More by the Same Author
2013-06-14 Going to a Digital Extreme in China by Frank Holmes of U.S. Global Investors
In its shift toward a consumption-driven economy, China has been embracing digital technology at rates that dwarf those of many developed countries. The Chinese have been scooping up smartphones, accessing the internet and consuming goods from online retailers at an incredible pace. We believe the world needs to quickly adapt to China becoming a major player in the digital marketplace, as this trend is in the early stages of exciting growth.
2013-06-14 A Sweet Find on an African Adventure by Frank Holmes of U.S. Global Investors
The heart of Africa has been beating strong in recent years due to elevated commodity prices and resilient domestic demand, despite the global economic slowdown. Among the sub-Saharan African countries, Sierra Leone was the fastest growing country last year, according to the World Bank. Its economy experienced growth that is as rare today as Fancy Red diamonds. GDP increased a whopping 18 percent.
2013-06-07 Why It Pays to Invest in Emerging Market Dividend-Payers by Frank Holmes of U.S. Global Investors
An unexpected change of heart happened in May that you might not have heard about. After years of resisting any path other than its rigorous course, Germany announced it is backing off from pure austerity and is now planning to spend billions of euros to stimulate the economies of Europe.
2013-06-07 As Economy Heats Up, Will Commodities? by Frank Holmes of U.S. Global Investors
Don’t wait for the Fed to officially raise rates, as research shows that investors get the most benefit from materials and energy stocks by getting in now
2013-05-31 What's the Answer to Unprecedented Policies and Ultralow Rates? by Frank Holmes of U.S. Global Investors
So what’s the answer to unprecedented central bank policies that have been driving stocks higher and ultralow rates? I believe investors need to stick to a strategy that includes dividend-paying stocks that offer the opportunity for both income and growth.
2013-05-24 The Love Trade for Gold is Still On! by Frank Holmes of U.S. Global Investors
The more important demand for gold, in my opinion, comes from the enduring Love Trade, as countries like China and India buy the precious metal out of love and tradition.
2013-05-22 Making Investment Grade Is Only the Beginning for Turkey by Frank Holmes of U.S. Global Investors
It’s been a few months since I was in Istanbul and wrote about Turkey’s exciting cultural and economic transformation, and the country is still making headlines. The Emerging Europe Fund’s (EUROX) portfolio manager, Tim Steinle, has been very bullish on Turkey for multiple reasons, including its young growing demographic, its fiscal and monetary policies geared toward growth, and its entrepreneurial mindset and pro-business policies, to name just a few.
2013-05-17 Finding Opportunity Far and Near by Frank Holmes of U.S. Global Investors
Would it surprise you to learn that a vast majority of equity valuation models state that stocks should head much higher over the next five years?
2013-05-11 Three Reasons to Buy Gold Equities Today by Frank Holmes of U.S. Global Investors
A strong stomach and a tremendous amount of patience are required for gold stock investors these days, as miners have been exhibiting their typical volatility pattern. That’s why I often say to anticipate before you participate, because gold stocks are historically twice as volatile as U.S. stocks. As of March 31, 2013, using 10-year data, the NYSE Arca Gold BUGS Index (HUI) had a rolling one-year standard deviation of nearly 35 percent. The S&P 500’s was just under 15 percent.
2013-05-04 Don't Sell in May: Here are Reasons to Extend Your Stay by Frank Holmes of U.S. Global Investors
During the first week of May every year, the maxim, “Sell in May and Go Away,” gets taken out, dusted off and powered up as a reason to sell stocks. The rhyme is more than just a catchy urban legend: June, July, August and September have historically been the weakest months of the year for the S&P 500 Index.
2013-05-02 A Case for Owning Commodities When No One Else Is by Frank Holmes of U.S. Global Investors
Sometimes following where money is being invested is a solid course of action to gain alpha; other times, a better opportunity lies in going the opposite direction, i.e., thinking contrarian.
2013-04-26 A Playbook for Investors: How to Shoot, Score, Win by Frank Holmes of U.S. Global Investors
So, in the competitive spirit of the NBA playoff season, I’ve gathered a series of plays that investors can use to shoot, score and win during this year’s market. I’m happy to say they include all the elements of an exciting game, including a comeback kid, an upset and an underdog.
2013-04-19 Gold Buyers Get Physical As Coin and Jewelry Sales Surge by Frank Holmes of U.S. Global Investors
Even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high. This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins.
2013-04-12 How a Landslide Shifts Copper Supply by Frank Holmes of U.S. Global Investors
The U.S. mining industry was dealt a devastating blow as Kennecott Utah Copper’s Bingham Canyon Mine experienced a pit wall failure causing a massive landslide with rocks and dirt covering the bottom of the mine pit. It’s a miracle no one was hurt due to the vigilance of its owner, Rio Tinto. The landslide is just one example of how quickly and unexpectedly the supply and demand factors facing the red metal can shift, which underscores the need for nimble active management.
2013-04-11 The Bright Lights of Big Oil by Frank Holmes of U.S. Global Investors
Texas has seen incredible changes in oil production because of advancements in shale technology. From one 200-mile view at night, you can easily spot the urban areas of Dallas, Houston, San Antonio and Austin, but the strip just south of the Alamo City and U.S. Global Investors’ headquarters illuminates something else entirely: the bright lights of big oil generated by the Eagle Ford shale formation.
2013-04-05 Every Gold Coin Has Two Sides by Frank Holmes of U.S. Global Investors
Just as every coin has two sides, every data point that doesn’t meet expectations usually has an upside somewhere. For instance, although the gold price has fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out this week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
2013-03-28 What's the Best Investment Advice You Received? by Frank Holmes of U.S. Global Investors
Throughout my years in the financial industry, I’ve been fortunate to meet many wonderful people who helped shape my philosophies about life, business and investing. One such role model has been Seymour Schulich. While some may have never heard of the Canadian entrepreneur, those who meet him, don’t forget him and his straightforward approach to the resources industry. He’s one significant person who continues to be an inspiration to me.
2013-03-28 What Maslow and Rand Would Tell Investors Today by Frank Holmes of U.S. Global Investors
While gold’s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.
2013-03-26 In Gold, Not Cyprus, We Trust by Frank Holmes of U.S. Global Investors
Global investors had to muster the courage to keep calm as news of Cyprus’ proposed partial theft of all bank deposits took Wall Street by surprise, closed the country’s banks and drove the price of gold higher.
2013-03-22 The Importance of Women Leaders: From Margaret Thatcher to Sheryl Sandberg to Park Geun-hye by Frank Holmes of U.S. Global Investors
I have always admired former British Prime Minister Margaret Thatcher, whose strong leadership and perseverance made her one of the most influential and respected political figures in recent history. She once said of her ability to persevere that she has the “woman’s ability to stick to a job and get on with it when everyone else walks off and leaves it.”
2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors
Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.
2013-03-20 China’s Next Stop by Frank Holmes of U.S. Global Investors
Would it surprise you to discover that China is planning to add 800 miles to its subway system over the next two years? That’s the distance equivalent to building a network from Dallas to Chicago in less time than the U.S. Congress can resolve a budget!
2013-03-15 China’s Next Stop by Frank Holmes of U.S. Global Investors
Would it surprise you to discover that China is planning to add 800 miles to its subway system over the next two years? That’s the distance equivalent to building a network from Dallas to Chicago in less time than the U.S. Congress can resolve a budget!
2013-03-13 Dow--Then and Now by Frank Holmes of U.S. Global Investors
The Dow Jones Industrial Average is making record highs, knocking the 2007 peak off its pedestal, but investors aren’t celebrating.
2013-03-08 Ride Over Bump in Gas Prices with These Investment Themes by Frank Holmes of U.S. Global Investors
U.S. oil independence is picking up steam. In December, the country lost its position as the world's largest importer of oil, with shale production climbing faster than expected. Net imports fell below 6 million barrels per day, domestic production increased more than 1 million barrels per day and demand declined by about 700,000 barrels per day.
2013-03-08 How to Keep Calm and Invest On by Frank Holmes of U.S. Global Investors
The market noise of today will not be going away. However, investors can gain confidence in the following wisdom of the crowd. As famous investor Benjamin Graham said, "The individual investor should act consistently as an investor and not as a speculator. Keep calm and invest on.
2013-03-07 A New Chapter for Turkey? by Frank Holmes of U.S. Global Investors
In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent.
2013-03-01 One Chart May Explain Why Gold Stocks Are Lagging Bullion by Frank Holmes of U.S. Global Investors
It may be time for certain gold stocks to shine, writes Bryan Borzykowski in a Canadian Business article this week. He highlights many of the issues that have come to the surface over the past few years, including the bad decisions made by management, capital cost increases, and the birth of the gold bullion exchange traded fund.
2013-03-01 Greetings from Istanbul! by Frank Holmes of U.S. Global Investors
As I travel around Turkey, I am reminded how vital good government policies are to the health of a nation. Following a decade of fiscally responsible actions, Turkey is the picture of a growing prosperity. Perhaps Americas elected officials could take a tip from this vibrant country overseas.
2013-02-22 A Test of Strength for Gold by Frank Holmes of U.S. Global Investors
This week, we saw the gold bears growling louder and gaining strength, as the worlds largest gold-backed ETF, the SPDR Gold Trust, experienced its largest one-day outflows since August 2011. The Fear Trade fled the sector following the Federal Reserves meeting that revealed a growing dissension among some of its members over the central banks bond-buying program.
2013-02-16 When It Comes to Gold, Stick to the Facts by Frank Holmes of U.S. Global Investors
During short-term gold corrections, its much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.
2013-02-16 In the Year of the Snake, Where Will Copper Head? by Frank Holmes of U.S. Global Investors
With an improving global economy and Chinas new leadership ramping up projects, will base metals, such as copper, head higher?
2013-02-08 Golden State Gets Upgrade by Frank Holmes of U.S. Global Investors
The turbulent clouds that settled upon California's bond market are beginning to dissipate, as the state's general obligation debt was recently upgraded to 'A' by Standards & Poor's. It has been almost a year since the rating agency has had a sunny outlook on the Sunshine State, but a series of improving economic data and better fiscal position have been turning things around.
2013-02-08 Out With the Dragon In With the Snake by Frank Holmes of U.S. Global Investors
Over 2013, we expect the Chinese government to continue its accommodative efforts, which should reinforce the equity rally. In addition, the new pyramid of power is focused on growth, as it seeks to improve and reform policies that will provide its residents with opportunities and social security, increase incomes and raise standards of living, which should encourage domestic consumption. Growth is set to be considerable over the next several years.
2013-02-01 Dow To 14,000 and Beyond? by Frank Holmes of U.S. Global Investors
So will the Dow go beyond 14,000? Although you cant predict how hot the weather will be this summer, the clouds appear to be parting to reveal the sun today. Make sure your asset allocation positions your portfolio to shine.
2013-01-25 Resource Investors: Why You Can Expect Sunnier Days Ahead by Frank Holmes of U.S. Global Investors
During the current commodity supercycle, there have been occasionstoo many to countwhen investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe. Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.
2013-01-18 4 Sensational Facts About Gold Investing That You Might Not Know by Frank Holmes of U.S. Global Investors
1. Gold has been a consistent performer over the decades. 2. Gold should remain a hot commodity in 2013. 3. Gold is the least volatile commodity on the table. 4. The last four years were better than you thought.
2013-01-11 Invest In Equities: Your Future Self May Thank You by Frank Holmes of U.S. Global Investors
Investors have had an illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward. This turned out to be a mistaken belief.
2013-01-04 In 2013, Resolve to Follow the Money by Frank Holmes of U.S. Global Investors
During these first days of January, many adopt an out with the old, in with the new, approach to shed bad habits or extra pounds. Washington opted for its same ol strategy when averting the fiscal cliff, as the addictive nature of can-kicking is a transatlantic sport, according to The Economist. The short-term fix did nothing to control the unsustainable path of entitlement spending on pensions and health care nothing to rationalize Americas hideously complex and distorted tax code... and virtually nothing to close Americas big structural budget deficit.
2012-12-28 The Year's Surprises in Gasoline, Oil and Resources Stock Prices by Frank Holmes of U.S. Global Investors
On Wednesday, I talked about three of the top 10 commentaries that were popular over 2012. Here are a few more to highlights.
2012-12-28 Readers' Golden Nuggets Focused on Gold, Resources and Overcoming Negativity by Frank Holmes of U.S. Global Investors
The past few days Ive been counting down the most popular commentaries over the past year. China, commodities and bond fund popularity were big hits; so were the Surprises in Gasoline, Oil and Resources Stock Prices. Here are the top four.
2012-12-27 Reader Favorites: A Countdown by Frank Holmes of U.S. Global Investors
The days between Christmas and New Year's are ideal times to reflect on the topics that captured your interest the most over the past year. To help uncover the top commentaries that were discussed, shared and read, we went data mining across news and social media sources. Over the next few days, I'll be counting down the top 10, concluding with the Investor Alert on Friday.
2012-12-21 Light at the End of the Tunnel for Gold by Frank Holmes of U.S. Global Investors
Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasnt only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually brutal with quite a few confused participants with some seemingly positive aspects of the market not having an impact.
2012-12-20 The Ghosts of Fiat Currencies Past by Frank Holmes of U.S. Global Investors
Nearly 600 paper forms of money created over the past several centuries are no longer in circulation, according to research summarized by Gold Silver Worlds recently. While the reasons vary from declarations of independence, monetary unions, war or hyperinflation, these ghosts of currencies past portray a haunting history for paper currencies backed only by the trust of a government.
2012-12-15 A Face-Off Between Passive and Active Investing by Frank Holmes of U.S. Global Investors
Exchange-traded funds continued to attract assets in 2012 while money has been exiting mutual funds. Still a majority of assets continue to be invested in actively managed products: As of the end of 2011, of the nearly $13 trillion invested in funds, index and exchange-traded funds comprise only about 8 percent, according to the Investment Company Institute.
2012-12-08 How Gold Miners Can Leverage the Price of Gold by Frank Holmes of U.S. Global Investors
Gazing into their crystal balls this week, Wall Street firms interpreted differing futures for gold next year. Morgan Stanley awarded gold the best commodity for 2013 while Goldman Sachs called the end of the metals hot streak. After seeing 11 consecutive years of positive performance from gold, one needs to be wary of research analysts price forecasts, as they have consistently underestimated the shifting dynamics driving the precious metal higher.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-11-29 Small-Caps Pack Big Punch in Emerging Markets by Frank Holmes of U.S. Global Investors
In October, the International Monetary Fund painted a gloomier picture for global investors, as it projected slower growth due to slumping world trade and uncertainty in the West. Despite the forecast, big gains can still be unlocked in the faster-growing emerging markets. We believe the smaller stocks are holding the key.
