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Edited Transcript of FRMO.PK earnings conference call or presentation 28-Jan-21 9:15pm GMT

·87 min read

Q2 2021 FRMO Corp Earnings Call PLEASANTVILLE Jan 29, 2021 (Thomson StreetEvents) -- Edited Transcript of FRMO Corp earnings conference call or presentation Thursday, January 28, 2021 at 9:15:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Murray Stahl FRMO Corporation - Chairman of the Board & CEO * Steven M. Bregman FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director * Thérèse Byars FRMO Corporation - Corporate Secretary ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the FRMO Quarterly Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Therese Byars. Please go ahead, ma'am. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [2] -------------------------------------------------------------------------------- Thank you, Emma. Good afternoon, everyone. This is Thérèse Byars speaking and I'm the Corporate Secretary of FRMO Corp, and we thank you for joining us on this follow-up quarterly conference call to cover the questions that we weren't able to get to last week. So I do have to read these disclaimers. The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation or 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 website at www.frmocorp.com. Today's discussion, or I should say, the question-and-answer session will be led by Murray Stahl, Chairman and Chief Executive Officer; and Steven Bregman, President and Chief Financial Officer. They will review key points related to the 2021 second quarter earnings. A summary transcript of this part of the call will be posted on the FRMO website in the coming weeks. A replay of this call will be available for 1 month, beginning at 07:15 this evening. The dial-in numbers for that replay are noted in the FRMO press release dated January 26, 2021, and it may be found on the FRMO website by clicking the link called Information Statements and 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 it over to Mr. Stahl, and we can begin the questions whenever you're ready. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [3] -------------------------------------------------------------------------------- Okay. I'm ready. I just want to -- very quick, just a few sentences, I just want to thank everyone for making this possible and for joining us today. And I also want to say, just by way of -- it's in the side, more or less. It's gratifying that we had so many questions last time, that we couldn't finish them, although I would like to have finished them. So we have to carry on to a second session. And you'll observe, there are plenty of companies, great big ones, much bigger than ours. They have Q&A sessions, and they accomplish it in less time than we have, and they never do a follow-up. So I think -- I think many -- I don't remember too many follow-up calls I've ever been on. So we're unique at least in one respect. We get a lot of questions, and I think it's great. So Thérèse, if you would kindly begin the questions, I will try to give appropriate answers. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [1] -------------------------------------------------------------------------------- It's my pleasure. So here's the first one. "There is so much "stuff" going on aside from Bitcoin at FRMO. Perhaps you might make clear that that is the case, and the future for this company has any number of huge potential big optionalities?" That's the question. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [2] -------------------------------------------------------------------------------- Okay. So that's a great question. So let's start with a little background. Really, it starts with some of the things I wrote about indexation. So historically, let's go back about 10, perhaps 12 years, and FRMO was really the spillover of Horizon Kinetics cash flow. So 10 or 12 years ago, pick your date, there's very little going on other than the spillover of Horizon Kinetics cash flow. And if you read the writings at that time about indexation, indexation was at a minimum at that time, and there are a lot of good things about indexation, and I'll get to that in due course, but from the point of view of active management, at least traditional conventional active management, indexation is not a favorable development. It reduces fees. It has an enormous cost advantage relative to active management, and it's very hard to compete with it on a fee basis. And there's one other thing, which I keep writing about, which is my contention that at the end of the day, it distorts markets. So let's just make that clear? And maybe there'll be follow-up questions, and I can elaborate on it. There's a lot of reasons why it distorts markets, but the 2 that I would say are preeminent is, number one, that the basic calculation for indexation, which is market capitalization rate fully adjusted, rankings in indexes, I don't believe those numbers are accurate, philosophically. I mean, mathematically, they are accurate. So what's the problem with it? The first problem with it is, if the market's going up or, alternatively, even it isn't going up, indexes are getting cash flow. As a practical matter, those shares are not part of the float. Yes, that there aren't 13Ds filed, and they should be treated like every manager. So if an index owns a 4% position -- 4% of the outstanding shares of a company, I own 4% of any outstanding shares, why shouldn't their 4% and my 4% be part of the float. The answer is because it's theoretically possible, if I have 4% of the company, I can wake up tomorrow morning and decide to sell it. The index can't do that. An index won't do it unless money is going at the index. As long as money is coming in -- as money is coming in, they're buying more. And the money is going out, they're selling it no matter what. So if money is going in, they're very unlike an active manager in that those shares are not for sale. So if money is going in and you're calculating the float, what's the float? If you take my point of view and maybe you won't, but if you do, you take my point of view, it's a big self-referenced paradox. The indexes are assuming there's a certain float, but if you want to buy shares, you can't buy them from the indexes. So you can't buy them from the indexes, therefore, it's not really part of the float. It's a different kind of category, and the more dominant indexation becomes an investment strategy, the more, I believe is -- that problem is, and therefore, the more -- the greater distortion. So that's the first problem with indexation. The second problem with indexation is it makes a presumption, which is actually true in conception. And as time passes, it's very logical, but it becomes increasingly false. What's the assumption that the indexes or the -- I should say, the orchestrators because the index is just a formula. It's the orchestrator of indexation. What is the assumption that was pretty valid at the beginning? Well, that for the most part, the markets are efficient, meaning that people doing their research. And by and large, maybe there's exceptions, that research is reflected in the prices. So I, myself would agree with that most of the time. And that's where we are -- at Horizon, where we are, we're special situations investors, meaning that our philosophy was to take advantage of those instances where stock was relatively inefficiently priced, misunderstood perhaps. Okay. In the fullness of time, as indexation grows and displaces the managers, and you're all probably aware how much displaced all the managers. Well, there's less money being managed. Therefore, there's less money being earned, therefore, there's less research being done. And that follows -- has a logical necessity. So there's less research being done gradually in the fullness of time. And obviously, with the passing in time, the market is getting less efficient. Okay. So those are the 2 things, and was a big gray storm cloud on the Horizon, no pun intended, and we saw that. So FRMO and Horizon, too, we had to do different things. We couldn't be the spillover account for Horizon asset management and make FRMO the near image, so to speak, of Horizon. We had these things different. And Horizon had to do things different, too. So -- but what's, first, indexation? What's its fundamental life blood? It's a policy of low interest rates. Because if you take the average, pick at random your typical S&P stock, and you can choose what you like and look at the last 10 or 12 years and see what's happened to the earnings of a typical company and see what's happened to the stock price. And what you've had is you've had multiple expansion. It's not true of every single stock in the S&P, they're true of a lot. Enough for that. As a generalization, I would say it's a true proposition. Okay. So that's what drives indexation. It's multiple expansion. It's multiple expansion from low interest rates, it's multiple expansion because of the creation of money by central banks in the world and around and around it goes. That's inflationary. The question is, how could FRMO take something, which we really can't control, which is really a bad thing for Horizon and for FRMO, and make it into a thing that might be a good thing. In other words, that's the way life works. It just gives you lemons. And you don't like it, and you have to make into lemonade. That's what FRMO -- if I had to put it in a phrase, that's what FRMO is really about. For the various things that are going on, they are ways to benefit from the inflation, which we believe would ultimately be the consequence of the fundamental growth factors indexation. So it's bad for us, but we can't change it, so we have to try to make the best of it. So that was the cryptocurrency thing. If you're going to be in cryptocurrency, you're never going to really understand it unless you mine, because you can understand it at a macro level. You can never do if you're just buying and holding cryptos. We are getting involved in that. Then we learned about the machinery. Then we want to get in the business of repairing machinery, maybe even building occasionally our own machines. We got involved in a publicly traded company that -- Winland Electronics, that became mining. We made an investment in Digital Currency Group, which of course, owns the Grayscale group of funds, the largest, which is the Bitcoin Investment Trust. We started Horizon Kinetics Hard Assets that basically, when we say hard assets, we don't mean commodities. We mean companies that benefits from inflation in the sense that little or no capital expenditure is required if the revenues actually increase as a consequence of inflation? That's what HK Hard Assets is all about. Anyway, there's probably things I'm leaving out that gives you the sense of what's going on. And we took Horizon Kinetics, we put it on the same pathway. So obviously, there is Horizon Kinetics cryptocurrency funds. We just launched Horizon Kinetics Inflation Beneficiaries ETF. By the way, that's not a contradiction. Some people might say -- people called me and said, "How can you launch an ETF after what you said about ETFs?" Well, what I said about ETFs, ETF is a synonym for indexation because virtually every ETF happens to be an index fund. But the ETF's rules are just the invention of the Investment Company Act of 1940. The ETF structure itself, let aside indexation, is a cheaper way of providing fund management to the public. It's just a lower cost structure. So why should we not benefit from the lower cost structure, meaning we're just passing on the savings for the clients without keeping any of that? So anyway, I probably left out some things, but that gives you a sense of all the things that are going on and its historical evolution. I invite my colleague, Steve, perhaps you want to comment on things that either I said that are incorrect or maybe you have other perspectives you'd like to add? -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [3] -------------------------------------------------------------------------------- Well, the beauty of a