FRMO Corporation (FRMO) CEO Murray Stahl On Q3 2022 Results – Earnings Call Transcript

FRMO Corporation (OTCPK:FRMO) Q3 2022 Earnings Conference Call April 19, 2022 4:15 PM ET

Company Participants

Therese Byars – Corporate Secretary

Murray Stahl – Chairman and Chief Executive Officer

Steven Bregman – President and Chief Financial Officer

Conference Call Participants

Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.


00:03 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 Therese Byars. Please go ahead.

Therese Byars

00:14 Thank you very much, Keith. Good afternoon, everyone. This is to Therese Byars speaking, and I’m the Corporate Secretary of the FRMO Corp. Thank you for joining us on this call.

00:24 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

01:15 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 one 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 market’s website by typing in the ticker symbol FRMO and clicking on the news link.

02:36 And now, I’ll turn the discussion over to Mr. Stahl.

Murray Stahl

02:41 Hey, thanks, Therese. And thanks everybody for joining us. I guess, doing — 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. Everybody 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 TPO we have, how many other cryptocurrencies we have, and so on and so forth. So here we go.

03:17 We — 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 what I should say for bitcoin cash. We have 4,220 shares of the Ethereum Classic Trust. We have 26,778 shares of the Bitcoin Cash Trust. We actually — one of the reason we got that is, we took our Bitcoin cash and we tendered it to the fund. One of the reasons for doing that is, when you are allowed to participate we actually got pretty good deal on that.

04:22 We have 500 — we have 606 units of shares of the Grayscale Zcash Trust. Excuse me, I read that wrong. I didn’t know we have [indiscernible]. We have 608 shares, 606 shares of Grayscale Zcash Trust. We have 5,895 shares of Litecoin Investment Trust, all these things by the way are big discounts to their asset value. I should take that in consideration when we give the market values.

04:57 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 gave my theory about the Bitcoin forks and their ultimate value. So I won’t repeat that unless somebody want to ask a question about. This we have directly as opposed to being on funds is, bitcoin itself, this is bitcoin that we have mined through our mining efforts. We have 123 actual Bitcoins. We have 7,644 shares of the Grayscale Bitcoin Investment Truist, 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 seven shares of the Grayscale Litecoin Trust. We also have mined some Litecoin, we are 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 gave mined and 61.4 Litecoins.

06:13 Now we own the 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. Listen, this is not the implied that we have, I’ll give you the implied we have momentarily, this is what they have. They have 52.9 actual bitcoins that they have mined. They actually purchased or acquired indirectly, these are through other modalities and there is 7.7that they didn’t mine. They’ve mined 14.9 Litecoin, they’ve mined 53.5 Zcash, they’ve mined one Bitcoin Cash, 8.7 Bitcoin Gold and Ethereum Classic, 9.4. That’s what we’ve got, our implied quantity multiplied by 0.308 those numbers, and you’ll know what that is. And you probably want to know how many shares of Texas Pacific Land Trust we have, which I will read you. We have indirectly through investment funds 50,729 and directly we have 7,374. Those two numbers, obviously, it’s over 58,000. So that’s that. Now you know where we stand. I think the balance sheet and income statement speaks for itself.

07:57 The salient quarterly event impacting our value is our shareholders equity is a decline in the value of Bitcoin and the Bitcoin Investment Trust. Texas Pacific, which was a biggest holding didn’t do a whole 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 $1,188.73 a share, obviously — so take that into consideration when you are looking at the financial statement, everything else is fairly self-explanatory.

08:45 One or two things are in the process of happening, which when we get to my various points, I’ll refer back to that document and event. You can clearly see that much of what we’re doing in investment sense, 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 six years now. So let me make some general remarks about inflation. I’ll make four or five remarks of that. Just to set the tone, that will go to crypto and various things we’re doing there and some other stuff. I think you’ll find interesting.

09:23 So, historically, and wealth was hard asset wealth. And that really changed in our side, probably from 1980 or 1981 to about a year ago. So financial assets in wealth. It had to do with the, not elimination, but the decline in the inflation rate of 70s up to 1980 from 1981 to, I would say, at least 2020, probably in 2021. There was no lot of measured inflation and 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 events. I would argue interrupted the inflation that we were experiencing up to 1980. And I was just going to say what they are.

10:27 So one is, the collapse of Soviet economy. So now in 1981 Soviet economy had not get collapsed. It was in the process of collapsing and not wanting their society to collapse the leaders that country. We are currently 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, iron ore, uranium, you name it. And that went on the market, that was a major disruption to global commodity markets. And it was happening for decades.

11:00 Second, I would say similar once in a millennium event was the — almost simultaneous collapse of Chinese communism. So the conversion of the Chinese state from an economy of 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 had no meaningful impact. On the world 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 the bigger deal than the Russian commodity sales. 1.4 billion people is lot of people. And it caused ideal shifts in terms of where goods are produced, displaced a lot of workers worldwide, that process has more or less played itself out, has obviously the Russian sales of commodities, reasons that you read about in the paper every day. Now we’re in the world of sanctions and embargo. So we’re in different — we’re in different world.

12:11 The third thing is, they were emulators, quite a few of them actually of the Chinese government bringing their labor on 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 less degree labor markets of the labor of Eastern European countries or also formally communist. You’re talking about possibly over 3 billion people [indiscernible] various points in time over the course of 40 years in world labor market. That’s done.

13:05 Two lesser important points, so I’ll just mention them, 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 for the part tie, the par tie 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 lot of needs. That’s a once in a life time event, maybe once in a millennium event.

13:39 And then another thing that’s been happening really started in the 70s, but certainly getting force in 80s, the integration of women in the workplace. That’s half the plant got intelligrated workplace, whereas historically that didn’t actually exist. But all those five things that I mentioned are major counter inflationary trends. All those counter inflationary trends were playing themselves out or I would argue, have playing themselves out.

