US Global Investors Inc (GROW) 2015 Q1 法說會逐字稿

Ladies and gentlemen, welcome to the US Global Investors webcast, US Global Investors Earnings Announcement for the First Quarter of Fiscal 2015. If you have any questions during the webcast, simply enter your question in the dialogue box at the bottom of the screen and click Submit.

Also, you may download a PDF of today's slides by clicking on the Resources tab in the top center area of your screen. You can also download some of US Global Investors' latest research on the Resources tab. To switch back to the presentation, just click the Slide tab.

We would like to begin by introducing Susan Filyk, Investor Relations at US Global Investors. Please begin.

Thank you. Welcome, everyone, to our webcast announcing results for the quarter ended September 30, 2014. The presenters for today's program are Frank Holmes, US Global Investors' CEO and Chief Investment Officer; Susan McGee, President and General Counsel; and Lisa Callicotte, Chief Financial Officer.

During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical facts are subject to risks and uncertainties that may materially affect actual results.

Please refer to our press release and corresponding Form 10-Q filing for more detail on any factors that could cause the actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today and US Global Investors accepts no obligation to update them in the future.

If you have a question for us, you can submit it at anytime during the webcast. Simply type your question in the dialogue box at the bottom of the screen and click Submit. If we aren't able to answer your question during the live presentation, we will follow up with you individually.

Now let's go to Frank Holmes, CEO and CIO for an overview of the quarter. Frank?

US Global, GROW, is a publicly traded boutique investment and in that process of being investment company, we have focused on emerging markets and resources which we had tremendous challenges in the past -- real GDP growth.

So with that, I'd like to go on to slide 5 and let's start to articulate some of the challenges we've had for the past quarter and the past couple years and how we're dealing with then but still let me start to show to you is that there are strengths and that GROW is a a go-to stock for exposure to emerging markets and resources.

This is where the bulk of the world's population is and the world now is connected like we've never seen before with Facebook over 1.3 billion people connected and everyone wants that American dream so emerging markets will have their turn and we are positioned to participate on that.

We, as a company, going through this is our valued its growth in the capital capitals, we remained debt free. We have a strong balance sheet and we have a reflexive cost structure to navigate through these waters.

We have still a monthly dividend and return equity disciple and to get that equity discipline, we have to be conscious of the cost which Lisa Callicotte can talk to more about in detail.

And the next visual, I'd like to hop over to top institutional holders of GROW and thank them for their loyalty and their support during these challenging times in emerging markets in gold and resources oil and gas. As you can see who are the top five key investors in the US Global.

Consistently paid dividends for more than six hours, it's a half a penny per share and we pay that every month and the current yield is 1.69%.

The next visual in on Page 8, the share repurchase program is in motion. The board approved a repurchase of up to $2.7 million of its outstanding common stock on the open market through the calendar this year 2014 and during that first fiscal quarter of 2015, the company repurchased 16,793 class A shares cash of approximately $59,000.

We have an algorithm and it is used to buy back stock in on down days, in accordance with all applicable rules and regulations that restrict amounts and times of repurchases. We may suspend or discontinue at any time but at this stage, we still remain committed to be able to accumulate stock in down days.

The current lineup of our funds as you can see, gold and precious metals, natural resources, the China region, emerging Europe, and then we have domestic equity, the Holmes Fund, the all American Fund and short-term bond funds which we're going to highlight where we're growing and what we find as important position in every one's portfolio as we would like to characterize our no drama fund, the near-term tax-free fund.

Building for the future growth is increased ownership at Canadian asset management company, developing innovative and dynamic ETF products to expand the product line and earning valuable exposure for our brand in over 170countries through publishing of our financial commentary and other content.

The next visual highlights the no drama fund. Assets have been growing. They've been growing at a 30% compound rate of return and this is our near-term, short-term, AAA rated municipal bond fund which we have a lot of our own money into this particular fund and it's a very low volatility fund and that's what we mean when we say no drama, we mean very little volatility and steady of the wealth building program.

So with that, I'd like to hop over to our strategic relationship with Galileo. GROW ownership is 65% of Galileo. It's Toronto-based company with approximately $226 million assets under management.

It's accretive to GROW. The flagship fund consistently rated four or five stars in Canada. A 2013 Lipper fund award for best small.mid cap fund in Canada over five years. The CEO Michael Waring is a seasoned veteran in active money management.

