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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.

U.S. ISM Manufacturing Index Heats up While China PMI Cools
September 10, 2014

Jobs, jobs: The U.S. ISM manufacturing Index for August is at a three-year high - U.S. Global InvestorsYou can always count on the United States of America to help boost global manufacturing growth. In its monthly Purchasing Managers Index (PMI) report, JP Morgan announced that the global PMI showed a slight uptick from 52.5 in July to 52.6 in August. The U.S. is again one of the top drivers alongside the Czech Republic, Taiwan, the United Kingdom, Ireland and Canada.

The U.S. ISM Manufacturing Index—our version of the PMI—rose more than 3 percent to close at a stellar 59.0, a three-year high. Meanwhile, China’s PMI inched down 0.6 points in August, from 51.7 to 51.1, ending a five-month winning streak beginning in February.

The monthly index tracks five major indicators in the manufacturing sector, including inventory levels, new orders, production, employment and supplier deliveries. The greater the number above 50.0, the greater the manufacturing expansion over the previous month. Anything below 50.0 would indicate a contraction. Economists rely on these numbers to adjust their GDP estimates.

That the U.S. nearly reached 60.0 supports the belief that we’re in for a robust second half. As I told Palisade Radio’s Collin Kettel recently, the U.S. “hit the ball right out of the park. You can’t even find the ball. It’s gone right past the parking lot. And that makes the dollar very strong.” 

U.S. ISM Manufacturing Index at a Three-Year-High - U.S. Global Investors
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This news is tempered somewhat by the most recent nonfarm payroll employment data released by the U.S. Bureau of Labor Statistics. Total employment in the U.S. rose by a weaker-than-expected 142,000 in August, compared with an average monthly increase of 212,000 over the last 12 months.

On the bright side, the National Federation of Independent Business’s Optimism Index, which measures job openings, job creation, capital spending and inventory investment, gained 0.4 points in August to end at 96.1, the second-best reading since October 2007. The largest gains in employment occurred in professional and business services and health care.

Emerging Markets
Commercial and business services also topped the growth ranking in August among global emerging markets, while health care services came in at number six. Business-facing and financial sectors posted their fastest expansion rate since January 2012, closing in on 60.0.  

Detailed Breakdown of Global Sector PMI - U.S. Global Investors
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Again, China cooled in August, interrupting its positive five-month run. But at 51.1, manufacturing activity is still expanding, just at a slower pace.

Despite a Slight Pullback in August, China's PMI Maintains Growth - U.S. Global Investors
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This slowdown is partially attributable to fewer orders from and weaker outputs to Europe, which trades more with China than the U.S. does. Europe’s flagging economy, as a result, has been a setback for China.

European imports to China, in fact, declined in August to a 14-month low compared to August 2013. Of the five indicators that compose China’s overall PMI, the New Orders Index dropped the most, from 53.6 to 52.5, a loss of 2 percent.

Another factor that led to China’s downgraded PMI is the country’s reduction in manufacturing jobs as part of cost-cutting measures. Its Employed Persons Index saw a minor dip from 48.3 to 48.2.

Many economists, as well as portfolio manager of our China Region Fund (USCOX) Xian Liang, are now waiting to see if China will announce further stimulus measures to prevent the world’s second-largest economy from slipping even further. Although Premier Li Keqiang has repeatedly dismissed the possibility of another full-blown bailout, typical monetary policy solutions might include cutting interest rates and reducing the amount of reserves banks must hold as deposits.

Will the People's BAnk of China enact further forms of monetary easing? U.S. Global Investors

To learn more about what’s driving the global economy, be sure to sign up for our upcoming webcast, “One World Market, Many Central Banks: How Will Your Investments Be Impacted?” The free webcast is scheduled to be held on Thursday, October 2, at 4:30 ET. We hope you’ll join us! 

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.

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.

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 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. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.

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Domestic and Indian Gold Rally Points to a Strong Second Half
July 17, 2014

Earlier this week we reported that gold, defying expectations, is one of the best-performing commodities of the year so far.

And now we’ve learned that gold bullion imports by India climbed a stunning 65 percent last month after the country’s central bank allowed more investors to buy foreign bullion. Imports rose to $3.12 billion in June from $1.89 billion this time last year.

India is the world’s second-largest consumer of gold after China, accounting for approximately 25 percent of all gold consumption. Gold is the country’s second-largest import item after oil.
The Indian wedding season has historically been a major driver of gold consumptionThis news comes closely on the heels of the recent election of Prime Minister Narendra Modi, whose Bharatiya Janata Party (BJP) seeks to loosen import restrictions and other government regulations that tend to stifle economic growth. The rally also coincides with the Indian wedding season, which typically ends on July 7 and 8.

