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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.

Why Argentina’s New Leader Is Good for Latin America and Global Investors
November 30, 2015

President-elect Mauricio Macri promises to bring market-friendly policies to Argentina.

It might be hard to believe now, but Argentina once ranked among the top 10 wealthiest nations in the world, following the United Kingdom, United States and Australia.

Today, however, it’s one of the most corrupt, according to Transparency International, a group that annually measures public sector corruption around the world. In 2014, Argentina ranked 107, sandwiched between Niger and Djibouti.

That’s largely because for more than half a century, Argentina has been led almost exclusively by the far-left Justicialist Party, based on the political thought of Juan Perón—an admirer of Mussolini—and his wife Evita.

But this week, Argentina said “no, gracias” to further leftist rule when it elected conservative businessman and two-term Buenos Aires mayor Mauricio Macri to succeed Cristina Fernández de Kirchner as president. It was an upset victory for the people of Argentina, who have seen their once-prosperous nation deteriorate under decades of Marxist policies.

It was also a strong win for investors around the globe. Not since Narendra Modi’s election last year has a leader’s entry on the world stage inspired such bullishness.

In the three months leading up to the November 22 election, Argentina’s Merval Index rose 30 percent as optimistic investors anticipated a win by Macri.

Argentina Presidential Election Drove Investor Confidence
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Last week I was in San Francisco speaking at the Silver Summit & Resource Expo, where many fund managers commented that their Argentine holdings had seen huge jumps recently. Many people I spoke with there were bullish on the country.

Latin America Veering Right to Escape Corruption

I join many others in expressing my belief that this change in leadership points to an ideological shift in Latin America and a rejection of the Peronism that has threatened to turn the region into an also-ran economy. I’m confident that once Argentina demonstrates to its neighbors that market-friendly policies stir economic growth and help lead to widespread prosperity, the people of Colombia, Brazil, Venezuela and others will demand similar corruption-free leadership.

Chavez's daughter, Maria Gabriela, is worth an estimated $4.2 billion.

In Venezuela—which is slightly less corrupt than the likes of Yemen, Libya and Iraq, according to Transparency International—the people are still reeling from Hugo Chávez’s disastrous administration. With food shortages and hunger worsening, the government implemented fingerprint scanners in grocery stores last year to limit purchases of basic goods.

This, despite Chávez—a leader who was supposed to be “for the people”—being worth an estimated $2 billion at the time of his death two years ago. It’s believed that he stole much of his wealth from the country’s oil industry. Today, his daughter Maria Gabriela is the wealthiest woman in Venezuela, worth double that.

In August, global intelligence company Stratfor conducted an analysis of satellite imagery taken of Puerto Cabello, Venezuela’s main port of entry for imports, between February 2012 and June 2015. The visible reduction in food container traffic is alarming.

Meanwhile, in Peru, First Lady Nadine Heredia is being investigated for money laundering and the usurpation of public functions. When I was in country earlier this month speaking at the Mining & Investment Latin America Summit, there was a lot of discussion on rule of law and corruption in Peru and surrounding South American countries. It’s estimated that stolen public money in Peru adds up to about 2 percent of GDP annually.

Latin Americans are increasingly saying enough is enough.

“What happened in Argentina was the first change in Latin America,” said former Brazil finance minister Maílson da Nóbrega, speaking to the Wall Street Journal. “It may be the start of a downfall in populist governments. I think the next one should be Venezuela. And I think Brazil will follow suit in 2018.”

Brazil President Dilma Rousseff, who won reelection last year, currently has an approval rating in the single digits. As I shared with you last month, her Marxist policies have suffocated business development. The country tumbled 18 points this year in the annual Global Competitiveness Index (GCI) and is now considered to be one of the worst in terms of burdensome government regulations and unethical business practices. The people of Brazil deserve better.

This is part of the reason why I believe active management is so important. When I travel around the world and talk to different people, I obtain and return with tacit knowledge that can’t be found by simply reading Bloomberg.

Macri Bucks the Trend

In this troubling context, Mauricio Macri is a breath of fresh air. He’s not what most people envision when they’re asked to describe the stereotypical South American leader. Unlike Fidel Castro, Chávez, Rousseff and others, Macri never served as a Marxist guerilla in his youth. There are no pictures of him posing heroically in a steaming jungle, attired in military garb like fellow Argentine Che Guevara. Macri’s more likely to be found playing a friendly game of soccer than delivering a rousing hours-long speech from a balcony. By most accounts, he’s contemplative and soft-spoken.

But change is precisely what Argentina needs now. For the last 12 years, former President Néstor Kirchner and, following his death, wife Cristina managed only to cripple the country’s economy even further. The size of the state doubled in the last 10 years alone. Entire industries were nationalized, taxing and spending skyrocketed, foreign investment fled and inflation exploded at an average pace of 20 percent a year.

20 Years of Wild Inflation: Argentina vs. the United States
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Under these conditions, holding gold in Argentina pesos has been a good bet for investors.

Price of Gold Per Ounce in Argentina Pesos
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Realistic or not, Macri has vowed to roll back many policies from previous administrations. He also plans to cultivate a warmer business climate with Brazil, Argentina’s top trading partner, and staunch the outflow of foreign capital. Last year, $2 billion left the country, a 75 percent increase from 2013, according to the Organization for Economic Cooperation and Development (OECD).

Which is a shame. Argentina has a huge amount of untapped potential—a highly educated population, the fastest-growing middle class in Latin America and an abundance of natural resources.

