The major market indices were lower this week. The Dow Jones Industrial Index fell 1.04 percent. The S&P 500 Stock Index dropped 1.64 percent, while the Nasdaq Composite finished 2.63 percent lower.
Barra Growth underperformed Barra Value as Barra Value finished 1.09 percent lower while Barra Growth fell 2.19 percent. The Russell 2000 closed the week with a loss of 2.44 percent.
The Hang Seng Composite finished lower by 3.63 percent; Taiwan lost 3.62 percent, and the Kospi declined 4.86 percent.
The 10-year Treasury bond yield closed at 3.60 percent, down 2 basis points for the week.
All American Equity Fund – GBTFX â€¢ Holmes Growth Fund – ACBGX â€¢ Global MegaTrends Fund – MEGAX
Domestic Equity Market
The chart above shows the performance of each sector in the S&P 500 Index for the week. All of the sectors were down. The best-performing sector was financials, down 0.1 percent. Other better-performing sectors include consumer staples and consumer discretion. Underperforming sectors were materials, technology, and energy.
Within the financials sector the best-performing stock was Genworth Financial, up 11.5 percent. The other top five performers in financials were Zions Bancorp, Travelers Cos. Inc., Wells Fargo & Co., and Chubb Corp.
The photographic products group was the best-performing group for the week, up 39 percent, driven by its single member, Eastman Kodak Co. The company reported fourth-quarter profit that greatly exceeded the consensus estimate. It was the company’s first profit in five quarters. The earnings were driven by consumer and commercial inkjet printer sales, leaner costs and royalties on digital-imaging technology.
The homebuilding group outperformed, rising 4 percent. A major brokerage firm published a positive note on the homebuilders, reiterating an â€œattractiveâ€ view on the homebuilders, and noting that it sees upside to current valuations. The brokerage based its opinion, in part, on positive comments from builders about January home sales, which may bode well for a strong spring selling season and growth in new home sales in 2010.
The automobile manufacturer group was among the outperformers, up 3 percent, driven by its single member, Ford Motor Co. The company reported fourth-quarter earnings significantly above the consensus estimate. Also, Ford may have an opportunity to gain from the recalls being made by Toyota Motor Corp.
The steel group underperformed, dropping 9 percent. United States Steel Corp. reported earnings below consensus, and it provided disappointing guidance. Investor concern over China starting to slow bank lending negatively affected the basic materials groups. A stronger dollar also weighed on the steel group.
The home furnishings group was among the underperformers, down 9 percent, led by its single member, Leggett & Platt Inc. The company’s fourth-quarter earnings report beat the consensus estimate, but the midpoint of the guidance for 2010 was below consensus.
The communications equipment group underperformed, losing 7 percent, led down by its second-largest member, Qualcomm Inc. The firm’s first-quarter earnings beat consensus, but guidance was disappointing. Competitive pricing in the cellular chip market was part of the reason for the reduced guidance.
There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010.
The strength in the market since March could be an opportunity to eliminate weaker companies in the portfolio and upgrade to companies with better fundamental outlooks.
Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.
As governments around the world begin to wind-down the monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks.
January 28, 2010
Platinum Goes Platinum
January 27, 2010
Wind Power Not Hot Air
January 26, 2010
A Car and Housing Growth Story
U.S. Government Securities Savings Fund – UGSXX â€¢ U.S. Treasury Securities Cash Fund – USTXX
Near-Term Tax Free Fund – NEARX â€¢ Tax Free Fund – USUTX
The Economy and Bond Market
The 10-year U.S. Treasury note was relatively stable this week, with the yield decreasing by one basis point to end the week at 3.60 percent.
As reported this week, real gross domestic product (real GDP) increased at an annual rate of 5.7 percent in the fourth quarter of 2009, besting the consensus estimate of 4.7 percent. This was the best performance since the third quarter of 2003. The figure below shows the annualized quarter-over-quarter percentage changes.
The Reuters/University of Michigan final index of consumer sentiment for January rose to 74.4, exceeding the consensus of 73.0 and the preliminary estimate of 72.8. This was the highest level in two years.
The Chicago Purchasing Managers Index increased to 61.5 in January, higher than the consensus estimate of 57.2. This was the highest level since November 2005.
The S&P Case-Shiller 20-city home price index for November rose a seasonally adjusted 0.24 percent from October, the sixth straight monthly gain. The index was down 5.32 percent year-over-year, the smallest year-over-year decline in two years.
The Conference Board’s index of consumer confidence rose to 55.9 in January from a revised 53.6 in December, besting the 53.5 median estimate of economists.
Durable goods orders for December rose 0.3 percent from November, less than the 2 percent advance expected by economists. Orders for durable goods excluding transportation increased by 0.9 percent, more that the 0.5 percent consensus.
