USFunds.com • February 26, 2016

Table of ContentsIndex Summary • Domestic Equity Market • Economy and Bond Market • Gold Market

Energy and Natural Resources Market • Emerging Europe • China Region • Leaders and Laggards

If you would like more information on our funds, feel free to contact our Institutional Services Team: Jerry Reed, Institutional Sales Specialist • 210.348.2650 • jreed@usfunds.com

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BREAKING: GOLDEN CROSS FOR GOLDBy Frank HolmesCEO and Chief Investment Officer U.S. Global Investors

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Today, gold experienced a “golden cross,” a technical indicator that occurs when an asset’s 50-day movingaverage crosses above its 200-day moving average. It’s the first such movement in nearly two years and is a signthat gold might have further to climb.

But there’s more exciting news involving gold. On the same day that New Jersey Governor Chris Christieendorsed Donald Trump for president, which is sure to give him another boost in the polls, the precious metalreceived its own high-profile endorsement. In a note to investors today, Deutsche Bank said it’s time to buygold, writing: “Buying some gold as ‘insurance’ is warranted.” The bank also stated its opinion that gold“deserves to be trading at elevated levels versus many other assets.”

The metal is already up 15 percent so far in 2016, its best start to the year in decades. But it started 2015 strongtoo, if you remember, before prices began to collapse in February.

So what’s the difference between then and now?

Gold owes a lot of its success this year to negative real interest

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rates, something it didn’t have on its side in early 2015. As I’vementioned many times before, the metal has historically done wellwhen real rates turned negative (because then you essentially endup paying the government to hold on to your money). To get thereal rate, you subtract the consumer price index (CPI), orinflation, from the five-year Treasury yield. If it’s positive,investors will be more likely to put their money in Treasuries, andif it’s negative, they’ll seek out other stores of value—includinggold.

In January 2015, the five-year Treasury yield averaged 1.37percent, while inflation, less food and energy, posted a tepid 0.2percent. This resulted in an overall real rate of 1.35 percent—aheadwind for gold.

But here we are a year later, and real rates have gone subzero. With the five-year yield at 1.51 percent andinflation at a healthy 2.2 percent—its strongest reading since June 2012—real rates have dropped to negative0.69 percent. This has helped make gold much more attractive to investors. For the month, as of February 24,the precious metal has risen nearly 10 percent.

There’s another way of looking at inflation, though—the ShadowStats Alternate Consumer Inflation index. Foryears, economist John Williams’ site ShadowStats.com has reported actual, or “real,” economic data that oftentell a very different story from the official government numbers.

Williams argues that at one time, the official CPI was useful in determining changes in consumer prices year-to-year. But government officials continued to tinker with their methodologies, in effect “moving the concept ofthe CPI away from being a measure of the cost of living needed to maintain a constant standard of living.”

Below you can see the actual inflation rate, according to ShadowStats, based on 1980 methodologies. Whereasthe official CPI is 2.2 percent, “real” inflation is running closer to 9 percent, adding to gold’s allure.

http://www.usfunds.com/investor-library/frank-talk/3-reasons-why-this-gold-rally-is-the-real-deal/#.VtDOfyseouIhttp://www.shadowstats.com/

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Oil Rallies Following S&P 500’s Best Week of 2016Following the S&P 500 Index’s best week of 2016, oil prices are strengthening on news that Russia and SaudiArabia, the world’s two largest producers, are scheduled to meet next month to discuss possible productioncuts. This, along with rising gasoline demand in the U.S., seasonality trends and supply disruptions in Iraq andNigeria, has helped push both Brent and West Texas Intermediate crude comfortably above $30 per barrel. Itwas oil’s best week since August 2015.

The rally has given investors renewed confidence in domestic stocks after one of the largest equity selloffsearlier in the year. The correlation between crude and S&P 500 stocks is currently at levels not seen since 1990,according to the Wall Street Journal.

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Oil’s gain arrives at a time when President Obama announces plans to impose a $10.25 “fee” on every barrel ofcrude sold in the U.S. The details are fuzzy at this point, but the revenue would reportedly go toward cleanenergy initiatives such as electric cars, charging stations, public transit and high-speed rail.

These are all admirable goals, but charging oil companies what’s essentially a tax is the wrong way to go aboutit. The proposal has already been met with strong criticism from analysts and think tanks, who estimate that, ifenacted, it would push up production costs, hurt employment and capital formation and lead to slower growth.The Congressional Research Service (CRS) concludes that oil and gas prices would rise, while the TaxFoundation writes:

[T]he annual level of GDP would be 0.3 percent less than otherwise (an annual loss of $48billion in terms of the 2015 economy), private business capital stocks (e.g., equipment,structures) would be 0.6 percent lower, and 137,000 full-time jobs would be lost.