2012-11-23 Five Amazing Global Consumer Trends by Frank Holmes of U.S. Global Investors
Fifth Avenue no longer the worlds most expensive retail location. China set to be the second largest luxury market by 2017. Viva Macau is gaming capital of the world. Inexpensive Indian Aakash 2 could revolutionize tablet industry. Emerging market residents don't need a bank account to pay with their mobile wallet.
2012-11-21 The Most Wonderful Time of the Year...for Stocks by Frank Holmes of U.S. Global Investors
November hasn't been living up to its reputation as one of the best months for U.S. stocks. Equity investors have been fed a cornucopia of negative news that has been difficult to digest, including the outcome of the "fiscal cliff," the front page photos of rioting in the eurozone, and the escalation of geopolitical risk in the Middle East.
2012-11-17 Three Events That Sum Up the Week by Frank Holmes of U.S. Global Investors
India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounceback in demand due to improved sentiment during the festival season. The Federal Housing Administration reported that it has exhausted its reserves, possibly requiring a bailout from U.S. taxpayers for the first time ever in its nearly 80-year history. The global economic picture came into focus a little more this week with the announcement of Chinas new leadership.
2012-11-15 Rediscovering the Golden Beauty of Myanmar by Frank Holmes of U.S. Global Investors
Myanmar has been called "probably the best investment opportunity in the world right now," by legendary international investor Jim Rogers. In an interview with The Myanmar Times, he compared the country formerly known as Burma to China in the 1970s, when it started opening up to the world. "In 1962, Burma was the richest country in Asia. Then they closed and [now] it is the poorest."
2012-11-13 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors
Last Friday, President Obama addressed the two topics that have been on many equity investors' minds since election night: the economy and the dreaded "fiscal cliff." In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. That's "how we did it in the 1990s, when Bill Clinton was president," says the president.
2012-11-09 Chart of the Week: Gold and an Ever-Growing Balance Sheet by Frank Holmes of U.S. Global Investors
While Americans were still submitting their ballots, gold rallied on the possibility of a President Barack Obama reelection. With presidential results confirmed, it appears that Ben Bernanke's job of hovering over the economy and dropping parachutes of money out of his helicopter is secure. "Gold could not have asked for a better outcome," with a second term for Obama, a Democratic Senate and Republican House, says UBS Investment Research.
2012-11-09 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors
On Friday, President Obama addressed the two topics that have been on many equity investors minds since election night: the economy and the dreaded fiscal cliff. In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. Thats how we did it in the 1990s, when Bill Clinton was president, says the president.
2012-11-02 A Tipping Point for Gold Companies by Frank Holmes of U.S. Global Investors
Did you know that gold stocks tend to underperform during election years? As shown in the chart below, over the past quarter-century up until the prior election, the performance of the Philadelphia Stock Exchange Gold and Silver Index (XAU) was weak during the year of a presidential election.
2012-11-02 Who Will Lead America Over the Next Four Years? by Frank Holmes of U.S. Global Investors
If President Obama is reelected, it could be a negative for certain energy companies involved in natural gas fracking, says International Strategy & Investment (ISI). Conversely, a Governor Mitt Romney win could be significant for energy companies. In its Romney Portfolio ISIs rationale is that Romney and the GOP will try to do more to promote traditional forms of energy, including offshore drilling, approving the Keystone pipeline, and exploiting the nations coal resources.
2012-10-26 Don't Fear a Normal Gold Correction by Frank Holmes of U.S. Global Investors
Dont let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, these are the positive dynamics driving higher prices for gold and gold stocks.
2012-10-22 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
With negative sentiment toward China reaching an extreme in recent months, patient investors have been rewarded with recent news of improving data from the Asian giant.
2012-10-19 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
This appears to be a good time to be investing in China, as stocks are historically cheap. Chinese stocks are also cheap compared to emerging markets.
2012-10-16 China's Pyramid of Power by Frank Holmes of U.S. Global Investors
China celebrated another achievement last week, as Mo Yan became the first Chinese citizen to win a Nobel Prize for literature. The selection of Mo was praised by a Chinese nationalist tabloid as a sign that mainstream China could "no longer be refused by the West for long."
2012-10-12 Chinas Pyramid of Power by Frank Holmes of U.S. Global Investors
We've been able to witness Chinas incredible growth, with GDP averaging 10 percent per year and more than 500 million people moving out of poverty over the past 30 years. Now after three decades of tremendous expansion, this new generation of leaders will have to carefully maneuver the country into the next decade, towing the line between maintaining the stability created during the previous Hu-Wen administration and continuing the political and economic reform necessary to adjust to the countrys slowing growth.
2012-10-10 Infectious Ideas for a Connected World by Frank Holmes of U.S. Global Investors
With a greater international exchange of ideas, goods, services, and talent today, our world has never been more wired and connected. Globalization has wholly transformed how people across continents absorb information and interact with each other. I believe it also has subtly changed how we think and act as individuals.
2012-10-05 How Helicopter Ben Helps Jobs and, Inadvertently, Gold by Frank Holmes of U.S. Global Investors
The world's central bank leaders continue to spike the monetary punch bowl, with investors imbibing on gold once again. This flurry of gold buying prompts many curious investors and doubting media to ask me two questions: 1) How can demand for gold and gold stocks continue; and 2) How high can the precious metal go? To answer these questions, we need to look at the intentions behind the economic and political decision-making across several developed countries, analyze the causes, the effects, and the possible ramifications.
2012-09-28 Is Negativity Contagious? by Frank Holmes of U.S. Global Investors
Negativity persists among investors, as evidenced by the ongoing stream of money leaving equity funds into bond funds. It's challenging to pinpoint the origin of the pessimism because it comes from all over the globe. Daily polls finding Americans at an extreme political division, scenes of anti-austerity riots in Greece and Spain, and the Shanghai Composite Index falling to new lows are only three recent examples.
2012-09-28 Commodity Stocks: Improving Returns With No Extra Volatility by Frank Holmes of U.S. Global Investors
Not every investment is the same. Even within the commodities space, when looking at measures such as correlation, performance and risk, two indexes can have very different effects on a portfolios results.
2012-09-27 Gold Stocks or Apple: Which Holds a Place in Your Portfolio? by Frank Holmes of U.S. Global Investors
In a battle between the largest gold exchange traded fund and the biggest tech stock, which investment would get your vote? Would you choose gold because of the macroeconomic factors supporting the rise of the precious metal? Or do you put your money on Apple because of its overwhelming popularity?
2012-09-25 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Chief Justice John Marshall, in 1819, once described policymakers' great influence, remarking, "The power to tax involves the power to destroy." With rising fiscal deficits and a desperate need to raise revenue, many nations have come up with various tax solutions to raise billions of dollars. One hotly contested idea in the U.S. and Europe lately, and once advocated by John Maynard Keynes during the Great Depression, is a financial transactions tax imposing a cost on buys and sells of stocks or bonds.
2012-09-21 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Could a transaction tax have unintended consequence for American banks? While the jury is still out on that answer, Hungarys example is a reminder to policymakers to comprehensively consider the rewards of collecting a Robin Hood tax along with the risks. Profits and bank credit growth rates across Hungary plummeted due to the hefty bank levies imposed.
2012-09-14 When You Should Stop Buying Gold by Frank Holmes of U.S. Global Investors
Economists and politicians have debated the merits of gold for decades. In the last 10 years, the discussion has been even more hotly contested, as the price of the yellow metal has skyrocketed. Ron Rimbus, CFA, in a blog for the CFA Institute, is the latest person to take on the subject. Rimbus argues that the intrinsic value of gold is intricately linked to whats going on in the financial system, even after the end of the gold standard in 1971.
2012-09-14 All Signs Pointing to Gold by Frank Holmes of U.S. Global Investors
So, gold investors, if you havent put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw 'massive inflows' into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.
2012-09-07 Policymakers Report Card on Competitiveness by Frank Holmes of U.S. Global Investors
The U.S. dropped to No. 7 on the World Economic Forums newly released 2012 Global Competitiveness Index report. Switzerland retained its top position as the most competitive nation, followed by Singapore, Finland, Sweden, the Netherlands and Germany. Asian countries continue to be among the most competitiveand many are gaining strength. Among the top 20, five are from Asia.
2012-09-07 Chinas Next Act by Frank Holmes of U.S. Global Investors
World markets may not have to wait much longer for Chinese policymakers to act, as the government recently announced new infrastructure projects. According to Bloomberg, China approved 25 new subway construction projects, with related investments estimated to be more than 840 billion yuan. Railway, subway and construction stocks in China increased on the news. China is in much better shape than the rest of the world. A powerful rebalancing strategy offers the structural and cyclical support that will allow it to avoid a hard landing.
2012-09-01 The Case for Emerging Europe by Frank Holmes of U.S. Global Investors
If history had turned out differently, the USSR wouldve taken home the most Olympic medals this year, as the total awarded to athletes from the area was 163, according to a blog on Foreign Policys website. As we all know, the Wall came down, the Soviet Union collapsed, and now Russia has to be content with its third-place position of 82 medals. Athletes from the United States were awarded the most medals (104), followed by participants from China, who took home 88.
2012-09-01 The Latest ETF Eye-Opener by Frank Holmes of U.S. Global Investors
A few years ago, we discussed the flow of money rushing into ETFs without careful analysis by investors about the unknown risks. Institutional Investor recently highlighted another downside to these investments: ETFs' use of hypothetical, back-tested performance. To attract assets, some index providers have unique indexes based on various performance characteristics, weighting methodologies and valuation metrics.
2012-08-28 Chart of the Week: Does Adopting Technology Increase a Nations Wealth? by Frank Holmes of U.S. Global Investors
That's the question Harvard Business School's Diego Comin wanted to answer. His research analyzed how quickly 15 different technologies -including steamships, the telegraph, the Internet, MRI scanners, electricity - have been adopted by 166 different countries over the past two centuries to determine if there is a relationship between a country's historical rate of adoption and its per capita income.
2012-08-24 Gold: First Mover Advantage by Frank Holmes of U.S. Global Investors
This week, gold bugs were rewarded with the long-awaited positive momentum in the yellow metal, and on Friday, bullion rose to about $1,670. After falling below the 200-day moving average, gold had been stuck in quicksand for several months. With the jumps in the price this week, bullion swiftly rose above this critically important long-term moving average.
2012-08-17 Evaluating the Wisdom of Buying Gold by Frank Holmes of U.S. Global Investors
At the end of January 2008, I posted a discussion about how the book The Wisdom of Crowds by James Surowiecki could explain gold's price climb. The book's premise was basically that "large groups of people are smarter than an elite few." Even before the height of the global crisis, there was a "wise crowd" of investors who had been buying gold as a safe haven from currency risks and the trillions of dollars invested in derivatives, and as a way to recycle petrodollars.
2012-08-17 Love Trade Cools as Central Banks Gold Demand Heats Up by Frank Holmes of U.S. Global Investors
Although the Love Trade (purchasing gold for coins or jewelry) is on ice for now, a relatively new gold buyer has been warming up to gold. Central bank purchases hit a record high since the official sector became gold buyers three years ago. If this trend continues over the remainder of 2012, central banks will be entering a new territory of gold buying that has not been seen since the early 1960s and since the end of the Bretton Woods System in 1971.
2012-08-13 Which Way Will the Pendulum Swing for Gold? by Frank Holmes of U.S. Global Investors
One of the most fascinating aspects when watching a sporting event like the Olympics is the historical statistics highlighting the tremendous advances in athleticism over the years. In the spirit of the events this summer, BTN Research compared gold's advancement from the beginning of the games in Beijing to the London Olympics.
2012-08-10 Where Wealth Thrives and Innovates by Frank Holmes of U.S. Global Investors
A surprising wealth of information about the world's most prosperous people can be discovered in two new reports. The Chinese Millionaire Wealth Report 2012 found that there are now a million millionaires in China. On average, a Chinese millionaire is 39 years old, has an average of four luxury watches, vacations in France, and owns a business. KPMG;s The Wealth Report 2012 found that there are 18,000 centa-millionaires in Southeast Asia, China and Japan.
2012-08-03 The Race for Resources by Frank Holmes of U.S. Global Investors
The world watched in awe as American swimmer Michael Phelps became the most decorated Olympian of all time. It's inspiring to see the incredible results of his tremendous sacrifice and commitment. Investing in global markets requires the same sort of stamina, especially at times like this week, when the month's reading on the manufacturing industry was not encouraging. The J.P. Morgan Global Manufacturing PMI of 48.4 for July was the lowest since June 2009.
2012-07-27 Will the Markets Direction Determine the Presidency? by Frank Holmes of U.S. Global Investors
After the first few months of President Barack Obama's term in office, I wrote about the carnival rollercoaster the market was riding. Looking at the blue line below, that post may have foreshadowed his tenure! The average of four-year presidential cycles from 1953 through 2008 shows that the S&P 500 Index generally remains flat for almost the first two years, before heading higher in the second half.
2012-07-27 Challenging the Paradigms of Investing by Frank Holmes of U.S. Global Investors
Global investors constantly need to be watchful of individual biases, impaired thinking and emotional reactions that can have an adverse effect on a portfolio. One of our values at U.S. Global Investors is to always be curious to learn and improve, and the Investor Alert was borne from a belief that shareholders want to understand the very subtle nuances of biases and misconceptions. I have selected a few that I believe challenge the paradigms of investing.
2012-07-20 America's Competitive Spirit by Frank Holmes of U.S. Global Investors
We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.
2012-07-18 How to Look Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors
Among investors these days, a fellow commodity bull is about as rare as finding a positive story in the media, especially when you look at the results of metals and natural resources during the first half of 2012. Only four commodities on our periodic table pulled off a positive return. Wheat grew the most, rising 13 percent, followed by single-digit rises from corn, gold and copper.
2012-07-13 Worried about Higher Taxes? Take Action by Frank Holmes of U.S. Global Investors
About 1.25 million Americans would pay more in taxes next year if President Barack Obamas latest plan is approved. The White House wants to allow taxes to rise for households making more than $250,000 by boosting the top marginal tax rates to 36 and 39.6 percent (currently, its 33 and 35 percent). In an environment where government policy favors higher taxes, investments that lower a tax bill can look attractive.
