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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.

Investors Get a Shot of Hope Amid the Uncertainty
November 13, 2020

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

global vaccine shot in the arm

America, and the world, received a huge shot of hope this week.

The $210 billion drugmaker Pfizer announced on Monday that its coronavirus vaccine is 90% effective at preventing COVID-19.

As expected, travel and hospitality stocks were the trading session’s big winners. The best performing S&P 500 stock was Carnival, up nearly 40%. Hawaiian Airlines cruised the highest among airline stocks, up an incredible 50%. Only three airline stocks —Singapore Airlines, Air Transport Services and Cargojet—were down for the day. Airline stocks’ daily volatility has historically been ±4%, but on Monday they had a move of 4 standard deviations.

Top 10 Best Performing Global Airline Stock on Monday November 9, 2020
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Following the positive news, Goldman Sachs was quick to adjust its market forecast for the next 12 months. The investment bank sees the S&P hitting 4300 by the end of 2021, which is an increase of more than 20% from Thursday’s close.

Goldman sachs forecasts SP at 4300 by end of next year on vaccine hope
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Investors’ enthusiasm was tempered slightly by the realization that Pfizer’s vaccine, although effective, has a couple of serious drawbacks that may prevent it from having a wide reach globally. One, the vaccine requires two doses a month apart, and it’s reasonable to expect that a large percentage of people who showed up for the first shot will not return for the second shot, for various reasons.

And two, the vaccine must be stored at an incredibly frigid -94° Fahrenheit. That’s colder than the average temperature observed at higher elevations in Antarctica’s icy interior. Most countries on earth, including some developed countries, simply do not have the appropriate cold storage, not to mention the supply chain infrastructure, to transport and deploy the vaccine to everyone who needs it.

According to CLSA’s estimate, as much as 50% to 60% of the population needs to be inoculated to stop the pandemic, though some estimates are even higher at between 70% to 75%. “Reaching this level of immunization will not be easy,” the investment group says.

That doesn’t mean it’s impossible, of course. Plus, other promising vaccines are currently in development. Russia claims its own Sputnik V vaccine is 92% effective against the coronavirus, and it’s already begun selling it to other countries, including Brazil, India, Mexico and Egypt.

LVMH’s Arnault Now Only Fifth Person on Earth to Be Worth More Than $100 Billion

It wasn’t just cruise lines and airlines that jumped on the Pfizer news. Luxury stocks like Burberry, Kering and Christian Dior all made strong gains on the hope that international travelers—particularly big-spending Chinese travelers—will return soon to airports and take advantage of duty-free shopping between flights.

Monday’s stock surge was enough to push French luxury titan Bernard Arnault’s wealth above $100 billion for the first time. He joins only four other people—Jeff Bezos, Bill Gates, Mark Zuckerberg and Elon Musk—in the highly exclusive centibillionaire club.

luxury tycoon bernard arnault joins exclusive centibillionare club after stock surge
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Arnault’s LVMH—the world’s largest luxury goods company, with brands ranging from Louis Vuitton to Sephora to Tag Heur—has shown great resilience during the pandemic. Third-quarter revenue, in fact, increased 12% compared to the same period last year.

The same goes for competitors Hermes and Kering, both of which delivered forecast-beating sales in the third quarter, thanks in large part to Asian consumers.

1.2 Billion Chinese in Middle Class by 2027

Retailers are right to court Asian consumers, particularly Chinese consumers. For proof, look no further than Alibaba’s monster Singles Day sales event this week. In the first 30 minutes on November 11, the giant Chinese retailers did a jaw-dropping $56.3 billion in sales, more than last year’s total haul of $38 billion over a 24-hour period.

Indeed, China has the world’s largest share of people online, and that share is accelerating. As of October, the country represented 40% of global ecommerce transactions, according to a report by the Brookings Institution.

Brookings’ report also provides startling new data on the size of China’s (growing) middle class, something I’ve written about before. Every year, the country has been adding an average of 60 million people to its middle class—defined as those who spend between $11 to $110 per person per day—and by 2027, Brookings believes the total size of China’s middle class could top 1.2 billion people. That’s approximately 3.5 times as many people living in the U.S. right now.

With the combined spending power of $41 trillion, the Chinese middle class is on track to spend an astonishing $7.3 trillion this year alone, Brookings says. To help put that figure in perspective, 7.3 trillion seconds is the equivalent of more than 230,000 years. That long ago is around when scientists believe Neanderthals appeared in Eurasia.