Initial jobless claims for the week ended January 23 were reported at 470,000, more than the 450,000 expected.
December new home sales declined 7.6 percent month-over-month to 342,000, less than the forecast of 366,000.
Sales of existing U.S. homes in December fell 16.7 percent from November levels to an annual rate of 5.45 million, worse than the consensus of 5.90 million. November sales had been helped by the government tax credit, which was originally scheduled to expire on November 30.
The Richmond Fed’s manufacturing index for the central Atlantic region for January came in at -2.00, slightly worse than the consensus estimate of 0.00. It did edge up a bit from December’s index of -4.00. For each of the seven months prior to December, the index had been positive.
The Mortgage Banker’s Association index of mortgage applications for the week ended January 22 dropped by 10.9 percent after rising for the preceding three weeks.
The fourth-quarter GDP of 5.7 percent reported this week provides another indication that the global economic recovery appears to be taking hold.
Coordinated global removal of fiscal and monetary stimulus are the biggest threats to the financial markets.
World Precious Minerals Fund – UNWPX â€¢ Gold and Precious Metals Fund – USERX
For the week, spot gold closed at $1,081.28 per ounce, down $11.92, or 1.09 percent. Gold equities, as measured by the Philadelphia Gold & Silver Index (XAU), fell 6.83 percent for the week. The U.S. Trade-Weighted Dollar Index (DXY) climbed 1.52 percent.
Investment demand for gold continued to be robust. The World Gold Council said investors bought 30 metric tons via exchange-traded funds in the fourth quarter of 2009, contributing to an overall total of 1,762 metric tons of ETF holdings for the year.
The China Gold Association said China’s gold output jumped 11.3 percent to a record of 314 metric tons in 2009, securing its position as the world’s largest gold producer for the third straight year.
India started the year on a positive note by importing 35 to 40 metric tons of gold during the first 27 days of January, up from 9.8 metric tons last January. Stable prices have given 2010 a good start to gold demand, the Bombay Bullion Association said.
Gold was negatively impacted during the week by offloading of positions based on sluggish global cues.
President Obama’s spending freeze for several federal departments, and the Commerce Department’s announcement that the U.S. economy grew at a 5.7 annual rate in the fourth quarter of 2009, were also supportive in a market environment where sovereign risk and financial imbalances are key concerns.
The Office of Fair Trading is conducting a probing investigation on several companies in the â€œcash for goldâ€ industry after complaints from customers show they were not offered fair values for their mailed-in jewelry.
Research from Cormark Securities shows that global gold production peaked in 2001 at 2,600 metric tons. World output has been steadily declining from that point because of lower grades and higher capital costs that are making it uneconomic for producers to bring new gold onto the market.
A bullion analyst in Beijing said the high price of gold is not deterring investors from the yellow metal as it does in India and the Middle East. Global investors Jim Rogers and Marc Faber have said that falling Chinese equity markets present good gold-buying opportunities.
The U.S. Federal Deposit Insurance Corporation is planning to securitize more than $36 billion in assets from failed banks, and auction them off in a bond offering to help cushion the ailing mortgage backed security market.
Bank of America-Merrill Lynch analysts believe that policy risk and government intervention remain the largest two risks to the economic outlook in 2010.
Economist Nouriel Roubini said he is pessimistic on the eurozone and that Spain poses a serious threat because of its fiscal imbalance. Spain is the region’s fourth largest economy with the unemployment rate of 19 percent, double the EU average. Rising sovereign risk may cause a flight of capital into the refuge of the U.S. dollar.
The World Bank said commodity growth will be restricted for the next two years as a result of a low-growth economic environment. It has forecast global GDP growth of 2.7 percent this year, followed by 3.1 percent in 2011.
Global Resources Fund – PSPFX â€¢ Global MegaTrends Fund – MEGAX
Energy and Natural Resources Market
Despite forecasts for record grain supply over the 2009 and 2010 growing season, the global grains stocks-to-use ratio is expected to remain below the historical average due to forecast growth in grain consumption.
Capacity utilization at U.S. steel mills has risen 1.5 percent to 65.6 percent in the last week, according to the latest American Iron and Steel Institute data. At 1.44 million metric tons, the total production was the highest since the end of October 2008 and represents 75 million metric tons per year on an annualized basis.
Japan’s shipments of aluminum rolled products rose 9.1 percent in December, posting the first increase since September 2008.
Crude oil prices fell this week as the U.S. Dollar gained 1.4 percent and concerns about Chinese oil demand amidst the Chinese government’s tightening economic policy.
Base metals prices plunged this week on fears of a slowdown in buying from China. Copper fell nearly 9 percent and zinc more than 10 percent.
