Gold, silver, pgms, mining and geopolitical comment and news
Gold vs Bitcoin: Are they competitors?
Mike Gleason: It is my privilege now to welcome te Rechttoe Holmes, CEO and Chief Investment Officer at US Global Investors. Mr. Holmes has received various honors overheen the years, including being named America’s Best Fund Manager for 2016 by the Mining Journal. He is also the co-author of the book The Goldwatcher: Demystifying Gold Investing and is a regular guest on CNBC, Bloomberg, Fox Business spil well spil right here on the Money Metals podcast. Rechttoe, welcome back and thanks for joining us again. How are you today?
Rechttoe Holmes: Excellent. Thank you, my friend. Thank you.
Mike Gleason: Well, to commence out here, Klinkklaar, I know you recently attended and spoke at the Denver Gold Voorstelling and I always like to talk to insiders like yourself following those sorts of events because you can always glean some good insights on the mood of the industry and how things are indeed going te the precious metals community. Now the mining industry has taken a pretty good hammering overheen the last few years and it resumes to fight a bit even spil wij seem to be te a fresh bull cycle that began te late 2015. You’ve got your fresh gold fund now, GOAU, so you’ve got lots on insights into the mining industry and know lots of gold bugs. So, what did you glean from the conference Open? What wasgoed the mood te general? Give us some highlights there if you would.
Rechttoe Holmes: Well I think my presentation wasgoed well received when I explained how the quant world and gegevens mining, and thesis other what they call alternative investment research companies, are providing fresh insight the way investing is taking place. Understanding the paradigm shift on that gegevens collection and that analysts love their old reports on mid asset value, are irrelevant. They’re not relevant to picking stocks today. And you have to go with the coerces of physics either spil electromagnetic rebounding to the mean is a cheap stock and math says it will rebound or has strong momentum. And you can take a universe of 88 gold stocks and take it down to 28 and far outperform the GDX or GDXJ.
Using gegevens that wasgoed foreign to a loterijlot of thesis analysts and recognizing … the other thing I think worth commenting on wasgoed gold and this entire thing on Bitcoin, is it a competition for bullion? It is not. Very first of all, without electro-stimulation Bitcoin is not worth any money. It needs electro-stimulation. Gold is always gold. It conducts electro-therapy and it will always have its materiality for currency ter addition to being jewelry. But I think that’s indeed significant is to recognize that it’s so much lighter, this idea of crowdfunding, to go and open up an exchange and trade 24/7 all thesis different currencies all around the world than it is to open a brokerage account. And I think that this excessive regulations is basically witnessing people migrate overheen to weerhaak investing, crowdfunding such spil into cryptocurrencies, et cetera. And I think that’s the thicker danger is to overall investing ter trading te the capital markets. So they’re the comments that I made and that seem to have come back with many written messages to mij regarding the quants and how they’re switching the landscape.
But I think the other part that’s significant for your listeners is that there were 1,100 people there. Now they don’t permit investment bankers te. Research analysts, traders, CEOs, gold analysts from the buy and sell side, they’re permitted to participate and there were 1,100. The week before there wasgoed a big event for the juniors (junior miners) but this event is the premiere event of the world. And I wasgoed amazed with it. The conversations looking for companies that are going to be taken overheen. What’s the probability. Because the seniors are desperate for future production and where is that growth going to come from because they’re just not finding the gold spil quick spil they’re mining. So, the Newmonts of the world have to go and strike deals like they did with Continental ter Columbia to get a foothold into high grade big geographic footprints. So I thought that wasgoed interesting. I think that te the next 12 months there’s going to be lots of M&,A work. And the other part wasgoed the royalty companies seem to get a fresh sort of respect for how their placed te the capital markets ter that gold space.
