Yes, issuers should disclose all risks that aren't self-evident from the nature of the investment and which apply to all investors (issuer can't predict all the ways in which people will use investments as hedges etc so can't possibly identify every risk that will apply to every investor).

What I talked about in the quoted post wasn't, however, a risk - it was a discussion in general terms of how investors should value investments and I wanted to make clear that future dividends isn't the same thing as value.  It also doesn't apply to everyone - as some may be using investments to hedge against other exposure.

CP risk is an interesting one - and so's the disclosure of it.

I'd argue that CP risk is a self-evident risk and so doesn't need to be explicitly disclosed in terms of it applying to the issuer and the exchange on which funds are held (though I've disclosed it anyway).

There's also the interesting question of whether I should disclose a risk of me running with the funds if I KNOW there's not actually any risk of it.  I tend towards avoiding that sort of discussion - same as I don't bother claiming I'm honest.  Reason why is simple - if I'm honest I'll say I'm honest and if I'm a thief I'll say I'm honest.  So me saying I'm honest doesn't actually provide any extra information on which investors can make a judgement (even if a few idiots get a warm fuzzy feeling when an issuer claims to be honest).  Same if I were to claim there's no risk of me stealing the funds - it's meaningless as there's no way I can prove it (best I can do is argue that with the profit I make from the investments I run it would be irrational for me to steal as I'd miss out on making a lot more legitimately : but even that argument fails if money now is worth a lot more to me than money later).

Dooglus divesting is far more rational than other investors divesting.  If the whale loses big he does well anyway without the same risk.  If the whale wins big he loses on commission (or increased time to commission) as well as on his investment.  So staying invested with a whale around has a LOT more variance for him than for everyone else.

And that's after all why he has investors anyway - to take the risk of big down-swings caused by whales.  By avoiding that action himself his down-side in the event of heavy losses is just the operating costs whilst he still keeps a nice upside if the whale loses big.

It's nothing to do with being a pussy - just avoiding double exposure to the same risk factor.

EDIT:  To be clear I'm agreeing with eltopo and expanding on what he said - not disagreeing with him at all.

Downside for that is that it allows investors to accept low-action whilst at the same time dodging high-action.  You'd likely end up with a lower max-bet but more money invested.  That's bad on a few scores:

1.  It increases CP risk for everyone without any increase in total profit to investors.
2.  It allows people to accept only low-variance action without penalty.  The price of getting the low-variance action IS accepting the high-variance action.  
3.  Dooglus' expected profit is based on turnover - actively making it easy for investors to reduce that isn't good for him.  A large portion of expected profits comes from Whales.
4.  Dooglus doesn't need backing to cover low bets anyway.  If he went this route and a large number of people only invested in the low-risk then he'd be best off scrapping the invetsment totally, getting a few private investors and running with a lower max-bet.

The root of the problem is the same as ever.  You seem to believe you have some entitlement to only accept low-risk bets which dooglus doesn't even need your (or anyone's) cash to cover anyway.  Covering the big bets is why investment is allowed in the first place.  Allowing investors to dodge that removes the whole incentive for him taking investments in the first place.  Cutting his own throat just so you can sleep more comfortably makes no sense whatsoever.

I think dooglus played it all wrong with the commission structure.

You should always start off charging too much then reduce your cut when you're sure you can afford to.  You end up in the same place but with much happier investors.

If he tried raising to 10% now there'd be significant whining.  If he'd started off at 20% and offered to reduce to 10% now he'd get heaped in praise.  Even though both scenarios end in the same place.  

That's not a proposal to raise to 10% BTW - I'm not arguing (here) over whether he's taking too much or too little (if you look way back in the thread you'll find I was one of the keenest advocates of a raise in his commission).  Just that it would have been better to start with a higher commission and then lower it than start with a low one and have to raise it.  A lot of (irrational) people here worry more about whether something's an improvement or not rather than whether the end result makes sense and is sustainable (which is what REALLY matters).

