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Fed Chairman: “We’re Not Even Thinking about Thinking About Raising Rates”

Jerome Powell: We'd be looking to get inflation back up and we'd be prepared to tolerate, uh, pretty low, welcome in fact, not tolerate, but welcome very low readings on unemployment, just based on what we saw in the last, uh, in the last expansion. So, um, we're not thinking about raising rates. We're not even thinking about thinking about raising rates. So, what we're thinking about, is, providing, uh, support for this economy. We do think this is going to take some time. There are just a lot of people that are unemployed, and it seems quite likely that there'll be a significant group, uh, at the end of, even after a lot of strong job growth, that'll still be struggling to find jobs and we'll still be providing strong accommodation for that.

When Georgia became the first state to reopen a few weeks ago in defiance of the federal government’s guidelines, the media warned it would be catastrophic.  And yet Georgia seems to be faring no worse than states that remained locked down.

We will see in the days ahead if illegal protesting and rioting in major cities across the country translates into a surge in coronavirus hospitalizations.

A full-scale war on history is being waged on statues, monuments, street names, military bases, and even classic movies such as Gone with the Wind.  The vandals want us to forget who and what came before us to make us who we are today.

Frank Holmes

Mike Gleason: It is my privilege now to welcome in Frank Holmes, CEO and Chief Investment Officer at U.S. Global Investors. Mr. Holmes has received various honors over the years, including being named America's best fund manager by The Mining Journal. He is also the co-author of the book, The Goldwatcher: Demystifying Gold Investing and is regular guest on CNBC, Bloomberg, Fox Business and also right here on the Money Metals podcast.
Frank, welcome back. And thanks for joining us again. How are you today?

Frank Holmes: I am great. Thank you. It's great to be back.

Mike Gleason: Yeah, it certainly has been a while. A number of months since we had a chance to talk and suffice it to say a lot has changed in the world and the market since then. We've got COVID-19 wreaking its havoc on world economies. We have race protests and rioting. It isn't the sort of backdrop you would expect for the stock market which has been moving relentlessly higher, but the Fed is not about to let prices fall it seems. The intervention is off the charts, starting with trillions of dollars to prop up the repo markets last fall. Then in March, they pulled out all the stops and began buying everything including ETFs and junk bonds. So, what's next for the equity markets? We aren't sure which dynamic is more important for investors in the months ahead; the lousy real-world fundamentals or the artificial stimulus being pumped in by the Fed? Give us your thoughts here.

Frank Holmes: Well, I think this is bigger than the fed and that's a thing to recognize. And I think I've said previous times in your program that after 2008, 2009, the government in the U.S. along with other governments around the world, they became the finance ministers and the central bankers basically became a cartel. The G20 became synchronized taxation and regulation. And that was a real big part, now they physically can't fly between countries. All of a sudden moving money became very difficult for everyone. And AML costs have continued to rise since then. So, now we have this calamity of a pandemic and you're seeing this sort of collectivism taking place amongst these ministers. So, they're all printing collectively and they're all taking their leads, so it is unprecedented when you hear Powell speak today…. I don't know these words which he used, he said, "We will continue to use powers, forcefully, proactively, and aggressively. We will continue."
So, I think that that just sets up a gold theme. It's just so important to have a gold theme if investors do not have some exposure to it. There's fundamentals on peak mine supply, etc., but I just think this is concept of owning gold as an asset class.

Mike Gleason: Yeah. That's certainly going to be a dynamic that should improve the fundamental picture if it's not already good enough with all the currency devaluation that's going on. Before we get a little bit more into gold, so, do you view the recent move higher in the stock market as an indication of the good things are ahead for the markets and the economy, or is this just a bull trap?

Frank Holmes: Well, your question did start off with the stock market at the beginning, but I think that a lot of this that's moving the stock market is money coming from all of this printing. And, and so what we've been seeing in the past eight years in particular, Japan, Switzerland, they go and print money at a zero cost of money and no one buys it so they buy it themselves. Then they go buy Apple. The Swiss Central Bank is one of the largest shareholders of Apple. Why was the dividend higher than they can raise money with? They can create funny money. They buy Cadburys so the largest shareholder of stocks in their own country is a central bank. And, that's a real different thought process. The largest holder of Japanese stocks is the central bank. So these central banks, as I mentioned earlier, are colluding altogether. They can print the money and they buy good corporations.

Mike Gleason: Yeah, certainly.

Frank Holmes: Certainly. And the dividend yields’ higher than you are going to get paid on any money market fund. And certainly the 10-year government bonds, the dividend yields higher. You can buy Newmont and its dividend yields higher than a 10-year government bond and they have free cash flow. So, I think that the stock market has done a great job where money has actually gone into those stocks which had the ability to pay dividends and sustainable growth from dividends, where those stocks have been able to respond to this pandemic such as Amazon. Amazon stopped all the overtime payment and they basically went out and hired 100,000 people to deliver goods every day. And so they've had revenue growth and you've seen their stock prices go up.

So, I think that this shift in what we're seeing is a lot of domestic companies that were able to stay profitable. I know, as I said earlier, we saw a big drop in our assets. I was very concerned the first week of March. And then all of a sudden we saw unprecedented money coming into our Jets ETF, which was a game saver. And our assets fell from a billion dollars down to less than half a billion dollars and now they're to two billion.

