FRMO Corporation (FRMO) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the FRMO Quarterly Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the conference over to Thérèse Byars. Please go ahead.

Thank you very much, Keith. 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 considered 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 third 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 8410731. These dial-in numbers are noted in the FRMO press release dated April 14, 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 guess we're going to leave plenty of time for questions because I understand there are quite a few of them. So one of the things that I've been asked to do, I'm going to do it right away before I get into my commentary. Everyone wants a bunch of numbers. I have them in front of me. So I apologize just reading them like this, but everyone wants to know this. So they want to know how much bitcoin we have, how much TPL we have, how many other cryptocurrencies we have and so on and so forth. So here we go. The first set of numbers are things we own through our various participation in funds. These are indirect numbers. We have the Bitcoin Investment Trust, GBTC. We have 588,796 shares. We have 95 units of Bitcoin SV, which is the spinoff from Bitcoin -- or I should say, from Bitcoin Cash. We have 4,220 shares of the Ethereum Classic Trust. We have 26,778 shares of the Bitcoin Cash Trust. Actually, one of the reasons we got that is we took our Bitcoin Cash, and we tendered to the fund. One of the reasons for doing that is when you're allowed to participate, we actually got a pretty good deal on that. We have we have 606 units of shares of the Grayscale Zcash Trust -- excuse me, I read that wrong -- I didn't. I've read right. We have 608 shares -- 606 shares of Grayscale Zcash Trust. We have 5,895 shares Litecoin Investment Trust. All these things, by the way, are big discounts to net asset value. You should take that in consideration when we give the market values. And we have some Bitcoin Gold. That was a fork from Bitcoin. These are actual coins. We have 224 of those. In the past, I've given my theory about the Bitcoin forks and their ultimate value. So I won't reprise that unless somebody wants to ask a question about it. Here's what we have directly as opposed to being [ indirect ], is Bitcoin itself, this Bitcoin that we have mined through our own mining efforts. We have 123 actual Bitcoins. We have 7,644 shares of the Grayscale Bitcoin Investment Trust, GBTC. We have 18 shares of the Ethereum Classic Trust, another Grayscale product. We have 12 shares of the Grayscale Bitcoin Cash Trust. We have 7 shares of the Grayscale Litecoin Trust. We also have mined some Litecoin. We're mining Litecoin. We have 1,514 actual Litecoin. We have 35 Ethereum actual coins that we've mined ourselves. We have 661.7 Ethereum Classic coins we've mined and 61.4 Litecoins. Now we own Winland Holdings, formerly known as Winland Electronics. We own 30.8% of that company. And I'll just give you how many coins they have mined, that they have. Now this is not the implied what we have. I'll give you the implied we have momentarily with this, what they have. They have 52.9 actual Bitcoins that they've mined. They actually purchased or acquired indirectly these through other modalities. That is 7.4 that they didn't mine. They mined 14.9 Litecoin. They've mined 53.5 Zcash. They've mined 1 Bitcoin Cash, 8.7 Bitcoin Gold and Ethereum Classic, 9.4. What we've got, our implied quantity, multiplied by 0.308 bolus numbers. And you'll know what that is. And you probably want to know how many shares of Texas specifically in trust we have, which I will read you. We have, indirectly through investment funds, 50,729. And directly, we have 7,374. See, if you add those 2 numbers, obviously, it's over 58,000. So that's that. Now you know where we stand. I think the balance sheet income statement speaks for itself. The salient quarterly event impacting our value is -- our shareholders' equity is the decline in the value of Bitcoin and the Bitcoin Investment Trust. Texas Pacific, which was our biggest holding, didn't do a heck of a lot in the quarter, either positive or negative. So that's that. You see what it is. Of course, the value we used at February 28 was $1,188, and it's $0.73 a share. Obviously, it's up. So take that into consideration when you are looking at the financial statement. Everything else is fairly self-explanatory. One or 2 things are in the process of happening, which when we get to my various points, I'll refer back to that document. In any event, you can clearly see that much of what we're doing in investment sense and much of what we're doing in Horizon Kinetics in investment sense and what we're doing in cryptocurrency has to do with inflation. We've been doing it for -- I think it's about 6 years now. So let me make some general remarks about inflation. I'll make 4 or 5 remarks about it just to set the tone. Then we'll go to crypto and various things we're doing there and some other stuff I think you'll find interesting. So historically, wealth was hard asset wealth. And that really changed in our society, probably from 1980 or 1981 to about a year ago. So financial assets became wealth. It had to do with the not elimination but the decline in the inflation rate of the '70s up to 1980 that from 1981 to, I would say, at least 2020, probably in 2021, there wasn't a lot of measured inflation. We could disagree about what that rate really was, but it wasn't of concern to people. So I'll point out that there were a number of events, I would say, are once-in-a-millennium invents that I would argue interrupted the inflation that we were experiencing up to 1980. And I was just going to say what they are. So one is the collapse of Soviet economies. Now in 1980, '81, the Soviet economy had not yet collapsed. It was in the process of collapsing. And not wanting their society to collapse, the leaders in that country, would put in the world market to get hard currency. And the only thing they really had to sell what was that commodities of every possible type, everything from oil to copper to iron ore, uranium, you name it. And that went on the market. That was a major disruption to the global commodity markets. And it was happening for decades. Second, I would say, seminal, once-in-a-millennium event was the almost simultaneous collapse of Chinese Communism. So the conversion of the Chinese state from a communist state to a state capitalist enterprise. And they didn't really have a lot in the way of commodities to put in the world market. Here and there, maybe a little bit, but certainly, they had no meaningful impact over the commodity market. What they did have is they have 1.4 billion people to put on the world labor market. That's a big deal, maybe even a bigger deal than the Russian commodity sales, 1.4 billion people, a lot of people. And it caused societal shifts in terms of where goods are produced, displaced a lot of workers worldwide. It's -- that process has more or less played itself out, as has obviously the Russian sales of commodities, reasons that you read about it in the paper every day. Now we're in the world of sanctions and embargoes, so we're in a different world. The third thing is there were emulators, quite a few of them, actually, of the Chinese government putting their labor in the world market. I would say this is the emerging markets labor supply. India, Pakistan, Bangladesh, Thailand, Vietnam, the Philippines, Malaysia, et cetera, et cetera, et cetera. There are plenty of other countries like Mexico would be a good example. Add that to the Chinese labor market. I could also add to a lesser degree the labor markets of labor of Eastern European countries, also formerly Communist. You're talking about possibly over 3 billion people at various points in time over the course of 40 years put in the world labor market. That's done. Two lesser important points. I'll just mention them so you can understand how the world is changing. The reintegration of South Africa commodity-rich nation into the world economy. You'll recall South Africa was sanctioned because of apartheid. Apartheid ended, and therefore, the sanctions ultimately ended. South Africa was reintegrated into the world, have a lot of commodities. They came on the world market. They certainly have a lot of needs. That's a once-in-a-lifetime event, maybe once-in-a-millennium event. And then another thing that's been happening really started in the '70s but certainly gained force in the '80s, the integration of women in the workplace. So that's half of the planet, got integrated in the workplace, whereas historically, that didn't actually exist. But all those 5 things that I mentioned are major counterinflationary trends. All those counterinflationary trends were playing themselves out or, I would argue, have played themselves out. And in a macro sense, if you want to think macro, that's what led to the investment posture we have. The most important investment posture we have, in my opinion, is not Texas Pacific Land Trust, but it is crypto. We invest in crypto in a variety of ways. So one way is we have our mining efforts, which we'd like to expand. In due course, we will. So you might say, why didn't we go out? We have plenty of cash, and we have plenty of assets. Why don't we go out and buy more mining rigs? Well, the answer is very simple. Because as the mining rigs become more efficient, which they actually have, and recently, we had another quantum improvement in power consumption efficiency in that respect, and the prices of the rigs actually fall. Price of the rigs falls. That interrupts the rise in Bitcoin value. Why does it do