3. is the main issue.  And it's not black and white.

A.  Some whales WILL still play, some WON'T.  It's the ratio of those two that matter - not trying to determine some universal truth that applies to all of them.
B.  The change also impacts people who aren't whales (to what extent depend where the bar is set).  It impacts people running martingales where their top bet runs over the limit (even if, in practice, some of them bottle out before it gets there).  It also impacts small bets made to win large sums at high odds.

And beyond that it's a mistake to assume current competition is all that will ever exist.  Raising the cut opens the door for other sites to increase their max-bet whilst maintaining 1% edge and opens a door for new competition where J-D then gives them a great marketting opportunity to claim they're fair to those risking larger sums.

I also dislike in principle trying to charge your best customers more than the rest - real casinos work the other way round giving an effective discount to those wagering large sums.

It all just seems like trying to solve a non-existent problem (there's no shortage of investment/backing) at the risk of adding in real problems.

I should correct this as potentially it could mislead some investors.

If you assume zero growth from investment then if you work out the lifetime expected earnings from MINING you can subtract that from (PURCHASE - fees) to get the expected earnings from SELLING.  An easy simplification is to ignore the fees and assume they'll be made back from investment/expansion (already the case for earlier sales despite J-D losses - nearly half of which losses were donated back by the whale after today's report anyway).

That does NOT give the value of MINING or SELLING - as if you assume zero growth that gives the money you'd expect to get back.  And obviously you shouldn't be buying EITHER MINING or SELLING unless you get back more than you paid.  How much more depends on what ROI you personally want/need and what growth you project from expansion/investment.

Buying ANY investment that will only ever return what you pay in is NOT smart.  Though such an investment WOULD still outperform the majority of securities here - there's very few few BTC investments that actually end up making a profit for anyone who invested at the start and held until the end (the profit is made by traders, smart speculators and issuers who sell crap pretending it's an investment when it's just a way to syphon off some of the investors' capital to themself).

Mining can also have value even if unprofitable to those unable/unwilling/too lazy to calculate proper valuations but who (for whatever deluded reason) have a fixation on investing in PMBs without determining their likely performance.  The value it has there is that they can still maintain the PMB exposure they irrationally believe is good (any investment without a valuation is irrational) with near guaranteed better performance than alternatives.  That in no way guarantees a profit - but if there IS one it'll be bigger and if there's a loss it'll be lower (assuming price per MH/s is significantly lower of course).

Short version: What eltopo describes only allows valuation of likely future dividends from SELLING - any meaningful value (which would vary from investor to investor) is below that due to CP-risk, opportunity cost etc.

Agreed.

If raising the edge on higher bets would increase EV then I'm all for it.  Question is whether it would.  If EV remains the same but variance reduces that's also good.

An approximation to the math is pretty simple.

If at 1% edge X BTC are wagered/week in the higher bracket then an increase of edge to (for example) 1.5% only makes sense if the BTC wagered in the higher bracket would drop to no lower that .667X (giving the same EV with lower variance). It's not QUITE that simple as there's other factors but as an approximation it isn't bad.  Here's some of the factors against it:

1.  It makes it more complicated for bettors - and potentially puts off some using betting strategies which start low but have the potential to end up in the higher band (people running martingles aren't goign to like the idea that if they lose a lot then sudenly the house makes the edge worse whilst they're trying to get back what they just lost).
2.  Whales draw attention which leads to other trade.  ANY reduction in whale action is likley to be accompanied by a drop (or reduction in growth) of smaller bets.
3.  Raising the edge makes life easier for existing and new competitors - which is an unnecessary risk when there's no problem raising the capital necessary at current edge.

But make a convincing case why with a 1.5% edge we'd still get at least 2/3 the volume of large bets (or whatever ratio applies for whichever edge you propose) and it's worth considering.  Personally I think even then the other factors make it unattractive - and the moment some other site offered 1% edge with a max bet above the higher-rate limit the change would likely have to be reversed anyway.