2012-07-13 Looking Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors
Tremendous population growth, changes in government policies, development of new technologies, urbanization trends work the same way. Its what Jeremy Grantham called the great paradigm shift and they have equally dramatic effects on how we invest in commodities, change opportunities and adjust for risk. Smart investors look past the rampant negativity in the media to see these patterns and anomalies to determine where the opportunities and threats lie.
2012-07-11 Pocket of Strength: Employment in the Mining Industry by Frank Holmes of U.S. Global Investors
Did you know that one of the industries that has seen the best job growth in the U.S. is mining? As you can see below, from the end of December 2007 through May 2012, U.S. employment in the mining sector has increased 16 percent. This percentage change is far better than any other sector, according to data from the Bureau of Labor Statistics.
2012-07-06 Global PMI: The Trend is Your Friend by Frank Holmes of U.S. Global Investors
Manufacturing around the world weakened in June, according to the JP Morgan Global Manufacturing Purchasing Managers Index (PMI). Its reading of 48.9 was the lowest in three years and the first dip below 50 since September 2011. The current reading is also below the three-month moving average for the second month in a row. As you can see on the chart, PMI crossed below the three-month in May.
2012-07-06 Are You Limited by Linear Thinking? by Frank Holmes of U.S. Global Investors
Dont be limited by linear thinking in your portfolio. As an alternative to low yielding Treasury bonds, consider resources stocks that pay dividends. Weve found that most materials, utilities and energy stocks in the S&P 500 Index pay a dividend higher than the 10-year Treasury: Materials and utilities companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy stocks pay an average yield of 2.2 percent. Nonlinear thinkers have historically benefited from the inclusion of natural resources as part of a balanced portfolio.
2012-06-29 Unmasking the Asian Giant by Frank Holmes of U.S. Global Investors
China is far from perfect: While actors can perfect their lines and use masks to captivate an audience, smart investors know better to use a wealth of information across numerous sources to guide investment decisions. Weigh the evidence and judge for yourself. As my friend, Investment Strategist Keith Fitz-Gerald recently said in an interview, A powerful China is coming, and we have two choices. Either we're at the table, or we're on the menu. To him this means, Good news from China is good news for the U.S.; bad news from the Chinese economy is bad news here.
2012-06-27 An Ending Made For Gold by Frank Holmes of U.S. Global Investors
Over the past several months, the markets have tested investors conviction to gold. Since February, the price of the yellow metal has steadily stepped lower, rallying somewhat in May before falling again when Ben Bernanke disappointed by not providing the U.S. with more stimulus. Meanwhile, the dollar gained ground as global investors fled the euro.
2012-06-27 What the Price of Gas Tells Us by Frank Holmes of U.S. Global Investors
A few months ago, we created two visuals we felt captured the emotions of how people respond to gasoline prices around the U.S. With an increased dependency on our cars these days to get to work, school and grocery stores, the price of gas is a constant reminder of how rich we feel. When it seems as if filling the SUV costs an arm and a leg, we shift patterns by carpooling, forgoing the trip to the beach or decreasing spending elsewhere.
2012-06-22 An Ending Made For Gold by Frank Holmes of U.S. Global Investors
Hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5 to 10 percent of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system.
2012-06-21 Rising China is a Misnomer...and Other Actionable Takeaways by Frank Holmes of U.S. Global Investors
Did you know that at the beginning of the 19th century, China made up the largest share of the worlds GDP? This makes the term Rising China a misnomer, as the country has been simply returning to, instead of rising to, super power, says former U.S. Secretary of State Henry Kissinger.
2012-06-15 Theres No Place Like America by Frank Holmes of U.S. Global Investors
One should not underestimate what it means to be American; you dont find a feeling quite like it outside the nation. In fact, emerging countries such as Singapore and China are now striving to replicate what my friend Alexander Green calls American exceptionalism. On the Organisation for Economic Cooperation and Development (OECD) Your Better Life Index based on 11 diverse measures of well-being, the U.S. is highly ranked. Each element measures a feeling of satisfaction with life, including health, education, environment, personal security, life satisfaction, and work-life balance.
2012-06-15 The Right Formula for Markets by Frank Holmes of U.S. Global Investors
Last weekend, I had the chance to experience the thrill of Formula 1 Grand Prix du Canada in Montreal. Seeing the incredible fluidity and flexibility of every race car, it got me thinking about how F1 has evolved over the past 60 years. Cars are now aerodynamic like a jet fighter, designed with wings that use the same principle as an aircraft and tires that withstand tremendous forces. Even with all these incredible advancements in technology, rules and regulations have been streamlined to reduce costs and improve safety. Since 1994, there hasnt been a fatal accident in the motorsport.
2012-06-15 Speed Up or Slow Down--Don't Exit the Commodities Highway by Frank Holmes of U.S. Global Investors
A positive signal received this week came from Goldman Sachs, when the firm recommended stepping back into the markets in its latest Commodity Watch. Goldman is anticipating a 29 percent return for the S&P GSCI Enhanced Commodity Index over the next 12 months and suggests investors might want to increase their position in commodities.
2012-06-09 China Eases the Way by Frank Holmes of U.S. Global Investors
Following negative data last week, investors were clearly concerned about global growth and anxiously anticipated government actions. While Europe and the U.S. disappointed investors, China surprised on the upside by cutting interest rates. The market reacted positively, as the S&P 500 Index increased 3.7 percent. Its clear the governments tone in China shifted this week with the rate cuts. The government appeared to be comfortable with slower growth, but that position seemed to change as the country took steps to avert a hard landing and cut interest rates to stabilize the economy.
2012-06-02 The Golden Wealth of Turkey by Frank Holmes of U.S. Global Investors
When I talk about the Love Trade, India and China are frequently discussed since the two countries have been dominating world jewelry demand. Turkeys love for gold, though, cannot be overlooked, as an estimated 5,000 tons have been accumulating in peoples homes for years. Turkey is now offering incentives for people to store their gold in the bank instead. By acknowledging the hidden wealth of the Eastern European nation, this move will allow banks to lend more money and ultimately improve the countrys current account balance.
2012-06-02 Will the ECB and Fed Follow Where China Leads? by Frank Holmes of U.S. Global Investors
Every month, policymakers track purchasing managers indices (PMI) around the world as they consider fiscal and monetary actions. To us, a PMI is a measure of health of companies around the world, because it includes output, new orders, employment and prices across manufacturing, construction, retail and service sectors. Historically, weve seen Chinas PMI number leading the year-over-year change in exports by three to four months, so when the PMI has increased, a few months later, Chinese exports have historically risen, and vice versa.
2012-05-25 China Gives Green Light to Car Buyers by Frank Holmes of U.S. Global Investors
China just made it a little more affordable to buy a car. Last week, the government announced a one-year, RMB 26.5 billion subsidy program devoted to energy-efficient products. About RMB 6 billion will be set aside for fuel-efficient cars, and the remaining incentives focus on LED lighting, high-efficiency motors, and air conditioners, refrigerators, washing machines and water heaters that comply with energy saving standards.
2012-05-25 There's No Place Like America by Frank Holmes of U.S. Global Investors
Investors arent endorsing U.S. equities today. With all the positive aspects mentioned above, todays low participation in the U.S. stock market is perplexing. Here are two more reasons to invest today: 1) About 620 companies in the S&P 1500 Index are growing their revenues at more than 10 percent; and 2) 428 stocks in the index have an annualized dividend yield higher than the 10-year Treasury.
2012-05-24 Pocket of Strength: Turkey Retail Stocks Rally by Frank Holmes of U.S. Global Investors
To add alpha, we believe investors need to continually seek pockets of strength amidst todays mire of pessimism. One bright spot weve seen lies just east of Greece: Turkey. Many investors believe banks are the only investment play in Turkey. The sole question for those investors is to hold or not to hold banks. Heres what we think is a better strategy: Invest in undervalued, diverse, smaller companies that will benefit from a resilient consumer, low unemployment rate and sound government policies.
2012-05-18 How Gold Demand Remains Resilient by Frank Holmes of U.S. Global Investors
Demand for gold was relatively resilient in the first quarter of 2012, with global demand falling 5 percent. Marcus Grubb, managing director of investment, calls this slight quarter decline in demand noise in the context of 22 percent rise in the price of gold compared to first quarter of 2011. Also, gold demand was very strong in the first three months of last year. Gold faced a complex quarter, as you can see by looking at jewelry demand by country. There was a significant rise in demand for jewelry from Russia, Egypt, Indonesia, Taiwan, and China, compared to the first quarter of 2011.
2012-05-18 Gold: The World's Friend for 5,000 Years by Frank Holmes of U.S. Global Investors
Investors have defriended gold recently in favor of the dollar, as Greek and French voters rejected austerity measures. Greeks have been responding to their escalating debt issues for a while by steadily pulling money from overnight deposits. I often say, money goes where it is best treated, and these deposits will need to find a safe haven.
2012-05-11 Chart of the Week: Where Global Industrial Production Is Coming From by Frank Holmes of U.S. Global Investors
Many have compared todays economic recovery to the slow, stagnant growth Americans lived through in the 1970s. I argue theres at least one significant difference: Four decades ago, the world couldnt depend on emerging market growth like it can today. Take a look at Macquarie Researchs chart comparing industrial production (IP) following the 1970s with the output after the downturn in late 2008. The output during the mid-1970s and todays cycle looks very similar over the first two years. The decline experienced around the 31-month mark today also mirrors the drop of the 1970s.
2012-05-11 Looking to China to Fire Up its Economy by Frank Holmes of U.S. Global Investors
Following on the heels of renewed concern over Europes debt situation, China released its monthly economic data. Fixed asset investment, industrial production and retail sales all rose in April, yet growth was not as strong as analysts anticipated. Weak is the word to describe Chinas April figures, says CLSAs Andy Rothman in his Sinology Report. But China wants the ability to manage a stable decline to promote medium-to-long-term structural reforms as well as avoid a hard landing, says CEBM.
2012-05-10 Gold Takes It On the ChinWhats Next? by Frank Holmes of U.S. Global Investors
The market reacted strongly to the elevated debt crisis in Europe by liquidating positions in multiple asset classes. Gold fell 3 percent this week, losing its safe haven status as the dollar grew stronger and the 10-year government note headed lower. Seasoned advisors know the markets usually overreact to negative news; they also are very aware of golds normal monthly historical volatility. Throughout the past 20 years of monthly returns, the precious metal generally increased only 0.5 percent in May, and has historically declined in June and July.
2012-05-04 Apple is a WantGlobal Resources are Needs by Frank Holmes of U.S. Global Investors
Investors seem to be overlooking the fact that Apples products are wants, not needs. Millions of consumers want an iPad and many want a computer, yet, every single person in the world needs global resources. We need companies to grow our food; we need oil, natural gas and coal to fuel our cities. And so do the other 7 billion people on the planet. To outperform the S&P 500 over the long term, we believe investors should overweight their portfolio to the global products and services that people need, not want.
2012-05-04 Do Emerging Markets Win, Place or Show in Your Portfolio? by Frank Holmes of U.S. Global Investors
The recovery in U.S. stocks is significant and helps restore confidence in equities. Were pleased to see markets improving, especially following a rough finish in 2011. Yet there lingers a persistent negativity toward emerging markets growth and commodities that prevents many investors from jockeying their portfolios into a position for growth. Rather, they remain spectators on the sidelines, with equity fund outflows continuing.
2012-04-27 Sell in May and Go Away? Not this Year by Frank Holmes of U.S. Global Investors
One catchy investing maxim thats popular this time of year is sell in May and go away, the notion that investors should cash in their investments and take the summer off. We believe its a much better market this year. After following a similar trajectory as the previous year from October to the beginning of March, improving economic data pushed the S&P 500 over 3 percent higher in March 2012 after trending sideways during the same time period last year.
2012-04-20 Outsized Outsourcing Opportunity in the Philippines? by Frank Holmes of U.S. Global Investors
Our investment team has reported in the weekly Investor Alert about a number of positive trends coming out of the Philippines lately, including a narrowing of the budget deficit, easing inflation and rising export numbers. In addition, CLSA reported last fall that, the Philippines increasingly looks like it could be where Indonesia was five years ago in terms of the potential for a multi-year credit and investment cycle to kick in after years of post-Asian Crisis de-leveraging.
2012-04-20 Weighing the Evidence of Oil and Gold Stocks by Frank Holmes of U.S. Global Investors
We believe in thinking contrarian and keeping a close eye on historical trends to discover inflection points, as stocks tend to eventually revert to their means. For example, in March 2009, we noted significant changes signaling the market had hit rock bottom; following that time through the end of the first quarter, the S&P 500 Index rose more than 100 percent. Todays extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.
2012-04-13 What CLSAs Andy Rothman Thinks is the Biggest Misunderstanding in China by Frank Holmes of U.S. Global Investors
In our webcast last week on what to expect from China, Andy Rothman from CLSA outlined the major misconceptions about China. He believes the biggest myth that investors think about China is that its economy is primarily driven by exports. Using two charts which debunk this misconception, Andy explained that domestic investment and domestic consumption have long been the most significant drivers of Chinas economic growth.
2012-04-13 Wheres the Beef for Gold Equities? by Frank Holmes of U.S. Global Investors
If you plan on shopping for bargains in the gold miner department, youre going to fight a crowd. Numerous global investors have been pounding the table for gold stocks, including Marc Faber who said gold shares have become extremely oversold and could rebound in the next few days and Global Portfolio Strategist Don Coxe, who reiterated that gold equities are undervalued compared to the precious metal. A big buyer has been the miners themselves. Mergers and acquisitions in the mining sector have been at an all-time high over the past two years. Theyve been willing to pay a premium too.
2012-04-10 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors
It was a challenging week for gold investors. Although the yellow metal has been on a spectacular 11-year bull run, some think golds heyday is over. This March, there seemed to be one main driver eight thousand miles away negatively affecting gold prices. I often say that government policy is a precursor to change, and fiscal policy strongly affected the Love Trade in India last month. To trim its current account deficit, Indias finance minister proposed doubling the customs tax on the precious metal. As a result, gold imports into the worlds largest gold market fell 55 percent.
