Prices of Spot Iron Ore in China and Shanghai Rebar Futures Have Edged Up on the Back of Better Economic Activity 54

55 China s Iron Ore De-stocking Setting Up for a Strong Start to

56 Improving Copper Consumption in China Should Help Prices Chevy Volt 56

57 Agriculture Commodities Are Resilient to Economic Slowdown 7 Billion People 57

58 U.S. Corn Crop Inventories Historically Low 58

59 Fertilizer Critical to Grain Prices 59

60 Ethanol Demand to Remain Stable 60

61 Economics of a U.S. Corn Producer Support Strong Fertilizer Applications for

62 Beans in the Teens 62

63 Central Banks Remain Net Buyers of Gold 63

64 Uranium Production Not Enough to Meet Long-Term Demand 64

65 Major Price Reversal Good for Employment and Commodity Demand Collateral Stimulation Cars, Appliances 65

66 S&P 500 Index and Shanghai Index Source: Bloomberg 66

67 Price Reversal China s PMI and IP 67

68 Sign Up for Investor Alert Today Subscribe to the weekly, free e-newsletter at usfunds.com/subscribe And for advisors Subscribe to Advisor Alert at usfunds.com/aasubscribe 68

69 U.S. Global Investors is Mobile Get Investor Alert and Frank Talk On the Go Visit /apps 69

70 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. 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. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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. 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 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 Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 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. 70

71 Disclosures The EURO STOXX 50 Index provides a Blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The MICEX Index is the real-time cap-weighted Russian composite index. It comprises the 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. 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 NAHB Housing Market Index is derived from a monthly survey, and gauges builder perceptions of current single-family home sales and sales expectations for the next six months, as well as rating traffic of prospective buyers. Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The S&P Volatility Index (VIX) shows the market s 30-day volatility, and is a widely used measure of market risk. 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. 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. 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. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Holdings in the Global Resources Fund and Global Emerging Markets Fund as a percentage of net assets as of 12/31/2012: ishares Core Total US Bond: 0.00%; Barrick Gold Corp: 0.00%; BHP Billiton Ltd: (Global Resources Fund 2.43%); Newmont Mining Corp: 0.00%; Randgold Resources Ltd: (Global Resources Fund 1.86%); Weyerhauser Co: (Global Resources Fund 2.09%); Whirlpool: 0.00%. 71