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US Global Investors' Holmes on Global Flight to Gold (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Pellett. Stocks for Laura resuming a drop that
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  Speaker 1: down seven a drop of four tenths of one percent
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  Speaker 1: up less than point one percent, now up seventy cents
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  Speaker 1: twelve ninety nine ten. The ounce and crude oil of
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  Speaker 1: the year of thematic e t f s. That's the
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  Speaker 1: word from Bloomberg Intelligence analyst Eric bel Tunis. Some examples,
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  Speaker 1: a new e t F that focuses on millennials, one
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  Speaker 1: IF Thematic ETF the gender diversity e t F which
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  Speaker 1: invest in company companies led by women. The tickers she
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  Speaker 1: took in the most money. So I about out of
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  Speaker 1: every twenty launch, there's one hit, and that's sort of
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  Speaker 1: what we're seeing. So I think it's like throwing spaghetti
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  Speaker 1: gonna hit with a customer Valtuna sounds a cautionary note
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  Speaker 1: That's your Bloomberg ETF report. I'm Katherine Cowdery Jews listening
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  Speaker 1: to taking Stock with Boombox and Kathleen Hayes on Bloomberg Radio.
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  Speaker 1: The gold rally glittering a little less brightly the last
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  Speaker 1: couple of days, as some of the recent polls in
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  Speaker 1: the UK show that the bregsit vote, the vote to
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  Speaker 1: leave the European Union, has fallen behind the vote to
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  Speaker 1: remain the remain vote that will be learning about June
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  Speaker 1: next week. Well, but we had to pull this week
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  Speaker 1: that showed that traders who were pulled by Bloomberg say
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  Speaker 1: that Gold's rally could continue and it could hit one thousand,
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  Speaker 1: three and fifty dollars in price if that Leave vote wins.
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  Speaker 1: Let's ask a man who knows so much about this
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  Speaker 1: what he sees in the gold market and the market
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  Speaker 1: more broadly, as we wait for this historic vote. Frank
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  Speaker 1: Holmes joins us now he's CEO and Chief Investment Officer
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  Speaker 1: of US Global Investors down in San Antonio, Texas. Frank,
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  Speaker 1: welcome back to the show. It's great to be back
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  Speaker 1: with all. So gold Boy this so there's this seems
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  Speaker 1: like every asset class, certainly bond, certainly gold has gotten
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  Speaker 1: a boost from the chance that the Brexit vote could win.
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  Speaker 1: How important is this to gold Well. I think it's
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  Speaker 1: a key component for short term for instability in the
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  Speaker 1: global economies. And it's also a reflection of more countries
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  Speaker 1: want to become isolationists. Not just the conversations happening in
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  Speaker 1: debate in America, it's also happening in other countries. And
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  Speaker 1: within the EU you had Poland to a surprise reversal. Uh,
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  Speaker 1: they were supposed to take seventy five d Syrians and
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  Speaker 1: their new leader that was ushered in so he was
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  Speaker 1: going to take nothing, and they felt that it was
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  Speaker 1: just being jammed down their throats by the EU by
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  Speaker 1: elected officials. And then for other reasons the bridge field
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  Speaker 1: for different things. So I do think immigration, Um, the
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  Speaker 1: British believed that they had a process to bring in
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  Speaker 1: thirty thousand people a year for immigrants, and they're bringing
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  Speaker 1: in a hundred and seventy thousand and there just don't
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  Speaker 1: have the infrastructure for free healthcare and other in free
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  Speaker 1: education for this this absorption. So I think all these
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  Speaker 1: things really do create a global They're not just said
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  Speaker 1: one country, it's a it's a global phenomena taking place.
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  Speaker 1: But I think the biggest thing is we look back
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  Speaker 1: GDP around the world is sloppy, lower and looking forward
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  Speaker 1: with p m I prisoning Manufacturer's Index, which has a
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  Speaker 1: very high court relation to demand for commodities. Global p
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  Speaker 1: m I is one month is below three months, so
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  Speaker 1: that is not comfortable for global econom activity. So we're
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  Speaker 1: seeing rates fall all around the world. And this week
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  Speaker 1: Germany went to tenure, government bond went to zero frank coins.
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  Speaker 1: I've been taken a look at some of work that
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  Speaker 1: various investment banks have been doing about gold. HSBC says
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  Speaker 1: the longer the Federal Reserve is seen as delaying a
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  Speaker 1: rate hike, the better it is for gold. Was also
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  Speaker 1: looking at the performance of one of the companies I
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  Speaker 1: know you track, Franco Nevada. This is a royalty, a
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  Speaker 1: gold royalty, a company. The shares are up more than
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  Speaker 1: fifty four percent year to date. And if you take
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  Speaker 1: a look at just the price of gold, we're talking
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  Speaker 1: about increase in the price so far this year. Do
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  Speaker 1: you believe that gold should be added to if you
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  Speaker 1: already own it, and if you don't already own it,
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  Speaker 1: should just start buying it now. It's a great question, Tim,
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  Speaker 1: and and I've always been an advocate of five percent
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  Speaker 1: into gold billion coins or four carrot gold jewelry, and
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  Speaker 1: another five percent into gold stocks high quality, and you
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  Speaker 1: rebalance every quarter. So I think that coming into July
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  Speaker 1: that we have not established a position, you should start
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  Speaker 1: establishing a position and then make sure that you're rebalancing.
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  Speaker 1: I'm not a world coming to an end, but it
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  Speaker 1: does help your portfolio when you get these incredible sprints
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  Speaker 1: this year, like our gold fund him is up a
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  Speaker 1: hundred percent. Well, we wish we were in your fund.
