U.S. Global Investors, Inc. (NASDAQ:GROW)
Q4 2014 Earnings Conference Call
August 28, 2014 08:30 AM ET
Susan Filyk - IR
Frank Holmes - CEO and CIO
Lisa Callicotte - CFO
Susan McGee - President and General Counsel
Welcome to U.S. Global Investors Web cast, U.S. Global Investors Earnings Announcement for Fiscal Year 2014. If you have any questions during the webcast, simply enter your question in the dialogue box at the bottom of the screen and click submit. Also you may download a PDF of today's slides by clicking on the Resource tab in the top center of your screen. You can also download some of U.S. Global Investors' latest research on the Resources tab. To switch back to the presentation, just click the Slide tab.
We would like to begin by introducing Susan Filyk, Investor Relations at U.S. Global Investors. Ms. Filyk.
Thank you. Welcome, everyone, to our webcast announcing results for the fiscal year ended June 30, 2014. The presenters for today's program are Frank Holmes, U.S. Global Investors' CEO and Chief Investment Officer; Susan McGee, President and General Counsel; and Lisa Callicotte, Chief Financial Officer.
During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical facts are subject to risks and uncertainties that may materially affect actual results.
Please refer to our press release and corresponding Form 10-K filing for more detail on factors that could cause the actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today and U.S. Global Investors accepts no obligation to update them in the future.
If you have a question for us, you can submit it at anytime during the webcast. Simply type your question in the dialogue box at the bottom of the screen and click submit. If we aren't able to answer your question during the live presentation, we will follow-up with you individually.
Now let's go to Frank Holmes, CEO and CIO for an overview of the quarter and fiscal year. Frank?
Good morning. As U.S. Global is, I always would remind people that we are a boutique publicly-listed investment advisor, with a unique expertise in natural resources, emerging markets because both of those are highly correlated and domestic equities, municipal bonds and what are known as GARP investors when it comes to equities. And I'm going to talk little bit more about favorite product at this moment in this low interest rate environment.
But as we go into the presentation, I’d like to talk about the strengths of GROW as a go to stock for exposure to emerging markets and resources. And we’re going to show that in how our stock price has balanced recently with the rise in gold in past nine months. We’re debt free, we have a strong balance sheet with reflective cost structure, monthly dividends and return on equity discipline and one of the key factors there is take a look at [indiscernible] and buying back our stock has been a discipline in down days. But our top institutional holders of GROW remain financial investment and management group, the Royce Funds, Vanguard, BlackRock and Century Investments, as you can see that on Slide No. 6.
So paying monthly dividends six years now. Currently dividends are $0.05 per share per month and a modest yield of 1.7%, which is higher than a five year government bond. We continue with our share repurchase program. It’s in motion. The Board has approved to repurchase up to $2.75 million of this outstanding common stock on the open market through calendar year 2014. During the fourth quarter of 2014 the Company repurchased 16,840 Class A shares.
We use an algorithm used to buy back shares in down days and of course with all applicable rules, regulations that restrict amounts of times of purchases and this may be suspended or discontinued at any time but the spirit is to continue this program. It’s been a transition year, streamlining operations and product lineup. We shifted to costly money market fund business. We had hope last year when the government announced pulling with a punch bowl that rates would rise and we saw the long end of the bond market rise. However money funds, repo rates, there was no budge. Rates remain only basis points and thus it was a continuous onslaught of cost to maintain the dollar, it’s just outrageous what these costs have been for the whole industry.
So with that we said we’re going to have to exit that business and focus on providing shareholders with an ultra short bond fund as an alternative where there is not a drain in our cash flow to the degree that was taken place with these money funds and we closed, merged and reorganized small funds for more focused product line up and we successfully transitioned client accounts to new transfer agency while retaining service relationships with a key client accounts. What’s really amazing to me is just the cost. The cost of streamlining our operations is more expensive than launching a fund. It’s just recognizing this for the industry, how it's changed and evolved. But we streamlined the stock to under 50 people. So it means fewer distractions, allow the Company to focus on core competencies.