14:12 And in a macro sense, you want to think macro, that’s with lead 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 expect crypto in a variety of ways. So, one way is, we have our mining efforts which we’d like to expand and 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. When we will 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 there’s been another quantum improvement in power consumption efficiency, in that respect. And the prices of rigs actually fall.

15:08 Price of rig falls that interrupt the rise in Bitcoin value. Why does we do it? You might think, why is 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 mind them. Than 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 to get cheaper produce wheat and or soya beans or corn that gets reflected in the price. So it’s no different than any other commodity with one incredibly salient exception.

16:02 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 really available to produced more gold, more gold is going to be produced. The same is true for oil, the same this true for soybeans or wheat or corn or whatever that just be. The case of Bitcoin, we’ve now mined over 19 million coins. They’re only going to be 21 million coins, in the year 2140. There’s less than two million ago and they are going to become increasingly scarce. Eventually, the scarcity factor is going to overwhelm to 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 and coming. When it’s going to be a perfectly legitimate asset class and that’s why it’s so important to be there.

17:15 Now apart from our own mining, we have four other investments in crypto that are worthwhile just noting. One is called hash master, we own, i think it’s 7.1%. Horizon Kinetics self owns over 15% 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 prepared a data center for their 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 hash master now has coins as well.

18:00 Then there is consensus mining, that’s the outgrowth of something we started a number years ago with HK, Cryptocurrency Mining LLSs, which we merged with newly created company called Consensus Mining and raised a fair amount of capital in the process. 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 lock up and all the insiders who have shares can’t sell till lock up expires on November 30 of 2022 and now we’re in April, so call it about half year on December 1, 2022 that will be publicly traded.

18:48 And of course, there 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 Trusts and perhaps one day those will be cryptocurrency ETFs and maybe GBTC will be a Bitcoin ETF and it will be the leader as it has been throughout the cryptocurrency efforts. So that’s cryptocurrency currency, I’m sure you have more questions about that. A couple of other points that I want to make. I think they’re important.

19:45 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 the Minneapolis Grain Exchange with Miami International Holdings, which was once the Miami Options Exchange, now it’s [indiscernible] Stock exchange and 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 $14 million stake, what we referred to as [MIEX]. It shows you from small investments, something big grow. I have a lot of high hopes on MIEX. And if you go to their 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 striving by every conservable measure one can try by.

20:50 We also lesser their investment is striving or blasting 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 lot of puts in Canada, accent to capital markets to replace essentially the role that Toronto Venture Exchange, I mean, well the Vancouver exchange which became Toronto Venture Exchange once played in Canada. And it’s thriving and blasting. One of the reasons is that, natural resources require capital. Canada literally has thousands of companies that are in need capital. And the commodity cycle in my opinion has just started, so this company is striving in every conceivable way.

21:49 Now Horizon itself. Horizon itself, we had — you could argue 12, maybe even 14 years issues, and I guess the issue every value investor had. Number one, every value investor was overshadowed by the rise of the enormous technology conglomerate. They’re really outside of what value investors typically invest in. So we really didn’t participate in that and you could say the whole value investing asset, but I would argue, it was impacted even greater by the rise of indexation. Indexation basically overwhelmed active engagement and for 12 or possibly even 14 years. That’s what was happening.

22:44 The next thing was, the rise of ETFs, that you could say is related to the rise of indexation, but we all believe as active managers that ETFs was non an asset class that would ever be permissible for active managers. There is certain disclosure rules in ETF and no one believes 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 in your mutual fund, you’ll be paying a fairly substantial basis points to that platform just because the money came from there. And that has a major impact on profitability. So, we were — we had that issue plus we had the competition with indexation, competition with ETFs. And then we realized or came to our attention that regulation had changed, we could do an ETF.

24:18 And the first ETF we launched – in light of everything I said, there could be no other, the Horizon Kinetics inflation beneficiaries ETF. And that was launched on January 12, 2021, now we’re in April, mid-April 2022. So in fifteen months, we now have over $1.4 billion when assets are measured. So change has opened up to us just because of that, that is a major factor that we now can access ETFs.

24:57 Another important factor is that, if you’re in the world of inflation over those 10 or 14 years with value investors, we’re suffering under — we are suffering their decline and assets are management. In the same period of time anything you can reasonably describe as an inflation beneficiary was gradually in waiting, in some cases actually purged form the index itself. So the indexes don’t have a lot of inflation exposure anymore. If we’re really right, we’re going to have inflation exposure. Indexation is going to have trouble because of lack of exposure, even though inflation may does occur, it is such an overwhelming feature of financial markets.

25:48 Anyway, needless to say, we’re going to soon be launching some other ETFs. I wrote down in a paper, four of them, actually five, that are going to be launching, I would tell you the names, but I don’t want to tell you names, because I’m afraid someone may copy them. So rest assured, there are — you will be seeing new things happen in not too distant future in the world ETF. So we’re going to do some interesting things. Some of them are in the equity market, some of them actually, believe or not, in the bond market and I think you’ll find them all interesting. So stay tuned. And you’ll learn about them. And last point I want to make before I go to 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.

26:40 So in addition, the HK hard assets, one, was major position of TPL, we started something, I alluded to it in last conference call. I believe HK Hard assets too, there are some shares at TPL and there we created, just to give it some life, we’re buying something in the world of hard assets that’s entirely different focus. So, I think it’s very interesting and in due course we’ll be able to talk about, but on March 1 we made our first investments in it and we will be adding to our investment as the month’s progress. And what I’ll say about now is, it’s no question of inflation beneficiary.

27:22 So, those are the remarks I wanted to make that I think are salient and important with regard to Horizon and FRMO. Steve, do you have anything to add? Have I missed anything? I guess, he’s got none on hand.

27:47 So, Therese, can you open up it for questions.

Question-and-Answer Session

A – Therese Byars

27:53 Absolutely. I will read you the questions we received in advance. They are not [indiscernible] the topics I think maybe we can get through. We covered some different things rather than copying [indiscernible].

Murray Stahl

28:08 Okay. No problem.

Therese Byars

28:10 Okay. So first question. Is there any policy whereby FRMO Employees must own stock, given management’s views on inflation and 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?

