Well known investor Frank Holmes of US Global Investors took some time to talk to us this week (MP3 Link here), and the ‘always on the go’ dynamo was enlightening on many topics.  For those of you who are unfamiliar with Frank’s company, US Global Investors is a registered investment advisor with a unique expertise in emerging markets and resources, currently managing somewhere in the vicinity of $1 billion.

The company is best known for it’s focus on the natural resources sector, but Holmes is proud of their track record with funds in Eastern Europe and especially China, who he refers to as the 800 pound commodity gorilla. Frequent trips to Asia have proved critical in Holmes’ appreciation for how China drives our resource funds.

Bullish on gold…

Frank believes gold should be $1400 for three reasons:

  • Real Global GDP has bottomed and is on the rise, significant for the ‘love trade’ in emerging countries.
  • There is a strong repetitive pattern for gold to rise with religious holidays, which start with Ramadan in the summer and end with Chinese New Year. We’re in that part of the season right now.
  • Countries in Europe and China are increasingly concerned about their economies and are creating stimulus.

Look for the CEO who knows the Street, and expect exaggerated claims…

Holmes says he is extremely selective about who he invests in. He insists that CEO’s know all the newsletter writers and the buy and sell side analysts so they can communicate their story to the marketplace.  In his experience, 80% of CEO’s don’t know ‘the street’.

And, the marketplace is so competitive, (and so risky) that promoters feel compelled to embellish their story with all kinds of adjectives, most of which are gross exaggerations. As an example, recent research into the subject revealed that when a CEO is advertising production to grow at 10% over the next 3 years, it’s really minus 5%.

First Mover Advantage . . .

According to Holmes, CEO’s who have what he calls ‘first mover advantage’ are the real talent in the investment world.  First mover advantage results from having explicit knowledge – like the information you need to drive a car, and tacit knowledge; walking the ground, getting to know people, values, gossip etc.  It is an arbitrage between the two.

When pressed for examples, Holmes was quick to name Frank Guistra as someone who can feel and grasp intellectually that we are due for a turn. He also credited Serafino Iacono for taking him into Colombia early, in the UK Andrew Groves, Robert Friedland, founder of Ivanhoe Mines and GMP’s Gene McBurney who was instrumental in financing Blackberry. Paul Reynolds of Canaccord Capital and San Francisco portfolio manager Paul Stevens who was early in the US junior resource market also made Holmes’ list of global citizens who are quick to see change and adapt.

Keys to maintaining balance and energy in your personal life:

Working out – Frank is serious about working out, and credits a vigorous fitness regime with helping him maintain energy and focus. And he’s not alone. He shares that many of the best executives he knows are also dead serious about their physical fitness. Holmes has run eighteen marathons in his time!

Meditation and Prayer – daily, according to Frank, is another key to his tremendous output. He admits that, given his demanding international schedule, balance can be elusive.  But he credits his father, who was an Anglican minister, with enlightening him early on as to the benefits of a daily spiritual practice.

Favorite Websites:

Frank has a diverse list of sites he visits regularly to keep speed with what’s happening in the global markets.  He loves ‘Psychology Today’, especially the behavior finance articles, because investing in capital markets is an emotional business, driven largely by fear and confidence.

Holmes also likes ESPN for sports, Harvard Business Review, and Ted.com.  He visits Kitco and 321Gold.com as the ‘go tos’ every day, and made special mention of Dennis Boyko’s site ‘GoldMinerPulse’.

Advice for entrepreneurs:

Frank Holmes says surround yourself with good people and good things will happen for you.  He believes in having a strong personal value system, and recommends “The Four Agreements” (based on the writings of don Miguel Ruiz) as important reading.

He also suggests joining EO (Entrepreneurs Organization, go to eonetwork.org), where you’ll be surrounded by a hundred other entrepreneurs who will inspire and motivate you.

A conversation with Frank Holmes is, in itself, pretty darned inspiring; you can’t help but catch his enthusiasm for what he’s doing.  If you’d like a little more inspiration from Frank, or information about US Global Investors, go to www.usfunds.com.

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