FRMO Corporation (FRMO) Earnings Call Transcript & Summary

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

Thank you, Jenny. Good afternoon, everyone. This is Thérèse Byars speaking, and I'm the Corporate Secretary of FRMO Corp. Thank you for joining us on this call. 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 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 2022 second quarter earnings. 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 6605367. These dial-in numbers are noted in the FRMO press release dated January 13, 2022, 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 Markets' 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.

Okay. Thanks, Thérèse, and thanks, everybody, for joining us. I thought I'd commence by saying 2 things. Number one, I have a little bit of a cough. I don't have coronavirus or anything. I have a little bit of cough. The reason I do is I do too much talking. So I'll try to drink a lot of water and, hopefully, you won't hear anything from me, other than factual analysis. So that's number one. Number two, I'm going to start with an interesting fact by FRMO, comes from the financial statements. So if you'll refer to our November 2021 financials, and you'll see something interesting. So if you look at the line, loss/income from operations before provision of taxes, it's about $2.2 million loss. Now that's largely that Texas Pacific Land Trust declined by roughly 150 points from its prior quarter end number. I may be off a point or so, but that's okay. And you can see the bottom line. Because a lot of that is the HK hard assets, with which FRMO only owns a piece, not the entirety. But what's really interesting is if you look at shareholders' equity attributable to the company, $178 million. I mean you really don't see a tremendous decline in shareholder value, at least as it's computed and formalistically speaking in GAAP accounting. You'll note, if we go back to the income statement, the actual recorded loss is $350,000. But there's a lot of weird things going on. And it kind of balances it out. So when you look at things that way, it's a way of introducing that FRMO's come, in my humble opinion, a very, very long way. There's a lot going on. And I hope I'll have occasion to touch on some more salient points of it. And then I'm sure the questions and answers get more of it. So I'm sure there'll be questions about Texas Pacific, so we'll leave it aside. And I want to go to cryptocurrency. So cryptocurrency, for us, is a real business. And it can develop in a lot of different ways. We're still figuring out how it can develop. We do have -- and I'm going to read these numbers in a moment to you. We do have a fair amount of cryptocurrency holdings. We don't want to be merely a cryptocurrency holding company. We want to be a cryptocurrency operating company, and there are a variety of ways we can go, and we'll touch on each one of them. And some preparation of that, let me just read some numbers to you. We do this every quarter. The first set of numbers are -- crypto won't form another form, held through our private investment funds, in other words, our interest in the private investment funds. So this is the implied share quantities of each of those. So let's read those. Bitcoin Investment Trust, GBTC, 579,695. Bitcoin SV, it's actually Bitcoin Cash SV. There's 2 kinds of Bitcoin Cash. This is Bitcoin Cash SV, which is actually a fork of Bitcoin Cash, 94 units. Ethereum Classic Trust is the Grayscale Ethereum Classic Trust. This will be shares, 4,148. Grayscale Bitcoin Cash Trust, we have some restricted shares, we actually subscribe to these, 9,897. Grayscale Bitcoin Cash Trust is the same thing, unrestricted. We could sell those tomorrow. I'm not going to, but we could, 16,439. Litecoin -- Grayscale Litecoin Trust, restricted, 1,155. Grayscale Zcash Trust, 596. Grayscale Litecoin Trust, unrestricted, 4,645, and some actual shares of Bitcoin Gold that we have, 222. Now held directly, almost all of this, but not all of it, is shares that were units that we mined over the years. So we keep mining. So Bitcoin, the largest quantity, 116.3 actual coins. Grayscale Bitcoin Trust shares, we've actually bought some shares over the years, 7,644 unrestricted. Same goes for Ethereum Classic Trust, 18 shares. Grayscale Bitcoin Cash Trust, 12 shares. Grayscale Litecoin Trust, 6 shares. Litecoin that we mined. Can I have some more remarks about Litecoin, just a minute? 1,194.5. Ethereum, 35. We actually mined Ethereum. Ethereum Classic that we mined, 661.7, and Zcash, 59.9. By the way, I should have said it earlier, so I'll say it now. The shares we own directly of Texas Pacific Land Trust Corporation, is we actually own not many funds, 7,340. Shares we own indirectly, which is -- that's actually owned in various funds, not the least of which is HK hard assets, 50,184, you can add 2, and that's our ownership there. Now another thing that's important to understand, Winland. We used to call Winland Electronics. Now we call Winland Holdings. We own 29% of Winland. Every quarter, we buy a little bit of Winland. So we own over 1 million shares. I always neglect to write down exactly how many shares we own of Winland. So if you'll pardon me, just look up Winland multiply by 0.29, that's approximately how many shares we have. Next time, I'll be better prepared. I'll write down the exact number of shares. I always forget to add on a few shares we buy. Anyway, it's important to note the crypto that Winland has because Winland is mining Bitcoin. Winland has 45.3 Bitcoin. So we have to just multiply 0.29, you get FRMO share. So I just won't repeat that again. Bitcoin, we actually purchased some, 7.4. Litecoin, we actually purchased some in Winland, 14.9. And remember, this is what Winland owns. To get to what FRMO owns indirectly, you need to multiply by 0.29. Zcash -- we purchased some Zcash, 53.5; Bitcoin Cash, 1; Bitcoin Gold, 8.7; Ethereum Classic, 9.4. Those are our holdings. You'll note that as we embark upon our cryptocurrency activities, we stayed within the framework of those currencies that are following the Bitcoin protocol because, as you probably know, Bitcoin Cash, Litecoin, Zcash, et cetera, Ethereum is an exception, they follow the Bitcoin protocol. So my theory, incidentally -- I believe I'm a minority of one in this theory. I believe ultimately that the coins that follow the Bitcoin protocol will ultimately have a value similar to that of Bitcoin. Why do I believe it? Because it has the same monetary policy. The difference at the moment is -- let's use Litecoin as the example. Litecoin has mined proportionally less of the total of coins that are available to be mined. So its inflationary at the moment is, therefore, higher. But ultimately, all of these numbers are going to converge. I believe ultimately, ultimately, some years from now, but nevertheless, ultimately, there's going to be a convergence of these, because ultimately, you're not going to see a lot of trading of Bitcoins or Litecoins or anything else that we kept as a store of value. Why have we kept a store of value? Because everybody is going to know what the policy is. Now a lot of people say, and there's some justification for saying this, I just don't agree with it. How is it going to be a store of value, look how volatile Bitcoin is? Well, the reason that the cryptocurrencies are volatile is, and we said this many times, it's worthwhile repeating, the cryptocurrencies are volatile because the mining economics are constantly changing, the prices of machinery through the rigs to mine. The difficulty rating, which is the number of rigs that are running and how many rigs you have to compete with to actually mine a coin. Those are actual factors. In the case of Bitcoin, that difficulty rating changes, generally speaking, going up. It's changing every 10 days on average. So when it changes, it becomes harder to mine Bitcoin and just like it was hard to mine gold or if it was more expensive to produce wheat or soybeans or something. Let's just say, just to illustrate the point, let's say, it became twice as expensive to own soybeans. Well, the price of soybeans would reflect that, same as Bitcoin. The only difference is the cost structure of wheat or soybeans or gold is really well understood. You're not going to have a major technological change in the manner in which those commodities are produced. That's not true of crypto. You can and frequently do have major changes in the manner in which those things are produced. And those changes, either positive or negative, they really reflect. They were reflected in the price of the crypto. Eventually, people will get that right. Eventually, the -- people are going to agree upon a certain -- is there a certain set of semiconductor or is there a certain