Steven Bregman

28:33 I just like to break in and be a little rude. It’s 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 — the little red head up icon, because I guess it attracts by hind brain attention. Anyway, my apologies.

Therese Byars

29:01 Okay.

Murray Stahl

29:02 Okay. Anyway, in response to that question, you may be aware there are only two employees of FRMO and they are on this call. It’s 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 gradually during the course of the quarter, but I own weigh 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 regulators you’re going buy X number of shares a day and we buy X number of shares a day. I should get how many shares we buy every day, but Horizon Kinetics is in the market every single day buying shares of FRMO and that goes to our benefit as well.

30:18 So, I think from a personal basis, FRMO because of doing this call it’s still restricted and I think it will go unrestricted not mistaken, April 21st. That’s the first day I personally can buy, but Horizon Kinetics was actually buying stock today, they buy stock every day. So I hope that’s a direct answer to your question.

30:49 Therese, Next question?

Therese Byars

30:52 Yes. Sorry, I was on mute. Okay. Next question. What are management’s biggest fears for the company’s business right now? What does management see as FRMOs five year plus destination? And what do you see as the most plausible narrative of failure in accomplishing that?

Murray Stahl

31:14 Okay. Well, there are 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 mentioned it again. We haven’t done that, two reasons really, two primary reasons. First reason, the things that we could have bought, we didn’t know enough about to warrant buying it. And secondarily, even for some of 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.

32:03 At the moment, I’m leaning towards crypto, because we have all the maintenance 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 and 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 comments. So that’s that.

32:28 In terms of what do we fear. Well, [indiscernible] I think it should be self-evident. We’ve made a fairly big investment in inflation beneficiaries, where there’s lot of inflation, what if there is disinflation. What if there’s deflation. All those things can happen. I personally don’t think at a moment there all that likely. But the best late plans [indiscernible], so it’s possible and we have to consider that. So we’re constantly reevaluating that and where that circumstance will arise. We have to do a lot of repositioning of assets, but doesn’t it seem like it’s happening at the moment, any of that. So, I guess that’s the greatest fear. We don’t have a leverage balance sheet. We don’t have any real liabilities, the only debt we have is the $707,000 of the mortgage. The mortgage is for the building which Hash Master is in. I think they are building itself personally and this might, I think the mortgages — where the mortgages like maybe at most, there are probably a quarter 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.

33:52 The other thing I mention, if where to have an operating company that we’re going to have some employees with employee come, there is personnel management problems, so we have hadn’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 some management. So there’ll be an employee expense item and 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.

Therese Byars

34:25 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 in employees perspective, what would management say is the worst or most difficult part of working for FRMO?

Steven Bregman

34:44 Let me just start there –

Murray Stahl

34:48 Yes, okay. Yeah. You just do it.

Steven Bregman

34:50 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 speaking about FRMO Corp as opposed to Horizon Kinetics, for instance can be a little sloppy with pronouns. But someone might have — the question might have confused one company with another with respect with discussion of employees. The first one, as Murray just mentioned, there are two employees of FRMO Corp and you’re on the line with them. And we have never left the company.

35:33 So that answers that. In 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 analysts has left the firm in many, many, many years, may be like a decade. And that’s still the case. But I would have been talking if that was me about that particular portion of Horizon Kinetics, the research staff.

36:17 As to taking an employs 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 lot more employees at FRMO Corp than there are. It’s just the two of us.

Murray Stahl

36:37 It’s just us. So we’re not going anywhere. But as I said, one day if we have an operating business, they’re going to be employees and that would be a more prudent question and we’d like to achieve that, but it hasn’t happened yet. In terms of Horizon, if I want to interpret that way, I think in terms of — I never calculated what the internal rate of Horizon, any way you do it, it’s low. We don’t have a lot turnover. We’ve got roughly 80 people at [indiscernible]. I would say, in a normal year we might have one or two resignations, something like that. Sometimes we’re in the growth mode, lately we’re in a growth mode. So last couple of years we actually brought some people on pertaining to the effort in ETFs, whatever. Right now, we are thinking of hiring the person in the bond ETF effort, we haven’t done that, but we’re thinking about. So I don’t know we don’t have a lot of — have a lot of turnover. With 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.

38:12 And secondarily, if you 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 partner, 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 twelve to fourteen year rough patch depending on how you calculate. So it’s was not pleasant. If you’re employee, I dare say, I don’t think anybody was 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 perhaps just being honest, that’s how I felt.

39:15 So I hope the addresses that. What’s next Therese.

Therese Byars

39:19 Next one is, there are some who say that quantitative easing is federal reserves and not as some take as [indiscernible] many printing that was in quotations. And in fact our view that quantitative easing has historically caused deflation or disinflation rather than inflation? And as the bond market has correctly predicted this each time and is presumably again correctly. Predicting a similar situation this time around, that is — the bond market isn’t buying it “our 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 non-bank deposits resulting from quantitative easing, marketing spent largely on things other than financial assets? That is exactly what — what means is quantitative easing which results in increased bank reserves at the FED [indiscernible].

Murray Stahl

40:40 Well, Okay. Well, one quite a bit easy to answer. And I’ll give the data sources. So there were two — so I’ll name the two in just a second, but let me just state the principal. The principal basically is, there’s a supply of goods and services in the growing economy that increases. And that could be oil, it can be cheese, it could be cars, it could be whatever product you want. To sold these different products and services the amount of money in the system is growing faster than products and services you could buy with that money in the best infinite variety, almost [indiscernible] you will buy. What’s going to happen? If you believe in the lower supply and demand as I do, that the money will buy less products and services, because that flows by demand.

