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Home of the Free, Land of the Entrepreneur

By Frank Holmes

CEO and Chief Investment Officer

U.S. Global Investors

Jan Koum, founder of WhatsApp
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At 16, Jan Koum immigrated to the U.S. from his native Ukraine, then still under communist control. He and his single mother rented a small two-bedroom apartment on government assistance and relied on food stamps. Even though he didn’t own a computer at the time, Koum devoured computer networking manuals and became proficient at hacking, a skill that helped him land a job at Yahoo! in 1997.

But after nine years at the Internet company, Koum grew restless. He had other ideas and ambitions. Within a year of leaving Yahoo!, he developed a new instant messaging app for smartphones that he named WhatsApp. Its popularity took off, and Koum watched the valuation of his startup soar from $250,000 in 2009 to $1.5 billion in July 2013.

The following year—only five years after its launch—WhatsApp was acquired by social media titan Facebook for $16 billion plus $3 billion for the company’s founders. In a symbolic gesture, Koum signed the paperwork at the building that had once served as the welfare office where he received his food stamps. With the stroke of a pen, he became $6.8 billion richer. Today, WhatsApp is the top messaging app in the world, with 800 million monthly users, and Koum is number 208 on the Forbes 400 list of wealthiest Americans.

Jan Koum, founder of WhatsApp
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Koum’s story might sound like a plotline from the mind of Horatio Alger, the nineteenth-century American novelist whose works dramatize the rise of an impoverished young man to financial prominence. But American history is replete with such stories, starting with that of Benjamin Franklin. One of the Founders of the United States, Franklin helped guarantee that this country would be a place where people can freely pursue their dreams, innovate and capitalize on their achievements.

Much has changed since Franklin signed the Declaration of Independence nearly 240 years ago, but America still stands as a land of opportunity for U.S.-born citizens and immigrants alike.

Where else but in America can a startup such as Uber be valued at $50 billion, higher than 80 percent of the companies in the S&P 500 Index, only six years after its founding? Where else but in America can someone reach billionaire status by inventing a new type of hosiery, as Sara Blakely did with Spanx? Before her now-ubiquitous undergarments were worn by women—and now men—all over the globe, Blakely was so broke that she had to write her own patent without the help of an attorney.

As I pointed out in a Frank Talk early last month, nearly 70 percent of billionaires who show up in the Forbes 400 list are self-made. In fact, the percentage of those who have a self-made score of 10, meaning they created their wealth from nothing (think Jan Koum, Oprah Winfrey and George Soros), now exceeds the percentage of those with a score of 1, indicating they inherited every cent (Laurene Powell Jobs, widow of Apple-founder Steve Jobs).

Under Pressure: U.S. dollar Continues to Weigh on Copper
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Regarding Apple, the tech giant represents just one of numerous American companies that were founded by either an immigrant or the child of an immigrant (Jobs’ biological father, still living, is Syrian). Recent examples include Sergey Brin, co-founder of Google, who emigrated from the U.S.S.R.; Elon Musk, CEO of Tesla Motors, originally from South Africa; and Yahoo! founder Jerry Yang, a Taiwanese émigré. According to the entrepreneurial research firm Kauffman Foundation, a quarter of all technology and engineering companies created in the U.S. between 2006 and 2010 were founded by foreign-born entrepreneurs. Amazingly, more than 40 percent of Fortune 500 companies were at least co-founded by immigrants or their children: AT&T, Budweiser, General Electric and IBM, among many more.

It’s doubtful that Jan Koum would have found the same level of success had he and his mother stayed in Ukraine. Fortunately for him, as well as the millions who regularly enjoy and benefit from his innovative service, the U.S. welcomed him in and allowed his talents to flourish.

I want to wish everyone a safe and happy Fourth of July, and to my friends and family in Canada, a happy Canada Day!

We asked some of our team members why they came to the U.S.
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Index Summary

  • Major market indices finished down this week.  The Dow Jones Industrial Average fell 1.21 percent. The S&P 500 Stock Index fell 1.18 percent, while the Nasdaq Composite fell 1.40 percent. The Russell 2000 small capitalization index fell 2.46 percent this week.
  • The Hang Seng Composite fell 2.02 percent this week, while Taiwan fell 0.92 percent. The KOSPI rose 0.82 percent.
  • The 10-year Treasury bond yield fell 9 basis points to 2.38 percent.

Domestic Equity Market

S&P 500 Economic Sectors

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Strengths

  • The U.S. ISM Manufacturing Index rose higher than expected for the month of June, a much needed positive sign for the industrial sector. The reading came in at 53.5, compared to an expected 53.2 and a reading of 52.8 for the prior month.
U.S. ISM Manufacturing Composite Index is Strong

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  • The Conference Board’s consumer confidence index jumped up for the month of June, surpassing analysts’ expectations. The reading came in at 101.4, compared to an expected 97.4 and a reading of 95.4 for the prior month.
Consumer Confidence is on the Upswing

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  • Utilities was the best performing sector in the S&P 500 this week due to the crisis unfolding in Greece and the subsequent decline in U.S. bond yields. The S&P 500 Utilities Index rose 1.14 percent this week.

Weaknesses

  • Energy was the worst performing sector in the S&P 500 this week as WTI crude prices slumped. The S&P 500 Energy Index fell 1.98 percent this week.
  • Although the unemployment rate in the U.S. declined, the increase in nonfarm payrolls was weaker than expected.
  • Turmoil in Europe continues to create a significant amount of uncertainty in global markets.

Opportunities

  • The final Markit U.S. Manufacturing purchasing managers’ index (PMI) for the month of June came in at 53.6, higher than expected and well above the critical 50 mark.

[drizzle]Markit U.S. Manufacturing Purchasing Managers' Index Better than Expected

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