Yeah - no fund can realistically sell/redeem actually AT NAV.  There's transaction costs and time involved plus also all new capital is by definition cash that isn't deployed and isn't earning.  Without some small markup on new sales, existing investors suffer a penalty whenever there's new investments due to the proportion of their own investment which is in play reducing.  The margin also needs to be sufficient to protect against active traders exploiting moves in underlying investments that take the NAV/U outside the range of the fund's own orders (as an example, DMS has some funds in Just-Dice.  If my spread on PURCHASE were too low then people could buy/sell it as appropriate when J-D's house profits moved a relatively small amount - taking money away from those actually using the security how it was intended.)

The million-dollar question is whether a fund is selling (and redeeming) at a level of premium to NAV/U which is commensurate to the costs/risks of sales/redemptions or at levels which are effectively a tax on sales/redemptions and/or a major source of profit.

Sale of new units is not, of itself, either an indicator of being a Ponzi or an indicator of NOT being a Ponzi - as both Ponzis and legitimate investments do it.

You're missing that Xbonds were originally .001 so offered a discount.

At current prices you aren't paying for a discount on .003, you're buying to be sure you get shares at all (or betting that the open IPO ones sell at a price at which paying whatever Xbonds now go for is actually a discount).

We need some way to set the address that's reported.  Very few of my withdrawals are to addresses I control (they're usually straight to my deposit address for other exchanges/services).  In fact NONE of the addresses to which my issuing accounts withdraw are an actual wallet controlled by me - so any address you report at present isn't going to help much.

Beyond that I have no issues with it - though I'd have to email all users anyway as can be certain some would have still given addresses they don't control.  If the reported address can be setup by users then they don't have to give away any useful information (I'd use a new one that had never been used before).

Lol.

I wonder who will be the first person to send eltopo PURCHASE or send me FUTURE.

WEEKLY REPORT (status as of 15th September 2013)




No real change since my update on Saturday - think we made a tiny bit more profit and the exchange-rate changed very lightly.  Final results were 2.0% profit of which only 0.48% was from trading with rest due to LTC's drop vs BTC.

Management fee of 58 unit will be transferred shortly.
Fund's own bid is at : .673

As there's nothing new to report I'd like to raise a suggestion I've been considering for a while - ever since LTC last bubbled in fact.  When LTC rises massively vs BTC and is likely to crash again it puts investors in a bit of a bad spot (those who don't like missing out on profits anyway).  IF they cash out of LTC-ATF they can make a decent profit (in LTC) by swapping to BTC then back to LTC after the bubble bursts.  But in return for taking that short-term profit they then have to try to get back into their LTC-ATF position.  This can be expensive and/or very hard in a relatively illiquid market - and it can also cause major price movements when nothing has changed in respect of the actual asset itself.

The same situation can arise for other reasons - ANY reason, in fact, where someone has a short-term profitable position but wants to maintain (or get back) their LTC-ATF position.

Now at present there's a couple of ways to do it:

1.  Sell into the market then buy back via the market.  This would likely be fine for small amounts (a few hundred shares or less) but would lead to massive losses if done with any holding in the thousands of shares.
2.  Take out a loan (and use the LTC-ATF shares as collateral).  Whilst you almost certainly won't get to borrow against full market value of the shares (it being a lot higher than NAV/U) I expect you'd get very near NAV/U.  Except that if LTC is in the middle of major price movement most lenders will be very wary of LTC-denominated collateral.

So in the most significant scenario (major upward movement of LTC that is likely to crash back down + significant holdings) neither of these options really works.  I'd like the fund to offer an alternative.  It's really simple.  Investors would be allowed to:

Sell their shares back directly to the fund.  They'd receive 95% of the NAV/U per share (lower than usual) but also an option to buy up to the same number of shares back at any time in the next month for whatever the current NAV/U was at the time of repurchase + 10%.

It should be pretty obvious how that helps the investor - it allows them to use the capital tied up in their shares whilst reserving their place in the fund - but how does it help the fund?

Well, obviously the fund makes a profit on the spread.  But to understand how it works very well for the fund you need to look at what happens to the fund's capital requirements with a moving LTC/BTC exchange-rate.

When LTC rises vs BTC our debt:equity ratio drops - as we owe same amount of BTC but our own LTC-denominated holdings are worth a lot more BTC.  That causes our effective BTC-denominated capital to rise (and that's what matters in trading terms as we don't do a lot of actual LTC-denominated trading) and we end up in a situation where we have more capital than we actually need, so at that stage buying back units is what we ideally want to do : so allowing people to cash out then is not just acceptable but positively good for everyone else (and doubly so if it's at a lower price than usual).