41:35 So what’s the data source? Well, data source is for money, and to SL, and you can look at the chart. It’s on the Saint Louis federal reserve website. So M2SL, Saint Louis federal reserve, if you heat that in, you’ll see the chart and they have it. So it’s growing in round numbers in recent months at about 10% a year. Now we can have a lively debate about what’s happening to global production, remember we’re in a global market. And we’re talking about a lot 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 like to buy is growing at 10% a year. That’s the basement. That’s the way it is. So now, if you were to take products in of themselves, whatever 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 to their prices. And there’s plenty of different — plenty of commodities we could talk about, the iron ore, if you really want to get [indiscernible], here’s the number I just cited, because I find it interesting. I don’t know, relevant it is, but the price of lithium, I’m not even saying the number because, it’s up so much. No one will believe me if I even cited the number, but you could look it up, there is 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 fifteen months is up tremendously.

43:38 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 state of sources is the energy, information administration [indiscernible] government The world even I say it’s producing about as much coal as they ever produce, maybe even producing more coal that it’s ever been produced in the history of the plant.

44:26 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 backlog, trying make reference to with data source. One second. I believe somewhere the national debt clock, I don’t have it in the front of me, but I believe somewhere in natural 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 example in terms of BTU, I would say, coal is probably 12 times the size of wind BTU. Now that’s the way they measure it. I don’t even believe that measurement is accurate, why I 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 are measuring rate capacity, not measuring output, so that’s another — that’s another story. Anyway, in terms of the debt in the world, see, I don’t look at plant easing in terms of what the government does. I look it 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 America, not the United States government, but collectively, everybody in United States have a student loan or a credit card loan, a personal loan, a mortgage, a treasury, municipal bond, whatever it happens the 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 so they can issue loans. Why? Because their treasury is risk free, and a conventional loan is not risk free. So, you have to reserve more capital against conventional loan and against the treasury. So if you shift your balance sheet even slightly, which treasuries, which I would say most banks have been doing in addition to increasing the size of their balance sheets. I think the big banks, Wells Fargo, Bank of America, Citigroup, JP Morgan Chase, their size of the balance sheets are in trillions of dollars.

47:19 So when a bank gives credit they are not pruning money, they are [indiscernible], but they are creating money, they’re creating liquidity. So that’s that now. I think one part of your question, that’s last part, I’ll address, which is the — what the bond market is predicting. This is the only thing where I’ll be a little strident and say, I don’t think the bond market is predicting anything. Why I thing to buy market is predicting anything, because the bond market is managed. I only indicative we call the bond. The size of the federal reserve balance sheet, the size of federal balance sheet alone, that reserve is over $9 trillion and you have the banks, how many treasuries they have that work hand and glove with the treasury, then you have the various indexes that buy bonds just to hold them.

48:14 So What is the bond – their indexes? They are not making a prediction, how much money is in bonding indexation? I can look up the number. I don’t have it ready in hand, because it wasn’t anticipating 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 on the website of federal reserve, I think you’ll find the analyst stream of articles and discussion points. That exactly what we are doing. And I have you mentioned the central banks nations, but also in the United States Treasury and I should add the international monetary fund and I should add the bank international settlements. So I regard as bond market is predicting anything, but that’s the only point I’m going to be strident done. I think in terms of what — to say that the bond market is making a prediction when the central banks in the world actually with their gas balance sheets, do everything I can to control rates. I just don’t think that’s the right way to look at it, that’s just make. So there you have it. I hope I complete the answer to the question.

Therese Byars

49:28 It sounds good. Next question, in FRMOs second quarter 2020 conference call management mentions [indiscernible] law when discussing a view of bitcoin price. This appears to be a common argument when discussing the value of bitcoin. What are management’s thoughts on parallels that is made between the argument for bitcoin value based on mid-caps 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 argument based on the caps law and artificial supply deficits?

Murray Stahl

50:09 Yeah. Well, you could say that the only difference is this, that in the dot com bubble of late 90s up to 2000 there is no limit how many websites you can create, absolutely none. So, there’s have no limit to many — how many searches you could do, practically speaking, I mean, maybe in theoretical physics is limited to it, but there is no limit to that. Bitcoin is limited, fixed supply. So, you can’t make a scarcity argument for websites. You can’t make a scarce argument for bitcoin.

50:52 So I myself was one of the people who I think go back to my work in the 90s, I myself will talk about the bubble, and I think had a piece that I’m proud [indiscernible] their market, and I went through this logic in great details. So I didn’t accept that, 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 are going be on a web so many hours a day. That’s it.

51:24 There is — in Crypto, bitcoin in particular, it’s the reverse. There is a limit, bitcoin you 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 is no theoretical limit. If there a fixed amount of bitcoin, it’s going to get more scarce. That’s what we do it, so I don’t think [indiscernible] law can be used to argue against the value of bitcoin and turning into a dot com argument. But anyway, they have my view.

Murray Stahl

52:04 Thank you. Given FRMOs 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 zero?

Murray Stahl

52:32 Well, the way I put is, it has a reasonable chance of failure. And so, what we do is, we don’t invest more capital in it that we could afford to lose, because the whole project could fail. It’s possible. And I can — I can come up with if I wanted to a number of possible failures scenarios. I’m more confident in it than I was a year or two ago. I don’t think it’s going to fail, but it’s possible. But I’m not going to hedge it with features, I’m not going to hedge you with options. I’m just constraining the amount 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 all this is not very likely, I’ll be brilliant enough to see that it’s going to fail before anyway else use it. I wouldn’t be confident that I’ve the ability to do that, actually I’m pretty confident and don’t have the ability to do it. But in the event, I think you look at our balance sheet, you look at what’s going on, we could survive complete failure of project, maybe we will be brilliant enough to 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 with failure if it happened. I don’t think it’s going to happen personally, but time will tell.

Therese Byars

53:59 Okay. Would FRMO transition to a crypto based operating business be linked to the progress of FRMOs uplifting to a major U.S. Exchange as mentioned during the fourth quarter 2021 earnings call?

Murray Stahl

54:17 No, it’s not — one is not depend on other. I mean consensus mining is going to be listed I think to starters, OTC markets. So I don’t think it’s necessary to be uplifted. I mean, we just have to see what happens in the world of crypto. It last 24 to 36 months. Crypto has made enormous progress. So what is the progress it has made? Well, number one, we’ve established institutional grade custody. Tremendous deal. But while do it, but it’s now a done deal.

