U.S. Global Investors’ (GROW) CEO Frank Holmes on Q2 2019 Results – Earnings Call Transcript
U.S. Global Investors, Inc. (NASDAQ: GROW ) Q2 2019 Earnings Conference Call February 14, 2019 8:30 AM ET
Frank Holmes – Chief Executive Officer and Chief Investment Officer
Lisa Callicotte – Chief Financial Officer
Holly Schoenfeldt – Marketing and Public Relations Manager
Conference Call Participants
Good morning, and thank you, for joining us today for our webcast announcing U.S. Global Investors’ results for the Second Quarter of Fiscal Year 2019. I’m Holly Schoenfeldt. If you have any questions during the webcast, you can enter them in the questions area of the control panel side bar, which is normally to the right of your screen. Also, you may download a PDF of today’s slides by clicking on the red handout button.
The presenters for today’s program are Frank Holmes, U.S. Global Investors CEO and Chief Investment Officer; Lisa Callicotte, Chief Financial Officer; and myself, Holly Schoenfeldt, Marketing and Public Relations Manager.
During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don’t pertain to historical facts are subject to risks and uncertainties that may materially affect actual results.
Please refer to our press release and corresponding Form 10-Q filing for more detail on factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today, and U.S. Global Investors accepts no obligation to update them in the future.
Quickly I’ll review about U.S. Global. We are an innovative investment manager with vast experience in global markets and specialized sectors. We were founded as an Investment club, the Company became a registered investor adviser in 1968 and has had a long-standing history of global investing and launching first-of-their-kind investment products, including the first no-load gold fund.
U.S. Global is well-known for expertise in gold and precious metals, natural resources, and emerging markets. And now let’s go to Frank Holmes, CEO and CIO, for an overview of the period. Frank?
Well, thank you, Holly. Thank you everyone. Happy Valentine’s Day. We’ll talk a little bit about that Love Trade when we get to gold. But right now our strengths are we’re the go-to stock for exposure in emerging markets, resources, gold and digital currencies.
And I’m going to talk about that – the volatility of the digital currencies and our investments there rather than trying to launch ETF, have impacted our volatile growing stock and I think that’s important positive and negatively. Debt free, strong balance sheet, reflexive cost structure, and monthly dividends, return on equity discipline.
The next visual I want to thank all of our shareholders, those in particular and see the active fund managers that have been very loyal, through this whole period. The Royce Funds, The Financial Investment Management Group out of Michigan and Perritt Capital, and Vanguard and Blackrock is strongly in their index funds. But I just want to really thank active fund managers because I realized, and I’ll talk about a little later, this is the challenges of being an active fund manager and some of the issues with this whole wealth phenomena of ETFs and what we’re doing in that space.
But I think the other important part is that we’ve consistently paid for more than 10 years. A dividend is modest, the yield is the more attractive than the S&P 500. And we’ve continued to buy back stock on a, basically it is a quant approach and we buy back stocks as the stock is more volatile and we may suspend or discontinue any time.
I think for the last quarter we bought back a minimal amount of 11,000 shares, which is approximately $13,000. Our balance sheet, as you can see, has lots of securities and investments and, that’s something that’s important for us as we – all for this bear market that’s in the financial asset class. In particular, small fund managers, that when you take a look at them as public companies and the number of RIAs in the space they are actually shrinking.
And this is all part of this sort of big shift that’s taking place and the burden of expensive regulatory costs. But we want to highlight the next visual, which is the volatility which Lisa is going to comment on, has a lot to do with how you’re reporting your investments and the volatility of our investments in particular HIVE blockchain had a material impact the last quarter on our reporting.
So the next one is to show you that the assets, they are declining. They seem to have slowed down in that decline. Last year we had a strong dollar, emerging markets came under great pressure and I thought on a relative basis we held up overall, because we had to headwinds against us.
One was the money leaving, emerging markets and B, the money that was going and it was predominantly going into U.S at ETFs. So from that end, we held off on a relative basis. Still, we’ve got to find that magic button that turned this around so that we’ve got this asset growth.
The next visual is the highlight, it’s not just a U.S. Global experience it is also a phenomenon that, excuse me, I’ve got these allergies that come through and it gives me my voice, a little raspy this morning. But Follow The Money is overflows from Domestic Equity Mutual Funds have gone to ETFs and 90% of these are just going to ones that are basically free.
