The Optimist’s Guide to Airlines, Crypto Mining and Gold

Author: Frank Holmes
Date Posted: October 14, 2019 Read time: 8 min

"Travel," Mahatma Gandhi once said, "is the language of peace." If that's the case--and I happen to believe that it is--then I'm extremely bullish about the future, especially with respect to U.S.-China relations.

Oversees tourists at NYSE

“Travel,” Mahatma Gandhi once said, “is the language of peace.”

If that’s the case—and I happen to believe that it is—then I’m extremely bullish about the future, especially with respect to U.S.-China relations. Last week I was in Lower Manhattan, and the number of Chinese tourists I observed visiting the New York Stock Exchange (NYSE) and Federal Hall National Memorial—the epicenter of American capitalism and birthplace of the U.S. government—was encouraging. Everyone wanted their picture taken with the statue of George Washington, the father of the country with which their own government has been locked in a trade war for more than 18 months now.

The trade war’s days may be numbered, however. Both sides of the skirmish reached a partial agreement last Friday, laying the groundwork for Presidents Donald Trump and Xi Jinping to sign a trade deal later this year.

Despite short-term headwinds, Chinese tourism to the U.S. is expected to continue rising
click to enlarge

Tourism has traditionally helped peace and understanding spread across borders, and I’m hopeful that it will do the same today. It’s also good for commerce, especially for airlines and the travel industry in general, as I told CNBC Asia last Thursday.

It’s Airline Earnings Season. Are You Participating?

Delta Air Lines, in particular, had a phenomenal third quarter as we head into the fourth, and historically most profitable, quarter. The carrier reported the best sales in company history as well as impressive earnings per share of $2.32, a 29 percent increase over the same period last year. CNBC reports that Delta is hiring as many as 12,000 new employees—including pilots, flight attendants and ground staff—through 2020 to meet surging demand.

Supporting this growth are rising ancillary fees. Those are the non-ticket fees and upgrades you may end up having to pay when you fly, for everything from meals to preferred seating to credit cards. Delta recently inked a new deal with American Express, which is forecast to generate a mind-boggling $7 billion in revenue for the carrier by 2023, up from $3 billion today.

But Delta’s not the only one that’s joined the party. In the chart below, you can see a comparison of the amount of ancillary fees select U.S. airlines collected in 2018, on a per-passenger basis, with what they collected a decade earlier. Low-cost carrier Frontier saw an unbelievable 1,187 percent jump in such fees, while Spirit topped the list with an average $50.94 per passenger.

Airline ancillary revenue per passenger, 2008 vs. 2018
click to enlarge

If you’re not participating, now might be a good entry point. The busy Thanksgiving and Christmas travel seasons are fast approaching, and according to recent analysis by the Wall Street Journal, the fourth quarter has typically seen the highest returns, with shares rising 8 percent on average every period going back to 1990.

HIVE Blockchain: $5.6 Million in Net Income

Another company that reported a spectacular third quarter was HIVE Blockchain Technologies, which is back to generating positive net income and cash flow. In case you’re unaware, I’ve been serving as HIVE’s interim executive officer. After having to defend ourselves against a proxy battle in the spring, we’re now benefiting from improved transparency and financial controls. What’s more, we expect continued improvements throughout the fiscal year.

HIVE reported $5.6 million in net income in the first quarter of fiscal year 2020, having mined some 1,331 newly minted bitcoin during the period, as well as 35,000 Ethereum Classic and 3,200 newly minted Ethereum. You can read the full press release here.

Since HIVE’s debut a little over two years ago, investors have used it as a proxy to trade cryptocurrencies. That’s precisely why we took it public. I wasn’t able to open a bitcoin ETF for regulatory reasons—indeed, this is unlikely to change any time soon, as the SEC just rejected the latest attempt at creating such an ETF—so the next best thing was to create a world-class crypto miner and bring it to market.

I’m proud of how far HIVE has come these past two years, and even prouder that we managed to make money in what could have been a disastrous quarter. I’m very excited to see what’s in store.  

Time to Buy the Gold Dip?

The same goes with gold, which is headed back to its mean after its price was up nearly three standard deviations in August. As CLSA analysts said recently, these price dips look like attractive buying opportunities “in anticipating of a resumption of the initial base breakout.”

Gold price is heading back to its mean for the five-year period
click to enlarge

Last week our office was visited by the legendary economist Nancy Lazar, co-founder of Cornerstone Macro, who commented that the growing mountain of global debt, not to mention the proliferation of low to negative-yielding debt, makes the yellow metal very attractive right now.

I agree. During my interview with Kitco News’ Daniela Cambone, I reiterated my call for $10,000 gold. Some critics believe only a major event, such as a war or famine, would be enough to push the metal up that high, but really all it takes is monetary and fiscal mismanagement. That’s exactly what we’re seeing right now in Europe, where growth is slowing because of business-killing regulations. But instead of getting rid of these rules, interest rates have been allowed to dip below zero. In Denmark, banks are actually paying borrowers to take out a mortgage, which is contributing to what Nancy sees as a European housing bubble.

Conditions aren’t much better in the U.S.—or at least they weren’t, until President Trump began rolling back unnecessary regulations.

According to Steve Forbes, there are 773,000 words in the Bible, which sounds like a lot until you learn that there are around 10 million words in the federal income tax code. Similarly, there are more than 185,000 pages in the Federal Register of rules and regulations. That’s up 17 percent from 158,000 pages in 2008. But in 2018, the number of pages actually fell almost 1,000 pages, or 0.5 percent, meaning Trump is keeping his word.

Register now for our upcoming webcast!

Mark your calendars! Pierre Lassonde, co-founder of Franco-Nevada, agreed to participate on our upcoming webcast scheduled for October 31. We’ll be discussing opportunities in gold mining, as well as our outlook for the gold price. (If you recall, Pierre says it could hit $25,000 by 2049!) It’s sure to be an interesting conversation—I look forward to you joining us!

To register, send us an email at


All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

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. Effective 8/31/2018, Frank Holmes serves as the interim executive chairman of HIVE. 

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 (09/30/2019): Delta Air Lines Inc., American Airlines Group Inc., United Airlines Holdings Inc., Allegiant Travel Co., Spirit Airlines Inc., Franco-Nevada Corp.