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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Experts Weigh in on What Investors are Missing in Europe
November 27, 2013

A few months ago, our investment team saw meaningful signs that Europe’s economy was improving. Even though many were fixated on U.S. stocks, we were tracking this emerging strength and suggested to investors that they might want to start looking across the Atlantic.

 

Read Is Europe Ready to Take Off?

 

Our team’s intuition was spot on. From the end of July through the end of October, the Stoxx Europe 600 Index increased almost 12 percent, while the S&P 500 only returned 5 percent.

The trend didn’t go entirely unnoticed. Many investors were smart to allocate to Europe. As you can see in the Bank of America Merrill Lynch chart, in recent weeks, European equities have seen the longest streak of inflows in 11 years.

Rolling 10-Week Flows to European Equity Funds
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However, many of these investors may be missing out on what we think are the best European opportunities to come. Take a look at the most recent data on three countries located east of established Europe. Hungary, Poland and Romania have all experienced recovering GDP growth over 2013.

That’s not the only takeaway. These countries are actually recovering faster than expected, as recent actual GDP blew away analysts’ estimates for growth.


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In a recent webcast, our emerging Europe experts, John Derrick, CFA and Tim Steinle, CFA, pointed to three reasons why emerging Europe could gain significantly:

  1. Sentiment on emerging markets is at a low. Fund managers’ holdings of emerging market equities remain at a low that hasn’t been seen since the early 2000s and again in 2009. Given the catalyst driven by the global synchronized recovery, we believe now is the time to be contrarian on emerging markets.
  1. Among emerging countries, valuations for emerging Europe seem exceptionally attractive. See a valuation ranking chart here.

 

  1. With the strong rebound in Europe’s economy taking place now, emerging Europe stands to benefit. Emerging Europe is economically bound to established Europe through export trade and development funding. It should be only a matter of time for companies in the periphery of Europe to catch up to their Western counterparts.

 

Listen to the webcast replay and download the presentation here.

 

U.S. Global Investors’ Emerging Europe Fund (EUROX) is one way investors can participate in this growth. The fund recently hit its “golden cross,” which is a technical sign that indicates when the short-term 50-day moving average crosses above the longer-term 200-day moving average.

The fund’s “golden cross” has historically been a bullish signal. Prior to this latest “crossing,” since 1998, there have only been 12 times that the 50-day has moved above the 200-day moving average. On average, from the cross above to the cross below, the return has been nearly 26 percent and has lasted an average of 312 calendar days.

Rolling 10-Week Flows to European Equity Funds
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See the fund’s performance.

 

Don’t miss another day: With the wind at your back, now appears the time to allocate to this area of the world. Learn more about investing in emerging Europe.

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.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). 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. 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. The Emerging Europe Fund invests more than 25 percent 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.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Dow Jones STOXX 600 Index is an index of 600 stocks representing large-, mid- and small-capitalization companies in the developed countries of Europe. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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What the End of a Greek Tragedy Means for Investors
October 31, 2013

After six long years, Greece’s economy is finally expected to grow in 2014. GDP expectations of 0.6 percent next year is a remarkable improvement compared to a loss of 4 percent this year. In addition to rising GDP, here are a few other significant changes from Greece lately:

Fiscal Drag Moving Out of Europe
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1. There’s less fiscal drag. According to BCA Research, from 2009 through 2012, the fiscal drag as a percent of Greece’s potential GDP was a considerable -16.4 percent. However, the country’s fiscal situation is expected to be less of a drag over the next few years.

2. The country’s current account situation is improving. Director of Research John Derrick, CFA, talked about Greece on VoiceAmerica last week, explaining that the current account should move from a deficit to a surplus by next year. He thinks it was only a matter of time before the economy naturally corrected itself.

One key reason the current account is improving is because of tourism. According to Reuters, in August alone, the money spent on tourism, which is “the country’s biggest money earner,” climbed about 12 percent on a year-over-year basis. And with the global economy recovering, Americans, Russians, Germans, and Asians have all been eager to soak up the sun on the Greek islands.

3. Greece gaining entry into the MSCI Emerging Markets Index. In November, Greece will be added to the emerging markets index, which means that funds benchmarked to the index will be putting money there.