55:05 We’ve established actual ETFs in Crypto in Canada we actually had bitcoin ETFs right now. In United States we have an ETF, it’s a features 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 versus, 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 that traded price needs various exchanges that are really brokerage should converge to the regulated futures price. And that’s actually happening. So the next step, the big step, I believe it’s going to happen within a year. No guarantees in that, I just think it’s going to happen in the year. We’re going to have some exchange somewhere and a cash market in the actual fiscal bitcoin.

56:08 And other things to control our currency has approved banks taking bitcoin deposits that are now, I think it’s three banks that actually — at least three 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 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 and if somebody — first we achieved that, but the average institution is not investing in bitcoin. And one other thing that relates to the bank’s taking deposits as bitcoin.

56:57 We now have a bitcoin yield curve. In other words, you can lend your bitcoin out and get a rate of interest. Believe it 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. But the dollar is being the base 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 spider 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 what’s the return, you get a higher interest rate in bitcoin, considerably higher than you get in the alternatives, the dollar as example, it’s true of the euro, it’s true of the yen, you can get a lower interest rate there.

58:09 So people are going to gravitate there, your person power is enhanced and your interest income is enhanced. Why wouldn’t you do it? They just don’t have confidence yet, because the infrastructure is as of yet complete and what are a minor point is going change us one day, the way they quote bitcoin, they quote it like it’s stock. They shouldn’t do that. They should quote it like it’s a currency. Not a big deal to change it, it just a convention, you don’t need a lot of software to do that. Anybody can do it. It’s basically 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. As you said, what is bitcoin — what is the bitcoin price in dollars? The value dollars 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 today. So I hope that’s an appropriate answer to your question.

Therese Byars

59:16 Okay. The next question, would FRMO given managements opinion on bitcoin versus U.S. dollar and other fiat currencies, ever consider distributing cryptocurrency to shareholders in the future?

Murray Stahl

59:33 Yes. Matter of fact, so one of the things we have if the minimum, we have on deposit, I don’t even know if it shows up good number, not that what the matters is, we have on deposit a fraction of bitcoin. So when see how the lending market works, what’s the fraction of bitcoin? I think it’s like 0.02 bitcoin or 0.03 bitcoin [indiscernible] our hoping, you would know anyway.

60:01 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 United States, because that is too high. I quoted a number before of total debt in United States, it’s almost $90 trillion comes to national backlog, it’s whole 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 for reality. I 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, either way are getting income, the trust accounts is an the example, not just people’s trust accounts, but there are assets that, let’s say, our assets, bridges tunnels, whatever they have a capital fund and color saving is another example.

61:30 You can’t invest in an equity for color savings and what if when the student reaches the 18 year and after the college, you can’t say to the student the market is down, you can’t afford to go to college. Ironically, you need the emergence 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 evolve in not too distant teacher and auto crypto as well. So I hope I’m addressing the question appropriately. That’s the way I would answer it.

Therese Byars

62:06 Next question. What does FRMO management think about the Tether controversy, that is — that it doesn’t have the absolute U.S. dollars reserve. The USD reserves to back each USDT issued by teva and the consequences of that for bitcoin prices given that Tether are used to facilitate roughly 60% percent of Bitcoin exchange transactions looking at the money flow charge from

62:40 Even the recent so called audit report released by Tether in September 2021 appeared to be more an opinion based — an opinion based on what Tether management is deciding to show, rather than the results of an independent audit process. The main question is how much actual USD not tether other USD derivatives. Does FRMO is sitting in banks that has been exchanged for or converted to bitcoin.

Murray Stahl

63:14 Well, I don’t know how much cash is backing Tether. I’ve never really undertook too, it’s not important to me. The problem with Tether is, it’s really buying Tether’s money fund and you can pick what money you want to be in. And some have actually very low risk. So the money is not there. Because it’s led out just like your money is not in the money market fund. It’s not like you — there’s a big basket you would reach in to get dollars, and there’s no money in any money fund, there is only securities, and they have very short periods of maturity and you get your money back and you keep rolling it. If it’s very low risk paper, not a big deal. The trouble is, a lot of it is not low risk paper. A lot of it is high risk paper. So — and if there were default there, it would start to run on Tether at least part of Tether. That will be a problem when it disturb the bitcoin market and maybe for a couple of weeks. In long run I can do anything for bitcoin. I mean, there are people who trade bitcoin in and out. And those that are people or at least some of the people have Tether balances, say by bitcoin and maybe they make a profit or maybe they don’t and then they sell it. And they want their money sitting there waiting for next trade, they want to get interest income and they put the million in Tether. I think Tether is a cryptocurrency, Tether is not a cryptocurrency. And people should know that before you get to the fragility of the asset because it’s unlimited issuance.

64:53 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 worth a dollar. Well, then why I put it in conventional money market fund like a government guaranteed money fund that had T bills or something. Your will be safe, well, the answer is because you can pick from variety of options and good 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 as your best adoption. 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 not going to effect, but it has no impact on bitcoin whatsoever. Because most of the money is in Tether, most of the money is not in bitcoin. I’d regard it as a big deal.

Therese Byars

66:02 Hello. I have 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 — what does this kind of cumbersome transaction fee imply for the future utility of bitcoin as a medium of exchange?

Murray Stahl

66:26 Well, don’t forget, the people — most of the people 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 publically traded companies. They are buying millions of dollars’ worth. In some cases, tens of millions of dollars’ worth at a mining rigs in one transaction. When you’re doing this, none of the mining companies to my knowledge will take United States dollars. They want crypto and it’s usually bitcoin.

67:12 So, if you’re going to do a transaction that’s stead 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 things we do that. So if you’re transacting in bitcoin we can expect people to do it for free. So, if you’re mining at large scale and you’re paying electricity costs you might have a monthly electricity bill, it could be in the hundreds of thousands, in some cases in the millions of dollars. Imagine having $150,000 or $200,000 electric bill. Well, you are going to paid that in dollars, but you got to convert it to dollars, you got to get dollars from somewhere, you going to sell the bitcoin to get dollars.

