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Edited Transcript of GROW earnings conference call or presentation 14-Feb-19 1:30pm GMT

Q2 2019 U.S. Global Investors Inc Earnings Call

SAN ANTONIO Feb 19, 2019 (Thomson StreetEvents) -- Edited Transcript of U.S. Global Investors Inc earnings conference call or presentation Thursday, February 14, 2019 at 1:30:00pm GMT

TEXT version of Transcript


Corporate Participants


* Frank Edward Holmes

U.S. Global Investors, Inc. - CEO, CIO & Director

* Holly Schoenfeldt

U.S. Global Investors, Inc. - Public Relations Leader

* Lisa Christine Callicotte

U.S. Global Investors, Inc. - CFO




Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [1]


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 am 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, and the company became a registered investment adviser in 1968 and has 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?


Frank Edward Holmes, U.S. Global Investors, Inc. - CEO, CIO & Director [2]


Thank you, Holly. Thank you, everyone. Happy Valentine's Day. We will talk a bit about that love trade when we get to gold. But right now, our strengths are we are 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 running -- trying to launch ETF have impacted our -- the volatility of our own stock. And I think that's important. It is positively and negatively; debt-free, strong balance sheet, the reflexive cost structure, and monthly dividends, and return on equity discipline.

For my next visual, I want to thank all of our shareholders, those, in particular, CD 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 has put us strongly in their index funds. But I just want to really thank active fund managers because I realized -- and I'll talk about it a little later.

These are the challenges of being an active fund manager, and some of the issues with this whole phenomenon of ETFs and what we're doing in that space. But I think the other important part is that we've specifically paid, for more than 10 years, a dividend. It's modest. The yield is more attractive than the S&P 500. And we've continued to buy back stock basically as a quad approach. And we buy back stocks as the stock gets more volatile, and we may suspend or discontinue anytime. And for the last quarter, we bought back a minimum amount of 11,000 shares, which is approximately $13,000.

Our balance sheet, as you can see, has lots of securities and investments, and it's something that's important for us as we all -- 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're 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 that 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 in the last quarter on our reporting.

So the next one is to show you that the assets, they're declining. I see the slowdown 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 2 headwinds against us: one was the money leaving emerging markets; and b, the money that was going was predominantly going into U.S. ETFs. So from that end, we held up on a relative basis. Still, we've got to find that magic button that turns around so that we've got this asset growth.

The next visual is to 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's made my voice a little raspy this morning. But follow the money is outflows from domestic equity mutual funds have gone in ETFs. And 90% of these are just going to ones that are basically free. And I find that sort of hypocritical. That is you cannot and I cannot induce an investor to put money into our funds by offering them a toaster, and the banks used to do that. I remember when I first moved to Texas that you could get a toaster if you opened up an account and that's -- you just couldn't do that in the fund business as an inducement. But you can induce them with cheap fees, which basically is still an inducement. And it's a flawed process that insists cheaper is better. And it's one of the reason why when we've gone into the ETF space, we've remained a 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 mean, the index for the New York Stock Exchange; and same thing with GOAU or GO GOLD and -- but the idea that just cheaper is better when it comes to investing is really remarkable. That's where the assets are flowing. And that means that money is going into -- 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 --that used to be -- like an arbitrage of buying the cheapest 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 in index has come with some unexpected consequences, including price distortion. We've seen this in the gold business. We saw it in the GDX and GDXJ that -- these are 2 big gold equity ETFs and they ended up having to own each other. Then they ended up having to unwind that and along with owning too much, owning more than 20% of 20 public companies. And that unwinding, which took a year to basically accumulate, was unwound in 3 days, damaged the small-cap gold stocks, which we -- it has a collateral damage with our active funds, nothing to do with good or bad stocks. And then last year, we had Vanguard's board get out of anything to do with gold. And a lot of gold fund investors have jumped and bought their index because it was cheaper than ours, but we outperformed them. And lo and 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 our gold ETF gold, GO GOLD, GOAU, 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 a lot of the 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 in the equity markets, we're going to see some massive distortions with the S&P 500 because the trillion dollars of stock buybacks means that floats are smaller. Money is going into overvalued stocks at 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 from the financial media investor experts on a range of topics that 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 in capital. And just the fact now we're seeing that the big wire houses will now allow a multimillion-dollar account to buy stocks under $200 million market caps or get margin under $10. So that whole small caps space is being orphaned with all of these interpretations of regulations and rules by this sort of slew of compliance officers that have no experience and understanding of how capital is formed, how people come together, savers and investors, to speculate or to invest in income. It's just rules upon rules. And so I'd like to highlight that. Eventually, it's going to come back to hurt those investors.