financial firm such as ours, an asset manager, is that there are -- there are scale advantages. The HK inflation beneficiary fund is an ETF in terms of speaking to the original question, which is what kind of large magnitude positive events could happen to a FRMO Corp? Well, this is one. Any funds can because as we know, the business model for asset managers, funds can flow in, and it doesn't require any additional operational expense. In the case of this ETF, there are a few things about it. I mean they're self-evident, but I guess I'll go through them. One is being an ETF, it is the first instrument we have which is constant with the expectations of what most investors look for. When I say most investors, I'm talking about the broad swath of public investors. It's how they see investing. And we've not been able to provide such a product for them before. So anybody can invest. And I don't know what the minimum is, I'm going to -- let's even say it's $500, anyone can do it. It doesn't require a 2-year relationship-building effort to have somebody open an individual investment advisory account or have sufficient wealth to qualify for and go through a -- in this trivia, of participating in a private partnership. The recognition that inflation might be a serious problem is clearly beginning to dawn upon some early edges of investors. I even discovered recently that there is a loyal market, whether it's frothy or not or whether it's the beginning of a long-term sustained expansion in all sorts of collectibles. And recently, I was looking at baseball card collectibles. And there are even -- there's even a JPMorgan private partnership has gotten involved to buy such collectibles. And the developments there, believe it or not, actually is new to me, is using blockchain. Some outfit has taken single frames out of, let's say, a video of a well-regarded basketball player, let's say, in the middle of a shot, and that single frame is identified on the blockchain. There is only 1 copy ever. And those are considered cards. And people are bidding like hundreds of thousands of dollars for this. So if that's an indication, this is the one anecdotal evidence that the idea that inflation is coming and that different investors looking for different ways to provide perhaps have a hedge against it is maybe only just beginning. And so this fund comes at an opportune time. And to a degree that some people say it's not just the skill, but timing or being in the right place at the right time. This might be such a front. Maybe it won't be, but it certainly has the capability of being far larger than it is. And that has helped to engineer over time. It is just one more possibility, aside from the various cryptocurrency funds, aside from HK Hard Assets. And certainly, there will be more. But the idea to -- I would say is that the optionality of -- and cost structure of this kind of participation in the financial sector means that you can't look at a company like FRMO Corp. on a -- on a linear basis. You can actually -- it could be a step function over time with respect to the value of NAV -- or to become a strategic investment. And that could include individual holdings such as Digital Currency Group. There are now a whole series of such investments that 10, 12 years ago didn't even exist. And they couldn't have existed because some of these opportunities didn't exist. Some of these companies didn't exist. Anyway, that's more than enough for me. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [4] -------------------------------------------------------------------------------- Okay. Thanks, Steve. And I hope that addressed this question. There's a lot to be -- more to be said there, but we will not -- we may have to go 3x for this, but anyway, 3 is the trump. So Therese, why don't you go to the next question. Because they're asking very good questions, it requires extensive answers to be responsive. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [5] -------------------------------------------------------------------------------- Yes. Okay. The next one I have said, "I have read a variety of tweets and articles and listened to interviews about tether, the cryptocurrency, many of them quite in-depth and by sophisticated investors, such as Jim Chanos, Michael Green and an article by John Griffith -- Griffin published in The Journal of Finance. They cover a variety of issues. But the one I'd most like Murray's thoughts on is that the proposition that Bitcoin value may currently be artificially inflated due to the leverage created through the issuance of Tether at less than dollar per dollar on exchanges outside the U.S. while using regulated exchange trading as on Kraken, for example, to maintain the illusion of dollar parity. And the other part is it seems to me that this would create a situation similar to the 2017, ICO craze that inflated demand for Bitcoin, followed by the year-end "crash"? That's it. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [6] -------------------------------------------------------------------------------- Okay. What was not there. I don't believe Bitcoin is overvalued, I believe it's undervalued. Now I have to say that at least 99% of the population of people who have anything to say about crypto basically don't think much of Bitcoin. They think a lot of Tether. So let's begin with just comparing in its essence, Tether and Bitcoin. Tether is just an electronic way of owning, fiat currency. In this case, that must be dollar. If you want to store your -- if you don't get interest rate anyway, you want to store your fiat and transfer it in a different way than the banking system would allow you to transfer it, then Tether is for you. But you own on cryptocurrency, which is fiat. Now it's crypto in the sense that it uses blockchain, and it really is encrypted. But at the end day, it's fiat currency. Thing about Bitcoin is it's a fixed issuance currency. That's all it is, really. It's not a superior technology. It doesn't -- it has some technology, but it's not advanced technology. The only the advantage is if you want to use it, it's not really money yet because it's not in general issuance, it's not generally accepted, but if it were, the only way it differs from other kinds of money is it's decentralized and there's a protocol to fixed issuance. There's over 18.5 million units right now, one day in the year 2140, it's going to be 21 million units, and you know the issuance schedule. So whatever inflation it's going to have, which obviously is much, given the numbers I just cited, you know exactly what it's going to be. There's no uncertainty as far as issuance go. And they offer the valuation. The question basically is, the market capitalization of Bitcoin is probably, I don't know, $560 billion, $570 billion, something like that. Okay. So is that high or low relative to fiat? So let's take the United States dollar. The M2 money supply, the United States dollar, is over $19 trillion. And there is unlimited issuance. And if you go into the Federal Reserve website, you'll see that the rate of growth of money was about 20-odd percent, 20-some-odd percent in the last 12 months. That symbol is scheduled into money supply, you can see it. You can see it as we speak. So what would you rather have? Would you rather have a $560 billion, $570 billion valuation on something with fixed issuance or would you rather have a 19-plus, I think it's $19.4 trillion, $19.5 trillion market capitalization with no limitation. Now by the by, there are a few applied economists -- most applied economists, I should say, don't agree with me, but there are a few that do, very few, but my assertion in my work is that the M2 is not even the right number. Why isn't the right number? Because treasury securities or high-grade bonds, in a sense, are really part of money supply. So if someone had no cash. They had $10 million in 1-year treasuries, and you asked that person the question, "Do you have money?" The person say, "Yes, I have $10 million." Why would they say that? They would say it because they know they can instantaneously transfer that sum of money into cash anytime they want. So a few economists have come up the notion of what they call M4, there's an M3, which is different from an M2 and M3 is. M3, I don't want to -- I'm going to get to the question, so I want to elaborate on this. So the risk of being partially wrong, M3 has the long-term CDs, institutional money markets and so on and so forth. M4 says that a big chunk of the bond market is really money. And that's tens of trillions of dollars. So now people don't turn it into cash instantaneously, although they could. They can also hypothecate instantaneously. So different economists say, "Okay, the value is X and let's apply a percentage of that sum to the M2, which gives you M4. It's a huge sum. I don't know how big that number is, but it's enormous. And then that doesn't even start to explain it because you have to do the same thing for the euro, you do the same thing for sterling, Canadian dollar and yen and the Chinese yuan, then dong, and on and on it goes. So you'll get to -- I believe, if you try doing that calculation, you're going to get to a number, and it depends what weighting you use for the bonds. But I think you'll get to a number something like $660 trillion and growing every single day. So the Bitcoin is $560 million or $570 million, whatever it happens to be, let's say, it's $560 million and the M4 number is really $660 trillion, and you know how fast the issuance of Bitcoin is going. And this other thing is growing astronomically. Well, why should the Bitcoin have a valuation? It's fixed issuance. Why it should have a valuation, which is less than a 1/10 of 1% of the valuation of M4 globally? It's all the fiat, not just the U.S. fiat. So if you accept my argument, and don't forget, the M4 is a moving target. It's increasing constantly. But if you said the 2 were static, and your coefficient of expansion is well over 1,000x right there, but it's many, many more times than that. And the reason is because the central banks in the world are starting, they're not stopping, they're going to accelerate, if anything. So that's the idea. So I don't agree with the idea that Bitcoin is overvalued because you can use leverage on it. And the reason -- and one other point I'll make, or I can spend a lot of time talking about this point. Whatever leverage you can apply to Tether or some other crypto and end up using it in Bitcoin tails in comparison to the Hong Kong-based Oex where you can buy Bitcoin features on 100x leverage. That's been around for many, many years. So you could always, if you want -- if you really want to leverage your Bitcoin, you can leverage your Bitcoin if you really want to. But you see, but systemically, you're not creating more currency. There's no money creation function like happens in a bank. There's only so many units, and that's it. So that's the salient point as far as I'm concerned. That people can leverage it. They can do all sorts of things, and they may work out for them or it may be disastrous for them. Obviously, if you buy an OKEx feature, you leverage 100x times, the Bitcoin goes down 1%, how many days has it gone down more than 1%? Then obviously, the web bites out. I'm sure in the many years that we've been using OKEx, it's happened to the various people. I don't know any of them, but I'm sure it's happened. So I don't think the other innovations are going to affect the valuation of crypto. In any event, whatever innovations exist in the world of features with regard to crypto, you could say the exact same thing about gold. You can buy gold features. You can buy silver features. And my wheat features, soybean features, rice features, you name it. And everyone is an enormously leveraged transaction. So on that logic, you have to assume everything in the plan is overvalued in addition to the bond features and the S&P features. So where does that get us? Anyway, I hope that's a satisfactory answer to the question. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [7] -------------------------------------------------------------------------------- Yes. I think we also have had a few questions in the past and part of this one was, "What if governments decide to really crack down on Bitcoin? Could that become a problem?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [8] -------------------------------------------------------------------------------- Well, what if governments decide -- the tense the question is in future tense. And it should really be, I think, rephrased. I'll take liberty of rephrasing it. What happened when governments did crack down on Bitcoin? So it happened already. We don't have to theorize. We know it happened. So I can give a lot of examples. Let's just give 2. The government of Venezuela made it a crime against the state to possess, to transact and to transmit any Bitcoin whatsoever. Penalty, life improvement. What did it do? Nothing. Why did it do nothing? Because all you really had to do is cross the border into, let's say, Brazil, and you could buy a server, you could hook it up to the grid and you could add Bitcoin. And do you take your Bitcoin, you can transmit it wherever you live. Once you're outside the control of government, you can really do anything. The government of Iceland, a number of years ago made bit cleaner Eagle. At that time, the government of Iceland made Bitcoin illegal, believe it or not, I was actually vacationing in Iceland when it happened. So at least, I didn't bring any Bitcoin with me, but here's what ultimately happened. The effectiveness of the government program lasted, I think, less than 24 hours. It's illegal to have Bitcoin. So the first thing you have to figure out is, if you're the government Iceland, by the way, there's only 333,000 people in Iceland. So if there's any place where you could -- and most of them live in Reykjavík. So if there's any place where you could actually monitor 330,000 people, that's got to be the place to do it. So that's the laboratory of what happens when we want to regulate a cryptocurrency and make it illegal. By the way, I don't know why the government would do it. We'll get to that in a minute. Anyway, the government did. So what happened? Nothing happened other than some enterprising souls took the Bitcoin software, decode, move it to a different database and create a new cryptocurrency called the Aurora, after the Aurora Borealis. It basically took the Iceland National Database, which is the Iceland equivalent to the database of Icelandic Social Security numbers, you basically open an account, probably a human being in Iceland and, like, created 21 million units of this Aurora thing and gave it to everybody. As I recall that the people actually went on database. You had to pick a password, you need to get a private key and a public key, just like you do in crypto. And they got their Aurora. The government could have read this in the law. And it said, "Any cryptocurrency of any kind whatsoever is illegal." So what are you going to do? The only thing you can do is you now have to, on a daily basis, inspect every device that is -- that could possibly have crypto on it, except you don't need a device to have crypto on it. What you really need is a private key and a public key. You only need the public key is relevant, since no one knows who you are. The only thing you really need is a private key. You could actually move your private key, all you really need are seed words because your money is on the blockchain. Your money is not on your iPhone or your iPad or your Mac book or your Android device. It's on the blockchain. Your -- even if you didn't remember your private key, you can remember your seed words. You can actually -- it could be a line of poetry could be your seed words. You could put it inside of a book of poetry. You can underline a page of poetry, if you want to, that could be your seed words. You can just know that in a book of poetry, Page 90, the last 2 lines are your seed words and now underline it. So how is the government going to police that? See the basic problem with crypto is, it doesn't reside anywhere. It's on something called the blockchain. And where is it? Well, miners have copies of it, they're all over the world. So if you're government of Iceland, you wouldn't go to every other country in the world and prosecute anybody involved in maintaining the blockchain because you don't have that kind of jurisdiction. So any nation, no matter how big and powerful it is, is going to find it extremely difficult to stop it. I don't even think it's possible. However, the question comes, why should they want to? And I don't think they do. I think it's just reverse. I think they should do everything they can to encourage it. And as far as I can tell, that's what's being done because the control of the currency, even though it's America, it's not that many weeks ago, is allowing banks to undertake crypto. The CFTC, Commodity Futures Trading Commission, all I know is -- allows crypto futures. They don't have to do that. If you want to stop it? I'd go on and on like that for the various states and the various countries in the world that permit the activity. You basically need all the countries of the world to unite. Even then, I just don't see it happen. I don't know how you can even control it. Even if you made every country a police state, I don't believe you're going to control it. And then it's encrypted, and it can be hidden. So there might be in the world, 40 million people that want to use crypto. And a lot of them are very astute at encrypting things. So the governments of the world are going to break all the codes. And if they do, are they going to keep those detection methods secret? I don't think so. And they'll never going to hire enough decoders and hackers to overwhelm the tens of millions of people that want to do it. I don't see it. Now why would they want to encourage it? I will tell you why. Let's take the United States America as an example. So let's say this M4 number is an accurate number. Remember, it's my assessment of what I think is the proper comparison. I mean the M4 is invented by other people, that terminology. But the same -- I had the same idea that really you should include a big piece of the bond market. And this where mine is going to differ, on how big a piece bonds you'd actually include? Okay. So let's say the number is really $660 trillion, which crypto is -- remember, that's not the Bitcoin by itself, that's crypto in its entirety. Bitcoin is only a piece of that. And Bitcoin may not even end up, at the end of the day, being a dominant currency. That may be something else. But anyway, let's use Bitcoin as an example. And understand that, that $660 trillion is a moving target, it's constantly going up. Okay. Well, Bitcoin, again, worth $660 trillion. Well, that's a lot of tax revenue for government but sooner or later, people are going to want to trade that and use the value. Even if you're using the value to buy something, it's still a gain and it's still subject to taxation, even if you're not exchanging it for some other currency, either a crypto or a fiat, still a profit. So $560 billion to $660 trillion, apply the tax rate on that, and $660 trillion is not even the limit. It's going to be much, much higher than that as anybody can see how fast these numbers grow. So apply whatever tax rate you want, 30%, 35%, 40%. So you're talking about the $560 billion of Bitcoin is a rounding error, it's irrelevant. You're talking about taxing, at minimum, $660 trillion. So apply your tax rate, 20%, 30%, 40%, 50%, whatever you think is the right number. And that's how much money the government is going to reap. And I just can't imagine they would walk away from that. And I don't think they will. I think if there's -- the only possibility they have for collecting revenue that's required is that. So I think they're going to do everything they can to encourage development of cryptocurrency. And as far as I can determine, and please correct me if I'm wrong, I see that very theme transpiring. I see new funds proliferating all around the world. I see new crypto products. I see a lot of money being invested in crypto, and I see the government encouraging it with, I think, quite appropriate regulations. That's why I think... -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [9] -------------------------------------------------------------------------------- If I may answer, it's Steve, Murray, I believe the IRS last year changed the Form 1040, I believe, to include an allowance for cryptocurrency. So not only aren't they not aware of it, but the IRS is already planning to provide for it, at least to judge by the form. They have to go through some effort to do that. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [10] -------------------------------------------------------------------------------- Thank you for that. Okay, Thérèse, next question, if you please. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [11] -------------------------------------------------------------------------------- Sure. "It appears that a small double spend of around 0.00062063 a Bitcoin or about $21 was detected by analysts at BitMEX research. What are your views?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [12] -------------------------------------------------------------------------------- My view is that no such transaction ever happened. And now many, many, many new organizations published that story. And at the end of the day, there's a double spend in Bitcoin. To verify it, it's a problem in computer science. So basically, what would happen is if someone discovered it, and they're in good faith. They would say we found a double spend in a certain block height. They're referring to a block that has already been validated. And they would direct one's attention to a transaction or possibly several transactions within it, and everybody could check their figures. And if that happened, the Bitcoin community would have to verify that. They wouldn't ignore it and have a big decision to make. Do you want to let it happen? Do you want to modify the code? We want to find out why it happened. But nobody can verify that. Nobody can verify that. Now I will tell you that the vast majority of news organizations published it as if it were true but provided no basis of investigation. Because you said there was a double spend, and I know it has various simulative because it's carried out to a lot of decimal places and is indeed very small. Without the block height and transaction number, if, indeed it happened, nobody can validate it to see if it did. So in world of science, and computer is a science, that's why they call it computer science, it isn't considered a fact until other people can validate the fact. And no one was able to validate the fact because the information required to validate the fact is not being shared by those persons that alleged happened. So therefore, we mine, we'll detect any hacks. We're just one of lots and lots of miners and none of them detected any the acts and -- or double spends. So as far as I'm concerned, having absolutely 0 evidence that it happened, I must conclude that it didn't happen. And that will be my answer. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [13] -------------------------------------------------------------------------------- Thank you. Next question, "What are your top 3 guesses on the identity of Satoshi?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [14] -------------------------------------------------------------------------------- I don't have the slightest idea who Satoshi is? I could tell you one personal experience I had, and I hope you find it amusing. I was speaking at a conference. And as I was speaking, or I didn't realize at that time, but after I had finished, someone told me that as I was speaking about crypto, there were -- people were e-mailing and tweeting back and forth. And they were making the assertion that I, Murray Stahl, am Satoshi. And I am not Satoshi, I assure you. I'm definitely not Satoshi. So I don't have the slightest idea who Satoshi is. And it may not be one person. It may be a group of people. We just don't know. Now whoever that person or persons happen to be, I can't imagine they'd want their identity known because they were obviously the community that bought the first couple of Bitcoin. And if they held on to it, which they probably did, they're extraordinarily wealthy right now. And I would imagine that various governments are interested in their share of the tax revenue. So we'll see what happens. I don't have the slightest idea who Satoshi is. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [15] -------------------------------------------------------------------------------- Okay. Thank you for that. Next question, "Would you please comment on the investment merit of Ethereum and more broadly on the theme of DeFi or decentralized finance?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [16] -------------------------------------------------------------------------------- Okay. So personally, I'm not greatly enabled with Ethereum. But it is, in my opinion, superior to fiat currency. That's as far as I'm going with it. See, the thing about Ethereum is its unlimited issuance, meaning it's a set -- it's not a fixed issuance. It's a set issuance every year. It goes on -- that issuance goes on infinitely. So that issuance, of course, is added to the denominator. And the denominator is constantly growing, but the numerator is fixed. So what happens is, in the fullness of time, the inflation rate keeps declining. It will always be an inflation rate. So I don't think that's as good as a fixed issuance currency. Although if the denominator, just a purely mathematical proposition, if the denominator got big enough, and we're actually around 120 years from now, that might not be a big difference in inflation rate between Ethereum and Bitcoin. But I'm planning to be around 120 years from now, but some people say I'm not going to make it. And you might be right about that. So within our effective Horizon, you have a fixed issuance, and then you have an infinite issuance. And infinite issuance has a greater inflation rate than fixed issuance. Now there are some good things about Ethereum in that it's programmable money. So the idea of the smart contracts is really a good idea. The problem is that each individual grouping of persons have to program the smart contracts. The contracts are only as good as the conditions that are set by the various people. And there have been problems, not necessarily hacking your way into Ethereum but hacking your way into the smart contracts because they're basically, they're made by human beings, and they're only intended -- they're not intended to be software that's used for a long period of time. It just it's a piece of software that undertakes one transaction. And that's the end of it. So you can only afford to devote so much attention to that. And there -- I believe there are vulnerabilities. And the idea of decentralized finance, what they call DeFi, basically, it's a good idea in the sense that it eliminates the power of certain intermediaries like banks, for example. And banks aren't pure intermediaries. Banks are also participants in the transactions themselves and its participations are profit centers of the bank. So it's -- so DeFi is a good idea, except that we can't have a system with no rules. We just can't do that because that's chaos. There's got to be rules. The notion of exchange, what's called a regulated exchange, is probably a good canvass. So in a typical exchange, a lot of don't people realize, the exchange is not the government. The exchange actually is the regulatory authority in the sense that all the people who trade on the exchange have to adhere to certain rules. Violation of rule, while it might be a criminal offense, but not necessarily a criminal offense. It just might get you expelled from permanently the community of traders or alternatively might be temporarily suspended or alternately might just get fined or several of those conditions might apply, but basically, the idea of decentralized finance is an idea whose time has come because we're all connected by the Internet, but that doesn't mean no rules. If there's not a regulated system, then maybe I should say, order in the system, it's not an order in the system and certain rules that have to be obeyed and some enforcement mechanism, decentralized finance as it's understood today, is not going to work. So as I said, the order doesn't need to be imposed by the government, but some type of order and some type of system and rules have to be imposed, and it's better for a group to do it than for a government do it because the group can make its own rules and how it evolves and so on and so forth. And everyone has the right to participate. Do good things. So I think decentralized finance is going to happen, but it doesn't mean an artistic finance. It still need some rules. And some of that actually might end up being laws, to have the force of law and the penalty is administrated by the government if you violate those laws. So I don't know if we're ever going to be in a purely DeFi, decentralized financial, circumstance ever, but we're moving in that direction. Next question? -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [17] -------------------------------------------------------------------------------- Okay. The next question is a follow-up on share repurchases. And it's says, "Mention was made that Mr. Bregman sold 20,000 shares to the company. I did not know any insider filing document of selling on the OTC/SEC websites. Is FRMO filing such paperwork at some other websites?" And if you'd like, I can answer that. Would you like that, Murray? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [18] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [19] -------------------------------------------------------------------------------- Okay. So FRMO -- sorry, FRMO is not registered with the SEC. Therefore, it does not file any items with that regulator. You will see the 20,000 share repurchase noted in the OTC Markets' disclosure statement posted by FRMO on the OTC Markets' website under the ticker symbol, FRMO. Once there, click on the Disclosure tab, then on the entry titled Quarterly Report, 6 Months Financial Statements at November 30, 2020, then scroll down to item 3A, Issuance History. The last entry on that table, which is on Page 4, discloses that the shares were repurchased, canceled and retired to authorized and unissued, but it does not name Mr. Bregman as the seller. So that's the information I have on that question. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [20] -------------------------------------------------------------------------------- Okay. Excellent Thérèse. So next question. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [21] -------------------------------------------------------------------------------- Next question is about disclosure. "Instead of reviewing it only verbally on the conference call, can you also please begin to list exactly what the exposures are of the major assets that everyone wants to know about? A small table that shows the number of look-through shares of TPL, Bitcoin, mining equipment, Winland shares, et cetera, would be very helpful. If that is not possible for some reason, then my question is, "What specifically prevents you from doing this choice? Specific regulation?" That's the question. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [22] -------------------------------------------------------------------------------- Okay. Well, I see no reason why we can't do that. The general convention is that I probably shouldn't be the person to actually calculate every number because of the conflict of interest rule. So we'll have to figure out, somebody who'll be assigned the job of calculating it, and we'll put it on a table somewhere, maybe in the quarterly press release. I have no problem doing it. So if you'd like to head that up, Thérèse, and figure out who should do it and how to get it into a quarterly release. I'm in favor. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [23] -------------------------------------------------------------------------------- Sure. I'll be happy to do it. And I'll also, of course, check on the regulations to make sure that we're allowed to. Our auditors are very careful about it. So I'm sure if they say, it's okay, we can certainly do it. I'll be happy to. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [24] -------------------------------------------------------------------------------- I'm in favor. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [25] -------------------------------------------------------------------------------- Okay. Next question, "Another area of suboptimal disclosure and reporting is that you maintain an odd corporate calendar with the additional wrinkle that you value fund investments with net asset values at period-end dates that do not align with FRMO cycle. This results, as you know, in much delayed reporting of performance such that FRMO's November 30, 2020, figures rely on September 30th valuations of HK Hard Assets. So when reports are released in January 2021, our most biggest asset, TPL is being marked at a time that is already 4 months tail. Can you consider making this more normal?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [26] -------------------------------------------------------------------------------- Okay. Well, we actually did that in the most recent quarter. So the policy is this: The policy as you stated with the following caveat, if the TPL price is X on September 30, and it's plus or minus 1% or something like that, a low number, on November 30, we defer to the September 30 numbers. We don't make any adjustments. But if the price is material and the auditors determine it's material, we update -- some people say adjust, I like the word update, we update these figures to November 30, meaning that we update our holdings and our investments carrying November 30th price of TPL because it really is material. So the figures you're looking at have been updated for November 30 prices of TPL. So the effort is to be current. And somewhere in the footnotes, that's actually explained. At the moment, you have me, disadvantaged because I don't know where it is, but somewhere there is disclosure that says that thing is being done, but it was done in the current quarter. So we're not using the September 30 market value. We're actually using for TPL, the November 30th market value. I think that should answer that question. I hope, Thérèse. Did we answer it okay? -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [27] -------------------------------------------------------------------------------- Okay. I believe so. Okay. Next question. "Would you use some of the parts by putting a value on different business segments? And if so, how would you go about doing this? I'm not asking you to tell us a specific share price but to give us something akin to Mr. Buffett using 5 groves of trees as an analogy for a Berkshire evaluation framework?" -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [28] -------------------------------------------------------------------------------- Okay. Well, see, there are some assets, TPL is one, the crypto either in GBTC form or in its raw Bitcoin or other cryptocurrency form, we can just get the values as of November 30, and then we can derive exactly what it is. Winland is that way. We can do all those things. The trouble is that some of these things have enormous optionality. So how do you express the optionality? And the whole idea of owning these things is that, let's take crypto. The one thing that's left out of crypto is because it's always possible you could have accelerated inflation. And it's always possible that you could have generalized adoption. So there's enormous optionality there. In other words, if you said to someone that you chose to hold Bitcoin for a very extended period of time. And you said, give me a call option on Bitcoin that would last for 50 years. First of all, no one would sell it to you. But that's what we have. And there's not a lot of supply of it relative to the