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Again, affordable and reliable clean energy is a noble pursuit, but in the case of the $10.25 tax, the costs faroutweigh the benefits. A much better and possibly more consequential strategy can be found in private sectorefforts such as Bill Gates’ recently-founded Breakthrough Energy Coalition. Together with a couple dozen otherbillionaire businessmen and executives—including Richard Branson, George Soros, Mark Zuckerberg, AmazonCEO Jeff Bezos, Bridgewater Capital founder Ray Dalio and Alibaba CEO Jack Ma—Gates plans to investbillions into clean energy innovations over the next several years.

We’re encouraged by the fact that the U.S. just launched its first-ever shipment of liquefied natural gas (LNG)for export. The LNG, sold by Houston-based Cheniere Energy, left the Sabine Pass terminal in Louisiana thisweek and headed for market in Brazil.

This historic event confirms the U.S. as a major energy superpower, with the potential to be the world’s topsupplier, and it should help support LNG demand around the world. The industry has a bright future.

Trans-Pacific Partnership the Cure for Sagging Global TradeHere at U.S. Global Investors, we follow government policy closely because it’s a precursor to change. Thepolitical party matters little. It’s the policies that have the most significant ramifications, and both majorAmerican parties are capable of creating both good and truly awful policies.

Having said that, I might disapprove of Obama’s 10 percent oil tax, but I applaud him for continuing to put hisweight behind the ratification of the Trans-Pacific Partnership (TPP). The TPP, as I’ve pointed out numeroustimes before, would help global trade by eliminating 18,000 tariffs among the 12 participating Pacific Rimcountries. This week the president said he planned to send the agreement to Congress for a vote sometime thisyear, and when that day comes, I urge our senators and representatives from both sides of the aisle to make theright choice.

Now more than ever, global trade needs a boost. According to the CPB Netherlands Bureau for Economic PolicyAnalysis, the value of goods traded across the globe, in dollar terms, fell a whopping 13.8 percent in 2015 afterfalling 2 percent the previous year.

Meanwhile, world trade volumes grew only 2 percent in 2015, the slowest year since the financial crisis,according to a recent report by the Organization for Economic Cooperation and Development (OECD).

http://www.usfunds.com/investor-library/frank-talk/how-these-12-tpp-nations-could-forever-change-global-growth/#.Vs9RrCserhkhttp://www.cpb.nl/sites/default/files/cijfer/CPB%20World%20Trade%20Monitor%20December%202015/cpb-world-trade-monitor-december-2015.pdf

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The OECD additionally trimmed its 2016 growth outlook to 3 percent, down 0.3 percentage points from itsNovember projection.

Joining the OECD in downgrading growth projections is the International Monetary Fund (IMF), which loweredits forecast 0.2 percentage points to 3.4 percent. To strengthen growth, G20 countries should “reduceoverreliance on monetary policy,” the IMF writes in a report ahead of the meeting among finance ministers andcentral bank governors in Shanghai this weekend. Further, “credible and well-designed structural reforms” areneeded to “lift potential output” and provide some “coordinated demand support.”

I second the IMF’s calls for G20 nations to rebalance their monetary and fiscal policies and to reform rules andregulations that stand in the way of global trade. The TPP, which will involve countries that represent 40percent of the world’s GDP, is a step in the right direction. But for synchronized growth to be achieved, morewill need to be done.

Mark Your Calendars!I will be in Carlsbad, California, April 13-16, speaking at the Oxford Club’s 18th Annual Investment UConference. I’m honored to be joined by other respected minds in the world of investing, including AlexanderGreen, Marin Katusa and Keith Fitz-Gerald. Reserve your seats today by clicking the link above. I hope to seeyou there!

Index SummaryThe major market indices finished up this week. The Dow Jones Industrial Average gained 1.51 percent.The S&P 500 Stock Index rose 1.58 percent, while the Nasdaq Composite climbed 1.91 percent. TheRussell 2000 small capitalization index gained 2.69 percent this week.

The Hang Seng Composite lost 0.08 percent this week; while Taiwan was up 1.03 percent and theKOSPI rose 0.20 percent.

The 10-year Treasury bond yield rose 1 basis point to 1.76 percent.

Domestic Equity Market

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StrengthsThe materials sector was the best performer this week, increasing by 3.07 percent versus an overallincrease of 1.71 percent for the S&P 500.

Chesapeake Energy was the best performing stock for the week, increasing 35 percent. The companyannounced it will pay off the remainder of a half-billion dollar debt that’s coming due in three weeks, amove that was applauded by investors. The company also plans to sell another $500 million to $1billion in properties this year, is cutting its drilling budget by 57 percent, and is shutting down at leasthalf the drilling rigs it has under contract, all in a bid to conserve cash needed to whittle down its debtload.

This is the first time this year the market has rallied for two straight weeks, perhaps pointing to the startof a new leg up.

WeaknessesThe utilities sector was the worst performer this week, falling 0.14 percent versus an overall increase of1.71 percent for the S&P 500.

