FRMO Corporation (FRMO) Earnings Call Transcript & Summary

Good day, and welcome to the FRMO Corp. quarterly conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Thérèse Byars. Please go ahead, ma'am.

Thank you, Brandon. Good afternoon, everyone. This is Thérèse Byars speaking and I'm the Corporate Secretary of FRMO Corp. Thank you all for joining us today. The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will prove to be profitable or that future investment decisions will be profitable or will exceed equal or exceed the past performance of the investments. For additional information, you may visit the FRMO Corp. website at www.frmocorp.com. Today's discussion will be led by Murray Stahl, Chairman and Chief Executive Officer; and Steven Bregman, President and Chief Financial Officer. They will review key points related to the 2021 first quarter earnings. A summary transcript of this call will be posted to the FRMO website in the coming weeks. A replay of this call will be available for 1 month, beginning at 7:15 this evening. To listen to the replay, the toll-free domestic number is (888) 203-1112. The international toll number is 1 (719) 457-0820. When prompted, key in the passcode 1236365. These dial-in numbers are noted in the FRMO press release dated October 15, 2020, which may be found on the FRMO website by clicking the link called Information Statements & Announcements. The press release can also be viewed on the OTC market's website by typing in the ticker symbol FRMO and clicking on the News link. And now I'll turn the discussion over to Mr. Stahl. Go ahead, Murray.

