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Frank Talk: US Global Investors on Fed Hikes, Trade War Risks, and Trump’s Infrastructure Push

In one of a series of exclusive market snapshots for Bonds & Loans, Frank Holmes, CEO of US Global Investors and one of the most experienced and successful capital managers in the mining sector outlines the main risks to global economic stability, assesses the damage from US-China stand-off and describes Donald Trump as an “economic neocon.”

On Trump: I think Trump remains the biggest wild card for the global economy. We see daily shifts in his rhetoric and policies, and he is unpredictable. But he is consistent in one aspect: going after [Fed chair] Jerome Powell, because the economy is not doing very well. He sees the trade war impacting economic growth, and calls for more rate cuts to weaken the dollar and increase exports.

What is the math of rates falling during economic expansion? Since 1971, every time this combination occurred, the stock market went up 100% of the time. The advantage of a figure like Trump, from an investor’s perspective, is that he is very pro-capital markets. He judges himself by the performance of the stock market – unlike his predecessors. It’s a different world now: Trump is really wielding the tariff stick, going after China, Germany, EU, anyone who he thinks is rigging the game. It’s unprecedented. And that brings volatility to the stock markets; quant funds are using these movements to “pump and dump” on his commentary.

He is pro-wealth creation, but the hard part for the rest of the world, of course, is that they are mostly not invested in US stocks, so the benefits to them are very limited.

Looking ahead, one of the big unknowns is whether Trump will be able to get his touted infrastructure development programme off the ground. But one factor that doesn’t get a lot of coverage is the EPA. Obama had his hands tied by the EPA, which prevented or delayed a lot of projects that his administration planned.

Trump, on the other hand, turned the tables on the EPA, and basically forced the organization to provide explanations for not rubber-stamping projects to the Justice Department. As a result, the approvals started coming through. This shows how government policy is crucial to providing a headwind to strength of demand for commodities required for all these projects.

On US-China trade: Another big risk is the ongoing trade stand-off with China. Trump wants a level playing field, so will look to make a deal. One of the initial talking points could be car-making. If they want unimpeded access to the US, producing cars and selling them to the US, then they can’t charge tariffs and duties on imported cars from the US. Same with semi-conductors. And the same goes with Germany, Europe, and more recently India, along with other trade partners.

How long that will take is the million-dollar question. It looks like China is playing for time, essentially seeing Trump as a paper tiger that Xi can simply outlast. I think they are more concerned about not losing face than the economic challenges the stand-off presents. We’ve had neo-cons in the Bush era, who wanted to start wars all over the world, but Trump’s isn’t like that, he doesn’t want a war. He is more of an “economic neocon.”

On broader macro environment: From a broader macro and monetary perspective, I am quite optimistic. Rates are on the way down, which is a boon for US markets, and that will drive other markets, creating collateral opportunities. But the trade war will remain the biggest headwind.

Global Macro Investor Insights

More than 30 years ago, Frank bought a controlling interest in U.S. Global Investors and has led the company, as CEO and chief investment officer, to become a go-to destination for investors seeking exposure to gold, natural resources, emerging markets and more. In 2006, Frank was selected mining fund manager of the year by the Mining Journal, and in 2011, he was named a U.S. Metals and Mining “TopGun” by Brendan Wood International. In 2016, he and portfolio manager Ralph Aldis received the award for Best Americas Based Fund Manager from the Mining Journal.

Frank is known as one of the world’s leading experts on gold finance and investing. He is the co-author of The Goldwatcher: Demystifying Gold Investing. His award-winning CEO blog, Frank Talk, is one of the very first to appear in the world of finance. More than 30,000 curious investors subscribe to his weekly commentary in the highly popular Investor Alert newsletter, read in over 180 countries and territories. His work regularly appears in Forbes, Seeking Alpha, Wall Street Journal’s “Experts Corner,” Kitco, GoldSeek and much more.

Frank is a true global citizen. A much-sought after keynote speaker at national and international investment conferences, he’s spoken at the Investing in African Mining Indaba conference, the Denver Gold Group’s European Gold Forum and numerous Money Show and Mining Journal events.

His frequent travels, in fact, helped inspire him to launch the U.S. Global Jets ETF (JETS) in 2015, still the only ETF on the market that focuses on the global airline sector. He followed this up, in 2017, with the U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU), which provides investors to companies engaged in the production of precious metals, with an emphasis on the royalty and streaming model.

Besides his writing and speaking, Frank is a regular commentator on financial television networks such as CNBC, BNN and FOX Business. His thoughts on the gold industry can be regularly seen on Kitco News, in collaboration with TheStreet.com.

Always forward-looking, Frank led U.S. Global Investors into the blockchain and cryptocurrency space by making a strategic investment in HIVE Blockchain Technologies, the world’s first publicly-traded company engaged in the mining of virgin digital coins. Frank was appointed non-executive Chairman of the Board, and he now leads the HIVE board of directors, contributing to the company’s vision and overall strategy.

When Frank isn’t working he enjoys spending time with his family, participating in long-distance running – including full and half marathons – reading, and exploring the local art community, whether that’s in San Antonio or in Toronto, the two cities where he splits most of his time.

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