The next visual shows you how the assets are including Galileo and what you can see is that steady decline is taking place in our assets. There's a couple of reasons for that. One is the restructuring of what we did in our lineup a year ago and two is just the decline in resources and emerging markets and they are highly correlated which I'll talk about later to global real GDP.

And as global real GDP is declined, it's created a decline in those assets. But we are seeing sparks change in government policies to ignite change in Europe. There's almost a panic button being pushed and Draghi and the gang of Japan was the first to ignite the war last year with this massive monetary stimulus program and now we're starting that in Europe.

So that's the positive part looking forward. Next visual you see is asset breakdown. As you can see, our funds were important here as that we have a strong relationship with our shareholders.

The bulk of the shareholders are correctly dealing with us. They're now through the platforms of Schwab, TD or great, great partners in that distribution of assets. However, their loyalty there is very much off the 50-day and 200-day average their investors using those platforms whereas investors that come directly with us are much more loyal and a lot of the high swinging assets come through those platforms.

So we maintained a strong brand relationship with our investor alert in Frank Talk which goes out on a weekly basis and that�s how we stay connected to our domestic investors and interesting enough, as I've mentioned earlier, there's a global reach into an extended universe of family of followers and in 170 countries.

The next visual at 15 is showing that our balance sheet remains strong and no debt. We deployed a lot of our assets to earn higher yield at money funds which we basically repositioned because it was just causing us too much money.

And even with rising interest rates that threatened 18 months ago, nothing's happened in fed funds rate, nothing's happened on repo rates. They're still even with the stock, interest rates are going to rise next year, the repo rates are going to rise, fed funds are going to rise.

The repo rates still remain at 2 basis points and how do we kept those money funds internally, we have lost millions of dollars additional. So looking back that rearview mirror, it was positive decision. However, when you look at overall, the company of direct assets as the only factor you look at, it's just as center administration, it doesn�t look as attractive but I do think it's an important strategic move that we have made and it's also we positioned how we rethink our own company and then needs from HR, from cost for maintaining in a highly, highly regulated world. It's been better to steam line and we're happy with that

The next is showing the earnings per quarter, what's taking place during this challenging period with declining assets, we were really frustrated, annoyed, and disappointed in the last quarter because we have anticipated that we were going to echo our profit.

However that last week of September was just so punishing to anything that was not resources, to our investments and funds and our other equity investments. They just declined.

And the big part now is we look forward going forward to that rebound but that did impact our business model in this past quarter. Lisa Callicotte can go into greater description of what took place before the Q&A.

The next is visual of how we like to position in the audience of investors. We have income-oriented investors, we have value investors, and we have growth investors.

What you can see is that the growth for the past three years has been dramatically challenged with the declining assets versus our peers which have a much clear exposure to the fixed income market or the general domestic equity market and they�ve enjoyed a stronger growth because the stock market as a whole has grown much more domestically, much more significantly in a relative basis.

And the same thing has happened for the value investor and the income investor. One of the things that our dividend yield remains healthy, what we're happy was higher than a five-year government bond and it's high reflexive to any popping gold or emerging markets and I'll show you that visual in a second.

But we realized that we have to do everything to get our return on equity higher and that�s we're focusing on by dropping our cost and very costly launching our ETF price and with the work we've been doing on it. One of the things we're, you know, happy when we didn�t launch that gold ETF that we looked at because it's gotten by fallen -- nothing but fallen, it's just so -- it's a drought on gold.

And if they factor, please go to usfunds.com. We've tried to explain to investors first and foremost is to have a 10% waiting, not 100%. It's just the helpful factor in overall portfolio that we balance each year.

But what are the drivers? And it's the peer trade and the love trade and with real interest rates doing positive on a 10-year government bond of 18 months ago being negative, that was positive, strong dollar, it has impacted oil, it has impacted gold and it has impacted our overall results.

But nevertheless, we do believe in emerging markets and the growth of emerging economies and we do believe gold is an important part of it in the diversified portfolio and to rebalance on an active basis.

Looking long term, we just like to give the visual showing what our annualized return is. It's still even with this tremendous volatility has an annualized return of 10.29%.

Now GROW, the next visual is trying to show you for the past 12 months, we have outperformed many of the natural resource industries that are out there and that�s real, you know, surprise for a lot of investors. We're the go-to stock when it comes to emerging markets and small cap stocks.

Other public companies that are - in our space like Spot, we have a much stronger shareholder following and it shows up in how we fast we respond and we've also did a great job with Lisa and Susan Filyk and Susan McGee have done a significant job in streamlining cost and structure to be that reflexive cost structure with overall decline in these assets.