However if LTC then falls again vs BTC then suddenly we need (or want, or ata least don't mind having) that capital back again.  Now obviously in theory we'd prefer to sell into the market at 2-3 times NAV/U than by allowing execution of an option at 10% over NAV/U.  But fact is that without something like this we'd never have bought the units back in the first place (they'd have been sold into market orders or used as collateral - noone is going to sell back to the fund at NAV/U without the right to get back in).

And in LTC terms not only are we making the 15% spread but if the units were sold back when LTC was high then repurchased when LTC was low then the NAV/U at reinvestment will be higher (in LTC terms - lower in BTC terms of course) than when the units were bought.

The proposal essentially allows existing investors to divest then reinvest (to make profit during the divested period) with the cost to them being lower - but with the cost (to them) of doing it going to LTC-ATF rather than either to market traders or to those giving loans (or, most likely, them just missing out on other profit due to the difficulty of getting back in).  There'd be limits on it - so it would only be available if it didn't take the debt:equity ratio too high, it would be first-come-first-served, it would be manually managed and all such trades would be documented in our reports including who did them (it isn't impossible I'd do it - though that's a lot less likely now than it was in the past due to my LTC-ATF investment only being a fairly small part of my portfolio now).

Any thoughts, comments or suggestions?  This isn't urgent (right now debt:equity is too high to do it - am planning ahead to whenever LTC gets on Gox or bubbles for some other reason) and I don't intend on having a vote soon - but it's something to consider anyway.

If you don't understand how it works you're honestly probably better off NOT buying it.  And that holds true for most securities around.  The single piece of advice I'd give to anyone asking me what securities to buy is not to buy any - if you don't already know which to buy from your own research then asking on a forum isn't that likely to end up with you making a profit.

As far as DMS is concerned if you buy and hold PURCHASE then it's likely that in the long-term you'll make a tiny profit if you just hold it.  Too tiny a profit to justify it in my view.

If you buy MINING or SELLING then you MAY make either a profit or a loss.  You have to decide which (if either) is the correct one (it's entirely possible for neither to be worthwhile at any point in time but impossible for BOTH to be signficantly profitable).  The current prices represent (by definition) the point at which there is an equal amount of money betting on both sides - but some of that money may well be better informed than the other side.  Unless you believe your judgment is better than the money-weighted view of the market as a whole then an investment by you is just a gamble.

And remember that if you accept investing in this without being better informed than the market as a whole is a gamble, then investing in any other PMB-type investment at a higher price per hash is the same gamble but with worse odds.

I'd guess that he'll take a snapshot of each exchange's order book at the official launch time, calculate share distribution based on those snapshots then sell the indicated numbers into each in one order per exchange.  There's no real way to lock order books at an instant in time (even if you prevent placing new orders you can't stop old ones being cancelled - at least on BTC-TC where same BTC can back multiple orders).

Actual orders when the Asks are placed could vary from bids when the snapshot was taken due to late placement of orders/cancellations but there's not really anything he CAN do about that (unless exchange operators are willing - and able - to freeze order books until he places the sale order which only makes sense if ALL exchanges do it as it's contrary to the interests of an exchange and its customers for them to do it if other exchanges don't).

Best he can do is just try to make the delay between taking snapshots and placing the Ask as short as possible - but don't think it can be too near to immediate because of splitting based on value of orders rather than quantity (quantity is easy to get immediately, value means copy/pasting into a spreadsheet).

Is what working?

The transfer bot is working.
Dividends are being paid according to the defined plan.
People who get the price wrong will be losing money to people who get the price right (though we won't know for sure which are which for a while).

If you meant something else then please clarify.

I didn't notice before today's report but we had our first CIPHERMINE.B1 dividend today:

2013-09-16 07:35:33    38234    ฿ 0.00003850    ฿ 1.47181783

That would account for the fairly small drop in NAV/U today - I didn't notice as the drop was always going to be a bit lower than normal because of high (compared to other recent trade levels) PURCHASE sales.  I won't be reporting these generally - though if anyone ever wants I can paste a list of received dividends.

BTC-TC has already done this.  If a business has traded profitably for 6 months+ (note to all the vapourware companies - trading profitably isn't same thing as pumping your market price) then they can make additional listings for free.  As my fund has traded for a nearly year and paid back 300% of initial price in dividends (and has a NAV/U that's 600%+ of initial price) I no longer have to pay for new listings (if they're owned by the fund - for ones where I'm personally the issuer, such as DMS, full listing price has to be paid).

That solves my issue #1 going forward - the solution to my issue #2 (allowing rollovers without anyone stumping up cash temporarily) is solvable with the automated transfer bot I use and a little bit of planning (it could be done manually but that's a prohibitive amount of work).