But here's the next one that I'm very proud of because despite headwinds, gold continued to outperform in 2018. And on a regular basis, in particular, the CNBC and New York is so different than the culture of Asia, where there's a culture of affinity for gold versus the U.K., which has a more balanced view for gold. Gold is bad. Gold is too volatile. But the facts are the -- and 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 then -- and so when I show this, now -- well, short term, it hasn't. And it'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 funds has just gone up dramatically and in small fund shareholders, it's cost more money and -- but still, we've given 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 affectionally known as. They're a macro force to not to ignore. They are 40% of the world's population. They have widened 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, getting -- 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 Chinese New Year, and we usually get a big run-up into it. And we get the spoofers in the gold markets 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 a slowdown as we're coming into those markets because gold has 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 Federal Reserve. It's monetary and fiscal. Today, Jerome Powell is the Chairman of Federal Reserve. So it's real interest rates and 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, 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, on this fiscal side, a wash trade. And I've seen this since the year 2000 when gold was actually taking up, has been since 9/11, with the Patriot Act, has this incredible growth in AML, anti-money laundering laws. The regulations continue to grow globally. Most of the rest of countries in the world are afraid of dealing with the U.S. So like in Switzerland, they won't even allow you to have 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 interestingly 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're seeing this global regulatory AML wars take place. That's impacted. So I think that gold is an interesting asset class, a diversified portfolio. And I think the unwinding of QE is -- really as a monetary aggregate, is having an impact on the volatility of stocks.

So here's the next visual, like it's all about managing expectations. And I think it's important for you to recognize bullion is about the same as the S&P 500. Crude oil is extremely volatile. 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 will be looking at the days when you have gold down more than 1%. If it's down 2% a day, usually, that's a lower-risk day to take on a position and vice versa. If it's up 2% or 3% a day, it's just time to take some profit. 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, and 70% of the daily trading in a stock market are quants. It's quant driven. And quants look at this DNA of volatility and they apply it to their asset classes. They look for correlations that are not directly cause and effects that you would normally think of, but they just look for patterns of correlations and they call how long will that last for when they do what is called a gamma that, that idea is good for maybe 1 day or 7 days. And that is showing up with press releases how stocks can be impacted up or down.

Now I'm going to jump over to the crypto world. So I was trying to launch an ETF in that space and recognized quickly that the regulators do these AML and KYC, know your client, rules were really pushing back but allowing -- and I understand why an ETF that would own bitcoin because their concern was some hacker would turn around and be able to get paid in bitcoin, and maybe that showed up in the listed ETF. But be it as it may, it's a rational reason. I had all this knowledge and so I launched with a coinvestor the launching of HIVE Blockchain, which is 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 chains with HIVE, and HIVE grew dramatically 3 months of -- in the last quarter 2017 raised $200 million predominantly from institutions at 3 different stages, deployed it. And we have this huge revenue and cash flow, but it declined naturally with the decline between 70% and 90% for bitcoin and Ethereum.

But this next visual is to 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 suppressions and push down the price. We've seen this in gold. We've seen it, but it 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 markets. It's been well known. There's been lots of litigation. We have written about this. We've commented about this. So you're seeing in bitcoin, I think it's a fair market. What's interesting to me is that still the enthusiasm. The conferences are packed. I would never get 2,000 people for a gold conference if gold had fallen 90%. It just wouldn't happen -- or if the S&P fell, 30%. No one is going to come up to a small-cap or big-cap gold equity conference.