BHP Billiton announced that it will acquire Athabasca Potash for $320 million. BHP Billiton also raised offers on manganese ore to customers in China by as much as 17 percent, as global supply tightens and demand picks up.
The queue of ships at Newcastle, Australiaâ€”the world’s biggest coal portâ€”is near its longest level since before the financial crisis, and waiting times are at a one-year high. Figures published this week show 58 ships waiting on Monday, just shy of the pre-Christmas peak of 60, which was the longest queue since mid-2007. Average waiting times for vessels is 18 days, the Newcastle Port Corporation figures show.
Bunge has sold its Brazilian fertilizer assets to Vale for $3.8 billion in cash to fill a war chest for agribusiness and sugar expansion and to attack its heavy debt burden.
Russian steelmaker Severstal confirmed its intention to restart its 1.2-million-metric-ton-per-year facility in Warren, Ohio, during March.
Australia’s government has not yet decided what recommendations it will adopt from a report proposing major tax reforms, possibly including a big increase in mining royalties, Prime Minister Kevin Rudd said this week.
MySteel.net claims that Chinese hot-rolled coil prices have fallen 80 Chinese yuan per metric ton so far this week and that cold-rolled coil price is off 100 Chinese yuan per metric ton. Further declines are expected ahead of the Chinese New Year holiday.
China Region Opportunity Fund – USCOX â€¢ Eastern European Fund – EUROX
Global Emerging Markets Fund – GEMFX
Fitch raised Indonesia’s long-term foreign and local currency credit ratings from BB to BB+, the highest level in more than a decade and only one level below investment grade. Indonesia’s resilience to the 2008-2009 global financial crisis due to improvements in its public finances was cited as a reason.
Thailand’s industrial production growth rose to 35.7 percent year over year in December, the highest on record and ahead of market expectations, as continued global recovery drove up exports 26.2 percent during the month.
The unemployment rate in Brazil in December declined to 6.8 percent from 7.4 percent in November, attributable to seasonal factors.
Fitch followed S&P in raising Russia’s sovereign credit outlook from negative to stable. Industrial production in the country grew 2.7 percent in December, a second positive monthly reading in a row. The monetary base jumped 25 percent in December, spurred by year-end government spending.
Bond yields in South Africa fell to their lowest level in three weeks after December inflation came in below expectations at 6.3 percent. Outside of gasoline, most major subcomponents of the CPI decelerated during the month.
Continued fears over the prospect of macro tightening in China resulted in an 8.8 percent decline for Chinese domestic A shares and 10.1 percent decline for Chinese H shares traded in Hong Kong in January.
South Korea’s GDP expanded by a seasonally adjusted 0.2 percent sequentially in the fourth quarter of 2009, slower than expected due to a decline in government spending and household consumption.
Brazil is to end tax cuts on purchases of cars (effective March 31) and appliances (end of January). According to the government, stimulus is no longer necessary. This move had been anticipated.
Czech industrial production fell 2.3 percent from the November’s level, suggesting a level of production close to that in the first quarter of 2009.
While the recent correction in China has been steep and swift, history suggests buying opportunities in the medium term. In early 2004 and early 2007, when tightening fears haunted investors in a policy environment similar to the current one, Chinese stocks underwent a sharp selloff for a couple of months and yet finished the year higher as investors realized the economy was not headed for a hard landing.
The fixed-line telecom market in Mexico is likely to become more competitive after the government decided to auction the fiber-optic long-haul network of CFE (electric utility). It is expected that Televisa and Megacable will participate in the auction in order to provide triple-play services for their customers.
After the Central Bank of Russia lowered refinancing rates by 425 basis points within last 10 months to the current 8.75 percent, consumer loan rates followed. The benchmark fixed mortgage is down 300 basis points to 17 percent. These lower rates have begun to translate into an increase in mortgage lending, based on research by Deutsche Bank.
The Indian central bank’s surprise increase of cash reserve ratio by 75 basis points and hawkish language regarding inflation may in the short term reinforce investors’ perception of tightening bias among global central banks.
Lower commodities prices would be a headwind for resource-rich economies in Latin America.
The inflation report from Central Bank of Turkey (CBT) continues to downplay rising headline inflation, according to Citi. As central banks around the world start tightening, keeping rates on hold could risk the CBT’s credibility and the lira’s performance.
Leaders and Laggards
The tables show the performance of major equity and commodity market benchmarks of our family of funds.