people who theoretically want it, if you really had an inflationary scenario because most people don't believe we are in an inflationary scenario, we're ever going to be in an inflationary scenario again. But that could change. It's possible. So how do you express the optionality of that? Because they are very, very unique, unique investments. And what I personally do is, and you can use it or not use it, I don't focus on a point in time. So basically, if I'm going to value any asset, well, on November 30, it traded a certain price, and it may be higher or lower on a subsequent date. But basically, I use a range. I look at an average value over a period of time. That's how I compute my net asset value, and it is the subjectivity of the optionality. All these investments have a common denominator, and they're not conventional investments. Let's use Bitcoin again. It's not a company. It doesn't have earnings. It doesn't have profits. So let's give you an example. It's something that's in the Polestar Fund. And we own shares in the Polestar Fund of the Litecoin Investment Trust. It actually trades. When we made -- we made the investment less than a year ago, so that we just carry whatever the NAV is. And that is reflecting the Polestar net asset value, which gets into the FRMO shareholders equity. Now believe it or not, you won't believe this, but you can check it and you'll see it's true, the premium, so if Litecoin -- if we -- we can't sell Litecoin. But let's say, the year ahead of that, we could sell Litecoin, Litecoin Investment Trust. Believe it or not, the premium is not 20%, it's 20x. Not 20%, I'll repeat it again, 20x. So how do we value that investment in the context of Polestar? I think it should be valued at the most conservative valuation because who knows when the lockup expires, will it really be 20x. And then there's a much more profound question, which is, well, why is it 20x? Certainly not my fault because I'm not trading it. So I have nothing to do with it. Why would seemingly rational people do that? And secondarily, even they're irrational people, and they just happen to value at 20x because they don't know any better, why wouldn't other seemingly rational people actually make an investment in the trust and sell short shares of a publicly traded company and the knowledge that, ultimately, the 2 have to converge? Why wouldn't they do it? And the only answer I can give you, it's a theoretical one, so based on my theory, I have no empirical data to support it because I'm not going to interview people who buy Litecoin Investment Trust and come up with a rationale of why they do what they did, but it's not entirely clear that on the thousands of so-called exchanges in the world, they really obey rules. There, you can figure out what the truly transparent price for Litecoin or any cryptocurrency really is. There's probably spoofing and wash sales in every manner of rascality going on. And something like Litecoin Investment Trust trades in OTC markets. It is regulated, and it is transparent. It could be that, that's actually really the price. It's just a futures price, but that's really the assessed value what Litecoin should be. So now, I think we're in 7 months, I maybe off 1, but I think we're 7 months away from the lockup. So somebody suggested to me, why don't we amortize? Meaning, that carried NAV on the day that you had the investment, and with every successive 30 days, take 1/12 of the premium. So that after 1 month, you won't take the whole premium, take 1/12 of the premium. 2 months, take 2/12 of the premium, then 3/12 and 4/12 and 5/12 and so on and so forth until ultimately, the 12th month, you would value it at market because it's days away from being tradable. And we didn't do that, but we obviously could. That's the completely reasonable way of valuing things, it's just we chose not to do that. Anyway, it gives you an idea of the complexity of evaluating things that are new and different, unusual that people don't have a lot of experience with, and there's a lot of subjectivity involved in things. As I said, I take averages. I think they're better than point in time. And the optionality part of it, it's a very subjective judgment. I, myself, am very enthusiastic about the optionality, but that's because I believe in it. Other people may find it dubious. So everybody is going to make their own decision as far as that goes. The optionality as a number might actually be 0. People might value it that way. I don't think that's appropriate. And because you take the typical security, well, should you evaluate the way bonds are valued, which is mark-to-market, I don't think so because there's no optionality in bonds. The prices aren't going higher because they can't make interest rates lower. A typical corporation that publicly -- that's publicly traded, it has some optionality, but not enough to be important. Why? Because the price earnings ratios reflecting people's expectations already because they say that market's sufficient, there's optionality there. It can't very well be much, so you might as well evaluate the market. This has optionality, but we can have a long and interesting discussion about what the optionality is. We all got to make our own choices, I guess. That's the best I can do. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [29] -------------------------------------------------------------------------------- Okay. Further to valuation questions, are there plans for an update to provide current valuations for investments in exchanges rather than just at cost? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [30] -------------------------------------------------------------------------------- Okay. I'm not planning to do that on the exchanges. Obviously, the only one that's really -- some of the investments are really not material. So it's not going to matter anyway. It's not material, we just value at cost. The only one that's material, which is Miami International Holdings, or otherwise known as MIAX. And there, we're investors in the company, we don't run the company. So not a publicly traded company. Any valuation I would put on it is highly subjective. The valuation we use is more or less the valuation that was arrived at by the people who did the valuation work for the merger between Minneapolis Grain Exchange and MIAX. And that merger took place at the end of December. This is the end of January. I don't feel that I'm confident to override their valuation given my position, and I still am a Board member of Minneapolis Grain Exchange, I don't know if that would be appropriate. So they had a valuation agent. You can look up what they did, and that's basically the number we use. One day that might change. One day there might be a transaction we can use. One day it might become a publicly traded company, and then we'll know. But we can all have our ideas, but it's worth. And on the website, there's a copious amount of information about trading volume and other things. You can get a lot of statistics, and you can compare it to other exchanges. And if you want to do your own valuation, I would pay particular note to the growth rate of the volume. At the end of the day, an exchange -- what gives an exchange value is its revenue. Why is that true? Because if you put together exchange A and exchange B, you have a lot more revenue, but you only need 1 cost structure. So it's the most accretive to kind of bring 2 exchanges to get your together most accretive kind of transaction you could ever do. So special valuation techniques are needed for that. And I don't want to imply my subjectivities. I'm sorry, I don't give a number, but I have my own ideas, but it's subjective. And I don't want to expose people to my subjectivity with all the biases that any human being have, and I have it as well. And what if I'm wrong? So somebody else arrived at a value, that's the value until we have a reason to change it, which is another mark for whatever -- however we get it, we're leaving it the way it is. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [31] -------------------------------------------------------------------------------- Okay. Any update on FRMO uplisting? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [32] -------------------------------------------------------------------------------- There's no update. We're -- we've got a lot of things going on, and we -- that was not something that's an immediate focus. I suspect day is going to come when we're going to want to do it, but there's so many things going on. Frankly, it's not that we don't want to do it, we just have so many things going on. We're only human beings, and we only have so much capacity to perform our duties. Frankly, we just don't have the hours in a day to pay attention to that matter. So we've neglected the last quarter. Maybe in the not too distant future, we'll reconsider, but at the moment, we are where we are. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [33] -------------------------------------------------------------------------------- Okay. Next question. A few questions have to do with Winland. The first is Winland filed a report indicating that FRMO has sold certain assets in exchange for Winland shares. Would you go into detail on the transaction? And is this part of a "restructuring" of the portfolio? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [34] -------------------------------------------------------------------------------- Okay. It's not part of a restructuring. So really, there are 2 steps. We bought about a month after the halving of Bitcoin, we bought an FRMO $400,000 state-of-the-art servers, which we turned around the very next day and sold to Winland in exchange for $400,000 of stock value the way it was valued at that time. They had a secondary smaller partnership called Horatio. And that had some cash, and it had some crypto assets and a small number of machines. We sold that as well on the same basis, some weeks later. The idea was, what is the best way of valuing mining assets? So part of it was to find out how the market will actually value mining assets in relation to cost? And right now, the market values mining assets at something like 4x what you pay for them. If you were to buy $400,000 -- we did it today. We bought $400,000 of mining equipment, and we put in a publicly traded company. Chances are the market capitalization of that'd be worth $1.6 million. So it was a learning experience. And it's -- we would like to make mining a bigger business. We'd like to do it in a way that's very different. There are some publicly traded mining companies. We do it -- we'll do it in a very different way. We don't want to have any meaningful kind of leverage. We want to operate at consistent profit. We want to pay a dividend every quarter. It requires thinking through how we go about doing this. That's the objective. Whether we can do it or not, you can debate because we debate it, but that's the objective. And we are working towards that end, [make that happen]. At the moment, we haven't for the last month or so, we haven't bought any mining equipment. So I should really comment on that. So it's not that we're not working on the problem. So we haven't bought any mining equipment, and here's the reason why, just so you would know. That we know in roughly 1,190 days in Bitcoin, using Bitcoin as an example, I have (inaudible). And when I have incomes, your revenues go down in half, your expenses are going to stay the same. So question is, what is the breakeven time on any machine you're going to get? And the problem is, if you were to order equipment today, you -- it won't be shipped until August at the earliest, which means that the earliest you'll receive it in September. So you need to pay for something and your equipment is going to be idle because you wouldn't have received it for some period of time. And there's no guarantee there won't be some disruption in the supply chain. You get even later in September. We're disinclined to buy equipment right now, which means that the suit of this thing becomes a little more difficult. That could change in any time. But the moment, we don't want to leave idle equipment. So let's say, it's -- oh, what is it, 8 months, 30 days a month, so up to 1,190 days roughly (inaudible) take away 240 days when an equipment is idle. Obviously, a breakeven or the time to breakeven starts the day you get the equipment. So we're considering the problem. We just can't act on it at the moment to reasons that are operational, that have nothing to do with our operations. In the meantime, we own a piece of a business called HashMaster where we repair other people's machines. So we're not inactive, we're just gaining a lot of experience in machines. But we're not buying the components to build our own at the moment. We think as we approach to having both the component parts and the machines fully constructed, we're going to be a lot cheaper. But we're waiting to see what happens. I hope that's a thorough answer to the question. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [35] -------------------------------------------------------------------------------- It sounds good. The next 2 brief questions have to do with the Winland Mt. Gox trade claims. So if I may, I'll combine 2 of them. There was a recent announcement regarding the Mt. Gox bankruptcy. I know that Winland Holdings owns Mt. Gox trade claims and at one time, the value was expressed as being $600,000. With the rise of Bitcoin's value, would you explain what the trade claim is exactly? And the next part says, Bloomberg reported on January 15 that 90% of the Mt. Gox remaining Bitcoin can be claimed by creditors. Since FRMO is a significant shareholder in Winland Holdings, do you have any thoughts on this news given that Winland is a creditor in the Mt. Gox litigation? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [36] -------------------------------------------------------------------------------- Okay. Well, that's true. Yes, the crypto can be claimed. And as soon as the bankruptcy is finalized, the ultimate outcome is you get your crypto. It's a little more complicated than just stating that we have x number of trade claims that's exchangeable for why I'm mad at Bitcoin. Because we bought a variety of freight claims. And -- but now that we bought them, they were very cheap. They were undervalued. In order to get 1 claim, we just couldn't buy 1 claim at face value. Someone didn't want to sell it, but we want to buy that. We wanted to buy the claim. So what we did is, we made a deal. The deal was that we owned trade claim, but if there's an ultimate recovery, we would share some portion of recovery with the seller. So we gave a value, that value is inclusive of what we promised share of the ultimate recovery. So one of the claims, because of the way we bought it, we're not entitled to the entire upside. That makes it a little bit complicated to just state a number because I just can't do it in my head, I have to go look at the figures and probably somebody else should calculate it. I shouldn't. That's actually circumstance. Another trade claims, we own them clear, there's no liability against it. Anyway, that's the way it is. And some parts have been a great investment. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [37] -------------------------------------------------------------------------------- Okay. So the last one on Winland is, of the $350,000 bankruptcy claim -- I think we have some different numbers here -- Winland owns, how much of it is Mt. Gox and what is the rest? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [38] -------------------------------------------------------------------------------- Well, everything on that -- everything is Mt. Gox trade claims. There's nothing -- I'm not sure I understand the sense of the question. So there's Bitcoin that Winland has mined. And the other exposure is Bitcoin that comes through the trade claims. The figures we gave before are the trade claims. I don't have a current figure in my mind, the reasons I mentioned earlier. And obviously, the price of Bitcoin changes as well. But you have to calculate the allowance for the share that the prior seller and when the claims would get in the event of a successful emergence from bankruptcy. So I just don't keep the years like that in my head. Anyway, there's 2 figures. The Bitcoin is always increasing because we're constantly mining more Bitcoin. Anyway, that's the way I understand the question. I know you want a current value, and I'll try to persuade the people at Winland to share a current value of the [summary] documentation of the Mt. Gox assets as of quarter end. I think that would probably clear up any uncertainty. I just don't have to figure to hand at the moment. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [39] -------------------------------------------------------------------------------- Okay. So the next 3 questions have to do with the cash balance. There is a large cash balance, and I understand this to be a certain risk mitigation strategy, in addition to providing the required collateral for the ETF short position. One of the research reports identified timber as an asset class that is expected to be an inflation beneficiary. Given that, why is a position in timber not being made with the cash on hand? This question also applies to the large cash balance held by the RENN fund. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [40] -------------------------------------------------------------------------------- Okay. Let's do the FMO first. So we don't have a plan to spend down a lot of the cash. We're leaving the cash unless something changes. We're leaving the cash the way it is. A number of reasons for that. One of the reasons is that the short positions, in the fullness of time, actually get collateral lease and it produces cash. So we actually don't need to spend the cash down. The second reason is that the hard assets portfolio is now additionally large, that just dividend income alone grows off a relatively extension amount of cash. I believe a few weeks ago, on an annualized basis, just in the hard assets portfolio alone, we passed the annualized $1 million mark in dividend flow, probably higher right now. And I say, I'm going to do our best to make sure that number increases. At some point, if everything works, there'll be a lot of dividend flow coming from that, and we'll have lots of cash for all sorts of tree investments that will liberalize our position a lot. So we don't have any plans to spend down that cash, unless something truly extraordinary happens. The other way, of course, of raising cash is we could borrow money, and we did borrow a little bit of money to buy the building in which HashMaster is situated. The reason we want to control the building is, because if ever -- if an occasion ever came, make mining bigger, we want to control the building. There's a lot of expansion space, and that represents optionality for us. The interest rate is fairly low. So we really weren't concerned with that. We obviously have the cash to pay down the liabilities. The self-amortizing notes can be paid down in the fullness of time anyway. So that's where it goes. Timber, there's a lot of different ways to invest timber. There's a few ways to invest in it by publicly traded companies, there are other ways to invest it. One day maybe we'll have the money, and we'll be able to undertake something like that. At the moment, if we're going to invest in timber, we're going to have to do it through publicly traded securities. You just can't make small investments in timber. One day perhaps we'll have the resources to undertake something like that. But at the moment, the cash balance that you see on the FRMO balance sheet, in the world of timber, it's not going to buy a lot of timber, not going to impress a lot of people. So we need a lot more capital, and we don't want to sell shares in the company. If anything, we actually like to buy shares [at our prices]. So I hope that's a thorough answer. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [41] -------------------------------------------------------------------------------- Yes. I just want to point out that it's 5:36, and I think we have a 6 o'clock stop. And we have 8 more questions. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [42] -------------------------------------------------------------------------------- Okay. We'll see if we can -- how many we can get through and we may have to do -- we have to -- maybe 3 is a charm. Who knows? That's (inaudible). -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [43] -------------------------------------------------------------------------------- Okay. I've noticed FRMO and Fromex acquiring shares of the RENN fund quite regularly. Well, much like HK acquires [TPM], i.e., daily. Please share the strategy or thoughts behind these purchases. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [44] -------------------------------------------------------------------------------- Okay. Well, in a way, I neglected the last part of the prior question because it explained -- dealt with the cash balance and RENN fund. So I'll do that in this. Basically, as anybody can see that looks at the fund, depending on the day, it's a big discount to net asset value, number one. So right away, we're buying the assets that we like at a discount to the prices that they trade at. So why wouldn't we do it every day? (inaudible) to begin with. Secondarily, there's cash there. So even if you think the prices are not what they should be on publicly -- on public markets, cash is cash. So a fairly big cash balance, and you said, well, cash is worth cash. And you say, okay, well, the discount is a discount, therefore, algebraically, you have to apply a bigger discount to the publicly trade securities to be equivalent to what the discount and the fund is because cash discount really should be 0. So it's really cheap. And that's why we buy it every day. It's preposterously cheap. And then thirdly, I think I referred to this last time, there was this security known as Petro-Hunter. And that was valued at 0, quite appropriately, I think, but there was a possibility of getting a bankruptcy payout, and we got it, and we might get other ones. So we're buying that for nothing. There's a lot of good things given the RENN fund. So if you think of it, a more general comment. It has to do with FRMO, has to with everything we do, we buy a little bit every day. Because of my prior remark about I look at things at averages, and that's really what they are. The prices fluctuate widely for just about everything. There's a lot of reasons for that: human participation in the markets, the ability -- guess people, to outguess people or at least they think they have the ability to outguess people. We don't look at life that way. We make an assessment of which way the river is flowing. And if things are greatly undervalued, the fact that one day it's undervalued by x percent, the next day it's undervalued by x plus another 5% in current, that's not going to make a big difference to us. And the reason is because all these valuations is subjective. Because I say it doesn't mean that it translates to some that you could make a lot of assertions about companies. Just understand that we're buying, generally speaking, hard assets. You look at what's in the RENN fund. Primarily entirely true, but it's largely true. They're primarily a hard asset. Hard assets has a meaning for us. That meaning is a company that can benefit from an increase in revenue without a concomitant requirement for capital expenditure. So you have a business that's growing. Usually, you need to hire people. You usually need to buy plant equipment. Your plant equipment wears out, you got to buy new plant equipment, it's true of almost every business. And sometimes these people who run those businesses make incredibly astute judgments. And sometimes, they're not so astute because we're all human beings and we're all fallible at the end day. The hard asset is a genre of company where you don't have to make that decision. You can take -- it's almost entirely true. It's not 100% true, but it's almost entirely true. We can make believe it's entirely true. Cash flow really belongs to the shareholders. I've said, it's not 100% true, a little bit of exaggeration there, but it's basically a true statement. That makes a unique genre of company. So in the case of hard assets, because of the optionality and the fact that you get the cash flow as a shareholder, you should always be buying, unless it has some elevated valuation that it trades at, which it does not. So we're buying a little bit every single day because we're not going to pick the high point and low point. There are just too many variables involved. When you trade securities, and you think you know what the high point and low point is -- and the high point, by the way, and a low point, there's only one high price for the year, there's only one low price for the year. So obviously, you want to buy it low. If you're doing that, well, there's 233 trading days in the year, there's only 1 low price. So who knows what day that's going to be reached. You've got a 1 out 253 shot of being right, and I don't like those odds. So basically, I buy every day. On the days when the price is really low, our cash that we spend has a lot more purchasing power. Over time, it's a $4 averaging. You get the harmonic mean price. And it's usually speaking, a good deal, and that's why we do it. So I hope that explains it more thoroughly. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [45] -------------------------------------------------------------------------------- Yes. And where might a shareholder find how many shares of FRMO and Fromex own of the RENN fund? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [46] -------------------------------------------------------------------------------- Yes. Well, it's on the SEC website. So if you go in the SEC website and you key in RENN, you'll see the fund, click on it. And they make it a little bit hard for you because the form -- the filings you're looking for are the Form 4 filings. So you'll see a little circle that says only Form 4. And if you click that, what you'll get is, you'll get only Form 4s. And you can click on every day. You'll see me buy every day. And every day, in the Form 4, it gives you the exact number of shares we have as a consequence of the most recent transaction. So you just have to fill in that little circle and click it. And you'll know what exactly to -- exactly how many shares we have in the RENN fund. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [47] -------------------------------------------------------------------------------- Okay. Great. A few years ago, Mr. Stahl discussed potential uses for FRMO's cash balance. At that time, "dream use" of Bitcoin/crypto or something that "might happen" as opposed to something that is happening. Given the recent acceleration of the mainstream's attention to and acceptance of crypto, in your eyes, has this changed to something that is happening and merits heavier concentration? Are there other opportunities that management is considering or has hopes for as to the ideal use of FRMO's cash? I think (inaudible). -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [48] -------------------------------------------------------------------------------- Yes. But let's go into a little more in depth. So at the time, and this is over 5 years ago, the probability that crypto, in general, Bitcoin, in particular, would fail was extraordinarily high. Yes, another way of saying the odds of success were low. However, just because the odds of success are low, it doesn't mean you shouldn't undertake the investment because the question is what is the payoff. So the payoff was so enormous, that we could afford the Polestar Fund as an example. We've made a 1% position in the Polestar Fund. And we are prepared for the worst. If it went to 0, well, we're going to lose 1%. We could have tolerated a 1% loss. But if it worked, it will revolutionize our balance sheet. And similar investment was made, the Croupier Fund and the Multi Strategy Fund and so on and so forth. And it did. It worked. And we take that approach with lots of things that are contingent just because has a high probability of failure, doesn't mean we should not undertake an investment. The question is, do you size it appropriately? It has a high enough payoff. It's worth it. And that's what I mean when you get down to optionality, that we have delivery of action, we can do certain things and live to fight another day. Now maybe it would be a calamity and it would be a failure. Maybe we wouldn't actually lose all our money. Maybe we would sell it down 80%. And even then, we get a tax credit. Let's say we had an 80% loss in the investment. It's 80 basis point loss. We're taxable. And we get to deduct that against taxes. So it's not a grievous loss. So to take -- put some numbers on. If we made 10 such investments, 9 failed. The worst that could possibly happen is you lose 100% of your money, and then you're really only losing a lot less because of the tax situation. Both losses are not that bad really. And if one works, just one, you're a completely different company. We could leapfrog ourselves into a far, far superior capital position. It makes many, many things possible that just aren't possible at a lower level. That's why we undertook it. It looks like it's working. We'll stay tuned because there's no guarantee of that. But to address the other part of your question, other people are realizing that. So when it comes to crypto in debasement, yes, those will be probably a failure, but it doesn't mean you shouldn't do it in the following sense. It's highly different from the prior answer, but it's the same basic idea. The risk of not doing it was much greater, the risk of doing is less. Let's turn the proposition on its head. So the worse that could've happened to us is we lost a fraction of 1%, seeing it actually went to 0, taking into account the tax benefits of the loss. Avoiding that loss is not going to make FRMO a better company, but debasement is real. And with the rise of indexation and the rise in the bond market, basically, the index world has really more or less eliminated inflation beneficiaries. Not entirely eliminated, but they have a very, very low exposure in the stock market. And you don't really have good anti-debasement choices available in capital markets. There are very few available. This was one. The risk of not doing it was missing an outlandish rate of return. And that was a risk we weren't prepared to undertake. But they say, the risk of not doing it was far greater than the risk of doing it. Because we didn't do it, then we're going to end up being debased, and we don't want to be in that position. That's far, far worse than losing a handful of basis points. That's the way we looked at it. Next question. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [49] -------------------------------------------------------------------------------- Okay. I would be interested -- I would be very interested in your take on the pros and cons of the streaming versus royalty business models. I know that FRMO, et cetera, has exposure to both. That's it. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [50] -------------------------------------------------------------------------------- Well, they're very (inaudible) -- I mean, we can go into details, but from our point of view, they're so similar. They're really the same. Yes, we have exposure to both. And the reason we have exposure both is because it's hard to make the argument that one is really superior to other. There are certain specific instances where one would be superior to other. We have no way of assessing if those circumstances are going to be there or not be there. And the difference is, really, even assuming one in (inaudible) so that circumstances are better than other are not that much better, makes a difference. So all we do is we just maintain exposure to both. Over the years... -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [51] -------------------------------------------------------------------------------- Murray, Steven here. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [52] -------------------------------------------------------------------------------- Yes, go ahead if you want. Sorry, Steve. -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [53] -------------------------------------------------------------------------------- It's not -- isn't that even the case that the difference between streaming and royalties within a given company that makes such investments. It's really just different points along the scale, a sliding scale, of how they price or negotiate their contract with their counterpart at the minor. Seeing the same company sometimes strike a royalty deal in its formal sense. In other cases, a streaming deal. And the preference for that or the outcome of that seems to be reflective of pricing and demand and supply and so forth in different eras. So they go through phases, reflecting the market. Is that not the case or would you phrase it that way? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [54] -------------------------------------------------------------------------------- Yes, it's all true. I would put it that way. So I've never really sat down and decided that one is superior to the other because I don't think you can make that assessment. It just there are differences, and they're not great differences. And sometimes, one works more in your favor than in another, but I've never really preferred one greatly to another. I personally think (inaudible) the royalty deal, it's a little bit easier to understand. So if you like simplicity, I would do a royalty deal. But other than that, they're all pretty much the same. So I hope that [addressed]. We can get into a lot of detail, but I had to sidestep that a little bit in the interest of time. So next question. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [55] -------------------------------------------------------------------------------- So with our last 9 minutes. Does FRMO have any plans to start an ETF or close and fund similar to the new HK inflation ETF? Does FRMO have an investment in this ETF, inflation ETF? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [56] -------------------------------------------------------------------------------- Okay. So let's do the latter. Yes, FRMO does have an investment in the inflation ETF. At the moment, it's very small, and we actually buy every day. I don't know if there's a filing forward or not because it's an ETF. So I don't know if they even -- I don't know if they even file. I don't think it's considered to be material. But we do have an investment, and we are buying shares in ETF. I think it's a great fund. So we're buying shares in a sister company that's not public, that's private, that you will see on the RENN fund filing called [Horizon Common]. Horizon Common is buying shares of the ETFs as well. So yes, we're buying. And in terms of ideas, we have lots of ideas. We'd like to do -- we have some ideas for other ETFs. Remember, everyone is, with one exception, is going to be active, and one idea for a passive ETF. But we have ideas for active ETFs, quite a few of them actually. And we just put the inflation ETFs into motion. So we're going to assess those results and figure out which one is going to be, which ETFs is going to be next, but we're working on doing other ETFs. It is so. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [57] -------------------------------------------------------------------------------- Okay. For the LPs, is it possible to look through at the underlying holdings and the valuation method? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [58] -------------------------------------------------------------------------------- Okay. Well, the valuation method is easy, in the LPs, everything is valued at market. So everything is publicly traded securities. Well, let's just say none of it. Let's say, 99% are publicly traded securities. And the LPs, there are some small positions in private securities, maybe they add up to about 1%, more or less. Everything is publicly traded securities. And every security that might be here or there, an odd exception, but they're all the securities that we've talked about. So you'll see them. I mean there are no surprises there. There's nothing there that you'll be astonished by. Let's put it that way. The private companies you haven't heard of. And there's probably no reason we couldn't disclose it, so I'll talk to our folks. And if we're allowed to disclose it, maybe next time we'll mention the private investors. As I said, it's about 1% -- not exactly 1%. It might be 1.2%, it might be 90 basis points, it's something like that. And if it's okay, I think, next time, we'll disclose where our private investments are. Not a big deal. They're always very interesting, though, and they all have optionality. So we'll see if they end up working. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [59] -------------------------------------------------------------------------------- Okay. In the investment world, advanced mathematical technology is well-known to those who care to study quant and artificial intelligence. Are there any mathematical modeling algorithms, machine learning, auctions pricing, tail risk mitigation or other uses within FRMO/Horizon Kinetics portfolios that depends on the mathematical output for investment decision-making? Or do the analysts utilize purely fundamental analysis/intuition to determine inflation beneficiary sectors and specific investments within those sectors? -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [60] -------------------------------------------------------------------------------- Yes. We aren't using mathematical models. So no reason why we couldn't use them other than the people who practice them, they are a lot better at mathematics than I have, that's for sure. Basically, we're looking for hard assets. As far as I know, there might be -- I'll be off a little bit in this number, there might be 12 in the world. If I'm off, it's really because there are 10 or maybe there are 15, it's some number like that. And we're aware of most of them. And I think we've defined what the characteristics for hard asset is. And not even bad investments in the noninflationary types. I'd love (inaudible) inflation. So for this question, let me just explain why even in a noninflationary time, they're actually pretty darn good assets. So let's say you have, as we have, certain companies in the commodity space, like oil. And the price of oil is never going to go up. Let's just say that was the case. So even though you could say you have optionality, but you really don't have optionality, but you do. And the reason you do is because the technology of the extraction of the commodities is constantly changing. So if the price is never going to go up, those companies that are involved in the extraction process, the only thing they can really do is endeavor to lower the cost of extraction. So they'll devote their resources to that end. If they lower the cost of extraction and ultimately, they'll try to extract more from your properties. And extracting more from your properties, mathematically, at least, is the exact same thing as extracting the same, but at a higher price, you get a royalty. So there's optionality even if prices never go up. So for example, if you look at some of the things we have, it wasn't that many years ago, it was considered to be an impossibility to extract anything on the properties we have, just physically impossible. And we believe that, but we didn't believe it was going to be permanent. We thought that one day, someone is going to figure something out. We don't want to invest in it; meaning, that we don't want to undertake the research and development because the probability of failure is actually pretty high. Most of those projects fail. But they don't all fail. We have a call option effectively at the money on every one of them. We don't hold the new patents, but we effectively have a call option on everything. So people realized how valuable that is. All these companies were traded radically at different prices, but maybe it's a good thing they don't realize that, what the optionality really is. Imagine, if there was such a thing, you could buy an option on a patent or a set of patents, into a number of patents, even ones that haven't been patented yet. It goes on forever. That would be worth a lot of money. That's what it actually has. That's maybe the best explanation I can give you for true optionality. So it can work in any environment. That's the benefit of a hard asset. Anyway, by the way, I should also tell you the same principle works in exchanges. So an exchange is not a hard asset in the way I described it. But in another sense, you could say maybe it is, you have an exchange. And there are all sorts of people who are very inventive and very clever, and they're coming up with different things to trade. So there are only so many places you can trade. If someone spends a lot of money to invent something that can be traded, and you trade on your exchange, you basically have the same call structure, you just have a lot more revenue. So you have optionality exchange, what other business could you have with somebody else's research and development, and you end up getting a piece of the revenue? There aren't too many businesses like that. Exchanges are another example of it, which is why they're so alluring to us. We all (inaudible) long periods of that. You'll see us doing more things in exchanges in the future. We're not done by any stretch of the imagination in exchanges. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [61] -------------------------------------------------------------------------------- Well, you do have another question, but I'm not sure there's time to answer it. But I'll read it to you. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [62] -------------------------------------------------------------------------------- So let's try. We have the time. Let's do it. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [63] -------------------------------------------------------------------------------- Okay. What do you make of the fact that close to 100% of all trades that take place today of all stocks are on lots every day? This is a new world of trading. It looks like people sitting at home "playing" trade stocks for fun and profit to me. What does it look like to you? Where are the institutional sized transactions? You hardly find anything reported anymore. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [64] -------------------------------------------------------------------------------- Okay. Well, I realize it looks like individual people trading odd lots, but it's not. Almost all the trading that -- being done is professional traders. So the way it's executed in the modern world is something called a VWAP. You get the value rated price during the day. So basically, somebody wants to buy 100,000 shares. So instead of showing up in the marketplace to buy 100,000 shares because there are so many algorithms and so much artificial intelligence in the market, but it's really 1 billion mathematicians, that will be spotted instantly. So once people become aware that there is all this technology looking for big trades, well, the market reacts and there basically are no big trades. There are only little trades. So 100,000 shares a block, we've broken up into these little tiny component parts. And they might be as small as even 1 share. And people trade in different component lots during the entire day. So everybody looks like they're an (inaudible) trader. Why? Because the systems are designed to ignore (inaudible) traders because they're supposed to be noise. And so flying in the radar, so to speak. So everybody seeks to fly in their radar. And therefore, the artificial intelligence reacts, realizing that every trade is just likely to be a disguise trade, which is much bigger in size, they develop new algorithms to try to stock the big trades. That's why they buy so much data and try to correlate that the data on trades to institutions and the biggest presence in the institutional world is obviously the index funds. The index funds are buying big blocks of securities, very big blocks of securities. So what they do when they have an inflow, they basically go to a market maker, and they say, deliver me a basket of securities that look like the index. Sometimes they put caveats on it. You can deviate from the index slightly. And as the market makers' objectives to fill the needs of the index, the market maker needs to have that activity disguised, which is why it's broken up in these component trades. At the end of the day, the index or the ETFs in question receives the actual shares. It's what I have with most of what -- so how they hedge themselves, what they will do is if somebody wanted to buy an ETF, they might -- one technique, there are many techniques, but one technique might be the market maker might short shares of the ETF and simultaneously buy the component shares. And when they deliver the component share in index structure to the ETFs in question, they are issued units of the ETF. And the units of ETF basically equilibrate the shares of the ETF that are short, basically wipe out their short, and hopefully it can be done at a profit. Now they arbitrage in other ways as well because there are different venues for trading stock. So New York Stock Exchange stock, for example, is, of course, traded and listed on New York Stock Exchange, but it's also traded but not listed on NASDAQ. And there's BATS, which is owned by the Chicago Board Options Exchange, et cetera, et cetera, et cetera. So different traders will operate simultaneously or different times in different exchanges. There's lots of ways to disguise yourself and hope that's adequate introduction to institutional trading. Everything looks like an out lot. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [65] -------------------------------------------------------------------------------- Well, thank you, Murray, and thank you, Steve. That was a very illuminating call, but that was our last question for today. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [66] -------------------------------------------------------------------------------- Okay. We did it. Okay. I'm very gratified. And -- that we did the (inaudible). I hope we answered everyone's questions satisfactorily. I thought -- I enjoyed answering them. I thought they were uniquely good questions. And we look forward to reprising this at the next conference call and maybe be so lucky as continue to have this great audience. So thanks, everybody, for spending the time with us, and thanks for your interest. And I guess, it remains to say good night and if you have anything to say to sum up, Steve or Thérèse, go for it. -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [67] -------------------------------------------------------------------------------- No. No, I think you've done as good a job as can be done. I thought it was pretty interesting myself to listen. -------------------------------------------------------------------------------- Murray Stahl, FRMO Corporation - Chairman of the Board & CEO [68] -------------------------------------------------------------------------------- Okay. Well, thanks so much. So -- okay. Well, in that case, good night, everyone, and look forward to doing it again. And for the moment, we're just going to sign off. Thanks so much. -------------------------------------------------------------------------------- Steven M. Bregman, FRMO Corporation - President, COO, CFO, CAO, Treasurer & Director [69] -------------------------------------------------------------------------------- Bye-bye. -------------------------------------------------------------------------------- Thérèse Byars, FRMO Corporation - Corporate Secretary [70] -------------------------------------------------------------------------------- Bye. -------------------------------------------------------------------------------- Operator [71] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.