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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Bitcoin Is Just the Latest in the Trend Toward Decentralization (INFOGRAPHIC)
January 31, 2018

Something Interesting is Happening

It’s been called a number of things: The sharing economy, or “shareconomy.” Peer-to-peer economy. Collaborative consumption. What all of these terms have in common is the idea of decentralization—and blockchain applications, including bitcoin and other cryptocurrencies, are just the latest in a trend toward this new economic paradigm.

If it’s unclear what decentralization means, consider the following visual. You might have seen one like it before. On the left is a representation of a centralized, top-down system. Think of a traditional corporation, one that has only one CEO and one head office.

Are we headed for a new economic paradigm?

Now compare that to the next two visuals depicting decentralized and distributed systems. Instead of being top-down, their infrastructures are more collaborative, helping to prevent systemic failure, collusion and more.

This is the “sharing economy” business model that’s growing in prominence thanks to the internet and practiced by companies such as Facebook, Airbnb, Uber and more. Although these firms have one CEO and headquarters like a more traditional company, their assets are decentralized and widely distributed: Facebook’s content is collaborative among 2 billion users worldwide. Airbnb and Uber’s hotels and cabs are privately owned. Jack Ma’s Alibaba has no inventory of its own, relying instead on a decentralized network of retailers and manufacturers.

Blockchain, and bitcoin specifically, is the logical conclusion to this trend. Bitcoin is completely open-source and peer-to-peer. No one owns it. Unlike fiat currencies, it’s not controlled or regulated by a central authority. This is possible only through the power of blockchain, the decentralized, unmodifiable electronic ledger that records all activity across the entire system.

We’re in the very early stages of this new paradigm, but already much is expected. Mastercard believes the sharing economy will inevitably graduate beyond social media and accommodations, spreading “into new sectors, including insurance, utilities, health and social care.” And UBS estimates that by 2027, blockchain could add between $300 and $400 billion of annual economic value to the global economy.

Indeed, something interesting is happening!

Curious to learn more? Watch my interview with SmallCapPower, where I explain the reasons for my decision to invest in HIVE Blockchain Technologies!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly. This interview should not be considered a solicitation or offering of any investment product.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 12/31/2017.

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What Do Quincy Jones, Serena Williams and Blockchain Have in Common?
January 29, 2018

Frank Holmes Robert Friedland

Two big themes last week at Inside ETFs, the Comic-Con of exchange-traded funds attended by more than 2,300 advisors and investors, were innovation and disruption. Like all other industries, the investing world has seen its fair share of disruption in the past quarter-century—think indexing, passive investing, the rise of robo-allocation and now blockchain and cryptocurrencies. This year marks the 25th anniversary of the first ever ETF, and today total ETF assets top $3 trillion. That’s a far cry from the estimated $40 trillion sitting in mutual funds worldwide, but exchange-traded funds are rapidly catching up as investors seek cheaper, more innovative and tax-efficient instruments.

Consider robo-advisors, which emerged only 10 years ago. Who would have thought in the mid-2000s that so many investors would be comfortable enough with the idea of a machine managing their money? And yet here we are. By 2020, Citi analysts predict, assets controlled by robo-advisors could reach close to $450 billion globally.

Robo advisor  platforms forecast to continue growing around the world
click to enlarge

Disruption was definitely top of mind during many of the presentations and interviews at Inside ETFs, including that of producer and composer Quincy Jones, who was at the conference to promote a new stock index that tracks music and entertainment companies. “Q” is the very definition of a legend, having been at the center of some of the most influential musicians, actors, and artists over the course of his long career. With a record 79 Grammy Award nominations to his name, he’s made an indelible impression on the music, television, and film we all consume and enjoy, whether we’re aware of it or not.

When CNBC’s Bob Pisani asked Jones if he was ready for the day when robots write and perform music, the 84-year-old Jones said, “You can’t stop the technology,” adding that he was among the earliest experimenters of synthesizers. (Anyone remember the synthy theme song to the old 1960s-1970s detective show, Ironside? That was composed by Quincy Jones.)

“You got to always stay curious. You got to be willing to take a chance,” he said.

Tennis star Serena Williams being interviewed by Barry Ritholtz at Inside ETFs 2018

A similar forward-thinking attitude was expressed by Serena Williams, who was also in attendance. The tennis virtuoso and four-time Olympic gold medal winner, who bagged her 23rd Grand Slam last year while pregnant, is a savvy businesswoman in her own right, sitting on the board of online survey firm SurveyMonkey and Oath, a subsidiary of Verizon that controls a number of media outlets such as HuffPost, Yahoo and Tumblr.