And I find it sort of hypocritical that is you cannot, and I cannot induce a investor to put money into our funds by offering them a toaster and the banks used to do that. When, I remember when I first moved to Texas that you could get a toaster if you open up an account and you just couldn’t do that in the fund business. So that was an inducement, but you can induce them, which cheap fees, which basically is still an inducement.
And it’s a flawed process that is just cheaper is better. And that’s one reason why when we’ve gone into the ETF space, we’ve remained with smart Beta and we’re really happy to see that our indexes that were used have outperformed, their asset classes, be it Jets airline ETF, has far outperformed the global ETF – I think the index for the New York Stock Exchange and same thing with GOAU or GO GOLD.
But the idea that just cheaper is better when it comes to investing is really remarkable. And that’s where the assets are flowing. And that means if money is going into a – bigger money is going into these indexes that are buying overvalued stocks and less money is going into undervalued stocks.
So, that active manager is basically a, that used to be like an arbitrage, buying the cheaper stocks and selling the more expensive stocks. And a lot of performance has nothing to do with picking good stocks in the short-term. It has to do with just fund flows.
So these are new dynamics that investors have to be really aware of. And in this race to the bottom, everyone ends up last. The seismic shift and index has come with some unexpected consequences including price distortion. We’ve seen this in the gold business. We saw when GDX in GDXJ, that these are two big gold equity ETFs and they end up having to own each other, then they own to have to unwind that along with owning too much more than 20% of 20 public companies.
And that unwinding, which took a year to basically accumulate, was unwound in three days, damaged the small cap gold stocks, which we, it has a collateral damage of our active funds and nothing to do with good or bad stocks.
And then last year we had Vanguard, abort and get out of it and to do with gold. And a lot of gold fund investors have jumped in, bought their index because it was cheaper than ours, but we outperformed them and lo behold they just didn’t stay with gold and that was part of almost a bottom, but they really hurt. They blew out $2 billion worth of gold stocks.
And in our gold ETF, GO GOLD, GOAU this is the New York Stock Exchange. We saw the biggest activity of stocks going in and out of that particular ETF. Why? Because the pounding of lot of stocks became undervalued, but it does impact the sentiment, the psychological factor of investors. But we’ll see how it unfolds. I think that when the big correction happens to the equity markets, we’re going to see some massive distortions with the S&P 500 because of the trillion dollars of stock buybacks means our folks are smaller, money is going into overvalued stocks in a rapid rate, and if they go to rebalance that, it will have massive distortion.
We have witnessed this as case studies in the gold market, but talking about this, the sharing insights and the financial media industry experts on a range of topics. I speak around the world from Latin America, summit to Fox News in New York, or Kitco, which has the largest following for people looking for gold information in the world and on a weekly basis do their touchdown pass.
So we have a great exposure, in that space as educators, and that’s what’s really important to us. So, here’s the next visual free ETFs, but not free toaster. So that’s the sort of contrarian thought process for investors to recognize and it will just create a distortion capital. And just the fact now we’re seeing that the big wire houses, will not allow a multimillion dollar account to buy stocks under a $200 billion market caps or give margin at $10.
So that whole small cap space is being orphaned with all these interpretations of regulations and rules, by this sort of slew of compliance officers and then have a no experience in understanding of how capital is formed, how people come together, savers and investors to speculate or to invest in income, is this rules upon rules.
And so I like to highlight that eventually it is going to come back to hurt those investors. But here’s the next one is I’m very proud of because despite headwinds, gold can tune to outperform in 2018 and on a regular basis in particular, the CNBC in New York, is so different than the culture of Asia, where there is a cultural affinity for gold versus the UK, which has a more balanced view for gold.
Gold is bad, gold is too volatile. But the facts are the – the DNA of volatility of bullion is about the same as the S&P 500, so it is not more volatile. But since this century started, it is outperformed by a wide margin, the S&P 500. And so when I show this now, well short-term it hasn’t and there’s always an excuse. But here we are going at 18 years of a spectacular track record and we’ve always advocated the 10% golden rule that investors have 10% exposure into the asset and we’ve also allowed small retail investors to be able to invest.
So, that means we have to have higher expense ratios because the cost of having a funds has just gone up dramatically. And the small fund shareholders costs more money and – but still would give them that avenue to participate in gold and gold related stocks. So, I remain that gold, is such an important asset class, especially with the growth of Chindia around the world.
China and India actually known as there are macro force to not to ignore. They are 40% of the world’s population. They have rising GDPs per capita, which are highly correlated to the next visual of the Love Trade. And love is about 60% of the consumption of gold each year, fear is what dominates the media in New York. To get out of gold based on fear, but I think that what’s really important is that people recognize love.