China leads the world in middle class spending
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Foot Traffic Data Proves Home Improvement Boom

As I’ve said before, I’m pleasantly surprised with how well some luxury retailers have done during the pandemic. Back in July, I discussed how sales at home improvement stores were increasing as high-net worth individuals (HNWIs) were spending lockdowns on do-it-yourself (DIY) projects, renovating their homes, building back patios and installing swimming pools.

This week we got even more proof of home improvement’s retail dominance. Placer.ai is a startup that provides retailers with foot traffic analytics and predictive consumer behavior. In a blog post titled “Kings of 2020: Home Improvement,” the group shared findings showing that foot traffic in Home Depot and Lowe’s has actually grown most months during the pandemic compared to the same months last year.

Look at the month of May. Lowe’s saw an almost 50% increase in store visits versus May 2019. Home Depot had 26% more. Although there’s been some slowdown, foot traffic is still substantially up year-over-year. Visits also accelerated from September to October as we head into “what could be an enormous holiday season for these chains,” as Placer.ai’s Ethan Chernofsky writes.  

Foot traffic in home improvement stores has consistently increased in 2020
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Gold Briefs: First Day of Diwali; Judy Shelton Moves Closer to Fed Confirmation

Judy Shelton proponent of the gold standard expected to be confirmed to the Federal Reserve Board

The price of gold fell 4.5% on Monday, its biggest one-day drop since August. But don’t worry—gold’s daily DNA of volatility is only ±1%. The decline was an attractive buying opportunity I hope you took advantage of.

This weekend marks the start of India’s five-day Diwali celebration. Also known as the Festival of Lights, Diwali is considered an auspicious time for gold buying.

Indian gold demand fell 30% year-over-year in the September quarter as high prices discouraged consumers. The good news is that 2020 was the second straight year of good monsoon rains, which is supportive of India’s rural economy, responsible for about 60% of annual gold demand, according to the World Gold Council (WGC).

Also in gold-related news, Judy Shelton moved one step closer to getting a seat on the Federal Reserve Board. The former economic advisor to Trump supports both longer-for-longer interest rates as well as a return to a gold standard. However unlikely that may be, it’s good to know someone on the Fed has gold in mind.

Shelton could be confirmed by the full Senate as early as next week.   

In celebration of the Festival of Lights, view our slideshow, “7 Things to Know About Diwali.”

IS CPI Fake News? Watch the 2-Minute Clip on YouTube

Gold Market

This week spot gold closed at $1,889.20, down $65.15 per ounce, or 3.18%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 8.58%. The S&P/TSX Venture Index came in off just 0.80%. The U.S. Trade-Weighted Dollar rose 0.54%.

Date Event Survey Actual Prior
Nov-10 Germany ZEW Survey Expectations 44.3 39.0 56.1
Nov-10 Germany ZEW Survey Current Situation -63.5 -64.3 -59.5
Nov-12 Germany CPI YoY -0.2% -0.2% -0.2%
Nov-12 Initial Jobless Claims 731k 709k 757k
Nov-12 CPI YoY 1.3% 1.2% 1.4%
Nov-13 PPI Final Demand YoY 0.4% 0.5% 0.4%
Nov-15 China Retail Sales YoY 5.0% -- 3.3%
Nov-18 Eurozone CPI Core YoY 0.2% -- 0.2%
Nov-18 Housing Starts 1458k -- 1415k
Nov-19 Initial Jobless Claims 715k -- 709k

Strengths

  • The best performing precious metal for the week was platinum, off just 0.23 percent on positive price forecast. Spot gold rose as much as 1.5% on Tuesday, recouping some of its losses from Monday after positive news of a coronavirus vaccine was released. The yellow metal also rose on Thursday and appears to have steadied after the dollar fell on news that COVID-19 cases are surging in the U.S.

gold price steadies as investors weigh vaccine progress and virus numbers
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  • Russia’s finance ministry is proposing allowing its sovereign wellbeing fund to invest in precious metals, according to a draft amendment of the law published on the government’s website. Russian giant Polyus said the prefeasibility for Sukhoi Log, the world’s largest untapped gold deposit, shows annual production of 2.3 million ounces at a cash cost of $390 per ounce, reports Kitco News.
  • In more Russian news, the country’s most expensive ever diamond – a 14.83-carat pink gem – was sold for $26.6 million at Sothbey’s in Geneva this week. The diamond was discovered by Alrosa PJSC and named “The Spirit of the Rose”.