When asked why she was drawn to tech firms in particular—her husband Alexis Ohanian co-founded Reddit—Williams said, “This is a new time, and I don’t want to be left behind.”

I couldn’t agree more with Jones and Williams.

Embracing Disruption with HIVE Blockchain Technologies

Curiosity and a willingness to embrace change and innovation are what led me to invest in HIVE Blockchain Technologies and agree to become its chairman last year. As many of you know, HIVE is the first publicly-traded company engaged in the mining of virgin digital currencies, including bitcoin, Ethereum, Litecoin, Dash, Monero and many more.

I’m thrilled to be at the forefront of this new technology that’s already disrupting our industry and reshaping how transactions are made and companies raise funds across the globe. The year 2017 was the real catalyst, bringing cryptocurrencies into mainstream conversations as bitcoin hit an all-time high of nearly $20,000 apiece in mid-December.

Total crypto market cap briefly cracked $830 billion earlier this month yet has since receded to around $540 billion, with strong pressure being exerted by the global equities bull market. A record $33.2 billion flowed into stocks in the week ended January 24, according to investments data provider EPFR Global. U.S. stocks alone attracted $7 billion, while emerging markets saw inflows reach $8.1 billion, the second-highest amount recorded in a week.

Competition among digital currencies is also heating up. Although bitcoin remains the top dog, it faces tough competition from the likes of Ethereum, Litecoin, Ripple and the other nearly-1,500 coins on the market today. It now accounts for about 40 percent of the entire market, down from almost 100 percent just a few years ago.

Bitcoin is facing gretaer competition from other cryptocurrencies
click to enlarge

What’s important to remember is that digital currencies are, at the moment, highly volatile and speculative. Unlike gold and other hard assets, they haven’t been tested in all economic backdrops. Bitcoin was created only in 2009, after the worst months of the financial crisis, and it’s existed mainly in an environment of rising equity prices and gradually improving economic conditions. How investors might use it in the next recession or major market correction is unknown at this point.

Coinbase Generated $1 Billion in Sales Last Year

Having said that, the crypto space is rapidly maturing in a number of different ways. Every day, more and more businesses accept the currency as a form of payment. Investors can now buy bitcoin futures. Fidelity and USAA both allow account holders to monitor their cryptocurrency holdings. Blockchain ETFs are appearing on the market—though a couple of proposed bitcoin ETFs have hit roadblocks getting approval from the Securities and Exchange Commission (SEC). And I overheard at the Canaccord Genuity Blockchain Conference in Toronto last week that as many as 10,000 millionaires have been created from Ethereum.

Last year, the cryptocurrency trading platform Coinbase booked $1 billion in revenue, almost double what company executives had expected for 2017. Founded only six years ago and boasting more than 13.5 million accounts, Coinbase has recently closed the door on any additional venture capital, leaving investors to hope for an initial public offering (IPO) sometime in the near future.

Coinbase is about to face some serious competition, though, as smartphone-only trading app Robinhood will begin allowing customers to trade bitcoin and Ethereum next month—all commission-free.

World Gold Council: Cryptocurrencies Are No Substitute for Gold

Several attendees at Inside ETFs and the blockchain conference raised concerns that cryptocurrencies are on a path to replace gold as a safe haven investment. I’ve mentioned multiple times before that I do not see this to be the case, for a number of reasons. Unlike bitcoin, gold has thousands of years’ worth of history to justify its role as a currency and store of value. Central banks own gold, as do institutional and retail investors. It’s widely used not just as money but also as jewelry and in dentistry and electronics. The metal, in fact, can be found in the very computer hardware used to mine bitcoin.

Now, in a new report, the World Gold Council (WGC) takes the position that, while cryptocurrencies and blockchain technology are attractive, they simply don’t and can’t usurp gold’s place in investors’ portfolios.

What’s more, “there isn’t any quantifiable evidence that gold holdings are directly suffering from competition from cryptocurrencies,” the WGC writes.

Tennis star Serena Williams being interviewed by Barry Ritholtz at Inside ETFs 2018

Need proof? According to the group, bitcoin currently trades around $2 billion a day on average. That’s less than 1 percent of the $250 billion in gold bullion that’s traded every day. Remember, gold is one of the most liquid currencies in the world, with a highly developed and accepted market structure.