protocol, a certain technology, and there'll be a big number of rigs or machines, if you prefer mining. And then those costs will become relatively stable. It's just that at the moment it changes. Now let me make a point about Ethereum. You'll note that -- I don't know if I'm going to get this question. I haven't seen the questions yet, but I anticipate somebody ought to. If they didn't, they really should. Why am I focusing on Bitcoin and not Ethereum? And I'll add to the question. Ethereum has a smart contract. Ethereum has a lot better technology, which is true, by the way. So won't the dominant technologies ultimately triumph, even it doesn't necessarily triumph on a given day. And I'll give you the answer to that in a second, but just to illustrate, a lot of people think that cryptocurrencies are a battle between technologies. They're not a battle between technologies. It's just that crypto -- that Bitcoin as a crypto and Ethereum as crypto are doing very, very different things. So in doing different things, they're going to have entirely different cost structures. So I'm looking for something, a sheet of paper, which you'll bear with me. I memorized these numbers, but I don't want to give them to you unless I actually read the exact numbers. So here they are. Let's start with Ethereum. If you're going to mine Ethereum -- and you might want to write this down. If you're going to mine Ethereum, the state-of-the-art mining rig is the A10 miner. That A10 miner draws 960 watts of power. It runs, meaning its computational power is 500 megahash, mega stands for million. So when I say 500 megahash, what I mean is this A10 miner does 500 million calculations in a second, well, calculations. The state-of-the-art Bitcoin miner is the S19, also known as the S19 Pro. The S19 Pro draws 3,250 watts and runs as a 110-terahash -- tera is shorthand for trillion. So it means that it's generating or it's producing, if you like, 110 trillion transactions a second. Now you have to compare the 2, one is in trillions of transactions, one is in the millions of transactions. So let's try to find the common basis. So let's say we wanted to put them both on a megahash basis, meaning how much power does it draw per 1 million transactions or 1 million calculations a second? Well, if you do the division, the Ethereum A10 draws 1.92 watts per megahash. So all I'm really doing is, so you understand the calculation, I'm taking 960 watts for 500 megahash, I'm just dividing 960 by 500. So I can get to 1.92 watts per megahash. Now Bitcoin draws, as we said before, 29.54 watts per terahash. So how do you convert terahash to megahash? You have to divide by a 1 million. Because 1 trillion is 1 million millions, or 1 million squared. So write this number down. If I do that calculation, convert the S19 to the wattage per megahash, I basically have to divide by 1 million. In other words, Bitcoin draws 0.00002954 watts per megahash. So you can clearly see Bitcoin is infinitely more power efficient than Ethereum. Now the reason that's important is if these things were to scale up, and you can understand why, Ethereum is going to use a lot more power than Bitcoin, especially if you're going to do all these validations of smart contracts and whatever. The more smart contracts you do, the more power you're going to use. So if you thought about from a point of view of the user of Ethereum and you were thinking about one day it's going to be scaled up, now you understand why Ethereum has to move away from the proof-of-work system like Bitcoin has to a proof of stake system. So you're going to put up some Ethereum as collateral, you might be the validator of a transaction. So you're not going to have redundancy from the Bitcoin blockchain. Why are you not going to have redundancy? Because you want to save the power. So that being the case, what if you made a mistake or someone hacked you? The guarantee is you are the guarantor. So the guarantors have to be, by definition, the people who are most able to guarantee the transactions, meaning the people who have the most coins. So you can end up with a concentration of power. And my opinion, this is my opinion, feel free to disagree with it since virtually everybody disagrees with it. You'll end up with a central banking system ultimately in the sense that a concentration of power, a handful of people making decisions. Now some committee or some group has got to decide if there's a hack, who is responsible? Also requires a centralized decision-making body. So that's kind of interesting. And here's another way of addressing the same thing because this is -- it's more or less the same question. It just comes up. You read about it in the papers. So I'm going to take the same question. I'm going to ask myself a question. I don't even know if I'm being rude or redundant from some of the questions I get, but it's important to understand how we're developing as a firm. Doesn't Bitcoin use a lot of power? Well, the Bitcoin blockchain, that's what you have -- that's what you're studying. That's what you're reading. The Bitcoin blockchain approximately is 447 gigabytes. It's a big, big chain. If you watch a Netflix movie in high definition, you use 3 gigabytes an hour. So clearly, 150 people watching Netflix in high definition are going to use ultimately bandwidth and, therefore, the power of the Bitcoin blockchain. Gives you idea of how power efficient Bitcoin is. That's why I'm involved in it. The coins that are using the same structure are equally power-efficient. Ultimately, you look at the Bitcoin blockchain, you'll see 80-some-odd percent of the coins run by 20-some-odd thousand addresses. That's not 20-some thousand people. That's 20-something thousand addresses. We have multiple addresses, and we are large owners of Bitcoin. It's concentrated. Ultimately, if you believe in Gresham's law, bad money drives out good, it won't trade off. The technology will be more or less standardized, will be set, won't be volatile. It will be a store of value. The next liquid coin with the same monetary policy is then to be kind of the thing people concentrate on, and so on and so forth. And by the by, if you look at the blockchains of Bitcoin Cash or Litecoin, whatever, you'll see, believe it or not, they're more concentrated than Bitcoin. So what we're doing in the cryptocurrency sense, one approach is mining. We're doing a lot of our work through mining. It's not our only mining company. We brought public at the end of November another company called Consensus Mining, has a somewhat different strategy but it's still mining. Those shares will be publicly traded. Coins aren't publicly traded right now, be publicly traded in about 10 months. And on the deal, we actually bought more Consensus Mining stock. Sorry, I neglected to tell you how many shares we own of that, but it's a holding. And then there is our holding in 7.1% of HashMaster. HashMaster is a hosting company. It's also a cryptocurrency mining equipment repair business. And I think it's fair to say that business is flourishing right now. A lot of ways we can go, be better if somehow we can find a way to consolidate these things and make them 1 operating company. Eventually, we'll figure it out. Right now, we're examining different possibilities. That's crypto. On the money management side, what we're doing is we are entering -- we started our first ETF. It's called Horizon Kinetics Inflation Beneficiaries ETF. We've got about $850 billion in assets, I imagine. One of the problems that Horizon as a firm has had, a lot of people had this problem. We believed and everyone believed that you can't do actively managed funds in ETFs. And ETFs were passive creations. ETFs are just cheaper, much more operationally efficient than the conventional mutual fund. So for a lot of years, we were disadvantaged. So about a year ago, January 12, I believe, 2020, to be precise, we started the Inflation ETF. It's been a very successful product. We're in the process of converting one of our mutual funds to an ETF. If that's successful, we intend to go along that route more. There's another ETF, I mean another mutual fund, which we're also considering -- we're in the process of making ETFs. These are smaller funds and basically changing the charter to be a little bit more expansive than what it is right now. So we're well into the ETF space, major change for us. It's led to, I think, considerable increase in assets under management. And I hope we'll be able to report more interesting developments along those lines in due course. So that's kind of about it for prepared remarks. Steve, do you want to add, maybe a lot of things I missed. You want to add anything to what I said so far?

Hi, Murray. I just had to turn off my mute button. No. No, I don't have anything specific to add right now.