Thanks, Thérèse, and thanks, everyone, for attending. So obviously, today is -- I'll point out some things on the income statement. I'll point out some things on the balance sheet. I'll give the audience some of the customary information, which is ever-growing, that they usually ask for. I'll do some highlights of some things we're up to, that I think you'll find interesting. And then we'll turn it over for questions, and I should tell you, again, this time, I haven't seen the questions. I don't know what they are. I have not the slightest idea of what they are, but I have a feeling they're going to be very interesting. So with that, let's start with the income statement. And the first thing you'll observe is you'll see a lot of big negative numbers. And a lot of big positive numbers. Anyway, if you can guide your eye to net income loss for the most recent 3-month period, what you'll see is with all of that, it comes out to comprehensive income attributable to the company of roughly $182,000. So what does all that mean? It means that our investment in Texas Land Trust from May 31, August 31, declined -- actually declined precipitously. But since we consolidate HK Hard Assets, a lot of that is not actually attributable to us, so you back that out. On the other hand, we had a fair amount of depreciation in our investment in South LaSalle fund, South LaSalle, which you may recall is our vehicle of rolling our seats in Minneapolis Grain Exchange. Minneapolis Grain Exchange is in the process of merging with Miami International Holdings, otherwise known as MIAX. MIAX started its life as primarily an options exchange. In September 25, actually began operating a real-life equities exchange, so it's almost a month, it have been operating actually as exchange called MIAX PEARL. And it's getting to be a pretty big up. So that's sort of the income statement highlights. A lot of things going on, but it ends up -- the impact cancels each other out. On the balance sheet, the first thing I direct your attention to is, with all that activity, and I said for the quarter, it's only $182,000 of net income. Well, that's the GAAP rules. But if you'll turn your attention to shareholders' equity attributable to the company, it's a little bit less -- was on May 31, in the event, a little bit less, $115 million. Now we're up to $116.2 million. That's the shareholder equity attributable to ourselves, shareholders, I mean all of us collectively on this call, any of the FRMO shareholders. So when I say all of us, I mean the FRMO shareholders, not myself and Steve and the individual shareholders. I believe I look this up the other day, something around it. I don't think I'm very far off. I believe the record shareholders' equity for the FRMO bunch, it's roughly $127 million. So you can look at it this way, we've been through an oil price crash. We've been through a global pandemic and a lot of other things in the last 6 months. And our thesis was that we were prepared for some gruesome things. Well, I'd leave it to you to look at the share price of TPL and some of the other things that happened. And this is -- we are $116.2 million shareholders' equity, down $127 million and it's a record. So all things considered for a global pandemic and the worldwide depression, I have to say not so horrendous. I wouldn't want to experience it again, but I think we were reasonably -- we're never really prepared, but we were reasonably prepared for this sort of thing. The other points are statistical. So I will just read you some numbers, if I may, because these questions are always asked, always asked the question, what is our direct and indirect ownership of Texas Pacific Land Trust in sum as of the most recent period, it works out to 52,534 shares. As of September -- it's data that's as of September 30. So it doesn't exactly correspond with the August 31 number. So I thought I'd give you the most recent. And then the next question we normally get is, what is the quantity of GBTC. GBTC stands for Bitcoin investment trust and that share quantity also -- and frankly, as of September 30, 2020, so it doesn't exactly correspond. But we had the number, so you might as well have it. And that number in shares, GBTC, is 550,831 shares. The next thing we normally are asked, which I will give you, if I turn the page here, we're asked, is that coin ownership. And those are as follows, and these are claims that we own directly. There are also some coins we own indirectly, but they're private partnerships, first direct and then the indirect. And these are our pro-rata interest. So direct Bitcoin, 66 coins. Now that is rounded. Normally, we give you to decimal points, but maybe it's better to do it this way because it changes every day in the up direction, I should add. So 66 coins. Litecoin, again, coins that we mined ourselves, 536 coins; Ethereum, 35 points; Ethereum Classic, 662 coins; and Zcash, 52 coins. Indirect ownership by the private partnerships: Bitcoin Cash, 91 coins; Bitcoin SV, 91 coins. The Ethereum Classic Investment Trust, so we had some Ethereum Classic shares, or coins, I should say, in the funds, and we actually contributed them for shares of the Ethereum Classic Investment Trust, and we own 1,546 shares. And then we had some Bitcoin Cash, which we actually contributed to the Bitcoin Cash Investment Trust that gives us 1,375 shares of that. And we also have the XRP, otherwise known as Ripple Investment Trust, and that's 448 shares. And we have the Zcash Investment Trust, that's 542 shares. And we happen to own indirectly through the funds, 209 coins, Bitcoin Gold. Bitcoin Gold, you might recall, is when the forks had occurred several years ago of Bitcoin. We ended up collecting Bitcoin Gold, and we never sell it. We never sold it. So -- and that's actually our pro-rata ownership. What are we working on? A couple of interesting things: Number one, we are, in 30 days, going to launch an ETF. The first time we ever launched an ETF, and the theme in ETF is going to be inflation-oriented. And we're doing it for a couple of reasons: Number one, we think we're going to have some inflation. I could be wrong about that, but we think that we're going to have some inflation; secondarily, whether we're right or wrong, and that's merely a forecast, the popular indexes have moved so radically away from any inflation beneficiaries that inflation beneficiary just as a proportion of the index or the popular index, in any event, is fairly de minimis. So the world needs a product like that. And then it's actively managed as opposed to passively managed. Why actively managed as opposed to passive? I have a feeling, even though I haven't seen the questions, I'm going to get a question about this. So forgive me, there might be answering part of it in advance. But the thing about the indexes is, and we've written this many times, in the fullness of time, in any index, something is going to be the best investment, and it's going to be the biggest investment just by appreciation. So every index ultimately gets top-heavy. And the question becomes, if you're passive, well, you have to accept that. And if you accept it, the first question is, are you even diversified, meaning that if your best investment is too good, in a way, it's a little bit of a curse because you may not want to be in that concentrated. In other words, you ultimately become concentrated. It's one thing to be concentrated because you chose that, it's another thing to be concentrated because it actually happened to you. In the case of index like the S&P 500, it's concentrated in technology stocks, obviously, and it may well be that, that continues for a very long time. But is that something that people really want and desire or another way of looking at the same problem is, if you are looking at the biggest investments in the S&P, look at the smallest. And you ask yourself a question, how many investments in the S&P, meaning how many positions, are 1 basis point in size? How many investments are 2 basis points in size? How many investments are 3 basis points in size? And so on and so forth. Well, anyway, if you look, you will observe a shocking number of investments. And obviously, if an investment is 1 or 2 or 3 basis points in size, in theory, one of those companies could go bankrupt every day and be worthless by the close of business, and the 1 or 2 or 3 basis points that day will have no material impact on the value of the S&P 500 because you looked at the companies themselves, in terms of what are their revenues, what are their total assets, how many people do they employ, what relationships do they have with other companies and so on and so forth. You would then see that if those companies de minimis, though they are in the index as weights, were to actually go bankrupt, it might have de minimis impact on the index. It will be disastrous for the global economy and even more disastrous for U.S. economy. So what does that mean? That means that the index, as a matter of definition, if you look at that way, is no longer diversified in the sense that it doesn't reflect the economy. It just reflects the best-performing stocks, but the purpose of the index was to be diversified and have participation in general economy, not be supercharged vehicle with the best companies that ever existed on the plant. They may be the best companies ever existed on the face of the plant, but it's gotten away from indexation. So I believe we have to bring indexation back to where it was, and we need to bring diversification back to where it needed to be. And I don't think you can do diversified portfolio. Oddly enough, it's almost bizarre for me to be saying this, I don't think you can move back to a classically diversified position without adding active management. So we're doing this ETF, and the first one we've ever done, and I think we're going to do others in the fullness of time. The other thing I'd like to say is that you might find interesting. We've -- subsequent to September 30, we're investing $2,700 to try to build our own cryptocurrency mining machines. Obviously, if we fail, it's only $2,700. We're going to give it a try, and I actually believe we can do it. And if we do, it opens up a different kind of opportunity for us in the world of mining. I think we've gotten a lot of experience just through the last couple of years, we've learned a lot. And I think we could actually -- if we could do this, if we could pull it off, it would really greatly raise our return on invested capital. It will also have implications for our investment in Winland Electronics. So as you probably know, we're we bought some more shares of Winland. We're up to 28.39% ownership. Winland itself, now with its mining, has, as of this recording, this is September 30, again, 2.9898 Bitcoin. So rather, we call it 3. Our proportional ownership, if this is even important to you, is 0.8488. So if you want to add nearly 1 Bitcoin to the -- on a look-through basis, you can do that. I don't know if it's going to change your calculations, but there it is. Anyway, if we can do it, it would dramatically raise our returns of capital, not just for ourselves but for Winland as well because we're both going to be mining, and it's worth a try. So we're doing that. So there is interesting things going on, and we're going to be continuing doing, hopefully, more interesting things, which I'll tell you about next time we do a call like this. So with that, I'll ask Steve, do you want to add anything to what I just said in terms of the outline?

No, not so far. I find this very engaging.

Okay. Good.

I'd listen some more.

Okay. Great. And now to Thérèse, if you'd be kind enough to read the questions.

Yes. I'd be glad to. Okay. The first one says, what is the look-through ownership for FRMO shareholders of MGEX, so the Minneapolis Grain Exchange, and the pending transaction with Miami International Holdings?