it, you might think. Why doesn't Bitcoin just purely reflect inflation or purely reflect the supply/demand of the commodity itself? Because it's no different than gold really. If it's cheaper to produce the coins, meaning it's cheaper to mine them, then some of that, and I would argue all of that or virtually all of that, is going to be passed on to the people who would buy the coins. Just like if they got cheaper to produce gold, somehow, it's going to be reflected in the price of gold. And just like from time to time you get cheaper produced wheat and/or soybeans or corn. That gets reflected in the price. So it's no different than any other commodity with one incredibly salient exception. What is that salient exception? That salient exception is that in principle, supplies of any commodity are not really fixed. So it gets cheap enough, and the equipment is readily available to produce more gold. More gold is going to be produced. The same is true of oil. The same is true of soybeans or wheat or corn or whatever that must be. In the case of Bitcoin, we have now mined over 19 million coins. There are only going to be 21 million coins in the year 2140. It's less than 2 million to go, and they're going to become increasingly scarce. Eventually, the scarcity factor is going to overwhelm the continual improvements in the efficiency of the mining equipment. So crypto, especially Bitcoin, is unlike any of the other commodities. That makes it a class in itself. I believe the day is not long in coming when it's going to be a perfectly legitimate asset class, and that's why it's so important to be there. Now platform on mining, we have 4 other investments in crypto that are worthwhile just noting. One is called HashMaster. We own, I think, 7.1%. Horizon Kinetics itself owns over 50% of that. So we obviously have a big stake in it. That company does a number of things. One, it actually hosts other miners, so prepare -- it's a data center for the miners. Secondly, it repairs equipment. Strategically, it's very important to us to have that faculty. And thirdly, it actually mines for its own account. So HashMaster now has coins as well. Then there is Consensus Mining. This is the outgrowth of something we started a number of years ago with HK Cryptocurrency Mining, LLC, which we merged with newly created company called Consensus Mining and then raised a fair amount of capital in the process. And we own a piece of Consensus Mining. And that company is technically publicly traded. It was a public offering, but it won't actually be trading in the marketplace as a lockup, and all the insiders who have shares can't sell through the lockup. Lockup expires on November 30 of 2022. And now we're in April, so call it about half a year on December 1, 2022, that will be publicly traded. Then, of course, is Winland Holdings, formerly known as Winland Electronics. We own 30.4% of that -- 30.8% of that. That's another mining company. They do some other interesting things, which is they make sensors, heat, temperature, moisture, those kinds of things. And that's a small business, but it's a profitable business. And of course, we own a small stake in Digital Currency Group. Digital Currency Group, of course, manages the Grayscale Trust. And perhaps one day, those will be cryptocurrency ETFs. Maybe the GBTC will be a Bitcoin ETF. And it will be the leader as it has been throughout in the cryptocurrency efforts. So that's cryptocurrency. I'm sure you have more questions about that. A couple of points I want to make. I think they're important. Exchanges. Last couple of meetings, we haven't talked about exchanges. But just to review, you are probably aware, we sold our stake in the -- or we merged our stake, is better said, in Minneapolis Grain Exchange with Miami International Holdings, which was once the Miami Options Exchange. Now it's the Bermuda Stock Exchange and an options exchange and commodities exchange. We also merged our Bermuda Stock Exchange with Miami. So we now -- if you look at our financial statements, we now have a $14 million stake, what we refer to as MIAX. It shows you from small investments something -- they grow. I have a lot of high hopes from MIAX. And if you go to our website, or alternatively, if you go to the Minneapolis Grain Exchange website, you can see what's happening in terms of volume. And I think you'll agree, the company is thriving by every conceivable measure one can thrive by. We -- also lesser investment, striving, blossoming even, is the Canadian Securities Exchange. The Canadian Securities Exchange is a lesser investment for us. The idea of the Canadian Securities Exchange was to provide a small cap exchange, giving small cap natural resource companies, which is a lot of what's in Canada, access to capital markets to replace essentially the role that Toronto Venture Exchange -- well, the Vancouver Exchange, which became Toronto Venture Exchange, once played in Canada. And it's thriving and blossoming. One of the reasons is that natural resources require capital. Canada literally has thousands of companies that are in need of capital. And the commodity cycle, in my opinion, has just started. So this company is thriving every conceivable way. Horizon itself, we had, you could argue, 12, maybe even 14 years' issues. And I guess it is the issue every value investor had. Number one, every value investor was overshadowed by the rise of the enormous technology conglomerates. They're really outside of what value investors typically invest in. So we really didn't participate in that and you can say the whole value investing effort. But I would argue, it was impacted even greater by the rise of indexation. Indexation basically overwhelmed the active management, and for 12 or possibly even 14 years, that's what was happening. The next thing was the rise of ETFs. So that, you could say, is related to the rise of indexation, but we all believe as active managers that the ETF was not an asset class that would ever be permissible for active managers. It was -- there are certain disclosure rules in ETF, and no one believed that an active manager would ever get permission to do an ETF. And the big problem, because the mutual fund, which is very, very important for Horizon Kinetics, the mutual fund is inherently operationally less cost-efficient than an ETF. And that's what we had. So there's also the issue of platform fees. So you're on a mutual fund platform. A big part of your fee income actually goes to that platform, meaning that if someone takes $10,000 and they just happen to have it in some money market fund and have to put it in your mutual fund, you'll be paying a fairly substantial number of your basis points to that platform just because the money came from there. And that has a major impact on profitability. So we were -- you had that issue plus we had the competition indexation, competition ETFs. And then we realized or it came to our attention that the regulation has changed. We could do an ETF. And the first ETF, we launched. In light of everything I said, there could be no other, and the Horizon Kinetics inflation beneficiary is ETF. And that was launched on January 12, 2021. Now we're in mid-April of 2022. So in 15 months, we now have over $1.4 billion of assets under management. So a sea change has opened up to us just because of that. That is a major factor that we now can access ETFs. Another important factor is that if you're in the world of inflation over those 10 or 14 years where the value investors were suffering under -- were suffering their decline in assets under management, in the same period of time, anything you can reasonably describe as inflation beneficiary was gradually lessened in weighting, in some cases actually purged, from the index itself. So the indexes don't have a lot of inflation exposure anymore. If we're really right, and we're going to have inflation exposure, indexation is going to have trouble just because of lack of exposure. Even though inflation does occur, it's such an overwhelming feature of financial markets. Anyway, needless to say, we're going to soon be launching some other ETFs. And I write down on a sheet of paper 4 of them -- actually 5 that we're going to be launching. I would tell you the names, but I don't want to tell you the names because I'm afraid someone might copy them. So rest assured, there are -- that you will be seeing new things happening in the not-too-distant future in the world of ETFs. So we're going to do some interesting things. Some of them are in the equity market, some of them actually, believe it or not, are in the bond market. And I think you'll find them all interesting. So stay tuned, and you'll learn about them. And the last point I want to make before the other questions and answers is something that you don't see on the financial statement as of February 28 because technically, we started it on March 1. So in addition, the HK Hard Assets I whose major position is TPL. We started something. I alluded to it in the last conference call, I believe, HK Hard Assets II. There are some shares of TPL in the air. We created just to give it some light, but we're buying something where we had assets that's entirely different focus. So I think it's very interesting, and in due course, we'll be able to talk about it. But on March 1, we made our first investments in it, and we will be adding to our investments as the months progress. And I'll say that now is -- it's no question an inflation beneficiary. So those are the remarks I wanted to make that I think are salient and important with regard to Horizon FRMO. Steve, do you have anything to add? Have I missed anything? I guess he's nothing to add. So Thérèse, can you open it up for questions? If you...