So people are pretty sentiment-driven, but this ecosystem of crypto around the world is really quite fascinating to me. And I saw it in India where the Supreme Court ruled against the Federal Reserve basically of India, the stock going crypto exchange. And then merely a week later, they came out with -- they're doing their own cryptocurrency as a country. So we're seeing many countries looking at exploiting 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 universities basically buying for their pension funds and some of these cryptocurrencies. 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 now 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 emerging market prices of '97, '98, it takes 4 years to repair that damage. And we saw last -- a week ago, Friday, bitcoin was up 17% and high jumped 70% in a day. It moves just with that and rolls up with it. So we become a proxy. A HIVE Blockchain is a derivative play on the space. It moves in the same DNA volatility. And the second rule of that appears to be growth. 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 come back to this sort of educational thesis, suppression of gold. You can see that the decoupling took place in 2012, the QE2 and 3s. And now the QE3 is now being unwound. We're seeing gold all of a sudden get a base, which is unusual because of real interest rates. But I have been mentioning all over the world that last year was a phenomenon of real interest rates to the U.S. spread between what Japanese government would pay you versus what the U.S. government would pay you versus what the E.U. countries would pay you. That difference was so great that 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 write about it a lot. We comment 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 crypto world. So as I mentioned, rather than spend a lot of time and effort 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 1-day volatility of bitcoin is 5% versus bullion, 1%, and the S&P is 1%, in theory up. So the 1-day and the 10-day volatility of these cryptocurrencies is substantially greater, and that's what impacts the overall asset class. And so you can see here that investors appear to be using HIVE as a proxy for bitcoin and Ether. And you can see that HIVE has come down just like with the currency.

The next visual is just to give you some highlights regarding HIVE Blockchain technology. It's all 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, like anyone in the -- 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 are always assessing cost.

And I'm going to turn it over to hardworking Mrs. Dynamite of the financial world and a bear market for the fund -- gold fund business, Lisa Callicotte.


Lisa Christine Callicotte, U.S. Global Investors, Inc. - CFO [3]


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 investments that were expected -- that is expected to cause our earnings to be more volatile. We adopted accounting standard update ASU 2016-01 recognition measurement of financial assets and financial liability effective July 1, 2018. This amended the guidance on -- and the classification of the measurement of investments and equity securities as per disclosures. Starting in this fiscal year, some of our corporate investment 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 the cumulative 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 our decline in market value and 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 costs. 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 recorded 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, non-current on our balance sheet. We own 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 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 revenue of $1.8 million, 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 the increases 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 for the quarter end is $322,000.

On Slide 31, we see that other income loss for the quarter was 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 security 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.


Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [4]


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 3/4 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 publisher. 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 at 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 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 TheStreet, 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. And 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 3 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 and 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 these subscribers who receive 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 T-shirt, please shoot us a quick note to info@usfunds.com after today's presentation.

Now we'd like to open it up to questions. And as a reminder, you can enter the question in the control panel on your screen.


Questions and Answers


Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [1]


And I do have a couple of questions. The first, I will 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?"


Lisa Christine Callicotte, U.S. Global Investors, Inc. - CFO [2]


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 that was a small area that 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 if a favorable opportunity presents itself. So we are progressing in leasing, but we're also keeping our options open.


Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [3]


Great, thank you. And Frank, you kind of mentioned this during the presentation, but this question is for you. It says, "Do you think GROW stock will continue moving with the price of crypto? Or do you think it will revert back to tracking the movements in gold mainly as it's done in the past?"


Frank Edward Holmes, U.S. Global Investors, Inc. - CEO, CIO & Director [4]


I think it moves with both. What's more volatile in the short term, as we've seen, is bitcoin and Ethereum. So I think that impact on our balance sheet is attracting investors that use us a second derivative in that crypto world. Where a lot of people do not want to go in, open an account, Coinbase. They don't want to -- they're afraid of that. They're not afraid of buying stocks and speculating. And so I think that's the biggest part. It's to recognize that small-cap investing, micro-cap investing in new technology, new biotechnology, new oil or gas, fracking or gold mining exploration or blockchain, the mining, this is all speculative investing. And from what I heard when I was in the conference recently was really surprising to me. In Vancouver, we had 2,000 people show up on a Sunday morning. 500 people showed up at 8:30 in the morning. And the comments were that it's okay to go. And 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, they are looking to speculate in the Ethereum market. They're using us as a proxy on -- or they're going directly to HIVE.


Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [5]


Great. Thank you. One more for you, Frank. Can you share any gold or updates as we move towards the rest of 2019 that you want to leave listeners with?


Frank Edward Holmes, U.S. Global Investors, Inc. - CEO, CIO & Director [6]


I think that 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 economies. They had no control of it. Now they have GDP growth rates twice the euro. They have been big buyers of gold. So I think you're going to continue to shift and see that buying of gold from China, Russia, Eastern Europe, the Eastern Europe block countries as a way to diversify themselves just like Ray Dalio does, who runs the biggest hedge fund in the world. And he's always advocated positioning gold as a parity against bonds and other currencies. And I think it's just wise for investors to follow the 10% golden rule and have some exposure towards the industry and rebalance once a year.


Holly Schoenfeldt, U.S. Global Investors, Inc. - Public Relations Leader [7]


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.