Mike Gleason: Yeah certainly. Sounds like there is a wave of optimism there and some good things ahead. Now I desired to get back to some of the cryptocurrency conversation here. Your hard, Klinkklaar, US Global Investors, recently made an investment te HIVE Blockchain Technologies and you have bot appointed chairman of the houtvezelplaat there. Given you are strenuously involved te the cryptocurrency space now, wij’d like to get your take on a topic of growing rente ter the metals community. You alluded to this a uur ago but cryptocurrencies, Bitcoin ter particular, have bot seen by many spil another form of fair money. You’ve obviously maybe slok a little bit of a slot ter what it is that is needed ter order to proceed the cryptocurrency world, that being tens unit. But since you’re a fan at least ter part of both metals and blockchains. What are your thoughts on how metals might gezond ter with this emerging technology, Open?
Open Holmes: Well let’s just concentrate on this emerging technology. Wij go back to the internet and it wasgoed actually very boring when it very first come out because it wasgoed very slow and it used to be a joke that it wasgoed just porn and dark things. And now it’s rapid porn. No, I’m kidding. But the real catalysts for the internet exploding te usage were emails, AOL. And long before Yahoo came out to give you free email. And then people spotted the incredible capacity for this channel of distribution of information. Well I think that the Bitcoin and Ethereum are doing that for blockchain technology and that there’s a large scramble to be able to apply this so that you’ll be able to trade stocks 24/7.
And when I wasgoed doing my research and I went to the largest cryptocurrency event, that used to be where the gold vertoning used to be held ter Fresh York at the Marriott. I wasgoed just shocked to see how many youthfull people were there. Many more than everzwijn when gold wasgoed peaking. And two is that they weren’t drinking scotch and whiskey at the buffet and mannetjesvarken, they were drinking Pepsi and coffee. That indeed threw mij off to just observe those youthful people and how they’re looking at it. And then to find out that the keynote speaker wasgoed a CEO of Fidelity. Fidelity is a massive multi-trillion dollar asset management company and they have all their employees on Bitcoin. They have a wallet and you can buy goods te the store. And watching that she’s the keynote and that the Fresh York Stock Exchange when it wasgoed launching GOAU they were commenting that they had waterput money into Coinbase along with USAA ter San Antonio.
So, at Coinbase you can open an account so lightly and they will now let your Ten,000 or 50,000 or 100,000 of coins vertoning up spil an asset overheen all te your portfolio. USAA and all that should do that at Fidelity. So I said well it’s something truly that’s not mainstream and then te the summer it came out ter the Wall Street Journal that Fidelity is doing it. But indeed it didn’t seem to captivate a loterijlot of people’s rente. And I think that the big part with the Fresh York Stock Exchange is just their worry of being Uberized the way taxi cabs were with having stock trading 24/7 and a lotsbestemming cheaper.
So, I think that that’s the big trend and along I wasgoed attempting to launch a cryptocurrency, ETF, or a product with that and I just kept bringing up cul-de-sacs. Had to back that car out, back that truck out. It didn’t matter if it wasgoed the U.S., the SEC, or Canada with the OSC. They’re just so consumed that AML (Tegenstrijdig Money Laundering) supersedes, even however you can track Bitcoin, supersedes anything else. So that’s why you’ve not seen anything come out directly where you can trade Bitcoin into an ETF.
So I’ve bot working on this and then all of the unexpected I hear from my friend Open Giustra telling, “Look, wij have this overeenkomst. Do you know much about this space?” And I said “Oh, yes. I’ve bot working on it. And I just keep running into cul-de-sacs.” And he said, “Well, why don’t you explore it” and explored it and I said, “You know what, I’ll be come your third largest shareholder, and I will go on the houtvezelplaat,” because I think that HIVE is so special and unique because it’s the mining business.
And the company behind HIVE is Genesis Mining and Genesis Mining is the largest cryptocurrency miner ter the word. They have a million people give them 500 bucks a year and one of the things I learned wasgoed that if you want to do mining of cryptocurrency you need to have cheap energy like two cents a kilowatt hour. So you find that a loterijlot of thesis big dealer centers are te Iceland where it’s cool and you have cheap electro-therapy. Google is there. Facebook is there and so is Genesis. And you need to have pc graphic cards because the processing power to validate a transaction. So, you found that NVIDIA stock has taken off because the cryptocurrency companies like Genesis have bot massive buyers of their laptop graphics cards.