Okay. So that's -- I hope that's a decent piece. I will go further. We have a lot more to say. It's just that we want to get to the questions. So Thérèse, if you wouldn't mind reading them, I'll do my best to answer.

That will be my pleasure. The first one is, are there any updates to potentially becoming an operational business rather than just an owner of assets, if there are any updates that can be discussed with shareholders?

Okay. Well, to do that, basically -- kind of alluded to it, but I didn't go there. To do that, and the easiest path is to acquire 51% of one of our publicly traded subsidiaries. So the company we have the biggest stake in right now was Winland. It's about 29%. We -- usually, quarter-by-quarter, we buy more. In the most recent quarter, we bought some more. So if it's going to happen, when it's going to happen, the step 1, what you would see is 1 of our businesses, we require 51%. And if we could -- and conduct our operations via that. But we haven't done it yet for reasons that I've implied, but I haven't gotten into, but I'm sure you'll understand the absence of detail at the moment. But that's what we'd like to do. And cryptocurrency, it just -- it's just an incredible field. It's just starting. And that's 1 of the reason we picked it because we knew very little about it, but we knew at least as much as everybody else, also knew nothing about it. And that was the starting place of it. And I have big expectations for crypto. And of course, in the fullness of time, the inflation, in my opinion, nothing to say much about it, but maybe there was some questions about it -- the inflation is just getting started. So I think crypto is going to flourish in that environment. But we'll see. What's next?

Okay. Would Horizon Kinetics ever consider closing their mutual funds to new capital if the assets under management ever reach a certain limit? And what would that limit be?

I don't know the answer to that question at the moment. So let me try to answer it this way. I mean the honest answer is I don't know. Reason I don't know is it's worthwhile stating, at the last, let's call it, 12 years, I think that's about right. It might be even 13 or 14. Horizon itself -- and I don't think we're the only firm of this type. We were operating under 2, I think, big constraints. And for a lot of years, it appeared to me there wasn't a good way out, or at least a good solution to them. One, I already alluded to, we had mutual funds, and we need ETFs. And no one had ever done anything in active managed ETFs of scale. It wasn't clear we could ever get into the ETF business, unless we want to be an index and I didn't really want to be in the index business, at least not in large scale. So that was an impediment. Second problem was our posture vis-à-vis the mega technology companies. You know what they are. These are basically the 8 largest companies. Yes, I don't have to figure out how to mention their names. The problem that I saw -- maybe it was a mistake on my part, so feel free to critique me if you like. The market capitalizations, you can see them, were so large, that basically, and their values on the premise, they're going to grow at 15% or 20% or whatever it is by company. The idea that a multitrillion dollar company could actually grow by that amount consistently because that's what underlies the valuation, I simply didn't agree with that preposition -- proposition. And some agree with it. So ultimately, I believe, there was going to be some major market reversal. Maybe we're in it right now, who knows. But that's, to me, the salient problem. The fact that it continued for so many years and the market capitalizations went up into the trillions, that just illustrates what I write about all the time, the top heaviness product indexation. Sooner or later, every index that ever existed in the history of indexation, something, by definition, is going to be the best-performing stock. Something is going to be a second best-performing stock. Something is going to be a third best performing stock. Leave it alone long enough an index is passively managed. It becomes enormous relative to the economy. And the economy starts responding to the size and scale and political influence of that enterprise. Kind of like a good example in the 20th century is Germany and Deutsche Bank or Germany and Allianz, things of that type. And the economy loses, I would argue, a great deal of its suppleness because so much is dependent upon the continual success of 1 or a handful of companies that may have completely exploited their niche. Sometimes they are challenged by new competition. Sometimes they just product saturate. Lots of things can happen. Sometimes the governments view them as a source of tax revenue. And things happen that way, and they get excessively regulated. There are a lot of ways that comes to an end. But it has a life cycle. So everything was premised on that happening. So far, it hasn't happened actually. So you could argue...

I would add a comment, Murray, and something you observed some time ago. And not only hasn't this dynamic on the way, it's gotten worse. And it potentially could become spectacular, depending how things play out, which is it's been a couple of years now since the proportion of the U.S. stock market, shares held by indexes, crossed the 50% threshold. So -- and this year, in 2021, the amount of money that flowed into ETFs was $900 billion. 10 years ago, exactly, it was $100 billion. So it's a new record. It's 60% higher than it was last year. And in the final month of last year, in December, it collected just under $100 billion, basically the higher annual inflows of 10 years ago. So as more money goes in, I think -- I don't know if I did the math right, I think that the amount of money that -- net that flowed into ETFs last year was well over 10% of the total amount of money in indexes in the United States or in ETFs.

Sure. Sure. Right. And that's with ETFs. You can apply it to other indexes.

Yes. So the -- so what happens is you can just -- it's a mental experiment you can do without a pencil and paper is that as the share of available -- the reports of available share is not locked up in the indexes, as long as there are inflows, that keeps shrinking. So the proportion of liquidity available for subsequent purchases shrinks. And it's kind of like a -- not a short squeeze but a float squeeze. So the market should get more and more volatile. And who knows what kind of extreme behavior that could be, not just down, but even up before things go too far. Yes, go ahead.

Right. And that's an excellent point to elaborate on, if I may. Excellent point. I didn't elaborate on that. So let's just say -- so we're obviously adherent to the inflation view. So let's just say there really is a lot of inflation. And people make up their minds. They want to buy Exxon. Why did we even cite Exxon? It's the biggest 1 of the energy group. It's got a $200 billion market cap. The trouble is a very large proportion of that market capitalization is actually owned by the indexes. So whether they go up or down or sideways, the indexes, the less money comes out, it's not going to sell. And maybe more money will come in. So if people decided no, what I really want is, I want to buy Exxon, shares actually wouldn't be for sale. Today, there's all these money indexes and you find a certain plasticity, plasticity is the word I want to use, in markets that never existed before. They might even become stenotic. So I don't like to put a cap on it. I don't know what's going to happen in the world of mutual funds. Maybe we'll just have ETFs. Maybe we'll convert them all. It won't have any mutual funds in the conventional sense of the word. And maybe the capacity of ETFs, actively managed, as they would be, would be somewhat different. Maybe we'd find some other structure for it. Anyway, you see why, when you write all these things about indexes, it's so hard to know what the future market structure is going to be. It's why we're reluctant to just put arbitrary numbers to it. This whole adventure in indexation, we're a lot closer to the end of it than we are to the beginning of it. And some really amazing things, in my humble opinion, are about to happen. So that's why I'm kind of reluctant to put numbers to the mutual funds. I think that's an acceptable answer.

Okay. Next part is, what was going on with FRMO's investments in stock price in 2006 to 2009, which was a big rise and fall? Looking at the 2011 shareholder letter, the self-reported total book value written did not drop a similar amount in those years. It was apparently growing all the while. It appears that FRMO was trading at some big price to total book value valuations in those times, but I can't find any info on this or whatever else was actually going on here as FRMO did not publish official financials during those times prior to the 2015 annual letter. What I'm also interested in is whether Mr. Stahl and Mr. Bregman have ever reflected on their investment choices, the last process, that led to that rise and fall in market cap that did not recover until around just this year and changed anything, et cetera. Googling around, I couldn't find anything where they looked back and talked about that. That's the end of that part of the question.

