Gold That Grows

Robert D. Mitchell Managing Member - Portal Capital, LLC

General Partner for the Odysseus & Green Energy Metals Funds
Tel: (503) 783-2568, Email: info@aditfunds.com, rmitchell@aditfunds.com Website: www.aditfunds.com
Great things are done by a series of small things brought together Vincent Van Gogh
The best life is a series of daring excursions from a secure and orderly base David Brooks

When things got bad I jumped on my 24 inch black Schwinn and rode to my grandmothers house left on Oak
Grove then Ottawa Lasalle Madison hop the curb at 102 Central and she would say what is the matter and you'd
say a headache and she'd say come here lay down and you'd lay on your back head in her lap close eyes and
she'd rub your temples in slow circles with her old dry chapped fingers and you didn't let anyone else touch you
if anyone tried to kiss or touch you'd recoil like it was going to be an electrical shock and at family gatherings
they would laugh about it because no one knew what to say but granny knew and she watched the Mets and
always had a can of Coke next to her with a straw and vanilla junket pudding in little glass cups in the ice box
and the TV guide on the arm of the sofa and her garden with the tomatoes she traced on paper to keep a record
of how big they got and cookie tins piled up full of old pennies in her back parlor and you would dump one out
on the carpet and rub across the top like a hand across ocean sand looking for shells for a 1909 VDB and her
foot bounced her shoe nearly off her foot up and down and up and down and only the toe in and nearly out like
soft waves above the carpet and sometimes you tapped at it to break the rhythm and she would laugh and you
would laugh and you still think about her fingers slowly rubbing soft circles on your face and one day she
showed you a bright gold coin seemed too heavy for its size after all the thousands of old brown copper pennies
with the smudged portrait of Lincoln the face of a beautiful woman in bright gold captured you hard until you
fell for Kathy Marshall in sixth grade now what's old is gold again.
Today and Gold
Global debt has risen by $57 Trillion since the financial crisis and $5 Trillion of it is currently trading with
negative yield. The economic growth response to loose monetary policy has been disquietingly disappointing.
The ignoble partner to central bank easing has been the pursuit to the bottom of national currencies to stimulate
exports, and here too, the results seem to be uninspiring. Nearly everyone agrees equity markets seem to be the
beneficiary of these circumstances, but now we are six years deep into an equity bull market. What is an investor
to do? First, if the age alone of a bull market dictates the decision to vacate, it is worth noting that if one had
sold the bond market rally six years deep, the investor would have left 28 years and counting on the table.
Nonetheless, is it my imagination, or has the cloth of the fiat monetary system become a bit credibility frayed, as
in, are there clothes at all? The most vocal and articulate of the Armageddions have grown sullen and petulant
only because they called the sky is falling so long ago, and it hasnt, but a couple quick thoughts from a mere
stock pickerarent the buyers of negative yield debt supposing they will sell their lovely investment to another
buyer at a higher price before booking their loss? Isnt this getting a tiny, wee bit farcical?
Im not a gold bug, and mining it is a horrendously poor business model. Most mining jurisdictions now require
five to ten years of environmental work to satisfy government mandates. NIMBY and native interests sometimes
influence mining companies to spend more on legal counsel than developing the deposit. Finally, in a world
where capital moves to where it is treated best, an immovable mining operation is a sitting duck for government

interests that are desperate for more tax revenue. The industry is generally characterized by a variable revenue
stream and inexorably rising costs. I would also note that gold is trading near five year lows while the producers
have hedge books near five year highs, so not only is it a poor business model, but the managers tend to also be
decent contra indicators for the price of that which they produce.
The stuff is inordinately heavy, and strangely shiny, and relatively rare, but so what? The metal has served as
money for 6,000 years, while 400 fiat currencies which began with the letters A through D alone are now extinct.
It is not so much that gold is easily and exceedingly commendable as its fiat alternative of every stripe is
contemptibly, laughably ineffectual (See Figures 1 and 2). By the way, fiat is an item manufactured by
governments. Enough said. Again, what is an investor to do in such an unsavory and uncertain environment?

