U.S. Global Investors, Inc
Frank Edward Holmes - University of Western Ontario
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CEO and Chief Investment Officer, U.S. Global Investors, Inc
An interview with Frank Holmes, Founder & Chief Engineer, U.S. Global Investors, Inc
Our special interview on America’s Royalty Expert charts the rise and rise of FRANK HOLMES, Executive Chairman of HIVE Blockchain Technologies and award-winning fund manager, CEO & Chief Investment Officer of U.S. Global Investors, Inc., a publicly traded firm and registered investment adviser managing $4.8 billion in investment funds. Executive Global discussed precious metals, cryptocurrencies, and macroeconomic risk with the renowned Canadian-American investor, venture capitalist and philanthropist.
Frank Holmes CV
University of Western Ontario
1999 Appointed Chief Investment Officer (CIO), U.S. Global Investors.
1989 Purchased a controlling interest in
U.S. Global Investors, becoming CEO.
1983 Passed the examination of Canadian Investment Finance by the Canadian
1983 Appointed Executive Vice President and director, Merit Investment Corporation. First initial public offering (IPO) to work on as Vice President and director was Franco-Nevada Corporation, the first gold royalty and streaming company.
1978 Graduated with a Bachelor’s degree in economics, Huron University College, University of Western Ontario.
America's Royalty Expert
EG: Your first initial public offering (IPO) to work on was Franco-Nevada Corporation, the first gold royalty and streaming firm which has now become one of the world's largest and most successful gold royalty companies, with a market cap of over $8.2 billion! What exciting opportunities exist in the field of royalty companies for wealthy investors today?
Frank Holmes: Royalty companies present an exciting opportunity for investors due to their unique business model. It is very similar to the high-tech “SaaS” model, which stands for software as a service – in that both of these kinds of companies are essentially guaranteed consistent revenue. Gold royalty and streaming companies have historically had high gross profit margins, recurring revenue, and very high revenue per employee, which generates a lot of free cash flow in order to grow. I believe one of the smartest ways to play gold stocks is with Franco-Nevada. Believe it or not, Franco has outperformed big names like Berkshire Hathaway by a wide margin.
EG: And why are gold royalty companies such an important consideration for an investor's portfolio at this stage in the business cycle?
FH: It might surprise investors that gold has the same volatility as the S&P 500. However, it’s often counter cyclical. So I believe it’s just wise to own 10% in a diversified portfolio and rebalance each year. As for royalty stocks, I believe they’re a safer gold stock model for investors to consider.
EG: During the Great Depression of the 1930s, the returns from investment in mining shares were highly significant. How and why could this be replicated with the next great economic downturn?
FH: Gold was pegged at $20 per ounce in the early 1930s and was raised $36 so the U.S. could print money for Depression-era work programs. Thus, labor costs were flat in the 1930s. Mining was also flat, but the price jumped 40%, which made gold mining very profitable.
EG: With zero-negative interest rate policy now the norm along with rampant debt monetisation worldwide, what proportion of metals-to-cryptocurrencies do you think that UHNW investors should consider to mitigate againstthe impact of inflation, while maintaining yield?
FH: I always recommend 10% to 15% in gold, with no more than 5% in high-quality gold mining stocks and ETFs. I believe 2% to 3% should be allocated in Bitcoin or Ether.
EG: As Executive Chairman of HIVE Blockchain Technologies, where do you see the future of cryptocurrency mining and staking as an investment tool against the backdrop of unlimited global QE, asset bubbles and negative interest rate policy?
FH: We are early in the global adoption of blockchain technology, which is also known as triple-entry accounting. It has been validated by the global acceptance of Bitcoin with 15,000 nodes and Ether with 30,000 nodes. Next will be the massive growth in stablecoins, DeFi (decentralized finance) and non-fungible tokens (NFTs).
Award Winning Funds
EG: Under your leadership, U.S. Global Investors have been recognised by Lipper and Morningstar. Tell us more about the U.S. Global Jets ETF which may enable investors to gain exposure to the global airline sector?
FH: JETS is a unique smart-beta 2.0 ETF, meaning it has a quant-based approach to stock picking and weighting. The ETF is the purest way to play the airline industry globally and the recovery of air travel following the pandemic. JETS is now listed in Mexico, Peru and London via a UCITS product.
EG: Is metals revaluation the greatest step to saving the USD and fiat currencies? If we theoretically revalued gold upwards to $10,000,000 per OZ and silver to $5,000,000 per OZ,
due to their scarcity, properties and limited supply to makeup for the sheer volume of printed fiat currency, could we prevent a global economic catastrophe occurring, while simultaneously empowering a new middle class and bolstering our economies, or is this merely a pipedream?
FH: Many believe gold at $10,000 is a pipe dream. I follow the Gold Anti-Trust Action Committee (GATA), and it believes the G7 central banks are working like a cartel to suppress the price of gold using the futures markets. Personally, I know that 60% of gold demand is for love and mostly from Asian cultures, and that their rising GDPs are highly correlated to rising gold demand. In India, women wear six times the amount of gold than is in Fort Knox.