Okay. So 2 things there. Let me give you the numbers first. So obviously, as I said before, the vehicle via which we own shares in Minneapolis Grain Exchange is South LaSalle. South LaSalle owns, at the moment, 110 seats of the total 402 seats. That means South LaSalle owns 27.36% of the entirety of Minneapolis Grain Exchange. FRMO, as of September 30, owns 29.91% of the South LaSalle Fund. So you could multiply the 110 seats by 0.2991, and I know I don't want to give you a round number, but that's on a look-through basis how many seats we own in the Minneapolis Grain Exchange. Now in terms of MIAX, you'll observe when you look at the notes of the financial statements, you'll see our carrying value for our investment in MIAX. You might recall that the MIAX shares, even though we had a few, we actually got the bulk of the MIAX shares we currently own for exchanging Bermuda Stock Exchange for MIAX shares. So the value we have, as of most recent date, is $4.33 million. So obviously, all the seats, we could theoretically take some cash, but we don't want. We want MIAX shares. So we're tendering all our seats for MIAX shares. Obviously, assuming this deal closes in due course, I don't know if it will close by November 30. It's possible, but it should be closed by the end of the year. That means by February 28 we're going to, on a look-through basis, have a lot more of MIAX. I hope that answers that question.

Okay. Now I have a series of others and some cover that same topic. But first, what is the current ownership percentage of FRMO in South LaSalle, which you answered? South LaSalle has acquired additional seats after the end of the quarter. Will these purchases increase the exposure of FRMO in MIAX in any way?

No, it doesn't. And the reason it doesn't is because the South LaSalle Fund took in more money, and so we were using that money. So FRMO itself did not bring the quarter or subsequent to it, invest more money in South LaSalle. It's just that South LaSalle has -- it owns more seats. We have -- on a pro-rata basis, we had the same number of seats.

Okay. South LaSalle is a hedge fund. Is the investment of FRMO and South LaSalle subject to management and/or performance fees? And does that differ from other LPs?

Okay. So first of all, South LaSalle is not a hedge fund because it only owns one asset other than some cash. It owns the Minneapolis Grain Exchange. It's just a partnership, and the partnership exists to hold seats of Minneapolis Grain Exchange. There are -- we ourselves don't pay a performance fee. There are clients who are in the fund that if this is a successful investment, there would be a performance fee. So that performance fee would be collected by Horizon Kinetics, and I guess, we would participate via our interest in Horizon Kinetics.

Okay. Horizon Kinetics recently filed a prospectus for an actively managed ETF. Can you talk about HK's strategy with active ETFs going forward?

Okay. Well, I referred to it a little bit. So the first one is the inflation ETF. And believe it or not, I think there is something like 1,700 ETFs in the United States and globally. I just looked this up the other day, and I actually don't believe a number, but my source is the World Federation of Exchanges. You could look it up and maybe I read the wrong line, but I don't think so. Globally, they're over -- well over 15,000 ETFs globally. So that's a big number, and I believe there is one ETF that we could find that's a beneficiary of inflation -- that you could argue is beneficiary of inflation. So why is it big deal? Because unlike other assets in the world of ETFs, you can't -- it's very hard to passively define inflation beneficiary. So let me elaborate on that. Most ETFs are either in index like the S&P 500 or a NASDAQ 100 or Russell 3000 or something like that, where the definition of membership is just being part of the index. There's no stock selection involved. There is no analysis. The S&P says, you're part of the index, and you're part of the index, whatever inclusion criteria are. In inflation, it's different because the functional problem is if there were inflation, would the expenses go up faster than the revenues, in which case, you're not inflation beneficiary and/or would the revenues go up faster than the expenses, in which case, you'd benefit from inflation. But how do you know in advance without doing some analysis. Even if you do some analysis, it's not easy to do. The basic problem is, for most companies, the biggest expense is the people. If you thought about it, let's just say -- and again, I'm making up the number for illustrative purposes, this is by no means a forecast. Let's just say the inflation rate were 10%. So if a company were producing a certain product, is it possible the company could raise its price by 10%? Of course, it is. Could the company then say to the employees, the inflation rate is 10%, therefore, I will grant a 10% across-the-board salary increase on inflation? Yes, of course, it is. However, the oddity is if the company did that, the employees would actually not keep pace with inflation. I know that sounds arithmetically strange. But why is that? Because we live in the world of progressive tax system. So if an employee makes x, whatever x happens to be, and the wages rise by 10%, there have to be in a higher tax bracket, and therefore, the after-tax income wouldn't rise by 10%, it would rise by something less than 10%. The only way to remedy that is, the company would have to increase the wages by more than 10%. But if they did that, they would not be beneficiary of inflation. They'd be hurt by inflation. And you could say, well, why can't the company raise the price of its product by 11% or 12% or 13% or 14% or some other number of percent, and of course, that's theoretically possible for a given company. But it's not possible in the aggregate because every company raised their prices on their goods and services more than the rate of inflation. There would no longer be a rate of inflation. By definition, the sum total, weighted, of course, of all the price increases would be the new inflation rate. So it's not possible. So the only thing that really work are companies that really have relatively low people expenses in relation to their revenue and not all of them work. So you have to do a certain amount of analysis, and that requires active management. So therefore, the ETF strategy, at least primarily is, there are certain contingencies, inflation's just one of them, for which one could arguably assert that one would like to be prepared. So you might or might not think there is going to be inflation, but very few people would assert that the probability is 0. And maybe the probability is 1 out of 100 or 1%. So if that's true, a person who actually believe that might say, well, I'll put 99% of my money in the S&P 500, and I'll put 1% of my money in inflation beneficiaries. That would be a reasonable diversification of assets. Maybe they believe the probability is 2% or 2 out of 100, in which case they change their asset mix accordingly. So there is, we think, a market for -- just because of the rise in indexation and it represents a concentrated variable as a market for other contingencies, which can't be provided for, it's impossible on a passive basis. It must be provided for on active basis, and that gives you an idea of what the ETF strategy is. So there'll be other things being launched. So stay tuned.