Okay. Good question, easy to answer. So you'll observe the high point in FRMO occurred at least in that era back in the 2007 era, I don't have a chart in front of me to actually see the high day, but let's call it, late 2007, for lack of a better thing. What happened in late 2007? Horizon Kinetics, believe it or not, for a brief period of time, we had $40-some-odd billion in assets under management. So FRMO was valued as if that would continue because FRMO gets about 5% of revenues of HK. At that point, Horizon Kinetics were separate companies, but the math was still the same. So we're going to get all that revenue and expenses and was presumed that's going to keep growing. Well, obviously, we didn't keep $40-some-odd billion in assets under management and then came 2008, beating 2009. We didn't change the strategy. It was never our strategy to be running hundreds of billions dollars in assets under management. It just happened. It was our strategy to make the investments that we felt like making. So what's happening is the clients are making the same investments we're making. That's it. Grew it at levels. I'm not going to grow that level in the future in AUM, meaning in cash flow. Might get very big. If inflation happens, it might even be a bigger number. But it's not because we're relying upon cash flow. We're relying upon depreciation of our investments. If that scenario happens, which is the inflation scenario, I think we'll have a lot of operational flexibility, and we'll see what happens there. So as I said, something really has -- something happened. It was really very extraordinary. We didn't anticipate it. It just happened. And then came 2008 and it ceased happening. So there was nothing to change because it was neither a positive development nor a negative development. It was just a development. So that's the story in brief.

Okay. What Horizon Kinetics mutual funds are the Horizon Kinetics high exposure limited partnerships? For example, Polestar and multi-strategy funds held by FRMO, most -- what are they most similar to so I can get a better proxy understanding of how FRMO is investing, since only the concentrated TPL and GBTC positions are reported in FRMO's financials? Why don't I let you answer that and then we'll see.

Okay. So what's happening -- you can leave that, then you can give me the -- okay. I'll answer that part now and address it. So basically, you're right in Polestar. It's true of the other funds. The big exposure is our FRMO and Bitcoin. But we're buying other things. So we're buying other things. So the 2 things that we're -- 3 things really. The 3 things we're buying are Mesabi Trust, the PrairieSky, just similar to Texas Pacific Land Trust and a company called Labrador Iron Ore Royalty. Now what's happening is it's -- this is the same in all these companies. I'm going to use Mesabi Trust as the example. Little by little, we use the cash flow to funds to establish a position in Mesabi Trust. Ultimately -- even though it's nowhere near the size of TPL, ultimately, the position becomes sufficiently big enough. So the dividend flow of Mesabi can pay for more Mesabi. So it's a self-replicating position, meaning it's growing organically. And that's the goal, to find maybe 9, maybe 10, if we can, positions like that. I'll describe them more in detail in a second, what our criteria are. We did self-replicating, because, remember, we're not allowing for cash flow. We get it, it's great, but we may not get it. So ultimately, it will grow. And as they grow, there's more dividend flow. And ultimately it will grow bigger than our requirements to buy more shares, and we'll find something else to buy. What's the common feature? I mentioned those 3 positions. What's the common feature? They're all royalty businesses. So what's so great about royalty business? Well, in theory, done right, they do have limited expenses. And the royalty just comes from the mining extraction, whatever the price is of the commodity. So Mesabi Trust as an example, somebody leases the property. In this case, it's Cleveland-Cliffs, keeping in mind whatever iron ore they're going to mine, the price is the price. You get a check. You have inflation. The revenue is going up. The expenses stay the same. Those are the businesses we're looking at. Labrador Iron Ore Royalty has a somewhat different structure, but the principle is the same. As I said, if we could find 10 things like that, we would do it. You'll see in coming months we are -- we haven't done it yet, but we're going to invest in HK hard assets, too. That's going to have yet another investment that I haven't mentioned. And you'll probably get to see it in another quarter or so. Right now, we haven't even done it yet, and the fund is too small. So you see what we're doing. We stick a little money in there. We get a little dividend flow. The thing becomes self-replicating. And after a while, it went at inflation. It becomes big enough to show people. It's going to happen. And it's going to happen inside Polestar. And you'll see this thing in HK hard assets, too. You'll see some new investments. But since -- but we're still buying, so I'm not disclosing what's in HK hard assets, too. Indeed, FRMO has not even invested in it yet, but they will, and you will see it.

Okay. Given FRMO's large -- oh, I'm sorry, was that -- were you finished?

I'm finished. So there's another part of it, I understand?

Given FRMO's large oil exposure and the supply shortage thesis talked about by both Mr. Stahl and Mr. Bregman in various Horizon Kinetics and FRMO commentary, has FRMO ever looked into the potential supply impact of oil that, as collateral in London, we bypass the Commission of Trade by large commodity traders like Glencore, Vitol, et cetera, which would potentially be unwound to back out of increased margin costs if interest rates were to rise? Basically, do you think the fundamental impact would be -- what do you think the fundamental impact would be to FRMO's oil investments and total book value if interest rates were to rapidly rise by, say, 1 to 3 points just to let the extremes inform the mean of this example? Clarification about the hypothecation question, basically what role do Mr. Stahl and Mr. Bregman think green hypothecation plays in the current price of oil? And how would a rapid rise in interest rates affect that in FRMO's oil and other inflation investments in general?

Well, rehypothecation would be a problem. But before you even got to that front, it is a problem. I don't want to understate it, but you got bigger problems. If I use the extreme number, 3%, you raise -- if the central banks of the world raise interest rates 3%, two things going to happen immediately, long before you start rehypothecating oil. First thing that's going to happen is the value of all sorts of assets are going to plummet. So for example, let's take mortgage-backed securities. So it's about $10 trillion in mortgage-backed securities. Whenever the value of the collateral rises, the orchestrator of the mortgage-backed issue refinances the entire thing and buys more mortgages. So basically, the B tranches and C tranches, they're properly collateralized. There's not a lot of excess there. So -- and maybe it wouldn't be 3%, but just as to use it, just to talk about it. If it wasn't properly collateralized, there are all sorts of cutoffs that happen. And you can't pay interest in principle on lower tranches, It'd be Armageddon just on that alone. It'd be Armageddon to the banking system. So it would be good for oil either, to be sure, but it's the least of everyone's problems. Basically, it's 2008 on steroids raised to the third power. That's how bad it would be. So I personally don't believe -- and maybe I'm wrong, and we'll find out if I'm right or not. I personally don't believe that scenario was going to happen. I personally believe another scenario is going to happen. That scenario is the inflation scenario. You're going to see, in my humble opinion, endless money creation without stop. I don't believe the political echelon is going to be able to do much about it. And a point in fact, just America, just to give you 1 data point among many that I could give. In the last 5 weeks, the United States government has borrowed way in excess of $700 billion, in 5 weeks. And it just continues. And such as America, I just mentioned that because we live here. It's basically every country in the world. Slight stylistic differences among the countries if you're really interested, but that's the way it is all over the world. And one of the -- and there's a lot of reasons for that. But 1 of the reasons -- and to me, this is an important one, so I'm stating it. I can give a lecture that goes on for 2 hours just on this subject. So I'll just use this as a data point. In prior inflations, the government, not just the American government, any government, they would use the power of the Central Bank, and they would fund some debt for some public purpose. Is it a noble public purpose? Is it not a noble public purpose? You could debate that. And people do. You can come to whatever conclusion you can come to. So -- but you could still say it's -- it could be for a war. It could be for public housing. It could be for whatever it is. You could debate the necessity of those expenditures and there are people on both sides. This -- even though that happens today, what's happening today largely is not debt. What's happening today is you don't just have the hypothecation of oil. You have the hypothecation of everything. Look at private equity as an example. What is private equity? It's just leveraged equity. There must be, in America alone, $5 trillion or $6 trillion of debt, trillion with a T. Just companies that are leveraged. Real estate, such as home mortgages, what piece of commercial real estate -- there are some few exceptions. What piece of commercial real estate isn't leveraged manifold. There are some exceptions. Generally speaking, it's highly leveraged. Real estate, farmland, you mentioned oil hypothecated. You could have said gold. I mentioned mortgage-backed securities. So other kinds of bonds, it's just there is lots of commodities. Matter of fact, just the notion of a commodity future itself, look at the leverage at any commodity future where you even got the hypothecation. Look what the margin requirements are in any commodity, you name the commodity. So the prior societal limits, let's put it this way, on the use of leverage, we have long, long, long ago, as societies, exceeded it. We are in unbelievably uncharted territory. There is absolutely no historical precedent from what's going on. This number I'd like to use, I can give you a lot of numbers, but as near as I can reckon, the United States alone has $86 trillion of debt. Let's just use the 2% number because at the midpoint of the range, that you selected, so I think it's valid. Now remember, the $86 trillion is going to up constantly. But let's say interest rates go up by 2%. That's under a $1.72 trillion of debt service right there, ignoring the fact that debt rises every minute or every day. The whole GDP of the country is $23 trillion in round numbers. The public spending, is spending of federal government, state government, local government, is already over $10 trillion. So it's almost half of the whole GDP. That's why there's so much borrowing. So how is society -- so do you say the government spends $10 trillion, let's call it, it's actually more than $10 trillion, out of $23 trillion. There's $13 trillion left. So at $13 trillion, if interest rates go up 2%, you got to find at least $1.72 trillion to cover the extra debt service. We're not talking about population growth, which might require some social spending. We're not talking about Medicare or Medicaid or health care in general, infrastructure, people say is deficient. We're not talking about any of that. So if they try it, I don't think they will, but if they do, it's clearly, in my view, it's calamitous. And that's why I'm an inflation proponent. I'm down to advocate inflation, like I think inflation's a wonderful thing. I just think it's going to happen. And that's one example of the reasons why I think that. Anyway, I hope that's a comprehensive answer.