On the listing without fees on BTC-TC the waiver of fee also applies to businesses that have traded profitably for 6 months without being listed anywhere - they just need to prove they've been making a profit (which is maybe not as easy as it sounds, in fairness).  What's not clear is whether a BTC-denominated business that made a profit in USD but not in BTC is considered profitable (which is where the better mining companies fall).  I (and I'd expect you) would say no - if it's listed as BTC-denominated then it has to make a BTC-denominated profit to be considered profitable.

They look similar because the first 12 characters ARE the same every time - they identify the key.  The remainder, which is the sequence number + OTP plus check-sum is different each time.  If you're seeing them in a small input box which only displays the start of the key then it'll always look the same.

I'm one of those offering something meeting your description - where there's no apparent intent or deadline for repayment.  I can't speak for others offering similar things but in my case the issue was more a practical thing than related to my intent.

I'd FAR prefer to have the bonds issued with fixed maturity dates - as that would allow me to reduce as well as increase debt (and, more usefully, reduce the rate paid).  But I ended up issuing perpetual paper because of a combination of the following:

1.  There was no way provided on the exchanges to do a partial buyback (rightly so) so to avoid having to buyback everything at once I'd need to issue a bunch of different bonds with different maturity dates.  The listing fee (5 BTC per listing) compared to the total amount of debt issued makes this unfeasible.
2.  There was no simple way for participants to rollover from one issue to another (assuming I was renewing a batch of debt) without either them having to temporarily tie up double the capital they intend to OR me having to refund all even when I know the new issue will be fully subscribed.

In fact, for future debt (if/when I look to take on more) I intend to move to a more traditional bond structure with fixed maturity dates as I believe those likely to deliver better value for me and more transparency/clearer valuations for investors.  But the solution I've arrived at wasn't available to me back when I initially issued bonds (or even when I more recently sold LTC-ATF.B2) but does solve the especially problematic point 2 above (avoiding either party having to needlessly make liquid and briefly tie up cash where both parties intend to renew the debt).

As an issuer I disliked 'perpetual' bonds - not because I don't have to buyback, but because I can't (at face value) when I want to.

Getting back to your report I'd like to comment on this:


I'm quoting it not because I disagree with it but because I believe it bears repeating.  A fund such as this (where there's no practical limit on units issued) should absolutely trade very close to NAV/U.  About the only practice worse than redemption at a lot below NAV/U (and selling at a lot above it) is the opposite which some funds have in the past indulged in - placing bids on their own units at ABOVE NAV/U to try to force the market up and/or selling below NAV/U to increase capital (some funds have managed to do both).

It's refreshing to see someone trying to grow NAV/U by trading/investment rather than by gouging new/departing investors.

Do you actually have specific percentages (relative to NAV/U) at which you intend to buy/sell (after publication of reports)?

Ah thanks - missed that.

One minor clarification you should probably make to it is that you'd only consider bids at/above the list price when evaluating total bids on each exchange.  i.e. I couldn't, for example, sling up a huge bid at below official price to ensure maximum allocation to the exchange of my choice (something which I'd quite happily do IF I was bidding and there was oversubscription to ensure my order got filled) - which could actually leave you with unsold shares on one exchange and unfilled orders on the others.

Something that may be worth clarifying now - to potentially avoid butt-hurt later - is what the procedure would be if there was oversubscription prior to release.  i.e. if total bids at/above list price on the three exchanges added up to more than available shares.  Would you:

a) Fill bids on all exchanges above list price then split rest in proportion to orders on each book.
b) Fill one (or more) exchange before others - specifically would you fill orders on the 'main' exchange before filling orders on the pass-throughs.

What the plan is has obvious implications for those with the ability to place orders on multiple exchanges (though only if it looks likely that bids will exceed supply of course).

I'd certainly agree that a large portion of market participants chase promiseware/vaporware taking on massive risk in return for speculative profits.  But don't assume everyone interested in redemption falls into that boat.  I'm very interested in redemption values but stay well clear of all the wannabe ASIC-manufacturers/massive mining companies (with no hardware yet).  That's because the yield on bonds such as Ukyo (or all the others - including my own) don't appeal to me as a long-term prospect, only as a short to medium-term resting place whilst waiting for much more profitable opportunities.  Those opportunities are rare - but not SO rare that I'm willing to take a large hit whenever one arises.  If the redemption was immediately available via the market then I may be more interested - but with Ukyo frequently not around for a few days the potential hit taken when wanting cash out fast becomes even more significant.  Were J-D (with near immediate cash-out and visible capital backing) not available then I'd also tend to value bonds such this higher.