Absolutely. I will review the questions we received in advance. They are not sorted according to topic because I think maybe we can get through -- cover some different things rather than comping them together.

Okay. Any order. Yes. Okay. No problem.

Okay. So first question, is there any policy whereby FRMO employees must own stock? Given management's views on inflation in Bitcoin, coupled with the recent mainstream discussion of inflation and decline in Bitcoin price, are FRMO employees and management buying FRMO stock? If not, why not?

I'd just like to break in and be a little rude. Steven here. And the reason is that I'm pretty orthodox about keeping my mute button engaged when someone else is speaking, but this is probably the third meeting in a row when I rushed to unmute. And instead, I hit the little red hang up icon because I guess it attracts my hindbrain attention. Anyway, my apologies.

Okay. Okay. Anyway, in response to that question, you may be aware, there are only 2 employees of FRMO, and they're both on this call, me and Steve. That's it. And we both own, I would argue, considerable amounts of stock. I myself -- usually, during the course of the quarter, I myself buy some more shares, usually. I like to buy it gradually during the course of the quarter, but I own way in excess of 7 million shares. You also might be interested to learn that Horizon Asset Management, Horizon Kinetics itself, which we obviously have a big stake in, is, generally speaking, buying shares in accordance with a preordained -- one of these preordained programs that if you declare your intention to the regulators you're going to buy X number of shares a day, and we buy X number of shares a day. I forget how many shares we buy every day, but Horizon Kinetics in the market every single day buying shares for FRMO, and that goes to our benefit as well. So I think from a personal basis, FRMO, because I'm doing this call, it's still restricted. And I think it will go unrestricted, if I'm not mistaken, April 21. That's the first day I personally could buy. But Horizon Kinetics was actually buying stock today -- buying stock every day. So I hope that's a direct answer to your question. Thérèse, next question.

Yes. Sorry, I was on mute. Okay. The next question. What are management's biggest fears for the company's business right now? What does management see as FRMO's 5-year-plus destinations? And what do you see as the most plausible narrative of failure in accomplishing that?

Okay. Well, a couple of things. Number one, we would like to have an operating business within the context of FRMO. And we haven't achieved that yet. I mentioned it last time, so I'll mention it again. We haven't done that. Two reasons really, 2 primary reasons. First reason, the things that we could have bought, we didn't know enough about it to warrant buying it. And secondarily, even for some of the things we knew a lot about, we didn't like the valuation. So we didn't buy it. But ultimately, we'll do something in that regard. Eventually, we'll get there. At the moment, I'm leaning towards crypto because we have all the makings for that, but it doesn't have to be crypto. It can end up being something else. Whatever it ends up being, it's going to be something that we have a lot of expertise and knowledge in. We're going to run the business on a day-to-day basis, but we're not going to go outside of our circle of competence. So that's that. In terms of what do we fear, well, for openers, I think it should be self-evident. We've made a fairly big investment in inflation beneficiaries. And what if there's not inflation? What if there is disinflation or if there's deflation? All those things can happen. I personally don't think at the moment they are all that likely, but the best laid plans of mice and men often go awry. So it's possible, and you have to consider that. So we're constantly reevaluating that. And were that circumstance to arise, we're going to do a lot of repositioning of assets. But it doesn't seem like it's happening at the moment, any of it. So I guess that's the greatest fear. We don't have a leveraged balance sheet. We don't have any real liabilities. The only debt we have is the $707,000 of the mortgage, the mortgages for the building which HashMaster is in, I think, the building itself personally. And this might -- but I think the mortgage is like maybe at most 1/3, probably 1/4 of what the market value of the building is. So I think we're in good shape there. Not that $707,000 is such a big deal in debt. So by most of the issues, I think we're in good stead. The other thing I'll mention, if we're to have an operating company, then we're going to have some employees. And with employees comes various personnel management problems that we haven't had in the history of FRMO, but we'll deal with it when the time comes. That's why whatever we buy is going to have to have its own management. So there'll be an employee expense side, and then there'll be other expense items running the business. So the character income statement will change. But anyway, that's where we stand as far as that goes.

Okay. So the next question has something to do with employees as well. In the past, management has talked about employee retention and how no one has ever left the company. Taking an employee's perspective, what would management say is the worst or most difficult part of working for FRMO?

Let me just start there.

Yes, you should do it.

A couple of technical -- these are sometimes communication issues. It is no doubt easy if someone is speaking with Murray or me in a room to mistake when we might be speaking about FRMO Corp. as opposed to Horizon Kinetics. I, for instance, can be a little sloppy with pronouns. But someone might have -- the question might have confused one company with another with respect to discussion of employees. And first of all, as Murray just mentioned, there are 2 employees of FRMO Corp. And you're on the line with them. And we have never left the company. So that answers that. And speaking about Horizon Kinetics, there are certainly people who've left Horizon Kinetics. but someone may have spoken to me, for instance, once and asking me about our research efforts and our analysts versus our investments and how that relationship works and so forth. And I might have said that, which would have been the case at the time, that no analyst has left the firm in many, many, many, many years, like a decade. And that's still the case. But we were -- I would have been talking, if that was me, about that particular portion of Horizon Kinetics, the research staff. As to taking an employee's perspective, what would management say is the worst and most difficult part of working for FRMO Corp.? Well, that would be us. So the question may be thinking there are a lot more employees at FRMO than there are. There's just the 2 of us.

Yes. Just us. So we're not going anywhere. But as I said, one day, if we have an operating business, there are going to be employees, and that would be a more pertinent question. And we'd like to achieve that, but that hasn't happened yet. In terms of Horizon, if I want to interpret it that way, I think in terms of -- I never calculate what the turnover rate in the Horizon -- any way you do it, it's low. We don't have a lot of turnover. We've got roughly 80 people with waxes and wanes. I would say in a normal year, we might have 1 or 2 resignations, something like that. Sometimes we're in the growth mode. Lately, we're in the growth mode. So last couple of years, we actually brought some people on pertaining to the effort in ETFs, whatever. Right now, we're thinking of hiring another person in the bond ETF effort. We haven't done that, but we're thinking about it. So I don't know. We don't have a lot of turnover, attributable to -- I don't think we pay such crazy great salaries. I think we're reasonable. I think we're fair. I think we have a fabulous health plan. Maybe that's part of it. But I think we try to make it an interesting, fun place to work, and I think that's part of it. And secondarily, if you were inside the company, you would see that when we went through our rough periods in investment management, we didn't lay anybody off. We didn't make the employees pay for what would be our misjudgments. It was on the partners. It was on us. So I presume everybody appreciates that. And we were very unlike a typical Wall Street firm when you go through a rough patch, and it was a 12- to 14-year rough patch, depending on how you calculate. So it's not pleasant. If you're an employee, I dare say, I don't think anybody was told that -- worried about it. Personally, I was not worried about it either. Maybe I should have been. I wasn't. I was very confident in our investment posture. Perhaps properly. But I'm just being honest. That's how I felt. So I hope that addresses that. What's next, Thérèse?

Next one is there are some who say that quantitative easing is Federal Reserve and not as some take as "axiomatic money printing," and in fact, argue that quantitative easing has historically caused deflation or disinflation rather than inflation and that the bond market has correctly predicted this each time and is presumably again correctly predicting a similar situation this time around. That is that "the bond market isn't buying it" argument. Could management explain exactly how quantitative easing is money printing from the perspective of the real economy? Are there any primary data sources where you believe this direct cause and effect can best be traced through, for example, that bank reserves and nonbank deposits resulting from quantitative easing are being spent largely on things other than financial assets? That is exactly what -- by what means is quantitative easing, which results in increased bank reserve [indiscernible], debasing the dollar? [ All questions ].

