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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.

The Pool of Publicly Traded Stocks Is Shrinking. Here's What Investors Can Do
August 13, 2018

Many U.S. Tech Firms Have Delayed Going Public

Elon Musk is no stranger to making controversial and outlandish comments, and his tweet last week is no exception. As you probably know by now, the perennial entrepreneur announced to his more than 22 million Twitter followers that he is “considering taking Tesla private at $420.”

Despite the Herculean challenge—such a move would be the largest leveraged buyout in history—and despite Musk’s history of being a provocateur, Wall Street seemed to take his comment seriously. Tesla stock rose close to 11 percent last Tuesday to end at $379, a few bucks shy of its all-time high of $385, set in September 2017.

There are many reasons why investors should take note. For one, Musk and Tesla are now likely to face heightened scrutiny from securities regulators.

My reason for bringing it up is that, should Musk follow through and take the electric carmaker private, the already shrinking universe of investable U.S. stocks will lose yet another name.  

This is a trend that cannot continue indefinitely.

As I wrote in May 2017, the number of publicly listed companies in the U.S. has fallen steadily since 1997. More companies have delisted, in fact, than gone public in every year of the past 20 years except one, 2013.

Put another way, the pool is getting smaller even while the population and economy are expanding.

The number of publicly listed U.S. firms has been falling steadily since 1997
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The U.S. Has 5,000 Fewer Listed Companies Than It Should

In 1976, there were about 23 listed companies per 1 million U.S. citizens. Today, it’s closer to 11 per million.

That’s according to a new National Bureau of Economic Research (NBER) report by respected financial economist René Stulz, who adds that the U.S. has roughly 5,000 fewer companies listed on exchanges than you would normally expect, given the country’s size, population, economic and financial development and respect for shareholder rights.

Are we seeing the same phenomenon in other countries, developed or otherwise?

“There are other countries that have lost listings since 1997, but few have experienced a greater percentage decrease in listings,” Stulz writes. “Further, the U.S. is in bad company in terms of the percentage decrease in listings—just ahead of Venezuela.”

Given that Venezuela’s economy is in freefall, with inflation forecast to hit 1 million percent this year, I would call it bad company indeed.

So why is this happening?

A Record $2.5 Trillion in M&A Activity

One of the main causes of fewer listings is the explosion in mergers and acquisitions (M&As). When one company acquires another, or when two companies merge, that lowers the number of traded stocks—assuming they were available to be traded to begin with. So far this year, worldwide M&A activity has been very robust, with a record $2.5 trillion in deals announced in the first six months alone. That puts 2018 on track to surpass $5 trillion, which would be the most ever recorded.

the total value of global deals of $10 billion or more has surged in 2018
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What also makes 2018 different from past years is the high number of mega-deals that exceed $10 billion. Together, these deals total $950 billion, more than in any past first-six-month period.

Among the biggest deals is AT&T’s takeover of Time Warner, valued at $85 billion. Coincidentally, that’s about $80 billion less than the deal that merged Time Warner and America Online (AOL) back in 2000, still the largest in history.

There’s nothing wrong with M&As, of course. The problem arises when there aren’t enough initial public offerings (IPOs) to replenish the pool and give investors early access to new firms.

At the most basic level, fewer stocks means fewer options. It becomes more difficult to build a diversified portfolio when you don’t have a diversity of stocks to choose from.

Consider how many companies Warren Buffett’s Berkshire Hathaway has acquired over the years. It owns recognizable brands like Duracell, Dairy Queen, GEICO, Fruit of the Loom and more, not to mention is the majority owner of a number of other companies. There’s even talk that Buffett might buy a domestic airline outright, possibly Southwest.

But at more than $311,000 a share right now, Berkshire’s A stock is out of most Main Street investors’ price range. How long until they’re priced out of participating in the entire market?