Southwestern Energy was the worst performing stock for the week, falling 10.01 percent. The stocktanked on poor fourth quarter results and a rating downgrade from Jefferies.

Several large U.S. banks are increasing loan loss reserves in anticipation of more troubled loans tocompanies in the oil and gas industry. JP Morgan and Wells Fargo both announced additionalprovisions this week. Across the industry, loan loss provisions rose in the fourth quarter of 2015 for thefirst time since 2009.

OpportunitiesThe retail drug store industry is enjoying a twin boost from both bullish cyclical and secular forces. Thelatter is reflected in the long-term advance in personal outlays at pharmacies, which likely reflectsincreased drug demand as a consequence of an aging population. From a cyclical perspective, the surgein health care sector hiring activity reflects increased health coverage and rising patient volumes. That isa boon for drug demand, and is consistent with rising store traffic.

Both Home Depot and Lowe’s produced strong profit results in the most recent quarter, aided by warmwinter weather which pulled forward sales of many products. The odds of the industry maintainingdecent sales momentum are good, given that ultra-low mortgage rates should sustain housing turnover.

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BCA’s proxy for REIT occupancy rate is still trending higher, supporting good growth in REIT pricingpower proxies. Furthermore, pipeline supply pressures look set to ease based on the downturn inmultifamily home construction. All of this points to decent cash flow growth prospects. Against abackdrop of still attractive value and depressed yields, REITS look poised to perform.

ThreatsM&A has been running red hot over the past few years, as the lack of organic global growth has forcedcompanies to pursue acquisitions. Given the tightening in financial conditions, this source of investmentbanking income could dry up. The consequence would be that capital market companies will have alarge profit hole to fill.

Oil services may be overdue for a rebound, but the typical signposts to a durable outperformance phaseremain elusive.

Based on BCA’s U.S. profit models, deeper profit contraction still looms, putting at risk the recentbounce in the equity market.

The Economy and Bond Market

StrengthsAfter slumping sharply in December, U.S. durable goods orders bounced back in January, rising 4.9percent. Nondefense capital goods orders excluding aircraft, a proxy for capital spending by companies,rose a robust 3.9 percent.

U.S. GDP during the fourth quarter of 2015 was revised upward to 1 percent, up from the 0.7 percentinitial estimate, but still lower than the 2 percent pace set during the third quarter. Growth during thequarter was impacted by a slowdown in net exports. For the full year, gross domestic product rose 2.4percent, matching 2014's growth rate.

Personal spending for January grew 0.5 percent, up from the previous month’s 0 percent and beatingexpectations of 0.3 percent.

WeaknessesU.S. Federal Reserve Vice Chair Stanley Fischer said it is too early to assess the impact of recent marketvolatility on the U.S. economy. Investors seem to disagree, having priced out Fed rate hikes until late2017, a sharp departure from just two months ago, when markets expected multiple hikes this year.

European inflation remains depressed. Consumer prices in the eurozone rose a scant 0.3 percent on anannualized basis in January. This will keep pressure on the European Central Bank to add additionalmonetary policy stimulus at its policy-setting meeting in March.

The Consumer Confidence Index fell to 92.2, down from the previous 98.1 and disappointing consensusexpectations of 97.2.

OpportunitiesGiven the persistent strong correlation between high-yield spreads and oil prices, any signs of greaterstability in the oil market should help keep a lid on spreads. With the average dollar price of the BarclaysEnergy High-Yield sub-index now trading at 58, the market is already priced for substantial default

https://attendee.gotowebinar.com/register/3859752378672790530

losses from the shale oil companies that dominate the Energy index. The price of Brent is now trading -26 percent below its 40-week moving average. The option-adjusted spread (OAS) for the Barclays U.S.High-Yield index is now trading 177 basis points above its 40-week moving average. For both oil andhigh-yield, these represent some of the most oversold conditions seen in the past 15 years.

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The challenging macro environment still demands a defensive portfolio allocation. This means that fixedincome investors should overweight Treasuries relative to spread product (corporates, asset-backedsecurities, mortgage-backed securities).

According to BCA, the tightening of financial conditions since last December is sufficient to cause theFed to adopt a more dovish policy stance at the March Federal Open Market Committee (FOMC)meeting. Specifically, BCA believes the Fed will keep the funds rate steady and will also lower itsprojections for future increases. Consistent with the Fed Policy Loop, which has now played itself outseveral times over the past year, risk assets could rally from here, on the back of a more dovish Fed.

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ThreatsMonthly payroll data (released next Friday) is a key input to the Fed's rate decision-making process.Given the bond market's very low expectations of further imminent rate hikes, a strong payroll numbercould trigger a violent move in yields.

The U.S. ISM surveys (manufacturing released on Tuesday and non-manufacturing on Thursday) willoffer some insight into whether any economic slowdown has spread beyond the manufacturing sector,and also the extent to which selling prices are falling.