2012-04-06 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors
Its been a challenging week for gold investors. As I often say, investing, like life, is about managing expectations. Over the past 11 years during golds spectacular bull run, investors should remember that price action can go both ways. What helps is to look at the historical rise and fall of gold. For example, looking at the past decade of one-day 5 percent drops in gold, you can see that this event is pretty rare. In 2006, gold dropped more than 5 percent in a day only two times. In 2008, there were three such events. Another one occurred at the end of this February.
2012-04-05 The Blue Chips of China by Frank Holmes of U.S. Global Investors
Business Insider created a slideshow that showcases Chinas biggest brands from BrandZs ranking of companies by brand value. The list is a global recognition of how China is increasingly becoming a brand creator and marketer, not just an export machine. Many of the companies are state-owned; all of the brands are publicly traded, report positive earnings and formed by a mainland enterprise. Because the country is growing as an economic powerhouse, it is time that others around the world understand the power brands of China, says BrandZ.
2012-04-03 Time to Pay the Piper by Frank Holmes of U.S. Global Investors
One way investors can offset higher tax rates is through municipal bonds. In general, interest generated from municipal bonds is exempt from all federal income taxes and some state and local taxes (depending on your state). While municipal bonds carry a greater amount of risk than Treasury bonds, tax advantages and higher yields make them extremely attractive to Treasuries on a relative basis. The yield on government debt is currently in the doldrums just above 3 percent while the yield on the Bond Buyer 40 Index of munis is above 4 percent.
2012-03-30 The World's a Little Richer by Frank Holmes of U.S. Global Investors
The World Bank released an update to its consumption poverty estimates in developing countries, and for the first time ever, the organization found progress in all the regions they track. In terms of the number and percentage of people living on $1.25 a day at 2005 prices in 130 developing countries, the world is a little richer. The area seeing dramatic progress was East Asia, reports the World Bank. Back in the 1980s, this region had the worlds highest incidence of poverty. Nearly 80 percent of people lived on less than $1.25 each day; In 2008, the number dropped to 14 percent.
2012-03-30 Does China Hold the Winning Ticket? by Frank Holmes of U.S. Global Investors
Some bears may think the odds of China being the winner among emerging markets in 2012 are also remote. Over the past few years, Chinese stocks have lagged compared to its emerging market peers. However, the Periodic Table of Emerging Markets perfectly illustrates: last years loser can be this years winner. Historically, every emerging country has experienced wide price fluctuations from year to year. Over time, though, each country tends to revert to the mean.
2012-03-29 Who Will the Next President Be? by Frank Holmes of U.S. Global Investors
For global investors, its important to keep track of the presidential elections happening all around the world, as leaders can significantly affect their countries policies. And as our investment process indicates, we believe government policies are precursors to change. The Economist, which provided inspiration for U.S. Globals Election Interactive, discussed how the leaders who run the world could change this year, along with the ideas: A battle of ideas is under way From Shanghai to Mumbai and Sao Paulo, governments that removed economic restrictions have made their citizens richer.
2012-03-23 Gold and China: Where the Bulls and Bears Square Off by Frank Holmes of U.S. Global Investors
To paraphrase the great Steve Martin, todays investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly whats happened in gold and global markets in recent weeks. While market bulls have been sniffing out data points to support their case, market bears have continued to take a glass-half-empty approach. Gold and China are two areas that have been caught in the bear trap this week, but we believe the gold and China bulls still have room to run.
2012-03-22 Why Gold Can Go the Distance by Frank Holmes of U.S. Global Investors
Golds been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback. Since the beginning of 2012, gold has trailed its precious metals peers, gaining only about 6 percent compared to double-digit returns for silver and platinum. At the end of February, gold was especially hard hit, following Ben Bernankes announcement that there would be no additional quantitative easing and the European Central Bank offering additional LTRO loans to banks.
2012-03-16 The Heart of March Madness by Frank Holmes of U.S. Global Investors
Everyone agrees that its unethical to put the firms interest ahead of its clients. More importantly, a self-serving financial attitude is a breach of fiduciary duties. It may be possible that Goldman Sachs has moral issues, but not all financial firms are morally bankrupt. Nor are thousands of executives and professionals employed in the industrymoms, dads, uncles, aunts, daughters, sonswho are hard-working and acting in the best interest of their customers.
2012-03-14 Chart of the Week: The Worlds Infrastructure Plans by Frank Holmes of U.S. Global Investors
Demand for access to basic needs, an emerging middle class and a never-ending use of global resourcesthese are the primary drivers of major infrastructure projects over the next several years. The infrastructure plans taking place across emerging markets emulate a 1950s America. As these governments help their residents pursue the American Dream of better homes, health care and quality of life, I believe the companies with a strong footprint in these growing markets stand to benefit.
2012-03-09 Trading Volume's Disappearing Act by Frank Holmes of U.S. Global Investors
What do investors in the stock market need? Trading volume. After daily trading volumes in the S&P 500 Index hit a high in July 2002, volume quickly declined before leveling off, bouncing between 20 and 30 billion shares on a daily basis for a few years. Since its January 2009 high, daily shares traded have quickly spiraled downward. Today, volume is at a 15-year low, with only 7 billion shares traded.
2012-03-09 And the 2012 Pritzker Prize Goes to by Frank Holmes of U.S. Global Investors
Winning the Pritzker gives Wang credibility on the world stage,. It also gives credibility to Chinese architecture. Zhu Tao, a University of Hong Kong architecture critic, told The Wall Street Journal that Wangs award sends a message to young architects working in the context of explosive urban growth that architecture is a cultural enterprise, not just a commercial enterprise, and that architects are creators of culture. In this globalized world where China is a powerhouse economy, modern Chinese culture is being sculpted right alongside its skyscrapers.
2012-03-09 Appreciating China to its Fullest by Frank Holmes of U.S. Global Investors
While most analysts dont expect another moon shot rise in China's GDP this year, a 7.5 percent growth rate still exceeds most emerging economies and all developed nations. Advanced economy growth is expected to be meager, slowing from 1.6 percent to 1.3 percent in 2012, according to The Conference Board. For long-term investors learning to appreciate the finer points of the country, we believe China is somewhat like fine wine; it only gets better with age.
2012-03-08 The Apple Doesn't Fall Far From the Global Resources Tree by Frank Holmes of U.S. Global Investors
After Apple reached $500 billion in market capitalization, it was inducted into a very elite club of businesses that have reached this size. Only Cisco, ExxonMobil, General Electric, Intel and Microsoft have made it to the $500 billion mark. Since October, the tech companys stock has increased nearly 40%, making it the top driver of the S&P 500 rally. This increase caught the attention of many analysts, including Thomas Lee from J.P.Morgan, who declared that the company is a sector unto itself. At a market cap of just under $500 billion, Apple represents 3.7 percent of the S&P 500 Index.
2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors
We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.
2012-03-01 Cures for the Apathetic Investor by Frank Holmes of U.S. Global Investors
A lack of faith and trust has driven investors to the sidelines and halted the flow of capital in the U.S. According to the Investment Company Institute, investors pulled more than $130 billion from equity mutual funds during 2011. This is a common reaction in the cycle of market emotions where investors generally move from a fear of losing money, to becoming apathetic about the markets, to feeling confident about investments, and finally, to irrational exuberance. Right now, many investors appear to be stuck in an apathy sandpit.
2012-02-25 The Emotions of Fear and Apathy Create Good Buying Opportunities by Frank Holmes of U.S. Global Investors
One of the reasons money has found its way back to the market is that low interest rates and a bubble in bonds have upped the attractiveness of equities relative to other asset classes. In fact, many large-cap equities come with a higher yield. This means that investors can wait for the growth, while receiving the income. Overall, it looks like the markets dark clouds are lifting and we could be in for a period of sunny skies in the months ahead.
2012-02-23 Is America Over-Regulated? by Frank Holmes of U.S. Global Investors
The cover story of this week
2012-02-18 The Enduring Popularity of Gold by Frank Holmes of U.S. Global Investors
For thousands of years, pharaohs, explorers, rulers and investors have been attracted to gold, as the precious metal has been a vital tool in building and protecting wealth. While gold naysayers focus on the day-to-day fluctuations in price, I believe gold equities and bullion will continue to enjoy maximum popularity, as the Oracle of Omaha puts it, for years to come. The allure of goldwhether it is from Fear or Lovecannot be underestimated.
2012-02-18 What Will be the Most Promising Emerging Market? by Frank Holmes of U.S. Global Investors
Bloomberg Markets magazine recently posted a list of the most-promising emerging and frontier markets for investors. Rankings were determined by several investment measures, including GDP growth and ease of doing business.
2012-02-10 The Quiet After the Storm by Frank Holmes of U.S. Global Investors
Its all quiet on the equity front. For the past month, the S&P 500 Index has experienced an unusually calm period of lower volatility. Bespoke Investment Group says the timeframe between December 28 and January 26 has been remarkably lacking in 1 percenters. The firm found that its been more than a year since the S&P 500 has gone 26 trading days without declining one percent. We believe government policies are precursors to change, which is why our investment team continually monitors and tracks the fiscal, monetary and regulatory policies of countries.
2012-02-10 Theres Value in Russias Future by Frank Holmes of U.S. Global Investors
Increasingly, Russian companies have begun paying dividends, with some companies paying as much as a 10% annual dividend. As interest rates around the world will remain low or even negative for years to come, dividends offer investors the opportunity to earn income with the potential of appreciation. Although political risks remain, we believe Russia continues to be a hotbed of opportunity for emerging market investors.
2012-02-08 A Spark That Lit the Economy by Frank Holmes of U.S. Global Investors
Fridays employment data was the latest of a series of data showing marked improvement in the U.S. economy. ISI counted 18 straight weeks of stronger U.S. data including better vehicle sales, same store sales, homebuilding and manufacturing. Also, U.S. money supply is growing at a robust 10 percent year-over-year, greasing the wheels for Americas economic engine, which showed 3.7 percent growth in nominal GDP in the fourth quarter.
2012-02-03 In the Bullring With Gold by Frank Holmes of U.S. Global Investors
We anticipated that the Year of the Dragon would spur an increase in the buying of traditional gifts of gold dragon pendants and coins. Gold buying did hit new records, says Mineweb, with sales of precious metals jumping nearly 50 percent from the same time last year, according to the Beijing Municipal Commission of Commerce. This should serve as a warning to all of golds naysayers. Gold bullfighters bewareyou now have to fight the gold bull while fending off a golden Chinese dragon.
2012-02-02 What Milestone Will China Achieve Next? by Frank Holmes of U.S. Global Investors
The Economist put together a comprehensive dateline, charting which year China overtook or will overtake the U.S., using 21 indicators of consumption, GDP or spending. It summarizes the significant milestones reached over the last decade or so, reminding us how far China has come. Looking into the next decade, The Economist also plots an estimation of when Chinas GDP will be larger than that of the U.S. China stands to be the largest economy by 2018. However, if China grows faster with all the other factors remaining the same, the countrys GDP could be larger than the U.S.s GDP by 2017.
2012-01-31 Junior Resources Companies Set to Outperform? by Frank Holmes of U.S. Global Investors
In volatile markets, small stocks typically lag larger companies as investors flee what they perceive to be risk. However, this love affair with large-caps is generally short lived as investors return to the beaten-up small caps when the turmoil subsides. Historically, small-caps have outperformed their larger counterparts. In 2011, junior miners were shunned, but Global Resources Fund co-portfolio managers Evan Smith and Brian Hicks pointed out to me this week that were beginning to see signs of small-cap strength.
2012-01-27 Filling an Energy Order with Chinese Takeouts by Frank Holmes of U.S. Global Investors
Years ago, China did not have a global footprint, but over the last few decades the country has transformed itself into a global power. It boasts the largest automobile market and the largest consumer of steel, copper, mobile phones, and energy. It has built 18k miles of high speed rail connecting 250 cities with 5.5k skyscrapers. This tremendous infrastructure has amplified and globalized M&A activity, which has a positive effect on commodity-related stocks. For commodity equity investors, BCA says to expect Chinese firms to play an increasingly important role in global capital markets
2012-01-27 Heart of China Bull Beats Strong by Frank Holmes of U.S. Global Investors
With rising incomes and increasing urbanization, we believe China is pursuing the American Dream, and the government has shown great determination to build the necessary infrastructure along with a robust urban labor market. On a purchasing power parity basis, Chinas share of world GDP has risen significantly, from around 3 percent in 1985 to a current world share of nearly 16 percent.
2012-01-26 Peering Through Exxons Looking Glass by Frank Holmes of U.S. Global Investors
The emerging world will push global energy demand 30 percent higher by 2040, according to ExxonMobils Outlook for Energy: A View to 2040. The report contains some interesting projections on what may be in store for the energy sector in the coming decades. The global population is expected to reach a staggering 9 billion over the same period, but it isnt population growth that will drive the increase in energy demand. Instead, rising affluence and higher living standards in regions such as Africa, Latin America, the Middle East and India will be the biggest factors.
2012-01-25 Significant Growth Potential for Indonesia's Middle Class by Frank Holmes of U.S. Global Investors
Indonesias workforce is growing 7,000 people stronger each day, adding an estimated 21 million people to its workforce by over the next decade. This is second only to India. This growth has given birth to a burgeoning middle class willing to spend money on durable goods such as clothing, personal-care items, home appliances and electronics. Currently, domestic consumption accounts for two-thirds of Indonesias GDP. Weve already seen double-digit growth in sales for televisions, cars, computers and laptops over the past few years. More importantly, this trend is just getting started.
2012-01-20 The Great Urban Migration of China by Frank Holmes of U.S. Global Investors
If China follows this path, another 30 percent of the population is expected to move to the cities by the year 2030 less than 20 years from now, says BCA. This movement means there will be more than a half-billion city dwellers in the next 20 years or about 200 million new urban households. I believe this urbanization trend just hit the pivotal moment that dramatically shifts certain buying patterns into a higher gear, driving an enormous demand for housing, consumer staples and durable goods.
2012-01-20 After 2011 Hit, Are Emerging Markets Set to Recover First? by Frank Holmes of U.S. Global Investors
Our team has put together a great table ranking 19 emerging market countries by how their stocks have performed in each of the past 10 years. Most of the E-7 countriesthe most populous nations in the worldare listed, including Brazil, China, India, Indonesia, Mexico, and Russia, as well as other resource-rich and growing Asian, Eastern European and Latin American countries.