The next visual on Slide No. 10 is just trying to highlight to you as visually as possible why we shifted out of the money market fund business. Look at the U.S. debt funds rate. The fee waivers for the industry rose to a record $5.8 billion in 2013. So we’re happy that we are out of that program because rates for this past year in the short end of the curve still did not rise. Repos still are low and in fact tenure government bond yields have come back to under 2.5% and inflation is running at 2%. Five year government bonds, yields are less than the CPI number.
And when we look at Europe, rates have gone negative than Germany. So what that, it basically says we’re going to continue to live in a low interest rate environment. But what does this mean to us at U.S. Global? Well, we're streamlined and our current lineup of funds as you can see on Slide No. 11, is focused China. China region is still important for us to be tracking because it's highly correlate for demand for resources and the overlap with that with gold as we’ve seen that the China region has been a dominant player in the consumption of gold, in particular for the love trade.
And then emerging Europe is -- Europe is the largest economic trading nation with China. So it’s important to be able to take a look what Europe’s doing, emerging Europe along with America and China and now India is becoming a much more focused economic development nation. There our stock markets had a great rebound with new leadership, with new policies, very much policies of fiscal streamlining, not fiscal regulations in every department. It is basically trying to streamline tax results for economic activity and is showing up in their overall stock market.
The next visual is building for future growth. So we increased our ownership in the Canadian asset management company of Galileo. Michael Waring, the CEO and owner of that company, we’re very, very happy with the investment in Michael. He’s running the show and he's a tremendous individual, knowing this space especially when it comes to small cap growth in energy and income. We’re working in developing innovative but dynamic ETF products to expand our product line and earning valuable exposure by a brand in over 170 countries through publishing of our financial commentary and other content.
So we continue to be a content leader. We were commenting yesterday with Susan Filyk, our Head of Marketing that we were one of the first to come out with this idea of positioning content research of how we’re trying to help in educating investors on what is volatility, what are cycles? How to manage expectations in capital markets? Why having -- of waiting [ph] in gold of only 10% and rebalancing. What is dark investing meaning? Et cetera, et cetera. So we’re happy to see that we were early on that whole sort of movement and now how we’re repositioning our brand globally.
So growth in ETF products continue to be a disruptive product line for mutual funds and we do feel that because we see money jumping in and out of emerging markets or resources, our gold funds have outperformed the big GDXJ but that doesn’t really matter because it appears that people want to be able to have the ability to trade in and out. And we don’t know at which stage will the active management enlist it in separate accounts and then something we’ve been pursuing, the ability to be able to provide that separate account management. Maybe Susan McGee can talk a little bit about that as we go through this transition.
So let’s talk about the strategic partnership with Galileo. Increased GROW ownership to 65% of Galileo allows us to basically change how we accrue for the revenue, expenses, the cash flow, the assets et cetera on to our balance sheet and income statement and Lisa Callicotte our CFO can basically highlight and comment on that and their Toronto based company has about 267 million in assets. It’s accretive to GROW. This transaction is very accretive and the flagship fund consistently rated four or five stars. 2013 Lipper awarded the best small midcap fund in Canada over five years and CEO Michael Waring is a seasoned veteran as I mentioned earlier. In fact he is also a global trotter. I was chatting with him and he’s in Singapore looking at opportunities in the Southeast Asia and what the risks are and what the opportunities are and where he sees threats in overall growth.
So looking at the next visual Page 15, as it shows our quarterly average assets under management with Galileo addition have decreased. So that’s a positive note. The asset breakdown, which really important on this visual on Page No. 16 is the direct relationship we have with many shareholders. Most of our peers have their money coming through the swabs [ph], the TV et cetera. With us it’s a direct relationship. And that’s very important because we noticed the hot money coming in and out of our funds usually come through these platforms. They do not have a direct relationship with U.S. Global. And so we will continue to pursue having this more intimate umbilical cord directly with that customer and to being the high quality service from our VIP telephone shareholder resolving issue service along with the content we provide on our web.