Weaknesses

  • The worst performing precious metal for the week was palladium, down 6.76 percent, tumbled this past Wednesday by nearly 6 percent on little headline news for the day. Gold ETFs had the biggest weekly outflow since March as the prospect of a coronavirus vaccine hurt demand for the haven, reports Bloomberg. Investors sold at least 18 tons of bullion from ETFs this week.
  • The London Bullion Market Association (LBMA) sent a letter to countries with large gold markets threatening to blacklist them if they fail to meet standards on money laundering and responsible gold sourcing, reports Reuters. The letter says nations that don’t declare support for LMBA standards by December 11 and share plans on how to implement them by the end of January won’t be able to supply LBMA-accredited refiners. This is the latest initiation to crack down on illegal or unethical gold trading.
  • SSR Mining cut its gold production forecast for its Seabee mine for the fiscal year. Production for the third quarter was down 37% year-over-year of 20,249 ounces. Despite the negative news, its stock rose as much as 10% in intraday trading on Thursday due to its start of a 5-cent quarterly dividend policy.

Opportunities

  • UBS Group sees platinum at $1,150 an ounce by the end of 2021 due to a resurgence of industrial activity and supply disruptions at Anglo Platinum’s converter plant. UBS also still believes that gold could trade to $2,000 an ounce in the coming months on expectations of another U.S. stimulus package.
  • Goldman is also bullish on gold. The bank is targeting gold at $2,300 an ounce next year due to reflation pushing near-term real rates lower. Analysts said in a report that gold is primarily bought as a hedge against dollar debasement, and the bank expects its to be more sensitive to short-term real rates, akin to currency markets.
  • Endeavour Mining Corp is in talks for a potential merger of equals with rival Teranga Gold Corp as it seeks to build scale. Bloomberg reports Endeavour is considering an all-stock purchase and may offer a low premium for Teranga, which has seen its stock surge 87% so far this year. This is a positive sign with more potential for deal-making in the industry.

Threats

  • Diwali began this week but record high gold prices in India could erode demand for jewelry. Festival season in the world’s second largest gold consuming country is usually a strong time for gold buying in the form of jewelry. Record prices and the ongoing pandemic will likely hurt sales this year.
  • Quarterly 13 F filing released over the coming days could show that big investors have sold gold positions in the quarter ended September 30. Bloomberg speculates that after bullion peaked above $2,000 an ounce August and then backtracked to below $1,900, big money managers could have sold their gold or gold mining stakes.
  • Last week Wall Street legend Bill Miller said he strongly recommend bitcoin, and this week Stanley Druckenmiller revealed he now owns bitcoin. Forbes writes that Druckenmiller, after made headlines last week for his bearish views on the U.S. dollar, said he expects his bitcoin bet to "work better" than gold, though he holds a gold position that is "many, many more times" larger than his current bitcoin holding.

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Index Summary

  • The major market indices finished mixed this week. The Dow Jones Industrial Average gained 4.08% percent. The S&P 500 Stock Index rose 2.16% percent, while the Nasdaq Composite fell 0.55% percent. The Russell 2000 small capitalization index gained 6.08% percent this week.
  • The Hang Seng Composite rose 1.73% percent this week; while Taiwan was up 2.31% and the KOSPI rose 3.20%.
  • The 10-year Treasury bond yield rose 7 basis points to 0.895%.

Domestic Economy and Equities

SP 500 Economic Sectors weekly performance
click to enlarge

Strengths

  • Applications for U.S. state unemployment benefits fell by the most in five weeks, signaling the gradual recovery in the labor market is continuing despite a record surge in COVID-19 infections. Initial jobless claims in regular state programs totaled 709,000 in the week ended November 7, down 48,000 from the prior week, Labor Department data showed Thursday. The figure was below economists’ projections for 731,000 initial claims.
  • The NFIB Small Business Optimism Index met expectations and remained unchanged in October, measuring a robust 104 points. While business conditions have improved, many respondents nonetheless reported increased uncertainty driven by the elections and uncertain conditions in future months due to the ongoing COVID-19 pandemic.
  • Kimco Realty was the best performing S&P 500 stock for the week, increasing 38.60 percent. Commercial real estate got a bid this week as a result of the positive vaccine news igniting a risk-on recovery trade. 