And we're only poised that any rise in assets will just be extremely accretive and fall at the bottom line and you could see the performance for the past three months even with the meltdown in many of these markets, GROW has done significantly well on a relative basis. We just list that we have a stronger flow in these emerging markets and resources and that we're positioned for growth.

Now I'm going to turn it over to the brains of the outfit and it will be Lisa Callicotte who will talk about financials and then Susan McGee will talk about some of the strategies and what we're working on.

Now I'll turn it over to Lisa to talk about the income statement financial analysis.

Thank you, Frank. Good morning.

I'd like to summarize the results of operations for the quarter ended September 30, 2014. And after I discussed the results, you'll see a consistent thing and this is due to a pain in controlling interest in Galileo in June 2014 because we are now consolidating the revenues and expenses into our income statement.

So as I'm comparing the quarterly results, you will see there will be increases in both revenue and expenses due to the consolidation of Galileo's results. So beginning on Page 22, we recorded total operating revenues at $3.3 million for the quarter and this was an 8% increase from the $3.1 million we reported the same quarter last year.

The increase is primarily due to the consolidation of $662,000 of Galileo revenue and was offset from the decreases of revenue of our USGIF mutual funds due to lower assets and for management.

Moving on to Page 23, operating expenses for the quarter was $3.6 million. This is a decrease $515,000 or 13% primarily for the following reasons -- employee compensation and benefits decreased [$304 million] or 60% as a result of fewer employees and lower performance-based bonuses offset by the addition of Galileo expenses of $153,000.

General and administrative expenses decreased $363,000 or 24% primarily due to higher fund reimbursements and fund restructuring cost in the prior year and offset somewhat by the consolidation of Galileo expenses of $145,000 in the current year.

Platform fees actually increased at $171,000 or 34% and this because - it's because we included $276,000 in Galileo platform fees but it was offset by decreases in platform fees for our USGIF mutual funds due to lower assets held through broker/dealer platform.

On Page 24, we see our operating loss for the quarter ended June 30, 2014 as $316,000 but this was offset by our other income which is income related to our investments. Other income for the quarter was $220,000.

Net loss attributable USGI after taxes for the quarter was $128,000 and as you can see on Page 25, this is a loss of the penny per share. Moving on to Page 26, we do see here that we have strong balance sheet. It includes $27.9 million of cash and marketable securities and this makes up 76% of our total assets.

And o Page 27, again, we have no long-term debt. The company has a networking capital of $23.4 million and a current ratio of 14.9 to 1.

With that, I'd like to turn it over to Susan McGee.

Thank you, Lisa and good morning to everyone.

One of our seven core values of our company is to be performance and results oriented and as many of you know and are aware, several of our funds have been recognized for their leadership in investment performance.

In fact, since 2000, our funds have received 29 Lipper performance awards, certificates and top ratings and these are sales and service teams engaged in daily conversation with financial advisors and investors.

A common refrain that we hear is that investors are looking for a no drama fund so counteracted volatility in the market. Frank mentioned this a little bit earlier. And then we positively during the past quarter, our efforts have been focused on one of our top rank funds, our focus on near-term tax-free fund or NEARX that has delivered consistent steady performance.

If you compare the S&P 500 to NEARX since the year 2000, what's interesting is you'll see that it took the S&P 13 years to pass the steady growth of near-term. If you have a couch potato portfolio as we call it where you can sit back, invest in a 50/50 allocation to the S&P and NEARX and if you rebalance annually, you will get steady growth with less volatility.

We're proud of our near-term tax-free fund. It's generated as we mentioned consistent positive annual total returns for investors for 13 years and this was done in periods of very volatile interest rate. It's gained - it's also earned from Morningstar a five-star rating for five-year performance along Municipal National Short-term funds.

Also highly ranked by Morningstar are Gold And Precious Metal Fund. It earned an overall four-star rating among Equity Precious Metal Funds.

We're also pleased that three of our funds hold the top Lipper leader rating. This rating is based on investor-centered criteria and on a scale of 1 to 5, a Lipper leader fund that rates 5 is in the top 20% of its category.

The near-term tax-free fund rates 5 for preservation and tax efficiency, the All American Equity Fund rates 5 for preservation and the US Government Straight Ultra-Short Bond Fund rates 5 for preservation and expense.

And we have found over the years that investors value preservation and tax efficiency and so we're very happy and pleased that we have funds that are highly ranked in these categories.

