Early in his professional life, Canadian-born Frank Holmes adopted two goals: One was to run his own company; the other was to move to a warmer climate. Holmes accomplished both in one fell swoop when he acquired a controlling interest in U.S. Global Investors and took command of its headquarters in San Antonio.
His active mind plays a constant game of topic association, as he connects dots in ways linear thinkers might miss. In particular, he pays close attention to the advance of disruptive technologies and demographic trends in the United States and abroad. Holmes looks for indicators such as airline stocks bouncing back stronger after getting sacked by market disruptions, including the aftermath of the Sept. 11, 2001, terror attacks; the SARS epidemic; and the 2007 global financial crisis. Then also the CEO of one of the nation’s largest asset managers — a woman known to reject attending investment conferences — suddenly finding it suitable to take a speaking role at a crypto conference.
The former intel helped convince Holmes and U.S. Global Investors to create an airline exchange-traded fund (ETF) years ago; the latter contributed to his decision to invest and take a leadership role in HIVE Blockchain Technologies, a crypto mining company that he claims is the first and only publicly traded company that mines both Bitcoin and Ethereum on an industrial scale.
More than 100,000 subscribers follow his thinking as expressed in his weekly Investor Alert newsletter, and his Frank Talk blog is read in more than 180 countries. Holmes’ blog posts about cryptocurrency, renewable energy, barriers to private equity and venture capital investing, and so on, have made the pages of this magazine. In the September edition, at our request, Holmes wrote a full-length feature about the coming renaissance in supersonic air travel on the efforts of household name manufacturers, such as The Boeing Co., Lockheed Martin Corp. and Rolls-Royce, as well as startup players such as Denver-based Boom Technology.
But he’s also a fancier of more traditional asset classes, such as gold, a precious metal he focused on early in his career before diversifying U.S. Global into other areas. He is, after all, co-author of The Goldwatcher: Demystifying Gold Investing.
He is not reticent about issuing his opinions and prognostications through social media channels or stalwart financial news outlets, such as CNBC Asia, Bloomberg Radio, Fox Business, Fortune, The Financial Times and, of course, Real Assets Adviser.
If you could go back in time, what would you tell a 25-year-old Frank Holmes?
Stay curious to learn and improve at everything.
Where did you grow up?
I went to the oldest high school in Toronto, Jarvis Collegiate Institute, and it included the wealthiest area of Toronto, Rosedale, and a couple of tough areas, Cabbagetown and Chinatown. We won all the national competitions in math and science. My best friends were Ukrainians, Poles and Yugoslavians, and 30 percent of the school was Chinese, so l learned about different cultures as a kid. That made it easy for me to embrace a global attitude when I took control of U.S. Global Investors. It made it easy for me to see that China’s consumption of gold was rising, and to set up the first no-load China fund. I also recognized some long-term trends in Poland and the Czech Republic, which convinced me to start an Eastern European investment fund, which rose from $4 million to $1 billion in assets. I knew how educated Eastern European people were and their strong work ethic.
Tell us about your early career.
I took my early junior research analyst skills and experience into trading. In the early ’80s, brokers were also market makers, with their capital providing liquidity for stocks. Today, this is dominated by quant shops, like Citadel Capital. I built a trading desk that focused on gold stocks and research in the early ’80s.
I’ve been told you have a keen interest in sports.
Business and sports are very similar. Basketball and hockey are dynamic. You could be up seven points, and suddenly you are down three, and that relates so much to fund performance. One quarter you are ahead, next quarter you are behind — what are you going to do? I have always loved basketball more than hockey, even though I grew up in Canada, because you score more points in basketball and there are more transitions. I played it in high school, and I played intramural basketball in college.
You live and work in San Antonio, home to the NBA’s Spurs franchise.
I love the Spurs and have been a season-ticket holder since I moved to Texas 30 years ago. My seats are at the top of the key, seven rows up, a perfect spot to watch players drive to the rim or shoot jumpers. I know the Spurs owners and the team’s CEO, R.C. Buford. Buford and I are members of an organization called YPO, Young Presidents Organization, which is a global organization of 25,000 members that represent about 10 percent of the world’s GDP.
How do basketball strategies relate to investing?
The dynamics on the court relate to the macro and micro factors in industry and stock picking. Am I going to overweight or underweight an industry? What is the size of the players on the court? Are they quick players, or are they tall players? How do I adjust and adapt to that type of market scenario? You are always rotating your players in and out to create an advantage against the other team.
What position did you play?
I was a shooting guard.
Another sport you have long participated in is boxing.
When I was 12 years old and fighting in the 85-pound weight division, I won a Golden Gloves championship, and when I brought my big trophy home to show my mother, she told me I would never box again. “You’re not going to destroy your brains,” she told me. Later in life, though, I came to know former champion boxer Jesse James Leija, who is a San Antonio hometown hero and operates a boxing gym in the city. I’m one of his clients. I’m 66 and step into the ring with Jesse James Leija, and we start throwing punches.
Boxing helps keep the fast-twitch muscle alive, and when you’re hitting the heavy bag, you’re rotating your midsection back and forth, and end up doing about 3,000 twists. I find boxing classes so helpful in maintaining quickness and balance because of the coordinated footwork that’s required. My vice chairman, who is 75, trains with him, too. He is in great shape.
Were you working at U.S. Global Investors when you bought the company 30 years ago? How did that come about?