So the next visual, as you can see that the quarterly average assets under management, as I just commented, it has an uptick. What we do have to see do is see a change in overall economic -- global economic activity because what we have noticed is that global real GDP, as it declined from a peak of 2011, so did our assets. Our assets are highly correlated. We had real global GDP growth that basically fell over 50%. We’ve had an uptick in the first six months of this year. So this is positive construction with U.S. leading the charge.
Our balance sheet on Visual 17 looks healthy and strong and that’s the way we'd like to keep it. As you can see the cash has shifted into our ultra-short bond fund to earn a higher yield. Our investments are all government rated bonds. So that’s positive. With that our earnings per share in the next Visual, they have turned. You can see last December we took a big dip and that was predominately for the cost of restructuring, repositioning, and streamlining our operations.
The next visual is growth and period comparisons. There is a group of growth investors out there. Then there's a group of value investors and then there is income investors. As you can see our peers, the dividend yields are higher now. Their overall three year returns on equity are greater than ours because we’ve had to take big charge on repositioning and streamlining our complex. But we still trade at a very attractive value proposition when you look at our cash and our holdings and what are you paying for, the assets and the earnings power.
And we have shrink our overall cost structure, which Lisa Callicotte, our CFO, can comment on. And where the growth prospects -- the past three years the average has been negative. I commented on that. It’s a very easy to explain. It is basically the decline in the emerging assets and resource assets, which is highly correlated with real global GDP growth. However, it appears in its first six months and its forecasted next year to be rising out of its lows.
The next visual is the Company snapshot. We try to take a look as give you a quick review of its market cap. It’s trading range. It’s highly volatile. We always comment on that for investors to manage their expectations as like we do educational programs on our Web site, usfunds.com on the volatility of our funds. And you can see that the long-term trend has been 9.32% return on our money.
Well, what’s really important for investors is we have a large goal following and we also have resources and as you can see here for the 12 months with a pickup in the gold prices, our stock all of a sudden balances quickly with a strong shareholder following, both domestically and globally. It’s a thorough performance, the strong asset management basically who is also in the gold space as a go-to stock for resource investors. And year-to-date, you can see the performance of U.S. Global in a shorter timeframe has also done exceptionally well as a highly responsive stock and then you can take a look in the past three months, how we've responded in a relative basis. And I think this is an important for the shareholder following.
We have value investors, we have growth investors, we have GARP investors and we have gold investors that look to us a first mover in the gold space with any rise in gold. As you can see here in this visual that the gold miners index rose and it’s one of the nice run here and so that we really respond with it. GROW is above its 200 day moving average and that’s interesting enough. We have found that that also attracts a group of technical investors globally, that many of them use a 50-day average and longer term investors look at the 200-day moving average. We have written about and talked about what's a called debt process when the 50-day average price crosses the low 200-day, which is basically 10 months. The 200-day moving average is approximately the average stock price for 10 months.
And when the three months goes above the 10 months or goes below, it does trigger a sort of trade on of risk or a trade-off and it does create a different compass in capital markets. What’s interesting about GROW is also we saw during this period rising gold stocks. We start seeing a turn positively and we’ve commented on that and I think that that's important.
The next visual is industry recognition of leadership. Congratulations to Susan McGee, top 10 women in asset management. NASDAQ published this on their Web site in Times Square. So we also like to highlight that we have many women that are key leaders in positions like U.S. Global. And today you have Susan McGee, our President and General Counsel; and you have Lisa Callicotte, our CFO; and you have Susan Filyk. She is not only just Director of Communications but basically Executive Vice President of Marketing in operations, in quantitative research. So we go throughout the Company internal auditor, et cetera, women play a very significant role in the operations of U.S. Global.