Speaking at an oil industry conference this week in Houston, Saudi oil minister Ali Ibrahim Al-Naimisaid producers will meet in March in hopes of negotiating an output freeze. However, he added thatproduction cuts will not occur. Even if production cuts are agreed to in principle, they will likely not beimplemented, as there is less trust than there usually is among the world's oil exporters, he said.

Gold MarketThis week spot gold closed at $1,222.65, down $3.65 per ounce, or 0.30 percent. Gold stocks, as measured bythe NYSE Arca Gold Miners Index, climbed 2.29 percent. Junior miners underperformed seniors for the weekas the S&P/TSX Venture Index traded up 1.37 percent. The U.S. Trade-Weighted Dollar Index rose 1.60 percentfor the week.

Date Event Survey Actual Prior

Feb-23 US Consumer ConfidenceIndex 97.2 92.2 97.8

Feb-24 US New Home Sales 520k 494k 544k

Feb-25 Hong Kong Exports YoY -3.2% -3.8% -1.1%

Feb-25 Eurozone CPI Core YoY 1.0% 1.0% 1.0%

Feb-25 US Initial Jobless Claims 270k 272k 262k

Feb-25 US Durable Goods Orders 2.9% 4.9% -4.6%

Feb-26 Germany CPI YoY 0.1% 0.0% 0.5%

Feb-26 US GDP Annualized QoQ 0.4% 1.0% 0.7%

Feb-29 Eurozone CPI Core YoY 0.9% -- 1.0%

Feb-29 Caixin China PMI Mfg 48.4 -- 48.4

Mar-1 US ISM Manufacturing 48.5 -- 48.2

Mar-2 US ADP EmploymentChange 185k -- 205k

Mar-3 US Initial Jobless Claims 270k -- 272k

Mar-3 US Durable Goods Orders -- -- 4.9%

Mar-4 US Change in NonfarmPayrolls 193k -- 151k

StrengthsThe best performing precious metal for the week was gold, by a significant margin. Gold experienced itsfirst “golden cross” in two years, as the 50-day moving average moved above the 200-day. This weekGeorgette Boele from ABN Amro, who switched her gold outlook from bearish to bullish, noted thatinvestors are now buying the metal on dips, rather than selling on rallies as they’ve done previously.

Gold rose for a fourth day to head for its biggest monthly advance in four years, reports Bloomberg.Inflows into ETFs backed by the precious metal amounted to about 50 tons in two days, added a report

from Commerzbank, the sharpest two-day inflow since the Greek crisis flared up in May 2010.

Extending gold’s rally this week, a private report issued Wednesday showed the worst reading on U.S.service-sector activity since 2013, with separate data showing new home sales fell more than forecast. Asfinancial markets remain fragile gold has benefited. Commerzbank analyst Carsten Fritsch said by emailthis week, “It is a clear shift in investor sentiment and therefor an important sign.”

WeaknessesThe worst performing precious metal for the week was silver, with a slide of 4.16 percent. Palladiumcan apparently count itself lucky as it finally dodged a bullet with it not coming in as the weekly worstperformer in the precious metal space, as it has consistently been shunned by investors.

China’s imports of gold from Hong Kong slumped to the smallest amount since 2011 in January, reportsBloomberg, with net purchases falling to 17.6 metric tons from 111.3 tons in December. In India thejump in bullion costs has dampened Indian demand, with price discounts widening from as little as $4in November to $30 an ounce, according to Bachhraj Bamalwa, a director at the All India Gems &Jewellery Trade Federation.

Core CPI gained the most in four-and-a-half years, up 2.2 percent year-over-year and exceeding theFederal Reserve’s 2 percent inflation target. Sputnik News says according to the regulator’s data-basedapproach to tightening monetary policy, the Fed will have to respond with another rate hike. The odds ofa 2016 rate hike climbed to 44 percent from 11 percent on February 11, according to Bloomberg. Thecost of living in the U.S. (excluding food and fuel) increased in January by the most in four years,adding to the prospects of the Fed raising rates.

OpportunitiesAccording to the World Gold Council, central bank gold sales have historically resulted in a marketsurplus. From the second quarter of 2009 through 2015, net gold purchases by central banks absorbedmost of the surplus, reports Bloomberg, which may continue as reserve portfolio diversification ispursued. Bloomberg Intelligence estimates that central banks accumulated more than 2,448 metric tonsof the metal versus gold ETF outflows of around 270 metric tons in the period.

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The San Francisco Fed is calling for a period of inflation overshoot, according to a note from UBS. Giveneconomic slack, the Fed sees possible benefit in allowing inflation to rise above 2 percent for a shortperiod (good luck putting the genie back in the bottle) to achieve a better balance between the Fed’s dualmandates. Investing.com reports this week that if negative interest rates come to the U.S., savers mightpark their cash under their mattresses. Or a better option may be in holding hard assets such as gold.