More importantly, what this news could portend is a stronger-than-normal second half of the year for the gold market. Data points going back 35 years confirm the probability of gold gaining strength in the second half, thanks largely to international celebrations such as Diwali, Ramadan and Christmas. This year in particular looks very promising indeed.

Keep your eyes on real interest rates.
Recently I chatted with Daniela Cambone during my weekly Gold Game Film program on Kitco. I pointed out that, with the end of the Indian wedding season, we’re historically due for a slight correction in the gold market. But whereas last year saw a huge contraction and liquidation of gold around this time, the gold bullion exchange-traded funds (ETFs) around the world this year actually expanded.

Daniela and I also looked ahead at the gold market in the coming months. One of the points I shared dealt with the strong correlation between gold performance and real interest rates, which you arrive at after subtracting inflation from the nominal interest rate.

If we go back to when gold was at $1,900 [in August 2011], the negative real interest rates were 200 basis points. Then by December of last year, it went to plus 50 basis points. Now it’s gone negative again, and gold is rallying. And I think that that’s a key factor when we look forward, and I think we’re going to continue to have negative real interest rates. So when inflation starts to rise like it did in the ‘70s, [the Federal Reserve isn’t] going to be able to lift rates as fast as the inflationary rate because it will stifle the economy dramatically.

Gold Rebound Linked to Fall in Interest Rates
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One last point I want to emphasize is our perennial suggestion to investors: 5 percent exposure to gold bullion, 5 to gold stocks, and rebalance each year for an overall 10 percent weighting in your portfolio.

Last year the stock market boomed, whereas bullion disappointed and gold stocks dramatically underperformed. Had investors taken their profits in the stock market and rolled it into gold, they would have done exceptionally well this year.

That continues to be our discipline here at U.S. Global Investors, and the recent gold rally, domestically and in India, substantiates this position.

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.

Past performance does not guarantee future results.

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Why We Invest Heavily in Poland
July 9, 2014

There’s a reason why Poland retains the number two slot in our Emerging Europe Fund (EUROX), following Turkey. Ever since the fall of communism in 1989, the country has risen steadily, from a fledgling republic beset by near-bankruptcy, a deteriorating infrastructure and an East-West identity crisis, to emerge as one of the European Union’s (EU) most prosperous nations, alongside the U.K., France, Germany and Spain.

The latest issue of The Economist, in fact, asserts that Poland has had its best 25 years in half a millennium, citing its relatively quick market-oriented recovery, decrease in public spending and insistence on keeping its native currency, the flexible złoty, in favor of adopting the euro.

For these reasons and more, Poland was the only country in the EU—of which it’s been a member since 2004—to dodge the recession that struck Europe in the late 2000s. More recently, the international sanctions against Russia following its invasion of the Crimean Peninsula have also benefited Poland, as many investors have found it to be a safer, less volatile place for their money.

In a recent interview with VoiceAmerica, U.S. Global Investor’s Director of Research John Derrick said:

[Poland is] used as a safe haven in the region: stable economy, stable political environment. It’s benefited from the European recovery and doesn’t have that much trade with Russia.

Many economists now believe that Poland will eventually join ranks with the top 20 economies in the world, perhaps by as early as 2030. It currently sits at number 22, 23 or 24, depending on the source.

As you can see in the chart below, Poland has consistently outpaced its EU peers in the eurozone for the last 10 years, never once dipping below zero percent growth.

Poland Leads Economic Growth in Europe
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An eye for business.
Poland has grown in economic strength largely because it offers the EU low-wage yet high-quality labor. Many German companies can get a better production deal from their eastern neighbor than they can from China.

Although Poland doesn’t have any internationally recognizable brands, there are a few held in EUROX worth mentioning.

One of the most successful and lucrative companies is Powszechna Kasa Oszczędności Bank Polski, which translates roughly to “Polish General Savings Bank.” With a net income of over $1 billion, PKO Bank Polski, as it’s popularly known, is the largest and most highly rated bank not just in Poland but also Central and Eastern Europe. Founded in 1919, the bank is headquartered in Warsaw.

Another Warsaw company in the financial industry is Powszechny Zakład Ubezpieczeń, or PZU Group. With a net income just below $1 billion, it’s one of the top insurance groups in Central and Eastern Europe.