Now, I would like to turn it over to Lisa Callicotte to give you a review, a financial analysis of the income statement.
Thank you, Frank. Good morning. First, I'd like to talk about Galileo. We invested in Galileo beginning in March 2013 and we purchased a 50% interest in it and we accounted for that as an equity method investment and that yielded good returns over the year. Then on June 1, 2014, we purchased an additional 15%. With that we became controlling interest in the Company. Therefore now we are consolidating Galileo into our balance sheet and our income statement and you will see that we have that one month interest starting in June 2014.
Now, I would like to summarize the results of our operations for fiscal year ended June 30, 2014. Beginning on Page 28, you can see that we recorded operating revenues of $11.4 million which is down about 34% from last year of $17.3 million. This is primarily due to the lower assets under management related to shareholder redemptions.
Moving onto the Page 29, you can see that we have reduced our operating expenses also. They were $14.8 million. This is a decrease of $2.7 million or 15% and this is related to employee compensation and benefits decreasing $1.5 million or 18% and this is because we have fewer employees and lower performance based bonuses. Platform fees decreased $760,000 or 29% as a result of lower assets held through broker/dealer platform. We also reduced advertising $247,000 or 29% as we decreased sales and marketing cost. General and administrative expenses decreased $110,000 or 2% but also included in G&A are some one-time costs that Frank talked about, related to our strategic fund changes. We had approximately $525,000 that we paid in the second quarter of last year related to legal proxy filing and solicitation cost.
One Page 30, you see our operating loss for fiscal year 2014 is $3.4 million but this was offset by other income of $2.2 million which is our income related to our investments. Other income increased $1.9 million compared to prior year and the increase was due to realized gains on sale of available for sale securities, unrealized gains on trading securities, increases in dividend and interest income and gains recognized in conjunction with the acquisition of Galileo. During fiscal year 2014, the Company decided to exit the transfer agency business in order to focus more on our core strength of investment management.
The transfer agency results are reflected as discontinued operations and the loss net of tax on discontinued operations for the year was $243,000. Net loss attributable to the Company after taxes for the year is $970,000 or a loss of $0.06 per share. And as we discussed earlier this is related to this being a transition year and including several expenses related to streamlining our processes and exiting the transfer agency business.
Moving on to Page 32, we see that we still have a strong balance sheet that includes high levels of cash and securities that combine to make up 79% of our total assets. As you can see on Page 33, we still have no long-term debt and the company has a net working capital of $24.7 million and a current ratio of 12.5:1.
With that I would like to turn it over to Susan McGee.
Thank you, Lisa. You have just heard about many of the positive changes that we've made this past year and we're looking forward to our opportunities for future growth. In marketing and sales area, we are continuing to build the U.S. Global Investors brand through our personal interactions that we have with investors and also our far reach in distribution of our award winning educational communication. Our institutional sales team engages daily with financial advisors who are current and prospective asset holders. As many of our long time stockholders are aware, several of our funds have been recognized for their leadership in investment performance.
Since 2000, the funds have received about 29 Lipper performance awards, certificates and top rankings. The Global Resources Fund continues to be highly ranked by Lipper for its long-term performance. As of June 30, this fund is in the top 5% out of the entire universe of mutual funds of the 10 year period and we're very proud of that.
We're pleased that three of our funds hold the top Lipper leader rating. This rating is based on investor centered criteria and on the scale of 1 to 5 Lipper Leader funds that rate a 5 are in the top 20% of their category. The All American Equity Fund rates us 5 for preservation, the near term tax free fund rates us 5 for preservation and tax efficiency and the U.S. Government Securities Ultra-Short Bond Fund rates us 5 for preservation, expense and tax efficiency.
And we believe investors value preservation and tax efficiency and so we're very pleased to offer funds that are highly ranked in these categories. We have three funds that continue to be highly ranked by Morningstar. At the end of June 2014, the All American Equity Fund had an overall rating of three stars among its prospective peers. The Gold and Precious Metals Fund and the near term tax free fund had overall ratings of four stars in their respective categories. We're proud of the near term tax free fund. It generates consistent positive annual returns for investors for 13 years in a row now.