Whilst changes shouldn't be ruled out just because they're changes (or because the current system is assumed to be perfect) it remains the case that changes that are obviously detrimental to bettors are NOT going to attract more bettors.  And there's no need to worry about chnages being beneficial to investors - as, unlike bettors, there's no massive incentive to attract more investors.  Unless, that is, you believe max bet should be a lot higher and the way to raise it is to heavily increase investment - which I disagree with (not because I'm against a higher max-bet but because the price of it is diluted EV and higher variance for existing investors).

In short, changes shouldn't be rejected out of hand - but it's the responsibility of whoever suggests them to demonstrate the change is likely to result in increased EV.   That's because any change which is negative to bettors is almost certain to reduce betting volume (unless very cunningly disguised).

If you make a profit it works out roughly the same as a monthly fee on profits, yes.  But difference is if investors make a loss you still take 5% of all received dividends - hence why I don't like it as a system for funds (where investors rely on the management's decisons - so management fee should be based on how well management deliver profit for investors).

Sold   175
Swapped   0
Total   175
Price   0.039505
Total   6.913375
Less Fee   6.89954825
Man Fee   0.206986448

BTC Balance (BTC-TC)    1,346.51207158
11417 LTC-ATF.B1    114.17000000
Coinlenders CD 29/7    202.68310874
Coinlenders CD 13/8    100.35464266
Just-Dice Balance    146.70748229
TOTAL ASSETS    1,910.42730527
   
Outstanding MINING   49022
Outstanding SELLING   49022
Outstanding PURCHASE   1740
Effective Units   50762
   
Block reward   25
Difficulty   26,162,876
Hashes per MINING   5000000
   
Daily Dividend    0.00009611
50 days (Min Liquid)    0.00480554
100 days (Forced Close)    0.00961107
365 days (Buyback)    0.03508041
405 days (IPO)    0.03892484
400 days (Post SELLING div)    0.03844428
410 days (Pre SELLING div)    0.03940539
   
NAV Post MINING Div    1,905.54853342
NAV/U Post MINING Div    0.03753888
Days Dividend Post Div   390.58
SELLING Dividend    -         
NAV Post SELLING Div    1,905.54853342
NAV/U Post Selling Div    0.03753888
PURCHASE selling price    0.03941582
PURCHASE buy-back price    0.03678810

That's not a policy I recommend for a few reasons:

1.  It encourages the issuer to invest in assets which pay high dividends but lose share price fast.  So if you invest in a PMB that only veer pays back half what you paid for it you still get a management fee for a horribly bad investment.
2.  It discourages investments which would be profitable but not pay dividends (or where only a small part of profit is returned in dividends) - as you don't get fees on them.

Basically it puts the managers interests out of alignment with those of investors.  Investors want profit, manager makes most by going for dividend churn-rate.

You're by no means alone in this misguided viewpoint - somewhere along the line a large chunk of the "investment" scene here have totally confused dividends with profits.  It may be a natural extension of the abusive mining securities that take a management fee as percent of turnover (coins mined) regardless of how much profit (or, more usually, loss) investors are making.

EDIT: I should add that I like your spreadsheet - clear and easy to understand.

Wow - some pretty amazing blunders here.


First time I've ever seen a fee DEDUCTED from the price charged for shares.  It's more normal to add it on - existing investors don't generally like new ones buying in for LESS than the value of units.

Zero mention about diversification/spreading risk other than a claim that it's low risk.  The previous incarnation had 2/3 of all assets in one single security (ASICMINER) which is hardly a low-risk strategy - plus there's already loads of ASICMINER pass-throughs anyway.

Monthly fee is taken on profits - but with zero mention of whether or how losses are carried over to offset future profits.  This coupled with no defined method for valuing shares is horribly open to abuse.

etc

EDIT:  Checked spreadsheet and looks like a bit under 200 BTC of assets there, so removed my comments asking about starting assets.