Okay. Next, can FRMO post on its website a list of shares of all stocks as other assets such as cryptocurrency that are directly owned by the company on a periodic basis in a manner similar to what is usually done with closed-end funds?

I don't think -- we certainly could do that. I just would rather not do it. So normally -- I hope you can appreciate. I normally, if I can err on the side disclosure all we could, but there are small positions, especially 1 in particular that we hope to build to a big one. We're buying it right now, buying it every day. At the moment it's small, so it's not a big deal. I really don't want to tell the world what we're buying. We're in the process of buying it. We get to a meaningful position where it could, in success or failure, impact a shareholder interest. I'm more than delighted to disclose it to everybody. But I'm open to comment, but I hope everyone would agree, maybe you don't. But I hope everyone would agree. If we're in the process of accumulating something -- and for good or real, a lot of people watching what we're doing. I don't know if it's a great idea to reveal everything we're doing while we're in the process of establishing it. So I hope you'll understand that's -- anyway, right or wrong, that's our reasoning, but I invite comment on it.

Okay. Next question, with NFTs, non-fungible tokens, and digital art going mainstream, is this an area that FRMO will consider entering by buying a Bored Ape, for instance? With China moving to allow NFTs, the coming coin-based NFT marketplace, and real-world utility of smart contracts, is there an expectation that Ethereum price will increase substantially up to and potentially slipping Bitcoin?

Look, it can increase a lot. I commented on Ethereum because I anticipated a question like that. The bullish case for Ethereum is the case is just stakes, non-fungible tokens, smart contracts, et cetera, et cetera, et cetera. And they can be used, remember, it's the Ethereum blockchain, it's really what we mean, Ethereum blockchain can be used for all these different things. The problem is, if you do that, in light of numbers I gave before, especially if you use smart contracts, it's just a lot of electric power. So in the current mining environment, I just don't see how you could scale it that way. Given the figures I quoted, I personally don't see it. But it's a debate. I will say this. I'm in the minority by a heck of a lot. So it may be a couple of people agree with me, but it can't be very many. I haven't counted them recently, but the overwhelming majority -- I think it's fair to say, the overwhelming majority supports the Ethereum as the dominant cryptocurrency thesis. So I think let's just leave it at that. But I stated my reasons. I don't agree with that, too.

Okay. With the next Bitcoin halving taking place in about 2 years, mining cost reductions are imperative. Is there an opportunity to mine it using flared gas in the Permian Basin?

Yes. Good question. There's opportunities to mine using flared gas. And people are already doing it. It's bound to happen. The real thing is, are there efficiencies in mining using ASIC chips? Can the technology be made better? So without any use of flared gas or anything, if you were to look and see in the last, call it, 5 years, how efficient, in power consumption terms, the ASIC chip has become. At least in physics terms, I don't think we reached the limitation of that. So one of the reasons I'm kind of reluctant to load up on a lot of mining equipment is I'm not sure that we can't make further improvements in the energy consumption of the ASIC chips. So I just don't want to buy equipment that could be rapidly obsolete. Anyway, I guess that's, I guess, an interesting way of -- I hope of talking about the subject.

Okay. Was FRMO's ownership stake in cryptocurrency mining business exchanges for shares in Consensus Mining & Seigniorage Corporation? Or is that business stake in the computer repair/service company in North Carolina still owned by FRMO?