Along with investment leadership, we also continue to be leaders in the financial industry for our award winning marketing and communications efforts. The Mutual Fund Education Alliance has recognized the company with 54 awards for marketing and communication excellence since 2007. Two of our repeat award winners are the Investor Alert and the Advisor Alert. Both have been named best electronic shareholder and advisor newsletters for five years. These publications engage tens of thousands of investors on a weekly basis and we publish original and insightful content from our investment teams through these newsletters.
We believe that a key to building asset is through engaging educational content and this helps investors navigate the complex global markets that we deal in. Our special reports are in other format in which we share our expertise and we build our brand. This research is one of the most popular items on our Web site and it’s available for download on our Web site at usfunds.com. Also there investors will find a constantly changing wealth of material. We include slideshows from investment trips, media interviews, we have learning games and podcasts.
Our CEO blog Frank Talks is one of the longest running blogs in the financial industry. We've been producing that blog for seven years and we have insights and observations from Frank Holmes available through his blog. The content and our other communication efforts do receive an invaluable amount of earned media. Earned media is viral publicity that’s gained through sharing of our content by third party sources rather than paid advertising. And this helps us leverage our brand on reaching millions of readers, viewers and potential investors.
In addition our online community is growing as we interact frequently with loyal and digitally engaged followers through email, through Twitter, through LinkedIn and through Facebook. Kitco News, with an audience of 10 million monthly visitors has launched a new weekly show called the Gold Game Film. And it features Frank’s gold market analysis. We’ve produced 16 episodes so far and that audience continue to grow.
As you can see Frank and members of our investment team continue to be sought out by the financial media for their expert opinions on gold, natural resources and emerging markets. We’ve been interviewed by CNBC in the U.S. Asia and Europe by Bloomberg Radio, Stansberry Radio, the Gold Report, Marketplace, Business News Network and many more. In addition we have many influential financial newsletter writers who recommend our funds to their subscribers.
So with that Frank, I’d like to turn it back over to you, so you can discuss what we’ve been watching in the markets this year.
Thank you Susan. Something else that I think is important that Susan McGee is also very committed to the industry, the fund industry, is on the board of the Small Fund Committee and she’s on the Board of Governors of the ICI and I think those factors all recognize particularly with the Money Management Executive Magazine honor 10 women in the finance industry and Susan was recognized for that. So as a small organization we’re committed to the industry and I think that that's just the key factor. In addition as I mentioned earlier that I would say that the shop here is dominated by women in all the key industries -- not key industry but key tasks that we have to deal with.
But let’s hop over and take a look at what’s driving these markets in our stock and recent insights from the investor alert. The year-over-year percentage to change oscillator, we comment on this, we’ve written about this extensively in the past month to try to help people to manage expectations. We are big believers that there is no certainty except where life is filled with probabilities. The certainties as Benjamin Franklin said that we’re all going to pay taxes and die. After that it’s a life of probabilities. And within that you can measure what the volatility and probability of an event taking place and yes there are black swans et cetera but there'll always the anomalies that are out there. It’s more understanding is that our probability is going to rain today, is it going to be snowing in Texas in August, I don’t think so. I really don’t think so.
But it’s just recognizing these differences and it can show up in capital markets. So we’ve written about cycles, understanding the long-term cycles, the four year presidential election cycle and what is the probability of markets rising and falling in each year. And then this is seasonal commodity cycle that different commodities are effected and impacted by weather, transitions as the world terms. There is very defined seasonal patterns for gold consumption which is driven by what we like to characterize as the love trade. We see a pick-up in the second half of the year and it’s not 100% each time. But there is a higher probability of gold rising and gold stocks rising in the second half of the year because of many religious holidays and with demographic shifting in China and India and Southeast Asia rising GDP, we're tapping these countries have been very significant in the demand for gold for the love trade. So it’s recognizing those patterns and then try to explain what leaders are. What you see in this visual -- when we wrote a book just back early in June, I gave speeches back in December and January that the gold markets were extremely oversold and there was time for big rally. And basically what this visual is telling you that it is a non-event for gold to rise or fall over any rolling 12 month by 15%. That’s just normal D&A of volatility.