That's correct.  Assuming SELLING receives dividend at next difficulty change (looks likely but can't be certain obviously) and assuming J-D doesn't change in either direction then the dividend would be somewhere around .0004 per share less than it would have been had the J-D investment remained unchanged since the time last dividend was paid.  Exact amount obviously also depends on precisely how many more Purchase are sold by then.

On a more general note I'd recommend against trying too hard to make sense of how markets here price things.  We routinely see stupidity such as shares trebling or more when a company's ASIC arrives - which could only make sense if prior to arrival consensus was there was less than a 50% chance of the ASICs arriving within the next 6 months.  And people happily throw away money on mining investments that can never make a profit even with a fantasy scenario for difficulty.

Most 'investors' just buy and sell at whatever the price on market is - and, perversely, prefer to buy something that just rose in price than something that just fell even when there's no rational reason for the price change.  Which is why pump and dumps are so common - and work so well on anything with limited supply and an unclear value: the manipulator just has to start the pump and the sheep keep it going.

Total deposited into Just-Dice was 160.   We're down 15 and a bit on it - but some of that was made back by selling some LTC-ATF.B1 at 15-20% over face value.

Even without what was made back it would only be a a loss of under 1% of capital.  We've made more than that just on markup on new sales of Purchase since last dividend (approx 200 in sales at 2% markup is 40 BTC gain for those already invested), so I can't see it being a rational reason for any loss in SELLING value.  Though all investment losses SHOULD apply to SELLING - but, as already noted, SELLING by default  should rise slowly anyway due to sales of new PURCHASE (if we assume difficulty isn't about to go flat before next difficulty change).

There IS one obvious reason why prices would drop - that's if the market agreed in general that prices were actually correct and represented a fair split between Mining/Selling.  In that situation everyone would be thinking prices were about fair - meaning they'd actually like to sell (as no real gain holding when prices are fair - as you just take on CP risk for small profit).  I find it hard to believe that's the case - given PMBs are selling at far more per MH/s - but it's definitely one possibility.

I'll train to explain it with an example with imaginary numbers.

Say PURCHASE sold at 105 (100 + management fee and markup)
Then ignoring profits there's be 100 that would be split between Mining and Selling eventually.
If everyone agreed Mining was worth 60 and Selling was worth 40 then noone would want to pay more than 60 for mining or more than 40 for selling.  And most people would rather sell what they had at 60 or 40 than just hold it to get back not a lot more over a longer period of time.

If you THEN add in J-D making a loss and people decide that in fact they won't make much profit if any, then you end up with the prices falling so that they end up BELOW the cost of a Purchase less fees.

But for that to happen needs everyone to agree on what a fair price is for Mining -  and I really don't think we've got to that point as there's other PMBs selling for significantly more.  Now that difference COULD be that all the buyers just don't shop around, or that they don't trust me or that they believe difficulty is about to go flat making Mining no longer pay out like a PMB.  But I think the difference is too large for that to be the case - which suggests to me there's still no commonly accepted value for the future output of PMBs and hence no consensus on value for Mining (and thus for Selling as well).

Difference is with ASICMINER you owned shares - and were entitled to growth in hardware.

Here it's neither a bond nor a share - and the contract gives you no rights to anything other than the 100 MH/s.  If he wanted to take a defined percentage of profit then he could have written the contract to do that.  He didn't - so obviously he doesn't want a fixed percentage of profit.  Relying on anything the contract doesn't grant you is just terrible practice.  When someone writes a contract giving very little assume that's all you get.  If you wanted to rely on charity then we could skip the whole securities thing, just send him BTC direct and get back whatever he felt like giving.

Likely someone who wanted BTC in a rush for something and didn't have time to wait for an Ask to fill - it happens sometimes.

Report late - as I was out again today (dividends went through on time as I'd scheduled them).  There was 1 transfer not done at time of dividend payment - have manually sent that person their missed dividend.  I should be back to usual schedule tomorrow.