Weekly Performance Index Close Weekly
Change(%) Korean KOSPI Index 1,602.43 -81.92 -4.86% DJIA 10,067.33 -105.65 -1.04% Gold Futures 1,082.10 -8.70 -0.80% S&P BARRA Value 513.83 -5.68 -1.09% S&P 500 1,073.87 -17.89 -1.64% S&P BARRA Growth 551.93 -12.33 -2.19% Russell 2000 602.04 -15.08 -2.44% Natural Gas Futures 5.12 -0.70 -12.10% Nasdaq 2,147.35 -57.94 -2.63% S&P Energy 410.57 -11.99 -2.84% Hang Seng Composite Index 2,822.25 -106.38 -3.63% S&P Basic Materials 182.50 -8.30 -4.35% 10-Yr Treasury Bond 3.60 -0.02 -0.58% XAU 147.93 -10.85 -6.83% S&P/TSX Canadian Gold Index 300.37 -18.29 -5.74% Oil Futures 72.74 -1.80 -2.41%
Monthly Performance Index Close Monthly
Change(%) Oil Futures 72.74 -6.13 -7.77% Russell 2000 602.04 -31.14 -4.92% S&P Energy 410.57 -22.91 -5.29% Nasdaq 2,147.35 -141.05 -6.16% S&P Basic Materials 182.50 -19.62 -9.71% Natural Gas Futures 5.12 -0.70 -12.02% S&P BARRA Value 513.83 -16.20 -3.06% S&P 500 1,073.87 -52.33 -4.65% 10-Yr Treasury Bond 3.60 -0.25 -6.50% S&P BARRA Growth 551.93 -36.53 -6.21% Korean KOSPI Index 1,602.43 -70.05 -4.19% DJIA 10,067.33 -478.08 -4.53% XAU 147.93 -21.54 -12.71% Gold Futures 1,082.10 -17.40 -1.58% S&P/TSX Canadian Gold Index 300.37 -32.25 -9.70% Hang Seng Composite Index 2,822.25 -332.01 -14.83%
Quarterly Performance Index Close Quarterly
Change(%) Natural Gas Futures 5.12 +0.05 +1.05% Gold Futures 1,082.10 +32.90 +3.14% 10-Yr Treasury Bond 3.60 +0.10 +2.89% DJIA 10,067.33 +104.75 +1.05% Nasdaq 2,147.35 +49.80 +2.37% S&P BARRA Growth 551.93 -3.35 -0.60% S&P Basic Materials 182.50 -1.48 -0.80% S&P 500 1,073.87 +7.76 +0.73% S&P BARRA Value 513.83 +10.58 +2.10% Korean KOSPI Index 1,602.43 +16.58 +1.05% Russell 2000 602.04 +21.82 +3.76% Hang Seng Composite Index 2,822.25 -105.61 -3.61% Oil Futures 72.74 -7.13 -8.93% S&P Energy 410.57 -26.92 -6.15% XAU 147.93 -14.11 -8.71% S&P/TSX Canadian Gold Index 300.37 -22.50 -6.97%
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting Home – U.S. Global Investors or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. Each tax free fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Past performance does not guarantee future results.
These market comments were compiled using Bloomberg and Reuters financial news.
Holdings as a percentage of net assets as of 12/31/09:
Genworth Financial: 0.00%
Zions Bancorp: 0.00%
Travelers Cos Inc: 0.00%
Wells Fargo & Co: 0.00%
Chubb Corp: 0.00%
Eastman Kodak Co: 0.00%
Ford Motor Company: All American Equity 0.04%
Toyota Motor Corp: 0.00%
United States Steel Corp: Global Resources 1.12%
Leggett & Platt Inc: 0.00%
Qualcomm Inc: 0.00%
BHP Billiton: 0.00%
Athabasca Potash: 0.00%
Vale: Global Emerging Markets 1.58%
*The above-mentioned indexes are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.
The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.
The S&P BARRA Growth Index is a capitalization-weighted index of all stocks in the S&P 500 that have high price-to-book ratios.
The S&P BARRA Value Index is a capitalization-weighted index of all stocks in the S&P 500 that have low price-to-book ratios.
The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.
The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.
The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
The Philadelphia Stock Exchange Gold and Silver Index is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks.
The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500.
The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.
The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500.
The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500.
The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University of Michigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing to spend money.
The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
The S&P/Case-Shiller Index tracks changes in home prices throughout the United States by following price movements in the value of homes in 20 major metropolitan areas.
The Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.
The Richmond Fed Manufacturing Survey Assesses regional manufacturing conditions for the Richmond Fed District. Based on mail-in surveys from a representative sample of manufacturing plants, the Richmond Fed Index seeks to track industrial performance. The report puts particular emphasis on inflationary pressures.
The Mortgage Bankers Association Market Composite Index measures mortgage loan application volume.
The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns.
The Shanghai A-Share Stock Price Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares listed on the Shanghai Stock Exchange that are restricted to local investors and qualified institutional foreign investors. The index was developed with a base value of 100 on December 19, 1990.
H-shares are Chinese companies that trade in Hong Kong but are incorporated in China.