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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.

Big Cities, Big Opportunities
October 23, 2009

One of the biggest drivers of global infrastructure is the rapid rate of urbanization experienced in the developing world.

The reason is simple – roughly 70 million people per year in developing countries are moving to cities, so there will need to be more roads, water systems, housing and electrical generation.

Nowhere is this trend more apparent than in China, which already has 100 cities with more than 1 million people. It is expected to eventually have 30 cities with more than 10 million people.

Urban Populations chart 102309

As you can see in the chart from UBS, Asia will be the main source of this urban growth. The United Nations says that over 1 billion Asian people will move to urban areas by 2030. Another 500 million people are expected to migrate to urban areas in Africa.

While this trend has picked up in pace in recent years, the growth of urban centers in the developing world has already been an established trend. Of the 20 largest urban areas in the world in 2005, only four were in the developed world (Tokyo, New York, Los Angeles and Osaka, Japan). 

The infrastructure build-out truly is a global opportunity. As much of the infrastructure focus in the developed world centers around repair and replacement, the focus in the developing world is around providing people with basic needs taken for granted by many of us.

We believe emerging-market governments that commit to ambitious infrastructure programs will be the ones with the best economic growth prospects in the coming years.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-740

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A Quick Look at Gold Trends
October 20, 2009

Gold Coins 102009With the price of bullion at all-time highs, there’s a raging debate on gold as an investment – is it overbought or can it go still higher? What’s the inflation risk to the dollar? Should we be more worried about deflation?

Every Friday we try to address the factors affecting gold in our award-winning Investor Alert, which recaps the week just ended and also looks forward to provide insights on what might lie ahead. Along with gold, the Investor Alert covers energy and natural resources, global emerging markets, domestic equities and the bond market.

We encourage everyone with an interest in our key sectors to join the 23,000-plus individual investors who now subscribe to the Investor Alert and the 10,000 investment professionals who receive its sister publication, the Advisor Alert. Signup is free and easy – just follow the appropriate link.

To give you an idea of the Investor/Advisor Alert’s value, here are a few of the gold-related items from the latest issue:

  • International Monetary Fund data shows that currency holdings among reporting central banks reduced the U.S. dollar’s weight to 62.8 percent as of June 30, the lowest on record. The shift in reserves to euros and yen confirm that world leaders are acting on threats to diversify out of the dollar based on lagging performance on U.S. assets and a weakening dollar.
  • According to UBS, investment growth is not coming from the world’s largest bullion-backed exchange-traded fund, but rather from private purchases of bullion and Indian buying during the festival season. COMEX net long positions stood at a record high of 23.5 million ounces.
  • Macquarie Bank said exchange-traded funds backed by physical supplies of industrial metals may potentially drive prices higher than index funds that buy futures contracts because there are currently talks of regulatory measures being imposed in the futures markets.
  • An analysis by the Bank Credit Analyst shows gold and silver markets to be fairly overbought, but BCA expects that any correction should prove short-lived in the absence of a reversal in the dollar and/or deterioration in liquidity conditions. The Bureau of Labor Statistics says the consumer price index for jewelry in the U.S. rose to its highest level since January 1996.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The COMEX is a commodity exchange in New York City formed by the merger of four past exchanges. The exchange trades futures in sugar, coffee, petroleum, metals and financial instruments. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. #09-728

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Poor Infrastructure a Pothole for Russian Economy
August 27, 2009

Russian Economy 082709The deadly collapse of a freeway bridge in Minneapolis in 2007 brought to national attention that our vital infrastructure was falling apart.

Perhaps last week’s disaster at a major hydroelectric power station in Siberia that killed 69 people will get Russia moving to update its crumbling infrastructure. But the challenges are many.

The vast majority of Russia’s roads, bridges, railways and power grid date back to the Cold War era, and it’s estimated that more than 60 percent need to be replaced.

Heat and power outages during winter months are common, and Moscow is plagued with world-class traffic-jams. But at least Muscovites have places to drive—as of last year, more than 10 percent of the country’s population had no access to roads at all.

And while other BRIC (Brazil, Russia, India and China) nations have rapidly expanded their highways and rail systems over the past several years, the length of Russia’s usable roads actually declined by 31,000 kilometers (19,375 miles) from 2000 to 2006.