Okay. One quite easy to answer, and I'll give you the data sources. So there are -- so I'll name the 2 in just a second, but let me just state the principle. The principle basically is there's a supply of goods and services and the growing economy that increases. And that could be oil. It could be cheese. It could be cars. It could be whatever product you want. So all these different products and services. The amount of money in the system is growing faster than the products and services you could buy with that money, the vast, infinite variety, almost infinite variety of products and services you will buy. What's going to happen if you believe in the law of supply and demand as I do, that the money will buy less products and services because that goes by demand. So what's the data source? Well, data source is, for money, M2SL. And you can look at the chart. It's on the St. Louis Federal Reserve website. So M2SL, St. Louis Federal Reserve. You can key that in. You'll see the chart. And there you have it. So it's growing, in round numbers in recent months, at about 10% a year. We can have a lively debate about what's happening to global production number or in a global market. And we're talking about a lot of different products. So all the things you can buy. I don't think anybody would assert that the things you can buy, whatever it is that you'd like to buy, is growing at 10% a year. That's the basis. That's the way it is. So now if you were to take products in of themselves with the -- or services, if you like those. So it can be medical procedures, which is a service. It could be the price of raw commodities. It could be lumber. It could be soybeans. It could be wheat. It could be natural gas. Look, what's happening in the prices. And there's plenty of different -- plenty of commodities we could talk about. It could be iron ore. If you really want to get esoteric, here's the number I just cited because it's -- I find it interesting. I don't know how relevant it is, but the price of lithium. I'm not even saying the number because it's up so much. No one will even believe me if I even cited a number, but you can look it up. There's a website called Trading Economics, and you'll see what that is. So just about anything that I can think of in terms of raw commodity in the last year to 15 months is up tremendously. It's hard to believe, but it's true. But natural gas, year-to-date, that's measuring from December 31 to mid-April, is up over 100%. As an example -- and we need natural gas. So lumber, I mentioned, coal, which theoretically is on its way out. But practically speaking, the world, believe it or not, my data sources, the Energy Information Administration, the United States government, eia.gov, the world, even the United States, are producing about as much coal as they ever produced, maybe even producing more coal than some of them produced in the history of the planet. So coal measured in terms of BTU, it's up big. I think the National Debt Clock could give you a measure, somewhere in National Debt Clock. I'll try to make reference to -- with data source, one second. I believe somewhere in the National Debt Clock. I don't have it in the front of me, but I believe somewhere in the National Debt Clock, there is an energy output chart to the world. And I believe that the biggest source of energy in terms of BTU is natural gas, and coal in terms of BTU is a little, tiny fraction less in terms of BTU. If you compare it to wind, as an example, in terms of BTU, I would say coal is probably 12x the size of wind BTU. Now that's the way they measure it. I don't even believe that measurement is accurate. Why don't I believe that measurement is accurate? Because you have a coal-fired generator, and it's working 24/7, if that's what you want. Wind doesn't blow the entire day. So what they're measuring is they're measuring rated capacity, not measuring the output. So that's another story. Anyway, in terms of the debt in the world, I don't look at quantitative easing in terms of what the government does. I look in terms of how much debt is in society. And according to the National Debt Clock, which I mentioned earlier, the total debt of the United States of America, not the United States government but collectively everybody in the United States, whether it's a student loan, a credit card loan, a personal loan, a mortgage, a treasury, a municipal bond, whatever it happens to be, a corporate loan, it's $89.9 trillion. So when you borrow money, banks can [indiscernible] reserve to create money. Banks can do it. Why can banks do it? Because they can buy more treasuries with a given capital base, but they can't issue loans. Why? Because the treasury is risk-free and a conventional loan is not risk-free. So you have to reserve more capital against a conventional loan than against the treasury. So if you shift your balance sheet even slightly with treasuries, which I would say most banks have been doing in addition to increasing the size of their balance sheets -- take the big banks, Wells Fargo, Bank of America, Citigroup, JPMorgan Chase. The size of the balance sheets are in trillions of dollars. So when a bank gives credit, they're not printing money with a little printing press, but they are creating money. They're creating liquidity. So that's that. Now I think one part of your question, that's the last part I'll address, which is the -- what the bond market is predicting. This is the only thing where I'd be a little strident and say I don't think the bond market is predicting anything. Why do I think the bond market isn't predicting anything? Because the bond market is managed. I only [indiscernible] called the bond market. The size of the Federal Reserve balance sheet, the size of Federal Reserve balance sheet alone, Federal Reserve, is over $9 trillion. And you have the banks. How many treasuries do they have? They work hand in glove with the treasury. Then you have the various indexes that buy bonds just to hold them. So what is the bond, their indexes? They're not making a prediction on how much money is in bond indexation. If you look at the number, I don't have it ready at hand because I wasn't anticipating a question, but the answer, a huge number. So I don't think they're predicting anything. I just think that it's a policy of managing the interest rate. And I think if you go to the website of Federal Reserve, I think you'll find the endless stream of articles and discussion points. But that's exactly what we're doing. I haven't even mentioned the central banks of the other nations but also on the United States treasuries. And I should add the International Monetary Fund, and I should add the Bank for International Settlements. So I don't regard it as bond market is predicting anything, but that's the only point I'm going to be striding done. I think in terms of what the -- to say that the bond market is making a prediction when the central banks in the world actually, with their best balance sheets, do everything they can to control rates, I just don't think that's the right way to look at it. But that's just me. So there you have it. I hope that's a complete answer to the questions.

That sounds good. Next question. In FRMO's second quarter 2020 conference call, management mentions Metcalfe's law when discussing a view of Bitcoin's price. This appears to be a common argument when discussing the value of Bitcoin. What are management's thoughts on parallels that have been made between the arguments for Bitcoin's value based on Metcalfe's law and the use of that same logic in elevating the prices of telecom and business-to-business stocks during the dot-com bubble that similarly rose on arguments based on Metcalfe's law and artificial supply deficits?

Yes. Well, you could say that. The only difference is this, that in the dot-com bubble of late '90s up to 2000, there's no limit to how many websites you can create, absolutely none. So there's no limit to how many searches you could do practically speaking. I mean maybe in theoretical physics, there's limit to it, but there's no limit to that. Bitcoin has limited its supply. So you can't make a scarcity argument from websites. You can make a scarcity argument for Bitcoins. So I, myself, was one of the people -- I can go back to my work in the '90s. I myself, we talk about the bubble and I think had a piece that I'm very proud to have called the Infinite Bear Market. And I went through this logic in great details. I didn't accept it because there's no limit to what can be produced. But there is a limit to how much people can be on the web. You can only be on the web so many hours a day. That's it. There is -- in crypto, Bitcoin in particular, it's the reverse. There's a limit to how many Bitcoins you're ever going to create. There is no theoretical limit to how many goods and services people are going to want to buy in the fullness of time. There's no theoretical limit. If there is a fixed amount of Bitcoin, it's going to get more scarce. That's what there is to it. So I don't think Metcalfe's law can be used to argue against the value of Bitcoin and turn it into a dot-com argument. But anyway, there you have my view.

Thank you. Given FRMO's interest in converting to a crypto-based operating business, are there any risk mitigation or hedging strategies being employed or considered as FRMO goes further into the cryptocurrency space beyond, at this point, what would appear to be a de minimis investment given that management has said repeatedly that the crypto space still has a reasonable chance of going to 0?

Well, the way I'd put it is it has a reasonable chance of failure. And so what we do is we don't invest more capital at it that we can't afford to lose because the whole project could fail. It's possible. And I can come up with, if I wanted to, a number of possible failure scenarios. I'm more confident in it than I was a year or 2 ago. I don't think it's going to fail, but it's possible. But I'm not going to hedge it with futures. I'm not going to hedge you with options. I'm just constraining the amount of capital that I put into it. And it's going to be what it's going to be. So we're taking a certain amount of risk. Maybe -- this is not very likely. I'll be brilliant enough to see that it's going to fail before anyone else sees it. I wouldn't be confident that I have the ability to do that. Actually, I'm pretty confident I don't have the ability to do it. But in any event, we -- I think when you look at our balance sheet and you look at what's going on, we could survive complete failure of the project. Maybe I'll be brilliant enough and be able to sell before it fails. It's possible. I don't think it's very likely, but maybe it's possible. But we could survive a failure if it happened. I don't think it's going to happen personally, but time will tell.

Okay. Would FRMO's transition to a crypto-based operating business be linked to the progress of FRMO's uplisting to a major U.S. exchange, as mentioned during the fourth quarter 2021 earnings call?