Okay. It's really 2 questions, so -- because they're separate. So our stakes in the mining business and the Horizon Kinetics cryptocurrency mining LLCs, we exchanged our interest in entirety for Consensus Mining shares. A minor point to be added is that -- I think you'll find it interesting. We made it a practice. We still do it. We were going to buy mining equipment. Horizon itself, not FRMO, Horizon itself bought the mining equipment on behalf of the crypto funds. Then we used it for a month or so, taking the risk because sometimes you don't get such great equipment. After a month, we're satisfied it's good, we would transfer it to mining LLCs and then they would pay us because we lent the money out. One of the things we forgot at Horizon was, we had laid out money for crypto LLCs. The equipment was good. We gave the money to LLCs, the equipment. And the mining LLCs never paid us. So in cash, technically speaking, actually legally speaking, in doing the audit to do the conversion, there was a sizable sum of money that was owed to Horizon Kinetics. We're taking that money. We did not. We just said we don't want the money, and we'll just convert our cash interest, which we're owed, meaning our receivable, into more shares of it. That's what we did. So we have that. The HashMaster interest is a separate company. So why is it separate? The HK cryptocurrency mining was profitable from the start. We bought the interest in HashMaster, who was not profitable from the start. We encountered a variety of problems, some of whom were anticipated, some of whom were not anticipated. If you have about 48 hours, I can give you a rundown of every problem we had hit, so a lot of problems. Not all of them -- well, let's just say some of them were more serious than others. As we were confident we could sell them, and actually, we did, the new problem was every time we solved a problem, another problem that we generally did not anticipate, although some we did, but generally we did not anticipate would arise and then we had to solve that problem. So for the first 22 months, maybe even 24 months, but certainly for the first 22 months of the HashMaster experience, it just wasn't profitable. We were very confident that we could bring it to profitability. And it actually happened. There is one problem left. There's nothing we can do about it. It's just there's a contract that we signed with another entity. It's just -- the company should never have signed that contract. It's not a great contract. It's going to expire in either 8 or 9 months. Expirers were not going to renew it. And because of the expiration of the contract, we're not going to do anything. It's going to be meaningfully more profitable even though it's actually flourishing right now. So we don't do anything about it. We're just going to wait it out, whatever it is, 8 to 9 months, and it's going to be what it's going to be. So we didn't want to -- and that's why we kept it separately. Different businesses have different business issues. So we felt that it just wasn't morally right.to burden 1 group of shareholders that were investing in a certain area of cryptocurrency with the problems of another area of cryptocurrency that they really didn't bargain for when they made the initial investment. So we just kept it separate. And of course, like in all these cases, Horizon itself took the risk on the theory of that leader goes first. You're asking people to risk their capital, you, meaning us, we're risking it first. So we're the first level risk. If -- what the heck did we know bad buying machines? A little bit, yes, not a heck of a lot. But if you think of that back in the day, it was bold. It was daring. It was dangerous. So what right do we have to commit people's money to something that bold and that dangerous? We have to protect them. Now if it was a $5 transaction or a $10 transaction, maybe no one would have cared and it wouldn't have been a big deal and we wouldn't have done that. But we were buying $250,000 to $500,000 equipment at a shot. By the way, some people buy tens of millions of dollars’ worth of equipment at a shot. So we're about knowing, excuse the aggression. But if you buy $10 million equipment at a shot and you bought wrong, you got a serious problem on your hands. And that's happened to a lot of people. So we didn't want that to happen. So we were going to buy in small lots. And there was a problem. Generally speaking, there wasn't. Generally speaking, we bought well. But it's not to say there was never a problem. So in one case, the shipment, as I recall, someone stole a couple of machines right off the truck. They really did. So we had to go to the insurance carrier and get payment, document it happened. We got it. It just took a while. So that's one kind of risk. Another kind of risk, we bought some equipment, had a virus in there. We should have checked on delivery, and we did check. We missed that. The virus was placed there intentionally. Placed there intentionally. The purpose of the virus was, if you didn't know, if we didn't look closely, you are mining a certain amount of cryptocurrency. And the virus -- you can keep running it, the virus would basically steal, I think, 15% or 20% of the cryptocurrency you mined daily. It's a small enough number and you might not notice it. We noticed it on the fourth day. We turned the machines off and now we got to get the virus out of there. That's easier said than done. It took us 6 weeks to figure out how to get the virus out of there. I tell you all that stuff, you can understand. I'm not defending it. I'm just telling you, we did -- the things we did, why we did them, what was our rationale and, basically, to put it in the cents or 2, no one knew in the beginning what was what in cryptocurrency. You can make the assertion, but it's a new field for everybody. So as a moral question, as I said before, if it was $5, it wouldn't be a big deal. Nobody would care, but it wasn't $5. We felt we had to take some of the risk with our personal money before anybody else would take that risk. We felt that was the right thing to do, and we did it. Ultimately, it shows how seriously we took it. We even put our money up for Consensus Mining and HK, cryptocurrency, mining LLC. We forgot to even pay ourselves for equipment we actually delivered, which was good. Anyway, I'm not doing it to praise us. I'm just trying to -- so when you see these compartmentalizations, which looks so bizarre, may be bizarre, but there were reasons for it. Those are the reasons. So we're not looking to be called noble or anything. We just felt it was the right thing to do, and that's what we did. And if we had to do it over again, we'd do the exact same thing. And I can say, on behalf of Horizon, no one hesitated. No one complained. Everyone thought it was the right thing to do. And we did, and that was it. I hope that addresses this set of questions.

Okay. We have several more questions, and it's almost 5:40. So I would say we probably would have about 40 more minutes.

Let's do it. Let's see how much we can get through. Let's do it.

Okay. I'd like to hear any thoughts or comments you may have on hashrate/equipment prices. I can't help but sense the sort of convexity effect much like, say, interest rates approaching the 0 bound, when I see ASIC prices and consider the efficiency current models have achieved and the availability of the power at attractive rates. This is notwithstanding the underlying belief that we all have in crypto, of course. How do conditions look from your perspective? Is dynamically scaling the operation up or down something you think about from a risk perspective?

Okay. So let's start with the prices themselves. State-of-the-art, which is the S19 Pro, if you want to buy one, it can be a few dollars off. The prices have come down the last 10 days by about 5%. So let's say if you bought one, $10,780, something like that. If you paid that price, that's actually a little bit more. You have to pay for shipping, insurance or whatnot. But let's leave that aside. At the current hashrate, you're going to break even about 680, 690 days, or 838 days roughly, away from the halving. So 838 days -- you order it, by the way, you're not getting delivery tomorrow. So from the 838 days, you have to subtract -- you're laying out the money. How many days is it going to take to get delivery? So you take in whatever number that is, subtract from 838, then the breakeven time. You should subtract, let's say, 680, 690, whatever. And you can see, if you pay the current price, you'll break even with a little bit of profit to the halving. That's that. That's why we haven't bought a lot of equipment. Matter of fact, lately, we haven't bought any equipment. However, there's a good side to it. Good side is that on an operating basis, forget about the breakeven. But if you bought a machine and they deliver it today and you were just running it, profitability, it's like a 60-some-odd percent profit margin. So the profit margin is big enough, so if the halving occurred, assuming everything stayed the same, you actually keep making money. For me, I like the Litecoin numbers better. We're about, I don't know, 560 days away, something like that from the halving. Breakeven time on a Litecoin L7, if you can get it, is about 370 days, but the profitability is so high, just unbelievably high, that when -- so you make a decent profit. You get to breakeven before the halving. You'd still be making money after the halving. So what am I really saying? I'm saying that Litecoin equipment, the market is more or less discounted to halving. With Bitcoin equipment, the market is more or less yet to discount to halving. It's happening, happening slower. I predict, one way or another in the next, let's say, 6 months market will discount to halving. You could do it 1 of 2 ways. Bitcoin price could go up or the price of the machinery can go down or it could be a combination of the 2. I don't know what's going to happen. I do know that in the United States and other parts of the world -- I'm just going to take a drink of water for a second. Believe it or not, I've been talking the entire day. That's why I got a little bit of laryngitis. But anyway, so you don't have to worry about the stock in terms of my health. I'm good. Anyway. The market is going to -- there's a paucity of mining rack space. Very hard to find. It's one of the reasons we have HashMaster, that we have our own -- in a pinch, we have our own rack space. There's a lot of rack space being built. When that rack space is built, there's a lot of equipment that had been ordered, hasn't been delivered. There's no place to put it. I think the aggregated hashrate is going to go way, way higher. That's going to push the Bitcoin prices way, way higher. I believe that's going to happen in the next half year or so. If it happens, that resolves the mining equipment issue. Just to understand the caveat. If it's 680 days or 690 days to break even, then there is whatever -- however many days delivery, you don't have very many days left from the 838, which is the time to the halving. Every day goes by, you're losing a decent percentage of that. So it's important to get the hashrate up. It will be more expensive then to make a Bitcoin. It will drive the Bitcoin price higher. But you can't get the hashrate meaningfully higher until the mining rack space opens up, which I think is going to happen, as I said, over the course of the next 6 months. It's been happening over the last couple of weeks anyway, but only a little bit. I hope I addressed that.