What’s more, profits are being divided among fewer winners. This is contributing to inflated valuations and market frothiness. In many ways, Apple can thank its $1 trillion market cap largely on the fact that there’s less competition now among equities—specifically tech equities. Uber, Airbnb, Pinterest, Coinbase, and many other huge tech unicorns have delayed or put off getting listed altogether.

Many U.S. Tech Firms Have Delayed Going Public

Tougher Regulations Have Contributed to Private Equity Boom

So why would a company like Uber or Airbnb choose not to seek public funding? We can point to two related causes: stricter regulations on publicly traded firms, and the boom in private equity.

The most reported among these regulations is the Sarbanes-Oxley Act. More commonly known as SOX, the law was passed and signed in 2002 in response to major accounting scandals that brought down WorldCom and Enron.

In May 2017, I named SOX one of the five costliest financial regulations of the past 20 years. Its notorious Section 404, which requires external auditors to report on the adequacy of a firm’s internal controls, disproportionately hurts smaller companies, costing them six times as much in accounting fees in relation to larger firms, according to estimates by the Securities and Exchange Commission (SEC).

Because of these added costs, many smaller companies and startups are opting not to raise funds from public capital markets—or at least to delay it.

Nasdaq private market sets new record in deal flows in the first half of 2018In the meantime, firms are finding it easier to get adequate private financing—which Main Street investors don’t have access to. According to Reuters, the global private equity industry raised $453 billion from investors in 2017, a new record. And last week, Nasdaq Private Market (NPM), which helps companies facilitate shareholder liquidity, announced it conducted a record 33 company sponsored liquidity programs in the first half of 2018. Deal volume grew 74 percent compared to the same period last year and exceeded $10 billion for the first time.

You can see now why some companies like Uber are staying private for longer. Some prefer not to have added costs associated with compliance. Others might not want to answer to a board or share financial details publicly.

These are among the things Elon Musk apparently wants to avoid by taking Tesla private. He’s become more combative with analysts and shareholders, especially short sellers, going so far as to tell listeners during a May conference call to “sell [Tesla] stock and don’t buy it” if they’re concerned about volatility.

Before SOX, the average age of a company at the time of its IPO was 3.1 years. Today, it’s more like 13.3 years, according to S&P Global Market Intelligence.

This hurts Main Street investors. Because they’re generally not able to invest in private equity, they lack access to companies when they might be expanding at their fastest pace.

Check out the chart below. In the 10-year period through 2015, private equity and venture capital averaged 11 percent or more annually. They far outperformed stocks and bonds, sometimes by more than double.

investors are locked out of number 1 asset class
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What Investors Can Do

Ideally, regulations would be streamlined to lower the costs of going public. I believe this would encourage more firms to get list earlier in their existence.

Outside of that, investors should take the long-term view and diversify in domestic and emerging market stocks, municipal bonds and gold.

As for domestic stocks, I think it’s important to focus on companies that are consistently raising their dividends on an annual basis and buying back their own stock. We’ve found that companies that are growing their revenue streams, quarter after quarter, and that show strong free cash flow generation have tended to outperform over the long run. Our funds favor these metrics.

I’ll have more to say about dividends and free cash flow, so stayed tuned!

 

 

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.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes.

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 6/30/2018.

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Wait Until You See the Price of Gold in Venezuela Right Now
August 6, 2018

Paper Money eventually returns to its intrinsic value zero

Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars. That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000 percent, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.

But that was July. Prices in Venezuela are doubling roughly every 18 days. The International Monetary Fund (IMF) now projects inflation to hit an astronomical 1 million percent by the end of this year. This puts the beleaguered Latin American country on the same slippery path as Zimbabwe a decade ago and Germany in the 1920s, when a wheelbarrow full of marks was barely enough to get you a loaf of bread.

Venezuela’s socialist president Nicolas Maduro—who only this past weekend survived an assassination attempt involving several explosive-laden drones—announced recently that the country plans to rein in hyperinflation by lopping off five zeroes from its currency. If you recall, Zimbabwe similarly tried to combat soaring prices of its own by issuing a cartoonish $100 trillion banknote—which in 2009 was still not enough to buy a bus ticket in the capital of Harare.