There are several other important differences between the two asset classes, and I highly recommend you read the full report. You can do so by clicking here.

Investors Pile into Gold-Backed ETFs Ahead of Potential Jump in Inflation

Coming back full circle to ETFs, Bloomberg reported last week that holdings in gold bullion-backed funds rose to their highest level since 2013 on a weaker U.S. dollar, rising geopolitical risk and growing expectations that inflation could finally heat up in 2018.

Holdings climbed to 2,250 metric tons earlier last week, the highest amount since May 2013, when gold prices were still in the $1,400 to $1,500-an-ounce range.

Holdings in bullion backed ETFs are at their highest since 2013
click to enlarge

The U.S. dollar has plunged in value for the past several weeks, dipping more than 1 percent last Wednesday alone—the biggest one-day pullback in 10 months—following Treasury Secretary Steven Mnuchin’s comment at the World Economic Forum in Davos, Switzerland, that a weaker buck “is good for us as it’s related to trade and opportunities.” The greenback similarly tanked back in April 2017 when President Donald Trump said the dollar is “getting too strong.” Soon after, it fell below its 200-day moving average.

US dollar has lost 12 percent since Trumps inaug
click to enlarge

Last Thursday, however, Trump walked back Mnuchin’s (and his own) comment, telling CNBC that the dollar “is going to get stronger and stronger, and ultimately I want to see a strong dollar.”

In any case, this has all been constructive for the price of gold, which Thomson Reuters GFMS now sees hitting $1,500 an ounce this year. If you remember, $1,500 was approximately my estimate after analyzing gold’s performance in the months following the December rate hikes in 2015 and 2016.

According to Thomson Reuters, the price appreciation could be driven by “concerns that the United States may pull out of NAFTA.”

Doing so, of course, would be highly inflationary—and inflation, as I point out in last week’s episode of Frank Talk Live, has historically been a tailwind for gold. The tax overhaul is already helping to boost wages at Walmart, Starbucks and elsewhere, and the U.S. recently slapped fresh tariffs on imported washing machines and solar cells. In response, South Korea opened two cases against the U.S. at the World Trade Organization (WTO).

And let’s not discount geopolitical noise. Last week, the “Doomsday Clock” was moved 30 seconds closer to midnight and now stands only two minutes away. That’s the closest to midnight the symbolic barometer has come since 1953, when both the U.S. and Russia first began testing thermonuclear weapons—among the most disruptive advancements of the past 100 years.

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly.

The U.S. Dollar Index (USDX, DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 12/31/2017.

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5 Big Questions for 2018
December 18, 2017

bitcoin accepted everywhere

Today marks the seventh day of Hanukkah, and in only seven days, many families across the world will be celebrating Christmas. Not only is it the season of giving, but it’s also time to reflect back on the past 12 months and look ahead to 2018.

Below are five questions to help guide your thinking when making investment decisions in the new year.  

1. Will stocks follow the historical presidential cycle?


U.S. presidential cycles and stocks click to enlarge

Next month marks President Donald Trump’s first year in office and the beginning of his second. How have markets responded to his pro-growth policies, including pledges to lower taxes and slash regulations?

The answer: Overwhelmingly. As of my writing this, the S&P 500 Index is up 19 percent year-to-date, far outperforming the historical returns we’ve seen in the first year of a president’s four-year term.

In the second year, returns have traditionally been lower than the first. From 1928 to 2016, such years produced average market gains of just above 4 percent, making it the weakest year.

The reason for lower returns in the first two years, according to CLSA analysts this week, could be that “an administration looks to put as much bad news and painful actions into the first two years to form a good bias for getting reelected or paving the way for the predecessor of its own party.” Recall that President Bill Clinton didn’t hesitate to hike taxes after getting elected—he signed the Omnibus Budget Reconciliation Act just eight months into his first term.

But Trump has taken a different strategy. As CLSA puts it, “all the good news is being front loaded in the first half of this presidential cycle.” Right out of the gate, Trump placed major executive and legislative agenda items on the docket, from an Obamacare repeal to deregulation to sweeping tax cuts.

Not all of these efforts have borne fruit, of course. Even last week, his tax overhaul appeared to be imperiled after serious concerns were raised by moderate Republican senators such as Marco Rubio, Bob Corker and Jeff Flake.

