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Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., a boutique investment advisory firm based in San Antonio that manages domestic and offshore funds specializing in the natural resources and emerging markets sectors. The company’s no-load mutual funds include the... More
My company:
U.S. Global Investors
My blog:
Frank Talk: Insights for Investors
My book:
Goldwatcher: Demystifying Gold Investing
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  • Keeping Tabs On China's Favorites

    President Obama is set to deliver his fifth State of the Union Address next week on January 28, a key opportunity for our nation's leader to comment on the well-being of the country as well as his plan for the upcoming year. Americans won't be the only ones listening to such a speech though.

    Chinese citizens will be tuning into a similar forecast in March delivered by Premier Li Keqiang, the "Annual Government Work Report." Li's report will highlight the direction of the Chinese economy in 2014, and as I like to remind shareholders, government policies are a precursor to change, so I believe the report holds significance for investors.

    Xian Liang, new co-portfolio manager of our China Region Fund (MUTF:USCOX), pointed out to me this week an interesting idea about policymakers in China. More specifically, he noted how their presence during the planning of Premier Li's speech could very well signify what's happening in the Chinese market.

    On January 17, Li invited several academics and corporate executives to give their input on what "vital" factors should be included during his annual report. Judging by the guest list, and pictures published on the government's website, Xian said it is quite clear which industries are currently favored by policymakers in the country.

    Two familiar faces caught Xian's eye as he noted Li's guest list: Lei Jun and Pony Ma.

    Circled in the picture above is Lei Jun, or the "Steve Jobs" of China. Lei founded KingSoft, Xiaomi and YY, all technology and social networking names. More recently, Lei even converted Apple investor Steve Wozniak into a user of the Xiaomi, a popular smartphone maker, instead.

    In the second picture below is CEO of Tencent Holdings Ltd, Pony Ma. Tencent is the maker of mobile app WeChat, a name you may remember me mentioning previously, which since June of 2013 has been one of the most popular free apps to be downloaded.

    With such open government policy support, we believe the technology and Internet areas are positioned to succeed in 2014.

    This is one thing we watch when managing our funds at U.S. Global Investors. The China Region Fund (USCOX) has owned both YY and Tencent Holdings Ltd, both of which are names that fall into one of the strongest three sectors in our fund, the technology sector.

    Take a look at the strongest sectors in the China Region Fund now.

    Please consider carefully a fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

    Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund's returns and share price may be more volatile than those of a less concentrated portfolio.

    All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. Holdings in the China Region Fund as a percentage of net assets as of 12/31/13: Apple Inc 0.00%, Google Inc 0.00%, KingSoft Office 0.00%, Tencent Holdings Ltd 0.00%, Xiaomi Inc 0.00%, YY Inc 1.26 %.

    Disclosure: I am long YY, .

    Jan 23 10:06 AM | Link | 1 Comment
  • Follow The Money By Investing Alongside The Wealthy

    For investors looking for a lucrative approach for their money this year, take a cue from Citi's advice to its wealthy clients.

    CNBC recently highlighted Citi Private Bank's new report, saying investors are "hurting their long-term returns by focusing too much on assets that can be cashed in at virtually any moment."

    We agree with this sentiment that investors are overly concerned with liquidity. Warren Buffett once wrote to shareholders that his "favorite holding period is forever." While forever may not be appropriate for everyone, a multi-year investment timeframe and annual rebalancing are essential to building wealth, especially when investing in volatile asset classes such as emerging markets, resources and gold. Even though these asset classes typically have higher volatility, they historically have performed spectacularly.

    Citi's "Outlook 2014" is a significant change compared to the view it gave last year, as the firm tells its wealthy clients:

    "We have seen both equities and many fixed income markets rise in tandem regardless of economic fundamentals and modest growth expectations. Investors, however, have not participated broadly in those market developments, and, despite a rise of over 20 percent in the value of global equity markets during 2013 (following a 13 percent rise in 2012), portfolios still remain poorly allocated, underweight in equities, overweight in cash and carrying a significant amount of interest rate risk."

    The new year is a great time to look at your portfolio to see if Citi would deem your investments "poorly allocated." I suggest investors go with the momentum of the market and apply an approach similar to the one taken by the Holmes Macro Trends Fund (ACBGX). In 2013, the fund outperformed its benchmark S&P Composite 1500 Index by nearly 7 percent. See its performance history here.

    One way U.S. Global Investors can help investors with appropriate allocation is through the ABC Investment Plan. It's an automatic plan that uses the advantages of dollar-cost averaging, which allows you to invest a fixed amount in a fund at regular intervals, together with financial discipline to help you work towards your financial goals.

    No matter how you achieve these goals, it's important to follow the money. If Citi's advice is valuable for its wealth clients, it's good advice for all investors.

    See CNBC's article here.

    Please consider carefully a fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

    Past performance does not guarantee future results.

    All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content. The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600.

    A program of regular investing doesn't assure a profit or protect against loss in a declining market. You should evaluate your ability to continue in such a program in view of the possibility that you may have to redeem fund shares in periods of declining share prices as well as in periods of rising prices.

    Jan 17 6:50 PM | Link | Comment!
  • Resource Investors Who Used This Strategy Have Seen Significant Gains

    When playing Blackjack, the house has the edge in winning … unless you know how to count cards, a strategy proven to increase a player's chances. But did you know you can apply this concept to the market as well?

    While card-counting may get you barred from a casino, you can freely use patterns to your advantage in investing.

    Take the Purchasing Manager's Index (PMI), which gives us a reliable indication of the manufacturing sector's well-being, as it gathers data such as global output, new orders, exports, prices, and employment. And because recessions tend to start and end with manufacturing activity, PMI can also be counted on as a measure of how well the economy is doing.

    Investors can use the PMI data to improve their chances of positive returns in the market, as the math shows that with the positive momentum of PMI, commodities and commodity stocks build momentum as well.

    Take a look at the two-year trend in the JP Morgan Global Manufacturing PMI that is based on the results of surveys across 32 countries and accounts for 89 percent of global manufacturing output. As of November, the JP Morgan Global PMI has stayed above its longer three-month reading for the fifth month in a row.

    (click to enlarge)

    At the beginning of July 2013, we noted that the June Global PMI had crossed above the three-month number. Just like in card-counting when players place larger wagers when the deck has a favorable number of tens and aces, investors can shift their strategy when keeping a tally of these "cross-aboves" and building momentum.

    From January 1998 through December 2012, there were 22 times when the PMI rose above its three-month trendline. As you can see in the chart below, over the following six months, there was an 86 percent probability that copper would rise, resulting in a median return of 14.7 percent. The S&P Energy Index rose about 86 percent of the time and had a median return of 9.6 percent. Typically, WTI crude oil rose 77 percent of the time, with a median return of 17.7 percent. And the S&P 500 Materials Index rose 77 percent of the time, with a modest median return of 5.5 percent.

    (click to enlarge)

    If investors were "counting these cards" since the PMI experienced a "cross-above," they would have had a winning strategy, as the five-month returns for commodities and commodity stocks were comparatively consistent with history.

    Since the beginning of July through the end of November, materials stocks in the S&P 500 jumped a spectacular 15.42 percent, the energy stocks in the S&P 500 rose 9.35 percent and copper climbed 5.9 percent. WTI crude oil was the only to buck its historical trend, falling about 4 percent.

    While you may never know what card the market may play next, this "card counting" strategy has again tipped the odds in favor of the investor. And right now, with the global PMI building your momentum, it appears that the trend is your friend.

    Past performance does not guarantee future results.

    All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: commodities
    Dec 06 4:54 PM | Link | Comment!
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