Slide1: The Oil Factor: Its Impact on the Markets Dr. Stephen Leeb MegaTrends Fund (MEGAX)


Dr. Stephen Leeb, Ph.D.: Portfolio manager of the MegaTrends Fund (MEGAX) Ph.D. Psychology & M.A. Mathematics - Univ. of Illinois; B.A. Economics - Wharton School of Business, Univ. of Pennsylvania Dr. Stephen Leeb, Ph.D.


Author: Author The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel (Warner Books, 2006) The Oil Factor: Protect Yourself – AND PROFIT – from the Coming Energy Crisis (Warner Books, 2004)


ENERGY AND INVESTING : The urgent message for investors: Oil supplies will become inadequate sooner than is generally understood. ENERGY AND INVESTING


ENERGY AND INVESTING : Back in early 2002, $30-a-barrel oil was widely viewed as an anomaly. Most anyone with an opinion on energy – from Wall Street analysts to oil industry executives – believe oil prices are in a long-term trading range centered around $40 a barrel. This opinion rested on the assumption that worldwide oil capacity was sufficient to supply the world with all the oil it needed. NOW: Oil trading above $60 per barrel ENERGY AND INVESTING


Slide6: Energy as the Most Important Inflation Indicator Are We in the Oil Price Uptrend? Is the uptrend long term? Will the high energy prices come to determine the economic and investment outlook?


AMEX OIL INDEX PRICES: AMEX OIL INDEX PRICES AMEX Oil index, XOI – price weighted index of the leading companies involved in the exploration, production and development of petroleum. AMEX Oil Index (XOI), 1988-Present


CRUDE LIGHT PRICE: CRUDE LIGHT PRICE U.S. Dollars per Barrel, 2001 - Present


ARE OIL PRICES HEADED HIGHER? : Even if demand were to slow? ARE OIL PRICES HEADED HIGHER?


DEMAND : Lately oil has been in the headlines constantly as prices have reached previously unseen levels. Will demand continue to rise? How should investors respond? CHINDIA Rapid growth in Asia will be a major reason demand for energy will accelerate. DEMAND ®


ENERGY DEMAND : ENERGY DEMAND Source: http://www.eia.doe.gov/oiaf/ieo/world.html


OIL SUPPLY: OIL SUPPLY Saudi Arabia Russia Other Non-OPEC countries


CAPACITY LIMITS: CAPACITY LIMITS Much of that capacity was in the hands of the Saudis – but Saudi Arabia had always proved a reliable supplier of last resort. The Emerging Russian oil miracle: from the late 1990s on, Russian oil production and exports have been rising sharply. By 2004 – burgeoning demand for oil became obvious.


SAUDI ARABIA: Internal consumption of oil production has been in a sharp uptrend Energy-intensive economy Growth has exceeded 4 percent. Energy use has grown by 12 percent. SAUDI ARABIA


RUSSIA: In the 1990s and early 2000s, Russian GDP dropped by more than 30 percent. Good thing for the rest of the world Russian demand for energy fell by 20 percent. If As energy production within Russia began to climb, so did energy consumption. RUSSIA


BOTTOM LINE: While oil may be volatile shorter term – Longer term there are simply no scenarios Apart from a massive worldwide recession As long as growth in oil supplies isn’t keeping pace with growing demand, oil prices will continue to rise. Whether curbing demand or boosting supplies…highly unpleasant scenarios will arise. BOTTOM LINE


ULTIMATE ANSWER: Development of alternative energies Likeliest to have the most immediate impact on helping us meet our energy needs: Nuclear Energy Wind Energy Tar Sands Liquefied Natural Gas ULTIMATE ANSWER


INVESTING: Heavily in stocks that are suitable for both inflationary and deflationary portfolios. Big players in alternative energies. Hedges. All-weather stocks. INVESTING


CHINA AND INDIA: CHINA AND INDIA Two Lands Of Growth Opportunities ®


CHINA AND INDIA: Different Ways of Getting Exposure to Chindian Markets Selected U.S. Stocks Investing in companies located in Chindia High yield for growth and income ® ® CHINA AND INDIA


PPP to Dollar GDP Ratio: PPP to Dollar GDP Ratio Source: World Bank Purchasing-power parity (PPP): A theory which states that the exchange rate between one currency and another is in equilibrium when their domestic purchasing powers at that rate of exchange are equivalent. Gross Domestic Product (GDP): Total value of a country's output, income or expenditure produced within the country's physical borders.


INFLATION: INFLATION Three Periods of Double-Digit Inflation


Slide23: What the 1970s Can Teach Us About Money Making When Inflation Soars


Investment Pitfalls: Investment Pitfalls Investment Pitfall #1: Cash Investment Pitfall #2: Bonds


Investment Pitfalls: Investment Pitfalls Investment Pitfall #3: Stocks Investment Pitfall #4: Small Cap Stocks


STOCKS TO AVOID: STOCKS TO AVOID


INVESTMENT JACKPOTS: INVESTMENT JACKPOTS Investment Jackpot #1: Gold and Gold Shares


INVESTMENT JACKPOTS: INVESTMENT JACKPOTS Investment Jackpot #2: Oil and Oil Shares


INVESTMENT JACKPOTS: INVESTMENT JACKPOTS Investment Jackpot #3: Real Estate Investment Jackpot #4: Chindia ®


CONTINUING UPTREND: Turbulent times ahead Upside potential for investors is still enormous CONTINUING UPTREND


DISCLOSURES: DISCLOSURES For more complete information about the MegaTrends Fund (MEGAX) or any U.S. Global fund, including charges and expenses, obtain a fund prospectus by visiting us at www.usfunds.com or call 1-800-US-FUNDS (1-800-873-8637). Please consider carefully the fund’s investment objectives, risks, charges and expenses. Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The AMEX Oil Index (XOI) is a price weighted index designed to measure the performance of the oil industry through changes in the prices of a cross section of widely-held corporations involved in the exploration, production, and development of petroleum. Holdings as a percentage of net assets as of 12/31/06: 3M (0.00%); Coca-Cola: MegaTrends Fund (2.63%); Intel: MegaTrends Fund (2.79%); Proctor & Gamble: MegaTrends Fund (2.31%); Texas Instruments: (0.00%); Elizabeth Arden (0.00%); Kellogg: (0.00%); Hershey (0.00%); General Mills (0.00%); Federated Stores (0.00%); Kohl’s: All American Equity Fund (0.47%); AMR (0.00%); Jet Blue (0.00%); Ford (0.00%); General Motors (0.00%); DuPont (0.00%) 06-261