I remain optimistic, though, and I see no reason at the moment to think that 2018 won’t be an encore of 2017. We’re nine years into the current equities bull market, the second-longest in U.S. history, but there could still be plenty of “gas in the tank,” according to a Bank of America Merrill Lynch report this week.

So with only a month remaining to Trump’s first term, it’s important to remember the words of Warren Buffett a day before the president was sworn in. Even though Buffett backed Hillary Clinton in the election, he said that “America works and I think it’ll work fine under Donald Trump.”

2. Will S&P 500 Index companies continue to post record-level earnings per share (EPS) in 2018?


s and p 500 index could report record-level earnings per share in 2018
click to enlarge

Earnings per share (EPS) growth is one of the most reliable and closely monitored indicators of market health. It’s one of the key metrics we use to find the most growth-driven and profitable companies.

As my good friend Alex Green said in an interview back in August, “if you look back through history, you’d be hard-pressed to find a single example of a company that increased its earnings, quarter over quarter, year after year, and not see its stock tag along.”

Except for a slight dip from 2014 to 2015, when EPS for the S&P 500 Index fell from $119.70 to $117.55, earnings have been rising steadily since 2009.

As of today, EPS for 2017 stands at $133.73, a new record and up nearly 13 percent from last year.

Next year we could see them climb even higher, if estimates prove to be accurate. In a report last week, FactSet analysts predict EPS by year-end in 2018 to reach $143.17, a 7 percent increase from 2017.

In other words, the American stock market is poised to continue its record-setting bull run in 2018.

3. Can small and mid-size businesses get any more pumped than they are now?


u.s. small cap stocks head higher as optimism hit a near record high in november
click to enlarge

The short answer here is: Yes, they can—but not by much before a new all-time record is reached.

For the past 44 years, the National Federation of Independent Business (NFIB) has taken a monthly survey to measure the optimism of small-business owners, and in November, the index climbed to a skyscraping 107.5. That’s the second-highest reading ever, after the index hit 108.0 way back in July 1983 on the hopes of additional Reagan tax cuts.

If we drill down into the various index components, we find that owners are most optimistic about the next three months, with 27 percent saying it will be a “good time to expand,” up from only 11 percent one year ago. They’re ready to unleash capital, buy new equipment and increase labor.

In their monthly commentary, NFIB economists William Dunkelberg and Holly Wade wrote: “There is still much uncertainty about health care and taxes, but it appears that [small-business] owners believe that whatever Congress finally comes up with will be an improvement and so they remain positive.”

That positivity is shared by small-cap stock investors, who’ve driven up the Russell 2000 Index more than 12 percent since the beginning of the year.

4. What will drive gold prices higher?


U.S. dollar forecast to complete a seven year cycle in 2018 click to enlarge

As of Friday, gold was up more than 9 percent for the year. If it stays at its current price level, gold will log its best year since 2011, when it returned 10 percent.

The yellow metal has faced a number of significant headwinds in 2017, including surging equity markets around the world and rate hikes by the Federal Reserve. Under the circumstances, I would describe its performance as highly respectable.

Potential tailwinds in 2018 could help the yellow metal crack the $1,300 level and head higher.

That includes a weaker U.S. dollar. CLSA analysts this week noted that the dollar has traditionally risen in seven-year cycles. Between 1978 and 1985, it gained 68 percent; between 1995 and 2000, 41 percent. The current bull market so far has seen the dollar rise 35 percent, which has been a challenge for gold, commodities and U.S. exports.

That might be set to change in 2018, when we could see a completion of the seven-year cycle. As CLSA writes, “our tactics through 2018 would be to sell U.S. dollar strength in anticipation of break below 91-92 support.”

Other possible tailwinds include geopolitical risks, negative real interest rates across the globe, continually expanding global debt and overvalued equities.

On Monday, the North Atlantic Treaty Organization (NATO) raised concerns that Russia has developed a ground-launched cruise missile system that might violate a 1987 Cold War pact banning such weapons. It’s believed the missile system would be able to strike Europe on very short notice. Meanwhile, the U.S. State Department is working around the clock to dissuade North Korea from continuing its nuclear weapons program. As a store of value, gold has historically performed well in such uncertain times.

Meanwhile, two-year government bond yields in a number of European countries—the Netherlands, Germany, Austria, Belgium, France, Spain and more—are below zero. As I’ve explained many times before, negative real rates have traditionally been constructive for gold in that particular country’s currency.