Here’s hoping Macri’s administration can succeed at fostering a more welcome environment for business, one that might benefit the Argentine people and global investors alike.

From Pump to Plate: Low Fuel Costs Help Americans Spend Less on Thanksgiving Dinner

Argentina Presidential Election Drove Investor Confidence

As Argentina is facing steep inflation, American consumers today are spending a little less on essentials such as food—more specifically, Thanksgiving dinner.

According to the Texas Farm Bureau’s Thanksgiving Meal Report, a typical spread of turkey, stuffing, sweet potatoes, cranberry sauce and more cost $46.48 this year, down 31 cents from 2014.

(The one Thanksgiving staple we spent more on this year was pecans. They’re up 11 percent as China’s appetite for the nut has increased.)

The reason for the savings? Lower fuel and grain prices. As a whole, grains are down about 11.5 percent from a year ago, while crude oil is off more than 36 percent. According to AAA’s Fuel Gauge Report, gas averages $2.05 per gallon right now, a 27 percent decline from this time last year.

As I’ve been saying since last December, this “oil peace dividend” is helping us save not only at the gas pump but also the grocery store and elsewhere.

Additionally, AAA estimates that 46.9 million Americans travelled 50 or more miles this Thanksgiving holiday, the highest travel volume since 2007. Because of lower fuel costs, more Americans evidently felt as if they could afford to travel longer distances to visit Grandma and Grandpa. A spokesman for AAA says that motorists are currently saving about $11 on every full tank of gas compared to this time last year.

What Is Janet Yellen Thinking?

Speaking of saving, Americans are saving at the highest levels since 2012. At the same time, personal spending is slowing GDP growth.

That’s according to a new report by investment advisor Strategic International Securities (SIS), which writes that it believes a rate hike next month is unlikely.

“The Federal Reserve needs to keep real interest rates at zero to set the equilibrium between the demand and supply for money in the economy,” SIS strategist Philip L. Miller says. “This further implies in order to keep investment where it is already making up for nearly 30 percent in the trend GDP shortfall, the Fed believes it needs to keep real rates at zero to sustain the current anemic levels of private investment or they may falter even more.”

In addition, BCA Research reports that the Fed is no closer to achieving its key 2 percent inflation goal than it was at the beginning of the year. Inflation expectations, in fact, are shifting down. The Fed’s preferred measure of inflation, core PCE, has remained stuck at 1.3 percent all year.

We won’t know what Yellen’s thinking until December 15, but whether or not she decides to raise rates, it might be a good time to consider tax-free, short-term municipal bonds. Shorter-term, quality munis are less sensitive to rate increase than longer-term bonds that are locked into rates for greater periods of time.

Past performance does not guarantee future results.

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(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The MERVAL Index is the most important index of the Buenos Aires Stock Exchange. It is a price-weighted index, calculated as the market value of a portfolio of stocks selected based on their market share, number of transactions and quotation price. The Mexican IPC index (Indice de Precios y Cotizaciones) is a capitalization weighted index of the leading stocks traded on the Mexican Stock Exchange. The Santiago Stock Exchange IPSA Index is a total return index and is composed of the 40 stocks with the highest average annual trading volume in the Santiago Stock Exchange (Bolsa de Comercio de Santiago). The index has been calculated since 1977 and is revised on a quarterly basis. The Bovespa Index is an index of about 50 stocks that are traded on the São Paulo Stock, Mercantile & Futures Exchange. It is composed by a theoretical portfolio with the stocks that accounted for 80% of the volume traded in the last 12 months and that were traded at least on 80% of the trading days. It's revised quarterly, in order to keep its representativeness of the volume traded and in average the components of Ibovespa represent 70% of the all the stock value traded.

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What We’re Paying Attention to Following the Paris Attacks
November 23, 2015

Ten days ago, 129 lives were brutally cut short when assailants affiliated with the terrorist group ISIS, also known as the Islamic State, stormed Paris in a series of coordinated attacks. Along with the rest of the world, we were shocked and saddened as the tragic news unfolded, worsening as the night progressed. Our thoughts are with the victims’ families and friends.

For us, the atrocity struck especially close to home, as one of our portfolio managers, Xian Liang, was in the city at the time of the attacks. We’re extremely grateful he and his wife returned home safe and sound. I wish the same could be said for the victims in Paris that day, the 224 on the Russian jet brought down by an ISIS-built bomb, the hostages in Mali Friday, and many others whose lives have been affected by the global scourge of terrorism.

We Take Our Role as Fiduciaries Seriously

As money managers, it’s our duty and responsibility to be cognizant of such geopolitical events—large and small, good and bad—and to consider all of the possible ramifications. The consequences often reach far and wide, and can be felt in the short-term (changes in investor confidence) as well as the long-term (changes in government policy).

Early last year, for instance, we were quick to adjust asset allocations when Russia invaded and annexed Crimea. We anticipated that sanctions would be imposed on the country, and indeed they were, by the U.S., European Union, Australia and other international organizations. These sanctions, coupled with falling oil prices, contributed to the Russian ruble’s dramatic breakdown.

Diesel, the seven-year-old belgian shepherd who was killed recently during a French SWAT raid

Against these challenges, I’m impressed by how strongly Russian stocks have performed lately. Last Tuesday, the Micex Index jumped to an eight-month high in ruble terms. This is especially interesting since both Brent oil and the ruble are way down. It suggests that investors are showing approval of President Vladimir Putin’s involvement in Syria.