But whenever it goes up 30% it’s time for a profit and the high probability of mean reversion and any time its fallen 30% the probability of it rising increases dramatically and it’s basically a mathematical model that helps you to manage your expectations. So not to become fearful of volatility, understand it. Understand so that you could turn around and make it as an opportunity for U.S. Investor.
So with that I’d like to go on to the next visual and talk with the energy sectors rising. The S&P energy sector has put on a great run here and a key factor for that has been the significance of American leadership and technology, technology in the exploration development of natural gas and oil which we’ve written about and hear in the media called fracking. We’re so much further advanced and there is other factors that drive that. One is common law. You’re going to realize that when you have common law, you can own your real estate. When you have civil laws and all these nations there seems to be, it's owned by the country, the nation and that whole process of allowing you to go in develop and take leadership in your property is very different in America and Canada.
So we find that this is an important factor when global investing as rule of law and understanding what the opportunities or risks are with rule of law and America does have the best sort of legal system when you compare that to much of Africa or Latin America and Europe. So with that our leadership and technology is allowed to advance. Now the visual is coming back as I mentioned earlier for the gold seasonality and it’s driven by holidays just to recognize this pattern. It’s a 30 year pattern. I mean it’s amazing that it has just 70% probability of rising and hitting lows between June and July.
The next visual, educational content is showing you that China’s gold share total reserves, that foreign exchange reserves [ph] is advising. There is a huge shift, big gold bricks are leaving America and they are going to over to Switzerland to refineries. They are maxed out in Switzerland. They take those big gold bricks, melt them down into smaller wafers and coins and they ship them over to China and there has been nothing but a big increase. So as the ETFs in North America were being liquidated last year, we saw this transition to big buyers were coming out of China. And we have also seen that there's been a better pickup in the past couple of months with a change of leadership in India, that it seems that India has been able to become a bigger buyer of gold in a more transparent way.
We saw a lack of transparency in the consumption of gold because we saw premiums being paid for gold in India last year, significant premiums. I have wrote about that in my trips to India last fall, which when you went to small gold jeweler and saw what they had to pay for gold. But coming back here to show you this oscillator, it’s just so important on Visual No. 54, its heading back to the mean. This is going back since basically 2004, 10 year snapshot, showing you how gold goes from overbought to oversold. We had four times, actually five, here you can see extremely overbought gold and now we have got extremely oversold. It still isn’t back to the mean. So us favor [ph] that we can see gold still rise.
What we have found on the next Visual 55 that's very important for investors is the global industrial production has been rising and what is the difference; I'm often asked between PMI, that is Purchasing Manufacturers Index and industrial production, because both of these are highly correlated to demand for resources. When you look at industrial production, it is a subset if GDP, it is looking back, it’s like accounting. Accounting is reconciling to a zero file balance, it is looking back. Finance is looking forward, PMI, Purchasing Manufacturers Index or in America they call ISM, is a looking forward analysis of the demand, the potential demand for commodities and it’s usually a precursor for stronger demand for commodities or weaker demand.
So what we have published on or written is forward looking PMI when the one month is above the three months and we like to look at our G7 countries versus the E7 most populated countries. And when it comes to basic commodities of iron core and copper, everyone has a turn to the gorilla and the 800 pound gorilla is China. China is 50%. It’s the country that moves the dial for basic bulk commodity demand. So it’s important to be tracking that and what we're seeing here in this visual is industrial production, it appears the wind is at our back not in our face and PMIs globally have been flirting [ph] with rising. They have been rising for the past year with a few setbacks with Japan and they started rising again, now it looks they have a setback. China has turned the corner but Europe maybe slowing down.