And so, with that, I said, “You mean, wij’re going to be investing ter a company that’s mining and validating transactions all overheen the world, and wij create fresh coins, fresh coins, mint coins, cherry coins” … however you want to characterize them. Wij are not trafficking on the silk road. Wij are not buying and selling a coin that could have bot painted et cetera. No. Wij’re the creator because wij validate transactions and you get paid every time you validate a blockchain transaction. So, I became enormously excited about this chance and so far wij’ve made for our shareholders more than 500% on their money.
Mike Gleason: That’s fantastic. Now I’d like to get your take on the U.S. dollar. The dollar had a pitiful voorstelling through the very first eight months of the year and bottomed ter early September at 91.Five. The greenback then bounced and has liked a very good rally since then. What is driving this rally ter your view and are you expecting the dollar to keep moving higher te the months ahead, Open?
Klinkklaar Holmes: Well, historically it does get a bit of a rally going into the year end. That’s one. Two is the 5-year government unie. The 5-year government unie is positive now, the yield. So, the CPI number is 1.9 and you just take whatever the government is attempting to entice you to buy their 5-year government unie, subtract the CPI number… it recalibrates every month and it gives you a good idea for where fund falls are going for real rates come back. And whenever the five year government unie and the two year government unie are negative, gold is positive. And so, wij went from a 1.Four to 1.Five 5-year government unie to a 1.93. Now it’s just slightly positive but that wasgoed enough to sort of have the dollar rally and gold come off ter the past month.
But I think that unless you truly get switch, you get fiscal switch, attempting to get the tax code streamlined and attempting to get other parts of the legislation assets te its Beltway to streamline regulations. Wij need to have the TSA preferred, how you can fly much more quickly now, rather than those two hour waits to fly and to go and catch your flight. You know most people te San Antonio were driving to Houston rather than going to wait two hours for an hour flight. And so, you’re watching now this TSA preferred. That’s just streamlining processes and this has to be done for the movement of money, for opening a trading accounts, for opening up investment accounts, et cetera. If wij don’t get those things, wij’re going to have to have negative real rente rates to keep the economy going. Or you’re going to have to a very feeble dollar to drive exports.
And I think that Trump has bot a master disrupter. He’s so disruptive to the Beltway Party, which is the regulatory staatsbestel that’s bot their professional regulatory. I’ve listened to other people like Bernanke spoke about the difficulty for Jimmy Carter and Trump to take on the Beltway Party. But he’s different and so he’s attempting to shove for the streamline of regulations. If he can, rates can trade higher and I think that the dollar will just trade with the real rente rates relative to the surplus of the world.
But I remain very positive on gold. It’s amazing to see how well gold has done this year. The gold stocks have had a superb run until the GDXJ blew up. Basically, they captured 95% of all fund flows. Therefore, they had to be concentrated possessing more than 20 companies 20% means they had to do a force takeover. They had to back out of that one and they blew out three billion dollars. They brought te five billion dollars overheen 12 months and then they did an uitgang ter only a matter of weeks of three billion dollars. And that indeed bruised the bid side and bruised people. It’s like getting kasstuk by Mike Tyson. You just don’t heal quickly when he hits you and it’s the same thing with the gold stocks. But I think there’s some just fabulous gold stocks out there that are ripe to be taken overheen, that have very strong positive metselspecie flow. The weaker dollar ter the U.S. and the higher gold prices, there’s very strong margins for companies like Klondex.
Mike Gleason: Yeah, certainly can be interesting spil wij go towards the latter part of the year here to see what might be sustained ter this correction te gold or if it can rebound and get back to where it wasgoed maybe a month ago or so. Wij did have a good very first half of the year te the metals but the markets obviously have succesnummer some of those headwinds here recently, a rising dollar and so forward that you alluded to. If you would, give us your bull case for metals te near term and then also if you would maybe a bear case spil well and then kleintje of expand more on which side you’re betting on, spil wij start to wrap up here.