Roads in Russia Graph 082709

Safety and quality of life aren’t the only reasons Russia should invest heavily in its infrastructure. Looking at the economics, estimates are that annual GDP growth is reduced by up to 6 percent by the country’s poor infrastructure.

One infrastructure challenge facing Russia is its government incompetence and “unfathomable levels of corruption” that add huge cost to projects, according to the Moscow-based Center for Research of Post-Industrial Studies.

It cites figures that the cost of building one kilometer of a four-lane highway in Russia is about $13 million, about four times that of Brazil or China. For some sections of a highway connecting Moscow and St. Petersburg, the construction cost exceeded $130 million per kilometer due to government waste and palm-greasing.

Another problem is finding the big sums needed to get the work done. Prime Minister Putin proposed a 10-year, $1 trillion plan last year but that was prior to fallout in global markets and commodities.

Since then, more than $13 billion in infrastructure projects have been delayed or canceled, with the government spending most of the money earmarked for infrastructure on shoring up the country’s banking system instead. Rather than embarking on a comprehensive upgrade program, Putin now pledges to address “vital parts” of Russia’s infrastructure.

This means much of the funding for Russia’s infrastructure repairs will need to come from public-private partnerships (PPPs) and other innovative non-government sources. But these projects too will be vulnerable to costly corruption demands involving political entities and bureaucrats that would cut returns to investors.

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What’s New in Global Markets
June 18, 2009

Many years ago, when I first traveled to China, the presence of construction cranes as far as the eye could see really solidified in my mind that something special and enduring was going on there.

With the power of first-hand experience in mind, we’ve set up a webcast double feature for investors.

Next Thursday, I will share what I’ve learned on recent trips to Europe and Asia. What signs of recovery are out there? Have the actions of global governments been enough to pump life back into these economies?

And on Friday, my good friend Andy Rothman, CLSA’s China macro strategist, will fill you in on what’s happening on the ground in China.

Has the Beijing government’s infrastructure-focused stimulus been effective as reported? Will more stimulus be needed for growth to continue in the second half of 2009?

Andy is one of the most knowledgeable sources on China. He spent 17 years following China’s economic policy while working in the U.S. foreign service. He’s been CLSA’s China macro strategist since 2000.

I urge you to take advantage of this opportunity to expand your global perspective. Registration for both webcasts is below.

 Recovery Webcast 061809

China Webcast 061809

Register Now

Thursday, June 25, 2009
11:00 AM ET (10:00 AM CT)

Register Now

Friday, June 26, 2009
10:00 AM ET (9:00 AM CT)

I also wanted to share with you a slideshow of ongoing construction projects in China that I found on wallpaper.com. It’s really interesting to see how the unique Chinese culture mixes with the rapid changes that are taking place.

Watch the Slideshow

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New Jersey’s ARC de Triomphe
June 11, 2009

The Obama administration is looking toward infrastructure as a way to kickstart the U.S. economy, so this week’s start to the nation’s largest mass transit project is a significant event.

The $8.7 billion Access to the Region’s Core Project (known as the ARC) will connect New York and New Jersey via a new tunnel under the Hudson River. Transit agencies in the two states are putting up about two-thirds of the construction money, with the federal government providing the rest. Construction is scheduled to finished by 2017.

An expansion project of ARC’s magnitude is long overdue. The existing tunnel was built a century ago and was never intended for commuter use. Meanwhile, New Jersey’s rail ridership has quadrupled since 1984 to 44 million trips annually.

The system is so strained that one five minute train disruption during peak time can delay up to 15 trains and affect more than 10,000 passengers, according to ArcTunnel.com.

 Doubling Rail Capacity 061109

The ARC project is expected to create 3,000 jobs on each side of the Hudson and produce an additional $660 million annually in economic benefit for the region.  There’s also an environmental upside, as access to more trains is projected to reduce auto traffic and emissions.

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Net Asset Value
as of 02/22/2018

Global Resources Fund PSPFX $6.17 0.01 Gold and Precious Metals Fund USERX $6.94 -0.01 World Precious Minerals Fund UNWPX $4.18 -0.04 China Region Fund USCOX $11.80 -0.07 Emerging Europe Fund EUROX $7.84 0.06 All American Equity Fund GBTFX $25.22 No Change Holmes Macro Trends Fund MEGAX $19.33 -0.19 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $1.99 No Change