However, Greece isn’t the only positive story in emerging Europe today. We think investors should look to the east, as Eastern Europe, Russia and Turkey offer meaningful opportunities.

Here are some of the area’s strengths:

  1. Emerging Europe countries offer free flowing currencies, lower taxes, and fewer regulations. They have a more competitive labor force, with lower wages and a more educated staff. All are tremendous advantages for companies located in these countries.
  2. The nations are only at the beginning of their journey to developed status and will likely benefit from a recovery in Western Europe because of their economic ties through establish export trade.
  3. A convergence with developed Europe is also in their future. The integration process in many of these countries is currently underway, with emerging countries in the east working to meet the European Union’s standards that include living standards, GDP, environmental standards, regulatory standards and infrastructure.

Some of these markets are also attractively priced today. According to BCA Research, the valuation ranking of emerging European equities provides these markets with the very vital margin of safety against negative surprises, compared with many other emerging markets.  This suggests that countries including Russia, Hungary, Poland, the Czech Republic and Turkey are poised for a string of outperformance versus other emerging markets.

Central European Markets Are Among the Most Attractive
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Our team believes this string of outperformance is only a matter of time. If you are apt to agree, take a closer look at the Emerging Europe Fund (EUROX).

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.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). 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. 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. The Emerging Europe Fund invests more than 25 percent 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.

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.

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Keeping a Nuanced View of Emerging Markets
September 18, 2013

When it comes to emerging markets, director of research John Derrick has become the “go-to” guy for VoiceAmerica’s “Emerging and Frontier Markets Investing with Gavin Graham.” Over the past couple of weeks, here are a few of the most important topics that John discussed with host Gavin Graham:

VoiceAmerica Logo

Q. As the turmoil in Syria erupted, has there been much impact in emerging markets?

A. I think the biggest impact has been on Russia with higher oil prices. Russia is the biggest beneficiary, at least in the Eastern European and emerging region, and that is due to these higher oil prices along with the knock-on effect it has had throughout the economic unrest in the Middle East.

There is also another big opportunity for Russia as we talk about energy going forward. You’re seeing LNG projects moving forward and you’re seeing pipeline projects moving forward in China as well. Those are big, important steps for Russia to diversify its revenue base.

Director of Research John Derrick was able to see the resiliency of Eastern Europe first hand when he traveled to Prague, Budapest and Krakow to meet with executives.Q. There is news that Western Europe has finally emerged from recession. Has this also happened to markets in Eastern European economies and other emerging and frontier markets?

A. We now have positive growth out of the eurozone. Indicators out of Germany have been better, industrial production has been better and sentiment indicators have also definitely improved. I think a lot of these things take time, but a lot of people are starting to come around to the European-recovery story. And for the region, I think this economic uptick has trickled down to everyone.

The improvement in Europe is broadly positive for emerging markets. If you look at historical relationships between European economic activity, you will see a tighter correlation with emerging market economic activity than you will with that of the U.S. If we can get Europe growing again, that will be a positive dynamic for emerging markets. That helps China for one, which in turn helps a slew of other countries.

Q. Often when we look at emerging and frontier countries, they look like great investment destinations that we want to be in now. Is it possible though, that one of the downsides to an increased interest in emerging and frontier markets is the large number of growth estimates out there, especially with a pretty wide range in some cases?

A. As far as economic forecasts go, there can definitely be wide ranges. We try to focus on what is a likely sustainable trend and whether you have government policies that are going to be supportive of that trend. A good example is China because I know there are a lot of questions about the validity and accuracy of some of its numbers. You need to dig a little deeper than GDP, and really try to verify activity levels.

You need to look at whether government policies are supportive of whatever the estimates are. China is expected to grow 7 or 7.5 percent this year, but it is fairly restrictive on the monetary front and even on the fiscal front as well. There is always risk that it may not actually reach those targets. It’s a nuance type of view that you have to take with a lot of these countries.

Every week, Gavin brings together experienced money managers, journalists and analysts to discuss global events, pinpointing opportunities in the market and expanding investors’ knowledge. If you haven’t had the chance to tune in, the full-length version of all the programs can be found on VoiceAmerica’s website.

Don’t miss these related Frank Talk posts.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.