EG: As a successful resource portfolio manager with over 30 years investment experience, what are some of the ways in which your book The Goldwatcher: Demystifying Gold Investing (2008), may deepen the insight of resource investors?
FH: The book has two parts. One covers the history of gold, and the other is investing in gold stocks and understanding the lifecycle of a gold mine, from discovery to production. It also lists what I call the 5 M’s of picking better gold stocks. Investing in gold requires a curious mind and awareness of the history of money, from paper to gold. Investors must also understand that there is a smarter process for screening and selecting gold stocks, like your mom’s recipe for baking cakes and cookies.
EG: What would your first three acts as newly appointed U.S. Secretary of the Treasury be on banking, taxes and fiscal policy and why?
FH: 1) Embrace blockchain technology and digital money. 2) Increase official gold holdings to counter the huge accumulation made by China over the past 15 years. Buy any and all gold and silver production in the U.S. 3) Change the CPI indicator to better reflect the basic cost of living, and so that it’s closer to the model used in the 1980s.
EG: A prolific philanthropist, you established the Paul K. Robertson Scholarship for children and grandchildren of U.S. Global Investors' employees, as well as the Frank Holmes Academic Athletic scholarship at the University of Western Ontario. What have these positive contributions to society taught you about the importance of giving back to the community?
FH: I believe education is key to healthy growth, especially in the sciences, engineering and geopolitics. Education builds personal confidence to grow and evolve. Children from poorer countries and communities need a boost in their self-worth, which is highly correlated to net worth and rising GDP per capita in a nation.
EG: Having accomplished great things within the mining industry, you certainly could be referred to as America's Royalty Expert. How integral of a role does the importance of risk management play in establishing a successful career as an entrepreneur and investor?
FH: Understanding the balance between ambition vs. risk and ethics is important to be a successful person. Respect for others, personal integrity and rule of law could fall into ethics. What do you want to be known for? That’s an important question to ask oneself before making big decisions, whether you’re a parent, entrepreneur, teacher or skilled worker.
EG: Philosophically speaking, how would you chart the correlation between a nation's advocacy of freedom, liberty and entrepreneurship in proportion to their outlook towards precious metals and private cryptocurrencies? Moreover, where would Communist China and El Salvador rank in your index?
FH: Each country has its own unique culture just as each of us has our own unique DNA and fingerprint. I believe common law is better than civil law for many reasons, and that the American model uniquely balances power and accountability. Thus, “life, liberty and the pursuit of happiness” is key.
EG: If the regimes of Stalin, Mao, Pol Pot, Trotsky and Lenin have taught us anything it is that Communism simply does not work! Isn’t the notion of a Central Bank Digital Currency in a fully digitised economy without cash (such as with China’s digital yuan), a steer in the wrong direction that is completely antithetical to the very freedoms we enjoy today? Who wins in the ‘Mexican Standoff’ between decentralised, private crypto assets that are in limited supply and CBDCs?
FH: Nearly every central bank on the planet is at some stage of launching its own CBDC, or else has already done so. It’s not difficult to see why these digital currencies are an attractive idea. Money supply can be restricted or expanded with the click of a button. Everyone’s transactions, big or small, can be monitored or even halted. Governments with hyper-aggressive climate change policies could literally stop all money flows to companies seen as having big carbon footprints. Against this backdrop, Bitcoin, a trustless asset with no third-party risk, becomes even more essential to securing one’s privacy and freedoms.
EG: You’re a prominent speaker at investment conferences and a regular financial commentator on Bloomberg, CNBC, Barrons, Fox Business and Stansberry Research. What in your opinion does the future portend for meme stocks like AMC and GME?
FH: I hope the past couple of years has put to bed the idea that millennials and Gen-Zers can’t be serious market participants. This became very clear to me when young Robinhood investors piled into distressed airline stocks at the start of the pandemic, and they continued to hold even after Warren Buffett sold. A lot of these same investors and traders were responsible for the run up in AMC and GME, others are now speculating in cryptos and NFTs. They’re highly organised, taking their cues from influencers on Twitter and Reddit, and those that have bet against them have largely been burned. They’re here to stay. EG
Revenue per employee is an important efficiency ratio.
Anticipating macro trends is key.
Grasp the importance of profit margin and scale in every product.
» Leader of an investment team whose mutual funds have won over two dozen Lipper Fund Awards and certificates since 2000.
» Created the Frank Holmes Academic Athlete Scholarships, available to one male and one female student at UWO, renewable annually.
» Appointed Executive Chairman of the Board, HIVE Blockchain Technologies.
» U.S. Metals and Mining “Top Gun”,
by Brendan Wood International.
» Fund Manager of the Year,
by Mining Journal.
Frank Holmes is chief executive officer and chief investment officer of U.S. Global Investors Inc., a registered investment adviser managing approximately $4.8 billion in 8 no-load mutual funds and 2 ETFs. A Toronto native, he bought a controlling interest in U.S. Global Investors in 1989, after an accomplished career in Canada’s capital markets. For further information, please visit: www.usfunds.com