I'm pretty confident a significant portion of holders of Ukyo.loan are relatively safety-minded AND have a strong interest in having access to redemption at near the price they paid.  Those two factors are actually complementary not opposed to one another - being able to get your cash back out quickly without major loss is a big factor when assessing safety in the BTC environment (though the promise of it doesn't, historically, mean the facility will actually exist if things go wrong).  And as such participants will always sell to the market when they want cash back (if market is above face value + site fees) and won't buy significantly above face value it acts to ensure the bid side won't accumulate significant volume much above face value.

Part of the problem is that the way these 'bonds' are structured (and I include my own in this, obviously) makes valuation much harder than with traditionally structured bonds (where there's an exact value for them defined at a predetermined date).  Variable dividends and a buyback price based on a low-liquidity market make this one even harder to value than others.

Will be withdrawing 60 BTC from J-D back to BTC-TC, to get us back just below 10% invested there.  Would have withdrawn already but the J-D server just died right as I was trying to do the withdrawal.  Will try again once it's back up.

EDIT: Withdrawal had actually gone through - server must have died right as it was sending me confirmation.

Sold   8849
Swapped   0
Total   8849
Price   0.009377
Total   82.977073
Less Fee   82.81111885
Man Fee   2.484333566

BTC Balance (BTC-TC)   994.6788181
9071 LTC-ATF.B1    90.71000000
CIPHERMINE Bonds    382.34000000
Coinlenders CD 27/9   202.3603714
Coinlenders Cash   0
Just-Dice Balance    247.55800000
TOTAL ASSETS    1,917.64718947
   
Outstanding MINING   204057
Outstanding SELLING   204057
Outstanding PURCHASE   10413
Effective Units   214470
   
Block reward   25
Difficulty   112,628,549
Hashes per MINING   5000000
   
Daily Dividend    0.00002233
50 days (Min Liquid)    0.00111629
100 days (Forced Close)    0.00223259
365 days (Buyback)    0.00814895
405 days (IPO)    0.00904199
400 days (Post SELLING div)    0.00893036
410 days (Pre SELLING div)    0.00915361
   
NAV Post MINING Div    1,912.85895585
NAV/U Post MINING Div    0.00891900
Days Dividend Post Div   399.49
SELLING Dividend    -         
NAV Post SELLING Div    1,912.85895585
NAV/U Post Selling Div    0.00891900
PURCHASE selling price    0.009365
PURCHASE buy-back price    0.008741
   
J-D House profit at report   6329

Seems to be some misunderstanding here.

You said :


My point was simply that all other things are NOT equal - i.e. there's a big difference between it trading at double face value with .01% daily yields and it trading at face value with .05% yields (the most obvious such difference being the price at which guaranteed liquidity is provided relative to the market price).

I was not trying to argue that the bonds are currently overvalued (I don't believe they are) nor was I disputing that the difference in buyback terms makes them better value than alternative bonds (it definitely adds value).

I was pointing out that any analysis/comment based on "all other things being equal" where, rather obviously, all other things are NOT equal is a waste of virtual ink.  Further, it could be read as an attempt to persuade others to drive the price up given that you didn't then go on to explain how the logic doesn't actually apply in practice.

Saying "If X is true then Y" isn't a lot of use unless you also comment on whether X is true.  In the absence of any such comments the obvious conclusion is that you believe (or want readers to believe) X to be true.

Have to say I disagree with this part of your analysis, largely because all other things are NOT equal.

The first point to consider is that, if the price were to rise to somewhere near .02, then it's highly unlikely Ukyo has liquid assets to perform a buy-back based on that price.  If he HAD liquid assets able to pay out over twice the face value of the loans then it's unlikely he'd have needed the loan in the first place.

The second point to consider is that if he needs to do a buy-back then the first stage before that would be the shrinking of dividends to their guaranteed minimum which would, in any event, cause the price to fall back to current levels anyway.  It's not hard for an asset issuer to cause a price drop by releasing bad news.

The third point is that he is entirely capable of flooding the market in new bonds which, especially if couple with news that the dividend would likely only be the minimum going forward could guarantee the price collapsing back to near IPO.

The fourth point is that if the price inflates then you immediately lose guaranteed liquidity at or near that price.

And the fifth point (and the kicker) is the consideration of why would you pay .02 for something with liquidity only guaranteed (with a delay) at .01 when you could obtain higher expected returns (albeit with much higher variance) investing in J-D where the capital backing is obvious and liquidity at full price 'paid' is guaranteed.

At .01 or slightly over Ukyo.loan is a good investment so long as you believe Ukyo has sufficient assets/is trustworthy (and most of us already use bitfunder so are fine with that).  At .02 it would be absolutely horrible in both return and (especially) liquidity compared to alternatives.

It's not June prices - MINING was trading at .024 then (different number of 0s after decimal place).