Putin is also benefiting from a strong public relations push. The Daily Mail writes: “Russia has shown its solidarity with the people of France in an unusual way—by donating a new puppy to carry on the memory of Diesel, the police dog killed by a suicide bomber.”

It should come as a surprise to no one that, following the tragedy in Paris, defense spending will likely increase. French President François Hollande has already told Parliament that France is at war and will “be merciless” in its pursuit of justice. The country wasted no time in striking back against ISIS and has begun bombing raids in Syria.

As early as last Monday, stocks of companies that manufacture weapons and fighter jets traded up.

War Stocks Rally Following Attacks in Paris
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We own Lockheed Martin, manufacturer of the F-35, F-22 and F-16 fighters; Boeing, manufacturer of the Tomahawk cruise missile, F-18 fighter and more; and Northrop Grumman, which was recently awarded the contract to build America’s next generation of long-range strike bombers. Raytheon develops and manufactures guided missiles.

The U.S. Navy plans to buy more Boeing F/A-18E/F Super Hornets in the coming years.

International Travel to Be Hit

Understandably so, the terrorist attacks will have an impact on international travel, immigration and border security. France immediately tightened its borders, and other European countries quickly followed suit. Meanwhile, Poland’s newly-elected government rejected the European Union’s quotas for accepting refugees from Syria, an attitude that’s echoed by more than 30 U.S. states. The House of Representatives just passed legislation to suspend the admittance of 10,000 Syrian refugees, though it’s likely to be vetoed.

This is the climate we find ourselves in right now. It has a huge effect, at least in the near-term, on perceptions of international travel.

“Most people are risk-averse,” Xian says. “When my wife and I left for the airport by taxi the morning after the Paris attacks, we agreed not to travel to Europe again any time soon.”

Others share Xian’s attitude. Paris has for years been the world’s top tourist destination, but the City of Lights has already seen a huge drop-off in tourists as people have delayed or cancelled travel plans. Hotel stocks were up 10 percent in October but will likely face headwinds as a result of Paris and Mali.

Gold, Diamond and Oil Declines Good for Manufacturers

Xian stresses the importance of having gold exposure as diversification. A good diversifier is any investment that’s expected to have a low correlation with the rest of your portfolio, and gold historically has little to no correlation with equities.

The yellow metal has traditionally been seen as a safe haven in times of war, but so far we’ve seen little movement. Year-to-date, gold is down nearly 9 percent, and it could possibly end 2015 in negative territory for the third straight year.

Even so, the yellow metal has performed better than other select world currencies for the year, including the Russian ruble (-10 percent), Australian dollar (-11 percent), euro (-12 percent) and Canadian dollar (-13 percent).

Gold and Diamonds Follow the Same Downtrend
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Diamonds have likewise struggled over the past four years, but with the recent news that Canadian miner Lucara discovered the largest diamond in 100 years, investors might show renewed interest. The massive 1,111-carat diamond was unearthed in Lucara’s Botswana project. Although the stone has yet to be assessed, it’s worth noting for comparison that a 100-carat diamond sold at Sotheby’s in April for $22 million.   

Gold and Diamonds Follow the Same Downward Trend
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These declines over the past three and four years have been good for jewelry companies such as Tiffany, which I wrote about last December. Gold and diamond supply is now less expensive, so the company has margin expansion.

The same can be said of oil. Low prices have hurt South Texas, the Middle East, Russia and Colombia, not to mention drillers and explorers, but they’ve been a windfall for the end consumer, including manufacturers and airlines. Falling energy prices are finding their way into the global engine of growth.

$500 Billion Peace Dividend for Global Consumers and Businesses
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Many analysts expect to see crude oil prices tick up on mounting tension in the Middle East. During past military engagements, oil has typically performed well since a lot is required to fight a war. We haven’t seen prices move just yet—oil still sits at $40 per barrel—but it’s something we’ll monitor closely. As I said earlier this month, the global purchasing managers’ index (PMI) turned up in October after bottoming in September, and in the past this has been followed by a jump in oil prices.

Oil Trends Typically Drive by Global Economic Activity
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Inflation Rousing from Sleep

We learned this week that the consumer price index (CPI) rose 0.2 percent in October, suggesting that inflation is finally picking up steam in the U.S. and giving the Federal Reserve further excuses to raise rates next month.

Based on the 2-year Treasury yield (0.89 percent) and the headline CPI (0.20 percent), real rates now stand at 0.69 percent. (Real interest rates are what you get when you subtract the CPI from the Federal funds rate.) I’ve often explained that gold responds positively when real rates turn negative, as you can clearly see in the chart below, so we’re eagerly awaiting stronger inflation.

Real Interest Rates and Gold Share an Inverse Relationship
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In a note this week, Drew Matus, an economist at UBS, wrote that inflation in the U.S. is poised to jump in the next couple of months. The CPI measures the price of a basket of goods to the price of the same goods a year ago, so inflation fell dramatically between November 2014 and January 2015 as energy prices plunged.

But “absent a similar move this year, those sharp price declines will drop out of the year-over-year data, resulting in a rapid, technical acceleration in overall inflation measure,” Matus says.

If such inflation occurs—possibly as soon as January or February, Matus points out—real rates could have a better chance of dipping into negative territory, which would be constructive for gold prices.

Thanksgiving is this week, and in light of recent events, I think we all have ample reason to express gratitude to friends and loved ones. Everyone have a blessed week!  