68:10 If you are doing a transaction, so $62 is 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 — the market going to set the bitcoin transaction price. Not really very worried about – not worried about now.

Therese Byars

68:34 Okay. Now this question is about the inflation beneficiaries to ETF. What is Horizon Kinetics plan regarding turnover of the INFL ETF? There have been several Horizon Kinetics public [indiscernible] a low turnover, letting winners run Conway method of investing. Is this the long term plan for the INFL ETF as well or something more algorithmically rules based? Do the managers of INFL directly own any shares thereof.

Steven Bregman

69:09 Let me answer the last part, of course, of that question. The primary manager of the fund gave me a permission to inform you all that over quarter of his liquid net worth is in the fund and he buys more each quarter.

Murray Stahl

69:30 Okay. Well, that answer that question. I myself, I buy a little bit of INFL. I do it every day. I’m in the market every day buying, I think it’s a great fund in terms of turnover. It’s going to file the normal horizon procedure that you’ll in all our funds very, very limited and very small turnover. It can never be zero as there are fund flows whenever, but it’s going to be as low as we can we get it. We’re not traders, I don’t see a need for that. So I think it’s going to be extremely tax sufficient.

Therese Byars

70:11 Okay. The next is the rather long question. In the January 18, 2022 second quarter conference call transcript on Page six, 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 leads FRMO is still having a 29.1% ownership since FRMO does not appear to be an active ongoing buyer of Winland 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?

Murray Stahl

71:20 Okay. Well, the most recent year that is given to me, we’re at 30.8% as a figure. So as far as transactions go, there is your answer, if we have the opportunity to buy more, of course, we will certainly will seriously consider that. Obviously, I’m not going to tell you we’re going to buy next quarter X number of shares, wouldn’t be very intelligent nor wouldn’t be appropriate to say that. But it’s not the only avenue for us. There’s lots of things we can do and it does fairly even have to be in crypto, it could be in something else. So they’re a variety of very small company that are interesting and some might be inflation beneficiaries.

72:09 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. And I’m sorry, we didn’t do anything, the opportunities that were presented to us or that we stand on over the years was one, I’ll mention what it is, but it was one, we could have done a very substantial transaction. And at least in terms of the metrics, the price was right. But it involved getting into a business that I personally was just did set again. I didn’t want to do it.

73:01 I always have an open mind, but I guess I didn’t have an open mind, I would end purchased against it and it was presented and the more I heard the less I like to bet. And I wasn’t inclined to do it in the first place, and I didn’t do it. And when I found out what happened to the after math, I was really glad, we didn’t do it. I was really, really glad, very happy. It would have been nice announcement day, we now own 50% something of whatever the heck it was. We would have. I fact we would have owned 100% of what it was, we were on the whole thing and we’ll regret every penny we through into it. So I’m glad we didn’t do it. It’s going to be careful. And it takes what it takes. That’s the answer I we would give you.

Therese Byars

73:48 Okay. Since FRMO does not have a majority owned operating business under your management at the present time, do you have any thoughts on whether prospective investors should distinguish between the stock FROM for purchase versus closed and mutual funds that may be selling at a premiums or discounts 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 out a premium to the underlying book value. [indiscernible] to that question.

Murray Stahl

74:25 Okay. Well, that’s a reasonable answer, because we’re not a collection of assets even now. And the reason for that 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 was no close end fund which I’m aware as any security, anything like that. So you saw what just happened to the inflation ETFs, it went from nothing to over $1.4billion assets that I mentioned. Whatever the revenue is we’re going to collect 5% of that. So, it’s possible gather a tremendous amount of asset under management. So it’s possible for the cash flow of FRMO to expand it enormously.

75:18 So because it’s possible, and the matter of fact, it’s actually happening, not a closing bug. Now what you’re going to value that revenue share at, you could debate that, but it has no cost associated with nothing, whatsoever, just revenue that you get making no effort. If you can 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 in Horizon Kinetics, lately they’re going up. So it could end up being much more successful than anybody has any right to achieve, 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 close end fund that has nothing even roughly close to a close end fund.

76:16 We needed to get an operating business, we can get an operating business. The thing is, we want to have the right transaction. The opportunities to have the right transaction for reasons I’ve stated previously just didn’t present themselves, wrong transactions presents 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. 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. And it’s got to be, as I said, got to be within our comments. We’ll see what happens.

Therese Byars

77:12 Okay. In January 18, 2022 conference call transcript on page twenty, Mr. Stahl mentioned that digital currency growth did a recent transaction in selling shares and when she personally purchased some additional shares and he thought digital currency group was under undervalued. Was there a rationale why FROM did not participate in that transaction since cryptocurrency is a focus of investment interest for FRMO?

Murray Stahl

77:43 Well, very simple, because when the original transaction opportunity presented itself some number years ago FRMO got much bigger. We didn’t had — we had a limited number of shares we could buy, so we allocated. And basically, FRMO got a lot of more shares than I got. I didn’t really get a lot of shares. Personally, it’s time when I bought more. But there are 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 need to get and no reason to increase it. So we didn’t – In 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.

Therese Byars

78:37 Do you have a long –

Murray Stahl

78:39 Yes. I just wanted to finish it. So, 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 the FRMO. I think that’s reasonable there. And then buy a tremendous quantity of it, even the size of FRMOs balance sheet, the demand I bought when they made that much difference to FRMO. So, but it just brought me up to what I thought I should had in the beginning, that’s all it was.

Therese Byars

79:21 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 and transparency between environmental opaque financial reporting and not that was a 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 entries?