ENERGA Group, which rounds out the top three Polish stocks in EUROX, held its initial public offering (IPO) in December of last year. With over 118,000 miles of power lines, ENERGA is one of Poland’s leading energy providers, servicing close to 3 million customers. A significant percentage of the power it generates comes from renewable energy sources such as wind, biomass and run-of-the-river hydroelectricity. ENERGA reported a high return on equity (ROE) in the first quarter of this year, soaring to 10.6 percent, up from 4.4 percent in the same quarter last year.

Always seeking growth and opportunity.
If any country knows how to overcome crushing war and hardship, it’s Poland. Having been invaded and antagonized countless times over the centuries by nations such as Russia, Sweden, Austria, Hungary, Turkey and, most notably, Germany, it’s had little chance to find its place in the world.

But after 25 years of peace and stability, Poland is finally on a path to great success, ascending more rapidly than any other country in Central or Eastern Europe, with no signs of slowing.

Find out what other holdings we have in our 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.

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. Holdings in the Emerging Europe Fund (EUROX) as a percentage of net assets as of 6/30/2014: Powszechna Kasa Oszczednosci Bank Polski SA (4.55%), Powszechny Zaklad Ubezpieczen SA (2.86%), Energa SA (2.73%).

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% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

By 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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Can Tesla Motors Strengthen Its Brand by Giving Away Its Patents?
June 24, 2014

by Frank Holmes

“Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

That’s according to Elon Musk, CEO of electric automaker Tesla Motors Inc., which we own in our All American Equity (GBTFX) and Holmes Macros Trends (MEGAX) Funds.

Innovators and entrepreneurs aren’t normally in the business of sharing their intellectual property. But in his blog published June 12, Musk defends his shocking decision by asserting that “applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position” in technology leadership and the auto industry overall.

The patents Musk refers to include the lithium-ion technology used to power his company’s Roadster and Model S.

Nissan and BMW, two of Tesla’s rivals in the electric vehicle (EV) market, have expressed interest in collaborating with the company on improving their own line of low-emission cars.

 

 

Investors might crinkle their noses at Musk’s decision, arguing that giving away trade secrets for free will only hurt shareholders of an already somewhat speculative company. The market didn’t agree, however, as shares rose more than 13 percent to $231.67 within five days of the announcement.

Although competitors will likely take advantage of and benefit financially from Tesla’s hard work, Musk has dramatically grown the size of the pie to be shared by all and positioned Tesla to be the thought leader in sustainable transport technology.

Besides, as he points out, Tesla’s “true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.”

Running on all cylinders—if it had any.

Tesla, founded in 2003, is showing no signs of slowing down. The Model S has received numerous awards such as Automobile Magazine’s 2013 Car of the Year, Motor Trend’s 2013 Car of the Year, Consumer Reports’ Best Overall Car and an unprecedented 5.4 Vehicle Safety Score from the National Highway Traffic Safety Administration (NHTSA). Sales have been brisk. California drivers in particular are enamored, and in September of last year, the Model S was the top selling new car in Norway, the first time an EV outsold conventional vehicles in any country.

This year Tesla introduced its brand to China, the world’s largest auto market, and already the car was spotted cruising the streets of Shanghai by a friend of Xian Liang, co-portfolio manager of our China Region Fund (USCOX).

For those who blanch at the Model S’s nearly $60,000 baseline asking price might soon see some relief. Musk has announced the construction of a “gigafactory,” which will turn out approximately half a million lithium-ion batteries every year. Mass-producing the batteries, the car’s costliest component, will help lower the price of both Tesla and rival manufacturers’ EVs.

A real-life Tony Stark.

With Elon Musk at the helm, Tesla Motors is primed to become one of America’s greatest success stories. A serial entrepreneur, Musk made his billions investing and taking leadership roles in such tech endeavors as PayPal and SpaceX. Besides combatting carbon emissions with his line of EVs, his other ambitious goals include the construction of the so-called Hyperloop—a rapid transit system that, if realized, will zip commuters between Los Angeles and San Francisco in about 30 minutes—as well as a permanent human colony on Mars.

However these other pursuits unfold, it’s nearly guaranteed that history will rank Musk in the same category of top American automobile innovators as Henry Ford, Ransom Olds, Walter Chrysler, the Dodge brothers and Lee Iacocca.

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.

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. Holdings as a percentage of net assets as of 03/31/2014: Tesla Motors Inc. (All American Equity Fund 1.34%, Holmes Macros Trends Fund 1.94%), Nissan 0.00%, BMW 0.00%, Ford 0.00%, Chevrolet 0.00%, Toyota 0.00%, Zip2 0.00%, PayPal 0.00%, SpaceX 0.00%.   