Along with our investment leadership, we also continue to be leaders in the financial industry for our award-winning marketing and communication strategy. In fact, this past month, the Mutual Fund Education Alliance recognized our marketing and investment team with 10 awards for our marketing excellence. That brings our total awards to 64 since 2007.

Our weekly advisory publication was named the best electronic advisor newsletter for six years. It provides original insightful content from our investment team. And then our shareholder report magazine was named the best investor magazine for the eight year.

We believe that a key to building assets is through educating our shareholders and providing this content that help shareholders and investors navigate some of the complex global markets that we deal in.

Our special reports or another area that we share our expertise and we build our brand, we have a new research report. It's a white paper called "Managing Expectations: Anticipate Before You Participate in the Market."

This report is one of the most popular items on our website and it's available to download at usfunds.com and I encourage you to visit the website. We have many more interesting items. We have a wealth of interactive material including slide shows, videos and learning games. So we do invite you to check those items out.

Our CEO blog, the Frank Talk, is one of the longest running blogs in the financial industry. We've had more than seven years and provided insight, observations from Frank Holmes.

This content and Frank special commentary published in Investor Alert received a great deal of earned media which is by publicity gain through sharing of our content by third party sources rather than paid advertising.

And this earned media helps us leverage our brand by reaching millions of readers, viewers and potential investors. And in addition, our online community is growing because we interact frequently with loyal and digitally engaged followers through emails, through Facebook, through Twitter and LinkedIn.

The financial media continues to elect Frank as the go-to gold guy for his expert and balanced views on the precious metal. Just this week, he was on CNBC. You might have seen him there.

And another popular item that Frank participates in is the Gold Game Film. It is being produced by Kitco which is one of the biggest god websites in the world. It's a weekly show that features Frank's commentary on the gold market and it airs to an audience of 10 million monthly visitors on the Kitco news website. We produced 3 episodes so far and that audience continues to grow.

In addition to expert opinions on gold, Frank and other members of the team are sought out by the financial media to discuss natural resources, domestic and emerging markets. We've been interviewed by CNBC in the US, in Asia, Oxford Club Radio, The Money Show, Casey Research, Palisade Radio, MarketWatch and many, many more.

In addition, we've had many influential financial newsletters. Writers recommend our funds to their subscribers.

So with that, I'd like to turn it back over to Frank who will discuss what we've been watching in the markets this year. Frank?

Thank you, Susan.

Susan has been busy as I mentioned earlier looking for opportunities at the same time managing the repositioning of our company at the same time right sizing cost as we continue to look for avenues to streamline and be prepared for the next rebound.

And when it comes, I just from a cashable point of view, it will be spectacular. It's just a matter of when do we get this synchronized growth. And so I'd like to turn to the first visual, in 2002, '03, '04,' 05, '06, and '07, you had an amazingly synchronized global growth where Europe had a strong GDP, strong purchasing manufacturers numbers, rising trend, everything was above 50, America and you had China.

And this synchronized global growth led to an incredible change in poverty around the world for poor people and all these emerging countries. It was the greatest shrinkage and the most significant rise before the Facebook took off.

Now they're all connected and you're seeing government policies flounder around the world to deal with this sort of slow down that took place in 2008. And now we're starting to see which is on a constructive note what Japan is trying to do and hopefully Europe will be.

But I've still been writing that I see the imbalances, not their monetary policy, so much as fiscal policy because it still appears that they're on steroids to tax anything and everyone and that G20 meetings have come from global trade and economic prosperity to tax and regulations.

And this creates a sort of schism that take place but it is just a matter of time before that pendulum swings while the world still doesn�t stop rolling. All these changes, these imbalances, they're still having babies, they're wired, they're connected and like we mentioned there's 600 million people in India under the age of 25. And I think that that's a big positive backdrop.

But short-term, well, what we see is the JPMorgan Global Manufacturing Purchasing Index which is a forecast of what economic activity one can expect six months based on people buying equipment, making purchase of metals to make a tractor or buying services, food, doesn�t really matter. It's the anticipant, the confident that they have in purchasing good for future manufacturing.

In the US, we call it ISM and every month you get this data and we've done extensive knowledge, if you haven't seen it, then go to our investor alert and take a look at this research. What are the ramifications? Cost, effect, and possible ramifications that when the one month is above the three months, it does have a significant impact on commodity demand.

And what we're seeing now is it's gone negative and that is particular since September is that a big impact in oil, steel, copper, and the slowdown and when you dig down and you try to say, well, what are the countries that are pulling that apart, it's not America. America is just doing fabulously well but it's Europe and Europe was the first to start to pull it down and it's impacted China because Europe is a bigger trading partner with China than America is.

