USFunds.com • April 15, 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

To our podcast listeners, please tune in on Monday. Thank you for listening!

If You’re Not Following this Energy Trend, You’re Being Leftin the DustBy Frank HolmesCEO and Chief Investment Officer U.S. Global Investors

This week our office was visited by my friend, investor and author Gianni Kovacevic, who is at the halfwaypoint of a cross-country book tour to promote the latest edition of “My Electrician Drives a Porsche?” As partof the tour, he’s driving a Tesla Model S from Boston to Palo Alto, California—Tesla’s hometown—todemonstrate the potential of green energy and spread his message that “the future is now.”

His book features a successful young man—the titular electrician, and an analogue of Gianni himself—whoinstructs his older family doctor on how to invest in the rise of the new spending class. Not only is “Electrician”a fact-filled, convincing treatise on the importance of following long-term trends in China, copper and other“financial soap operas,” it’s also a real page-turner. I urge you to grab a copy and check it out.

Copper: Beneficiary of Unprecedented Number of New ConsumersCentral to the book’s thesis is a concept that is both simple and yet profound: As the size of the world’s middleclass continues to grow, demand for “things that come with an electrical cord” will surge. Below is a briefexcerpt:

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My point is that once a group of people make the move from rural to urban, from peasant toworker and on to consumer, their way of life changes. Subsistence disappears from theirvocabulary and their lives begin to revolve around the three Cs: comfort, convenience andcommunication. And in order to achieve any of those things, it takes a whole lot more stuffthan ever before. We get a dishwasher to free up time and a television to waste it. We get an airconditioner to stay cool and a heater to stay warm. Then later on, we get other luxuries likesolar panels on our roofs and newer, more modern cars. When a society achieves its very ownconsumer revolution, as China and the developing world are undergoing right now, lifebecomes less about needs and more about wants. With an unprecedented number of newconsumers, these luxuries need way more stuff to make them possible.

Back in 2014, Microsoft founder and philanthropist Bill Gates predicted that by 2035, there will be “almost nopoor countries left in the world.” You might scoff, but for a moment let’s imagine this turns out to be the case.What effect would that have on energy demand? Millions more people joining what Gianni calls the spendingclass will increase the demand for millions more things—dishwashers, air conditioners, smartphones, cars—and necessitate the production of thousands more megawatts of electricity than the world currently generates.

All of which is a boon for copper. However energy is produced, the red metal is needed for conductivity. In fact,even more copper wiring is used in new energy technologies than in traditional sources. An electric car such asthe Tesla Model S uses three times as much copper wiring than an internal combustion engine vehicle.

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It was reported this week that China imported 39 percent more copper (and 13 percent more crude oil) inMarch than in the same time last year, a sign that the Asian giant’s appetite for commodities and energyremains strong. Despite a slowdown in GDP growth, China is still the number one importer of metals andnumber two consumer of oil.

Shipments out of China also rebounded the most in a year, rising 11.5 percent in the first quarter. This suggestsits economy fared much better than what analysts were predicting.

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The country’s manufacturing industry saw very welcome improvement last month as well, with the purchasingmanagers’ index (PMI) coming in at 49.7—still below the key 50 threshold, but the highest reading sinceFebruary of last year. The PMI was also above its three-month moving average for the first time since October.

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The Rise of the Chinese Spending ClassConsider the dramatic difference in size between college graduates in older and younger Chinese generations.According to Gianni’s book, there are 160 million people aged 56 to 65, yet this cohort has only one milliongraduates. Meanwhile, millennials are 415 million strong—100 million more than the entirety of the U.S.population—and of those, 107 million have college degrees. So far. As this number rises, so too will incomes aswell as the desire to live a more “Western” lifestyle filled with stuff.

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You can check out the entire Visual Capitalist infographic on Gianni’s website.

The Asian country’s middle class is already larger than America’s. In October, Credit Suisse reported that thereare more than 109 million middle-class consumers in China, compared to 92 million in the U.S.