Murray Stahl

79:55 Well, in a way we did report daily production because we give you the Holdings of mined crypto at the end of prior quarter, give you end of the current quarter, there is 93 production days in the quarter, so divide by 93 you’re going to know what we produce on a typical day. On a typical day, even though production varies, for us it doesn’t vary greatly. So, the burden of just having somebody leaning into employees, a 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, the put that we doubt that we got couple of fractions of a bitcoin on a given day, is anybody really going to benefits from that? I mean, I wouldn’t want to be transparent, but those are the work that we’re going to have to do to produce that. We have no secrets, we don’t care. People know it is the work that we’re going to do to do that can give anybody any meaningful value. So just if you crude just took to change differential and divided it by number of days in the quarter. I think you’ll see that, there’s no information gathered.

81:18 Now the other minor I can see why they do it, because 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 great smart thing to do. So anyway, you could 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 ware out. And I don’t know what the accounting treatments is going to be market to market. And they are not worth but they paid for them and they are going to be worth zero. Well, I don’t think that tells you a lot. Anyway, if someone really insisted I suppose we do it, but I don’t think you learn how to do a lot. So, we produce information where we think it’s to benefit to shareholders. So to tell shareholders, today we mined a tiny fraction of a bitcoin, I don’t know what people can get, but you really insist on knowing, it’s not a secret. We’ll tell you.

Therese Byars

82:36 Next question. Does FRMO have any financial ownership in Horizon Kinetics Hard assets too?

Murray Stahl

82:45 Does FRMO. Yes, it has a substantial ownership in HK Hard assets too, because the three — basically, HK Hard assets too is jointly owned by three entities. Horizon Common, not Horizon Kinetics, Horizon Common and FRMO and you’re truly me. I don’t remember what the ratios are, but at the end of the quarter we 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 [indiscernible] So it should be adequate for your needs. Next quarter we are going to report that.

83:39 Basically, the whole idea was to give it life and we gave it life we thought on February 28. So would have been 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 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. I think you can have the exact number.

Therese Byars

84:20 Do you think Ethereum Classic, I guess that would be classic, will have increased value when Ethereum goes from proof of work to proof of stake?

Murray Stahl

84:34 The short to answer is, yes. Because the miners, what they are going to do with their mining equipment. If you’re in classic, it is not going to stop mining, it is going to stay as proof of work. So all those miners will have no alternatives. So in ours they’re going to migrate to Ethereum Classic.

84:59 And so 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 doesn’t have a lot of value. But if there were a bit proof of stake, what’s going to happen to all mining equipment, now theoretically you could argue that 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 then need the equipment, the real thing if you are in need of the stake, you’re going to have to put up a lot of Ethereum. Then who’s going to want to do that is all the small miners, not going to want to do it. They don’t have the capital to do it anyway. So one of the problems with that is, now they worked out, it’s I would say almost a necessity, the validation is going to be done by the people with the biggest stake. Then it’s going to be a, as I understand, this is going to be like a lot of resistant. So a small validator, you can actually have a chance, wherever small validator, 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 on proof of stakes.

86:13 So I say this all time, I’ll just repeat it. And I will mind, I’m willing to listen if someone tells me proof of stake is going to work, but the more I think that the less [indiscernible] I am of it. Maybe we’re talking about it for years, and it hasn’t happened, it’s not happening tomorrow. So I ultimately don’t think it’s feasible. The basic problem in cryptocurrency and the reason that bitcoin remained dominant currency is not because the bitcoin is better technology, there’s lot of better technologies. Not because the miners are loyal to bitcoin, or they have a big community of miners or any of that. It’s basically, they did one thing that no other cryptocurrencies is ever going to do, although they could do it theoretically. Bitcoin started in 2009, it was a labor of love. But essentially the entire corpus or 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. it takes a lot of work and a lot of these !!! cryptocurrencies in my opinion, there are just brilliant, lot more billion 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 elevators, which are really the minors. Human beings aren’t wired that way. They are not wired to make an active love of Crypto. And they aren’t wired to make that love on any asset. So, that’s what makes bitcoin dominant basically, that you can get a lot more value, that’s why the miners are there.

88:07 Now a lot of other cryptocurrency currencies they don’t even have mining. There are all kinds of quasi incentives to battle their transaction and achieve consensus. The only one that I could say is intriguing although the jury is at on that is XRP. So in XRP, you are not actually paid a feet of mine. So you could say, well, why would you mine? Well, because there is a transaction fee and transaction fee is burned, meaning, the total units have outstanding is what we shrinking. So XRP is very interesting mathematically, because it’s a deflationary currency. That makes it 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 when you allow more ventilators. 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’re likely to pull anything. So now they’ve decentralized a little bit and let some other people into it. Anyway, it’s a — I don’t know there’s a bit solution to XRP, maybe a viable currency in a permission marketplace. So it’s going to have a narrow application. Maybe that’s [indiscernible] Ethereum Classic, if they’re really serious in Ethereum about proof of stake and ultimately, Ethereum Classic could be Ethereum winner.

90:10 Ethereum has a lot of other issues aside from the proof of stake issue. And per transaction, we have 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 100,000 times the power of bitcoin for transaction. Does you everyone to scale up Ethereum they might really have a power problem. Another problem with Ethereum is, it’s into the issuance even though the denominator which is number of coins issued increases at a decreasing rate because denominator is keeps getting bigger, but the issuance per year is constant. So you have to deal with that issue. I need 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 on when that happens. So that’s a problem and it’s in my opinion it’s very ambitious with the smart contracts and everything. It want to do a lot of things and smart contracts is not really part of the system, they only is good as the programming that people make them so smart contracts since it’s hackable. And it has been hacked and it frequently gets hacked, but not hacking the currency it is hacking the smart contracts, 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 the bitcoin remains dominant crypto. It’s not technology. But in crypto, if you had some rises in the sensor two in crypto, because all the code is open source. Any anybody can copy it. anybody can make a better or similar or almost identical cryptocurrency currency. So you got to give people incentive to transact and validate.

92:18 How do you do that? If you’ve done a lot of work and you are the [indiscernible] you want to get paid for that, but you can’t have 100% of anything. It’s a serious problem and so far and no one has [indiscernible]. I hope that’s enough information on that subject.