2012-01-20 It May Take a Dragon to Breathe Fire into Markets by Frank Holmes of U.S. Global Investors
Ive found many people are particularly energized about predicting a hard landing for Chinas economy, but I believe the country is no sinking ship. China isnt fast-approaching an iceberg in the dark of the night like the Titanic. Beijing has long been anticipating the ice chunks and subtly adjusting the rudder around inflation without steering the economic ship too far off course.
2012-01-13 What the Next Decade Holds for Commodities by Frank Holmes of U.S. Global Investors
What will happen over the next 10 years? I believe the supercycle of growth across emerging markets will continue with rising urbanization and income rates. This bodes well for commodities, especially copper, coal, oil and gold, and well continue to focus on companies that will benefit the most from these much-needed resources.
2012-01-13 Pocket of Strength: Bright Economic Lights of Texas by Frank Holmes of U.S. Global Investors
The Milken Institute released its 2011 list of Best-Performing Cities Index and topping the list of 200 large U.S. metropolitan areas was San Antonio, Texas, home of U.S. Global Investors. The Alamo City jumped to the No. 1 spot from last years 14th place. Milkens index measures U.S. cities economic performance based on job creation, retention and quality as well as where businesses are growing and thriving.
2012-01-12 Anticipating the Golden Cross by Frank Holmes of U.S. Global Investors
One trigger where we generally see money move in and out of the market is based on the golden cross, which identifies when the 50-day short-term average crosses above the 200-day long-term average of a stock or index. Over the past 20 years, the golden cross of the S&P 500 Index resulted in surprisingly bullish data. Of the nine times this event has occurred in those 20 years, the S&P 500 averaged a 23 percent increase before the market reversed.The lone exception to this trend was the unusual and very volatile market in 2010-2011. Even then, the S&P 500 only lost a third of a percent.
2012-01-06 Burgers or Barrels--What's Your Power Play? by Frank Holmes of U.S. Global Investors
In a recent blog post, the Wall Street Journal asked its MarketBeat readers if a share of McDonalds stock or a barrel of oil made a better $100 investment. The share price of the fast-food restaurant topped $100 for the first time ever in late December and rose 30 percent over 2011, substantially beating the overall market. Crude oil prices had less sizzle, only moderately increasing over the year. The three-year picture is a little different, with crude oil more than tripling since its bottom in late 2008. Over the same time, McDonalds increased about 66 percent, says the Journal.
2012-01-06 Banning Iranian Oil Imports by Frank Holmes of U.S. Global Investors
Diplomatic relations between Iran and the West regarding the countrys determination to enrich uranium have been contentious for some time. However, the current rhetoric and new policies such as the banning of Iranian oil imports have upped the ante.
2012-01-06 Have Winds Shifted to Provide Relief to Investors? by Frank Holmes of U.S. Global Investors
We believe the winds are shifting to bring needed relief to global investors. Weve seen improving economic data from the U.S. lately, and this positive news from the worlds largest economy, along with an improving Chinathe worlds most populated countryoffsets the negativity in Europe.
2011-12-30 Hirsch's Weather Vane for Markets by Frank Holmes of U.S. Global Investors
Using annual figures going back to 1950, the January Barometer says the performance of the S&P 500 Index in the first month of the year dictates where stock prices will head for the year. Jeffrey and Yale Hirsch of The Stock Traders Almanac find that the barometer has a surprisingly high accuracy ratio of nearly 90 percent. However, in the last two years, the market defied this trend. Even with these disruptions in the long-term trend, the writers at Almanac Newsletter said last February that they dont know of many indicators with such a strong track record.
2011-12-30 Is the Gold Super Cycle Still Intact? by Frank Holmes of U.S. Global Investors
Golds short-term and long-term drivers remain intact. Money supply in the worlds largest countries is expanding by roughly 18 percent. Countries like the U.S. and Europe are continuing to print paper, while holding interest rates near zero, as they grapple with debt issues.
2011-12-30 Case for Sustained $100 Oil by Frank Holmes of U.S. Global Investors
China, along with other emerging markets, and the European Central Bank are in the early stages of a global easing cycle, primarily by cutting interest rates to spur growth. Also, the Federal Reserve should remain stimulative. These government actions set the stage for sustained, or perhaps higher, demand for oil. Geopolitical threats remain on the horizon, and could also be a positive catalyst for oil.
2011-12-29 What Can We Expect in 2012? by Frank Holmes of U.S. Global Investors
As we prepare to bid farewell to 2011 and welcome 2012, its undoubtedly important for investors to start the new year off with as much knowledge about the markets as possible. I saw a great visual over the holiday weekend that captured the effects of the financial crisis. The sky-high leverage ratios of Morgan Stanley, Bear Stearns, Lehman Brothers and Goldman Sachs caused part of the economic weakness, but Nomura points to the policy mistake which forced Lehman Brothers to declare bankruptcy as the reason GDP plunged so significantly.
2011-12-23 Chart of the Week - Struggling Copper Supply by Frank Holmes of U.S. Global Investors
As Chinas appetite for commodities slowed this year, much of the worlds copper demand went with it. Despite this softening in demand, Macquarie Research thinks the red metal could see a rebound in 2012 because copper mines are struggling to supply the marketplace with adequate reserves. Macquarie says, Global copper mine output has continually disappointed forecasts and, more importantly, market needs over a number of years now, despite the strong financial incentive not only from high copper prices but also high by-product prices.
2011-12-23 How Do Markets Perform During Election Years? by Frank Holmes of U.S. Global Investors
Yale and Jeffrey Hirsch from The Stock Traders Almanac have scrutinized the performance of the Dow Jones Industrial Average over 177 years of presidential cycles. Beginning with Andrew Jackson in 1829, election years have averaged a 5.8 percent gain in stocks. In fact, 29 out of those 44 election years have resulted in gains for the Dow.
2011-12-16 'January Effect' Begins Now by Frank Holmes of U.S. Global Investors
Followers of The Stock Traders Almanac are probably familiar with the January Effect that shows how small-capitalization companies have historically crushed large-cap stocks during the first month of the year. According to Yale and Jeffrey Hirsch, small-caps have delivered a forceful blow to their larger counterparts in 40 out of 43 years from 1953 through 1995.
2011-12-16 Striking Portfolio Balance with Gold Stocks by Frank Holmes of U.S. Global Investors
Back on August 22, I wrote that gold was due for a correction and that it would be a non-event to see a 10 percent drop in gold. I wrote, This would actually be a healthy development for markets by shaking out the short-term speculators. This mornings gold price of $1,590 is about 15 percent from the high, which is a little greater than predicted, but a non-event just the same. I believe the long-term story remains on solid ground.
2011-12-15 Eastern Europe Financial House Stronger than Debt-Ridden Neighbors by Frank Holmes of U.S. Global Investors
For some Eastern European investors the geographic proximity to the eurozone has been too close for comfort, with the Russian MICEX Index declining about 20 % year-to-date. However, stronger fiscal and monetary stances in Eastern Europe compared with its western neighbors warrant a 2nd look. Eastern European countries generally have experienced higher GDP growth along with less debt, so financing costs have less of a negative effect on GDP than in Western Europe. In most of Eastern Europe, every one percent increase in the cost of funding only detracts about 0.5 percentage points from GDP.
2011-12-09 Building Wisdom with Our Boots on the Ground by Frank Holmes of U.S. Global Investors
Analysts at U.S. Global Investors scrutinize research reports and study Bloomberg data to help our investment team gain first-mover advantage. Today, I asked research analyst and Shanghai-native Xian Liang to share how he combines analyses from third-party reports with boots-on-the-ground observations to find the best opportunities Asian markets have to offer.
2011-12-09 You Can't Print More Gold by Frank Holmes of U.S. Global Investors
As central banks print money and increase supply, currencies become devalued. Whereas in the recent past, one currency may be reduced in value compared with other currencies, this time there is global competitive devaluation as excess liquidity is put into the system. Historically, this excess liquidity has made its way to riskier assets, i.e. stocks and commodities. Gold is generally a benefactor of this flight to riskier assets as many investors see it as a store of value. This chart illustrates the interconnectivity of gold and global money supply growth.
2011-12-08 Significant Growth Potential for Indonesias Middle Class by Frank Holmes of U.S. Global Investors
Indonesias workforce is growing 7,000 people stronger each day. This is second only to India as Asias fastest growing workforce. CLSA says this growth has given birth to a burgeoning middle class willing to spend money on durable goods such as clothing, personal-care items, home appliances and electronics. Currently, domestic consumption accounts for two-thirds of Indonesias GDP. Weve already seen double-digit growth in sales for televisions, cars, computers and laptops over the past few years. Indonesia appears well positioned for future growth.
2011-12-02 Chart of the Week - Oil's Breakeven Price by Frank Holmes of U.S. Global Investors
One way to gauge support for the price of oil is to calculate the breakeven price. In other words, what is the dollar amount per barrel that would be required for an oil-producing country to balance its fiscal budget? Analysts at Carnegie Investment Bank recently put together this chart, which illustrates the breakeven price needed for some of the worlds largest oil producers. Combined, these countries are expected to produce 30% of the worlds oil in 2011 Carnegie says. Note: these prices are for Brent crude, which have been $10-$15 per barrel above West Texas Intermediate prices this year.
2011-12-02 What Makes the U.S. Special by Frank Holmes of U.S. Global Investors
This economic and cultural DNA is difficult to reproduce elsewhere. There are many advantages to starting a business in the U.S., including an open immigration policy, excellent universities, a large domestic market, and venture funding. What stops other countries from having their own version of Silicon Valley are obstacles such as rigid labor laws, bureaucratic hassles, regulations and access to debt instruments. Similar hindrances seem to have sprouted in the U.S. in recent years in the form of regulations.
2011-12-02 Are Stars Aligned for a Year-End Rally? by Frank Holmes of U.S. Global Investors
Correlations will decrease along with volatility as we get more clarity on the eurozone crisis and see signs of stability in the global economy. Volatility fell this week, with the CBOE Volatility Index (VIX) declining 20 percent. This could be related to the news that November U.S unemployment unexpectedly dropped to 8.6 percent, U.S. auto sales in November were the strongest in more than two years, and preliminary data on holiday retail sales appears to be strong. According to Bloomberg News, Black Friday sales hit a record high this year, with consumers spending $11.4 billion.
2011-12-01 Return of the Comandante's Gold by Frank Holmes of U.S. Global Investors
Back in August, we discussed the precarious proclamation that Venezuelan President Hugo Chavez was shipping his countrys gold reserves home for safekeeping. On Friday, we learned Chavezs chosen transportation method for Operation Gold was through the air after the first shipments arrived to much fanfare in Venezuela. Some believe Chavezs announcement of Operation Gold was a catalyst for the August run up in gold prices, but there is no way to be sure. However, the impact could be significant if other countries employ a similar strategy.
2011-11-26 American Classic Finds New Life in China by Frank Holmes of U.S. Global Investors
With a middle class that could to balloon to 1.4 billion people by 2030, China has become a lifeline for automakers looking to keep their profits afloat in a weak global economy. Through October 2011, more than 15 million new vehicles have been purchased in China. Thats about 3 percent higher than a year ago. Toyota, Audi, Volkswagen, BMW and Nissan are all searching for ways to tap into this fast-growing market. One of the countrys biggest success stories is General Motors (GM), which has positioned itself as one of the most recognizable and highly sought after cars in China.
2011-11-26 With Rising Wages, Will China Remain a Manufacturing Hub? by Frank Holmes of U.S. Global Investors
In 2010, countries such as Hong Kong, Japan, South Korea and Germany depended on China for data processing, apparel, and iron and steel exports. Chinas largest import partners in 2010 were Japan, South Korea, the U.S., Germany and Australia. For those companies not already doing business in China, theres one dominant factor that shows they should start: the vast domestic market. Companies may be able to find a cheaper workforce in Bangladesh, India or Sri Lanka, but being located in China allows convenient access to what is rapidly becoming the worlds largest consumer market.
2011-11-23 Seven Surprising Stats on the Internet and Emerging Markets by Frank Holmes of U.S. Global Investors
With rising wealth in emerging markets in recent years, people in China, India and Brazil have quickly acquired a taste for mobile phone and Internet technology. The industry in developing countries is in its infancy but growth has been swift. Here are seven surprising facts about this fast-growing emerging market trend.
2011-11-18 Big Shift in Gold Demand by Frank Holmes of U.S. Global Investors
In 1970, according to the latest World Gold Council (WGC) report, half of the worlds gold was purchased in two regionsNorth America and Europe. Ten years later, that figure jumped all the way to 68 percent during a period of high inflation, a weak economy and spiking gold prices. At the same time, China and India (broadly represented in the chart as East Asia and Indian Sub continent) saw their combined share of gold demand diminish from 35 percent to 15 percent.
2011-11-18 The Gold Triple Play - Volatility, Currencies and Europe by Frank Holmes of U.S. Global Investors
Resurgent investment lifted global gold demand 6 percent from the previous year to just over 1,000 tons during the third quarter of 2011, according to the latest Gold Demand Trends Report from the World Gold Council (WGC). The potent cocktail of inflationary pressures in the emerging world and the European sovereign debt fiasco left investors searching for a safe haventhey looked for it in gold.
2011-11-17 South Africa's Incredibly Shrinking Gold Production by Frank Holmes of U.S. Global Investors
Finding evidence to pop the talk of a gold bubble is much easier than finding a needle in a haystack. There are enough needles of evidence out there to fill a pin cushion. The latest Gold Demand Trends Report from the World Gold Council contained two salient visuals of how the dynamics of the global gold market have shifted from the West to the East over the past 40 years. Today well take a look at supply, and tomorrow well dive into demand.
2011-11-11 Get Paid to Play Gold by Frank Holmes of U.S. Global Investors
With money markets and Treasuries yielding next to nothing these days, investors are finding income in new places. One area those investors should consider is gold mining. With gold rising in value, mining companies are reaping record profit margins, yet the stock prices are depressed due to lack of investor interest. A solution for both gold companies and investors may be dividends, specifically gold-linked dividends. Several top-tier gold producers that are benefiting from higher gold prices have begun to share a portion of their profits with shareholders via a dividend payout.
2011-11-11 China's Rising Imports of American Goods by Frank Holmes of U.S. Global Investors
American companies are riding the wave of Chinas growth all the way to the bank. From what they drink and eat to where they shop and what they buy, as increasing incomes provide more discretionary income, the dynamics of the Chinese consumer forever change. I believe savvy investors can benefit from these emerging trends.