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Indeed, domestic consumption in China is following a staggering upward trajectory. In 2015, total retail salestouched a record, surpassing 30 trillion renminbi, or about $4.2 trillion. By 2020, sales are expected to climb to$6.5 trillion, representing 50 percent growth in as little as five years. This growth will “roughly equal a market1.3 times the size of Germany or the United Kingdom,” according to the World Economic Forum.

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The new Chinese spending class is still very concentrated along the country’s highly-urbanized eastern coast, inmegacities such as Shanghai, Beijing, Guangdong and Shenzhen. But this is changing rapidly, with 39 percentof middle-class growth shifting inland toward more rural areas by 2022, according to McKinsey & Company.This will introduce new investment opportunities as these areas will require modern roads, railways and—mostimportant—energy infrastructure.

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It’s estimated that between 2010 and 2025, 300 million Chinese citizens—a little less than the entirepopulation of the U.S.—will migrate from rural areas to cities. As Gianni points out, lifestyles drastically changewhen this occurs, shifting from one of subsistence to one that revolves around convenience and comfort.

Tesla Disrupts the Auto MarketKey to this migration is transportation. In 1979, there were only 60 privately-owned automobiles in China.(That’s according to a 2006 report by legendary Canadian investment strategist Don Coxe, and cited in “MyElectrician Drives a Porsche?”) Fast forward to today and China is now the world’s largest auto market. Morethan 21.1 million passenger cars were sold in the country last year, a 7.3 percent increase from 2014. Comparethat to the U.S., the number two car buyer, where sales totaled 17.5 million, an all-time record.

By the way, 2015 sales of the Toyota Corolla, one of the top-selling sedans in the U.S., were a little over350,000. That’s slightly more than the number of preorders for the Tesla Model 3, the company’s first mass-produced vehicle, within a single week of its unveiling on March 31. In a blog post, Tesla promptly proclaimedit “the week that electric vehicles went mainstream.”

The future, as Gianni says, is indeed now.

Index SummaryThe major market indices finished up this week. The Dow Jones Industrial Average gained, 1.82percent. The S&P 500 Stock Index rose 1.62 percent, while the Nasdaq Composite climbed 1.80 percent.The Russell 2000 small capitalization index gained 3.06 percent this week.

The Hang Seng Composite gained 4.55percent this week; while Taiwan was up 1.86 percent and theKOSPI rose 2.16 percent.

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The 10-year Treasury bond yield rose 3 basis points to 1.75 percent.

Domestic Equity Market

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StrengthsFinancials was the best-performing sector for the week, increasing 3.95 percent compared to an overallincrease of 1.62 percent for the S&P 500 Index.

Chesapeake Energy was the best-performing stock for the week, increasing 60.37 percent. Climbing oilprices helped lift the struggling energy stock, but investors were also willing to do follow-through buyingafter news about a favorable debt restructuring for the company. Analysts now believe the threat of animminent bankruptcy has diminished substantially, and that has investors more optimistic aboutChesapeake—at least in the short run.

After the worst start ever to a trading year, the U.S. stock market has reversed and is now up for theyear. The S&P 500 is up close to 2 percent year-to-date after having lost 10 percent at one point inearly February.

WeaknessesConsumer staples was the worst-performing sector for the week, falling by negative 0.78 percentcompared to an overall increase of 1.62 percent for the S&P 500.

Seagate Technology was the worst-performing stock for the week, falling negative 22.99 percent. Sharesof the hard drive manufacturer tumbled after the company issued preliminary third-quarter results,lowering its expectations for both revenue and gross margin. Seagate now expects to report third-quarter revenue of $2.6 billion and a non-GAAP gross margin of 23 percent, down from previousguidance of $2.7 billion and 25.6 percent.

Amid increased antitrust scrutiny from the Obama administration, Canadian Pacific Railway ended itsattempt to acquire Norfolk Southern. Late last week, the U.S. Department of Justice said it opposed thevoting-trust structure that Canadian Pacific proposed.

OpportunitiesThe spreading global shift to negative deposit rates is creating a significant amount of uncertainty, asthe unintended consequences of this unorthodox policy remain unknown. In the meantime, real interestrates, the opportunity cost of holding a zero-yielding asset like gold, have slipped back into negative

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territory. That is a plus for both gold bullion and gold shares. While gold and gold shares might lookoverbought on a short-term basis, it is important to keep the longer-term context in mind. Gold is stillfar below its 2011 highs, while gold share relative performance is barely above its secular lows.