So, it’s just important, we see this trade, this risk on-off, on-off as people look at this global PMI and what this trend is doing. One thing that we believe is that the governments around the world have exhausted their monetary stimulus by having basically zero interest rates and next they are going to have to have a wakeup call and all these wars -- skirmish that we're seeing like this morning in Ukraine again, it’s been more of a war on capitalism with finally seeing complaints coming out of Europe of over-reaching regulatory arms that are basically slowing down the ability for capital to form, form jobs. You can’t rely just on the government to create jobs, you have to allow an ingenuity and the creativity of people to invent new products, new ways of distributing a product, distribution et cetera.
And with that we believe that in the next 12 months, we're going to probably see a revisit of how do we create fiscal stimulus and to that is tax free zones, tax free areas, streamlining or rethinking how you get a loan, how capital is formed and that will unleash much more significant global economic activity, much more synchronized and this is what we have been lacking. Since 2011, we have not had synchronized global growth. We have China pick up, America lagging, Europe start to take off, then all of a sudden China is slowing down and then we have America now leading and we have Europe slowing down. So, it’s unsynchronized growth, which creates a skittishness but what’s important is that people continue to have babies and we are well through that 7 billion people on the earth and the other big tectonic shift is the move from rural area to urban areas and this will continuously need infrastructure building.
So in that context, we take a look at, coming on the next visual which we highlighted, Chinese jewelry consumption triples since 2004. We did comment that we did see a leveling off the past couple of years because the GDP per capita of Chindia, China and India, is very important for the love trade and the love trade is very important because in the 70s when gold took off, it was predominately out of the fear trade and because China and India only had a global economic footprint of 2% of the world’s GDP. So now we’re pushing 25% of the world’s global GDP and 40% of the world’s population. So as they have been rising in the global GDP and they have this natural emotional affinity towards gold, it lends itself that they consume and give gold, gold gift giving, from India right now is the god of success, prosperity. And next it will be something that will be China it is the Year of The Horse. So it’s giving gold horses. So it’s just recognized that.
The other part is Greece. Look at the Greece 10 year government bond yields are back to pre-crisis level. So when Draghi came out and made the statement that no matter what that we’re going to protect the integrity of the euro, it was the point where all of sudden Greece start to take off and so they're still one of best performing stocks and stock exchanges and we have investments in our emerging euro in Greece. And then the next visual and I'm trying to give you some ideas of what we have been getting the most hits for on our Web site.
And then the next one is of top global oil consumers. So as you can see the U.S. continues to be the 800 pound gorilla when it comes to consumption of oil, but what’s also really significant is that we’re importing a lot less. That makes our current account deficit looks much prettier and that makes our dollar -- relative currency much more attractive. And you can see that China is the next big oil consumer and you can see Europe is another significant factor. The dramatic increase of market risk in Ukraine every time is, we’ve seen get a little bit of peace. Ukraine market can rebound. Other it takes down to chin. This morning it will be taking on chin because supposedly another front taking place. And all this is doing is creating volatility in the European marketplace both economically and we’ll what Putin is trying to do with the thought process as he’s trying to do everything to get the price of oil up because Russia is a largest exporter of oil and gas in the world. And they need those foreign currencies.
What’s interesting is that Putin within his own nation has highest ratings. It is more than double what President Obama has. So it’s bizarre to think that this whole thing of not peace and not prosperity. They have a slowing economy. They have rising inflation. And they are at war. But Putin has a higher rating, which is a really conundrum to the way we look at the world as a nation.
But let’s talk about the positive parts, healthcare sector continue to see all these takeovers and mergers but it’s also demographics because we’ve noted that healthcare sectors also very strong in China, in Thailand, in Asia. So we believe this shift in demographics of people over the age of 50 and then the huge shift over 60 are going to continue in more and more support in healthcare. And America is a leader in technology and a leader in so many forms and ways of administrating healthcare. So I think it’s going to be a very healthy sector to be looking at not just domestically but globally.