Weaknesses

  • U.S. consumer sentiment unexpectedly declined in early November as an increase in COVID-19 infections and the election prompted Americans to reassess their outlooks for the economy and finances. The University of Michigan’s preliminary sentiment index for November decreased to a three-month low of 77 from a final October reading of 81.8, data released Friday showed. The figure matched the lowest estimates in a Bloomberg survey of economists that had called for 82.
  • Three of the world’s top central bankers warned Thursday that the prospect of a COVID-19 vaccine isn’t enough to put an end to the economic challenges created by the pandemic. “We do see the economy continuing on a solid path of recovery, but the main risk we see to that is clearly the further spread of the disease here in the United States,” Federal Reserve Chair Jerome Powell said during a panel discussion at a virtual conference hosted by the European Central Bank (ECB). “With the virus now spreading, the next few months could be challenging.” Powell was joined on the panel by Bank of England Governor Andrew Bailey and ECB President Christine Lagarde. Both echoed his caution and added to recent warnings from other central bankers against fiscal complacency.
  • Biogen was the worst performing S&P 500 stock for the week, falling 24.42 percent. The stock crashed Monday after an FDA panel voted against recommending its Alzheimer’s treatment for approval.

Opportunities

  • Any pullbacks in stocks are buying opportunities as the S&P 500 sets its eyes on marching 13% to 4,000 by early 2021, according to Fundstrat.
  • According to Goldman Sachs, health care stocks are the best value sector to buy right now. Even though the sector has rallied 6% since Election Day, the firm notes it is still trading at bargain levels.
  • Enterprise software looks recession-proof. Cloud-based software companies have largely shook off the effects off the coronavirus pandemic, according to a new report from VC firm OpenView Venture Partners.

Threats

  • The U.S. has been setting fresh daily records of new coronavirus cases in recent days, prompting several states to tighten restrictions. If the virus escalation shows no sign of easing off in the coming days, equities could face pressure as market volatility picks up.
  • October retail sales figures due next Tuesday will probably attract the most attention on the economic data front. They are forecast to have risen by 0.5% month-on-month, slowing down from a 1.9% increase in the prior month.
  • Bill Ackman is hedging the pandemic against corporate defaults again after news of a promising COVID-19 vaccine. He turned a $27 million position into a $2.6 billion windfall on a similar bet in the spring.

Energy and Natural Resources Market

 

Strengths

  • The best performing commodity for the week was lumber, up 10.44% on strong housing demand as well as curtailed harvesting and processing of trees due to COVID-19. Copper hit a two-year high in London on Monday after Pfizer announced its coronavirus vaccine in development was 90% effective. Oil futures rose as much as 2.1% on Tuesday after posting its largest gain since May on Monday on the vaccine news.
  • Iron ore also rose on Monday after Chinese import data showed robust demand. Steel futures rose to the highest in 15 months and iron ore in Dalian rose as much as 4.8%. China imported over 100 million tons of ore for the fifth straight month in October. Aluminum also had a 20-month high close on higher-than-expected Chinese demand. The country’s aluminum inventories in eight major consumption centers fell to just 635,000 tons as of Monday, down from a peak of 1.68 million in April.

Base metals continue to advance despite rising coronavirus cases
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  • Occidental Petroleum became the first major U.S. oil producer to aim for net zero emissions. Bloomberg notes the Houston-based company announced a target to hit net zero emissions from its own operations by 2040. Oil majors in Europe have been making similar pledges.

Weaknesses

  • The worst performing commodity for the week was wheat, down 1.31%, suffering from Russian’s plans to extend its exports of wheat into mid-February, which was unexpected. Crude oil rose as high as $45 a barrel on Monday, then fell below $41 by Friday as the surge of coronavirus cases outweighs the positive vaccine news.
  • OPEC again cuts its estimates for crude oil it will need to provide. The group reduced forecasts of the volume of crude it needs to pump this quarter by 960,000 to 26.51 million a day, following significant downgrades the past two months.
  • Toshiba Corp said it will stop taking orders for new coal-fired power plants, but it will still complete work on 10 further facilities. Although the company is making a wider push to embrace renewable energy, it will still manufacture steam turbines and offer maintenance services for existing coal-powered plants and work on the construction of already-ordered projects.