Okay. The next 2 has 2 parts, and it's also related to that. Can you give some insights into how different active ETFs are structured, such as portfolio confidentiality and transparency? Will the HK ETFs be materially different in structure than, for example, those of GAMCO with active shares or ARK Invest?

Well, in terms of an ETF, we don't really need any confidentiality. So what we're doing is pretty open. It's the result of research. There is nothing proprietary there other than the analysis we do to select the companies, and we basically share with anyone in any event. So I don't think we're going to need any unusual secrecy arrangements. It's going to be pretty open and honest with people. And we're not going to have trillions of dollars in it probably, I can't imagine we would. But if we ever did, maybe we'd seek another arrangement, but we're not going to have enough money that we won't be able to execute exactly what we want to execute whenever we feel like executing. So there is no reason to hide, and we're not going to hide. We're going -- everything is going to be pretty -- as transparent as it could possibly be under the rules and regulations that we operate under.

Okay. And did you want to mention anything about how it structurally different from GAMCO's active shares or ARK Invest?

It's not material. I mean every ETF has slight nuances because we're using something slightly different, but it's just not material. There is nothing proprietary. There is nothing unique about it. Everybody uses a slightly different operational structure, and it's just -- it's too picky to go into, but it's not material. Let's put it that way. There is nothing unusual. There is nothing -- there is no patents. There is no proprietary technology in it. Everybody uses a slightly different methodology, and we'll use ours, and you'll see -- it will be pretty well disclosed once we're out there, but there is nothing -- there's just nothing that's radically different. Nothing even that's materially different.

Okay. Different subject. Does FRMO still have plans to move from pink sheet listing to, perhaps, a higher OTC markets listing or one of the larger exchanges?

Eventually, we'll get around to that. In the last 6 months or so, given what we went through, I guess, it wasn't our top priority, but eventually, we'll get around to that. But it just wasn't something we're working on right now.

Any thoughts to a stock buyback? I know it's been discussed as a possibility in the past.

Well, last quarter, we actually bought back a little stock. The problem is that for us because we're really a closely held company, stock buyback, I don't think, is going to affect our valuation. What it really means is we're going to have less assets to do things with because the valuation is really set by the handful of people who trade it. And the handful of people who trade it are not going to change that we bought back 5% or 10% or 20% of a float. Your opinion is not going to change. We're not going to get a new -- entirely new base of shareholders. It might be very different if the bulk of our shares were in the float, but I don't believe a share buyback is going to have any material impact on valuation. Or put it this way, you could say that there'll be less shares outstanding and in asset value, well, it won't be the same because we'll have less cash. But maybe we'll get more appreciation on the assets. And you can say in that sense, we get a little more, so to speak, operational leverage, that sense, it could improve it, but then our shares will be less liquid, and the next complaint is going to be, what it's always been is, what are you going to do to improve the liquidity of your shares. So we'll make our shares less liquid. So I don't know that, that's -- that I want to go down that road in a meaningful material way. Or having said that, we bought some shares back last quarter.

Okay. How has the recent Bitcoin halvening affected the mining business? Has the profitability been lessened?

The profitability is not lessened. The issue in the mining business is basically to buy machines with your excess cash flow. And lately, and this is entirely my fault, I have not been buying the machines. So I've kept cash in reserve. You could argue, so it's my fault. You could argue that I should have been buying more machines, but I didn't do it for a number of reasons: One is, not just because of the tariffs, but there was a lot of disruption just getting delivery because of the coronavirus issues. So the idea of laying money out and gained delivery 4 months later because machine only last so long. So to lay the money out and not have it delivered for 4 months, that's 4 months of its productive life because eventually, there'll be another halvening. So I didn't like that idea at all. And then secondarily, I thought there is an opportunity to actually build our own machines. So one of the things is if we can build our own machines, we can get the parts fairly quickly, like in days, like 4, 5 or 6 days, something like that. We have the room. We own a building. And we can buy a lot of parts, so we really had to get storage. We can take our time, and we're not risking a lot of capital, and it could be a lot more profitable than buying machines. If it's not, and it turns out as a failure, we risk hardly any capital. We can go back to buying machines because eventually, like all pandemics, it will eventually -- this pandemic will have an end. I don't know when it's going to be, I doubt it's going to be tomorrow, but eventually, it'll have an end. And at that point, we'll make the equipment quicker, and maybe one day, we won't have to pay a tariff, which is -- it affects profitability because it's a 25% tariff. And so basically, you're paying more for every machine, and I know I'm ignoring the shipping. It's one thing to get it shipped from the Far East, it's another thing to get the parts shipped, and they can be found locally. So it's a big difference in shipping as well. That's kind of what we are doing, and we propose to do, at least in the short run. So I hope that answers the question.