Earnings season kicked off this week. While only a small fraction of S&P 500 companies have reportedfirst-quarter earnings, early results have been solid. Thus far, 5 percent of companies have reported. Ofthe 24 companies that have reported, 79 percent reported earnings that exceeded analyst expectations,while 21 percent reported earnings below expectations.

Halliburton and Baker Hughes are attempting to divest more than $7 billion in assets to preserve amerger that has been in the works since late 2014. Last week, the U.S. Justice Department filed suit tohalt the proposed $35 billion merger, saying the deal could lead to price increases and reduceinnovation in the oil services industry. Private equity firm Carlyle Group and General Electric are in therunning to buy the assets being divested.

ThreatsU.S. banking regulators gave failing grades to five of the eight largest banks in the United States on theirbankruptcy and liquidation plans in the event of the banks' failure. The plans were a requirement of the2010 Dodd-Frank Act. The five banks have until October to amend their plans to the satisfaction of theU.S. Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).

The latest rebound in risk assets raises the question of whether small caps have become more attractivecompared with large caps. However, fundamental analysis signals little chance of a sustained recovery.There is a large and growing gap between small and large company profit margins. The latest NationalFederation of Independent Business (NFIB) survey of the small business sector showed that plannedlabor compensation continues to grind higher, even though reported price changes are falling and CEOconfidence is diminishing. Typically, labor compensation plans and price changes move hand-in-hand,but the gap this cycle is indicative of small cap-profit margin pressure. As a result, small-cap valuationsare likely to move to a steep discount to those of large caps.

Despite steady employment growth and falling energy prices, U.S. consumer spending remainslackluster. In many ways, consumers have had the wind behind their backs. Employment growth hasaveraged more than 200,000 per month in the first quarter, gasoline prices have declined sharply sincemid-2014 and unseasonably warm weather lowered heating costs this winter. Nonetheless, consumersare reluctant to spend. Retail sales fell 0.3 percent month-over-month in March, and while there weresome upward revisions to February and January, core retail sales are growing just 2.7 percent year-over-year. Moreover, U.S. auto sales have started to buckle. The more than doubling of auto sales fromthe lows of 2009 was a key factor driving the growth in consumer spending. As auto sales plateau ordecline, this will now become a drag on growth.

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The Economy and Bond Market

StrengthsIn a further sign that the U.S. labor market remains robust, claims for state unemployment insurancefell to their lowest level since 1973, when the U.S. population was significantly smaller than it is today.Only 253,000 first-time claims were filed in the latest week. Weekly jobless claims for this businesscycle peaked at 652,000 in the spring of 2009.

The Empire State Manufacturing Survey bounced up to 9.56 in April from 0.62 in March. The ISMManufacturing Index showed improvement as well, ticking up to 51.9 from 51.1.

In China, industrial production, retail sales and fixed-asset investment all rebounded in Marchfollowing disappointing reports in February. Last month's drop-off may have been a function of theextended Lunar New Year holiday period. Gross domestic product for the first quarter of the year rose6.7 percent, as expected.

WeaknessesThe International Monetary Fund (IMF) trimmed its global growth outlook. The global economy isexpected to grow 3.2 percent in 2016 and 3.5 percent in 2017, according to recent projections. The priorforecast was for 3.4 percent growth in 2016 and 3.6 percent in 2017. The spring IMF and World Bankmeetings will conclude on Sunday, April 17.

U.S. industrial production fell 0.6 percent month-over-month in March. The University of MichiganConsumer Sentiment Index inched lower from 91.0 in March to 89.7 in the preliminary April report.

The Producer Price Index (PPI) final demand reading inched down 0.1 percent month-over-month inMarch, while core core PPI was flat. Health care PPI also fell 0.1 percent, pointing to a soft corepersonal consumption expenditures (PCE) price index this month.