Finally, there’s some concern that too much money is flowing into equities right now. According to Bloomberg, the total market cap for world equities is now just a “whisker” away from hitting $100 trillion—a monumental sum, to be sure. Should there be a correction, the investment case for gold and precious metals will become stronger than ever.

5. Can anything stop bitcoin?


Bitcoin trading thrives wherever regulators crack down most
click to enlarge

Bitcoin made some people a whole lot of money this year. One year ago today, the cryptocurrency was trading in the $770 to $780 range. On Friday, it briefly broke above $18,000. That’s a phenomenal return of 2,200 percent. The total market cap of all cryptocurrencies has already crossed above $500 billion and is well on its way to $1 trillion.

So is there anything that could stop its progress?

The most obvious answer might be regulations, but remember, bitcoin made these unexpected gains even as several countries clamped down on the digital currency. Venezuela, which will introduce its own government-sanctioned cryptocurrency, is scheduled to begin regulating bitcoin, but as the bolivar loses more and more of its value, residents have had to rely on bitcoin to survive.

It’s not surprising at all to see that bitcoin has undergone the greatest surge in peer-to-peer trading in countries that have imposed some of the most stringent regulations on cryptocurrencies. This is a currency, after all, that does not require any third-party involvement to trade. It’s able to bypass governments, central banks and borders with ease.

As I said last week, this is precisely why bitcoin is appealing to many investors. And according to Metcalfe’s law, more investors could mean higher ask prices.

Bitcoin might be very appealing right now, but it’s important to keep in mind that this has been a very volatile market. If I didn’t readily have the money to buy bitcoin, I wouldn’t go into debt and certainly wouldn’t mortgage my house to get my hands on it, as some people are reportedly doing.

 

I wish you all a Happy Hanukkah and Merry Christmas!

 

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

The U.S. Dollar Index (USDX, DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.

The NFIB Small Business Economic Trends is an index derived from 10 components, with 1986=100. The index is seasonally adjusted for variations within the year. Monthly surveys are derived from a large sample of respondents drawn from the membership files of the NFIB. The NFIB survey provides an early health check on small businesses, which are critical to the economy. Small businesses account for about half of the nation's private workforce.

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Visit the Top Blockchain and Cryptocurrency Power Hubs of the World (VIDEO)
December 13, 2017

bitcoin accepted everywhere

The revolution might not be televised, but it will most certainly be digitized.

That’s the message, at least, of my friend Jonathan Roth’s short film on blockchain technology and cryptocurrencies, titled “Cryptocurrency Revolution: On the Frontlines of the World’s Hottest Tech Opportunity.”

I was very honored to participate in the making of this film, which takes viewers on a tour of some of the world’s key power hubs in the cryptocurrency industry. That includes Iceland, home of the Enigma Ethereum Mine.

The largest such mining farm in the world, Enigma is the crown jewel of Genesis Mining, whose billionaire cofounder and CEO, Marco Streng, likes to compare blockchain to the earliest days of the internet.

“Everyone knows by now that this space has huge potential and drives innovation, but we can’t know how big it will be,” Marco says in the film.

Similarly, few people in the mid-1990s could have guessed just how dominant Google and Amazon would become in people’s day-to-day lives.

This is a sentiment shared by my good friend Frank Giustra, founder of Lionsgate Entertainment, who was instrumental in helping HIVE Blockchain Technologies become the world’s very first publically-traded blockchain and cryptocurrency mining company.

“This game will evolve. It’s not going to stay static,” Frank says. “We just have to figure out how to stay relevant and part of what will be a technology that is not going to go away.”

Be a part of the digital revolution by watching the video below!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Free cash flow (FCF) is a measure of a company's financial performance, calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 9/30/2017.

Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly.

 

 

 

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Net Asset Value
as of 10/23/2018

Global Resources Fund PSPFX $4.95 -0.08 Gold and Precious Metals Fund USERX $6.87 No Change World Precious Minerals Fund UNWPX $3.48 -0.02 China Region Fund USCOX $8.08 -0.13 Emerging Europe Fund EUROX $6.25 -0.03 All American Equity Fund GBTFX $25.04 -0.20 Holmes Macro Trends Fund MEGAX $17.84 -0.16 Near-Term Tax Free Fund NEARX $2.19 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change