Figure 1

Figure 2

Significance of Inflation - 1962 Average U.S. Costs

New House
Annual Income
New Car
Monthly Rent
Annual Tuition to Harvard (Stanford)
Movie Ticket
1 Gallon of Gasoline
USPS First Class Stamp
1 Dozen Eggs
1 Loaf of Fresh Baked Bread

$12,500
$5,556
$2,924
$110
$1560 ($1,260)
$1.00
$0.28
$0.04
$0.32
$0.21

The Odysseus Fund

First, we dont forecast market direction because unlike most, we are intellectually honest enough to
acknowledge it as an imponderable. Secondly, we are generally company to metric agnostic P/B, ROE, ROA,
P/E, P/CF are all instructive but not stock price formation conclusive. In a world lacking strong organic growth,
we strive to uncover undiscovered hyper growth companies before they are institutionally owned, run by
managements that own a lot of stock so that we as shareholders are partners. Liquidity is important we dont
own meaningful positions in roach motels where you can get in but not out. This doesnt leave a large
population of candidates. We run a concentrated, focused portfolio there are more than enough index funds
and index funds masquerading as active managers. Further, we identify catalysts to higher valuation that are not
embedded in the stock price and we typically leg into positions while we observe whether management is under
promising and over delivering, a key component of price performance. We have identified both industries and
stocks within those industries which make us optimistic regarding the balance of the year. The world is dripping
wet with optimistic managers our fund was up a net 87% last year and 254% since inception in 2010.
We like the online gaming space both because of its growth characteristics and the fact that a portion of their
commerce flows to desperate governments searching for tax revenue. We find the fantasy sports industry a great
area in which to search for related stocks, and we currently own three of them before most investors are aware
that there are public ways to play the space. Finally, we are attracted to gold, but generally dont want to own
explorers, developers, or producers. We are appalled by the race to the bottom in fiat currency, which all
conspired to our discovery of a small company just being birthed into the public market. We look at the 1,906
publicly traded exploration, development, and producing gold companies and shrug in disinterest. We
contemplate the 260 gold related investment funds, ETFs, and closed-end gold funds and wonder how many of
them might be as enthusiastic as we are at putting the following stock in their portfolios and what valuation for a
one of a kind would result.
BitGold (XAU CN)
Uber is the worlds largest taxi company and they own no vehicles. Facebook is the worlds largest social media
company and they create no content. Alibaba is the worlds largest retailer and owns no inventory. AirBnB is the
worlds largest accommodation company and owns no real estate. Is it entirely implausible that BitGold could
become the worlds highest capitalized gold company and neither own nor produce any of it? Consider Figure 3.
At the inception of their existence, did you say to yourself, What a great business model! This is inevitably a
multibillion dollar enterprise! Obviously, for each of them, most will never gain critical mass.

Figure 3

Internet Comp Table

Source: FactSet, Company Reports & Cantor Fitzgerald Research

Digital currency formation and proliferation is being driven by the internet and mobile phones, driving commerce
not possible when trapped in physical form, and bringing banking to the unbanked. Unlike fiat, it also tends to
be characterized as having finite units outstanding, which is a meaningful positive. Unfortunately, their unit
valuations are purely a function of supply and demand. Further, they have become associated with illegal
commerce and occasionally been victimized by hacking. It is also fair to say that currencies like Bitcoin are not
particularly easy to understand.
BitGold (www.bitgold.com) is electronically accessible gold, bringing all the convenience and innovation that's
happening in fiat or digital currencies to the one commodity money that's passed all tests of time. The online
financial platform is elegantly designed by a technical team that has composed more than 100,000 lines of code
to date. The gold is fully reserved, allocated, redeemable and stored on behalf of account holders in Brinks
vaults around the globe. Storage and Lloyds of London insurance are free. Trades are settled nearly instantly.
BitGold is not a bank, but rather, a third party internet based platform linking a users securely vaulted gold to
global payment rails of every sort. The product is ideally suited as both a savings and transaction account. The
online wallet is secure and fully fungible back and forth from fiat to gold and back again. BitGolds service isnt
just limited to the digital world. The company is in the process of deploying hundreds of BitGold ATMs and the
gold in ones account can be spent with a BitGold MasterCard at any traditional point of sale or ATM.