OpportunitiesThe global oil supply will move closer to being balanced late this year, according to the InternationalEnergy Agency (IEA). Lower prices are trimming production outside of the OPEC countries, the agencyreports. The oversupply is expected to fall to 200,000 barrels per day from 1.5 million barrels per day inthe first half of 2016.

The housing market is shaping up to be one of the bright spots for the U.S. economy this year. Relatedindicators to monitor include National Association of Home Builders (NAHB) sentiment (Monday) andhousing starts (Tuesday).

The European Central Bank (ECB) is unlikely to come out with major announcements at its Thursdaypolicy meeting. Unless there is a sudden change in the economic outlook, the ECB will probably adopt await-and-see approach in the coming months as it will take time to assess the impact of the most recentround of stimulus. On a related note, the next week's bank lending survey (Tuesday) and flashPurchasing Managers’ Indices (PMIs) (Friday) will provide an update on the growth momentum in theeuro area.

ThreatsTreasuries appear overbought in the near-term, given excessively bullish sentiment and some evidenceof a rebound in global manufacturing. The global manufacturing PMI has ticked higher, led byrebounds in the U.S. and Chinese indices back above the 50 boom/bust level. This potential for awindow of global reflation makes the current bullish sentiment toward U.S. Treasuries appear poorlytimed. According to the JPMorgan All Clients Survey, investors have not been so aggressively long forsuch a length of time since late 2013. Meantime, the Active Clients survey currently shows the largestnet long positioning since its inception in 2003. Similarly, bullish sentiment toward U.S. Treasuries isat its highest level since early last year.

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OPEC and non-OPEC oil producers like Russia will meet on April 17 to discuss a possible deal to freezeproduction at current levels and shore up prices. Given the rally since the beginning of year, a failure toreach an agreement on limiting production could temporarily push down oil prices and risk assets.

Four potentially destabilizing events are gearing for June, which could influence the Federal Reserve'sdecision on interest rates. The U.K. referendum on EU membership is set for June 23. California'sprimary election, which is likely to determine whether Donald Trump is the GOP candidate for president(and perhaps, though far less likely, whether Bernie Sanders will join him on the Democratic side), willtake place on June 7. Greek debt relief negotiations are likely to heat up in June, with 4.3 billion eurosdue on July 20. Lastly, Spain might hold new elections by the end of June, although the result of theelection is not likely to produce an antiestablishment-led government.

Gold MarketThis week spot gold closed at $1,234.15, down $5.20 per ounce, or -0.42 percent. However, gold stocks, asmeasured by the NYSE Arca Gold Miners Index, rose by 3.49 percent. Junior miners outperformed seniors forthe week as the S&P/TSX Venture Index traded up 4.95 percent. The U.S. Trade-Weighted Dollar Index gained0.49 percent for the week.

Date Event Survey Actual Prior

Apr-12 Germany CPI YoY 0.3% 0.3% 0.3%

Apr-13 U.S. PPI Final DemandYoY 0.3% -0.1% 0.0%

Apr-14 Eurozone CPI core YoY 1.0% 1.0% 1.0%

Apr-14 U.S. Initial Jobless Claims 270k 253k 266k

Apr-14 U.S. CPI YoY 1.1% 0.9% 1.0%

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Apr-14 China Retail Sales YoY 10.4% 10.5% --

Apr-19 Germany ZEW SurveyCurrent Situation 50.8 -- 50.7

Apr-19 Germany ZEW SurveyExpectations 8.0 -- 4.3

Apr-19 U.S. Housing STarts 1168k -- 1178k

Apr-21 Eurozone ECB MainRefinancing Rate 0.000% -- 0.000%

Apr-21 U.S. Initial Jobless Claims 265k -- 253k

StrengthsThe best performing precious metal for the week was silver, up 5.66 percent. Silver has overtaken goldas the year’s best performing precious metal, reports Bloomberg, extending its gains to 17 percent onthe back of a stabilizing Chinese economy. The precious metal, which is used in a variety of industrialproducts, is now trading at a five-month high.

Following a strike that lasted nearly six weeks, a majority of gold sellers in India have finally reopenedtheir doors. This is positive news for the global gold sector, which has been missing its largest buyer ofthe precious metal. Good news was reported in China as well, where gold demand picked up to 183.2tonnes in March, according to Lawrie Williams. Gold demand surged in Japan too, with sales climbing35 percent in the three months ended March 31 with the imposition of negative interest rates.