Now we just finished basically the Chinese New Year and we usually get a big run up into it and we get the spoofers in the gold market trying to manipulate the price of gold down during Chinese holidays or the first week of October. But there’s been litigation and I think, we’re seeing the slowdown in that sort of coming into those markets, because gold is actually been relatively stable during this Chinese new year cycle.
So, what drives this fear trade, it’s a binomial model and I continue to try to educate investors all over the world. That government policy, it doesn’t matter who’s on the left or right, who’s the President, who’s the Head of the Federal Reserve. It’s monetary fiscal. Today is Jerome Powell is the Chairman of the Federal Reserve. So as real interest rates of money supply and we’re seeing that the bulk of this debt unwinding has created more volatility in the capital markets.
And then the other side we have fiscal policy which is tax and regulation and spending. Trade wars are basically a form of taxation. And so they actually slow down an economy. Rising tariffs are not good for global economic growth, lower corporate taxes are, so you have sort of a on the fiscal side eye-wash trades. And I’ve seen this, since the year 2000 when gold is actually taken off, has been since 9/11 with the Patriot Act has, it had been this incredible growth in AML, anti-money laundering laws there the regulations continue to grow globally.
Most of the rest of the countries of the world are afraid of dealing with the U.S. so they like in Switzerland, they won’t even allow you to have having an account over there. And it goes on the process of even for corporations in doing business.
So we have a trade war when it comes to the flow of money and it’s been growing. But interesting enough, gold is the fourth most liquid asset class in the world and it is a form of money and it has grown as you’ve seen this these global regulatory AML wars take place. The impact is so I think that gold is an interesting asset class to diversify your portfolio.
And I think the unwinding of QE is really as a monetary aggregate is having an impact on the volatility of the stocks. So here’s the next visual, life is all about managing expectations and I think it is important for you to recognize Bullion is about the same as the S&P 500, crude oil is extremely volatile and emerging markets are also volatile but I point out that gold stocks are the most volatile if you’re looking at that and so investors, so we’ll be looking at the days when you have a gold down, more than 1% of it is down 2% a day.
Usually that’s a lower risk day to take on a position and vice versa. But it’s up 2% or 3% in a day. It’s usually a time to take some profits. That’s all based on regressional math. And why is this important to you and to our shareholders of GROW? Is that volatility is showing up in the 70% of the daily trading in the stock market are quants. It’s quant driven.
Quants look at this DNA of volatility and they apply it to their asset class. So they look for correlations. They are not directly causing effects that you would normally think of, but they just look for patterns of correlations and they call how long would that last for? And they do, I put this called a gamma that that idea is good for maybe one day or seven days. And that is showing up with press releases of how stocks can be impacted up or down.
Now I am going to jump over to the crypto world. So, I was trying to launch a ETF in that space and recognize quickly that the regulators do these AML and KYC, know your client rules were really pushing back about allowing and I understand why an ETF of that would own bitcoin because they’re concerned with some hacker would turn around and be able to get paid in bitcoin.
And maybe that showed up in the listed ETF. But as it may is a rational reason I had all this knowledge and so I launched, was it a co-investor in launching of HIVE Blockchain, which was the first industrial scale mining of virgin coins in Iceland and in Sweden. And this truly caught the imagination of capital markets, it allowed investors the first time to directly play and all of a sudden the DNA of our volatility of growth changed with high and a high grew dramatically in three months, in the last quarter of 2017 raised $200 million.
Predominantly from institutions at three different stages, deployed it and we had this huge revenue and cash flow, but a decline naturally what it would with the decline between 70% and 90% for Bitcoin Ethereum. But this next visuals will show you that the major events suppressing the price has a lot to do with global synchronized regulatory, attacks against that industry.
And it basically started with the launch of the CME futures contract, which allowed, institutions to basically use suppression to push down the price. We’ve seen this in gold and we’ve seen it but this never lasts long because gold is so deep and gold is so wide. It is the fourth most liquid asset class in the world. But you can spoof markets in the futures market, it’s been well known. There’s been lots of litigation. We have written about this, we have commented about this. So, you’re seeing in the Bitcoin, I think it’s a bear market. What’s interesting to me is, is that it’s still the enthusiasm. The conferences are packed. I would never get a 2,000 people for a gold conference if gold had fallen 90%. It just wouldn’t happen or the S&P fell, you know 30%, no one’s going to come out to a small cap or a big cap, gold – equity conference.