2011-11-11 The Many Factors Fueling a Return to $100 Oil by Frank Holmes of U.S. Global Investors
The IEA says trends on both the oil demand and supply sides maintain pressure on prices. We assume the average IEA crude oil import price remains high, approaching $120 per barrel (in 2010 dollars) in 2035 (over $210 per barrel in nominal terms). Thats a distant projection but it certainly illustrates why you should consider investing a portion of your wealth in oil.
2011-11-04 3 Drivers, 2 Months, 1 Gold Rally? by Frank Holmes of U.S. Global Investors
Combine the central bank purchases of gold with the fact that we are now entering the strongest months of the year for gold. While the spot gold price has differed from the S&P/TSX Composite Index of gold equities during the first 10 months of the year, their historical pattern is very similar during the last two months. November has historically been the strongest month of the year for gold equities, with mining stocks increasing 8.1 percent.
2011-11-03 Poland's Power Play for Energy by Frank Holmes of U.S. Global Investors
Poland is setting the stage to become a rising player in the European natural gas market. Europe has long been reliant on Russia for its supply of natural gas, but domestic discoveries of shale gas might soon catapult Poland to the forefront of the energy landscape. Morgan Stanley cites several reasons for Polands likely success: a large resource base, gas pricing that is almost twice the pricing of the U.S., a developed gas market, and political support that welcomes foreign firms and hydraulic fracking permits compared to other countries in Europe.
2011-10-28 How China Drives the Global Economy by Frank Holmes of U.S. Global Investors
The Chinese economy is not a bubble, but that does not mean a significant slowdown wouldnt affect the global economy, especially natural resources. This is because Chinas economic transformation over the past few decades has cast the country into the forefront of demand. PIRA Energy Group says that, in 1990, Chinas share of oil and GDP was less than 5 percent; its share of world energy was just under 10 percent. Since then, Chinas share of energy, GDP and oil has risen dramatically, with each expected to be approximately 28 percent, 21 percent and 16 percent, respectively, by 2025.
2011-10-28 The Impact of Seven Billion People by Frank Holmes of U.S. Global Investors
On October 31, the world symbolically welcomes its 7 billionth. The real date the world hits that number is up for debate, but it has been symbolically chosen by the United Nations as a way to emphasize the effects a growing population will have on the globe.
2011-10-27 Happy Diwali by Frank Holmes of U.S. Global Investors
Whats significant to gold investors is that India makes up a considerable part of the worlds population that has a strong cultural bond with gold. This Love Trade identifies a key differentiator between the East and the West. Whereas in the U.S., we separate gold jewelry from investments in gold, in the eastern hemisphere in countries such as India and China, gold is one and the same. No matter the formjewelry, coins, bars or statuesgold is an investment. With half of the worlds population in this part of the world, this concept is what we believe will drive the long-term shift in demand.
2011-10-21 Do Bullish Investors Have an Ace in the Hole? by Frank Holmes of U.S. Global Investors
You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing. One card worth counting is the Purchasing Managers Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.
2011-10-14 Which Gold Miners Have Largest Upside? by Frank Holmes of U.S. Global Investors
Since hitting $1,900 an ounce through the beginning of October, gold has declined nearly 11 percent. Over the same timeframe, the NYSE Arca Gold Miners Index lost almost 13 percent. Thats a closer performance correlation than the roughly 3-to-1 gold equities to bullion ratio weve historically seen and could mean the miners are finally closing the gap. Looking over the next year or so, we believe the smaller gold miners are especially poised to outperform this time. As TD says, on a rebound, we expect the best performing equities to be among the ranks of the explorers and developers.
2011-10-14 Case Study: Buyouts Crystallize Value in the Market by Frank Holmes of U.S. Global Investors
Theres value in the market. Thats the message the market is sending through the recent strategic acquisitions in the energy and gold mining spaces. This week it was announced that Sinopec, a large Chinese oil and gas company, is purchasing Canadian energy company Daylight Energy for $2.1 billion in cash. The deal was struck at a whopping 120 percent premium to Daylights share price prior to the announcement and a 43.6 percent premium over the 60-day weighted average price, according to Reuters.
2011-10-12 Gold During Times of Market Turmoil by Frank Holmes of U.S. Global Investors
Jason Toussaint from the WGC provided an interesting perspective during our recent webcast. The WGC looked back at six incidences of market turmoil over the past few decades. In five out of the six periods during market turmoil, an allocation to gold preserved wealth by reducing the hit taken by the portfolio. On average, the portfolios with an allocation to gold were about 7 percent more buoyant. Only during the Dot-com Bubble did gold in a portfolio hurt its performance. These dramatic events happen infrequently. However, Its best to prepare for the worst and hope for the best.
2011-10-07 Can Markets Find the Road Back to Positive Territory? by Frank Holmes of U.S. Global Investors
Can markets find the road back to positive territory? This week, wed like to point out three reasons investors should consider remaining in equities or reassessing whether to sit on the sidelines: 1. Investor sentiment is signaling the market is overextended to the downside. 2. Stocks are trading well below historical valuation trends. 3. S&P 500 dividend yields are higher than the 10-year Treasury yield.
2011-09-30 Extreme Divergence Between Coal Rocks and Stocks Unwarranted by Frank Holmes of U.S. Global Investors
Coal was relatively flat for the quarter, but whats interesting is that coal companies were severely discounted. Over the last two years, coal stocks and the commodity have closely tracked each other, until this summer, when worries about a global slowdown caused coal stocks to fall off a cliff, not once, but twice, in August and again in early September. This extreme divergence between coal companies and the commodity seems unwarranted when the long-term drivers of coal remain supportive.
2011-09-30 Managing Emotions in Today's Marketplace by Frank Holmes of U.S. Global Investors
One positive point is the Conference Board Index of Leading Economic Indicators, which is also known as LEI. Historically, the LEI has proven to be a reliant indicator of recessions and recoveries. The index deteriorated ahead of the 2001 global recession, and again in early 2007 and 2008 before the global financial crisis and associated recession began.
2011-09-29 China--The Great Stabilizer by Frank Holmes of U.S. Global Investors
For the past ten years, whenever global base metals demand dissipated, Chinas voracious appetite stepped in to gobble up the leftovers. Since 2001, China has increased the countrys share of total global demand for base metals from about 15 percent to over 40 percent in 2011. This has made China more important to commodities than ever before, according to Macquarie. Macquarie says China has been a great stabilizer for commodities: As growth elsewhere in the world tends to weaken, Chinese call on supply from the rest of the world tends to rise and visa versa when demand weakens.
2011-09-23 Turkey Gets an Upgrade by Frank Holmes of U.S. Global Investors
The IMF offered a sober assessment of the global economy this week when it released the September 2011 update of its World Economic Outlook. The IMF stated the global economy is in a dangerous new phase, citing two main downside risks: The possibility the crisis in the eurozone will be too much for the regions policymakers to handle, and soft economic activity in the U.S. is due to a weak housing market, deteriorating financial conditions and a political impasse regarding fiscal consolidation. Accordingly, the IMF cut its projections for global growth to 4 percent through 2012.
2011-09-23 Extreme Moves Leave Markets in Rare Territory by Frank Holmes of U.S. Global Investors
Many investors have used gold and other commodities as a haven from recent volatility, buoying prices while equities sunk, but even those investments werent immune to the wave of selling. The U.S. dollar, in contrast, was up 2.2 percent. Much of the dollars rally came after the Fed announced the creatively named Operation Twist. The Fed will sell $400 billion of short-term securities and buy an equal amount of long-term debt. The goal is to push down long-term interest rates, which would spur economic activity.
2011-09-22 World Running Low on its by Frank Holmes of U.S. Global Investors
Did you know that Chinas energy demand is set to grow so dramatically over the next 25 years that its consumption is expected to be 68 percent higher than that of the U.S.? That was only one of the findings of the U.S. Energy Information Administration (EIA). In its new International Energy Outlook 2011, the EIA reports that throughout the world, energy consumption is expected to rise by 53 percent from 2008 through 2035 driven by robust economic growth and expanding populations in the developing countries.
2011-09-16 A Yuan, Euro and Dollar Walk Into a Bank... by Frank Holmes of U.S. Global Investors
Currency markets have been the pawns in central bankers chess games around the world in recent weeks, as each country looks to gain the slightest edge in todays economy. Weeks ago we saw an intervention from the Bank of Japan, which tried to stop the yens downward slide. Last week, the Swiss National Bank moved to improve the Swiss francs stature. Also recently announced was that the Hong Kong dollar will no longer be pegged to the U.S. dollar. Given the important role paper currency plays, weve developed a quiz so you can test how much you know.
2011-09-16 Perfect Storm Creates Tidal Wave of Gold Demand by Frank Holmes of U.S. Global Investors
In the East, gold is not only celebrated, acquired, worn or displayed during holidays or special occasions; it is seen as an everyday symbol of wealth. Increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewelry during the first half of the year despite a 25 percent increase in the price, according to a report released this week from GFMS. However, much of Indias potential gold demand remains untapped.
2011-09-15 Six Reasons to Sell Economy, Buy Stocks by Frank Holmes of U.S. Global Investors
Money supply is a key lubricant of the economy and financial markets. Historically, if money is growing faster than nominal GDP, the excess money has found its way to other uses such as investment in stocks, commodities and other financial assets. The risk/reward profile for owning stocks appears positively skewed. While bond investors have enjoyed a 30-year bull market, equity investors can now use long-term mean reversion to their advantage by buying those undervalued companies that are flush with cash, reward their shareholders with a dividend payment and have envy worthy balance sheets.
2011-09-10 China Fears Much Ado About Nothing by Frank Holmes of U.S. Global Investors
There are many questions surrounding the global market but the Chinese economy remains headed toward the moon. The country, of course, remains vulnerable to external forces but we believe the economys strong momentum will be enough to carry the country through, should volatile times persist.
2011-09-10 Economic Resilience of Emerging Markets by Frank Holmes of U.S. Global Investors
A boxers stamina is judged by how quickly he rebounds from a blow. Strength of a country, then, could be measured by how quickly the economy can bounce back from a crisis. The Economist provided one measure when it compared countries percentage change in real GDP per person from the fourth quarter of 2007 through the second quarter of 2011.
2011-09-10 The Story of Moon Festival by Frank Holmes of U.S. Global Investors
On Monday, September 12, many Chinese, Koreans and Vietnamese celebrate the Mid-Autumn Festival, one of the most important holidays besides Chinese New Year. It is also known as Moon Festival because it is celebrated when the moon is at its brightest of the year.
2011-09-09 Chart of the Week - Can Russia Stay #1? by Frank Holmes of U.S. Global Investors
Siberias western oil fields have been a mainstay of Russias economic growth for decades, but the worlds largest producer of oil is now looking elsewhere in its country to replenish its stagnating supplies. Western Siberias oil fields have proven to be fertile hunting grounds for Russian oil companies, producing nearly 70 percent of the countrys exported oil. But most of W. Siberia's oil fields are considered brownfieldsregions where roughly 75 percent of fields have been exploited. The firm says oil and gas firms must now consider the big picture to maintain growth of their resources.
2011-09-03 How to Find Opportunities from Blood, Debt & Fears by Frank Holmes of U.S. Global Investors
For the long-term investor, the risk/reward profile for owning stocks appears positively skewed. Equity investors have suffered through one of the most difficult decadesrivaling even the Great Depressionwhile bond investors have enjoyed a 30-year bull market. Long-term mean reversion is a powerful tool that investors can use to help them attain their long-term goals.
2011-08-26 Oceans 2011: Venezuelan Gold by Frank Holmes of U.S. Global Investors
Now might be a good time for Daniel Ocean to start assembling his gang of 11. Venezuelan President Hugo Chavez announced last week that he was ordering the countrys ample gold reserves back to Caracas for safe keeping. Not a bad idea given the global geopolitical environment, but with some 211 tons of 400-ounce gold bars to be moved from bank vaults in London, President Chavez has a logistical nightmare on his hands.
2011-08-26 Valuation Gap Makes Gold Miners Attractive But All Miners Arent Created Equal by Frank Holmes of U.S. Global Investors
Goldwatchers were reminded golds volatility works in both directions this week, with prices falling more than $100 an ounce in just one day. We forecasted the selloff last week, explaining a 10 percent correction would be a non-event. Once again the CME Group hiked the exchanges margin requirements for gold investment to shake out overleveraged speculation. This is a positive for long-term investors.
2011-08-25 Deflation or Inflation? The Answer is Gold by Frank Holmes of U.S. Global Investors
There are tectonic plates pushing against each other in Washington these days, and Im not talking about the 5.8 earthquake felt along the East Coast. Rather, it is a product of the governments rising levels of debt and a printing press pumping out money and weakening the dollar. In an excellent video, James Turk and James Rickards converse about golds role in this monetary issue. They discuss the tension building between natural deflation coming from the depression and inflation coming from policy. Eventually there will be a break, and the outcome is either deflation or hyperinflation.
2011-08-22 The Neverending Story of a by Frank Holmes of U.S. Global Investors
Gold continued to make headlines last week, reaching nearly $1,900 an ounce on Friday before resting around the $1,850 level. Golds 15 percent rise to new nominal highs over the past month has rekindled gold bubble talk from many pundits. Long-term gold bulls have been forced to listen to these naysayers since gold reached $500 an ounce. If you would have joined their groupthink then, you wouldve missed golds roughly 270 percent rise since. That said, gold is due for a correction.
2011-08-19 Gold's Sun Also Rises in the East by Frank Holmes of U.S. Global Investors
During the second quarter, golds rising value didnt deter Chinese and Indian buyers. In its webcast, the World Gold Council (WGC) said these predominant drivers of gold demand accounted for 52 percent of bars and coins and 55 percent of jewelry demand. Chinas demand grew 25 percent, while India saw an increase of 38 percent. WGC attributes this growth to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.
2011-08-19 Is Business Choking on Red Tape? by Frank Holmes of U.S. Global Investors
About a year ago, I wrote about The Shocking Cost of Regulation and the unintended consequences new rules can have on our business system without proper cost-benefit analysis being done. A year later, its clear the swarm of red tape is choking companies and impeding growth.