Deutsche Bank, one of four banks accused of manipulating silver futures prices, reached a settlementthis week, reports Bloomberg. Lawyers for traders said the bank signed a binding agreement andarranged to expose other banks’ rigging as well. Interestingly enough, Reuters reported Thursday thatDB also reached a settlement in U.S. litigation alleging that it conspired to fix gold prices too, accordingto an article on ZeroHedge.

WeaknessesThe worst performing precious metal for the week was gold, down -0.42 percent. The yellow metalapproached its longest run of declines in three weeks, reports Bloomberg. A stronger U.S. dollar andgains in equities curbed demand for an alternative investment.

Jobless claims in the U.S. fell unexpectedly last week, reaching a 42-year low, reports Bloomberg. For58 consecutive weeks, claims have been below the 300,000 level that economists believe is typicallyconsistent with an improving job market, making this the longest stretch since 1973. While manycommentators view this as a positive sign of strength, the reality is that the job picture really can’timprove much more as it has hit its lower limits based on historical data.

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The Department of Mineral Resources released a revised draft mining charter that demands a“perpetual minimum 26 percent BEE [Black Economic Empowerment] ownership per mining right,”reports Business Day. An analyst from HSBC notes that this comes despite the ongoing legal challengeto the “once empowered, always empowered debate.” This could be a headwind for new investment inSouth Africa.

OpportunitiesHSBC believes the gold/silver ratio (which measures how many ounces of silver it takes to by an ounceof gold) will narrow further, meaning that silver is outperforming. In a research note on Tuesday, thegroup stated that the ratio is back below 1:78, explaining that retail demand for coins and small bars,along with light institutional buying in the paper markets, has boosted silver. TD Securities sees goldstrengthening as well, particularly on the back of a strong dollar, a dovish Federal Open MarketCommittee (FOMC), and equity market volatility.

James Rickards, chief global strategist at West Shore Funds, told Bloomberg that he thinks gold willsoar 700 percent in the near future. His reasoning? Cyber threats. Rickards explained that the 21stcentury cyber age poses risks to digital money and wealth to all investors and savers. “The thing aboutgold is you can’t hack it, you can’t erase it, you can’t delete it,” he explains.

A number of drilling results were reported this week. Pure Gold intersected 56.2 grams per tonne (g/t)of gold over 1.3 meters at Russet South on the Madsen Gold Project. Oban Mining Corp. intersected24.7 g/t of gold over 6.8 meters at its Windfall Lake gold project in Quebec. Roxgold provided anupdate for its Yaramoko Gold Project too, stating that the overall construction program is now 84percent complete, with over 23,000 tonnes of ore now on the Run of Mine (ROM) pad. The company’sfirst gold production remains on target for June 2016.

ThreatsTotal U.S. commercial bankruptcy filings by corporations of all sizes (along with other businessentities), jumped 24 percent year-over-year in the first quarter, reports MacroStrategy Partnership.Following 22 straight quarters of declines, there has been rapid deterioration, which suggests the creditcycle could be turning. Deutsche Bank thinks that the world is “past the point of no return” in thedefault cycle, according to ETF Daily News.

OCBC Bank’s bearish view on bullion remains unchanged, reports Bloomberg. The bank sees theprecious metal falling to $1,100 an ounce by year end. UBS is also doubtful of gold’s value. ReneBuehlman, global asset management head of Asia Pacific at UBS, stated “We don’t think in the long runthat’s adding value to investors’ portfolios as there is no yield to be gained.”

The CME reported that it received notice from the Federal Reserve that it is authorized to open anaccount at the Fed which would “allow it to better safeguard cash deposited by its traders,” writes Dave

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Kranzler on Goldseek.com. But why is a Fed custodial account any better than one held by a big bank?Is the CME preparing for an eventual Comex default? The ratio of physical gold available for deliver isdwarfed by the size of paper contract claims on such gold.