So people are very sentiment driven. But this ecosystem of crypto around the world is really quite fascinating to me. And I saw in India where the Supreme Court ruled against the Federal Reserve basically of India, is top one crypto exchange. And then nearly a week later they came out with – they’re doing their own crypto currency as a country.
So we’re seeing many countries looking and exploring this, probably the Bank of England is the most advanced and most positive and constructive. And we’re still seeing during this bear market, fidelity deploying tens of millions of dollars in infrastructure build out. We’re seeing Ivy League institutional, the university is basically buying for their pension funds and some of these crypto currencies we’re seeing, Goldman Sachs deploying capital. So there’s lots of money. There’s lots of people attending these conferences. So that ecosystem has not gone away.
And interesting also enough is that most of it is a cash economy. And so it’s not leveraged so it can easily surge back. When you have a debt crisis like we had in 2008 or the merchant market crisis of 1997, 1998, it takes four years to repair that damage. And we saw last – a week ago, Friday, bitcoin was up 17% and HIVE jumped 70% a day.
It moves just with that and GROW was up with it. So we become a proxy. A HIVE Blockchain is a derivative play on this space. It moves in the same DNA volatility. And the second derivative of that appears to be GROW. That is so important for investors to recognize what’s moving our stock up and down. It used to be gold. It used to be predominantly gold. We were up and down with the movement of gold relative to our gold funds.
And I’ve come back to this sort of educational pieces, oppression of gold. You can see that the decoupling took place in 2012, the QEs 2, 3s and now is – gold, the QE 3 is now being unwound. We’re seeing gold all of a sudden got a base, which is unusual because of real interest rates, but I have been mentioning all over the world that last year was a phenomena of real interest rates in the U.S. spread between – the Japanese government would pay you versus what the U.S. government would pay you versus what the EU countries would pay you that differential was so great.
Then in fact, gold should have been like $700 an ounce and gold and the dollars have been up another 20% because of that spread differential. So you’re seeing this diversification take place. Stay tuned to usfunds.com we read about it a lot. We commented about it a lot and I think it’s important for you and you can go on and take a look at HIVE, at Genesis Mining and learn more if you’re interested on the blockchain and crypto world.
So as I mentioned, rather than spend a lot of time and effort, we’re launching an ETF in that space we launched HIVE Blockchain. Now I’d like to come back to that volatility, as you can see the one-day volatility of bitcoin is 5% versus bullion is 1% and the S&P is 1% and Ethereum.
So that one-day and 10 day volatility of these cryptocurrency is substantially greater. And that will impact the overall asset class. And so you can see here that investors appear to be using HIVE as a proxy for bitcoin, ether and you can see that HIVE has come down just like other currency.
And the next visual is just to give you some highlights regarding HIVE Blockchain technology. So build out and now what we’re doing is just striving to cut costs, cut costs everywhere. And that’s the biggest thing with all of these blockchain companies who like anyone that’s in the mutual fund world that has small funds, the idea there is to drive another day, you have to survive in the short-term. And so that’s one reason why we’re always assessing costs.
And I’m going to turn it over to hardworking, Mrs. Dynamite, the financial world in our bear market sort of the gold fund business, Lisa Callicotte.
Thank you, Frank. Good morning. Before I summarize our results of operations, I’d like to discuss the investment accounting pronouncement that we adopted this year.
Slide 28 notes changes in the accounting rules related to our investment that is expected to cause our earnings to be more volatile. We adopted Accounting Standards Update, ASU 2016-01 recognition in measurement of financial assets and financial liabilities effective July 1, 2018. This amended the guidance and the classification of measurement of investments in equity securities and certain disclosures.
Starting in this fiscal year, some of our corporate investments are accounted for differently than in the past. There was no longer an available-for-sale classification for equity securities with readily determinable fair value. And as part of the adoption of the new standard, we made a required cumulative effective adjustment and reclassified $3.1 million in unrealized net gains and $1 million in related deferred tax expense out of accumulated comprehensive income and into retained earnings.
Effective July 1, 2018, changes in fair values of investments formerly classified as available-for-sale are now reported through earnings, rather than comprehensive income. This includes any changes in the market value of our investment in HIVE. The impact to earnings for this change for the quarter ending December 31, 2018 was an investment loss of $2.8 million. These losses are related to unrealized declines in securities formerly classified as available-for-sale and previously would have been reduced our comprehensive income, rather than investment income.