No. It's not. One is not dependent on another. Consensus Mining is going to be listed, I think, to [indiscernible] OTC markets. So I don't think it's necessary going to be uplisted. I mean we just have to see what happens in the world of crypto. The last 24 to 36 months, crypto has made enormous progress. So what is the progress it's made? Well, number one, we've established institutional-grade custody, tremendous deal. It took a while to do it, but it's now a done deal. We've established actual ETFs in crypto. In Canada, we actually had Bitcoin ETFs right now. In the United States, we have an ETF. It's a futures-based ETF. But we do have a futures market in Bitcoin. And I would say that's the prelude to a cash market. The reason the futures market is first is futures market, you're just betting on what you think the price of Bitcoin is going to be. But the shortest-term future is a proxy for what the cash price of Bitcoin should be. So the traded price in these various exchanges, really brokerages, should converge to the regulated futures price. And that's actually happening. So the next step, the big step, I believe, is going to happen within a year. No guarantees on that. I just think it's going to happen in a year. We're going to have some exchange somewhere and a cash market in the actual physical Bitcoin. Another thing is the Comptroller of the Currency has approved banks taking Bitcoin deposits. Now I think it's 3 banks -- actually, at least 3 banks that take Bitcoin deposits. That's a very, very big step. What we don't have yet is, as I said, we don't have the cash market, which would enable truly transparent pricing, and that would be -- open up the world to genuine institutional investing. We have some institutional investing, but it's not big yet, but we do have some. It's interesting that somebody had to be first. We achieved that. But the average institution is not investing in Bitcoin. And one other thing that relates to the banks taking deposits of Bitcoin. We now have a Bitcoin yield curve. In other words, you can lend your Bitcoin out and get a rate of interest. Believe or not, the interest you get on your Bitcoin is a lot greater than the interest you get on your dollars. That's an important point. Ultimately, maybe that's the biggest deal of all. The dollar is being debased in terms of Bitcoin over time. Why is that true? Because next, I guess, 118 years, we're going to produce something a little bit over 1.9 million Bitcoin. So it's going to grow in number by about 10%. The money supply in the world might be 10% in less than a year. There's no question about what the dollar is going to do as an example relative to Bitcoin. Dollar is going to decline relative to Bitcoin. So as soon as people have a way of realizing that, which in return, you get a higher interest rate in Bitcoin, considerably higher than you get in the [ fee up ] currency, dollar as an example, true of the euro, it's true of the yen, you can get a lower interest rate there. So people can gravitate there. Your purchasing power is enhanced and your interest income is enhanced. Why wouldn't you do it? They just don't have confidence in it yet because the infrastructure is as of yet incomplete. And one other minor point that's going to change one day, the way they quote Bitcoin, they quote it like it's a stock. They shouldn't do that. They should quote it like it's a currency. It's not a big deal to change it. It's just a convention. You don't need a lot of software to do that. Anybody can do it. It's basically if you take the chart essentially and turn it upside down. So it's not that Bitcoin is going up like the stock is going up. The value of the dollar is declining relative to Bitcoin. If you said what is Bitcoin, what is the Bitcoin price in dollars, the value of dollar, over the last 10 years, has crashed in relation to Bitcoin. And when people start looking at it that way and they get a higher interest rate, I have no doubt that crypto is going to win the day. So I hope that's an appropriate answer to your question.

Okay. The next question, would FRMO, given management's opinion on Bitcoin versus U.S. dollar and other currencies, ever consider distributing cryptocurrency to shareholders in the future?

Yes. As a matter of fact, so one of the things we have -- it's de minimis. We have on deposit -- I don't even know if it shows up in the aggregate number. The fact of the matter is we have on deposit a fraction of Bitcoin. We want to see how the lending market works. What's the fraction of Bitcoin? I think it's like 0.02 Bitcoin to 0.03 Bitcoin. So you lost the whole thing, you wouldn't know anyway. Anyway, we are testing out the interest rate market on Bitcoin. We're learning about it. It's a brand-new thing. And ultimately, that's going to be the attraction. People need income. You can't raise interest rates materially on the planet, and you certainly can't do it in the United States because that is too high. I quoted a number before of total debt in the United States. It's almost $90 trillion. It comes to the National Debt Clock. It's called total debt. People should pay attention to that. Anyway, the idea that you could raise the interest rate materially and the country would be able to pay that, it's just an escape from reality. I can give you more figures about that if you want, but I want to be direct to the question, so I'm not going there. But you can ask me, and I will go into great detail on that subject. So people, however, need a way of getting income. Trust accounts as an example. Not just people's trust accounts. But there are assets that -- let's say hard assets, bridges, tunnels, whatever. They have a capital fund, and college savings is another example. You can't invest in an equity for college savings. And what if when the student reaches the 18th year and has to go to college? You can't say to the student the market is down, you can't afford to go to college. Ironically, you need the immersions of a real market-derived yield curve, which they all have, which goes to a previous answer I had. That's Bitcoin. And it's going to evolve and have to do some feature and other cryptos as well. So I hope I'm addressing the question appropriately. That's the way I would answer it.

Next question, what does FRMO management think about the Tether controversy that is -- that it doesn't have the actual U.S. dollar reserve, the USD reserves to back each USDT issued by Tether and the consequences of that for Bitcoin prices given that Tethers are used to facilitate roughly 60% of Bitcoin exchange transactions, looking at the money flow charge from coinlab.io. Even the recent so-called audit report released by Tether in September 2021 appeared to be more an opinion based on what Tether management has decided to show rather than the results of an independent audit process. The main question is, how much actual USD, not Tether or other USD derivatives, does FRMO believe is sitting in banks that have been exchanged for or converted to Bitcoin?

Well, I don't know how much cash is backing Tether. I've never really undertook to -- it's not important to me. The problem with Tether is it's really -- behind Tether is money funds. And you can pick what money fund you want to be in, and some have actually very low risk. So the money is not there because it's like that, just like your money is not in the money market fund. Now it's not like you could like there's a big basket and you would reach in and get dollars. There's no money in any money fund. There's only securities, and they have very short periods of maturity. And you get your money back, and you keep growing it. It's very low risk paper. It's not a big deal. The trouble is a lot of it is not low-risk paper. A lot of it is high-risk paper. And if there were a default there, it would start to run on Tether or at least part of Tether. That would be a problem. It disturbed the Bitcoin market maybe for a couple of weeks. Long run, that couldn't do anything for Bitcoin. I mean there are people who trade Bitcoin in and out. And those are people or at least some of the people that have Tether balances. They buy Bitcoin, and maybe they make a profit. Or maybe they don't, and then they sell it. They want their money sitting there, waiting for the next trade. They want to get the interest income. They put the money in Tether. They think Tether is a cryptocurrency. Tether is not a cryptocurrency. And people should know that even before you get to the fragility of the asset because it's unlimited issuance. Why would you want to put your money in an unlimited issuance security? Now they say the reason to do it is because it's Tether, so to speak. To the dollar, it's always going to be worth $1. Well, then why not put it in conventional money market fund like a government guaranteed money fund that had T-bills or something? Your money will be safe. Well, the answer is because you can pick from a variety of options and get higher interest. And it's not -- because it's not regulated, I don't think it's well explained that you're taking a risk. How big a risk it is? I don't know. I guess it depends on what you select with your investment option. But it doesn't have major long-term implications for Bitcoin. I suppose the whole thing blew up for a couple of weeks. There'd be a lot of excitement in Bitcoin, but that's not a big deal. It's has no impact on Bitcoin whatsoever because most of the money is in Tether. Most of the money is not in Bitcoin. I don't regard it as a big deal.

So one more crypto question. From the start of 2020 until around May 2021, the transaction fee for Bitcoin reached a high of $62. What does this kind of cumbersome transaction fee imply for the future utility of Bitcoin as a medium of exchange?