There is a 1% transaction fee on purchases and sales when fiat is converted to gold, or gold to fiat which
compares most favorably to the cost of buying, storing, and selling physical gold. One of the more disruptive,
revolutionary features of the BitGold platform is that gold can be transferred from one account to another,
anywhere around the world, for free. The remittance industry, or sending payment for goods and services, or as a
gift, is a lucrative $500 Billion business worldwide and dominated by the likes of Western Union and
MoneyGram. The BitGold product is particularly well suited for the 4 billion un-banked and under-banked as a
means of remittance and wishing to save in gold, for citizens living in countries with depreciating currencies and
dangerous political climates, and for everyone else who covet gold as a superior currency to fiat. Customers will
be able to seamlessly and effortlessly now house their monetary assets in a safer jurisdiction of their choice on a
platform host to 10 languages and 160 global currencies.
The forex market has daily trading volume of around $4 Trillion. BitGold is marketing on Facebook, Twitter,
and other social media sites. To date, they have nearly 30,000 customers on their waitlist to open accounts. We
assume an average initial deposit of $3,500 and 58,000 accounts by the end of 2015 with 1% velocity of funds.
We ignore the prospect of exceedingly large deposits skewing average deposit and much higher velocity of funds
than 1%. Both seem likely. Employing these metrics the company throws off monthly revenue of $475,000
exiting 2015. If the company exits 2016 with 600,000 users at prior metrics BitGold can generate monthly
revenue of $4.2M. We think worst case the company gets 50,000-100,000 accounts open and would be a nice
little business. However, we wouldnt be writing an article about the company if we thought we were describing
a nice little business we think there is a chance it joins the ranks of the companies on Figure 3, and the investor
certainly isnt paying for it today.
Co-founders Roy Sebag and Josh Crumb are young, yet experienced, and have attracted serious and sophisticated
funding to date. Pre-IPO, the company has $10M in financing - and post-IPO an additional $7M - the company
will have 37M shares out. CEO Roy Sebag is purchasing $1M of the IPO shares and the two co-founders own
53% of the outstanding shares. Neither pay themselves salaries. 60% of the payroll goes to the technical team.
Though prohibitively small initially for substantial institutional purchase, I would remind readers that our largest
position Amaya (AYA CN $30.25) floated 5M shares in 2010 at $1 a share, and it would not have required a
strong swing of the bat at the time for it to have moved ones portfolio needle today.
The investor in BitGold gets the benefits of a positive gold bias, a turbocharged internet model that is incredibly
scalable, while the customer gets a superb and innovative product on an elegant and simple to use platform.
Early 2004 was invited to a Society of CFA meeting hosting Marc Faber outside Portland somewhere at a little
country club and as you approached you saw him sitting on a bench alone with a glass of white wine in one hand
and a cigarette in the other you figured he preferred to be alone but approached him anyway telling him you
were a subscriber like he owed you attention now but it's all you had for conversational ammunition and you
asked him what he knew about uranium you were mildly obsessed at the time and he said I know nothing about
uranium what do you know about uranium and he finally got rid of you by telling you to write him something
about it and in his presentation he said capital flows where it's treated best and it goes back and forth around the
world from one place to another and he looked up at the ceiling and swung his hands over his head back and
forth and picture a cocktail party in a room like this its not the crowd at the middle it's in an empty corner to
focus and pick the right one the crowd will find it soon enough and there was uranium and now there is Amaya
and we don't know for sure yet but we're nearly alone and fascinated by digital currency and one backed with
gold on a scalable internet platform run by a bright young guy buying IPO shares and it feels not like finding
another 1909 VDB or Kathy Marshall but better, gold that grows.
We would welcome inquiries by email or phone.