Top gold forecaster Barnabas Gan called gold a “superhero” this week, saying the precious metal could

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rally as high as $1,400 an ounce amid the global equity downturn, low oil prices, and magnified riskaversion. Another bullish sign for gold comes from a Bloomberg report this week showing that, for mostof last year, the volatility of puts exceeded that for calls. But now, the situation is reversed, indicatingthere is strong interest in higher gold prices.

ThreatsThe market could be losing faith in the Fed’s current narrative, says ZeroHedge, with bets on negativeinterest rates reaching record levels (with 2017 more likely than 2016). The article noted investors werenow turning to Eurodollar futures to lock in interest rate sensitive trades as puts on the S&P 500 wereprogressively becoming more expensive. Further ZeroHedge noted, “We are at that inflection pointwhere the Fed starts to waffle, the bear market beckons and they will not be able to stick with theirinterest rate guidance.”

Concerns over diminishing liquidity dominated discussions at this week’s TradeTech FX conference,reports Bloomberg, namely because some say it is drying up during periods of turbulence. The worryover shrinking liquidity gripping fixed-income desks, due to higher capital requirements, is creeping itsway into the world’s biggest, most liquid financial market of currencies, the article continues.

In a report from MacroStrategy Partners this week, Julian Garran argues that we could see both asignificant margin contraction and a serious price/earnings derating of U.S. equities in 2016 and 2017.Such a combination could lead U.S. stocks down more than 40 percent, peak to trough. Mike Norman,writer for Real Money and TheStreet.com, thinks that quantitative easing and other monetary policiesare nothing more than asset swaps, rather than printing as many believe. Norman says these operationsare actually deflationary rather than inflationary since they reduce interest income. Bond purchases bythe Fed have also removed U.S. Treasuries – the most important global collateral around – from theworld economy, which is like draining the oil that keeps an engine running.

Energy and Natural Resources Market

StrengthsGold posted a bullish “Golden Cross” pattern this Friday after strong inflows drove the yellow metal upmore than 15 percent year-to-date. A post on Zero Hedge notes that the last time this pattern occurredcoupled with major fund inflows was in February 2009, which marked the start of a dramatic trendhigher in the precious metals.

The best performing sector for the week was the S&P 500 Construction Materials Index. On the back ofstrong earnings reports for companies in the sector, JP Morgan analysts upgraded their views on thematerials sector, specifically recommending investing in companies exposed to the U.S. constructionmaterials sector.

The best performing stock for the week in the broader natural resource space was Tesoro Corp. TheTexas-based refiner rose 14 percent for the week as gasoline demand remained resilient, and West Coastcrack spreads rebounded strongly as contracts rolled into summer grade gasoline pricing.

http://www.usfunds.com/interactive/which-industrial-metal-are-you-quiz

WeaknessesNatural gas demand continues to soften as evidenced by another extremely soft storage withdrawal,adding to the storage overhang and pushing prices to a 17-year low. Desjardins analysts report that nextweek’s storage draw is tracking even below this week’s level, just as the two-week weather forecastremains bearish for implied heating demand.

The worst performing sector for the week was the S&P 500 Integrated Oil & Gas Index. Exxon MobilCorp. and Chevron Corp., both major weightings in the index, were advised by Moody’s that their creditratings are at risk of being cut despite sizable reductions to their 2016 capital budgets.

The worst performing stock for the week in the S&P Global Natural Resources Index was Goldcorp Inc.Shares in the Canadian gold miner dropped 13 percent on Friday after the company posted a surpriseloss on higher costs. The company also downgraded its forward guidance and slashed its dividend by 66percent.

OpportunitiesRefiners are poised for a rebound after gasoline inventories dropped 2.2 million barrels this week, likelyputting an end to the weakest annual seasonal period. On a related note, VTB Capital notes that gasolinedemand continued to improve strongly, up 5.2 percent year-over-year, setting up for a strong spring-summer destocking period.

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In addition to the bullish outlook for gasoline consumption and destocking in the U.S. over the comingmonths, gulf refiners are likely to see gasoline exports spike as Mexico will speed up the liberalization offuel imports. President Enrique Pena Nieto is said to sign a decree allowing local companies to beginbuying gasoline and diesel from overseas as soon as April.

The rally in steel and iron ore prices may continue as news January’s steel output figures by worldsteelshow further supply curtailments. Output fell for the 13th consecutive month, posting a 7.1 percent dropfrom a year ago. According to Macquarie Research, output dropped in every single region, with Chinaleading with 7.8 percent drop.

ThreatsGlobal crude output is not showing any signs of abatement. Bloomberg's Julian Lee suggests Russiancrude and condensate production just set new post-Soviet daily record of 10.92 million barrels per dayin February, on data up to February 25. The rate is slightly above January’s numbers, and more than

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200,000 barrels per day higher than February 2015.

Crude inventories in the U.S. continue to show the oversupply imbalance is still far from over. Crudestockpiles rose 3.5 million barrels this week to historically high levels of 507.6 million barrels.Inventories at Cushing were up again to fresh record highs of 65.07 million barrels.