Yes. So the next one shifts to another topic. You have discussed the depressed shipping sector in a positive light many times over the last several years. Containership rates just hit a 5-year high and are still increasing. Any update or thoughts on the sector regarding this promising development?

Yes. Well, it is a 5-year high. It's only a 5-year high because the 5 years that preceded were so low. So it's higher than it was, but it's nowhere near what it could be. You could say, it's improving to a modest degree. Basically, it has been shipping for 5 years, and if the inverse starts tomorrow, I just can't imagine it would start tomorrow, but even if it did, it would take years for those ships to get to the market. So every ship is getting older every single day, and eventually, they get scrapped. They're just no longer efficient. There are changes in regulations. There changes in fuel consumption laws and whatever. So it's an improvement. We're very, very far from having the profitability that we could theoretically have. Now having said that, having been through a number of recycles, once it actually gets to acceptable levels of profitability, it happens just unbelievably rapidly. Once it commences. But if you look at some of like the Baltic Dry Index, it's improved, but it's nowhere near what it could be. So we're still waiting for the big profitability, but I'm glad to see it's improved.

Okay. I believe you have stated in the past that FRMO's initiatives in the mining of Bitcoin had the potential to be more profitable than investing in the currency directly. It's difficult for the typical investor to see how this could be achieved. Could you explain the optimal mining potential and project the kind of return that would result in -- that, that would result in?

Well, let's put it this way. Yes, theoretically, you have 2 ways to get a Bitcoin. You can buy at the new open market or you can mine it, which means you get the machines, you put a hosting facility, and you do what needs to be done. That's a lot of work. So if they were -- if you got exactly the same result, I don't know why anybody would go and do the mining. It's pointless. You might as well just buy it. But if no one did the mining, you couldn't have Bitcoin. There is got to be a profit. The question and the problem is, how much profit it's going to be. Now in the world of all cryptocurrency, just like in all businesses, there's what you call the rent seekers. There are all sorts of intermediaries along the way. There is the mining pool operator that pools or your hash rate, not yours, but all the other people. So you can get a daily payment. It's kind of like everyone teaming up to buy a lottery ticket. There are the people who host, therefore, are selling electric power. You need people who do repair work and so on and so forth. One of the things we've been doing is we invested a limited amount of capital, and you heard one example of it. We want to go around all the intermediaries. We want to get to the point where we're going to do either everything ourselves, including building machines, hosting it, doing everything. In order to do that, we basically had to spend some time learning how to do all of those various things. How do you buy electric power more cheaply? Where are the optimal times to operate during the day because a lot of people, when you host, there is only one option to run the machines 24/7. But in the world of buying power, there are at times a day when power is cheaper. So it might be better if you had control of everything to operate only part of the day. That could dramatically affect profitability [indiscernible] to earlier, what if you built your own machines, they will be a lot cheaper than if you buy the machines from someone else and so on and so forth. So we've been developing, over the last couple of years expertise and doing this thing better and better and better. And to do that, we've just been used -- just for those experiments, we haven't used any client money. We only used our money. And I can't tell you every experience was successful when you do experiments. They don't always work out, but it's been better, I have to say, than we had any right to expect. And it's a lending curve like everything else. So what is all going to be -- ultimately be, assuming we're successful in everything, the rate of return, the honest answer is, I don't know. I can just say, I wouldn't do it if I didn't believe. It's going to be far, far higher than actually buying a Bitcoin. even though we've obviously bought a lot of Bitcoin. We have it, and we think Bitcoin is going to be a very profitable investment, just being more profitable. Another thing to think about in this regard, and it might be a minor point it's worth saying. I think I've stated this before. I have this theory, at the moment, just a theory, I can't prove it, I believe that mint coins ultimately are going to be worth much more than a regular coin. Why is that true? Because ultimately, I believe Bitcoin is going to be -- and the other ones are going to be as well a regular means of transaction, and it's going to happen via banks. And to measure client rules, it's going to be very, very difficult to prove that money is untainted unless you had a coin with no record on that it went through no hands. So I believe there is going to be a business one day to -- that a bank is going to lease mint coins. So let's say, we have 66 Bitcoin, and hopefully, one day we'll have a lot more. We have 66 Bitcoin. They've never been traded. We can prove beyond any doubt that we made those coins, we never traded with anyone. So the providence of that coin is known. If we leased it out to a bank and it can only be used by that bank's clients, the bank's transactional activity will correspond to what's in your client rules. And it can comply with all treasury department regulations. You get a fee for doing that. So in other words, what will happen is, you'll still own your coins because it's your property. Just like if you leased a piece of land or leased an office building, it's still your property, but someone else is using it and you get a rent. The difference is, unlike owning a piece of real estate, you have no operational expense. Whatever operational expense there is in transferring those coins hither and yon, that goes to the bank, and we just get a fee. So therefore, the -- we get a fee. It'd be probably a percent of market value or some percentage of the market or whatever happens to be. If our cost was officially low, the way you might look at it is, let's say, it cost us $5,000 to manufacture the coins. Let's make believe, just for the sake of argument, we had 100 coins, and it costs us $5,000 each. One day, equipment might be worth $1 million, and let's say, we've got a 1% fee for leasing it to a bank, okay? Well, 1% of $1 million is $10,000. If we assume the cost base is $5,000, yield on cost is 200%. You'd actually have, theoretically, since you like numbers on it, a 200% return on your embedded capital, and you have no ongoing expenses. That could theoretically happen. Man, I personally believe it's going to happen, and those numbers are just for illustrative purposes. What if a Bitcoin is worth $2 million, or a Bitcoin worth $4 million or worth $10 million or worth $20 million. Imagine, over $20 million a coin, that's our outlandish number. And you got a 1% fee for leasing it, so 1% of $20 million is $200,000, and your cost base is always going to remain the same, $5,000. Your return on capital is actually astronomical. You don't have to have any numbers like that. Now some people have written recently. This is not my idea, I'm just transmitting the ideas of others. They talk about something called the Bitcoin Reserve. So what is the Bitcoin Reserve? They define the reserve to be the coins that are custodied by the various exchanges. Now exchanges -- because I'm involving exchanges has a very precise legal definition, and you get submitted to certain regulations and data exchanges in the way I think of it. They're really broker dealers, but they call themselves exchanges, and they have on the custody of the coins. So you could look at it this way, which is the way some people look at it, that the coins in custody are the liquidity reserves. So if I want to buy a Bitcoin, I would have to go to one of these exchanges, which I call brokers, and by pouring $2 million to 1 Bitcoin, and presumably, the Bitcoin would come from, somebody who wants to sell it with their coins in custody there. That's liquidity, sir. In the last 2-ish months, maybe a little more than 2 months, the Bitcoin Reserve, which is remember this is sum of all the coins that they have custody in all these various exchanges, it's been declining. I don't remember how much it declined by, but it's a fairly substantial decline in a relatively short period of time. So like anything else, in the world of supply, which appears to be shrinking and the world of demand, which appears to be growing because they're would be clean funds starting over the world, there are people getting introduced to Bitcoin and other cryptocurrancies as well. And supply and demand in the right balance, the price usually goes up. So a lot of people are very optimistic about it for that reason, and it could change upward in a radical way in not-too-distant future is their basic investment thesis. So I think that answers the question.