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(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 9/30/2015: Lockheed Martin Corp., The Boeing Co., Northrop Grumman Corp., Lucara Diamond Corp.

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 J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

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Will Gold Finish 2015 with a Gain?
October 19, 2015

Gold-Ready-For-His-Closeup

After its stellar performance last week, gold might do something it hasn’t done since 2012—that is, end the year in positive territory. You can see past returns for yourself in our perennially popular Periodic Table of Commodities Return.

Responding to a weaker U.S. dollar, continued contraction in global growth and wide speculation that interest rates will stay near-zero for the remainder of the year, the yellow metal broke above its 200-day moving average and is close to erasing its 2015 losses.

gold-breaks-above-its-200-day-moving-average
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This could be the price reversal many gold bulls have been expecting.

Back in August I shared with you that legendary hedge fund manager Stanley Druckenmiller, who’s made some mythic calls over his long career, invested $323 million of his own money in gold, now the largest position in his family funds. Although such a large weighting isn’t appropriate for all investors—I’ve always recommended 10 percent in gold: 5 percent in gold stocks, 5 percent in bullion—it looks as if Druckenmiller made another good call.

The big news last week was that Walmart took a massive hit after the retail giant said it expected a profit slump in 2016. Walmart investors lost a whopping $24 billion—$21 billion on Wednesday alone. While this news dominated the headlines, it’s important to recognize that the total amount of net assets in the SPDR Gold Trust, the world’s largest gold-backed ETF, is just slightly more than Walmart’s one-week loss.

in-one-week-walmart-shares-lose-nearly-as-much-as-GLD-total-net-assets

“Death” of the Dollar?

It’s no mere coincidence that gold’s breakout coincides with the weakening of the U.S. dollar last week. The greenback signaled what’s known as a “death cross,” just in time for Halloween. Widely recognized as the start of a bearish trend, a death cross occurs when the 50-day moving average crosses below the 200-day.

This hasn’t happened since September 2013.

US-dollar-experiences-a-death-cross
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As ominous as this sounds, it’s good news for gold and other metals and commodities, not to mention emerging markets and American exports. For the past year, the strong dollar has crushed these assets, something I write and speak about frequently. If the death cross does indeed indicate the start of a downward trend, gold might have the breathing room it needs to reach the important $1,200 resistance level.

Our China Region Fund (USCOX) and Emerging Europe Fund (EUROX) have responded well to the dollar’s drop, both of them crossing above their 50-day moving averages.

China-Region-Fund-USCOX-Crossed-above-50-Day-Moving-Average
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Emerging-Europe-Fund-EUROX-Crossed-above-50-Day-Moving-Average
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When we factor in the Love Trade, gold has even further upside potential. In India, the world’s largest consumer of the precious metal, the annual wedding and fall festival season has officially begun, which has historically triggered a spike in demand. This period is followed by Christmas and the Chinese New Year in February, when gold prices have surged, based on the shorter-term, five-year pattern.

Gold-seasonality
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Russian Air Strikes Ignite the Fear Trade

Gold has also likely benefited in the short term by the Fear Trade, specifically global geopolitical events such as Russia’s involvement in Syria. We should never welcome war, but the truth is that political turmoil very often has had a positive effect on commodity prices and currencies. Both the Russian ruble and Brent oil are currently above their 50-day moving averages.

the-russian-ruble-and-brent-oil-are-above-their-50-day-moving-averages
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In a recent piece titled “The New Cold War Battlefield… and How It Will Affect Oil Prices,” Dr. Kent Moors, global energy strategist for “Oil & Energy Investor,” writes that what happens in the Middle East has “always had a rather direct impact on energy prices and the prospects for investing in the sector.”

Syrian-president-Basher-al-Assad-shaking-hands-with-Russian-president-Vladimir-Putin

The difference today, Moors says, is that Syria “is a rising power vacuum right smack in the middle of the largest concentration of global crude production.”

This is a theme that’s explored in even further detail in my friend Marin Katusa’s bestselling book, “The Colder War: How the Global Energy Trade Slipped from America’s Gasp.”

Speaking of Marin, his Katusa Research and Cambridge House International will be co-producing the Silver Summit and Resource Expo in San Francisco November 23 and 24. I’ll be giving the opening keynote address. If you’d like to attend the conference as my guest, send me an email for a complimentary registration.

Real Interest Rates, Real Impact on Gold

The Fear Trade also includes monetary and fiscal policies such as money supply and real interest rates. As opposed to geopolitical events, which might have an immediate effect on gold, these drivers can have a long-term influence.

As a reminder, real interest rates are what you get when you deduct the rate of inflation from the 10-year Treasury yield. For example, if Treasury yields were at 2 percent and inflation was also at 2 percent, you wouldn’t really be earning anything. But if inflation was at 3 percent, you’d be experiencing a negative real rate.

When gold hit its all-time high of $1,900 per ounce in August 2011, real interest rates were sitting at -3 percent. In other words, if you bought the 10-year, you essentially lost 3 percent a year on your “safe” Treasury investment. Since gold doesn’t cost anything to hold, it became more attractive and the metal’s price soared.

Today, the U.S. has virtually no inflation, so real interest rates are at 2 percent, a swing of 500 basis points since August 2011. This has lately had a negative effect on gold, which means it’s even more remarkable that the precious metal has broken above its 200-day moving average.

Our office was visited last week by Barry Bannister, CFA, the chief equity strategist for investment firm Stifel, who gave us buckets of useful macroeconomic research, much of which validated what we’ve been saying for a long time regarding the relationship between the price of gold and real interest rates.