North of the border, Canadian production continues to rise despite low prices. David Yager of Oil Pricesuggests Canadian production will continue to grow for the next three years thanks to oil sands and eastcoast offshore projects still under construction. By his numbers, Canadian oil output is set to rise by100,000 barrels per day in 2016 and a total of 585,000 barrels per day over the three-year period.

China Region

StrengthsIn China, January new home prices rose month-over-month in 38 cities, and year-over-year in some 25major cities, with Beijing up 24 percent and Shanghai up 14 percent.

Singapore’s seasonally-adjusted industrial production for January rose month-over-month to amultiyear high of 9.3 percent, far surpassing analysts’ expectations of a decline to 2.2 percent.

The Indonesian rupiah strengthened again this week. The rupiah is the best-performing regionalcurrency for the trailing week, month and quarter.

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WeaknessesThe Shanghai Composite Index suffered a particularly ugly day on Thursday, falling 6.41 percent, assomewhat fragile sentiment was undercut following reports that the China Insurance RegulatoryCommission banned insurance company Zhongrong Life from adding to its equity holdings due tosolvency concerns.

Despite a hefty injection of liquidity on Thursday, China’s overnight repo rate still rose to its highestlevel since before the Lunar New Year holiday.

The Dongyue Group fell almost 23 percent as trading resumed after the company reported suspectedmisappropriation of funds by former staff members. Dongyue’s price action makes it the worstperformer for the week within the Hang Seng Composite Index.

Opportunities

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Bloomberg reports that the People’s Bank of China (PBOC) issued a statement suggesting a tweak inChina’s monetary policy, as the PBOC clarified that instead of maintaining a “prudent policy” with“reasonable, ample” liquidity, it will now maintain a “prudent policy with a slight easing bias.” Thisfollows reports from PBOC officials that China could afford to raise its budget deficit to 4 percent.

Indonesia’s parliament announced a move mandating that all workers (of at least 20 years of age, ormarried, or even a foreigner with at least a six-month work permit) participate in contributions to apublic home purchase fund by means of required deductions from workers’ salaries. The public fund willonly be used to fund home purchases by low-income workers. The announcement helped spark a rally inIndonesian banks and real estate companies, and follows last week’s move by the government to lowerrates, which places pressure upon Indonesian banks’ net interest margins.

The PBOC released another statement on Wednesday explaining that most types of overseas financialinstitutions will no longer be subjected to quotas for investing in the interbank bond market. The movehelps China further open its debt markets to foreigners, permitting inflows to help counter the recentoutflows from the country.

ThreatsThe release of official Chinese and Caixin Manufacturing PMI data will be Monday. Analysts expect thePMI to remain below 50, signaling contraction.

A China State Council directive this week raises some concerns regarding property rights in China. Thedirective suggests that new residential compounds should not have walls, and that existing governmentand private compounds should in time remove their walls as well. Any negative outlook for housingcould exacerbate outflows from China.

Recent volatility and poor sentiment left over from the early weeks of this year could continue to weighupon markets.

Emerging Europe

StrengthsGreece was the best performing country this week, gaining 5.53 percent. Moody’s raised its Greek banksdebt rating to Ca from C with a stable outlook. The upgrade reflects the successful completion ofrecapitalization and Moody’s expectation for a modest improvement in funding.

The Russian ruble was the best performing currency this week, gaining 1 percent against the U.S. dollar.Brent crude oil gained 6.6 percent over the past five days.

The industrials sector was the best performer among Eastern European markets this week.

WeaknessesThe Czech Republic was the worst performing market this week, losing 67 basis points. The ConsumerConfidence Index declined in February. Purchasing managers’ index (PMI) data will be released nextweek and is expected to drop to 55.4 from the prior high of 56.9.

The Hungarian forint was the worst performing currency this week, losing 2.59 percent against the U.S.dollar. The forint has appreciated since the beginning of the year and now talks are emerging about theCentral Bank of Hungary cutting its main interest rate by 25 basis points in the second quarter, from thecurrent level of 1.35 percent.

The utilities sector was the worst performer among Eastern European markets this week.

OpportunitiesEmerging market assets are cheap and could be “the trade of a decade,” according to Research AffiliatesLLC, a sub-adviser to Pacific Investment Management Co., one of the world’s largest money managers.The Shiller P/E Ratio, a measure of valuation based on the cyclically adjusted price-to-earnings ratio,fell to 10 in January. There have been only six times when this measure dipped below 10 over the past25 years. And, in the following five years, stocks gained on average 188 percent, according to

Christopher Brightman, chief investment officer at Research Affiliates.

All of the Euro area’s 10 biggest banks say they exceed minimum capital requirements set by theEuropean Central Bank (ECB). Some banks exceed the minimum capital requirements by a widermargin than others, with Italy’s UniCredit showing the smallest buffer.