Without structural governmental reforms, a new bolivar is just as unlikely to steady Venezuela’s skyrocketing inflation or remedy its crumbling economy.

Gold Could Save Your Life

So where does this put gold? At some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211 million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.

Gold priced in Venezuela Bolivars
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My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime.

In extreme cases like this, gold could literally help save lives.

Such was the case following the fall of Saigon in 1975. If not for gold, many South Vietnamese families might not have managed to escape the country. A seat on one of the thousands of fleeing boats reportedly went for eight or 10 taels of gold per adult, four or five taels per child. (A tael is slightly more than an ounce.) Gold was their passport. Thanks to the precious metal, tens of thousands of Vietnamese “boat people,” as they’re now known, were able to start new lives in the U.S., Canada, Australia and other developed countries.

Venezuela’s Once Prosperous Economy Destroyed by Corruption and Mismanagement

But back to Venezuela. Amid the corruption and mismanagement, the only thing helping the country pay its bills right now is gold. Two years ago, it had the world’s 16th largest gold reserves. Today it stands at number 26 as it’s sold off more than half its holdings since 2010. While countries such as China and Russia continue to add to their holdings, Venezuela has been the world’s largest seller of gold for the past two years.

Venezuela began liquidating its gold after oil prices declined
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It’s hard to remember now, but as recently as 2001, Venezuela was the most prosperous country in all of South America. Like Zimbabwe, the OPEC nation is rich in natural resources, home to the world’s largest oil reserves and what’s believed to be the fourth largest gold mine. Oil exports account for virtually all of its export revenue.

In 2016, Venezuela was the third largest exporter of crude to the U.S. following Canada and Saudi Arabia, but with output in freefall, this is changing rapidly. For the first time ever in February, Colombia sold more crude oil to the U.S. than its eastern neighbor did. And in June, Venezuela’s state-owned oil and gas company, Petróleos de Venezuela (PDVSA), informed at least eight foreign clients that it would be unable to meet supply commitments. According to GlobalData, production is on track to fall to only 1 million barrels per day by 2019, down from 3 million a day in 2011, meaning the petrostate might soon have nothing left to deliver.

President Maduro now has the ignoble distinction of reigning over an economic recession that rivals the very worst in modern history. Last month, the IMF forecast that the country’s real gross domestic product (GDP) would fall 18 percent this year—the third straight year of double-digit declines.

Venezuelas recession among the worst in recent history
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A mass exodus of young, working-age Venezuelans, many of them college-educated, is unlikely to help. Estimates of the number of people who have fled the country in the past two years alone range from 1.7 million to as high as 4 million.

Their escape is no easy task, as numerous international airlines, citing rampant crime and a lack of electricity, have canceled all flights in and out of Caracas. The only U.S. carrier still operating in the country is American Airlines, which offers a single daily flight from the nation’s capital to Miami. Just two years ago, there were as many as 40 nonstop American flights, not to mention those of rival carriers, between the two cities—a sign of just how dramatic and swift Maduro’s mismanagement has been in crippling Venezuela’s once-robust economy.

The Diversification Benefits of Gold

The gold bears were on top last week, with the metal trading as low as $1,205 on Thursday. That’s the closest it’s come to dipping below $1,200 since February 2017. Friday’s lower-than-expected jobs report gave gold a modest boost, but it wasn’t enough to prevent a fourth straight week of price declines.

Gold delped stem the rout

click to enlarge

In times like this, it’s important to remember that, according to gold’s DNA of volatility, it’s a non-event for the metal to close up or down 1 percent at the end of each session, 2 percent for the 10-day trading period. And guess what? The S&P 500 Index has the same level of volatility.

Ten days ago, gold was trading just under $1,230 an ounce, or 0.6 percent more than today. The math is sound.

