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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.

Riding the World’s Fastest Train
February 17, 2011

The world’s largest network of high-speed rails now has the world’s fastest train running on its tracks. In China in early December, a 16-car train set a new world record during a trial run by speeding faster than 302 miles per hour. During regular service, the train will travel just over 236 miles per hour.

The world’s fastest train is currently running from Shanghai to Hangzhou, a city about 120 miles to the southeast. The $445 million project cuts train travel time in half, from 90 to 45 minutes.

A first-class ticket on this route costs a little less than $20, double the cost of an ordinary Chinese train ticket. In comparison, a first-class seat on the express train from Washington, D.C. to Philadelphia, a distance of 136 miles, will run you nearly $240, according to J.P. Morgan. This train’s average speed is only 70 miles per hour.

This is just the latest development in the fascinating story of China’s transit systems. Back in November we discussed how China’s high-speed rails were expanding into the interior of the country and connecting the country’s major cities (Read China’s High Speed Rails).

Rail expansion plays a big role in the 12th Five-Year Plan announced in November. Capital expenditure on rails is expected to total $455 billion over the next five years, according to J.P. Morgan. The goal is to lay 10,000 miles of track by 2015.

These amazing feats and ambitious goals are not imported from the developed world, but products of Chinese innovation. The world’s fastest train was built by a Chinese company (China South Locomotive & Rolling Stock Corporation) which has become the third-largest high-speed train producer behind Bombardier (Canada) and Alstom (France).

As China continues to develop its infrastructure and build higher-end manufacturing industries, the incubation of engineers and innovators should pay dividends for the country’s growth into a global powerhouse.

None of U.S. Global Investors family of funds held any of the securities mentioned in this article as of December 31, 2010.

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Reading China's Signs
January 21, 2011

CLSA’s Andy Rothman is one of the best voices out there discussing the growth of China. Andy’s ability to put today’s activities and government policies in historical perspective sets him apart from both China’s naysayers and those who are overly bullish. Andy’s Sinology report is a must-read for our investment team here at U.S. Global.

The most recent Sinology contains some good 2011 forecasts from Rothman and some interesting tidbits on China that are worth sharing:

  • China’s economy is expected to grow about 9.5 percent in 2011—about 5.5 percent of that coming from investment and the rest coming from consumption.
  • Infrastructure has accounted for one-third of total urban fixed asset investment over the past six years. The amount of projects scheduled and already underway should keep that pace in 2011.
  • Total rail expansion, which includes high-speed rails, should rise to 7,500 kilometers (km) this year, up from 5,000 km in 2010. Rail expansion is expected to peak at 10,000 km
  • Investment by manufacturing firms has accounted for roughly 30 percent of total fixed asset investment over the past six years and is expected to continue in 2011.
  • Investment by private firms outpaced that of the Chinese government for nine consecutive months through November 2010, accounting for 58 percent of all urban fixed asset investment.
  • Led by China’s smaller cities, which house roughly 57 percent of China’s urban population, housing sales rose 12-15 percent on a year-over-year basis in September, October and November.
  • Rising incomes, little household debt and a healthy consumer sentiment is expected to facilitate increased consumption. Consumption is expected to account for 42 percent of GDP growth in 2011.

We’ll have to wait and see how Andy’s predictions hold up but history has shown there’s a lot of truth in his crystal ball.

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Index Shows Companies Are Building Again
January 5, 2011

Looking for a reason to be bullish on construction materials and equipment stocks? Take a look at the Architecture Billings Index (ABI) published by the American Institute of Architects.

The ABI registered a score of 52 in November, up over 6 percent from the October level of 48.7, the index’s highest reading since December 2007. More importantly, all regions were expanding except for the West, which remains bogged down in the muck of a popped real estate bubble. Though activity in the region was down from the previous month, the strongest region was the Northeast.

Architecture Billings Index Rises to Highest Level Since 2007

The chart shows the ABI bottomed in January 2009 and has experienced a resurgence during the next 23 months.

The ABI is one of the best tools we have to measure non-residential construction activity, such as the development of offices, warehouses, strip malls and apartments but there’s typically a 9- to 12-month lag between movements in the ABI and construction spending.

If the expansion continues, this could be a positive for both construction materials companies, such as U.S. Steel, and for equipment makers, like Caterpillar. Many in the latter category have been feasting on emerging market growth in places like China while the U.S. recovered and 2011 may be the time for that growth to come home.

The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of September 30, 2010: Caterpillar.

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Russia's Infrastructure Opportunity
December 30, 2010

China used the 2008 Summer Olympics as a catalyst for infrastructure development that would benefit the country in the long term. Now Russia is giving itself a makeover before it plays host to the 2014 Winter Olympic Games.