Yes. The second part of that, you already answered. And the next says, what percentage of FRMO cryptocurrency exposure is allocated to Grayscale, which you gave us those numbers.

Yes, I gave you the number. So obviously, the bulk of it is Grayscale is the Bitcoin Investment Trust and some of the smaller ones as well, like the Bitcoin Cash Investment Trust and the XRP Investment Trust and so on and so forth.

Okay. Recently, HK has filed for an ETF. Will it be a or are you considering a family of ETFs? And how will they be marketed against the large ETF family so they become -- they could become largely held and potentially reach $1 billion or more?

Well, I guess the part...

And one more.

Yes. Okay. Yes, please.

Can I tag on, how do you considered the crypto ETF [indiscernible] participate?

Okay. To begin with, as I mentioned, we filed for an ETF, and hopefully, if everything goes right, more or less 30 days, you never know exactly because you're dealing with the regulators. More or less 30 days from now, we will have an ETF. We wouldn't be doing it just to have one ETF. There is going to be other ETFs that follow it. I know you'd like me to tell you what they are, but I think we have some pretty good ideas. If I tell you right now, there are people with more resources, it's a great idea, if somebody could be listening to this call, and they'll do the ETFs. It's not that I have any great secrets, but I don't think it's a great idea to tell you what it is, although I would love to share it with you But I don't think it's so -- it's such a bright idea. The -- we've actually hired a couple of people that are going to market it. The preliminary results, you never know how much money you're going to get. Preliminary results of what we believe we're going to get on the first day actually exceed my expectations. So I'm not saying we're getting $1 billion, but it actually exceeds my expectations. Everything we're going to do in all the ETFs, they're going to be unique. No one's -- anything we do is going to be different than anything anybody else has done before. As far as a Bitcoin ETF goes, they actually just have an ETF that owns nothing but Bitcoin. I don't know that I'm interested in doing that because ultimately, what's going to happen to that kind of -- I would put that in the genre of passive. So eventually, the technology have had to do it. A lot of people are going to figure it out, and they'll be beating these ETFs over the world, and they'll be available for a handful of basis points. And I don't think in the long run, that's what we want to do. Now there are interesting things to do in crypto currency, and I hope we're doing some of them. And I'd rather devote my attention to that rather than just going for a lot of the AUM, a very short period of time that might deteriorate into a very low fee, although a lot of AUM. And I'm less interested in what I would call gigantism, which is what that is. I'm more interested in proprietary things. So I hope we're moving direction or hope you agree, we're moving in direction of proprietary thing. So a Bitcoin ETF is not on our to-do list right now.

Okay. Next question has to do with inflation. At the conclusion of some recent commentary, a mention was made that there seem to be signs that there was a transition of sorts going on into a more inflationary environment. Inflation headed to an above trend level. Also mentioned was an increase in interest rates, but your indication seemed that the increase would be muted. Can you comment on these descriptions?