Opportunities

  • BP and Orsted A/S, two of Europe’s largest energy companies, announced they will join to develop an industrial scale electrolyzer to make hydrogen as a green fuel at a major oil refinery in Germany, reports Bloomberg. If the project gets financial backing, the plant will draw 50 megawatts of electricity from North Sea wind farms to make hydrogen and would power 20% of the facility’s energy needs. Industrial giants Linde and Air Liquide released steady third-quarter results, and both have booked around $2 billion in hydrogen sales last year. The booming hydrogen market could grow 10-fold by 2050 as policy makers step up the fight against climate change, notes Bloomberg.
  • UBS Group sees platinum at $1,150 an ounce by the end of 2021 due to a resurgence of industrial activity and supply disruptions at Anglo Platinum’s converter plant. UBS also still believes that gold could trade to $2,000 an ounce in the coming months on expectations of another U.S. stimulus package.
  • Royal Dutch Shell says it will push for the reversal of some of the Trump administration’s rollback of environmental regulations when Joe Biden assumes the presidency next year. “Some of the regulatory rollbacks that we’ve seen under the current administration haven’t actually benefited our industry,” Shell U.S. President Gretchen Watkins said Tuesday on a webcast hosted by the Greater Houston Partnership. The easing of direct regulation of methane emissions put the energy industry in a “backwards-facing position,” while the absence of carbon pricing makes it harder to incentivize new technologies like carbon capture, Watkins said and as reported by Bloomberg.

Threats

  • The International Energy Agency (IEA) cut its forecast for global oil demand amid new lockdown measures and cautioned that the vaccine breakthrough won’t quickly revive markets, reports Bloomberg’s Grant Smith. Although crude rallied to a 10-week high above $45, fuel use won’t see any “significant” boost from vaccines until the second half of 2021. “With a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker
    demand and rising oil supply provide a difficult backdrop,” the IEA said in its monthly report.
  • At least 20 giant bulk carriers of coal are anchored off the Chinese port of Jingtang and unable to offload millions of tons of Australian coal. According to an analysis by Bloomberg, 15 ships have been waiting since June and the remainder have been delayed for a month as the two countries are in a political spat.
  • Gold ETFs had the biggest weekly outflow since March as the prospect of a coronavirus vaccine hurt demand for the haven, reports Bloomberg. Investors sold at least 18 tons of bullion from ETFs this week. The yellow metal could be losing steam as it holds below $1,900 after surging past $2,000 an ounce in August.

U.S. global investors Q1 FY 2021 earnings webcast november 6

Airline Sector

 

Strengths

  • The best performing airline for the week was Copa Holdings, up 40.89%. Airlines surged on Monday after Pfizer and BioNTech announced its vaccine candidate against the coronavirus was 90% effective in its phase 3 study. Hawaiian Holdings ended the day up a massive 50.83%.
  • United Airlines is adding 1,400 flights and preparing to use larger aircraft the week of Thanksgiving due to late demand for the historically busy travel period. The airline said on Monday that November 23 is expected to be the busiest for traffic since March. Bloomberg reports United is adding around 200 extra flights on peak travel days next month. In another positive demand signal, American Airlines announced it is resuming much of its short-distance service to Latin America. The carrier is also bringing back longer flights over the next few weeks.
  • Troubled plane maker Boeing said it expects China to continue to be a main driver in aviation growth worldwide over the next 20 years, reports Bloomberg. Boeing said China is likely to buy 8,600 new airplanes worth $1.4 trillion over the next two decades. The manufacturer also expects annual passenger traffic growth of 5.5% in China.

Weaknesses

  • The worst performing airline for the week was Cargojet, down 11.61%.
  • Data from OAG Aviation Worldwide shows that a third of the world’s air travel routes have been lost due to the pandemic. In January there were 47,756 operational routes around the world and by November there were just 33,416 routes. As nations closed borders and restricted outside travel, the number of international routes dropped far more drastically than domestic.

a third of the world's air travel routes were lost during the pandemic
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  • The EU said it will place a 15% tariff on U.S. jets, along with other goods, creating a big problem for Ryanair. The carrier has more than 135 Boeing Max 200 jets on order and plans to take delivery of as many as 30 in 2021. Bloomberg reports that Boeing has over 300 pending orders from within the EU that could face cancellation due to the new tax. During the major cash burn during the pandemic, most airlines are not in a place to suddenly pay 15% more for their aircraft.