So, in the next visual, what makes America look healthy and strong as unemployment rates has dropped the lowest percentage in the summer of 2008, and yes, there are many -- less people in the workforce so this data point looks more attractive. But what's important is to see that there is an important in employment.

The next visual is showing that consumer confidence is rising to pre-recession levels and I think that seeing energy and the gas pump drop, we've done some data mining here and every penny is a billion dollars, basically, in a 40% drop in buying gas at the pump line is like $40 billion tax cut for consumers and it is profound when you take a look at people earning more than $50,000 -- less than $50,000 -- less than $50,000 a year, it is like a huge tax break for them. I think the math shows a 21% income cut -- increase in their disposable income.

So we're expecting consumer spending to pick up this quarter that will basically shock people where you take a look at consumer spending. But still, the talking heads on television and a lot of the newsletter writers are so bearish and negative but I think it's we're going to see this happy couple and it is handed me down because he's been buying goods but that's a happy couple and that's a reflection of the gas pump being down and so rising income levels in America.

Now, the US crude price reduction is at a 25-year high. A lot of that has to do with fracking. A lot of that has to do with America's technology, innovation from sands and what's really important to recognize is not just the great state of Texas that has enjoyed this immense prosperity and this growth from fracking. It's also sand quarries in Michigan and Illinois and then the railway systems that Warren Buffett owns because we've got a ship that�s sand down to Texas.

And you need that sand, so therefore, all these people are getting employed moving sand, values of quarries have gone up dramatically moving oil across the nation has improved the Burlington Northern's cash flow dramatically and substantially which that's basically shows up in Berkshire Hathaway.

So has had a phenomenal movement across the country and then for the capital markets, has been MLPs to finance the pipelines, the infrastructure necessary for these discoveries. And then that model has been like REITs we're done for, the creation of real estate.

So it remains very, very important that America is able to get cheaper fuel and there's a great concern for that. However, it triples down and it shows just compare to the next visual is that North America and natural gas boom is a global market. If you take a look at our gas prices compared to what Europe has to pay and Asia has to pay and Europe's natural gas or oil's substantially higher than what America has to pay and that shows up in bid stock for chemical industry.

And the Valero's just had -- and Tesoro which are based in San Antonio had phenomenal numbers and that means that they can basically buy energy inexpensively here. We produce a high-quality end product which is then exported so that helps our balance of payments and we're seeing these stocks have been on a tear.

So that's how you have to reposition and think there's always a positive with the negative. Where there's friction, there's always an opportunity. We see this -- this is what I call excessive regulations globally in the financial sector but there's been a boom for those that are in compliance.

JPMorgan's had a higher 12,000 people as recently in "The Wall Street Journal". So wherever there is a positive, you got to look for the negative and be able to move in that space. So that's what we're trying to highlight here that there are these opportunities.

Now, let's go back to China. China's manufacturing activity appears to be modest. They're trying to grow again but nothing significant enough to ignite a global boom in resources.

What's important is that their leader follows -- has his own economic barometer. He follows three key factors to try to monitor what's happening economically. The next visual is try to help investors appreciate that the EU trades more of China than the US so that when the PMIs in Europe are in decline and there's a schism that's over in that overall socialistic mindset in Europe, it does have an impact on China and Southeast Asia.

When I was in Rome a couple of weeks ago, in Italy, talking to private equity investors, it's for the first time they're going to invest in Italy. So you can imagine that. A private equity investor in Milan with $1.2 billion will -- in the past would not invest in his own country and he had have all of us analysts, basically owed up Luxemburg. Why is that?

Because the union mindset and federal laws in Italy basically prohibited employing people there and it also impacted youth. Highly educated youth under the age of 28 years old, 40% unemployment. So you end up going to hotels in London, England and you find that they're French, they're Spanish and they're Italians with all the university degrees but there's no employment in their own country even in the tourism business.

So that's what they have to go. And now, finally, Italy is changing those rules to be able to be more inclusive and that's one of the things that that European socialist union mindset is it creates exclusiveness and it creates division. Flying back, I had to fly through a German airlines to get the best deal and there was some disappointments with that process and what happens there was that the train union was going on -- was on strike and the airline unions between who tickets you and who flies you and the flight attendants are all different and they don�t talk to each other.