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According to an international survey on the quality of life, Austria’s capital Vienna ranked as the bestplace in the world to live. The Mercer Quality of Life study examines social economic conditions of 230global cities and Vienna, a city of nearly 1.8 million people, came in best. Vienna was followed byZurich, Auckland, Munich and Vancouver. Bagdad was named as the worst city in the world to live.

ThreatsThe European Commission said that its Economic Confidence Indicator, which aggregates measures ofconsumer and business confidence, fell to 103.8 in February from 105.1 in January. This is the lowestreading since June 2015. Other economic indicators also point to economic slowdown in the eurozone.

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February’s PMI number was 51, the weakest since the start of 2015.

Hungary’s government said it will call a national referendum on the European Union’s plan to resettleasylum seekers in Hungary. The EU proposed that each member country must accept a specific numberof migrants. Hungary has been a vocal opponent of this plan. The referendum in Hungary is anotherindication that some EU members are looking to gain more independence from Brussels. A referendumon whether the UK should stay in the 28-member bloc is due to take place at the end of June.

According to one HSBC strategist, the Russian ruble is still not cheap and could depreciate more. Theanalyst forecasts the ruble at 72 against the U.S. dollar by year-end assuming an oil price of $40 perbarrel, and if oil falls to $27 per barrel, than the ruble could depreciate to 100 against the dollar. TheBank of Russia has left the country’s key rate at 11 percent since July, but traders now predict areduction of as much as 70 basis points, putting pressure on the currency.

February 22, 2016Monopoly IsGoingCashless.Could We BeNext?

February 17, 2016Airlines Start TheirEngines as ScheduledService Returns to Cuba

February 16, 2016Trump: We’re GettingRailed by High Taxesand Regulations

Leaders and LaggardsWeekly Performance

Index CloseWeekly

Change($)Weekly

Change(%)

DJIA 16,639.97 +247.98 +1.51%

S&P 500 1,948.05 +30.27 +1.58%

S&P Energy 428.49 +1.72 +0.40%

S&P Basic Materials 264.09 +7.85 +3.06%

Nasdaq 4,590.47 +86.04 +1.91%

Russell 2000 1,037.18 +27.17 +2.69%

Hang Seng Composite Index 2,630.02 -2.22 -0.08%

Korean KOSPI Index 1,920.16 +3.92 +0.20%

S&P/TSX Canadian Gold Index 176.95 -1.09 -0.61%

XAU 61.90 +1.37 +2.26%

Gold Futures 1,223.30 -7.50 -0.61%

Oil Futures 32.85 +3.21 +10.83%

Natural Gas Futures 1.79 -0.02 -1.05%

10-Yr Treasury Bond 1.76 +0.02 +0.86%

Monthly Performance

Index CloseMonthly

Change($)Monthly

Change(%)

DJIA 16,639.97 +695.51 +4.36%

S&P 500 1,948.05 +65.10 +3.46%

S&P Energy 428.49 +17.88 +4.35%

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S&P Basic Materials 264.09 +26.86 +11.32%

Nasdaq 4,590.47 +122.31 +2.74%

Russell 2000 1,037.18 +34.44 +3.43%

Hang Seng Composite Index 2,630.02 +41.72 +1.61%

Korean KOSPI Index 1,920.16 +22.29 +1.17%

S&P/TSX Canadian Gold Index 176.95 +37.17 +26.59%

XAU 61.90 +16.24 +35.57%

Gold Futures 1,223.30 +107.00 +9.59%

Oil Futures 32.85 +0.55 +1.70%

Natural Gas Futures 1.79 -0.40 -18.46%

10-Yr Treasury Bond 1.76 -0.24 -11.95%

Quarterly Performance

Index CloseQuarterly

Change($)Quarterly

Change(%)

DJIA 16,639.97 -1,158.52 -6.51%

S&P 500 1,948.05 -142.06 -6.80%

S&P Energy 428.49 -67.85 -13.67%

S&P Basic Materials 264.09 -21.74 -7.61%

Nasdaq 4,590.47 -537.05 -10.47%

Russell 2000 1,037.18 -165.19 -13.74%

Hang Seng Composite Index 2,630.02 -411.11 -13.52%

Korean KOSPI Index 1,920.16 -108.83 -5.36%

S&P/TSX Canadian Gold Index 176.95 +54.43 +44.43%

XAU 61.90 +16.98 +37.80%

Gold Futures 1,223.30 +166.40 +15.74%

Oil Futures 32.85 -8.86 -21.24%

Natural Gas Futures 1.79 -0.43 -19.30%

10-Yr Treasury Bond 1.76 -0.46 -20.71%

Monthly Performance

Index CloseMonthly

Change($)Monthly

Change(%)