Okay. Kind of rebase or -- it's in 3 parts, but I think some of it you touched on. To maximize Bitcoin mining profitability requires low cost per acquired hashrate and cheap and reliable electricity. Just curious as to what your upfront cost per terahash per machines and what your electricity cost per kilowatt hour are in your operations? Do you plan to diversify your mining across the country in the future? At the current stage of operations, how many Bitcoins are you mining annually? And would you ever consider a Bitcoin dividend for shareholders? I can repeat any of those if you want.

Okay. So let's just start with the costs. So the best way to express it is electricity costs. We can buy electric power. The highest price we pay is about $0.05 a kilowatt. The lowest price we pay is about $0.01 a kilowatt. It varies by where you are. You might say why don't you put everything at the $0.01 kilowatt level. Well, there's a lot of issues. First of all, there may not be a rack space there. Secondly, you're going to pay -- $0.035 is another rate we have. You get it because you're only buying off-peak power. Go somewhere else, you got to buy peak power. There is the quality of the space itself. There's the climate in the space. So many years ago, we made mistakes. Now you understand why we took the risk first. We bought some equipment. The equipment was good. We just put it in the wrong place. We put in a place that was not far from the seashore. What's the problem with that? Salt air. It's not good for machines. We didn't know that. We just didn't know. It took about a month to figure it out. So we had to do something. We didn't want to expose the client base to that. We didn't know that was going to happen. We just knew that sooner or later something is going to happen. We're going to make a mistake. It's just that happened to be one of the various mistakes we made. So you don't want to put your -- it's not just -- it's not a question of merely the lowest cost. We found low-cost power in Canada. So what's wrong with that? Nothing wrong with that, except in Canada, the province of Quebec would charge us a sales tax on the power we buy. So we then petitioned the provincial government. Well, we -- there's a treaty between the United States and Canada. We're Americans. You can't charge us a sales tax. And they say, okay, well, the way the Quebec law works is we can charge you with sales tax. We just rebate you the money. They charge it and then they refund it to you. So they get like an interest rate free loan from you. Okay. How long it's going to take until we get our money rebate? You had to deal with that. So that -- you go through all these various issues because the point of the question, as I understand it is, you have to be diversified. There is a lot of different deals you can have. And sometimes, it actually pays to have high-cost power, for example, in the case, why do we pay $0.05 a kilowatt when we pay $0.01 a kilowatt? Because sometimes in a really big rack space facility, they are buying machines for themselves, and they're buying in such volume because it's such an enormous space, we can tie in with their purchase. Meaning everything we add gets them a bigger discount. And we would buy -- even though we're buying in small quantities, we would buy equipment at the volume rate. The discount we get in equipment, when you factor it in, is more important than the fact that we have to pay $0.05 a kilowatt. So strategically, it was better to even pay a higher electric rate and be a partner on the deals to buy equipment because the equipment is so much cheaper than it otherwise would be. Thinking 1 deal in particular that we -- I would dare say we probably bought equipment at 1/6, if you can believe it, of the price we otherwise would have had to pay, literally 1/6. Anyway, I'm giving you the example. But that's probably the best case example. But that's why we're diversified. We're in a number of different facilities. And we're looking to expand our own facility. So we just ordered a -- I think it's like a 2.5-megawatt transformer or something like that. Hopefully, in a couple of months, when they build out, we're going to have a lot more rack space. Anyway, our facility in HashMaster, we actually own the building. It's not a risk. If you own a real estate and the owner wants to use it for an alternative purpose, you might not be able to renew your lease. It's important to own the buildings. You'll see in FRMO's balance sheet we own that building. That building, if we want to use it for alternative purpose, we could probably get, in my opinion, 2.5x at least what we paid for the building. Just an example, so I'd just give you the factors that occur to me and the numbers that are associated with those factors. So I hope it's -- I've answered all the aspects of the question, but if I didn't address just tell me what I didn't cover.

I have a proposal. Steven here. Just for consideration. Questions about mining and cryptocurrency are endlessly interesting and edifying. And apparently, questions about Texas Pacific Land Corp are likewise endlessly interesting and fascinating. I suspect many of the people listening would very much like to have a sense of urgency about getting to some of the final questions, which has to do with an article today in The Wall Street Journal, that I'm sure if you hadn't read it, somebody made sure to tell you about it.

Okay. Well, I haven't read any article in The Wall Street Journal. No, I have no idea. What is the article?

Okay. So there is an article we've been questioned about, which talks about the fact that there's been an increase in small earthquakes in various parts of Texas where fracking is going on. That the Texas Railroad Commission is restricting use of certain wells that have been perhaps overused in terms of putting source water, and many companies are quoted in the article, the [ moaning ] that they can't make a profit if they have to truck water out at $2 a barrel, and things like this. So therefore, many people have read this and asked the natural questions, "My goodness, what does this mean for Texas Pacific Land Trust?" That's the gist of it.

Well, not a heck of a lot. To be perfectly honest with you, not a heck of a lot. So all you need to do -- I'm not telling you any secrets. If you just look at the income statement, you'll see the bulk of the revenue comes from existing leases. They're going to last a very long time. That's the bulk of it right there. And you'll have some easements. Easements, some of it is just people have to cross the property for whatever purpose. Other easements, you'll have sourced water, so there's 2 kinds of water. The sourced water, meaning someone takes the water ahead of the ground that you have, and they use it to frac. And there's produced water. What is produced water? Well, if you put a barrel of water -- okay, I'm just talking about oil in general. I'm not even talking about a company in particular. You put oil in the -- you put water in the ground for fracking. For every barrel of water you put in, you might get 10 barrels of water out. So you got to put it somewhere. Where you put it is a big deal. Now first, it's going to be cleaned or whatever. And the reason it has to be cleaned is there are valuable minerals in the water. So when people clean it, not merely a necessary exercise. What comes out of water, there are chemicals, there's is oil residue, whatever, towards something. So why do people clean it? So it becomes -- it's not potable water. It's so brackish, but it's not problematic. Question is where you put it? Every land owner wants to put it somewhere. They say, "Hey, if you put it in county X, you're going to cause an earthquake. We don't want it in county X." Well, it might go to county Y. So it's not going to cause an earthquake if you put it in county Y? So it's only going to cause an earthquake if you put it in county X? A lot of politics that go into these things. So the owned land, the land itself is not -- there's a lot of land. It's just not productive. Nothing happens there. So there's a battle. If you control the regulations depending on where they ultimately put this water, land that has virtually no value can be incredibly valuable, like anything else with political battles. It will be what it's going to be.

I would add, by the way, that -- please go ahead.

Have a look at Crane County and see the water flooding that's going on there. And it's not an issue because there's a large contiguous space of land owned by one party. That's uniquely invaluable. I'll say no more about it. It's not TPL land. And you'll see it isn't a geological issue, political issue. If it were a -- let me explain why there isn't a geological issue. Because the natural refresh rate on the groundwater varies by year. You had heavy snowfall in the Rockies that you get in winter, which happens from time to time. That water is going to make its way to Texas. So if there were problems with earthquakes, d*** it, snow falls in the Rockies and then a good winter, a lot. So this would have been measured and happening from time immemorial, just coming. No one can manage the process. If you're managing the process, you know how much a land can take. It's well under control. It's well understood geologically. I'm not a believer in the earthquake hypothesis. And while my two cents doesn't matter or maybe that's what it's worth, two cents, I wouldn't pay a lot of attention to it. But people do what people are going to do. I can show you contiguous properties. They're being water flooded. And no one's saying anything about those properties. Does that answer the question and/or concern? Like if you want to go further, I'll go further.