Yes. So now, let me do the interest rate first. So other than irrelevant increases, I don't think the world can afford interest rate increase. So 1 basis point or 2 basis point or 3 basis points debate is irrelevant, so we're going to disregard that. So let's just say for the sake of argument, rates went up by 1%. I'm not forecasting, I'm just saying if it were to happen as an illustration, the total debt of the United States of America, that's not the federal debt, and it's every piece of debt that everybody owes, everything from a federal bond to a credit card loan to a student loan to a municipal bond to a state bond, the state GO, General Obligation, whatever it is, that comes to the total $84.4 trillion. How do I know that? Because the national debt clock or the U.S. debt clock is cool sometimes to give that information. That's where I get it for -- from. So it's 84 -- let's say it's $84.4 trillion, trillion with a T. The total interest paid right now annually, on that $84 trillion is $3.859 trillion. So what do you pay it from? You can only pay it from the GDP. GDP of the United States is roughly $19.7 trillion, maybe $19.8 trillion. So let's say, we're $19.8 trillion , which I don't even think it is, but let's say at worse, I think $3.859 trillion and divide by, let's say, $19.8 trillion. That means roughly 19.5% of the U.S. GDP is used or national income is used to pay interest. So what if that number, $84.4 trillion, remember, the total debt of everything and everybody. Even though I personally don't even have any debt really, and a lot of people don't. That makes it even more because it's concentrated in not everyone's hands, but a portion of the country's hands. Well, what's 1% of $84.4 trillion, it's $844 billion. Take $844 billion divided by $19.8 trillion, and you get to see it moves the needle a lot. Now you could have made it a 2% or 3% or 4%. Whatever number you want to use to your interest rate increase assumption. And remember, that $84.4 trillion is constantly, I mean, every hour of every day growing, constantly growing. So it's a moving target. You'll collapse the economy. People won't be able to pay the interest. It can't be done. It just cannot be done. So that's not going to happen. So there are only 2 other things that are going to happen. Theory number one, people can be reasonable and stop accumulating collectively that kind of debt. Unfortunately, I don't see any evidence of that. It's just -- I'd like to wish and were true, it's simply not true. That number is going up incredibly rapidly, and it's not only -- and maybe not even primarily for consumption purposes. Like, for example, it's a $5 trillion private equity business. All it really is, is leverage equity. The way you enhance returns by cheap debt. So a lot of people try to enhance, moderate returns by cheap debt because it's cheap. That's part of the problem, and there is no break to stop. And the only brake theoretically to stop is Central Bank to raise interest rates. But reasons I say before, they're powerless or on the ruling, whichever one you want to use, to do that. So it's going to be a problem. The only other scenarios that set 2 possibilities, and we have the third possibility. And the debt is going to have to be monetized. It's not just the federal debt, but the state debt, local debt, even different kinds of private debt and it is because you saw the federal reserve invest in private partnerships run by a treasury, and it's buying all manner of debt. Every kind of piece of debt you can possibly imagine. So it's being monetized. The only way it can be monetized is putting up money. It's already happening. The only question is, what is the rate at which it's going to continue. We accelerated that. I personally think it will, just because I watch the debt numbers accelerating. So you won't stem the problem that way unless you accelerate the purchases away. And along the way, you can't accelerate the purchases without creating more money. The more money you create, the more inflation you're going to get because that's basically the definition of inflation that the amount of money available is rising faster than the goods and services that are available. We believe in the law of supply and demand and get inflation. That's where it comes from. That's what I ultimately see happening, and I think it's happening, that's why FRMO is positioned the way it is. That's why we have hard assets as well our assets portfolio. That's why we had cryptocurrency and that's why we're doing the inflation ETF. We really believe that's going to happen, and I think a lot of people will come to see that. No guarantee I'm right, but that's the way we see it. So what have I left out in that, if anything?

No, I think that answers it. Yes. Okay. The next few questions, they relate to Bitcoin. Then there is one on the rent front and one on mining. So I'm going to read that we have to do with BTC, the Bitcoin. So with the mining equipment sold to Winland, how many Bitcoin are they mining per day? What are the economics? Also, what are the economics of Bitcoin and other crypto mined by the FRMO [indiscernible]. So basically, when will BTC end?

Yes. Well, it's this way, we spent $400,000 on the mining equipment, and we've been mining for about 90 days, roughly. In that 90 days, we've got a little less than 3 Bitcoin. Now you can look at it this way. Let's just call it 3 because it's going to be 3 in a day or 2. 3 Bitcoin, you can multiply by the price, if you like, that's actually a fairly big amount of money in many days in relation to $400,000 we put up, but you also have to calculate the cost electric power. For Winland, we're paying $0.05 a kilowatt to the power. The expenses for mining Bitcoin crudely right now at $0.05 a kilowatt, is roughly half what it cost to me or what the market value of the Bitcoin is. So a Bitcoin were, let's say, $11,800. If divided by 2 crudely, those are the expenses. It's not exactly that, and the reason it's not exactly that electric power price is constant, the hash rate and therefore, the amount of coins you get. And this is decimalized, it's changing slightly every single day. Some days, you get lucky and you mine a little bit extra and some days, you're not, you mind a little bit less. So you can't give a precise number, but those are basically economics. The economics for FRMO, in some of the machines, not all the machines, some machines are a little bit better because we have a greater variety of locations. So in some locations, FRMO is mining -- it's mining expenses are at a lower rate. If we're successful in our efforts to build the machines and to pay a lot less on the machines, and -- but we'll still be mining the same number of coins, and we'll still be consuming basically the same amount of electric power. So the economics to go up a lot, which is why we're interested in trying this. So I hope that's pretty thorough.

Can you talk about your strategy at RENN fund, and how it is developing?