Barry made the case that real interest rates are even higher than we realize. He argued that the reason the Federal Reserve hasn’t allowed rates to lift off yet is because—you might want to sit down for this—it already has, in an “invisible” interest rate hike of 4 percent. Quantitative easing (QE), Barry said, was “negative” interest rates, and that “economic recovery and time ‘raised’ rates to 0 percent, a de facto rate hike.”

Gold’s rally last week occurred in spite of this “invisible” rate hike.

Active Management on Top

Even with gold prices off around 38 percent since the August 2011 high, our Gold and Precious Metals Fund (USERX) has done well, outperforming the Market Vectors Gold Miners ETF (GDX) and PowerShares Global Gold & Precious Metals ETF (PSAU).

active-management-on-top-USERX-vs-gold-ETF-peers
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Speaking to Investor’s Business Daily, portfolio manager Ralph Aldis pointed out that one of the reasons why our fund has outperformed is because we’re able to apply our tacit knowledge of company executives and management teams, as well as anticipate and act on political risks in countries we invest in. This is a skill (and benefit) that only active management can provide.

Both the GDX and the PSAU are strictly market capitalization-weighted, so they might miss out on unexpected “success stories.”

“They end up owning the biggest companies, which because of their size have difficulty growing,” Ralph told IBD.

Klondex Mines is one such success story. It’s the fund’s top weighting, at 17 percent—and yet because of its market-cap, it isn’t included at all in the two ETFs.

As Ralph told The Gold Report last week, “I want to own companies where management can increase the value proposition,” regardless of gold prices.

To end, I’d like to congratulate the U.S. Global communications team for receiving five STAR awards from the Mutual Fund Education Alliance Thursday night for excellence in investor education. Please help me applaud the team’s efforts and your commitment to being a curious and informed investor by sharing our award-winning communications with your friends, family and colleagues.

Thanks you for being a subscriber to our award-winning communications!

P.S. It’s with sadness to inform you of the passing of Raymond Edward “Ed” Flood. Ed spent his whole life and career in the mining industry, serving most recently as the CEO of Concordia Resource Corp. Back in the mid-1990s, he was the founding president of Ivanhoe Mines, today a massive producer of copper, gold and other metals that operates mostly in southern Africa.  We were early investors in Ivanhoe.

My path crossed with Ed’s many times over the years, and I came to know him as not only a talented money manager but also an exceptional human being. I join everyone else who knew him, both personally and professionally, when I say that he’ll be sorely missed.

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.

 

 

Past performance does not guarantee future results.

 

 

Total Annualized Returns as of 9/30/2015:
Fund Year to Date One-Year Five-Year Ten-Year Gross Expense Ratio Expense Cap
Emerging Europe Fund (EUROX) 17.84% -26.10% -10.43% -4.65% 2.29% N/A
China Region Fund (USCOX) -11.46% -6.68% -4.78% 2.53% 2.97% 2.55%
Gold and Precious Metals Fund (USERX) -6.98% -21.82% -20.11% -1.79% 1.97% 1.90%
Market Vectors Gold Miners ETF (GDX) -25.39% -35.31% -23.97% N/A 0.53% N/A
SPDR Gold Shares ETF (GLD) -7.39% -8.79% -3.53% N/A 0.40% N/A
PowerShares Global Gold & Precious Metals Portfolio ETF (PSAU) -26.26% -34.84% -22.62% N/A 0.75% N/A

Expense ratios as stated in the most recent prospectus. The expense cap is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, extraordinary expenses, taxes, brokerage commissions and interest) that U.S. Global Investors, Inc. can modify or terminate at any time, which may lower a fund’s yield or return. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees of 0.05%) which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

For information regarding the investment objectives, strategies, liquidity, risks, expenses and fees of the Market Vectors Gold Miners ETF, SPDR Gold Shares ETF, or the Powershares Global Gold & Precious Metals Portfolio please refer to those funds’ prospectuses.

Investment Objective: The Gold and Precious Metals Fund is an actively managed mutual fund that focuses on gold and precious metals producing companies. 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. The investment objective of the SPDR Gold Trust is for the shares to reflect the performance of the price of gold bullion, less the expenses of the Trust’s operations. The PowerShares Global Gold & Precious Metals ETF is a passively managed fund that seeks to replicate as closely as possible, before fees and expense, the price and yield performance of the NASDAQ OMX Global Gold and Precious Metals Index.

Liquidity: The Gold and Precious Metals 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, SPDR Gold Shares ETF and Powershares Global Gold & Precious Metals Portfolio 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 Gold and Precious Metals Fund, the Market Vectors Gold Miners ETF, the SPDR Gold Shares ETF and the Powershares Global Gold & Precious Metals Portfolio. Shares of all of these securities are subject to sudden fluctuations in value.

Tax features: The Gold and Precious Metals Fund may make distributions that may be taxed as ordinary income or capital gains. Mutual funds are pass-through entities, so the shareholder is responsible for taxes due on distributions.

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Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the China Region Fund, Emerging Europe Fund and Gold and Precious Metals Fund as a percentage of net assets as of 9/30/2015: Wal-Mart Stores Inc. 0.00%, SPDR Gold Shares ETF 0.00%, Market Vectors Gold Miners ETF 0.00%, PowerShares Global Gold & Precious Metals Portfolio ETF 0.00%, Klondex Mines Ltd. in Gold and Precious Metals Fund 16.91%, Concordia Resource Corp. 0.00%, Ivanhoe Mines Ltd. 0.00%.