The majority of this amount is related to a decline in market value in our investment in HIVE. And though we had an investment loss related to HIVE for the quarter ending December 31, 2018 as of yesterday, the market value of the Company’s investment in HIVE was higher than our cost.
What shareholders need to understand is that no matter if an investment is short-term or long-term in nature, the change in market value will be reported quarterly and cause our income to be more volatile.
Slide 29 summarizes our investment in HIVE. At December 31, 2018, the investment in HIVE was included in investments in securities at fair value noncurrent on our balance sheet. We owned 10 million shares of HIVE, which is approximately 3% of the outstanding shares at quarter-end. And the cost of the investment was $2.4 million and the market value at December 31, 2018 was $1.9 million.
Now I’ll discuss the results of operations for our quarter ending December 31, 2018. Beginning on Page 30, we recorded total operating revenues of $1.8 million for the quarter, which is a decrease of $194,000 or 10% from the $2 million in the same quarter last year. The decrease is primarily due to decreases in assets under management related to market depreciation and shareholder redemption and it was somewhat offset by an increase in annual performance fees earned.
Operating expenses for the current quarter were $2.1 million, a decrease of $21,000 or 1%, primarily due to the following reasons: employee compensation and benefits decreased $167,000 or 15%, mainly due to decreases in bonuses; and the decrease was somewhat offset by increases in general and administrative expenses of $137,000 or 15%, primarily due to increases in fund and consulting expenses. We see our operating loss at the quarter end is $322,000.
On Slide 31, we see that other income loss for the quarter with a loss of $3.4 million, which was mainly related to unrealized losses on investments, including investments formerly classified as available-for-sale. Other income and loss decreased $4.9 million from the same quarter in the prior year. Investment income decreased $3.6 million compared to the second quarter in the prior year, primarily due to unrealized losses of $3.4 million; $57,000 of impairment losses in the current period, compared to unrealized gains of $60,000 and realized losses of $58,000 in the prior period.
Also the second quarter of fiscal year 2018, we recorded income from equity investments of $1.2 million versus a loss of $48,000 in the second quarter of fiscal year 2019. Net loss attributable to USGI after taxes for the quarter ending is $3.2 million, a loss of $0.21 per share, which is a decrease of $4 million compared to the income of $749,000 or $0.05 per share in the same quarter in fiscal year 2018.
Moving to Page 32, we see we still have a strong balance sheet, it includes a high level of cash and unrestricted securities that combined to make up 76% of our total assets. And on Page 33, we still have no long-term debt, the Company has a net working capital of $15 million and a current ratio of 10.2:1.
With that, I’ll turn it over to Holly.
Thank you, Lisa. All right, as you can see a majority of our mutual fund assets are in emerging markets and natural resources, while 36% are in domestic equities and fixed income.
As for distribution, more than three quarters of assets come from retail investors with 18% coming from institutional investors. Our sales and marketing efforts have continued to focus on mutual funds, including those concentrated on gold, natural resources and emerging markets as well as our exchange-traded funds. The company and our funds continue to receive an invaluable amount of viral publicity gained through media interviews. Frank Holmes often shares his insights with financial outlets like CNBC Asia, Bloomberg Radio and Kitco News, just to name a few.
We continue to receive recommendations by influential financial newsletter writers as well, along with sharing and syndication of our award-winning original content by third-party publishers. The newsletters have loyal following and receive millions of visitors each month.
Frank Holmes’ CEO blog, Frank Talk, continues to grow in popularity as well. His commentary is often featured by prominent publications like Forbes, Seeking Alpha, The Crux and Business Insider with millions of monthly visitors. We like to call Frank Holmes our globetrotter because he, along with others on our investment team, travel around the world to share our thought leadership. We also interact frequently with our loyal followers through Facebook, Twitter, LinkedIn, Instagram, YouTube and Pinterest.
One of our core values that U.S. Global Investors is curiosity to learn and improve. We believe that providing educational material to investors is one way of many to achieve this. Some of our most recent pieces include What’s Driving Energy handout and our Gold’s Fear Trade white paper. Both of which are available for download on usfunds.com.
Kitco News, the biggest gold website in the world with an audience of over 30 million monthly visitors, in partnership with The Street, continues to feature the Gold Game Film show with Frank Holmes’ gold market analysis. And since the show’s beginning, 157 episodes have aired.
