Frank Holmes, U.S. Global Investors, HIVE Blockchain – JETS, Bitcoin vs. Gold, & How To Play Supply Chain Issues | #371

Episode Summary

Executive Summary: Frank Holmes argues that gold and Bitcoin are different expressions of the same macro fear—currency debasement—but serve different investor needs: gold for asset protection and Bitcoin for digital scarcity. He details how regulation and market demand pushed him from a Bitcoin ETF idea into crypto mining, and how similar quantitative, factor-based frameworks drove successful ETFs in airlines, gold miners, and shipping.

Main Topics: Gold vs. Bitcoin as dual hedges against monetary debasement (Priority: 5/5): Holmes says both gold bugs and crypto enthusiasts respond to government money printing, but gold is framed as conservative asset protection while Bitcoin is more aggressive, fast-money speculation and digital scarcity. From Bitcoin ETF rejection to Hive Blockchain (Priority: 5/5): He explains that SEC/KYC/AML concerns made a Bitcoin ETF impractical, so he pivoted to crypto mining—owning freshly mined coins on balance sheet as a clean, ETF-like exposure. ETF product design and smart-beta methodology (Priority: 5/5): Holmes describes how quantitative screening, rebalancing, and factor selection drove the success of JETS, GOAU, and the new shipping ETF, emphasizing that active research powers ostensibly passive vehicles. JETS ETF and the airline recovery trade (Priority: 4/5): He recounts how JETS was built around airline fundamentals, hedging, ancillary fees, and travel demand, then surged in retail interest during COVID as travel reopened. Gold miner strategy through royalties and quality factors (Priority: 4/5): He contrasts destructive traditional miners with royalty models and quality filters like free cash flow and enterprise value, arguing these improve risk-adjusted exposure to gold. Shipping, logistics, and inflation-linked opportunities (Priority: 4/5): A new ETF targets marine shipping and air freight because shipping activity correlates with PMI and because post-COVID supply-chain disruption, green-energy policy, and inflation have boosted pricing power. Balance sheets, mark-to-market, and future corporate treasury assets (Priority: 3/5): Holmes argues that mark-to-market accounting and inflation may drive companies to hold Bitcoin, gold, or other hard assets on balance sheets rather than idle cash or T-bills.

Key Arguments: Gold and Bitcoin come from the same distrust of fiat money, but gold is a prudential hedge while Bitcoin is a speculative, digitally native store of value. Mining crypto avoids AML/KYC issues of an ETF because newly mined coins are “virgin” assets never previously transacted. Hive’s thesis is to own the mining infrastructure, benefit from cheap/green power, and hold mined Bitcoin/Ethereum on the balance sheet. Smart-beta ETFs are not truly passive; they require substantial active research, data scrubbing, factor testing, and quarterly rebalancing. JETS worked because airlines had improved economics after bankruptcies, began earning meaningful ancillary fees, and benefitted from retail investors tracking travel recovery in real time. Gold miners are better owned through royalty-heavy, quality-filtered portfolios because many miners destroy capital while royalty companies have SaaS-like economics. Shipping and cargo exposure is attractive because logistics bottlenecks, energy policy, and global trade/reopening create sustained pricing power and link closely to PMI. Inflation may be understated in official metrics, implying gold could have much more upside than current prices suggest. Corporate treasuries may increasingly diversify into hard assets like Bitcoin and gold as cash yields remain low and accounting rules favor mark-to-market assets.

Data Points: Bitcoin block reward: 6.25 coins per 10 minutes - Used to explain “virgin coin” mining economics and supply shrinkage Initial mined coin supply before halving: 12.5 coins per 10 minutes - Referenced as the prior Bitcoin block reward before the halving Hive revenue: $800,000 per day - Holmes describes current daily revenue for Hive Blockchain Hive footprint growth: Triple over the next two years - Projected production expansion Hive valuation swing: $5 million to $100 million, then down to $2 million - Illustrates crypto volatility after launch and crypto winter Jets ETF volume: 40,000 to 800,000 shares per day - Retail-driven volume explosion during COVID Jets ETF asset growth: $12 to $28, then $22 - Describes the ETF’s price behavior after COVID lows Air travel volume before COVID: 2.7 million TSA clears/day - Average U.S. TSA throughput mentioned as a travel baseline Air travel trough during COVID: less than 90,000 on April 15, 2020 - Represents the collapse in travel used to contextualize JETS Farmland loss: 4.8 acres of cropland per minute - From the sponsor ad on farmland scarcity and urbanization Farmland access minimum: $15,000 - AcreTrader investment minimum from the sponsor ad Gold performance since the century start: 80% of the time positive - Claim about gold’s historical frequency of positive years this century Gold outperformance vs. S&P 500: 250% - Claim about cumulative outperformance this century Real interest rate backdrop: all-time lowest negative real interest rates - Holmes uses this to argue gold should benefit Possible fair value for gold: $4,000/oz - His estimate based on negative real rates and inflation skepticism Corporate tax reference: 15% - Mentioned in discussion of G7 corporate tax coordination Millennial wealth transfer: $10 trillion - Projected transfer from baby boomers to younger generations Ship costs example: $12/kg to $120/kg - Used to show logistics inflation for shipping chips to Sweden Dubai tax-free income threshold: first $100,000 - Discussing why young professionals are attracted to Dubai

Pivotal Quotes: "Hardcore gold bugs and hardcore crypto hornets... read from the same Old Testament." — Frank Holmes: On the shared macro mindset behind gold and Bitcoin "When you mine, you mine the virgin coin." — Frank Holmes: Explaining why crypto mining avoids ETF compliance issues and creates balance-sheet assets "Gold is used as money... Bitcoin is strictly the digital world of a store of value." — Frank Holmes: Contrasting the functional roles of gold and Bitcoin

Implications: The conversation suggests hard assets, crypto infrastructure, and logistics-linked themes may be durable portfolio diversifiers. It also implies ETF success comes from quantitative design plus strong thematic timing, and that regulation and demographics will keep pushing markets toward digital assets and real-asset hedges.