Therese Byars

92:38 We now have the ultimate question, and it is, given the developments on bitcoin layer two protocols, such as liquid and lightning protocols for scalable transactions, etcetera. And further adoption by companies such as Shopify and Blocksquare of these protocols, where does FRMO see future value coming from in other blockchain protocols such as Ethereum and Litecoin in comparison?

Murray Stahl

93:11 Well, I wouldn’t make too much of liquid or lightning, because basically, you can change where you could, you can forget and change the bit protocol, but we’ve had some forks. Nobody really is that greatly interested in doing that. So what people have done as oppose to working bitcoin yet again, what they done is, they created these, this not a good expression, but I use it because it’s — I think people understand the imagery. It’s like a service road or service lane on a highway. It’s a parallel pathway. The whole idea to get scale is, that is going to be just parallel roadway. And for small transactions that’s not going to get written to the blockchain immediately. We have 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 in bitcoin, , that’s what you’re looking for.

94:20 There is hundreds of cryptocurrencies can do it. I don’t think bitcoin is the element that — Bitcoin is designed to solve one problem in the world of private money, bitcoin is private money. That’s where it is. The idea of private money goes back hundreds of years. The problem with private money has stated in the book, the [indiscernible] is the authentication problems. So what’s the authentication rob? Let’s say, I personally create a currency, those doesn’t have 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 something myself or I gave some to my friends or even if I’m not even taking it from myself and just honestly, creating more currency and effectively creating a new central bank. How you know I’m not going to do that? I’m controls it.

95:29 So until there was a blockchain there was no answer to that question. Purpose now we can authenticate that whole purpose of bitcoin is when you have a fixed issuance it’s supposed to function [indiscernible] law. Which means bad money drives out good. So gold is better money than let’s say to dollar. A lot of people say that, I’d personally agree with it. But what happens, there is a huge market for gold, but if you can’t do the number of transactions per day in dollars versus gold, I mean dollars has a beat [indiscernible]. 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 all the transactions in gold, even took the euro based transactions and convert 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. The equipment regression law, what it supposed to do is, it supposed to hang on to it. Now, if you you’re not supposed to really use it for transactions, except occasionally, you’ll need to scale it up.

96:48 I don’t see — I don’t see a purpose in scaling of it. Really, people want to trade it, I would advise trade a future that you can trade and instantaneously. You don’t need bitcoin to have that kind of scalability. Now that being said, if you go on the blockchain explorer, known as bid info, if go on that and you’ll see somewhere on that website there is something called the rich list. Basically what it is, it’s a list of every public key, you can see it, who owns bitcoin, and you can see a transaction, you don’t know the names. But you can see every transaction if you have the patients look that was ever done in the world of bitcoin.

97:37 And I would tell you based on my calculations, you can see if I’m right, you can try to verify, I will tell you that 87%, all the bitcoin is probably owned by less than 100,00 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 the a bitcoin. So I look at life. It’s working exactly in accordance with regression law. You can see the big holders, you can go look — you can look at small too, big holders they rarely trade. And when they do they’re almost always spike. They’re holding it, because they know it’s going add 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 looked it because it’s intellectually interesting, but I don’t think it has a lot of impact on bitcoin.

98:43 I know hundreds of articles maybe thousands are written on how important is to bring bitcoin to scalability. It’s not going to be Mastercard, it’s not going to be Visa, that’s not what it was intended to do. So to scale it, I think, this is whole point, and you’ll observe that these various bitcoin folks, everyone one of them was in an attempt in one way 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 if it works and you see what happen if it works, no one is widely interested in it. There is not very many people probably interested in it. Now they want to find — they think they’re not highly interested in it because they didn’t scale it sufficiently, they have 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 a free market I guess. I hope that’s a thoroughly answer to the question.

Therese Byars

99:48 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 are Spiral and other high caliber open source developers with proven track records contributing, such as Dr. Adam Beck, how does FRMO see these individuals stacking up to [indiscernible] and Charlie League?

Murray Stahl

100:19 Well, the true answer is, I don’t know, because I don’t know what day or to what extend anybody is going to get a bright idea. I mean, there are brilliant people and are all capable of doing one of the things with regard to crypto. And no one knows even those people themselves, they know tomorrow morning they may wake up with a brilliant idea, or maybe they will come through a brilliant idea today and there are in the process of intimating it tomorrow morning.

I really don’t know. For me, bitcoin at least is not about technological expertise.

101:00 The reasons 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 a thousand of cryptos, I wish I had a time to read all of the papers. But the ones I read, they’re absolutely astonishingly brilliant. And I’m sure the people you mentioned are brilliant as well.

101:32 The thing is we don’t need that kind of brilliance to solve the authentication problem. Maybe they’re going to figure out billion things 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. I believe we have it. That’s where it’s going to be now. I’ll say one other, in the world of rare assets, let’s take something where there is potentially an infinite number of rare assets like rare books, really so many copies of first edition Charles Dickens. Okay. So Charles Dickens lived in 19th century, and their first editions of authors who lived in 20th century. That near fact you will have the accretion of every new authors, some of them might be better than Charles Dickens, it doesn’t destroy the value of Charles Dickens first edition. The idea that is, someone is going to come up with a better technology than bitcoin, it doesn’t destroy the value of bitcoin. it does, we’re supposed to do, and it’s authenticated, it’s a rare asset.

103:06 That’s the way 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 satisfied the ventilators. That’s basically the problem. I’ve 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. That might be a cryptocurrency success, it might be a bitcoin failures. We have to keep our eyes open for that. So I look forward to their brilliant future work.

Therese Byars

103:44 Thank you, Murray ad thank you, Steve. That was your last question.

Murray Stahl

103:50 Okay. Well, thanks everybody for listening. I was very impressed with the questions today. People are really doing their homework and that’s all for good, and i look forward to doing this again in about three 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 do in that regard. So thanks everybody and talk to you soon. Thanks for your support. Good afternoon.


104:25 Ladies and gentlemen, this concludes today’s conference. We appreciate your participation. You may now disconnect.