Energy and Natural Resources Market

StrengthsChina’s copper imports leapt 36 percent in March compared to the previous month, rising to the highestmonthly amount since data became available in 2001. A Bloomberg report highlights that year-to-datenumbers are also running 30 percent above last year’s levels, while warning that investors must wait tosee whether higher imports translate into higher industrial demand.

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The best performing sector for the week was the FTSE 350 Mining Index. The index of major diversifiedminers rose 14 percent for the week as both copper and iron ore prices soared to post their best weeklyadvance since early March.

The best performing stock for the week in the broader natural resource space was Anglo American. TheLondon-based miner rose 25 percent for the week as Reuters reported that BHP, Rio Tinto, Glencore,and large private equity firms have shown interest in purchasing all or some of Anglo American`s assetscurrently for sale.

Weaknesses

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The Energy Information Administration (EIA) reported a sharp crude inventory build ahead of the Dohameeting this weekend. Surging waterborne imports and lower refinery utilization led to a 6.6 millionbarrel build for the week. The build could have been greater had Canadian imports to the U.S. notdecreased sharply following an unplanned outage of the Keystone pipeline.

The worst performing sector for the week was the S&P 500 Oil & Gas Refining Index. The indexdropped 3 percent for the week despite gasoline inventories seeing major withdrawals for the week. Thebiggest mover was Valero Energy Corp., which dropped after Credit Suisse analysts lowered its targetprice by 20 percent citing weaker margin capture.

The worst performing stock for the week in the S&P Global Natural Resources Index was Agrium Inc.The Canadian agricultural retailer dropped 4.5 percent for the week after Scotiabank downgraded thecompany`s shares citing low nitrogen prices and weak demand outlook for fertilizers.

OpportunitiesChina data has turned supportive of commodity prices and risk assets. Money supply growth rose to itshighest since October 2010, posting a 22 percent advance from last year in March. In addition, fixedasset investments in urban China rose 10.7 percent in March and appears to have put a bottom, thussetting up a positive base for industrial demand in China.

Gold investors are set to benefit after Deutsche Bank settled a pricing manipulation case and offered toexpose other banks. The banks abused their positions of controlling daily gold fixes to reap illegitimateprofits from trading and hurting other investors, states Bloomberg. Silver and gold fixing claims havebeen brought against five other major investment banks.

De Beers increased diamond sales for a third time this year as demand recovers after a slump last year.De Beers also raised diamond prices by 2 percent, the first increase since 2014.

ThreatsDoha will not be able to deliver a bullish surprise to crude markets according to Goldman SachsCommodities Research. A production freeze at recent production levels would not accelerate therebalancing of the oil market as current production levels are already elevated. In addition, anyagreement that would support prices would prove self-defeating, because it will suspend the nascentnon-OPEC supply pullback.

Alcoa kicked off the reporting season and spooked investors with its grim outlook. The aluminum giantposted a 92 percent decline in earnings, and lowered its guidance for global aerospace sales, which itdescribed as “robust” just three months ago. Alcoa is planning to split the company to extract value outof its downstream business, precisely the segment that received the guidance downgrade.

The slowdown in emerging markets will result in lower oil consumption than initially forecast, saysOPEC. The organization trimmed estimates for demand growth in 2016 by 50,000 barrels a day asBrazil’s economy weakens, some fuel subsidies in the Middle East are removed, and milder wintertemperatures in the northern hemisphere all negatively affect demand.

China Region

StrengthsSingapore’s Straits Times Index jumped above its 200-day moving average to multi-month highs thisweek as the Monetary Authority of Singapore surprised markets by narrowing its Singapore dollarpolicy band and announcing that the Monetary Authority of Singapore (MAS) will no longer seekappreciation of the Singapore dollar against a basket of currencies.

New yuan loans and aggregate financing data for March in China beat expectations, as did retail salesand fixed asset investment (FAI).

China released encouraging March trade numbers this week, with exports coming in up 11.5 percentyear-over-year, ahead of expectations for only 10.0 percent, and imports declining only 7.6 percent,ahead of expectations for a decline of 10.1 percent.

WeaknessesChina’s first-quarter GDP came in at 6.7 percent, in line with expectations and within the government’sprevious guidance of between 6.5 and 7.0 percent for the year. Nonetheless, it marked China’s weakestgrowth rate since 2009.