Well, don't forget the people -- most of the people who were transacting in Bitcoin, they're buying and selling mining equipment. So the transaction fee doesn't mean anything. There are people who -- I'm not one of them. But there are people, and you can see it in publicly traded companies, they are buying millions of dollars' worth, in some cases, tens of millions of dollars' worth of mining rigs in one transaction. When you're doing this, none of the mining companies, to my knowledge, will take United States sellers. They want crypto, and it's usually a Bitcoin. So if you're going to do a transaction that's that high, I don't think the transaction fees are very high at all in relation to Bitcoin. Anyway, that's the market for Bitcoin. When you mine Bitcoin you get Bitcoin, you might need to sell Bitcoin to pay some of your electricity expenses or salary expenses or other things. We do that. So you're transacting in Bitcoin, you can't expect people to do it for free. So if you're mining in large scale and you're paying electricity costs, you might have a monthly electricity bill that could be in the hundreds of thousands, or in some cases, in the millions of dollars. Imagine having $150,000 or $200,000 electric bill. Well, you going to pay that in dollars, but you got to convert to dollars. You've got to get dollars somewhere. You're going to sell the Bitcoin to get dollars. So you're doing a transaction. So it's a few dollars. It's a lot of money for a transaction in Bitcoin. I don't think so. I don't -- in the long run, all that's going to work its way out. I'm not very worried. The market is going to set the Bitcoin transaction price. Not really very worried about it. Not worrying about it now.

Okay. Now this question is about the inflation beneficiaries, ETF. What does Horizon Kinetics plan regarding turnover of the IMFL ETF? There have been several Horizon Kinetics publications discussing a low turnover, letting winners run, [ Conwiler ] method of investing. Is this the long-term plan for the IMFL ETF as well or something more algorithmic or rules-based? Do the managers of IMFL directly own any shares thereof?

Let me answer the last portion of the question. The primary manager of the fund gave me permission to inform you all that over 1/4 of his liquid net worth is in the fund, and he buys more each quarter.

Okay. Well, that answers that question. I myself, I buy a little bit of IMFL. I do it every day. I'm in the market every day. I think it's a great fund. In terms of the turnover, it's going to follow the normal Horizon procedure. And if you've seen all our funds, very, very limited and very small turnover. It can never be 0 because they are fund flows and whatever, but it's going to be as low as we can possibly get it. We're not traders, and I don't see a need for that. So I think it's going to be extremely tax efficient.

Okay. The next is a rather long question. In the January 18, 2022, second quarter conference call transcript on Page 6, the question requesting an update on FRMO potentially becoming an operational business rather than just an owner of assets was answered by, "The easiest path to acquire 51% of one of our publicly traded subsidiaries. The company we have the biggest stake in right now is Winland. So if we end up going in that direction with one of our businesses, we'd acquire 51% if we could and conduct our operations via that entity." The latest Winland Holdings March 2022 annual report lists FRMO is still having a 29.1% ownership. Since FRMO does not appear to be an active ongoing buyer of Winland's stock, are there any near-term future plans to have a majority-owned operational business rather than FRMO being just a majority owner of a collection of assets?

Okay. Well, the most recent figure that is given to me, we're at 30.8%. That's the figure. So as far as transactions go, there's your answer. If we have the opportunity to buy more, of course, we'll seriously consider that. Obviously, I'm not going to tell you we're going to buy next quarter X number of shares. It wouldn't be very intelligent nor would it even be proper to say that. But it's not the only avenue for us. There's lots of things we can do, and it doesn't necessarily even have to be in crypto. It could be in something else. So there are a variety of very small companies that are interesting, and some might be inflation beneficiaries. So I wouldn't say it has to be that. And by the way, even end up being an inflation beneficiary, which is a different business in crypto, still might be a crypto business, and it might be even the one you mentioned. So I'm not excluding it. I'm just saying we're looking at a lot of different things, and we haven't found something to our liking yet. Not sorry, we didn't do anything. The opportunities that were presented to us or that we found over the years -- there was one. I won't mention what it is. But there was one, we could have done a very substantial transaction. And at least in terms of metrics, the price was right. But it involves getting into a business that I personally was just dead set against. I didn't want to do it. Yes. I always have an open mind, but I guess I didn't have an open mind. I went in prejudiced against it. And it was presented, and the more I heard, the less I liked to bet. And I wasn't inclined to do it in the first place. And we didn't do it. And then when I found out what happened in the aftermath, I was really glad we didn't do it. I was really, really glad, very happy. It would have been nice announcement day. We own 50-something percent or whatever the heck it was. We would have -- in fact, we would have owned 100% of what it was. We would have owned the whole thing, and we would regret every penny we threw into it. So I'm glad we didn't do it. Just got to be careful. And it takes what it takes. So that's the answer I would give you.

Okay. Since FRMO does not have a majority-owned operating business under management at the present time, do you have any thoughts on whether prospective investors should distinguish between the stock FRMO for purchase versus closed-end mutual funds that may be selling at a premium or discount to their net asset value of underlying assets that they own? At the moment, FRMO has book value of $6.79 and has a stock price that sells at a premium to the underlying book value. That's the end of that question.

Okay. Well, that's very simple to answer because we're not a collection of assets even now. And the reason we're not a collection of assets even now is the revenue share. So we get a little bit less than 5% of the revenues of Horizon Kinetics. There is no closed-end fund, which I am aware, as any security, anything like that. So you saw what just happened, the inflation on ETF. It went from nothing to over $1.4 billion of assets under management. Whatever the revenue is, we're going to collect 5% of that. So it's possible to gather a tremendous amount of assets under management. So it's possible for the cash flow of FRMO to expand enormously. So because it's possible, and as a matter of fact, it's actually happening, not a closed-end fund. And what you're going to value that revenue share at, you could debate that. But it has no cost associated with it, nothing whatsoever, just revenue that you get making no effort. So you can't say we came up with a number on the balance sheet for analytical purposes, but I don't take that number as a representative value of what it is. In any event, you can see our revenues go up and our revenues go down at Horizon Kinetics. Lately, they're going up. So it could end up being much more successful than anybody has any right to achieve. In any event, whatever the ultimate outcome is, the revenue share is an important consideration. And I would say in and of itself, whatever that number is, it's not a closed-end fund. It has nothing even remotely close to a close-end fund. If we needed to get an operating business, we can get the operating business. The thing is we want to have the right transaction. The opportunities to have the right transaction for reasons I stated previously just didn't present themselves. Wrong transactions present themselves on a variety of occasions, and we rejected every single one of them. And if the wrong transaction presents itself again, we're going to reject that. So it doesn't mean we're not looking, but it takes a while. We worked a long time to build it up to where it is. We're not going to risk a lot on something that we're not sure about. It's got to be -- as I said, it's got to be within our circle of competence. We'll see what happens.

Okay. In the January 18, 2022, conference call transcript on Page 20, Mr. Stahl mentioned that Digital Currency Group did a recent transaction in selling shares in which he personally purchased some additional shares, and he thought Digital Currency Group was undervalued. Was there a rationale why FRMO did not participate in that transaction since cryptocurrency is a focus of investment interest for FRMO?

Well, very simple. Because when the original transaction opportunity presented itself some number of years ago, FRMO got much bigger -- we didn't have -- we had a limited number of shares we could buy. So we allocated it. And basically, FRMO got a lot more shares than I got. I didn't really get a lot of shares. I personally, at that time, would have bought more. I didn't have the opportunity to add to my investment and bring it up to what it would have been at that time. FRMO got the allocation that we thought we needed to get and no reason to increase it. So we didn't. My opinion, I think it's worth a lot more than we have it on the books for, considerably more. But we'll find out how that goes. The short answer is -- yes, I just wanted to finish. The short answer is so I basically sacrificed. I didn't buy as much as I would have in order to make room for FRMO to have a bigger allocation. So I thought the fair thing is -- I'm buying at a higher price. I thought the fair thing was that now I should have a chance to buy some personally. FRMO already some. I think that's reasonable and fair. I didn't buy a tremendous quantity of it given the size of FRMO's balance sheet. The amount I bought, it wouldn't have made that much difference to FRMO. But it would make -- it just brought me up to what I thought I should have had at the beginning. That's all it was.