Opportunities

  • American Airlines resumed service to China this week, joining Delta and United, and bringing to 10 the number of weekly flights by U.S. carriers, reports Bloomberg. U.S. carriers suspended service in February to China as the coronavirus spread globally. The resumption of flights is a positive signal that demand could slowly pick up.
  • Germany’s flagship carrier Lufthansa started a COVID-19 testing program this week. All passengers and crew were given an antigen test on a flight from Munich to Hamburg and were only allowed to board after the test showed negative. The airline hopes it will ensure safety and encourage more people to fly.
  • Singapore Airlines plans to raise as much as $630 million via the sale of convertible bonds to increase liquidity, reports Bloomberg. The carrier said funds will be used for operating cash flow, to service debt and for capital expenditure.

Threats

  • Southwest Airlines issued notices for involuntary furloughs this week, which would be the first layoffs in its 49-year history. The carrier sent notices to 42 workers that they would be laid off on January 11. Bloomberg notes this move could signal further furloughs if it cannot secure givebacks with other unions. Southwest has asked employees for a 12-month, 10% pay cut to stem losses caused by reduced travel.
  • JetBlue joined Delta and Southwest in ending blocked middle seats. The carrier will make all seats available on January 8. Although positive for carriers that they can earn more money per flight selling all seats, it could deter travelers from flying who preferred the perceived safety of keeping middle seats empty.
  • The number of COVID-19 cases continues to rise globally. On Thursday, 160,000 new cases were reported in the U.S., just eight days after hitting 100,000 cases in a day for the first time. This is sparking fear of more lockdowns, which would further hurt travel demand and deter travelers from flying.

Emerging Markets

 

Strengths

  • The best performing country in emerging Europe for the week was Turkey, gaining 8.3 percent. The best performing country in Asia this week was Thailand, gaining 6.9 percent.
  • The Turkish lira was the best performing currency in emerging Europe this week, gaining 11 percent. The Thailand baht was the best performing currency in Asia this week, gaining 1.4 percent.
  • This week, eurozone members, after months of talks, agreed on the 2021-2027 budget, a much needed 1.8 trillion euros spending package. The European Parliament as a whole, still must approve the seven-year budget, and the council needs to sign off on the budget by unanimity.

Weaknesses

  • The worst relative performing country in emerging Europe for the week was Romania, gaining 1.2 percent. The worst performing country in Asia this week was Pakistan losing 40 basis points.
  • The Romanian ron the worst performing currency in emerging Europe this week, losing 53 basis points. The Indian rupee was the worst performing currency in Asia this week, losing 80 basis points.
  • Chinese state-owned Yongcheng Coal & Electricity Holding's defaulted on Tuesday. Yongcheng said on November 10 that it was unable to make principal and interest payments on 1 billion yuan of short-term commercial paper maturing that day. In the wake of this default, some banks have been selling bonds issued by state-owned firms on rising credit stress.

Opportunities

  • Emerging European equites continued their strong performance this week supported by the outcome of the U.S. presidential election and news of the Pfizer vaccine being 90 percent effective against the coronavirus. The price of the MSCI Emerging Market Europe Index crossed above its 50-day moving average, anticipating more money flow into the region.

MSCI Emerging Market Europe Index Crossed Above Its 50-Day Moving Average on November 10, 2020
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  • Turkey’s central bank may announce a rate hike next week. Bloomberg economists expect a rate increase in the amount of 400 basis points, from 10.25 percent to 14.25 percent. If the central bank delivers the hike, the currency may strengthen further against the dollar in the short-term.
  • Reuters reported that Germany’s health minister said he expects the European Commission to sign a purchase agreement with BioNTech and its partner Pfizer for its potential vaccine against COVID-19 in the coming days. The EU is in talks to purchase 200 million doses of its vaccine, with an option to buy another 100 million. This week, Russia claimed that its first worldwide Sputnik vaccine has an even higher effective rate than the vaccine produced by Pfizer. We may hear more news about new vaccines being released in coming months which should increase investors’ appetite for riskier assets.