No, I was not. I purchased controlling interest in 1989 and moved to Texas in 1990. At that time, the company was publicly traded but was a client of Merit Investment Corp. I put money into the new company.
In what way did you reposition the company?
Among other changes, after the global financial crisis we entered the ETF market, as that’s clearly where the trend is.
What kind of ETFs did you bring to market?
I launched the U.S. Global Jets ETF because I was getting pressure from my board that I had to come up with an ETF. I noticed that the cost of an airline ticket had doubled, and there were no airline ETFs, even though airlines have tremendous pricing power and were experiencing huge growth in ancillary revenue. They have all survived bankruptcies, they have merged, and airlines are now a true growth sector. For example, in 2014 Southwest Airlines was, I believe, the best performing S&P stock, with its shares rising 120 percent.
While doing our research, I was told about Sam Chui, a Chinese-Australian aviation and travel vlogger, and he said that during each global crisis, airlines shares fall 70 percent, but a year later they are up 80 percent to 120 percent. We did our own research and found that after 9/11, airline shares surged 80 percent within 12 months; after the SARS virus in 2003, they surged 120 percent; and after the 2008 financial crisis, they surged 80 percent.
I notice you have also gotten involved in cryptocurrencies.
My son started telling me about what was taking place around cryptocurrency and blockchain technology. A big thing for me was going to a blockchain conference in New York City, and the keynote speaker was Abigail Johnson, the CEO of Fidelity. She never attends or speaks at conferences, but here she was speaking at a crypto event, and that told me something big was happening. I went to try to launch an ETF in the crypto space and realized quickly that was not going to happen with the SEC’s concerns over anti-money-laundering laws. Instead, we launched HIVE Blockchain Technologies, a crypto mining company. An institutional investor put up the first $5 million, and another $25 million came in almost immediately. We took it public, and it has been a raving success, with immediate revenue. It was the fastest $100 million I have ever made on paper. My $5 million investment went up twentyfold.
Tell me more about HIVE Blockchain.
It does crypto mining, and there are no anti-money-laundering concerns because we mine virgin coins, so there will never be a coin that came from a dark pool or hacker. We are buying our own data centers, expanding green-energy resources to power them, and have cut a deal with Nvidia for $66 million to buy its highest-performing chips.
You’re a big proponent of gold. Why?
It’s an important part of a diversified portfolio. The U.S. government doesn’t hold any other foreign currencies; it only holds gold at Fort Knox, and it has the largest holdings of gold in the world. If you look at the data points since the year 2000, gold has outperformed Warren Buffett and the S&P 500 by 250 percent.
What do you see as gold’s role in an investment portfolio?
I have always advocated the 10 percent golden rule — having 5 percent in bullion, 5 percent in gold mining stocks, and rebalancing that once a year or once a quarter. It is just wise.
What characteristic do you most attribute to your success?
Work ethic and a passion for knowledge and curiosity. I also like change. A lot of people don’t like change, but I like change.
What would be your first choice for an alternate career?
But you were on an educational path to becoming a medical doctor. Why the switch to investing?
First of all, I was entrepreneurial from the time I was a child. I bought a paper route of about 20 homes, and I built that to 250 clients and sold it. I also earned enough money to pay for my own university education. I did this by being smart with the money I earned from the paper route, and by partnering with my best friend in high school to form a business bussing sports fans to and from events. Initially, we bussed people from rural areas in Toronto for hockey night, then to NFL games and even rock concerts. These jobs taught me how to put up capital and trade tickets like they were stocks. Capital allocation — it’s all about what’s hot and what’s not.
What did you find attractive about investing and asset management?
I have a high-activity mind, and going into the investment world was something that was so enriching for my high-activity mind because there are so many moving parts to it. I remember reading the book, Think and Grow Rich by Napoleon Hill, and he said you have to focus on something you can become expert at. That is what I did as a young person with gold, gold stocks, gold trading, gold bullion and the macro forces behind them.
How do you like to spend your time outside of work?
I find running relaxing, and I like socializing with other industry professionals and leaders.
Most influential book you have read?
Think and Grow Rich by Napoleon Hill
What are you afraid of?
Losing my ability to maintain my energy at high levels
Biggest lesson you’ve learned?
Compassion. Anytime you interact with someone, you are only seeing the tip of an iceberg. You can’t always see what’s under the water, what struggles people are dealing with behind closed doors, so it’s so important to practice compassion.
Best piece of career advice you ever received?
Birds of a feather flock together, so fly with other ambitious, ethical people.w
It’s from the poem Invictus by William Ernest Henley: “My head is bloody, but unbowed … I am the master of my fate / I am the captain of my soul.”
Tell us something people would be surprised to know about you.
I am the oldest of seven.
What is your idea of perfect happiness?
The enlightenment achieved by all of one’s needs being satisfied, and having healthy, loving children; a loving wife; and home filled with laughter.
You’re organizing a dinner party. Which three people, dead or alive,
do you invite?
My father, my mother and President Clinton.
Which historical figure do you most identify with?
What is your greatest extravagance?
My new house, which I consider an “extravagance” because I have lived in the same home for 30 years until this point.
What is your biggest regret?
Not spending more time with my two sons, who live in Canada.
What phrase is most overused in your industry?
“It’s too risky.”
If you could change one thing about yourself, what would it be?
Perfect pitch, so I could sing and carry a note.
What is your most pronounced characteristic?
If the most recent year were set to music, what would be the first cut on the soundtrack?
The Pachelbel Canon in.
Mike Consol (email@example.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.