It’s also worth remembering that gold has traditionally had a low to negative correlation with other assets such as equities. This is why many investors over the years have used it as a portfolio diversifier.

Case in point: On June 26, Facebook suffered its worst single-day decline since the company went public in 2012. Its stock plunged 19 percent, erasing some $120 billion in market capitalization—the most ever in history for a single trading session.

Gold, meanwhile, held relatively steady, slipping only 0.62 percent.

Curious about learning more? Explore the two main drivers of gold, the Fear Trade and Love Trade, by clicking here!

 

 

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 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

The Bloomberg Café Con Leche Index tracks the price of a cup of coffee in the eastern portion of Venezuela’s capital city of Caracas.

Diversification does not protect an investor from market risks and does not assure a profit.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 6/30/2018: American Airlines Group Inc.

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What Does It Take to Be in the Top 1 Percent? Not As Much As You Think
August 1, 2018

what does it take to be in the top 1 percent not as much as you think

When you think of the top 1 percent of all income earners in American households, how much do you think this group rakes in? Millions? Tens of millions? What about the top 10 percent?

On the contrary, to be considered in the top 1 percent of taxpayers nationally, you’d need an annual income of $480,930. The top 10 percent of taxpayers make at least $138,031. These figures are based on 2015 income tax data, the most recent year available.

This income level varies widely by both state and city. In San Jose, California, the top 1 percent income threshold is close to $1.2 million, almost double the level for Los Angeles. As seen in the chart below, the spread is fairly wide between the top 10 most populous cities in the U.S. In San Antonio, Texas – home to U.S. Global Investors – you’d need to make $416,614 annually to be considered in the top 1 percent, slightly below the national threshold of top 1 percenters.

top 1 percent income level varies greatly by location 10 most populous US cities ranked by annual income required to be in top 1 percent
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Earning enough income to be in the top 1, 10 or even 20 percent is no small accomplishment, but chances are good that many people you know, and may not think of as wealthy, fall into the top 1, 10 or 20 percent.

Is the Top 1 Percent Paying Their Fair Share?

Contrast the above income statistics with the picture often painted in the media that the wealthiest Americans aren’t paying their fair share. According to the Tax Foundation, the top 1 percent of households collectively pay more in taxes than all of the tax-paying households in the bottom 90 percent.

Take a look at how much this has changed over the past few decades. In 1980, the bottom 90 percent of taxpayers paid about half of the taxes. The top 1 percent contributed about 20 percent.
Now, the top 1 percent pays more than the bottom 90 percent. Perhaps this is more than their fair share?

top 1 percent now pay omre than bottom 90 percent comparison of taxpayers' share from 1980 to 2015
click to enlarge

Below is the line chart from the Tax Foundation showing how the income tax share for each category has changed since 1980. For the majority of years, the share of the bottom 90 percent fell while the share of the top 1 percent rose.

income share of top earners has been rising percent of federal income paid by top 1 percent versus bottom 90 percent
click to enlarge

Individual Tax Rate Cuts Take Effect in 2018

Taxpayers in the highest bracket should see a noticeable change when filing for the 2018 tax year since the top rate fell from 39.6 percent to 37 percent. President Donald Trump’s administration passed the Tax Cuts and Jobs Act in late 2017, which included small reductions to income tax rates for most individual brackets plus changes to exemptions, deductions and more. The average top 1 percent taxpayer will get a tax break of over $50,000 in 2019, according to estimates.

The new tax bill, however, eliminates the ability of taxpayers to deduct more than $10,000 in state and local taxes from their federal tax returns. This could significantly increase the tax burden of top earners who itemize their deductions in high-income tax states such as California and New York. One possible solution for these investors could be to take advantage of municipal bonds, which are often exempt from local, state and federal taxes.

Maximize Tax-Advantaged Investment Vehicles

Although it can be discouraging to see how top earners pay the majority of income taxes, there are still tax advantages for hard-working Americans who make saving and investing a priority in their lives.