Mike Gleason: Certainly the unprecedented demand or amount of stimulus that they've put out does not seem to likely to be ending anytime soon. And yeah, investors do seem to know that.

Frank Holmes: Well, silver is always the warn on gold. And so if you look at just math of markets, a 10% move in gold on the upside historically sees a catch up of 15% move in silver. It's always that 10% drop in gold, you're going to get a 15% drop in silver. And it's interesting psychology that gold goes up for enough months in a row, then all of a sudden silver starts to have this huge surge of interest for it.

Mike Gleason: How about platinum, Frank? A similar situation there as silver. It's been a beaten down metal and its way off its pre-financial crisis highs from over a decade ago. Any thoughts on platinum? What are you expecting there?

Frank Holmes: No, I think it'll do a sort of a catch-up as the economy starts to turn. But, I think the bigger part is the supply of platinum is not as stressed as palladium. And it's interesting for me is that you can only go so many years and all of a sudden it explodes on the upside and that's what takes place. I think that that's very, very positive for us. We're going to see these explosive moves. Very few people forecasted in 2019 that palladium would go from $1,000 to $2,700.
Well, if you go for enough years you don't have supply and you have basic GDP growth, then all of a sudden you get this huge move. And I think you're going to get in gold. I think that gold is going to ignite and go through $1,900 and go up like palladium did last year, $2,700. And then all of a sudden silver is going to have this massive move to $50 that everyone will all of a sudden be surprised over.

Mike Gleason: Yeah, that was a very interesting dynamic when we saw that major divergence between London, where the spot market is very active and the physical market and U.S. futures and we saw huge divergence in price there as refiners around the world were scrambling to get metal to the U.S. to satisfy futures contracts and make a nice spread.

Frank Holmes: Well, it's a great question. I'm very, very bullish compared to a year ago in the miners. And I'll give you a couple of reasons why. The CEOs now and the board of directors of a lot of these companies are much more sensitive and focused on the value metrics per share. And that's one reason why I launched the GOAU because I just got fed up with this value destruction by dumb mergers, dumb financings, and you saw that 46% of the GDXJ's stocks in that ETF had done diluted financing. So, they diluted the revenue per share, the cash flow per share and the reserves per share. And that's one reason why it didn't perform as well. And we go back to the year 2000, we've got a 20-year history that bullion has been up 80% of the time. It's outperformed Buffett by two to one.

Mike Gleason: Well, finally, Frank, as we begin to wrap up, give us some final thoughts here, maybe chime in on the state of the country. We've obviously got some tumultuous events going on right now with the COVID pandemic in particular and a presidential election coming up. And one would think that Trump is quite a bit more vulnerable now in November than he was say a few months ago. So, there are a number of black swans circling about and we ask for your help in interpreting it all and advising our listeners as to what they should be doing at a time like this. So, comment on that or anything else you care to as we close here.

Frank Holmes: Well, I publish every week, I have over 50,000 followers in 180 countries, and it's always a SWOT analysis of gold or my travels and bond markets. There’s always four factors, strengths and weakness of last week and opportunities of next week. It's at USfunds.com. And I try to comment and be as apolitical as possible, but I think what's really important for investors to recognize that President Trump is the only president that I know of that wakes up every morning, looks in the mirror, fixes his hair, and then wants to know what the stock market's been doing. And no other president has focused on the stock market. And I think that a lot of these millennials that are so negative on the president, but because he's always talking about the stock market and it's a leading indicator, they piled in when they were stuck at home. They couldn't go spend their money at casinos or bars or beaches, etc. for that experiencing world, they all became day traders.

Mike Gleason: Yeah, well, we'll leave it there. Well put. That's a good summary and kind of crystallizes it pretty well. Well, we appreciate the time as always and enjoyed having you back on. Before we let you go, as we always do, please fill listeners in on your firm, U.S. Global Investors. And then also tell them more about that Frank Talk blog that you spoke about a moment ago which we enjoy so much.

Frank Holmes: Well, thank you. It's just USfunds.com. And if you're interested in our ETFs, it's JetsETF.com. We have lots of research and you can find GoAU, GO GOLD is there. It's outperformed the GDXJ by 7% year-to-date. And it's outperformed it 90% of the time since we've on a rolling 12-month basis as we launched it. I'm very proud of it. I put a lot of robust activity into it, like 8000 hours into launching this product just like I did with JETS. And so if you're looking at gold equities, it's 30% royalty companies, and it's a way to play that high quality gold equities, and we rebalance it every quarter for those that are protecting and growing their value factors per share.

Mike Gleason: Well, thanks as always, Frank. Have a great weekend. Enjoy your summer and we'll catch up soon. Take care.

Frank Holmes: Thank you.

Mike Gleason: Well that will do for this week, thanks again to Frank Holmes CEO of U.S. Global Investors and manager of the GoAU Gold Fund. For more information the site is USfunds.com. Be sure to check out the previously mentioned Frank Talk blog for some great commentaries on gold and other related topics. Again, you can find all of that at USfunds.com.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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