Threats

  • China announced Tuesday a set of draft rules aimed at curbing monopolistic behavior on the internet, and the shares of Chinse internet stocks declined sharply on the news. The new guidelines target orderly competition, reasonable pricing, and data protection. Each internet leader may face some impact but will adopt and comply. CLSA research team believes that the new regulations will unlikely impact respective leadership as long as they protect users and merchants.
  • President Donald Trump has signed an executive order banning Americans from investing in Chinese firms that the administration says are owned or controlled by the Chinese military. Trump's order bans U.S. investors from owning or trading any securities that originate or are exposed to those firms. This includes pension funds or owning shares in the companies that are banned. Investors will have until November 2021 to divest from the companies.
  • Poland and Hungary are threatening to block the EU’s 2021-2027 budget. Both countries are against the EU’s decision to link funds to the democratic and judicial standards in recipient countries. The EU’s budget of 1.8 trillion euros included 23 billion euros of potential funds for Poland and Hungary.

Blockchain and Digital Currencies

 

Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended November 13 was Content Value Network, up over 1,208%.
  • Bitcoin briefly climbed above $16,000 for the first time in three years before quickly falling back below the psychological threshold, writes CoinDesk. “Against the backdrop of stimulus from the Federal Reserve, we expect investors holding cash to continue to allocate to bitcoin,” said Kyle Davies, co-founder of the digital asset fund Three Arrows Capital.

bitcoin moves past $16,000 the week ended november 13, 2020
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  • Payments provider BitPay announced Friday the launch of BitPay Send, a service enabling businesses to pay employees, contractors, customers and vendors en-masse with cryptocurrency. According to CoinDesk, with the new service, companies don’t need to buy, own or manage cryptocurrency, while the recipients receive payment more efficiently and at a reduced cost.

Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended November 13 was Defi Shopping Stake, down 96%.
  • According to CoinTelegraph, the number of cryptocurrency-related crimes have slowed down in 2020, however, some sectors have become new hotbeds for criminal activity. CipherTrace reported a notable growth in hacking incidents in decentralized finance, or DeFi. A recent surge in DeFi makes the industry a prime target for hackers.
  • For months, Chinese regulators have been clamping down on many crypto trading platforms that cater mainly to Chinese clients, reports CoinDesk. A spokesperson from Binance declined to comment on any impact China’s crackdown could have on its business. According to the article, some of these exchanges appear to have close, albeit informal, relationships with the Chinese government.

Opportunities

  • Celsius, a centralized crypto lending platform, claims to have doubled its crypto holdings in just six months, reports CoinTelegraph, now boasting $2.2 billion in assets under management. In total, the platform has attracted more than 215,000 users worldwide.
  • PayPal’s crypto trading and payments went live for all eligible customers in the U.S. on Thursday, writes CoinTelegraph. Trading now features a limit of $20,000 per week, which is double the originally announced $10,000.
  • Ripple has filed another new trademark with the United States Patent and Trademark Office, or USPTO, writes CoinTelegraph. On November 6, a filing for the trademark “PayString” detailed a span of different categories of electronic financial services.

Threats

  • On Monday a former software engineer at Microsoft received a nine-year prison sentence, reports CoinDesk, for an elaborate multi-million-dollar criminal scheme involving bitcoin and digital gift cards. The Ukrainian citizen Volodymyr Kvashuk was involved in the testing of an online retail sales platform for Microsoft from August 2016 until he was fired in June 2018, the article explains. Apparently, he used his employee access to steal “currency stored value” (CSV), namely digital gift cards.
  • Hedge fund billionaire Ray Dalio believes that if the price of bitcoin continues to rise, this will only force governments to take action. He expects authorities to clamp down on cryptocurrencies when they see “material” growth, explains CoinTelegraph.
  • Bitcoin has been very volatile in recent weeks, writes CoinTelegraph, rallying over $16,000 – but the futures market’s open interest indicates that a large volatility spike is likely very close.

IS CPI Fake News? Watch the 2-Minute Clip on YouTube

Leaders and Laggards

Weekly Performance
Index Close Weekly
Change($)
Weekly
Change(%)
10-Yr Treasury Bond 0.90 +0.08 +9.15%
Oil Futures 40.13 +2.99 +8.05%
Hang Seng Composite Index 4,120.46 +25.57 +0.62%
S&P Basic Materials 433.23 +6.08 +1.42%
Korean KOSPI Index 2,493.87 +77.37 +3.20%
S&P Energy 254.55 +35.97 +16.46%
Nasdaq 11,829.29 -65.94 -0.55%
DJIA 29,479.81 +1,156.41 +4.08%
Russell 2000 1,744.04 +99.88 +6.08%
S&P 500 3,585.15 +75.71 +2.16%
Gold Futures 1,886.60 -65.10 -3.34%
XAU 143.38 -12.00 -7.72%
S&P/TSX VENTURE COMP IDX 736.41 -5.88 -0.79%
S&P/TSX Global Gold Index 345.50 -30.58 -8.13%
Natural Gas Futures 2.98 +0.10 +3.29%
 