Well, basically, there are investments that would be better off in a closed RENN fund format. The basic problem when you close RENN fund is, they all seem to go to discounts to net asset value. So it's very hard to ask people to put up capital, and even when successful as investments to basically see it go to a discount to net asset value. That being said, it's an interesting thing in RENN fund. So I'll point to 2 of them, one of them is the way of bringing tax loss carryforward, which we're looking to utilize. And you would think that's worth something. And then secondly, there -- actually, when we got control of RENN fund, there is an investment in there called Petrohunter bond. We got our press release on this, I think, today. So the bonds were theoretically worthless, and they're not worthless, and we actually got a fairly big payment on it a couple of weeks ago, and we may even have more payments. A lot of assets that you could do a lot of things with in a closed-end fund format. You really can't do in an open-end format. We like to find ways to make the fund bigger. Working a lot of stuff. I can't obviously say what it is, but we're working on.

Okay. So the last question says, now that the exchanges have been consolidated, IX, MGEX, Bermuda Stock Exchange, do you ever foresee a day where the entity becomes public? Also, what do you see happening with the bricks rollout on MIAX of goods, is that commercial real estate indexes?

Okay. So let's do -- yes. Okay. So let's do the last part of it first. So the world of exchanges, this applies to every exchange, including MIAX. The world of exchanges in a couple of years is going to be radically different than the way it is today. The way exchanges historically evolved is as follows: the companies, the exchange was a place for raising capital. Companies want to raise capital, the shares. People buy them if they find those to be alluring investments, and then they trade. So the exchange makes money from listing things, exchange makes money, obviously, from trading and exchange makes money from selling the data. And the people put together portfolios and some do it on a stock by stock basis, some to on a macroeconomic basis, I might say, I think the economy is going to be good or better or whatever. And the problem with it is that the securities in general, no matter what they are, they are highly idiosyncratic. So what I mean by idiosyncratic? What do you think is going to be performance over a short period of time, based on the variables you think are relevant, turns out it's not that performance. So give you an example, just in the FRMO case, if you look at PPL because you see it now for initial statements, look how much a decline between May 31 and August 31. It's a lot. So why don't you look at the ISO well on May 31 relative to where it was on August 31 or now even. And why don't you look at the price of natural gas, they're higher, not low. And a price of oil was only marginally higher. Price of natural gas is materially higher. So how can it go down that much? It's no words. If it was May 31, and we had the Wall Street Journal of September 1, and we knew what the price of oil was going to be and the price of natural gas was going to be, we would have thought that PPO is going to go up, and it didn't. So what does they have to do with MIAX? Well, it has everything with MIAX and has everything to every other exchange as well. So it's coming out. You'll see at the index you referred to, but it will be many other indexes. So instead of somebody saying, I'm buying these stocks, I think the economy is going to be good or bad or indifferent. You'll actually be able to make an investment based on your forecast. You might say, the GDP is going to be up 2% or 3% or something else. And if it is like that or more, you also -- may be flows, you'll get paid based on some preagreed upon formula. And if the GDP doesn't go up by that amount or even goes down, you might have to pay in accordance with some prearranged formula. And the idiosyncratic nature of investing will be radically different. Now once you have enough indexes like that, it should be fairly obvious that, that makes conventional indexes completed obsolete. Like why would you buy the S&P 500 because you look the economy is going to go up, if you can invest in the GDP itself. Who would do that? So it's going to turn the world right back to active management. That's what's going to happen to the individual stocks. So the new ways the markets going to work are going to be very different, and it's not that stock investing or options investing or anything else is going to go away. It's just not going to be indexed, the way it is right now because it is too idiosyncratic. That being said, exchanges are going to be very different and an exchanging to clearinghouse is going to be incredibly valuable because there is only 3 clearinghouses in United States of America. One is owned by CME, one is owned by Intercontinental Exchange and one is owned by the New York State Exchange. I don't believe there is going to be any more created. Pretty simple reason that it takes a lot of regulatory bandwidth to oversee a clearinghouse because so the operation is just so critical. And it's not so easy to do either, by the way, it requires a lot of detailed work. So you can do securities like that. Basically, somebody is making investment upon a certain forecast, whatever it happens to be. And you got to put up money. The money has to be held somewhere. Where is it going to be held, it's going to be held in the clearing house. So that kind of business from an exchange point of view, it's a fairly lucrative business because it's tremendously scalable. Think about -- I'm not saying there is ever going to be a GDP security. I'm just making it up because now maybe someone will get an idea, next thing I know, there'll be a GDP security. But I don't know who's coming out of GDP security, but it could happen. So if they did, obviously, contract a lot of money and a lot of money with deposit in the clearinghouse and the exchange business is just an economy of scale business. The more throughput you have in the given operations, the more profitable it is. So exchanges in general that have those faculties, and we're all looking to do things like that. That's the way exchange rates are going to work in the future. That's what every exchange is looking to do. I don't think there's any exceptions in that regard. Some obviously, will be more successful than others. I think that answers the question, what do you think?

I think it does.

Did I miss anything?

No, I think you answered all of those many questions very cogently.

Okay. What's next?

That was our last one.

Okay. Well, in that case, all that remains is to do 2 things: One, Steve, would you like to give some concluding remarks. Do you have anything to add to what I said? Feel free to disagree with me.

No, I don't think so. I'm good.

Okay. Okay. He's good, and therefore, I hope you're good as well, and I'm pretty good. So with that, I'd just like to thank you for your attention, and thank you for your support. And of course, we're going to repeat this in another 3 months, and I hope you enjoyed the presentation. Hope you found it helpful. And onward to the next -- whatever the next thing is we're going to do. So thanks, everyone, and we'll see you again in 90 days. Good afternoon.

Thank you. Ladies and gentlemen, this concludes today's event. You may now disconnect your lines, and enjoy the rest of your day.