2011-08-19 The Silver Lining for Markets and the U.S. Economy by Frank Holmes of U.S. Global Investors
There is a silver lining: Despite all the negative news out there, the global economy will continue to grow. In fact, the U.S. economy has had several positive developments recently. The four-week average for unemployment claims dropped to 402,000 during the week ending August 13. There is still a large chunk of America unable to find a job, but that group has shrunk 13 percent since August 2010 and is about 40 percent of peak 2009 levels.
2011-08-12 Chart of the Week - Which Luxury Brands Do Best in China? by Frank Holmes of U.S. Global Investors
Rising incomes in China are also affecting sales of gold jewelry. Year-over-year sales have outpaced the other five categories of the retail sector. CEBM forecasts wealthier consumers to drive sales of gold and jewelry products up 55-60 percent on a year-over-year basis in 2011. In addition, Chinese citizens have purchased nearly 91 tons of gold bars and coins in 2011, more than double the 2010 total, according to the Financial Times.
2011-08-12 Buy, Sell or Hold? Relax and Don't Panic by Frank Holmes of U.S. Global Investors
There was more blood in the streets Monday as the world continued to digest S&Ps downgrade of US debt, the two-week market selloff, and the likelihood the US economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 Flash Crash. While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.
2011-08-11 Indians Celebrate Holiday with Offerings of Gold by Frank Holmes of U.S. Global Investors
No country in the world has a richer history with gold than India. One of golds strongest cultural bonds is with the holy Hindi month of Shraavan. The Varalakshmi Vratham, the festival of offering prayers to the symbol of prosperity and wealth, is said to be incomplete without a touch of gold. Many thought consumers would be priced out from participating this year, but the World Gold Council (WGC) has teamed up with local jewelers in India to offer discounts and small installment plans to those seeking to include gold in their puja.
2011-08-10 Run, Ride or Buy? What Should Investors Do? Dont Sell on Mondays! by Frank Holmes of U.S. Global Investors
With trillions of dollars in debt acting as a ball-and-chain for much of Europe, the U.S. and the rest of the developed world, must detoxify their balance sheets before hitting the ground running. On the other hand, emerging market economies carry low levels of debt and operate like a cash business, making them the final frontier for strong economic growth. A key reason is emerging market governments have the long-term policies in place to facilitate growth of their economies.
2011-08-05 Advisor Alert - Placing This Week's Selloff Into Context by Frank Holmes of U.S. Global Investors
The major market indices were lower this week. The Dow Jones Industrial Average lost 5.75 percent. The S&P 500 Stock Index decreased 7.19 percent, while the Nasdaq Composite fell 8.13 percent. Barra Growth outperformed Barra Value as Barra Value finished 7.53 percent lower while Barra Growth decreased 6.88 percent. The Russell 2000 closed the week with a loss of 10.34 percent. The Hang Seng Composite Index finished lower by 6.80 percent, Taiwan fell 9.15 percent, and the KOSPI declined 8.88 percent. The 10-year Treasury bond yield closed 24 basis points lower at 2.56 percent.
2011-08-04 Gold Bugs Rejoice by Frank Holmes of U.S. Global Investors
Many felt disbelief when they saw gold prices breach $1,675 an ounce in early trading, but you werent dreaming. Gold danced above $1,675 into the wee hours of the night before settling in at $1,663.45 this afternoon. Since pulling back to $1,487 an ounce on July 1, gold has surged nearly 12 percent. Over the past 10 years, golds normal volatility has been about 15 percent, so weve seen nearly a years worth of price movement in just 34 days! Does this mean were due for a correction? Possibly. Gold could easily correct 5-10 percent but I dont think thats what will happen.
2011-07-30 The 2011 Gold Season is Just around the Corner by Frank Holmes of U.S. Global Investors
September has traditionally been the beginning of the gift-giving season for gold. This is the time of year when gold jewelers are the busiest. The Muslim holy month of Ramadan begins in August and concludes with generous gift-giving in early September. Then its Diwali, known as the festival of lights in India, Christmas in the U.S., and Chinese New Year. The key to this seasonal strength over the past few years has been demand from China and India.
2011-07-22 2011 Halftime Report: Oil Outlook Remains Strong by Frank Holmes of U.S. Global Investors
Todays oil market is much different than what we experienced back in the 1970s. Back then, countries such as China, India and Russia had no global footprint; they were isolationists. Today these countries are building their economies and squeezing the existing supply of the worlds resources, including oil. These factors indicate that growth in global oil demand will likely outpace increases in production capacity and create a tighter market than what the IEA expected back in 2010.
2011-07-22 2011 Halftime Report: Oil and Copper by Frank Holmes of U.S. Global Investors
Last week we recapped commodities performance for the first six months of the year and offered our outlook on gold. This week, were discussing our outlook for two other commodities that are poised to have an exciting back half of the year.
2011-07-16 Commodities 2011 Halftime Report by Frank Holmes of U.S. Global Investors
Commodities don’t all perform in the same way. In any given year, a particular commodity will go gangbusters and outperform the group. However, that commodity will typically come back to Earth and underperform the following year or the year after that. This is why active management is important when investing in commodities. Active managers can benefit from rotating from winners to laggards or by investing in the companies which produce, farm or mine commodities most effectively.
2011-07-16 Should You Bank on Turkey's Growth? by Frank Holmes of U.S. Global Investors
While much of Europe’s economy remains stuck in the mud, Turkey expanded 11 percent during the first quarter of 2011. In fact, Turkey’s economic growth outpaced China’s this quarter and most of the world’s larger economies last year, leading The Wall Street Journal to declare the country “Eurasia’s rising tiger.” Despite the acclaim, many investors have yet to warm up to Turkey. We’re not one of them.
2011-07-08 India's Demand for Iron Ore Made of Steel by Frank Holmes of U.S. Global Investors
Much has been made of China’s insatiable appetite for the world’s natural resources but demand growth from another Asian giant is changing the dynamics of the global steel market. Indian demand for steel grew 10 percent last year, helping push global demand to a record 1.4 billion tons in 2010. This rise has been driven by the Indian government’s focus on building out the nation’s infrastructure. According to an Urban Land Institute and Ernst & Young publication, “Infrastructure 2011,” initiatives in India have been extensive.
2011-07-08 Don't Miss Your Chance to Catch a Bull Market by Frank Holmes of U.S. Global Investors
Many people missed the market’s enormous appreciation during the latest equity bull market because they were late to the game or chose to sit on the sidelines. The sideline is a crowded place these days as investors have been reluctant to fully embrace equities. Household savings for the past 12 months totaled $711 billion, the highest level ever recorded in dollar terms. You can see from the chart that’s roughly double the amount of savings recorded following the Tech Bubble. In fact, household debt-to-savings ratios are currently at levels so low, they’ve not been seen since the mid-1990s.
2011-07-02 China Opens World's Longest Cross-Sea Bridge by Frank Holmes of U.S. Global Investors
When the new Qingdao Jiaozhou Bay Bridge opened to traffic this week in China, it made the Guinness World Records for the longest cross-sea bridge in the world. The 26.4-mile long and 110-foot wide bridge stretches across the bay, linking the Huangdao district to the city of Qingdao and Hongdao Island. China spent 17 years planning and designing the engineering marvel to be able to withstand the bay’s high salt content and icy winters. Yet, it only took four years to build, with at least 10,000 workers on the construction team.
2011-07-01 Emerging Markets Building Highways to Wealth by Frank Holmes of U.S. Global Investors
Last summer, IBM surveyed more than 8,000 motorists in 20 cities across 6 continents to determine the emotional and economic toll of commuting. They measured the amount of time it took to commute and time stuck in traffic along with whether there was an agreement of the following: the price of gas is already too high, traffic has gotten worse, and driving causes stress and anger. According to IBM, 13 cities other than LA cause more commuter angst. The top three hail from three different countries: Beijing and Mexico City tie as the world’s worst, with Johannesburg coming in third.
2011-06-25 Playing Cat and Mouse with Global Oil by Frank Holmes of U.S. Global Investors
Oil markets took another dose of global geopolitics this week when the International Energy Agency (IEA) unexpectedly announced that it would be releasing 60 million barrels of oil from strategic petroleum reserves (SPR) around the globe. Thursday’s surprise announcement gave oil prices a 4.5 percent hair cut and oil prices closed Friday at $91.25, down 20 percent from their April 29 peak.
2011-06-25 The Malleable Market for Global Aluminum by Frank Holmes of U.S. Global Investors
Last week’s Investor Alert highlighted a Macquarie Research chart showing a recent notable upswing in aluminum production around the world. Following a huge dip in output in China and worldwide throughout 2009, China once again surpassed the rest of the world in producing the most aluminum. China’s massive production makes sense considering the country consumes the most aluminum. According to Jeremy Grantham of GMO, China uses 40 percent of the world’s aluminum as it rapidly develops its railway transportation, increasingly purchases automobiles and demands more energy.
2011-06-24 What’s Driving Platinum? by Frank Holmes of U.S. Global Investors
Following a substantial 90 percent increase since the financial crisis, platinum prices have been sluggish. During the first six months of 2011, the metal gained only a few basis points. Platinum has significantly lagged silver (up 15.72 percent) and gold (up 7.72 percent), but has outpaced palladium, its closest relative. In recent days, the market has discounted the metal because of weaker car sales in the U.S. According to the WSJ, Japan’s earthquake shut down car production, and higher vehicle prices and continued bad news about the U.S. economy prevented consumers from purchasing cars.
2011-06-17 Is Gold About to Have Its Status Upgraded? by Frank Holmes of U.S. Global Investors
Central banks have been on a gold buying spree. Mexico, Russia and Thailand, were adding to their gold reserves. And in 2010, central banks became a net buyer of gold for the first time in 21 years. Central bank gold buying could soon be matched with other global banks if gold’s quality as an asset gets upgraded to Tier 1 status by the Basel Committee on Banking Supervision. The BCBS is an international banking supervisory committee that provides a forum for determining global standards to ensure that banks all around the world have adequate capital.
2011-06-17 Will Gold Equity Investors Strike Gold? by Frank Holmes of U.S. Global Investors
While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13 percent year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16 percent. Companies such as High River Gold Mines, Jaguar Mining and NovaGold Resources are off 45 percent from 2007-2008 highs. This has been exacerbated in recent weeks making it a hot topic of discussion among investors. This chart shows gold equities of all market capitalization sizes were holding up quite well until late April.
2011-06-16 China is World's Largest Energy Consumer by Frank Holmes of U.S. Global Investors
World consumption of energy has increased 5.6 percent in 2010, according to BP’s Statistical Review of World Energy. This is the largest increase since 1973, which happened to be a memorable year in energy history. At the time, the U.S. was by far the largest consumer of energy, devouring 1,812 million tons of oil equivalent (mtoe)—more than 30 percent of the world’s total—as the country faced an energy crisis, oil embargo and record high oil prices. In 2010, another pivotal moment occurred in energy history: The country consuming most of the world’s energy was no longer the U.S., but China.
2011-06-10 World's Greatest Infrastructure Projects by Frank Holmes of U.S. Global Investors
Cities around the world take turns owning the title for the tallest skyscraper, the longest bridge or the deepest mine. Covering nearly every continent of the world, here’s our current list, which I’m sure will change over the next few years.
2011-06-09 Is Peru's Humala Jekyll or Hyde for Mining? by Frank Holmes of U.S. Global Investors
The Peruvian stock market has had a very strong reaction to the recent outcome of the country’s presidential election. With Keiko Fujimori’s surprise loss to Ollanta Humala, many Peruvian stocks saw share prices sink before quickly recovering the following day. Grana y Montero, a large engineering company in Lima, reached a three-month high shortly before the election, and then plummeted 20 percent just after. We digest the outcome and discuss the implications a shift in Peru’s government policies would have on the country’s economy and largest industries.
2011-06-03 Active Hurricane Season May Threaten Offshore Oil by Frank Holmes of U.S. Global Investors
It’s hurricane season in the Atlantic, and another year of above-normal activity is expected. If the prediction comes to fruition, the potential disruption of offshore oil production may add to already turbulent oil prices. The National Oceanic and Atmospheric Administration says due to a continuing high activity conditions, warmer water, and La Nińa’s wind sheers, this season may produce 12 to 18 named storms, six to 10 of which could become hurricanes. Two or three of these hurricanes may be major. Seasonal averages are 11 named storms, six hurricanes, and two major.
2011-06-03 Natural Resources Q&A with the Global Resources Fund Team by Frank Holmes of U.S. Global Investors
This week Frank Holmes and the co-managers of the U.S. Global Investors Global Resources Fund (PSPFX), Evan Smith and Brian Hicks, participated in a special webcast for the Peak Advisor Alliance. Here are some candid portions of the Q&A: Q. How are interest rates currently affecting commodity prices? A. The magic number for real interest rates is 2 percent. That’s when you can earn more than 2 percent on a U.S. Treasury bill after discounting for inflation. Our research has shown that commodities tend to perform well when rates fall below 2 percent.
2011-05-28 Global Infrastructure a $6 Trillion Opportunity by Frank Holmes of U.S. Global Investors
Each week, more than one million people are either born in or migrate to cities. Much of this rapid urbanization comes from the emerging world, putting tremendous pressure on that country’s feeble infrastructure. Merrill Lynch estimates that $6 trillion will need to be spent by selected emerging market countries over the next three years to meet the basic needs of these citizens. Water, transportation and energy investments will consume the bulk of these funds, 82 percent of total projected spending. Nearly every emerging market country Merrill researched will make an investment in all three.
2011-05-28 Railway Revolution Builds China's Consumer Culture by Frank Holmes of U.S. Global Investors
China is building the world’s largest network of high speed rails. Since opening the first high speed line between Beijing and Tianjin in 2008, the country has laid down more than 4,600 miles of new tracks. This is three times more than Japan, where the bullet train was invented. Once completed near the end of this decade, the high speed rail system will connect more than 250 Chinese cities, span 18,641 miles and reach roughly 700 million people. Currently, the high speed rail network connects about one-third of China’s cities. That figure is set to nearly double over the next two years.
2011-05-26 Why Asia is the Epicenter of Oil Demand Growth by Frank Holmes of U.S. Global Investors
A few weeks back we highlighted the strong link between GDP growth and oil consumption by showing you how oil consumption per capita has risen in selected countries as per capita incomes rise. Specifically, we noted the potential for China’s oil consumption—already the second-largest oil consumer in the world—to catch up on a per capita basis with other Asian countries such as Taiwan and South Korea. That’s where we think China’s oil consumption is headed, but this shows how strong oil consumption per capita growth has been over the past 50 years.