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(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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How these 12 TPP Nations Could Forever Change Global Growth
October 12, 2015

Historic. Landmark. Groundbreaking. Revolutionary.

These are among many of the words that have been used lately to describe the Trans-Pacific Partnership (TPP) trade pact, which was finally signed in Atlanta last Monday by 12 participating Pacific Rim nations.

The current members include Canada, the United States, Mexico, Peru, Chile, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.

runners on the starting line

After nearly seven years of negotiations, the TPP promises to deliver unprecedented free and fair global trade among the 12 participant nations.

Once ratified by each country’s congress or parliament—which is likely to happen in early 2016—the accord will become the most significant, most economically-impactful trade deal in history. As many as 18,000 tariffs are expected to be eliminated. It will remove barriers to foreign investment, streamline customs procedures and create an international investor-state dispute settlement (ISDS) system, among much more.

Global Purchasing Managers' Index Continues to Deteriorate
click to enlarge

The Peterson Institute for International Economics, a Washington, D.C.-based think tank, predicts that the resultant savings could boost the world economy by an incredible $223 billion by 2025.

Today, the 12 members control more than a quarter of all global trade, representing close to $10 trillion. But it’s estimated that once the TPP goes live, the trade percentage could climb to as high as 50 percent, according to CLSA.

The trade pact couldn’t have come at a better time. Global growth is slowing, and mounting tariffs threaten to suffocate trade. Even though the TPP’s full implementation is months and, in some cases, years away, it’s encouraging to know that positive change is on its way.

Having said that, no one knows the full details yet and it might be a while before we can see the official documents. When that time comes, we’ll analyze the deal to see which countries, industries and sectors stand to benefit the most. And of course the pact has already become the subject of criticism, targeted specifically at how it handles pharmaceuticals and intellectual property.

All in all, however, the world has needed such an agreement for years now to bring unilateral trade liberalization into the 21st century.

China Misses First-Mover Advantage but Isn’t out of the Race

The most notable player missing-in-action is China, and to a lesser extent Korea, both of which have taken a “wait and see” attitude. That will likely change in the coming years. China sat this round out because the trade deal would have imposed several stringent economic, labor and environmental conditions on the Asian giant, as it does on all TPP nations.

a penny-farthing economy o a precarious ride: governments must learn to balance monetary and fiscal policies to remain competitive globally

But China and Korea will doubtlessly have little choice but to join the team once they see the enormous benefits enjoyed by participating countries. China’s southern neighbor Vietnam, for instance, is expected to see a huge 10 percent boost in its GDP by 2025—twice as much as any other Asian market—according to Credit Suisse. Malaysia, a 5 percent boost.

The business relationship between the U.S. and China—the world’s two largest economies—grows stronger every day, and China doesn’t want to see its competitive edge dulled by other Asian countries that chose to be members of the TPP.

Here in Texas, where a lot of public signage is written in both English and Spanish, I’m starting to see more and more Mandarin, an indicator that U.S.-China relations are strengthening. The picture of the ad, which I took at the San Marcos Premium Outlets mall just north of San Antonio, is clearly targeted to Chinese tourists. It’s an ad for China Merchants Bank and reads: “In America, use Merchants Bank credit card! Very American!”

 

Vietnam Will See the Biggest Long-Term Economic Benefits

“Very American,” indeed. To be clear, the real winner in the formation of the TPP is the U.S., for whom the deal is as much about geopolitics as it is about trade. In a briefing this week, the National Bank of Canada writes that the TPP “would allow the United States to take the lead in setting the rules of commerce for about 40 percent of the global economy.”

But as I said, Vietnam is poised to see the biggest upside potential as a result of the deal. The Southeast Asian country is a large manufacturer and exporter of textiles, apparel and footwear, all of which the U.S. currently imposes a very high 17 percent duty on. That’s set to disappear, saving the country billions. Because foreign investment in Vietnam is expected to accelerate under the deal, banks, consumer goods and construction are also set to benefit.

Global Purchasing Managers' Index Continues to Deteriorate
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Malaysia is another country that stands to see sweeping changes. Right now the country doesn’t have a trade agreement with the U.S., Canada, Mexico or Peru. Once the deal is ratified and implemented, Malaysia’s vital palm oil, rubber, plywood, electronics, textile and automotive parts industries will be open for business to some of the world’s largest economies.

As for Japan, its all-important, $538 billion auto industry will receive a huge shot in the arm. Consultancy firm Eurasia Group estimates that the TPP could help add $105 billion to Japan’s GDP by 2025.

Say It with Me: Government Policy Is a Precursor to Change

Not only is the Trans-Pacific Partnership great for global trade but it also promises to help bring fiscal and monetary policies into balance. The deal is a welcome and much-needed development from a fiscal perspective, one that we haven’t seen from world governments in more than a generation. Lately, everything’s been about monetary policy—specifically quantitative easing and currency manipulation—to stimulate growth.  A reduction in taxes, tariffs and regulation also promotes growth.

Top 10 Most Competitive Countries, According to the World Economic Forum
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Here at U.S. Global Investors, we often say it’s the policy, not the party, that really matters. Republicans, Democrats and Independents alike are all capable of effecting change that can both move the U.S. forward as well as set it back.