Monthly Performance
Index Close Monthly
Change($)
Monthly
Change(%)
Korean KOSPI Index 2,493.87 +113.39 +4.76%
10-Yr Treasury Bond 0.90 +0.17 +23.28%
Gold Futures 1,886.60 -20.70 -1.09%
S&P Basic Materials 433.23 +18.31 +4.41%
S&P 500 3,585.15 +96.48 +2.77%
DJIA 29,479.81 +965.81 +3.39%
Nasdaq 11,829.29 +60.56 +0.51%
Oil Futures 40.13 -0.91 -2.22%
Hang Seng Composite Index 4,120.46 +214.62 +5.49%
S&P/TSX Global Gold Index 345.50 -27.09 -7.27%
XAU 143.38 -7.30 -4.84%
Russell 2000 1,744.04 +122.39 +7.55%
S&P Energy 254.55 +23.08 +9.97%
S&P/TSX VENTURE COMP IDX 736.41 +2.77 +0.38%
Natural Gas Futures 2.98 +0.35 +13.16%
 
Quarterly Performance
Index Close Quarterly
Change($)
Quarterly
Change(%)
XAU 143.38 -3.18 -2.17%
S&P/TSX Global Gold Index 345.50 -24.10 -6.52%
Gold Futures 1,886.60 -83.80 -4.25%
DJIA 29,479.81 +1,583.09 +5.67%
S&P 500 3,585.15 +211.72 +6.28%
Nasdaq 11,829.29 +786.79 +7.13%
Korean KOSPI Index 2,493.87 +56.34 +2.31%
Natural Gas Futures 2.98 +0.80 +36.71%
S&P Basic Materials 433.23 +39.88 +10.14%
Russell 2000 1,744.04 +164.26 +10.40%
Oil Futures 40.13 -2.11 -5.00%
Hang Seng Composite Index 4,120.46 +314.69 +8.27%
S&P/TSX VENTURE COMP IDX 736.41 -4.98 -0.67%
S&P Energy 254.55 -29.76 -10.47%
10-Yr Treasury Bond 0.90 +0.17 +23.96%

 

U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission ("SEC"). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

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 accounts managed by U.S. Global Investors as of (09/30/2020):

Linde PLC
Polyus PJSC
SSR Mining Inc
Endeavour Mining Corp
Hawaiian Holdings Inc
easyJet PLC
Copa Holdings SA
United Airlines
American Airlines Holdings Inc
Ryanair Holdings PLC
Delta Air Lines Inc
Deutsche Lufthansa AG
Singapore Airlines Ltd
Southwest Airlines Co
JetBlue Airways Corp
Singapore Airlines Ltd
Air Transport Services Group Inc
Cargojet Inc
LVMH Moet Hennessy Louis Vuitton SA
Burberry Group PLC
Kering SA
Christian Dior SE
Hermes International
Alibaba Group Holding Ltd
The Home Depot Co
Lowe’s Cos Inc
 

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index. The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. 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. 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. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

Formerly known as Dow Jones-UBS Industrial Metals Subindex (DJUBSIN), the index is composed of futures contracts on aluminum, copper, nickel and zinc. It reflects the return of underlying commodity futures price movements only. It is quoted in USD.
The MSCI Emerging Markets Europe Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the emerging market countries of Europe (Czech Republic, Hungary, Poland, Russia and Turkey).
The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.
The National Federation of Independent Business (NFIB) Small Business Optimism Index is a composite of ten seasonally adjusted components. It provides a indication of the health of small businesses in the U.S., which account of roughly 50% of the nation's private workforce.
The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.

Share “Investors Get a Shot of Hope Amid the Uncertainty”

Net Asset Value
as of 11/25/2020

Global Resources Fund PSPFX $5.33 0.05 Gold and Precious Metals Fund USERX $12.23 0.25 World Precious Minerals Fund UNWPX $4.72 0.10 China Region Fund USCOX $9.40 -0.27 Emerging Europe Fund EUROX $6.01 0.04 All American Equity Fund GBTFX $24.38 0.09 Global Luxury Goods Fund USLUX $19.42 0.04 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change