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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South Africa Strike Boosts Platinum Prices, Opens Opportunity for American Producer
June 12, 2014

All eyes are on South Africa, where a labor strike, now in its fifth month, has brought a halt to the production of platinum and palladium. As a result, platinum prices have inched up 8.25 percent this year to just under $1,500 an ounce, while palladium prices have surged 19.28 percent to over $850 an ounce, a three-year high.

The downside to this activity is that even before the strike broke out in January, platinum and palladium had supply issues. A British geological survey, in fact, placed the platinum group metals (PGMs) on its supply risk index in 2012, ranking them 13th among 41 “endangered” elements of economic value. One of the primary reasons for this is that approximately 80 percent of palladium and 70 percent of platinum production is concentrated in only two countries, South Africa and Russia.

Now, with the former country in the throes of its costliest strike ever and the latter experiencing economic sanctions because of its aggression against Ukraine, the world faces an even greater shortage risk of the precious metals.

Stocks are running low.
The worldwide demand for palladium is strong, driven predominantly by the automotive industry, which uses 67 percent of the metal’s global supply to manufacture catalytic converters, or mufflers. Because a growing number of countries are tightening carbon emission standards, the demand for the metal is increasing. So too are supply deficits, which might soon reach a 30-year high.

The largest South African producers have so far managed to make good on their deliveries by tapping into their reserves. But the well is drying up fast.

“We probably have another six to eight weeks to go before producers run really low on material they’ve stockpiled,” Standard Bank analyst Walter de Wet told Reuters in late May.

Even if a firm resolution were reached this week between top PGM producers and the Association of Mineworkers and Construction Union (AMCU), the group leading the strike, active mining wouldn’t resume for at least another three months.

“AMCU members are steadfast,” Joseph Mathunjwa, President of the AMCU, told Reuters, “and we are not turning back” on the demand for a wage hike to 12,500 rand ($1,200) a month.

Neither, it seems, are the producing companies, who claim they can’t meet the AMCU’s wage demands without being forced to slash jobs and shutter mines.

At the same time, companies are eager to resume production, having already lost a combined $2 billion. For each day the strike drags on, 10,000 ounces of platinum and 5,000 ounces of palladium are lost.

As of this writing, the production companies have offered the AMCU a wage deal which Mathunjwa has yet to sign, despite urges from his fellow mine workers.

When one door closes…
As worrisome as this news might sound, there is a silver—or, shall I say, platinum—lining. The strike in South Africa and Western tensions with Russia have given Stillwater Mining Co., the only U.S. producer of PGMs, an opportunity to grow its global market share.

The company, which we own in our Global Resources (PSPFX) and Gold and Precious Metals (USERX) Funds, announced in a press release last month that it has agreed to a five-year, multimillion-dollar refining and sales contract with Johnson Matthey, the third-largest manufacturer of auto catalysts in the world.

“We believe that this agreement provides numerous benefits to both parties at a time in the PGM industry when supplies are constrained and demand for our products continue [sic] to grow,” noted Mick McMullen, Stillwater’s president and CEO.

Located in Billings, Montana, Stillwater extracts its PGMs from the J-M Reef in southern Montana, the only known large-scale source of the rare metals in the U.S. The mine contains some of the world’s highest-quality ore grades.

Although McMullen sees the strike in South Africa as an opening to a stronger foothold in the global PGM market, he is hesitant to ramp up production too impulsively. Speaking with the Wall Street Journal, he explained that he would prefer to keep production costs down to maximize shareholders’ returns.

Stillwater’s net income in the first quarter, $19.6 million, was up 34 percent from the same time a year ago.

To receive the latest updates on this story, be sure to follow our Investor Alert.

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. Because the Global Resources Fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

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. Holdings in the Global Resources Fund as a percentage of net assets as of 03/31/2014: Stillwater Mining Company 0.95%. Holdings in the Gold and Precious Metals Fund as a percentage of net assets as of 03/31/2014: Stillwater Mining Company 0.26%.

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 02/23/2018

Global Resources Fund PSPFX $6.24 0.07 Gold and Precious Metals Fund USERX $7.03 0.09 World Precious Minerals Fund UNWPX $4.25 0.07 China Region Fund USCOX $12.01 0.21 Emerging Europe Fund EUROX $7.83 -0.01 All American Equity Fund GBTFX $25.53 0.31 Holmes Macro Trends Fund MEGAX $19.61 0.28 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 0.01