And then I commented early about Greece and now isn’t it amazing to see a government policy where they’re going to protect Greece. Austria came in and all of a sudden they posted a current count surplus. Their stock market has basically run with this current count surplus going from a massive shrinking as to a surplus, has been highly correlated to the stock market rising. And now we have a new commodity for market. I don’t believe we are in a complete robust secular synchronized global growth. So we’re not going to get at this stage 2003, ‘04, ‘05 and ‘06.
But what we’re going to get is any kind a supply disruption, then all of sudden that commodity start to rise dramatically. Any supply like Indonesia restricting the export of copper, trying to create a more integrated economic engine in their own country, all of sudden less supply for copper around world, but the world continues to have babies and governments continue to have infrastructure spending. So with that we believe that you're going to be much more fleet of foot, almost more functional like navy seals than the big U.S. Army in how you look at these capital markets in these different sectors.
And hopefully in the next couple of years we’ll get the sort of organized, synchronized growth again where all these commodities will have to be on tare [ph]. But the largest one month jump in China’s manufacturing activities since August 13th, which is helpful, which starts to pick up many of the commodities. We saw shipping lanes picking up. So these are all positive aspects.
The next visual is Turkish Banks Rally if the central stabilizes the lira. Turkey is an incredible economy. The biggest volatility happens to be the currency. What I would like to compare is Turkey versus Russia. Turkey has a high percentage of their overall economic engines in small cap companies and mid-cap companies. They don’t exist in Russia. It’s run by the mafia. There is -- you just don’t have a chance if you think you have the franchise rights for six Subway stores et cetera, all of a sudden the mafia is going to come in and the idea of taking a public company there, it just doesn’t exit compared to places like Turkey where there is much more free market, economic development and creativity. The engineering that comes out of Turkey is magnificent. First class engineering, they’re doing all the infrastructure projects of North Africa. They basically build for the Russian Olympics. Putin didn’t trust his own engineers and with that it was basically -- so it was developed by engineers and workers from Turkey. So it is capacity and country, has its own issues along the Kurdish border, has its other issues in that whole area but still has a robust economic engine when you compare it to other countries in that region.
Next is a visual that’s really important to understand, North American gas boom is a global bargain. What this means that this visual is that America’s ability use technology to extract gas at a very high volume rate, at a lower price than what is being sold in Europe and the rest of the world, Japan et cetera is for chemical industry and also for our refining products. So our refineries, those stocks have been on a tear, the chemical stocks have been on a tear because the input to make gas at the gas station, you need to have cheap natural gas or cheap oil to make chemicals. You need cheap natural gas. And so with that America has been able to be able to export the chemical industry most of its products to the emerging countries and that’s been a huge boom to our overall engine.
So if you’re reading the U.S. Global Investor alert, that’s great. Jimmy Cramer is, we’ve commented on this before. We think it’s important that you try to stay in touch with us and we can stay in touch with you. And if you have any ideas how we can help better serve you, please reach out to us and send in your questions today an at any time you feel free, just send your questions into U.S. Global so we get our feedback and a response to help address any things you have. We’ve now spoken here with my team for 51 minutes. Now we’re going to open to Q&A.
Thank you Frank. Now we’ll take some questions. (Operator Instructions). First question is for Lisa Callicotte and it relates to the discussion of expenses related to the transition of the share. Would these expenses be non-cash expenses or were they out of pocket expenses.
These expenses were out of pocket expenses. They included legal expenses, proxy cost, solicitation cost. We also did still pay out in the first half of the year the yield maintenance related to the money market. So all of these were cash expenditures.
Thank you. I have no more questions at this time. So this concludes U.S. Global Investors earnings webcast for the fiscal year 2014. This presentation will be available for replay on our Web site at usfunds.com. Thank you all for your participation today.
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