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The Singapore dollar was the weakest regional currency on the week, falling 1.0 percent after the MASannouncement.

February exports for the Philippines fell 4.5 percent year-over-year, missing expectations for a declineof only 3.9 percent.

OpportunitiesLate last week, Chinese regulators announced plans to continue to ease restrictions on brokerages,aiding brokerage shares this week and continuing to try to set the stage for stable growth in Chineseequity markets.

The International Monetary Fund (IMF) raised its 2017 outlook for China’s GDP to 6.5 percent.

If data continue to improve across the region, markets may continue climbing the proverbial wall ofworry off the lows of the global selloff of 2016’s early weeks.

ThreatsHigh-yield bonds in China continue to suffer as the number of defaults in recent weeks has risen,Bloomberg News reports. At least seven companies have defaulted on bond obligations this year, and ifthe Chinese economy continues to slow, that number will in all likelihood continue to rise.

The number of Chinese tour groups to Hong Kong fell nearly 60 percent year-over-year for the firstquarter.

As the region’s only net exporter of energy, Malaysia may prove vulnerable to a decline in energy pricesor negative headline risk out of Doha.

Emerging Europe

StrengthsTurkey was the best-performing country this week, gaining 3.7 percent. With a new governor of thecountry’s central bank having been appointed, investors are expecting further rate cuts.

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The Russian ruble was the best-performing currency this week, gaining 1.2 percent against the dollar.The currency continues to strengthen before the Doha meeting during which major oil producers willdiscuss a possible supply freeze to bolster prices.

The materials sector was the best-performing sector among Eastern European markets this week.

WeaknessesRomania was the worst-performing market this week, losing 2 percent. An amendment to foreclosurelaws was signed that will allow Romanian banks issuing mortgages to have their claims against thecollateral itself, instead of the mortgage holder. It is negative for Romanian banks as they could beunwilling to grant mortgages with low downpayments.

The Romanian leu was the worst-performing currency this week, losing 1.21 percent against the dollar.Weak economic data put pressure on the country’s currency. Latest trade balance data, including currentaccount and inflation, declined.

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

OpportunitiesThe Turkish government is working on revising tax legislation for companies across the financial sectorthat will unify transaction taxes. Finance Minister Naci Agbal may announce the revised legislation,which could ease tax burden on banks, in the next two weeks.

Turkey’s government named the central bank’s deputy governor, Murat Cetinkaya, ending uncertaintyabout who would take on one of the toughest monetary policy jobs in the world. The new governorshould be more growth-oriented. The next bank meeting is scheduled for April 20. A rate cut isexpected.

Eurozone consumer confidence and Markit purchasing manager’s index (PMI) data will be reportednext week. Bloomberg’s survey predicts stronger results.

ThreatsOil producers will meet in Doha on April 17 to discuss a possible oil production freeze. Most investorsmust predict positive outcomes out of the meeting as Brent crude continues to climb. Russian stocksrose to a three-week high, but if the outcome of the Doha meeting is not satisfactory, oil-driven Russianequities may sell off.

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Moody’s sees Poland’s general government deficit to exceed 3 percent in 2016, well in excess of thefiscal target of 2.3 percent outlined in last year’s convergence program. Moody’s has kept Poland at A2,the fifth lowest investment grade, with stable outlook since 2006. It will reassess the country’s ratingson May 13.

The International Monetary Fund (IMF) cut its global growth forecast in 2016 by 0.02 percentagepoints to 3.2 percent. It also cut 2017 global growth down 0.1 percentage points to 3.5 percent. IMFEconomic Counsellor Maurice Obstfeld urged leaders attending this week’s spring IMF and World Bankmeeting to take urgent action to revive global demand, which has been too slow for too long.