The host city of Sochi and its surrounding areas are busy building what’s needed to accommodate the thousands of visitors expected for the Games. A new $200 million airport opened for business in the fall of 2010, and officials say more than 200 sports and support facilities will eventually be constructed. This doesn’t include the road, railway, port, electrical and telecom infrastructure projects in the works.

And Sochi is just a part of the broader infrastructure effort under way in Russia as it strives to modernize itself out of the Soviet era. Along with the transportation, communication and power investments, Russia is also building schools, hospitals, housing and other social infrastructure.

Given Russia’s geographic size, its infrastructure ambitions are huge both in scale and in price. A new railway across Siberia, for example, is estimated at $13 billion and new airports can run close to $1 billion each.

The Russian Far East city of Vladivostok is preparing to host the 2012 Asia-Pacific Economic Cooperation summit – the infrastructure cost is estimated at close to $5 billion. And Russian President Dmitri Medvedev plans to spend as much as $7 billion in 2010 and 2011 on housing for the nation’s senior military officials.

On top of that, the improving relations between Russia and China stand to spread into the infrastructure realm. The Beijing government is expected to invest heavily in Russia – estimates are $12 billion over the next five to 10 years for a dozen construction projects. These projects include about $250 million to rebuild a rail link between the countries.

Infrastructure creation on this scale requires vast quantities of natural resources – energy, steel, copper, cement and more. As we have seen in China, Brazil and elsewhere, such investment typically pays off in terms of economic growth.

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Infrastructure Investing 101
November 18, 2010

InfrastructureWhen you envision America’s future, do you picture collapsing bridges, cracking dams and reoccurring brownouts? That’s certainly not the picture of America many would like to paint but it is a possibility if our country’s long-term infrastructure needs aren’t addressed.

A new article from researchers at the Wharton School of the University of Pennsylvania (America’s Aging Infrastructure: What to Fix, and Who Will Pay?) details the precarious nature of neglecting our nation’s network of pipelines, ports and power lines.

Here are some of the paper’s eye-popping statistics:

  • The U.S. has about 2.5 million miles of natural gas pipelines operated by roughly 3,000 different companies. More than half of America’s natural gas transmission pipelines were installed before 1970.
  • About 75-80 percent of the value of U.S. freight is moved via truck on our nation’s highways.
  • Government mandates and subsidies have pushed alternative energy sources up to 17 percent of Germany’s overall power supply, while that figure is roughly 1-2 percent in the U.S.
  • Less than 20 percent of America’s infrastructure is publicly owned.

President Obama has pledged $50 billion to rebuild 150,000 miles of roads, 4,000 miles of rails and 150 miles of runways but that’s only a fraction of the amount of investment needed. If America is going to give its infrastructure a comprehensive makeover, a considerable amount of investment will need to come from the private sector and this hasn’t happened yet.

Why haven’t U.S. investors embraced infrastructure investing?

A recent article from DealBook says that many of these private investors have found better opportunities abroad as foreign governments seek to privatize state entities, involve less politics and face fewer delays.

In our Global MegaTrends Fund (MEGAX), we employ a two-pronged approach to investing in infrastructure to offset some of the delays and disappointments often experienced with infrastructure investing.

First, we have taken positions in several infrastructure operators of toll roads, airports and utilities. In general, these companies possess stable cash flows, have regulated profits and pay a dividend.

One such company is Grupo Aeroportuario del Sureste, which operates airports in Cancun and southeast Mexico. As tourism traffic grows with an improving global economy and yield per passenger improves, so, in our opinion, should the company’s margins and profits.

Across the Atlantic, we’ve taken a similar position in Tav Havalimanlari, an airport operator based in Istanbul, Turkey. Tav is benefitting from Turkey’s 10.3 percent GDP growth (year-over-year) and overall growth in the region. Istanbul is only three hours by air from every major city in Europe and the airport has become a major transit hub for the region. In addition, Tav has stakes in the major airports of Macedonia, Georgia and Latvia.

Infrastructure opportunities aren’t always outside the U.S. border. Companies such as American Tower and Crown Castle provide much needed cellular and wireless infrastructure and are companies we currently hold positions in. There’s also pipeline operator NuStar Energy, which has more than 8,000 miles of pipelines and 93 million barrels of storage capacity around North America and overseas.

Second, we invest in the manufacturers and equipment makers that provide the heavy equipment needed to construct and maintain the world’s streets, sewers and electrical grids. Globally, many of these companies have seen a rise in equipment orders which has historically been a precursor to a pickup in construction activity.

The time to invest in America’s future is now, before the lights go out and the bridges fall down.

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 clicking the link(s) above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for its content. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Holdings in the Global MegaTrends Fund as a percentage of net assets as of September 30, 2010: Grupo Aeroportuario del Sureste 3.65%, Tav Havalimanlari 1.93%, American Tower 1.72%, Crown Castle 1.59%, NuStar Energy 2.97%.

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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