At quarter-end, we like to look into the most visited Frank Talk blog posts over the last year, no matter what year they were actually written in. So on this slide, you can see that the most visited articles include: one, The Top 10 Countries With the Largest Gold Reserves; two, Top 10 Gold Producing Countries and number three, What Does It Take To Be In The Top 1%? You can sign up for the blog for free on our homepage.
All of this coverage helps us leverage our brand by reaching millions of readers, viewers and potential investors in our website usfunds.com was visited 496,000 times from December 2017 through December 2018 by curious investors from all over the world. U.S. Global is well-known for timely, balanced and positive market insights and our thought leadership. The Company has been awarded numerous STAR awards by the Investment Management Education Alliance over the years, adding three more at the end of 2018, including best educational campaign within the small funds category.
The IMEA STAR awards recognize excellence in investor education. To-date, the Company has earned a total of 85 STAR awards. Our subscriber base continues to grow organically and we currently have over 44,000 curious investors subscribed to our investment newsletters in the Frank Talk blog. We also continue to see a large following across all of our social media platforms as well, particularly on LinkedIn and Twitter.
Investors can sign up at usfunds.com and join the subscribers who received the award winning Investor Alert e-newsletter as well as Frank Talk. And quickly as we wrap up today’s presentation, we do want to offer attendees of the live webcast, the opportunity to drop us a line. We love hearing from our shareholders and our subscribers. So if you would like a free enjoy Capitalism tee-shirt, please shoot us a quick note to email@example.com after today’s presentation.
Now we’d like to open it up to questions.
A – Holly Schoenfeldt
And as a reminder, you can enter the questions in the control panel on your screen. And I do have a couple of questions. The first I’ll start with, directing towards Lisa. It says in the last webcast, you mentioned the possibility of selling or leasing out a portion of the headquarters building. Can you give us an update on progress with that?
Sure. Actually we have made some progress in this area. Currently, we are in the process of finalizing a lease for a few thousand square feet of our building. And though it’s a small area that rent will help offset some of our building costs. We are considering making some capital improvements, that may increase the interest in the office space we have available but we’re still open to selling the building of a favorable opportunity present itself. So we are progressing in leasing but we’re also keeping our options open.
Great. Thank you. And Frank, you kind of mentioned this during the presentation, but this question is for you, it says, do you think growth stock will continue moving with the price of cryptos or do you think it will revert back to tracking the movements in gold mainly as it’s done in the past?
I think it moves with both. What’s more volatile in the short-term as we seen is bitcoin and Ethereum. So I think the impact on our balance sheet is attracting investors that uses us as a second derivative in that crypto world, where a lot of people do not want to go in and open an account at Coinbase, they don’t want to – they’re afraid of that. They’re not afraid of buying stocks in speculating. And so I think that’s the biggest part is to recognize that small cap investing, microcap investing in new technologies, new biotechnology, new oil or gas fracking or coal mining exploration or Blockchain, the mining that this is all speculative investing.
And what I heard was at a conference recently, was really surprised me in Vancouver, we had 2,000 people show up in a Sunday morning. 500 people showed up at 8:30 in the morning. And the comments were that it’s okay to go, it’s easy to go and speculate buying a lottery ticket or go to the casino. But to speculate in a small cap stock is too risky.
So I thought that was sort of an interesting debate and discussion regarding that topic. And so I think that people – that the speculators up there and looking us speculate in the Ethereum market. They’re using us a proxy and now they’re going directly to HIVE.
Great. Thank you. One more for you, Frank. Can you share any goals or updates as we move towards the rest of 2019 that you want to leave listeners with?
Excuse me. I think the rates will peak this year and that peaking will basically see the dollar become weaker and gold, as I’ve said before, in a blink of an eye, it just starts to surge. And we’re witnessing – we’ve written about this, new banks, central bankers buying gold. It’s a 50-year high in new countries’ central banks buying gold.
And 50 years ago, Hungary, Poland, these economies were communist type economies. They had no control of it. Now they have a GDP growth rates twice the year old. And they have been big buyers of gold. So I think you’re going to continue to see that that buying of gold from China, Russia, Eastern Europe, Eastern Europe Bloc countries as a way to diversify their themselves, just like Ray Dalio does, who runs the biggest hedge fund in the world. And he’s always advocated a position in gold as a parity against bonds and other currencies. And I think it’s just wise for investors that follow the 10% golden rule and have some exposure towards the industry and rebalance once a year.
Great. Thank you. This concludes U.S. Global Investors’ webcast for the second quarter of 2019. This presentation will be available on our website at usfunds.com. And thank you all for your participation today.