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Why It’s Hard to Ignore Russia
September 16, 2013

Tim Steinle at a pumping station in VyborgRussian President Vladimir Putin created a stir recently when he shared his thoughts with Americans in an op-ed printed in The New York Times. According to The Times, very few pieces written by heads of state have been published by the paper and very few received the attention Putin attracted.

But will the plea be influential? Will it change President Barack Obama’s or Americans’ opinion on the matter of Syria?

In recent years, Russia’s political stability and rule of law have been called into question, causing many investors to avoid the area. Yet, while Russia is a tough market to love and even easier to hate, the country is hard to ignore, says Tim Steinle, portfolio manager of the Emerging Europe Fund (EUROX).

While I was at Cambridge House’s Toronto Resource Investment Conference talking to investors about gold and resources, Tim was in San Antonio, Texas discussing his perspective on Russia on Canadian Business News Network with host Howard Green, Richard Jenkins from Black Creek Investment Management and John Hsu from John Hsu Capital Group. It was an insightful debate on finding opportunities in the sometimes challenging emerging countries of Russia, China and the Middle East.

Here is a summary of Tim’s perspective on the emerging Europe giant.

Q. A lot of big, sophisticated, institutional investors say it’s not worth the trouble to put your money in Russia. What do you say to them?

Since the Federal Reserve suggested ending its bond purchases, many emerging markets have suffered. Year-to-date through September 12, the MSCI Emerging Markets Index lost about 8.5 percent. Over the same time frame, Russian stocks have declined less than that, about 4 percent.

The Russian ruble also fared relatively well against emerging market currencies, as the country does not depend on external funding. Since the beginning of 2013 through today, the South African rand declined more than 14 percent, the Indian rupee lost 13 percent and the Brazilian real is down 10 percent. Comparably speaking, the Russian ruble looks stable.

Russian Ruble Fared Well Against Other Emerging Market Currencies
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Additionally, over the last 60 days, Brent crude oil increased about 15 percent, and a major oil-producing country such as Russia benefits from higher oil prices.

For these reasons, we believe people are taking another look at Russia.

Q: Novatek, an independent gas producer in Russia, is close to breaking the Gazprom monopoly on the gas export market. Will Gazprom fight that?  

Surprisingly, it hasn’t yet. What’s interesting is that the Russian MICEX Index is heavily populated by oil names, but these companies tend to carry a very heavy tax burden. They are basically all running to stand still, drilling to replace the decline from existing wells while net production remains flat.

The gas market is a different animal. Novatek is Russia’s largest independent gas producer and “one of the best-run global emerging market oil and gas companies,” says UBS. The company has grown its domestic market share in leaps and bounds to the tune of about 20 percent per annum. It has developed smaller fields where Gazprom has not been successful. In the last three years, Novatek doubled reserves and some of those fields were formerly Gazprom fields.

In addition, Novatek is venturing into an inherently profitable LNG project with China located on the Yamal peninsula. According to UBS, the Yamal project might be able to “unlock significant long-term production upside for Novatek, partially liberating it from its dependence on Gazprom’s pipeline network.”

The media has been focusing on China’s deals on an inland pipeline in Siberia with Gazprom, yet there’s a huge discrepancy in price. China wants to pay only $3 per million British Thermal Units (mBtu), but Russians want to charge $12 per mBtu.

While the Chinese want a stake in both areas, as well as some flexibility, Novatek is a clear winner so far. For the first time in Russian history, the Gazprom monopoly will be broken. This is a big deal for an independent company, as it allows Novatek to become “an energy player of genuine global standing,” says UBS.

Q. So, if you put your money in Russia, what about political stability?

A key to investing in Russia is to focus on domestic areas of the market that are profitable and growing. While China’s urbanization gets a lot of attention today, in the case of the Soviet Union, urbanization happened back in the thirties. Russia has a middle class and its GDP per capita is much higher than that in China.

Within domestic markets, one promising company is Mobile TeleSystems, which provides mobile and fixed line voice and data telecommunications services for Russian customers. So far this year, the stock has climbed 16 percent.

Russian internet companies, such as Yandex and Mail.Ru, have also done spectacularly well in 2013, significantly outperforming the overall Russian Index. While overall Russian stocks are down, Yandex, the “Google of Russia,” rose about 60 percent and Mail.Ru increased 20 percent.