How can you help make sure less of your money is going to the government and more of it is working for you in your investments? One way is to maximize your contributions to tax-advantaged investment vehicles such as an individual retirement plan, a 401(k), individual retirement account (IRA) or simplified employee pension (SEP) for the self-employed, all of which offer tremendous tax benefits.

To make it easier to have the discipline to set money aside, try an automatic plan that invests a fixed amount at regular intervals, such as the U.S. Global Investors’ ABC Investment Plan.

Wealth Isn’t Just a Number

No matter how much you earn, wealth is determined by how much you keep. My friend, Alexander Green, chief investment strategist of the Oxford Club, is a great source of inspiration for me and for many investors with his uplifting, holistic articles that relate to both health and wealth. Alex says wealth isn’t necessarily determined by an income figure. Instead, real wealth is determined by looking at your balance sheet. Here’s his formula:

“Maximize your income (by upgrading your education or job skills). Minimize your outgo (by living beneath your means). Religiously save the difference. (Easier said than done.) And follow proven investment principles.”

What matters most is being grateful for what you have. I’m a big believer that wealth is not a number or an amount, it’s an attitude and the umbilical cord to attitude is gratitude.

Take a look at my 10 favorite wealth and prosperity affirmations in this slideshow!

 

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.

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Bitcoin Miners See a Bullish Breakout on the Horizon
July 30, 2018

overbought or oversold? let these mathematical signals be your guide

The price of bitcoin surged above $8,000 last Tuesday for the first time since May after the Group of 20 (G20) meeting in Argentina concluded with little urgency to take regulatory action on cryptocurrencies. In a communiqué, G20 finance ministers and central bank governors expressed confidence that the technology underlying alt-coins “can deliver significant benefits to the financial system and the broader economy.”

Many of these benefits were discussed in my interview with Marco Streng, cofounder of Genesis Mining, the world’s largest cloud bitcoin mining company. Genesis had a huge win last week as securities regulators in South Carolina dismissed their cease-and-desist orders from March. The move, according to CoinDesk, marks the first time the state dropped such orders against a blockchain startup.

The U.S. global sentiment indicator reaches 54 percent mid-week
click to enlarge

Further support came courtesy of a July 16 report by the Switzerland-based Financial Stability Board (FSB), which concluded that, “like crypto-assets in general, crypto-asset platforms do not pose global financial stability risks.” Trading platforms include Coinbase—the most popular by far—Bitfinex, Kraken and many others.

From its low of $5,850 in late May, bitcoin was up nearly 44 percent on June 24 before pulling back on the Securities and Exchange Commission’s (SEC) decision not to approve a bitcoin ETF filed by Cameron and Tyler Winklevoss. (It was back above $8,000 on Friday.) I believe bitcoin’s fundamentals are lining up for a significant move higher, its price having already broken sharply above the 50-day moving average.

Keep in mind, though, that we’re still very early in crypto investing. It was only 10 years ago that the mysterious Satoshi Nakamoto wrote the now-famous whitepaper that led to the creation of bitcoin. Volatility is still roughly six times as high as large-cap stocks and gold in a single trading session, and 11 times as high in the 10-day period. As I told Market One Media recently, the space remains speculative, but there are opportunities for tremendous upside.

understanding cryptocurrency's "DNA of volatility"

Bitcoin’s Hash Rate Is Telling a Bullish Story 

Among the most bullish signs is bitcoin’s rapidly surging hash rate. In simple terms, a “hash” is a calculation made by a bitcoin miner in an attempt to secure a block reward, which currently sits at 12.5 bitcoin per block. (The reward automatically halves every 210,000 blocks. At the present mining rate, the next halving is estimated to occur in May 2020, after which the reward will drop to 6.25 coins.) The “hash rate,” then, is how many calculations are made per second across the globe. It generally reflects the pace at which new miners are joining the network.