I found that at the counter when my flights were delayed. So it's really -- you know, it's interesting to see that, finally, Italy is making changes and the private equity, Italian private equity fund is making investments in Italy so this is very positive.

A year ago, we noticed that if you get your passport -- if you get your visa to go into Europe and you're coming from China, then it was easier in China to go through the Spanish embassy than it was the French Embassy. So what would that do?

So the Spaniards were smart enough to make the process of moving the paper more readily and quickly to stamp and approve Chinese tourism to go to Europe so they went to Spain, they never made it to Paris. So luxury goods growth grew dramatically in Spain, not in Paris. In fact, Paris, the nation, the Eiffel Tower, the icon of luxury goods had a shrinkage in luxury good spending whereas tourism by the Chinese has been significant all over the world and we see here in San Antonio, Texas, yield them all.

So we see signs in Chinese now catering to tourism. So I think it's important to recognize that we have to have the streamlining of regulations and rules around the world to get back to 2003, '04, and '05 of global economic activity and it's good to see that it is in motion and that gives me optimism for the future.

We're now going to take a look at the next visual, Alibaba tops the list of 10 largest IPOs. This is China. There's so much negativity in China but the China A market has been positive all through the summer. And so there's something going on as very positive with China and when you take a look at Alibaba, you should see how profitable their numbers were this past day.

I mean, it's mind-boggling how much money Alibaba makes. It's just shocking. And so you could take a look at Visa and Mastercard to get an idea of global tourism spending and you can see that they have record numbers.

So we remain very bullish that the government policies are finally waking up. There's significant change and the future looks stronger and better. We had a piece, a marketing piece of 600 million reasons to keep your eyes on India, new leadership in India. He's all about pro growth. He's recently come to America. He was visiting Washington and he's going to become a significant trade partner with America, it's going to be India and I think in the global strategy of geopolitics that America is going to align themselves with India to balance the growth of China.

And with that, you could see this individual Modi, he is all of a pro-business. His state is like the state of Texas and his growth has been significant in Gujarat, in India. And that's a big part of this leadership that the Indians voted him in because he's all about pro-growth.

And that's showing up in consumer spending. It's also showing up in investors in India buying their local stock market which has seen resurgence. So, Europe's unbalanced fiscal monetary policy sometimes visuals are more important and I try to give you an idea that if you have balanced government policy between monetary and fiscal, it's like the Tour de France cyclist that can even climb extremely quickly up a mountain.

But the other bicycle, as you can see, when you have an unbalance of fiscal versus monetary, that bicycle is fun to look at but it's non-competitive on a global stage of economic prosperity.

And the other party I would like to highlight when we look at Europe, why is it that the brightest brains, engineers either Germany and France and Spain are all in San Francisco area? Because this where the hopes and dreams of innovation are rewarded. They're not rewarded in socialist countries.

There's no Facebook that come out in France. There's just none of that -- that opportunity that people aspire to, youth, it's all in America. And this idea that you too can be successful is America. Dancing with the Stars, competition from kids doing cheerleading, your son may not be in the football team but your son, as a musician, can get a full scholarship being in a band. And your daughter may not be training for the Olympic athlete or an Olympic athlete but they're getting a full scholarship playing for Texas A&M cheerleading.

This is an incredible phenomena in America and it attracts the best and brightest brains. And I think that this idea of socialism creates tremendous fiscal imbalances and what we're seeing is now a rebalancing. And maybe that took place to the elections recently in America this week of trying to rebalance the fiscal monetary policies so we remain very bullish on the global economic stage of this rebalancing of this. The wheel is here and let's get cycling. Let's move forward.

Now, let's talk about gold. Gold is very disheartening, usually September is a great month. We roll about. However, we saw the US dollar maintaining center stage as the strongest currency in the world because Europe went to a negative real interest rate. So gold started to rally in Europe because of the bonds falling relative to five-year government bonds here and gold is money.

It's an interesting triangle. You�ve got to look at five-year and money great on euros and you got to look at dollars and you look at gold and gold will go up in the country that has weakest overall negative interest rates. So gold went up in euro terms. Gold goes up in Japanese yen terms. Gold falls in dollar terms.

So if you're following that up to your trade, you wonder what's going on, it's real negative interest rates in America have turned constructively positive and therefore the dollar is stronger against the yen, it's stronger against the euro.

So the gold seasonal pattern is still in place for the trade but not as strong, is not as strong because the real GDP growth of Chindia has not has been as strong as it was in 2004, '05 and '06. And what's important to recognize that gold did rally during this environment and the big factor of that was not only negative interest rates on the US but it was a strong Chindia global economic boom.