2011-05-21 The Dollar and Oil Debate on CNBC Europe by Frank Holmes of U.S. Global Investors
This week in London, I joined CNBC Europe’s Commodities Corner to discuss an earlier post regarding my Three Reasons to Believe in $100 Oil. Of the three reasons I gave, most striking to this group was my belief that higher oil prices will continue because of a weakness in the dollar. What I explained during the discussion was that a falling dollar causes short-term volatility. As the demand for a particular commodity increases and the dollar weakens, or vice versa, investors need to deal with an exaggerated movement in the price. However, I stressed the short-term nature of these events.
2011-05-21 Asian Tiger Sinks Teeth Into Gold by Frank Holmes of U.S. Global Investors
The World Gold Council (WGC) released its quarterly “Gold Demand Trends” report this week and, as always, it was filled with fascinating data on the strength of the global gold market. Gold demand grew 11 percent to 981.3 tons during the first quarter of 2011, worth $43.7 billion at quarter-end’s price levels. The increase was driven by a significant rise in demand for gold as an investment, up 26 percent from a year ago, as emerging markets look to protect their assets from rising inflation. Demand for gold bars and coins was up 62 percent and 42 percent, respectively.
2011-05-19 Chart of the Week: Emerging Europe's Middle Class by Frank Holmes of U.S. Global Investors
Middle-class, affluent, bourgeois - they describe a group of people who enjoy a comfortable life, have access to healthcare and, have discretionary income. And across developing nations, there is a growing group that are just settling in to this lifestyle. A few weeks ago we discussed how economic power is gradually shifting eastward and highlighted a McKinsey Global Institute report that showed China, Latin America and South Asia are projected to account for most of the middle class children by 2025. Those regions aren’t the only ones. A surging middle class exists in Eastern Europe as well.
2011-05-13 Policy Reforms Pave Way for Indonesia by Frank Holmes of U.S. Global Investors
Known as the world’s largest archipelago, Indonesia is made of 17,000 islands—eight major ones—between the Indian and Pacific Oceans with the most volcanoes in the world. Almost half of the country’s population lives in an urban environment. Jakarta, the capital and largest city, is home to more than 9 million people. Literacy in Indonesia is high: 90 percent of the population aged 15 and over can read and write. Yet this highly literate country lags nearby southeastern Asian countries when it comes to infrastructure, according to a recent report by Morgan Stanley.
2011-05-13 Visiting a West African Gold Mine by Frank Holmes of U.S. Global Investors
This week I’m back on the continent of Africa. Along with 20 analysts from investment firms around the world, I spent a total of 17 hours traveling to Tasiast, Mauritania, kicking the tires and checking out Kinross Gold’s open pit operations there. Kinross is among the top 10 gold mining production companies in the world. According to the CPM Gold Yearbook 2011, the company produced 2.2 million troy ounces of gold in 2009, nearly 3 percent of the world’s total.
2011-05-13 Three Reasons to Believe in $100 Oil by Frank Holmes of U.S. Global Investors
After selling off nearly 14% last week, oil prices finished this week slightly higher at $99.65 per barrel. While the end result was a net positive, the volatility continued. Oil reached $104/bbl, then fell to around $96, before nesting just below $100. As an investor, this volatility can be difficult to handle. Throw in the uncertainty of today’s geopolitical environment, and investors feel the need to downsize their positions in commodity investments, such as oil. Markets could remain volatile in the short-term, but here are three long-term indicators to support $100+/bbl oil prices.
2011-05-11 The Strong Bond Between India and Gold by Frank Holmes of U.S. Global Investors
Casey Research’s BIG GOLD newsletter recently published a great interview that I’d like to share with you. BIG GOLD editor Jeff Clark interviewed Shanta, the mother of U.S. Global consultant and longtime friend Jayant Bhandari, on how strong the cultural bond between gold and Indians is, especially women. "When it comes to supply and demand, what you’ve been told about gold jewelry is wrong. That’s a strong statement, but I’ve got a firsthand account to back it up."
2011-05-07 Don’t Turn Out the Lights on Commodities Just Yet by Frank Holmes of U.S. Global Investors
The prices for many commodities suffered the worst week in recent memory this week. Oil prices dipped below $100 per barrel, gold fell below $1,500 an ounce and silver gave back much of the past month’s gains by falling to the $35 an ounce level. The prices for other commodities such as sugar, tin, nickel, aluminum, lead and copper also pulled back. Immediately, headlines on websites such as Marketwatch, Bloomberg and SmartMoney read “Has the Commodity Bubble Popped?” and “Imploding Commodities Complex.” In our opinion, not likely.
2011-05-05 The Rising Financial Gold Market by Frank Holmes of U.S. Global Investors
When the University of Texas Investment Management Corporation (UTIMCO) took possession of more than 20 tons of gold worth $991.7 million earlier this year, its gold stockpile became larger than the official gold holdings of about 28 countries combined. UTIMCO manages the second-largest endowment in the U.S. However, UTIMCO’s gold holdings pale in comparison to the top five countries: United States, Germany, Italy, France and China. These countries hold approximately 19,000 tons combined, about two-thirds of official holdings at the end of 2010, according to the World Gold Council.
2011-04-29 How a Falling Dollar Affects Gold by Frank Holmes of U.S. Global Investors
Statements by Chairman Ben Bernanke on April 27 shouldn’t have surprised investors. Following the Fed’s press conference, the Fear Trade continued. Gold hit a new high while the dollar fell further, touching a three-year low on Thursday. As gold investors know, the metal has historically been negatively correlated with the dollar, meaning when the greenback is weak, gold tends to be strong. That correlation is reaching an extreme, widening substantially over the last year. Spot gold prices on the COMEX closed above $1,527 yesterday while the U.S. Trade Weighted Dollar Index tumbled to 73.32.
2011-04-29 Coal Use in China Shines Light on Growth by Frank Holmes of U.S. Global Investors
International coal prices hit $124 per ton this week, the highest levels in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia has made coal supply tight. The floods in Queensland, Australia cut the country’s output of coal by 15 percent and other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.
2011-04-28 European Engines of Growth by Frank Holmes of U.S. Global Investors
Emerging countries in Europe are expected to outpace their developed counterparts over the next two years, with Latvia, Poland, Romania and Slovakia leading 2012 GDP growth, according to The World Bank. In its “EU10 Regular Economic Report,” the organization expects Romania to lead the way with 2012 GDP growth of 4.4 percent followed by Slovakia’s projected growth of 4.3 percent. Poland’s GDP is anticipated to grow by 4 percent this year and 4.2 percent next year. As domestic demand recovers, Latvia is set to produce a GDP of 4 percent by 2012.
2011-04-26 Energy and Natural Resources Market by Frank Holmes of U.S. Global Investors
China’s apparent fuel consumption has gained 12 percent to an all-time high of 21 million tons in March. Chinese oil demand averaged 9.265 million barrels per day during the first quarter. Even at $4 per gallon of gas, gasoline demand in the U.S. maintained levels around 9 million barrels per day, according to the U.S. Department of Energy. Aluminum shipments by North American service centers have rebounded in March. Total U.S. and Canadian shipments were 155 kilotons. This is the highest volume since October 2008 and represents a 25 percent month increase, 29 percent year.
2011-04-22 Internet: Land of the Free? by Frank Holmes of U.S. Global Investors
Cell phones, computers, laptops, tablets and portable media players have freed Americans to access the Internet wherever they are and at whatever time of day. World markets are now updated every minute, news feeds change by the second, and the free flow of business communication never stops. While the U.S. and freedom seem to go hand-in-hand, it may surprise you that the U.S. actually ranks second behind Estonia in Internet independence. A new report, Freedom on the Net 2011, charts different countries’ Internet activity against accessibility, revealing some rather important clusters.
2011-04-22 Don’t Fear a Pullback in Prices by Frank Holmes of U.S. Global Investors
The S&P credit agency sent shockwaves through the global financial system on Monday. This sent markets lower and the prices of commodities such as oil rocketing back above $110 per barrel and both gold and silver to new highs. It should be clear the S&P announcement was just a warning, the rating was affirmed at AAA. The fears quickly subsided and U.S. markets hit fresh three-year highs. Essentially there’s only a one-third chance of a downgrade and anyone who’s ever listened to the weather man knows that a 33 percent chance of rain means you probably don’t need your umbrella.
2011-04-16 Will China's Economy Overheat? by Frank Holmes of U.S. Global Investors
China’s GDP growth continued at a blistering pace during the first quarter of 2011, rising 9.7 percent from the previous year. Once again this outpaced many forecasts and reignited the discussion of China’s overheating economy. While its robust growth may raise a few eyebrows, the economy isn’t in danger of “red-lining.” Andy Rothman points out that the first quarter growth figures “[aren’t] dangerously high given the GDP growth rate and strong income growth” After rising nearly 8 percent during 2010, inflation-adjusted urban incomes rose 7.1 percent during the first quarter.
2011-04-15 Middle East to Spend $80 Billion on Public Transport by Frank Holmes of U.S. Global Investors
This week, the International Association of Public Transport held its annual conference in Dubai. 2,000 delegates from 80 countries attended the 4 day event. Delegates took rides on the city public transportation, including the longest driverless metro line in the world. Long known as a city dependent on its cars for convenient travel, Dubai has been ramping up its infrastructure to relieve increasing traffic congestion driven by urbanization. Car traffic is forecasted to increase four times by 2020 as the population jumps from 1.2 million people in 2005 to more than 5 million by 2020.
2011-04-14 Four Examples of China's Amazing Growth by Frank Holmes of U.S. Global Investors
It’s hard to grasp the growth China has had over the past few decades. The country’s GDP has grown tenfold since Deng Xiaoping’s reforms ushered in a new economic era in 1978. However, pessimists point to the very low base economic growth began and the fact that Beijing has manufactured this GDP growth via government subsidies. True, China’s economy in the 1970s was barely on the global radar, and the government has kept the country’s economy afloat when activity started to contract. However, these naysayers can’t deny that nearly every aspect of Chinese life has experienced a transformation.
2011-04-08 Why High Oil Prices Are Likely Here to Stay by Frank Holmes of U.S. Global Investors
A number of forces continued to push oil prices higher this week, reaching their highest levels in the U.S. since September 2008. One factor fueling the run has been the continued decline of the U.S. dollar. Oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.
2011-04-07 100 Years of Shifting Growth by Frank Holmes of U.S. Global Investors
As part of our research, we track the fiscal and monetary policies of countries around the world. We believe government policies are a precursor to change and that this change can lead to economic devastation, such as the nationalization of oil companies in Venezuela, or generate substantial growth, such as Colombia’s successful efforts to encourage foreign investment. Historical context allows us to gauge the outcome of these situations. For example, these pie charts from Credit Suisse show the relative sizes of the world stock markets from two very different periods.
2011-04-01 The Strong Link Between GDP and Oil Consumption by Frank Holmes of U.S. Global Investors
Global crude oil and liquid fuel consumption grew at its second-fastest pace in over three decades in 2010, rising 2.8 percent to 86.7 million barrels per day, according to the U.S. Energy Information Administration (EIA). In fact, worldwide oil consumption surpassed 2007 pre-recession levels. For 2011 and 2012, the EIA forecasts that, around the world, we’ll use an annual average of 1.6 million barrels of oil per day. The EIA says this increase is expected to be driven by rising demand from the emerging world, mainly China, Brazil and the Middle East.
2011-04-01 The Bedrock of the Gold Bull Rally by Frank Holmes of U.S. Global Investors
Naysayers started calling gold a bubble back when prices hit $250 an ounce and though gold’s bull market has tossed and flung the bubble callers around for almost a decade now, their voices have only gotten increasingly louder as prices broke through $1,000, $1,200 and now $1,400 an ounce. However, gold prices appear asymptomatic of the signs generally associated with financial bubbles.
2011-03-30 Middle-Class Middleweights to be Growth Champions by Frank Holmes of U.S. Global Investors
Over the next 15 years, the number of children in middle-class households in emerging market cities around the world may grow 10 times faster than those in developed countries. This future generation living in places such as China, Latin America and South Asia should drive the demand for goods and services, housing and transportation that extend beyond the basic necessities of life. In McKinsey's report, “Urban world: Mapping the Economic Power of Cities,” the researchers focus on demographic and economic trends to determine which cities will provide the most economic growth in the future.
2011-03-19 How the VAR Model and Japan’s Tragedy Affect Investors by Frank Holmes of U.S. Global Investors
The threat of disaster from the damaged Fukushima nuclear power plant unleashed a ferocious sell-off of Japanese equities, but the damage to other major markets has been limited. Already experiencing a slight pullback prior to the events on March 11, U.S. equities and emerging markets have held up quite well. The MSCI Emerging Markets Index has only pulled back 2 percent since the earthquake and the S&P 500 Index only 3 percent.
2011-03-19 Oil's Piracy Premium by Frank Holmes of U.S. Global Investors
Over the past 30 years, the International Maritime Organization (IMO) has successfully lowered the risk of pirate attacks in other regions around the world. With the recent escalation of piracy around Somalia, governments and worldwide organizations including the United Nations are now working in concert with the IMO to curb these attacks. Their theme for 2011, “Piracy: Orchestrating the Response,” represents an increased awareness of the world-wide political changes required to reverse this trend.
2011-03-18 China's Urbanization Driving Housing Demand and Car Sales by Frank Holmes of U.S. Global Investors
It’s been an eventful week in Asia. The world turned its attention to Japan as it copes with the most powerful earthquake in the country’s history. The markets reacted, with Asian shares declining and uranium sentiment negative as investors rethink nuclear power. We are optimistic that a resilient Japan will turn from tragedy to opportunity by stimulating its economy through a reconstruction of the nation. This week, China was recognized for an achievement of its own. The country has resumed the leadership as the world’s top manufacturing country by output over Britain and the US.
2011-03-12 Domestic Equity Market by Frank Holmes of U.S. Global Investors
The figure below shows the performance of each sector in the S&P 500 Index for the week. Four sectors increased and six decreased. The best-performing sector for the week was utilities which rose 1.5 percent. Other top-three sectors were telecom services and consumer staples. Energy was the worst performer, down 4.0 percent. Other bottom-three performers were materials and technology. Within the utilities sector the best-performing stock was Constellation Energy Group which rose 6.8 percent. Other top-five performers were Exelon, First Energy, DTE Energy, and Duke Energy.