Dr. Stephen Leeb

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

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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)
  

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ENERGY AND INVESTING

• The urgent message for investors
• Oil supplies will become inadequate sooner than
  is generally understood.

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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

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• 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?

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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
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CRUDE LIGHT PRICE
U.S. Dollars per Barrel, 2001 - Present
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ARE OIL PRICES HEADED HIGHER?

• Even if demand were to slow?

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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.

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

• Saudi Arabia
• Russia
• Other Non-OPEC countries

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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.

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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.

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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.

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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 isnt keeping
  pace with growing demand, oil prices will
  continue to rise.
  
• Whether curbing demand or boosting
  supplieshighly unpleasant scenarios will arise.

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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

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INVESTING

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

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CHINA AND INDIA

Two Lands Of Growth Opportunities
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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

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PPP to Dollar GDP Ratio
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.
Source World Bank
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INFLATION
Three Periods of Double-Digit Inflation
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• What the 1970s Can Teach Us About Money Making
• When Inflation Soars

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Investment Pitfalls
Investment Pitfall 1 Cash
Investment Pitfall 2 Bonds
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Investment Pitfalls
Investment Pitfall 3 Stocks
Investment Pitfall 4 Small Cap Stocks
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STOCKS TO AVOID
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INVESTMENT JACKPOTS
Investment Jackpot 1 Gold and Gold Shares
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INVESTMENT JACKPOTS
Investment Jackpot 2 Oil and Oil Shares
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INVESTMENT JACKPOTS
Investment Jackpot 3 Real Estate

Investment Jackpot 4 Chindia
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CONTINUING UPTREND

• Turbulent times ahead
• Upside potential for investors is still enormous

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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 funds investment
objectives, risks, charges and expenses. Read it
carefully before investing. Distributed by U.S.
Global Brokerage, Inc. All opinions expressed an
d data provided are subject to change without
notice. Some of these opinions may not be
appropriate to every investor. The SP 500 Stock
Index is a widely recognized capitalization-weight
ed 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) Kohls 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