But what do we witnessing with gold? Gold is extremely oversold. And if you go back to 2007, gold did not hit 800. It did not hit $1,000. But gold stocks that they're paying for earnings were substantially higher than what they are today.

So the emotional sentiment makes goal stocks extremely attractive and just the price of gold is extremely oversold and what we recently try to highlight to investors is that not only is gold extremely oversold and usually provides buying opportunity, that it's also similar to the hottest market right now is biotechnology.

And if you look at the volatility of biotechnology, it is in fact, rarer than gold. This shocks a lot of people. And we had biotechnology stocks in the summer of two center deviations and they immediately sold off in September and now they�ve had a rebound whereas gold sold off. It had a rebound and it's now come back to a buying opportunity.

So it's so important that investors understand the DNA of volatility is different for every asset class but some asset classes are similar. But because biotechnology relates to the demographics of the world, that is the aging population of China, of Europe and America.

And what can we do? What pill can I take that's going to make me, as they say, the 60, the new 60 is 40 years old and any new biotechnology is going to solve this problem is getting more and more attention or Ebola. Where is the technology and biotechnology is going to solve the Ebola.

It's really the thought leaders are North America. The thought leaders are in Canada and the US and particularly America. Where is the capital being formed to fund the scientists, they're in North America.

You can witness it in the capital markets. So this is what makes America special. And it makes us special how fast it can form capital to solve a crisis around the world. So this is the reason why you got to love the leadership, the thought leadership in this great nation.

But what we do see is in the market markets, there have been changes. and in Frank Talk, we've tried to highlight and educate investors and Susan Filyk and her team has done a remarkable job that we won 10 awards this past year for education and is in a competitive arena like Dancing with the Stars.

It's important that investors recognize it and with that, it's always competition and that's what leads America being a great nation. But in that idea of understanding how capital changes and educating investors that when volume, how volume affects stocks and the volume drops off, it does affect the spread bids and asks. And there are real patterns that affect gold markets and gold markets historically, since I've been in the business see when the price of gold in New York closes in the COMEX and it seems to make the low of the day in the later afternoon and then rallies at the month end and it rallies at weekend and guess what, most important in a daily basis, it rallies in the last.

If it's going to rally, the most significant rally is the last half hour of the day. It's just -- it's just a function that it's hot in Texas and it's cold in Alaska. That's just what it is and it's how those markets function and it's for us to be able to try to help this idea of price discovery.

And the capital markets have been impacted by high frequency trading. The ability of rewriting algorithms every night and then replacing them at capital markets, really, truly has changed the overall formation of capital and the advent of ETFs, that has changed the formation of capital and a lot of times over value fundamental stocks can rise all because of fund laws, all because of ETFs.

And it's important to recognize the stock picking will always be important and then we're overseeing this with ETFs coming with factor screens and try to capture how to separate better fundamentals from weaker fundamental in those fund [blows].

But if you're not reading US Global's Investor Alert, do start. We highly recommend it. It's a great way for us, as money managers, to think about what's driving the global economy, the domestic economy for the weak and try to articulate ourselves like analysis to be comprehensive yet concise. Always three strengths for strength -- three sense is for weaks, I have to start reading Dr. Seuss and speaking quickly with "One fish, Two Fish" and speaking here today and try to get this timeline in.

But I think it's important for investors to read it and if you have comments, ideas that you'd like to share with us, please do. We take great ownership in being thought leaders as best as we can and your input's important to us. Now with that input, let's talk about the day about your questions for our financials, our marketing strategy, et cetera.

Thank you, Frank. We'll take some questions. To ask a question, please type your question in the dialogue box at the bottom of the screen and click submit.

We'll start with Lisa Calicot. Could you comment on some of the streamlining of costs that you�ve gone through as assets have declined?

Sure. As I noted earlier, we have been reducing cost. You saw that pretty much across the board with all of our expenses. And we have discussed in the past that we have a reflective cost structure.

For example, one of our largest expenses is related to employee compensation and benefits, and with this, we are able to adjust bonuses to align with our revenues and in conjunction with restructuring some of our products, we also made some stocking reduction.

There are certain expenses like our platform fees that are based on AUM. And so, therefore, they naturally adjust at our AUM and revenues increase and decrease. But we are always trying to streamline our other cost also.

We are reviewing processes and procedures and we're trying to distinguish between our needs and our wants concentrating on what is going to be the most efficient and effective ways of getting to where we want to be. So as we do that, we challenge each employee and our department to look at the processes and reduce or eliminate cost when possible.