Okay. You have a long public track record of demonstrated skill and are very generous in sharing your time and insights with us. But there is still a large disparity in transparency between FRMO's opaque financial reporting and NASDAQ-listed crypto miners such as Core Scientific, which now reports Bitcoin production on a daily basis. What would you say to give minority shareholders confidence in management's alignment with their interest?

Well, in a way, we did report daily production because we give you the holdings of mined crypto at the end of the prior quarter. We gave it at the end of the current quarter. There's 93 production days in the quarter. So you divide by 93, you're going to know what we produce on a typical day. On a typical day, even if the production varies, for us, it doesn't vary greatly. So the burden of just having somebody -- we only have 2 employees. The burden of putting on a website, you can see what the change in mined crypto is in the last 93 days, it's either got to be -- it's got to be one of us, one of us basically or we can assign somebody to do it. To put that we got a couple of fractions of a Bitcoin on a given day, is anybody really going to benefit from that? I mean I want to be transparent, but there's the work that we're going to have to do to produce that. We have no secrets. We don't care. People know. Is the work that we're going to do to do that going to give anybody any meaningful value? So just if you crudely just took the change, differential and divide it by the number of days in the quarter, I think you'll see that if no information gathered. Now the other miners, I can see why they do it. Because they have an entirely different philosophy. They invested tens of millions of dollars in mining equipment in one shot. And I don't think that was such a smart thing to do. So anyway, you can look at the stock prices and what happened in the last quarter. And I know Bitcoin went down. That's a factor. But you can see what's been happening, and you'll see what the quarterly results are. And ultimately, these machines, they depreciate. They wear out. And I don't know what the accounting treatment is going to be, the mark-to-market. And they're not worth, but they paid for them. And then eventually, they're going to be worth 0. So I don't think that tells you a lot. Anyway, if someone really insisted, I suppose we'll do it. But I don't think you'll learn from there a lot. So we produce information where we think it's a benefit to shareholders. So to tell shareholders today, we mined a tiny fraction of the Bitcoin, what people can get from it? If you really insist on knowing, it's not a secret. We'll tell you.

Next question. Does FRMO have any financial ownership in Horizon Kinetics Hard Assets II?

With FRMO, yes, it has a substantial ownership in HK Hard Assets II because the 3 -- basically, HK Hard Assets II is jointly owned by 3 entities: Horizon Common, not Horizon Kinetics, Horizon Common and FRMO and yours truly, me. I don't remember what the ratios are, but at the end of the quarter, we're going to disclose that. So next quarter, you're going to know what FRMO owns in relation to what I own and Horizon Common. I don't remember what it is at the moment. It changes every day, basically, but you'll have the exact figure to, I think, 2 decimal places. So it should be adequate for your needs. Next quarter, we're going to report that. So basically, we -- the whole idea was to give it life. And we gave it life, we thought, on February 28. So it would have been in on the financial statements. The trouble is that the accounting treatment is the assets and monies that we put in, even though from our point of view we sent it on February 28, legally it's received on March 1. And therefore, it didn't appear on the financial statement right now. But it will appear for the quarter-end statement. You'll have the exact number.

Do you think Ethereum Class -- I guess that would be Classic will have increased value when Ethereum goes from proof of work to proof of stake?

The short answer is yes. Because the miners, what are they going to do with their mining equipment? The Ethereum Classic is not going to stop mining. It's going to stay at proof of work. So all those miners will have no alternative. So in hours, they're going to migrate to Ethereum Classic. And that's why we take the trouble of mining Ethereum Classic. Ethereum Classic, it's a small cryptocurrency. Not a lot of people are interested. And it doesn't have a lot of value. But if they were to go to proof of stake, what's going to happen to all the mining equipment? Now theoretically, you could argue that the mining equipment might still have value in Ethereum. But then again, you're going to have to -- the mining equipment is not going to mean very much. You're going to need equipment. The real thing is you're going to need the stake. You're going to have to put up a lot of Ethereum. And who's going to want to do that? The small miner is not going to want to do it. They don't have the capital or do anybody. So one of the problems with that is they work it out. It's, I would say, almost a necessity the validation is going to be done by the people with the biggest stakes. Then it's going to be -- as I understand, there's going to be like a lottery system. So a small validator can actually have a chance, or if a small validator gets something wrong, they don't have a big stake to do something wrong, what are you actually going to seize? I don't know how democratic and how decentralized you can really make it. I have my doubts about whether you can ever make it proof of stake. So I say this all the time, and I'll just repeat it. I have an open mind. I'm willing to listen if someone tells me proof of stake is going to work. But the more I think about it, the less enamored I am of it. They've been talking about it for years, and it hasn't happened. It's not happening tomorrow. So I ultimately don't think it's feasible. So the basic problem in cryptocurrency -- the only reason that Bitcoin remained a dominant cryptocurrency is not because the Bitcoin is a better technology. There's a lot of better technologies. It's not because the miners are loyal to Bitcoin. They don't have a big community of miners or any of that. Basically, they did one thing that no cryptocurrency is ever going to do, although they could do it theoretically. Bitcoin started in 2009. It was a labor of love. So essentially, the entire corpus of what was going to be issued, other than maybe the Genesis Block, was essentially reserved for the miners. So it's sort of like you're designing a cryptocurrency, and it takes a lot of work. And a lot of these cryptocurrencies, in my opinion, they're just brilliant, a lot more brilliant than whatever the Bitcoin protocol is. The trouble is, are you willing to be generous and say, "I'm going to allocate the bulk of it to the validators that are really the miners. Human beings aren't wired that way. They're not wired to make an act of love to crypto. Like they aren't wired to make an act of love to any asset. So that's what makes Bitcoin dominant basically, that you can get a lot more value at it. That's why the miners are there. Now a lot of other cryptocurrencies, they don't even have mining. There are all kinds of quasi incentives to validate transactions and achieve consensus. The only one that I could say is intriguing, although the jury is out on that, is XRP. So in XRP, you can actually [indiscernible]. So you could say, well, why would you mine? Well, because there is a transaction fee. And the transaction fee is burned, meaning that the total units outstanding is always shrinking. So XRP is very interesting mathematically because it's a deflationary currency. That mix is really extraordinarily interesting. The trouble with it is you don't have to be a validator to get the benefit of that. You could just be a holder. So the problem with it is making sure you have security in the network and you allow more validators. They don't have them right now. And within the context of what's done in XRP, I'm not sure that you can achieve that degree of integrity in the system. For a long time, it was a permission network, and that was how they got their security. So basically, only a couple of big banks were allowed to, and still the case actually, largely. They are likely to pull anything. So now they decentralized a little bit and let some other people into it. Anyway, it's a -- I don't know if there's a good solution to add an XRP. Maybe a viable currency in a permission marketplace, so it's going to have a narrow application. Maybe that's its ultimate fate. Ethereum Classic, if they're really serious in Ethereum about proof of stake -- and ultimately, Ethereum Classic could be the Ethereum winner. Now Ethereum has a lot of other issues aside from the proof-of-stake issue. I wrote a paper on this. You might want to get a copy of it. Per transaction, it uses -- you won't believe this, but I assure you this number is accurate. Per transaction, it uses 100,000x the power of Bitcoin per transaction. If you ever want to scale up Ethereum, they might really have a power problem. Another problem with Ethereum is its Internet issuance even though the denominator, which is the number of coins issued, increases at a decreasing rate because the denominator keeps getting bigger but the issuance per year is constant. So you have to deal with that issue. I mean if you went out enough years, it would approach the issuance rate of Bitcoin, but that would be a long time from now. All of us are going to be long gone when that happens. So that's a problem. And in my opinion, it's very ambitious with the smart contracts and everything. We want to do a lot of things, and smart contract is not really part of the system. They're only as good as the programming, the people who make them. So in a smart contract sense, it's hackable. And it has been hacked, and it frequently gets hacked. But not hacking the currency. It's hacking the smart contracts. A lot of technical issues that need to be worked out. So we're a long way from success mode in that kind of crypto. Anyway, now you understand why Bitcoin remains the dominant crypto. It's not technology. Crypto had some rise in a sense or 2. In crypto, because all the code is open source, anybody can copy it, anybody can make a better or similar or almost identical cryptocurrency. So you got to give people an incentive to transact and validate. How do you do that? If you're -- if you've done a lot of work and you're the originator, you want to get paid for that. But you can only have 100% of anything. It's a serious problem. And so far, no one has -- or at least none that I've better been able to see. I hope that's enough information on that subject.