Every 10 minutes on average, a new block is mined, meaning 1,800 bitcoin—or $14.8 million at today’s prices—are created every day of the week. Blockchain technology, remember, guarantees the validity of these new virgin coins. Imagine if stock trading were as quick, efficient and worry-free as crypto-mining. You can see now why JPMorgan, Citigroup, Bank of America and other big banks are rushing to patent blockchain processing systems of their own. 

Look at the chart below. The bitcoin hash rate has continued to grow at an astonishing pace despite the selloff, suggesting miners are still very bullish on future prices.

despite decline in bitcoin price, miner enthusiasm has continued to surge
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In July, the number of operations passed above 45 trillion per second for the first time ever. That’s a more than sixfold increase in power from only a year ago. It also signifies a huge recovery after extensive flooding in Sichuan, China knocked out significant amounts of hashing power earlier in the month.

Mining Doesn’t Consume as Much Power as Previously Thought

Speaking of bitcoin mining power, critics often like to point out how much electricity the network consumes, in an effort to turn public opinion against the industry. To be sure, mining bitcoin and other cryptocurrencies requires a lot of energy, but the figures you might have seen are highly exaggerated. Some sources claim that industry demand stands at 65 terawatts per hour (TWh), or 65 trillion watts per hour, on an annualized basis. But a more accurate estimate is closer to 35 TWh, “less than the annual energy consumption of Luxembourg, a country of 585,000 people,” according to CoinShares Research analysts Christopher Bendiksen and Samuel Gibbons.

How did Bendiksen and Gibbons arrive at this figure, and why is it so drastically lower than other estimates? The analysts point out that hardware efficiency is nearly doubling every year (81 percent), while the cost of hardware is almost cut in half on an annual basis (-48 percent). This means miners are increasingly able to do much more for much less. Miners also prefer to operate in colder climates, which lower cooling costs, and they largely rely on cheap green energy. This is part of what attracted me to HIVE Blockchain Technology, which conducts most of its business in Iceland and Sweden.

“Our total findings suggest that the bitcoin mining industry is relatively healthy, profitable and continues to grow at breakneck speeds,” Bendiksen and Gibbons write. “The hash rate is tripling on an annual basis while the efficiency of the hardware is rapidly increasing and costs are coming down.”

You Can Now Trade Crypto Securities on Coinbase. When Will We Get an ETF?

Investors have a growing number of options to gain exposure to bitcoin and cryptocurrencies, besides buying the actual assets themselves. There are several publically traded companies that have begun integrating blockchain technology into their business, such as IBM and Hitachi. Other firms have direct involvement in mining cryptos—HIVE Blockchain, for instance, and China’s Bitmain, which is seeking $1 billion in financing before a possible initial public offering (IPO). Bitcoin futures are available for trading on the CME and CBOE. And Coinbase just received SEC approval to “move forward with a trio of acquisitions that could allow it to become one of the first federally regulated venues for trading digital coins deemed to be securities,” according to Bloomberg.

most crypto investors favor ethereum and bitcoin
click to enlarge

But so far a bitcoin ETF has not yet been made available. I believe that once such a product comes on the market, the price of bitcoin will really take off.

Just look at the chart below. Gold traded mostly sideways throughout the 1980s and 1990s. Then in March 2003, the first gold ETF appeared, and the price of the yellow metal skyrocketed 420 percent as trading became more liquid and streamlined. I can’t say bitcoin would respond likewise, of course, but a crypto ETF would certainly attract more curiosity to the space.

the first gold ETF boosted metal prices. can the same happen with bitcoin?
click to enlarge

There’s no lack of investor interest in a bitcoin ETF. A recent survey conducted by international law firm Foley & Lardner found that nearly three quarters of participants, 72 percent, were hopeful they’ll have the opportunity to invest in an ETF that holds bitcoin or other cryptocurrencies.