DJIA 16,391.99 +625.25 +3.97%

S&P 500 1,917.78 +58.45 +3.14%

S&P Energy 426.77 +38.19 +9.83%

S&P Basic Materials 256.24 +19.67 +8.31%

Nasdaq 4,504.43 +32.74 +0.73%

Russell 2000 1,010.01 +10.70 +1.07%

Hang Seng Composite Index 2,632.24 +46.41 +1.79%

Korean KOSPI Index 1,916.24 +70.79 +3.84%

S&P/TSX Canadian Gold Index 177.80 +49.72 +38.82%

S&P/TSX Canadian Gold Index 177.80 +55.66 +45.57%

XAU 60.53 +20.43 +50.95%

XAU 60.53 +15.76 +35.20%

Gold Futures 1,228.30 +122.20 +11.05%

Oil Futures 29.88 +3.33 +12.54%

Natural Gas Futures 1.81 -0.31 -14.49%

10-Yr Treasury Bond 1.75 -0.24 -11.90%

Quarterly Performance

Index CloseQuarterly

Change($)Quarterly

Change(%)

DJIA 16,391.99 -1,431.82 -8.03%

S&P 500 1,917.78 -171.39 -8.20%

S&P Energy 426.77 -63.09 -12.88%

S&P Basic Materials 256.24 -29.19 -10.23%

Nasdaq 4,504.43 -600.49 -11.76%

Russell 2000 1,010.01 -165.14 -14.05%

Hang Seng Composite Index 2,632.24 -506.74 -16.14%

Korean KOSPI Index 1,916.24 -73.62 -3.70%

Gold Futures 1,228.30 +151.20 +14.04%

Oil Futures 29.88 -10.51 -26.02%

Natural Gas Futures 1.81 -0.33 -15.57%

10-Yr Treasury Bond 1.75 -0.52 -22.80%

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Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held byone or more accounts managed by U.S. Global Investors as of 12/31/2015: Chevron Corp.Deutsche Bank AG/LondonExxon Mobil Corp.Groupe Societe Generale SAHome Depot Inc/TheTesoro Corp.

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in theirindustry.The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S.companies.The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in theRussell 3000®, a widely recognized small-cap index.The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listedon 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 TaiwanStock Exchange.The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the KoreanStock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leadingcompanies 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 arecapped 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 subsetof the S&P 500.

The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as asubset 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 the1941-43 base period.The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in theindustrial 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 consumerdiscretionary 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 theinformation 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 inthe 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 subsetof the S&P 500.The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as asubset 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 thetelecom sector as a subset of the S&P 500.The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly tradedcompanies involved primarily in the mining for gold and silver. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a marketbasket of goods and services purchased by individuals. The weights of components are based on consumer spendingpatterns.The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index isbased on five major indicators: new orders, inventory levels, production, supplier deliveries and the employmentenvironment.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point isequal to 1/100th of 1%, or 0.01% (0.0001).The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a marketbasket of goods and services purchased by individuals. The weights of components are based on consumer spendingpatterns.The DOEASMGS Index is the Department of Energy’s indicator to show the total change in gasoline inventories eachweek, ending Friday. It is taken from text files released by the Energy Information Administration and is part of theirWeekly Petroleum Status Report. The S&P Global Natural Resources Index includes 90 of the largest publicly-traded companies in natural resources andcommodities businesses that meet specific investability requirements, offering investors diversified, liquid and investableequity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining.Barclays U.S. Corporate High-Yield Bond Index covers the universe of fixed-rate, non-investment grade corporate debt ofissuers in non-emerging market countries.The S&P 500 Construction Materials Index is a capitalization-weighted index that tracks the companies in the constructionmaterials industry as a subset of the S&P 500.The S&P 500 Oil & Gas Exploration & Production Index is a capitalization-weighted Index. The index is comprised of sixstocks whose primary function is exploring for natural gas and oil resources on land or at sea.The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index isbased on five major indicators: new orders, inventory levels, production, supplier deliveries and the employmentenvironment.The Shiller PE ratio, also known as the P/E 10 ratio, is a valuation measure, generally applied to broad equity indices,that uses real per-share earnings over a 10-year period.The Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthlysurvey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.The ISM Nonmanufacturing index based on surveys of more than 400 non-manufacturing firms' purchasing and supplyexecutives, within 60 sectors across the nation, by the Institute of Supply Management (ISM). The ISM Non-Manufacturing Index tracks economic data, like the ISM Non-Manufacturing Business Activity Index. A composite diffusionindex is created based on the data from these surveys that monitors economic conditions of the nation. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a marketbasket of goods and services purchased by individuals. The weights of components are based on consumer spendingpatterns.A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point isequal to 1/100th of 1%, or 0.01% (0.0001). The article/interview/commentary references the investment theory of an investment as insurance against a separatemarket event that could negatively affect performance of an investment. The reference does not guarantee performance ora safeguard from loss of principal by investing in that asset.The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily priceperformance of all A-shares and B-shares listed on the Shanghai Stock Exchange.The Caixin China Services PMI™, released by Markit Economics, is based on data compiled from monthly replies toquestionnaires sent to purchasing executives in over 400 private service sector companies.

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