On President Barack Obama’s watch, many new restrictive rules and regulations have been enacted in the U.S. that clog up the flow of capital like cholesterol and hinder business growth and innovation. I’ve written and spoken about these policies on many occasions.

At the same time, we must acknowledge that he’s been one of the most fervent champions for the creation of the TPP, even going so far as to stand up against several prominent members of his own party. I’m certain that in the decades to come, the TPP will emerge as the Obama administration’s crowning foreign policy achievement.

What the Influencers Are Saying

I’d like to end by sharing some compelling comments on the TPP by key policymakers, business leaders and economists. Their optimism should convince anyone that the TPP, once ratified, could end up being the best thing to happen to global trade in at least a generation.

To my Canadian friends and readers, I wish you a happy and blessed Canadian Thanksgiving!

Malaysia currently puts a 30 percent tax on American auto parts. Vietnam puts a tax of as much as 70 percent on every car American automakers sell in Vietnam. Under this agreement, all those foreign taxes will fall. Most of them will fall to zero. So we are knocking down barriers that are currently preventing American businesses from selling in these countries and are preventing American workers from benefiting from those sales to the fastest-growing, most dynamic region in the world.

U.S. President Barack Obama

This agreement in my view is truly transformational. To have one set of rules for 12 destinations is going to turbo charge regional supply chains and global supply chains and reduce costs.

Australia Minister for Trade and Investment Andrew Robb

Free-trade agreements create new opportunities for American companies and their workers. I thank the United States Trade Representative and fellow trade negotiators for their commitment to finalizing this agreement. U.S. companies need to be able to compete and win in global markets to support well-paying jobs at home. It’s critical we provide our manufacturers and exporters with the best tools to compete on a level-playing field in markets worldwide.

Boeing President and CEO Dennis Muilenburg

In many parts of the world, food and agricultural products still face the legacy of high import barriers. We believe the Trans-Pacific Partnership will allow food to move more freely across borders from places of plenty to places of need, which benefits farmers and consumers around the world.

Cargill Chairman and CEO David MacLennan

 

Canada’s mining industry has been a strong advocate for liberalized trade and investment flows for many years. NAFTA, free trade agreements with Chile, Peru, Colombia and other countries in Latin America, Africa and Asia have all helped to increase Canadian exports and investment, supporting jobs for Canadians here and abroad. TPP, representing such a massive trade block, including critical emerging markets, is a trading partnership Canada must not risk being left out of.

Mining Association of Canada President and CEO Pierre Gratton

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 9/30/2015: The Boeing Co.

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How Will These Leaders of 4 Billion People Change the World?
September 28, 2015

Last week the U.S. played host to three prominent and illustrious leaders to billions of people: Chinese President Xi Jinping, Indian Prime Minister Narendra Modi and Pope Francis. Among them, they lead—either politically or spiritually—nearly 4 billion people worldwide, more than half of everyone living on the planet right now.

Shanghai Gold Exchange Withdrawals As Of August

The effect of their visits cannot be overstated. I was attending an ETF conference in New York City, where the arrival of the populist Francis, hugely popular and revered among more than just Catholics for his humility and inclusiveness, brought the already-clogged city streets to a veritable standstill. So stacked were the cars and trucks as a result of Pope Mania that I was forced to cancel scheduled interviews on CNBC and Bloomberg. New York Police Department Commissioner Bill Bratton said that the pontiff’s arrival in the Big Apple during the United Nations General Assembly—when 90 percent of the world leaders were in the city at the same time—was the largest security challenge the department and city had ever faced.

I have immense respect for his Holy One. He embraces change, both within the Vatican and globally, and for the Jesuit tradition of education and ministry.

For many people, including me, Pope Francis is a thought-provoking figure. In his speech to the United Nations last week, he said that economic progress can be achieved through “the legitimate redistribution of economic benefits by the state.” I question his economic logic while admiring his caring heart and good intentions. Far-reaching progress can best be achieved through development, not redistribution. The secular proverb “Give a man a fish and he’ll eat for a day, but teach him to fish and he’ll eat for a lifetime” comes to my mind.

Certainly the pontiff’s aspiration to feed the world is honorable, but the people who take the risk to plant the seeds and work hard to harvest the crops are not to blame for the hungers that exist. America is the most charitable nation on earth and our focus for increasing prosperity should be on helping people to fish and farm for a lifetime of financial independence.

Perhaps not as wildly anticipated, but no less important, were stateside visits from the heads of the second- and seventh-largest economies in the world, China and India.

Mr. Xi: Trust Me, All’s Well

In his first stateside visit, President Xi Jinping addressed approximately 700 American businesspeople in Seattle last week, during which he, according to Foreign Policy magazine, touched on “the usual promises to stay the course on market reforms, the insistence of China’s status as a developing country” and “the plea for mutual ‘deep’ cultural understanding,” among other promises.

Mr. Xi also reassured his audience to worry not about the Chinese stock market, which I’ve written frequently about. He defended the intervention his government has made, arguing that the government has stabilized further deterioration and contained investor panic. 

Likewise, he pledged to work with the U.S. to curb additional cybersecurity breaches such as the kind that struck Sony Pictures back in November 2014.

American Business Leaders Expect Massive Growth in India

Last week marked Indian Prime Minister Narendra Modi’s second visit to the U.S., the first time being in October 2014 when he spoke at Madison Square Gardens in a rousing, rock-star reception.

As is the case with most politicians from whom much is expected, Modi’s star has dulled somewhat since then. Many business leaders are starting to grow impatient about the slowness of his government’s ability to eliminate investment hurdles.