Domestic Stocks Yandex MailRU Outperformed Russian Index
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Search engine company Yandex has seen success lately, as it’s been able to defend its 60 percent market share against Google, a fierce global competitor. And Mail.Ru, which is a Russian Internet company focused on social networks and gaming, currently captures about 96 percent of Russian Internet users on a monthly basis, and 74 percent on a daily basis, according to JP Morgan.

In addition, Mail.Ru may likely pay a 10 percent dividend on the proceeds of the Facebook sale, which it had successfully invested in prior to the IPO.

It’s a longer interview, but worth checking out. See the video clip now and then take a closer look at the Russian stocks in the Emerging Europe Fund (EUROX).

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.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). 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. 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. The Emerging Europe Fund invests more than 25 percent 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.

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 MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index was launched on September 22, 1997, base value 100. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange. The Russian Trading Systems Index is a capitalization-weighted index that is calculated in USD. The index is comprised of stocks traded on the Russian Trading System.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Holdings in the Emerging Europe Fund as a percentage of net assets as of 6/30/13: Facebook Inc., 0.00%; Gazprom, 3.06%; Google Inc., 0.00%; Mail.Ru Group Ltd., 2.19%, Mobile TeleSystems, 5.74%; NovaTek, 3.51%; Yandex, 3.50%.

Past performance does not guarantee future results.

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Look for these European Stocks to Exert a Lot of Horsepower
August 30, 2013

The Wall Street Journal recently published an article, “Emerging Europe is a Haven in Selloff,” highlighting the region’s recent success in “rising above the storm” that other developing markets have not been able to avoid.

Dark clouds have been swirling around emerging markets, with the MSCI Emerging Markets Index falling about 12 percent on a year-to-date basis.

We’ve been expecting a bounce in Europe’s emerging markets for some time now. In the Investor Alert a few weeks ago, we talked about how the area has lagged over the past five years. Since July 2008, the MSCI Emerging Market Eastern Europe Index has persistently underperformed the overall emerging market index.

Emerging Europe Lagged Global Emerging Markets Last 5 Years
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This underperformance happened seemingly through no fault of their own. As we’ve discussed, Eastern Europe has been an area of strength, with a rising middle class, low unemployment and a relatively strong economy. Rather, companies in these countries have suffered “guilt by association” due to their proximity to their Western neighbors.

Eastern Europe is very export dependent on developed Europe. More than 80 percent of Czech and Hungarian exports and about 50 percent of Polish and Turkish goods head to Western Europe.

So with economic data in Europe turning positive, many investors including our team are “betting that Western Europe's return to growth after a year-and-a-half-long recession will fuel demand for cars, appliances and other goods manufactured in Eastern Europe,” says the WSJ.

This could be a powerful engine to set emerging Europe on a huge upward trajectory, closing the performance gap and even outperforming its peers.

Additional research suggests stocks in emerging Europe could exert even more horsepower.

According to Bank of America Merrill Lynch, stocks in the European Union area historically outperformed when U.S. interest rates rose. Over the last 40 years during periods of rising rates in the U.S., European stocks took a hit up to six months prior to the Federal Reserve raising rates. However, six and 12 months after the Fed began its rate increases, European equities have taken off.

European Equities Outperformed When Fed Raises Rates
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With the likelihood for rising rates and an improving Europe in our future, this research makes a strong case that emerging European companies will be experiencing a “growth by association.” We believe the Emerging Europe Fund (EUROX) is poised to benefit. Find out why.

Read More about Emerging Europe

 

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.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

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. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.

The Emerging Europe 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.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for their content.

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 MSCI Emerging Markets Eastern European Index (Russia at 30 percent market-cap weighted) is a capitalization-weighted index that monitors the performance of emerging market stocks from all countries that make up the Eastern European Region.

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Net Asset Value
as of 09/25/2017

Global Resources Fund PSPFX $5.78 -0.04 Gold and Precious Metals Fund USERX $8.02 0.06 World Precious Minerals Fund UNWPX $6.69 0.06 China Region Fund USCOX $10.96 -0.46 Emerging Europe Fund EUROX $6.94 -0.06 All American Equity Fund GBTFX $24.34 0.10 Holmes Macro Trends Fund MEGAX $19.99 0.03 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change