As I mentioned earlier, the Winklevoss twins have now made two (unsuccessful) attempts to bring one to market, and the SEC has said it will postpone making a decision on five other proposed ETFs until September. Even if these get struck down as well, we move closer to getting one every day.

 

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 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

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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Minute with the Analyst: Meet Juan León
July 25, 2018

Juan Leon at the New York Stock Exchange U.S. Global Investors

Meet Juan León – a key member of the U.S. Global Investors’ investment team. Juan is responsible for researching companies, sectors and industries, in addition to constructing new investment strategies for several of the firm’s mutual funds and ETFs. Juan joined the team in October 2014 and has since been promoted to senior investment analyst. In addition to focusing his research on domestic equities and the bond market, he also holds an interest in technology and often travels to conferences to learn from other professionals on how artificial intelligence (AI) is changing the business landscape.

In this brief Q&A you’ll learn more about Juan’s role and how he got into the investment business in San Antonio, after growing up in Ecuador and originally hailing from Colombia.

Tell us about your early career and why you chose the path of investments.

I grew up participating in Model United Nations and student government activities, so I went to college with the idea that I was going to work in diplomacy, international relations or politics. During my time at Trinity University, I participated in the student managed fund, which is a student-run investment fund that holds a portion of the university’s endowment. I did well in the program and discovered my aptitude and interest for investments and finance.

After graduation I went to work for Rackspace, a cloud computing company, which was great because I’ve always been interested in the technology sector. I worked in the finance department and had a good experience learning how companies work, how financial decisions are shaped and how you communicate with Wall Street on the finance and earnings side. After a few years I realized that I still wanted to explore a career in investing, so I came to work at U.S. Global Investors.

Describe your role as an investment analyst.

In my role I have the opportunity to tackle a variety of tasks and work with many of our funds, especially the two bond funds. I’m the main quant-focused member of our investment team and perform back testing, regressional and statistical analysis and help build our multi-factor investment models. I also help develop the quantamental strategies for our mutual funds and ETFs.

In terms of research, my main focus is on the bond market and domestic equities. The bond and equity markets are almost counterweights to one another. It’s helpful to keep a pulse on both to get insights that you wouldn’t necessarily have if you’re not thinking about both worlds.

How was the experience of ringing the closing bell at the New York Stock Exchange?

As someone working in the investment industry, ringing the bell at the New York Stock Exchange (NYSE) is a dream and not many professionals get to do that. On the day of the bell-ringing, they gave us a tour of the trading floor and the private rooms and I saw some great memorabilia. Once you get out there on the floor, there’s an intense, palpable energy with lots of people and lots of noise. Then when you ring the bell and you have everyone looking up and cheering you – it’s a great burst of energy.

Juan Leon with CEO Frank Holmes and Galileo CEO Sam Pelaez at the New York Stock Exchange

What are your thoughts on where we are in the business cycle?

Right now I think we’re at a crossroads where we’re waiting to see how President Donald Trump’s protectionist policies and tariffs play out and whether or not it’s going to slow down economic growth. In the long-term, I think tariffs could lead to a slowdown in overall economic growth. In the short term, protectionist policies usually lead to insulated economies, which push up inflation because the cost of business and trade rises.

There’s also a great deal of concern by the investment public about the flattening of the yield curve. Historically, an inversion of the yield curve has been an accurate predictor of recessions. Although I do think we are in the late stages of the business cycle, I think the geopolitical concerns are driving volatility versus true economic slowdown. If you look at economic data in the U.S., it continues to move higher with robust consumer spending, manufacturing and services.

The longer end of the yield curve is up only 50 basis points, in terms of sigma or standard deviation moves. Just this week the longer end of the yield curve resumed moving up and we’re now again at 2.95 percent and approaching 3 percent. Compared to the shorter end, the longer end of the yield curve is less stretched in terms of sigma moves and has more room to run upwards before it hits an exhaustion point.

Get to know Juan Leon Senior Investment Analyst U.S. Global Investors

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

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).

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