But the promise he brings of a modern India, with electricity and Internet access for all 1.2 billion Indians, still remains more than just a dream.

U.S. business leaders seek to capitalize on this growth.

Janet Yellen Interest Rate Liftoff Delayed Again

Let’s be clear, though: India still has a lot of catching up to do. Morgan Stanley estimates that the country is at least seven years behind China when it comes to Internet penetration and online shopping. In 2014, India had about 243 million active Internet users, or about 19 percent of its population. In the same year, China had some 641 million users, or nearly half of its population, according to Internet Live Stats.

Quite contradictorily, though, Facebook users in India have skyrocketed to 100 million active monthly accounts, which represent a larger presence on the social media platform than in the U.S, according to Tech2. This means there’s huge upside indeed.

Modi: Tech-in-Chief

Narendra Modi is one of the most tech-savvy world leaders, a characteristic he wants to encourage his fellow Indians to embrace. He’s a prolific user of Twitter, followed by a staggering 15.1 million people. By comparison, President Barack Obama’s official presidential Twitter handle, @POTUS, has 4.38 million followers while @Pontifex, Pope Francis’ Twitter handle, has 7.35 million followers.

Narendra Modi vs Pesident Obama Twitter account

It’s no wonder, then, that Modi sought an audience with top tech industry leaders such as Facebook founder and CEO Mark Zuckerberg, Apple CEO Tim Cook and Tesla Motors CEO Elon Musk—some of the same figures Mr. Xi met with earlier in the week. All of them have expressed interest in diverting more resources to India, where the next huge surge in Internet usage is expected to take place. Retail giant Amazon, for instance, plans to spend $2 billion to expand its presence in India. Facebook will offer a free Internet service through its Internet.org platform.

In a YouTube video, Sundar Pichai, Google’s current Product Chief and its next CEO, welcomed Modi on his visit to immigrant-friendly Silicon Valley. Born in India himself, Pichai highlighted the strong, longstanding partnership between Indian and America’s major tech hub, stating:

The bond between India and Silicon Valley is strong. India’s long been an exporter or talented tech companies… The products by Indian graduates have helped revolutionize the world, but it is India that’s now undergoing its own revolution… Prime Minister Modi’s digital India vision is central to the revolution. It focused on connecting the 1.2 billion people in India.

You can watch Pichai’s full comments below.

In his personal tweets, Modi reassures followers that the goal of his visit is to strengthen business relations between the U.S. and India and to open his country up to further investment opportunities. This is a persistent challenge, as India is widely seen as one of the more difficult countries to conduct business in.

Modi has repeatedly pledged to speed up efforts to improve his country’s business climate for foreign investors. 

In the picture above, you can see a seated Modi surrounded by powerful Fortune 500 executives such as Citigroup’s Michael O’Neill, PepsiCo’s Indra Nooyi, IBM’s Ginni Rometty, Lockheed Martin’s Marilyn Hewson, Boeing’s Bertrand-Marc Allen and many more.

During his visit, Modi approved a $3 billion deal with Boeing—which we own in both our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX)—a purchase that’s eclipsed by Xi Jinping’s plan to buy 300 Boeing jets worth $38 billion, not to mention an arrangement for an assembly plant to be built in China.

Chinese President Xi Jinping just approved the purchase of $38 billion worth of Boeing jets.

In our quarterly earnings webcast, I mentioned the importance of staying abreast of government policy changes and the latest purchasing manager’s index (PMI) numbers. While India’s August PMI reading holds fairly steady at 52.3, indicating manufacturing expansion, China’s still remains in contraction territory at 47.3.

Both government policy reform and PMIs help our investment team inform its strategies. Government policy, as led by the G20 countries, has unfortunately been focused largely on synchronized global taxation and regulation since 2008. These are not great precursors for commodity demand.

When we can return to a point where governments are more focused on fiscal policies, reducing taxes, streamlining regulations and unleashing capital, I think that that would be a tipping point from a big macro sector theme.

So shorter term, we’ll be looking for the change in global PMIs, which would indicate global synchronized growth. The “magic” number is when PMI is above 50, and the momentum starts when the one month crosses above the three months. This is the positive, constructive sign that demand for commodities is picking up, and we’ll be looking for it.

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.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

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.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the All American Equity Fund and Holmes Macro Trends Fund as a percentage of net assets as of 6/30/2015: Sony Corp. 0.00%; Facebook Inc. 2.22% Holmes Macro Trends Fund; Apple Inc. 3.10% All American Equity Fund, 4.46& Holmes Macro Trends Fund; Tesla Motors Inc. 0.00%; Amazon.com Inc. 0.00%; Google Inc. 0.00%; Citigroup Inc. 1.58% All American Equity Fund; PepsiCo Inc. 1.15% All American Equity Fund; IBM 0.93% All American Equity Fund; Lockheed Martin Corporation 0.00%; The Boeing Co. 1.06% All American Equity Fund, 1.50% Holmes Macro Trends Fund. 

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(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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Net Asset Value
as of 06/15/2018

Global Resources Fund PSPFX $5.83 -0.08 Gold and Precious Metals Fund USERX $7.61 -0.07 World Precious Minerals Fund UNWPX $3.89 -0.06 China Region Fund USCOX $11.80 -0.04 Emerging Europe Fund EUROX $6.72 -0.10 All American Equity Fund GBTFX $25.97 0.05 Holmes Macro Trends Fund MEGAX $20.22 No Change Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change