Not sure I must. I would observe that there are certain areas where maybe small earthquakes are not considered much of concern because there are low populations there. And I think that there are some counties in the Delaware terrain part of the Permian Basin such as Loving County where I'm not even sure if there are 200 residents there. And anyway...

Well, there aren't. Anyway, whatever. I don't regard even -- I don't even regard it as a geological issue. I would not. But just understand that, ultimately, the decision on where to put the produced water is in the hands of the regulators. Depending on where do produced water goes you can actually make a fortune. So I hope you don't think -- and I don't want to cast dispersions on anyone, that someone is just objectively considering the geological consequences for certain activity that -- unfortunately, I don't want to cast dispersions on anyone, certainly not The Wall Street Journal. It's not near objective assertion of factual data. I don't think earthquakes are a problem whatsoever. Regardless such, I don't think it's a big deal. I really don't. Do you want me to go into more detail, if you like?

I think that's sufficient.

So I know for a fact there are areas being waterflooded and being waterflooded. So that's about as much water as you can possibly put into place. And no one says anything about earthquakes. I personally know those areas and they're not small. Maybe enough said about that or unless you want to go into bit in greater detail.

Steve, are there any of the other questions that you think might be since we're running out of time? We have about 10 minutes.

No. I don't -- I just wanted to make sure this one get answered...

Well, let me just -- anything we -- the normal practice for us is, let me just say this even though we run over 10 minutes. Normal practice for us is if we don't get to it, let's just reprise and it could well be people are hearing answers to questions and it sparks ideas. I should have asked A or B or C. So we'll do what we can. If we run out of time, we run out of time. There's nothing we can do about it because these things are timed out. But if we run out of time, let's just set a date. We'll reprise it, and we'll deal with any questions that we did not cover. And if people have thoughts about other questions that just were imposed, add them in. We will address each and everyone. So I hope that's fair enough.

I think that's fair. If we don't get them, there's just a few. So we could even...

Okay. Let's do our best. Let's do our best. Let's do our best.

Okay. So there are some questions about Diamond Standard. I will just wring all of that and you can decide. Is there any update on the company's activity and the ownership stake in Diamond Standard? When do you expect to open your Diamond trust? How much institutional retail interest is there so far? What do you expect your AUM to be? And what management percentage do you plan to charge on AUM? So there's kind of a cluster.

Okay. A lot of questions there. To begin with, I am -- in terms of when this is all getting off the ground, I guess, that's the most important question of the ones that were posed, I'm told by the various attorneys, 6 to 8 weeks. That's what I'm told. That's one. Have we increased our ownership of Diamond Standard? Answer is yes. I don't have a breakdown. Sometimes we do these in the funds. This -- in this case, we actually did. We bought some shares. And in some cases, we put in the funds, we increased our position that way. Or the cases, we didn't put in the funds. Anyway, we did increase it. So obviously, I'm very enthusiastic about what's going on. The demand -- I mean the proof is going to be in the pudding. I personally think demand is going to be very high. I can't give you a number. I mean I could, but it's just a number. It's just an estimate. It's my personal estimate. And I'm not going to hit the mark. I'm -- it's just a number that I have in my head. And based on the conversations I have with people, they are enthusiastic. I believe tomorrow or the next day, I have a call with someone who's very enthusiastic about it, has ideas how to scale it best. So I don't know if they said yes or I haven't heard it yet. Maybe they're great. And whatever estimate I have in my head is going to be inaccurate because somebody has a great idea. I don't have all the great ideas in the world. I don't know if I've said it before, but I hope you realize that. I don't have the answer to every question. I'm just a fallible human being. So I know it comes as a shock, but it's the truth. Anyway, the fee, I know exactly what the number is. It's just that I don't remember it. So someone actually told it to me the other day what the fee is. It's not a huge fee. It's reasonable for what it is because we're just holding the diamonds. I would tell you, it's not a big secret. I would tell you the number, but I just don't remember the actual numbers. So I don't want to give you a number that's wrong. But in a few weeks, documentation is going to be out. You're going to see the number. I know what the number is, yet I don't know because I didn't write it down. I was told and should have written it down. I thought I could remember it. I just didn't. So I'm not trying to evade the question, but you'll know in a few weeks what the thing is. So really, I understand. You want to know the potential AUM and the fee, how much goes to the bottom line because the expenses are not going to be huge, although there are some expenses. It's going to be very a profitable undertaking. No question about it.

Okay. And you can share more...

And you'll be shocked how profitable it is. It's -- I'm very, very excited about it. So let's just -- I'd give you a number if I remembered it, but I just don't. I'm reluctant to give you a number that I just -- I'll be off by 5 or 10 basis points, and I'd rather not do that. So I'd rather give you something I know is accurate. Next time, I'll remember. I'll write it down.

Okay. I believe this will be our last question that we have time for, and others we have already touched on. So Digital Currency Group has sold $700 million worth of shares, yet value of FRMO's holdings are still held at a cost of $76,261. Is there a reason the valuation has not been adjusted given the recent transactions and the sale of Digital Currency Group stock? The Consensus Mining & Seigniorage Corporation is mentioned on Page 6 in the consolidated statement on evaluation reflecting recent share transactions. So there's the question.

Is there a reason? Yes, there is a reason. So the reason is, so what happens is quarterly we get a report from Digital Currency Group, where they place the valuation on those shares. Obviously, when they had a transaction they had to value it, okay? To begin with, I personally -- this is -- now we're talking about yours truly. When we did that transaction, the -- certain existing shareholders had the right to buy some more. I personally put some more. I didn't buy millions of dollars’ worth, but I actually personally buy -- so obviously, I know what the price is. The trouble is, so I had -- a, I actually paid a certain price, and I know exactly what that price is; b, I have a document quarterly comes from the companies, and they value it. Obviously, I should say -- this does goes without saying but I'd say it anyway. I bought shares at that price. If I thought that was the right price, I probably wouldn't have bought it. I think that, that price was undervalued, just my opinion, because I think the price be even more. Trouble is all that information says that, on these documents, it's private. It's for us. We're not supposed to leak it to the public. So if I took the price off that document or I took the price off the transaction, I personally did and I increased the shares, I'm kind of violating the undertaking of we're supposed to keep this stuff confidential. That's why we didn't adjust it. So if you're going to blame anybody, let's blame me for 99% of it and you blame the company for 1% of it because they want to keep everything private. Google bought shares. So SoftBank bought shares. That's public data. They bought shares. And yours truly bought shares. Google has more money than me, but I bought shares, too. Anyway, it says in documentation, you're not supposed to reveal it to the public, don't reveal this to the public. So I'm not revealing it to the public. That's why we didn't adjust it. So as I said, like in most things, 99% of the blame goes to yours truly. That's why. So I hope that's an acceptable explanation, but that's the explanation.

Thank you. Okay. I think that wraps it up.

Okay. So it remains for me to say thanks a lot, everybody, for an engaging list of questions. I must tell you, I very much enjoyed answering them. I'd like to give and take. And thanks for your support. And anything you think of in the interim, we'll try to get you an answer. And it goes without saying, we're going to reprise this in 90 days, and you'll see how we're doing. And I look forward to giving you the information at that time. So thanks again, and we'll see you shortly.

Bye-bye.

Bye-bye.

And so that does conclude this call. Thank you all for your participation. You may now disconnect.