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  Speaker 1: Frank Holmes, Let's look at crude oil because it's up
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  Speaker 1: the most in two months. Weeker dollar. Janet Yellen helped
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  Speaker 1: weaken the dollars some more. FED likes it right in
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  Speaker 1: terms of the impact on the economy, Uh, manufacturers, auto
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  Speaker 1: manufacturers probably like a two people. Anybody who exports oil.
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  Speaker 1: Where is it now? Where is it's heading, Frank, And
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  Speaker 1: what about it from an investment angle, Well, I think
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  Speaker 1: um over the the correlation to global p M is
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  Speaker 1: very high, and we came off with there's a there's
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  Speaker 1: a uh, well, suggest that oil is going to go
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  Speaker 1: sideways here um in the next little while. Except for
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  Speaker 1: what's taking place sort of supply side restrictions and what
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  Speaker 1: took place in the Fort McMurray and that disaster in Canada,
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  Speaker 1: we've not seen the drop off in the apply. Remember
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  Speaker 1: this oil goes at three miles an hour and has
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  Speaker 1: to go down two thousand miles too, and so they
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  Speaker 1: it takes several weeks before all of a sudden that
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  Speaker 1: supply coming from Canada bove eight hundred thousand barrels a
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  Speaker 1: day starts hitting the system. And there's concerned of Nigeria
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  Speaker 1: on supply restrictions and issues. So anything is temperamental and
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  Speaker 1: supply side can quickly hold oil prices between forty and
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  Speaker 1: sixty dollars a barrel, Frank. Just to continue a little
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  Speaker 1: bit more on the precious metal on goal because just
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  Speaker 1: looking at the price today or of about three tents
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  Speaker 1: of a percent on the COMEX thirteen hundred dollars an
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  Speaker 1: ounce without talking about specific price levels. Do you want
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  Speaker 1: mining stocks, you want royalty companies, or do you want
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  Speaker 1: as you mentioned earlier, bullion coins and jewelry or a
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  Speaker 1: little of everything. I think it's five and five and
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  Speaker 1: you could have a little of everything. The salty companies
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  Speaker 1: are just a safer way to play gold stocks. They
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  Speaker 1: have high operating margins, they have a high operating cashul
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  Speaker 1: enterprise value. If you take the basket of which I've
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  Speaker 1: mentioned many times on your program is Franko Nevada, Royal
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  Speaker 1: gold and silver Wheaton, and they also have a different race,
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  Speaker 1: but they're the three amigos that dominate the space around
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  Speaker 1: the world. So when companies like Glencore couldn't raise money
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  Speaker 1: six months ago, Franko Nevada could quickly raise a billion
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  Speaker 1: dollars and then by the the stream from Glencore and
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  Speaker 1: then Glencore stock starts to balance, it improves in stock doubles.
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  Speaker 1: So I think that they're important companies. But what's also important,
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  Speaker 1: PIM is that when you have the Australian dollar falling
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  Speaker 1: ruts the US and Canada and South Africa, the place
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  Speaker 1: of goal going up, so they're paying the local labor
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  Speaker 1: in Canadian or Australia or South African ran but they're
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  Speaker 1: getting higher margins on their gold production. So many of
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  Speaker 1: these stocks in these countries have more than double and
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  Speaker 1: some of them in all destroy up five in the
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  Speaker 1: past year. I want to ask you about the airlines
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  Speaker 1: because there's been a lot of developments. You know, lore
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  Speaker 1: all prices and higher all prices raising fears, are not
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  Speaker 1: raising fears. And of course you have your jet CTF,
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  Speaker 1: so you follow the airlines, among other things, very closely.
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  Speaker 1: How do they look to you? You know, the airline
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  Speaker 1: industry is the least expensive industry. When you look at
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  Speaker 1: cash flow, growth and castle returns on investment capitol, you
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  Speaker 1: look at payouts and dividends. You have a very unusual
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  Speaker 1: industry now with new leadership that is not underpricing. They
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  Speaker 1: just don't have the ability to underprice like they did before.
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  Speaker 1: So with the surplus cash flow, they're increasing their dividends
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  Speaker 1: that are clipped rate over nine a year, and they're
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  Speaker 1: buying back billions and billions of dollars of stock while
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  Speaker 1: they're upgrading their airlines. Boeing is has has over a
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  Speaker 1: tenure backlog of delivering those planes so they just can't
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  Speaker 1: quickly spend the money getting new judts tomorrow. But I
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  Speaker 1: think the industry is v very inexpenses, a classic GARB,
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  Speaker 1: but it trades off of two things. What is the
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  Speaker 1: global the sort of domestic economy and if the stock
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  Speaker 1: market is up, these are stronger if especially if we
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  Speaker 1: have GDP numbers. But then the headwind is always rising oil.
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  Speaker 1: And for the past three months we've seen oil prices rise,
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  Speaker 1: and this has always perceived as a big negative to
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  Speaker 1: their cash flow. Frank, you know, one of the things
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  Speaker 1: I always want to check in with you about is
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  Speaker 1: what are you hearing from the client base? What questions
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  Speaker 1: are you being asked? Is it about how can I
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  Speaker 1: get income in a very low interest great world? There's
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  Speaker 1: no doubt income is very important. This is the first rally.
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  Speaker 1: Like I mention earlier, goal fund is done exceptionally well.
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  Speaker 1: And uh, but we've not had these inflows, tim like
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  Speaker 1: you've had in previous cycles. Uh. So we've seen their
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  Speaker 1: money going into our short term tax free uh. And
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  Speaker 1: so that's where we see the strongest closed. We are
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  Speaker 1: getting flows into the goal funds um but nothing like
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  Speaker 1: the previous cycles where we would see five million, ten
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  Speaker 1: million a day. Thanks very much, Frank Holmes, Chief executive,
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  Speaker 1: Chief Investment Officer US Global Investors. This is Bloomberg Radio