For example, one of the things that we look at is our travel expenses and we've been critically looking at which conferences do we plan to attend and we're continuously reviewing the benefits that we receive for each of the items that we participate in.

Thank you, Lisa.

Next question is regarding ETFs and a timeline for offering ETFs. I'll hand that to Susan McGee.

Well, you can see behind the scenes working to finalize these products and the services and service providers involved with these products and we're expecting a lot in the first quarter of 2015.

Thank you, Susan.

Frank, it seems that the Galileo purchase has been beneficial to the company. are there plans for any future acquisition?

Well, yes. we're always taking -- looking at other opportunities to expand our footprint and our platform at the lowest cost or highest returns in capital and provide our intellectual capital. So we are -- but one of the things that�s most difficult is in this highly regulated world is the resources, it's just -- there's just so many forms and costs to turnaround and to respond to from one regulatory regime after nother.

I was looking at to the past 14 years that cost or the support system for the regulatory world has gone from both $0.02 a share to $0.08 a share. So it's a fact that we just have to be cognizant of in our resources and make sure that we have the highest quality, risk management and compliance procedures in place, at the same time explore and look at opportunities.

So when you go to do due diligence, they even -- the basic letter of reviewing takes so much time in a what we call a nondisclosure document that confidentiality agreement when you sign with other companies that entered these, just that process now takes so much longer.

Everything -- there's just so much friction in that process. But you know what? Even with all of that, we are still persevering and we sign agreements on a record basis, looking at opportunities, assessing opportunities, of how they fit into our strategy and what we're looking at. At the same time, the most important thing that I think about as chief investment officer is the fund performance.

And what are we doing to make sure that we get better fund performance across every product. And keep them rail up because it's very challenging as someone [psychic] to be going for three, now four years of up 5%, down 7%; up 8%, down 12%, overall as a macro backdrop.

So even for funds number one but the funds are all down as an asset class over three years, it wears on people. So I have to make sure my resources are focused on that. At the same time, we are, Susan, in support and for in respond to that question, signing agreements and looking at and assessing opportunity. In fact, today, I have calls on actually two other opportunities.

The other parts on the question I saw was our building. You know, on a regular basis, we get asked to sell a building and put more cash in the balance sheet or pay out dividends and -- you just have no idea how inexpensive it is to operate this building versus going and leasing. If we want to go and lease this quality of a building in San Antonio, even in half the space, it would cost us more money than what we had today.

So, basically, if you believe in real assets, then this building gives us valuations to rise overtime and our entry point was just so great that we bought this building under a million dollars. So like the building cost, I think, at the time, a hundred -- what was the number? $120 to build when this building was originally built and we paid less than $20 per square foot.

So when I take a look at those costs in San Antonio for this quality of a building at this location in the highway system, it is just better to keep this building unless we can find another great asset that will appreciate overtime.

Thank you, Frank.

Lisa, in hindsight, do you agree that it was a good move for the company to exit the money market business as you did last year?

Definitely. We were paying in excess of million dollars to maintain the yield on the money market. And so now that we don�t have that during as well as meeting expense caps, we are seeing that benefit.

Thank you.

Well, just quickly, and the morning session here and I highly recommend that you look at -- sign up for investor alert. If you have not or shared it with your friends and relatives and do visit Kitco, the Gold Game Show. It is -- what people liked about it and I just talk about technology.

You know, the iPad is just phenomenal that I have given this game film analysis from Albania and visiting the president of the country and I've given it from gold mines in deep in the -- almost the jungle of Colombia. I've given them from Asia.

The fact that you can Skype anywhere in the world and give people a review is just amazing and I think that the distribution of information for the iPad is just revolutionized. TED.com which now gets viewed in 170 countries, 2 million viewers daily.

So I think our educational from that system of being able to view one and get a flavor for just gold alone, not the Investor Alert which is a broader overall review from bond markets to equity markets, foreign and the domestic on gold, then I highly recommend and you want the video format that you take a look at Kitco's website.

Thank you everyone and thank you, Susan, and congratulations on all the awards and Lisa and Susan McGee for helping streamline costs, at the same time looking for opportunities in a very challenging market for resource and the emerging market orientated firm.

Thank you. Thank you shareholders for your loyalty.

This concludes the US Global Investors Earnings Webcast for the First Quarter at Fiscal 2015. This presentation will be available for replay on our website at usfunds.com. Have a great day.