We now have the penultimate question, and it is given the developments on Bitcoin's Layer 2 protocols such as Liquid and Lightning protocols for scalable transactions, et cetera, and further adoption by companies such as Shopify and Block/Square of these protocols, where does FRMO see future value coming from in other blockchain protocols such as Ethereum and Litecoin in comparison?

Well, I wouldn't make too much of Liquid or Lightning because basically, you can't change -- or you could. You could fork it and change the Bitcoin protocol. But we've had some forks. Nobody really is that greatly interested in doing that. So what people have done as opposed to forking Bitcoin yet again, what they've done is they created these -- this is not a good expression, but I'll use it because I think people understand the imagery. It's like a service road or a service lane on a highway. So it's a parallel pathway. The whole idea to get scale is that is going to be this parallel roadway, and for small transactions, it's not going to get written to the blockchain immediately. We've written that point of opportunity. I don't know how scalable Bitcoin becomes. And frankly, I'm not in Bitcoin because of scalability. The idea that there are going to be billions and billions of transactions today on Bitcoin, that's -- what you're looking for there is hundreds of cryptocurrencies can do it. I don't think Bitcoin is the element of that. Bitcoin is designed to solve one problem in the world of private money. Bitcoin is private money. That's what it is. The idea of private money goes back hundreds of years. But the problem with private money as stated in the book, The Denationalization of Money by Friedrich Hayek, is the authentication problem. So what's the authentication problem? Let's say I personally created a currency. It doesn't have to be crypto. It can be anything. I created a currency, and I told you like Bitcoin, there's 21 million units. Problem is, how do you know you can trust me? How do you know that I didn't make 22 million units or 23 million units and I kept some for myself or I gave some to my friends or even if not even taking it for myself and just honestly creating more currency and effectively creating a new central bank? How do you know I'm not going to do that if I'm in control of it? So until there was a blockchain, there was no answer to that question. Now we can authenticate the whole purpose of Bitcoin is when you have a fixed issuance, it's supposed to function like Gresham's law, which means bad money drives out good. So gold is better money than, let's say, the dollar. A lot of people say that. I personally agree with it. But what happens if there is a huge market for gold? If you count the number of transactions per day in dollars versus gold, I mean, dollars has a beat hands down. You counted it in just the market value of the transactions. What's the market value of all the transactions in the dollar versus the market value of a transactions is in gold? [ EV ] took the euro-based, the end-based transactions and converted them into dollars and compared it. Gold is a tiny fraction of the dollar-based transactions. And the reason is it's a store of value. So in accordance with Gresham's law, what you're supposed to do is you're supposed to hang on to it. Now if you -- you're not supposed to really use it for transactions except occasionally. You don't need to scale it up. I don't see a purpose in scaling it up really. People want to trade it. I would advise trade a feature that you can trade miscellaneously. You don't need Bitcoin to have that kind of scalability. Now that being said, if you go on the blockchain store known as BitInfo, BitInfo, if you go on that, and you'll see somewhere on that website, there's something called the Rich List. And basically, what it is, is it's a list of every public key, you can see it, who owns Bitcoin. And you can see every transaction. Now you don't know the names, but you can see every transaction, if you have the patience to look, that was ever done in the world of Bitcoin. And I would tell you based on my calculations -- you can see if I'm right. You can try to verify it. I will tell you, at 87%, all the Bitcoin is probably owned by less than 100,000 addresses. And I personally think that's not 100,000 people because we at Horizon, we have multiple addresses. I'd be surprised if it's more than 23,000, 24,000, 25,000 people own 87% of Bitcoin. So I look at life. It's working exactly in accordance with Gresham's law. You could see the big holders. You can go look. You look at a small holder still. Big holders, they rarely trade. And when they do, they're almost always buying. They're hoarding it because they know it's going to have value in the future. So what in the world are they doing building these scalable networks? I have no idea what they're trying to accomplish. So to me, I look at it because it's intellectually interesting, but I don't think it has a lot of impact on Bitcoin. I know hundreds of articles, maybe thousands, written on how important it is to bring Bitcoin scalability. It's not going to be MasterCard. It's not going to be Visa. That's not what it was tended to do. So to scale it, I think this is the whole point. And you'll observe that these various Bitcoin forks, every one of them was an attempt in one way or another to scale it. And it did scale it. It makes it a lot more -- it's a lot faster. And it's a lot more scalable in the forks, and you see what happened in the forks. No one is badly interested in it. At least not very many people are badly interested in it. Now they want to find -- they think they're not badly interested in it because they didn't scale it sufficiently. They only scale it even more than people will come to it. I think it's a false assumption, and I wouldn't recommend people waste a lot of time with that. But that's what makes it a free market, I guess. I hope that's a thorough answer to the question.

And here's your last question. Noting the development talent -- noting the development talent in Bitcoin such as having the attention of Jack Dorsey and his development team at Spiral and other high-caliber, open-source developers with proven track records contributing such as Dr. Adam Back, how does FRMO see these individuals stacking up to Vitalik Buterin and Charlie Lee?

So the truthful answer is I don't know because I don't know what day or to what extent anybody is going to get a bright idea. I mean they're all brilliant people, and they're all capable of doing wonderful things with regard to crypto. And no one knows, even those people themselves. They don't know. Tomorrow morning, they might wake up with a brilliant idea. Or maybe they woke up with a brilliant idea today, and they're in the process of implementing it tomorrow morning. I really don't know. For me, Bitcoin at least is not about technological expertise. The reason it's not about technological expertise is, well, one, we don't need to scale it. All we need is solve the authenticity problem and the authentication problem. We solve it. We don't need scalability, and we don't need fancy technology. There is thousands of cryptos. I wish I had the time to read all the papers. But the ones I read, they're absolutely astonishingly brilliant, and I'm sure the people you mentioned are brilliant as well. The thing is we don't need that kind of brilliance to solve the authentication problem. Now maybe they're going to figure out brilliant things to do with crypto that I haven't thought about yet. Maybe it's important, but we don't need that with regard to Bitcoin. We need security, and we need authentication. And I believe we have it. So that's where it's going to be now. One other thing. In the world of rare assets, so let's take something where there is potentially an infinite number of rare assets like rare books. There are only so many copies of first edition of Charles Dickens, okay? So Charles Dickens lived in 19th century. And there are first editions of authors who lived in the 20th century. That mere fact that you have the accretion of every new authors, some of them might be better than Charles Dickens, doesn't destroy the value of Charles Dickens' first edition. The idea that someone is going to come up with a better technology than Bitcoin, it doesn't destroy the value of Bitcoin if it does what it's supposed to do, and it's authenticated. It's a rare asset. So that's why people need to look at it. Now the problem is it's very hard to have a rare asset and properly authenticate and reserve enough for the brilliant people who come with next evolution and still satisfy the validators. That's basically the problem. I haven't seen anybody solve it yet, although maybe these people can do it, in which case, I might buy their cryptocurrency. I might sell the Bitcoin. And that might be a cryptocurrency success. That might be a Bitcoin failure. So we have to keep our eyes open for that. So I look forward to their brilliant future work.

Thank you, Murray, and thank you, Steve. That was your last question.

Okay. Well, thanks, everybody, for listening. I was very impressed with the questions today. The people are really doing their homework, and that's also good. And I look forward to doing this again in about 3 months. And if there's something we didn't answer or data that you think we should be providing, don't hesitate to contact us. And we'll see what we can do in that regard. So thanks, everybody, and talk to you soon. Thanks for your support. Good afternoon.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.