Rechttoe Holmes: Well, there’s the two drivers for gold: love trade and fear trade. And the fear trade predominates the psychic of Americans and the same thing with Europeans ter that’s predominantly negative real rente rates. So whenever the government has to monetize most of their debt, and basically negative real rente rates are losing money and buying their government bonds, gold does well. I don’t think that they can raise rates significantly without a massive streamlining of regulations and the government is doing everything to attempt to zekering Trump from doing that. So, I think wij’re going to end up still living with negative rente rates.
Now, the other positive part, for the U.S., is that the dollar is down but the exports are up. So wij have our strong industrial base. And it’s demonstrating up ter PMI, that’s Purchasing Manufacturer’s Index, which is a forward looking index. It’s not like GDP, which is looking out the rear view mirror. This is like looking with headlights looking down six months. And the one month is above the three month, and that’s truly positive for global growth. So I remain positive and constructive towards it. What could derail it? North Korea could derail it. China’s policies could derail it. And I think that if rates were to surge dramatically te the U.S., that could derail it.
But I don’t think that’s going to toebijten. Wij’re ter a very constructive mode and it’s a fine chance for stock picking. I just spoke at a conference ter Vancouver yesterday, and I commented on … By the way, I commented on HIVE. I wasgoed asked and I said, “You know, if you’re a value investor, HIVE is enormously overvalued.” But if you are a very first mover advantage ter the very first public company where funds can go by and get exposure to crypto-mining. It is not. It’s like Tesla, it’s like Amazon. They will always trade at lofty valuations. And so, it’s utterly attractive that way when you look at it spil being very first mover advantage.
Mike Gleason: Well that’s good stuff spil usual. Thanks spil always for joining us. It’s a real honor to hear your thoughts and wij appreciate your time spil always. Now before wij let you go, please tell our listeners a little bit more about your stiff and your services and then also mention the Klinkklaar Talk Blog so people can learn more about that if they’re not already checking it out.
Rechttoe Holmes: Well, wij are USfunds.com, makes it so effortless, just go to USfunds.com, sign up for investor bedachtzaam. It’s right ter the middle of the pagina. And wij write every week and wij do a spel filmrolletje analysis, three strengths or weaknesses for last week and opportunities and threats that can come out next week. Sort of forward looking like spel filmrolletje and looking back.
And the Rechttoe Talk is my global travels and I attempt to be insightful and learn about how wij’ve applied quant math. What’s called quantamentals to stock picking. And especially wij launched our GOGO Canadian gold ETF and wij’ve launched one here ter the U.S., which wij’re truly proud of because the ten year index based on those brainy factors, both performs of GDXJ say 94% of the time are rolling 12 month periods. So wij think that GOAU, wij’ll write about it, wij’ll tell you about the switches. And wij also have unique products like JETS which is also an ETF listed on the Fresh York Stock Exchange.
Mike Gleason: Yeah, it’s superb stuff. Certainly the Go Gold fund is looking very good from what I’ve bot reading about. Obviously performing just spil you were hoping it would and continued success there. Wij always appreciate it and good luck with the other endeavors that you have going on and keep up the good work on those market commentaries and wij’ll certainly look forward to our next conversation. Take care, Klinkklaar.
Klinkklaar Holmes: Take care, my friend.
Mike Gleason: Well that will do it for this week. Thanks again to Open Holmes, CEO of US Global Investors and manager of the recently launched GOAU Gold Fund. For more information, the webpagina is USfunds.com. Be sure to check out the previously mentioned Open Talk blog while you’re there for some of the best market commentary you will find anywhere on gold and other related topics. Again, you can find all that at USfunds.com, and you can also go to GOAUETF.com for more information on that fresh gold fund.
And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has bot Mike Gleason with Money Metals Exchange. Thanks for listening, and have a fine weekend, everybody.
Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with overheen 50,000 customers. Gleason is a hard money advocate and a strong voorstander of individual liberty, limited government and the Austrian Schoolgebouw of Economics. A graduate of the University of Florida, Gleason has extensive practice te management, sales and logistics spil well spil precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by ems of thousands each week.