Sold   487
Swapped   0
Total   487
Price   0.039759
Total   19.362633
Less Fee   19.32390773
Man Fee   0.579717232

BTC Balance (BTC-TC)    1,344.67837872
11417 LTC-ATF.B1    114.17000000
Coinlenders CD 29/7    202.55914917
Coinlenders CD 13/8    100.29349900
Just-Dice Balance    146.43392686
TOTAL ASSETS    1,908.13495375
   
Outstanding MINING   48950
Outstanding SELLING   48950
Outstanding PURCHASE   1637
Effective Units   50587
   
Block reward   25
Difficulty   26,162,876
Hashes per MINING   5000000
   
Daily Dividend    0.00009611
50 days (Min Liquid)    0.00480554
100 days (Forced Close)    0.00961107
365 days (Buyback)    0.03508041
405 days (IPO)    0.03892484
400 days (Post SELLING div)    0.03844428
410 days (Pre SELLING div)    0.03940539
   
NAV Post MINING Div    1,903.27300127
NAV/U Post MINING Div    0.03762376
Days Dividend Post Div   391.46
SELLING Dividend    -         
NAV Post SELLING Div    1,903.27300127
NAV/U Post Selling Div    0.03762376
PURCHASE selling price    0.03950494
PURCHASE buy-back price    0.03687128

The one I run on LTC-Global will be converting the entire final payment into LTC and paying it out in full.

Assuming you mean S.DICE it's being sold to new management.

Some saying that may not understand it.  But some saying it (such as myself) DO understand variance.

You counter variance with volume.  One way is to have lots of whales.  Another is to have lots of different investments.  If someone has a bunch of different investments all with similar risk profiles to J-D then they don't need any individual investment to have low variance itself.  Similarly if someone manages risk across their portfolio so that J-D is part of their high-variance portion then they also aren't too concerned.

The high variance of J-D only really matters to investors who are trying to use it as something it isn't - or who have too large a portion of their investment capital in it.  For the rest of us the main concern is maximising EV - then we can manage our investments ourself to deal with variance.

There's only two scenarios in which it makes sense to reduce the max bet % of J-D :

1.  If dooglus believes that doing so would attract so much more investment that the actual max bet would increase, allowing even bigger whales and so more total expected house profit (and thus more expected commission).
2.  If dooglus needs J-D to be profitable for himself in the short-term - in which case he should probably drop max bet to 5 BTC, remove the investment option (as he could bank-roll that himself) and settle for being just another small-stakes dice site.

For investors who are interested in maximising EV any reduction of max bet % is bad news.  Not only is it sub-optimal from a kelly perspective (and so even more inefficient use of capital than the current inefficient system - which is a seperate topic) but reducing max bet has a double whammy impact on likely  bet volume:

1.  Reducing the attraction of the site to whales.
2.  Reducing the attraction of the site to smaller bettors who only come because they can watch the whales play - and because in theory they can keep doubling up to a large win.

It also has a double-whammy impact on EV for investors:

1.  Loss of volume,
2.  Likely increase in investment diluting the already reduced volume.

Anything which reduces EV is bad for all sensible investors.  Variance is something you manage across your investment portfolio - not something every investment needs to handle itself.  Precisely how you do that depends on what invesments are available to you and what profile you want your investments as a whole to match.  Now I appreciate that can be hard to do - as there's a lack of investments available for the low'risk of your portfolio.  But asking for high returns AND low variance is just unrealistic.

Anyone not invested who wants max bet reduced so they can feel safe investing is totally missing the point.  Your investment is NOT needed if the condition for it is that the site makes itself less attractive to players than it already is.  What is so important about YOU wanting to invest that players should get reduced options and existing investors have their EV destroyed just to make YOU feel happy?

If dooglus wanted to run a low max-bet site than he has the funds to back it himself without investors at all : be careful what you ask for in case you actually get it.  It's debatable whether the current investment model is sensible at all - for any significantly lower max bet it almost certainly isn't.