Leaders and LaggardsWeekly Performance

Index CloseWeekly

Change($)Weekly

Change(%)

DJIA 17,897.46 +320.50 +1.82%

S&P 500 2,080.73 +33.13 +1.62%

S&P Energy 475.25 +9.22 +1.98%

S&P Basic Materials 289.36 +8.82 +3.14%

Nasdaq 4,938.22 +87.53 +1.80%

Russell 2000 1,130.92 +33.61 +3.06%

Hang Seng Composite Index 2,922.11 +127.16 +4.55%

Korean KOSPI Index 2,014.71 +42.66 +2.16%

S&P/TSX Canadian Gold Index 201.01 +3.91 +1.98%

XAU 77.92 +3.90 +5.27%

Gold Futures 1,235.80 -8.00 -0.64%

Oil Futures 40.47 +0.75 +1.89%

Natural Gas Futures 1.91 -0.08 -4.07%

10-Yr Treasury Bond 1.75 +0.03 +1.92%

Monthly Performance

Index CloseMonthly

Change($)Monthly

Change(%)

DJIA 17,897.46 +571.70 +3.30%

S&P 500 2,080.73 +53.51 +2.64%

S&P Energy 475.25 +9.50 +2.04%

S&P Basic Materials 289.36 +10.45 +3.75%

Nasdaq 4,938.22 +174.25 +3.66%

Russell 2000 1,130.92 +56.41 +5.25%

Hang Seng Composite Index 2,922.11 +173.73 +6.32%

Korean KOSPI Index 2,014.71 +39.81 +2.02%

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S&P/TSX Canadian Gold Index 201.01 +7.15 +3.69%

XAU 77.92 +6.53 +9.15%

Gold Futures 1,235.80 +4.80 +0.39%

Oil Futures 40.47 +2.01 +5.23%

Natural Gas Futures 1.91 +0.04 +2.19%

10-Yr Treasury Bond 1.75 -0.16 -8.28%

Quarterly Performance

Index CloseQuarterly

Change($)Quarterly

Change(%)

DJIA 17,897.46 +1,909.38 +11.94%

S&P 500 2,080.73 +200.40 +10.66%

S&P Energy 475.25 +66.05 +16.14%

S&P Basic Materials 289.36 +48.22 +20.00%

Nasdaq 4,938.22 +449.80 +10.02%

Russell 2000 1,130.92 +123.20 +12.23%

Hang Seng Composite Index 2,922.11 +257.07 +9.65%

Korean KOSPI Index 2,014.71 +135.84 +7.23%

S&P/TSX Canadian Gold Index 201.01 +69.47 +52.81%

XAU 77.92 +36.50 +88.12%

Gold Futures 1,235.80 +144.70 +13.26%

Oil Futures 40.47 +11.05 +37.56%

Natural Gas Futures 1.91 -0.19 -9.10%

10-Yr Treasury Bond 1.75 -0.29 -14.00%

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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: Alcoa Inc.Baker HughesMicrosoft Corp.Oban Mining Corp.Pure GoldRio Tinto PLCRoxgoldValero Energy 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 theKorean Stock 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.The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index ismarket capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used toremove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, whenincluded, will be greater than 0.05% of the index.

The Caixin China Manufacturing PMI, released by Markit Economics, is based on data compiled from monthly replies toquestionnaires sent to purchasing executives in over 400 private manufacturing sector companies.The Empire State Manufacturing Index is an index based on the monthly survey of manufacturers in New York Stateconducted by the Federal Reserve Bank of New York. The index summarizes general business conditions in New YorkState. The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University ofMichigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing tospend money.The Producer Price Index (PPI) measures prices received by producers at the first commercial sale. The index measuresgoods at three stages of production: finished, intermediate and crude.The "core" PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energyprices. The FTSE 350 Mining Index is a capitalization-weighted index of all stocks designed to measure the performance of themining sector of the FTSE 350 Index. The index was developed with a base value of 1000 as of December 31, 1985.S&P Oil & Gas Refining and Marketing Index tracks the market performance of downstream oil and gas companies.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.The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russianlargest and most developed companies from 10 main economy sectors. The MICEX Index was launched on September22, 1997, base value 100. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the mainRussian stock exchange.The Straits Times Index is a modified market capitalization-weighted index comprised of the most heavily weighted andactive stocks traded on the Stock Exchange of Singapore.

Local DiskWeekly Investor Alert by U.S. Global Investors, Inc.