announcement

[Puppet]

As usagi damn well knows, I used the latest numbers available on his site when I posted that, I made a screenshot if anyone doubts that.
He has been doing some trading, here is an updated spreadsheet.



Not much difference, if anything it looks a bit worse.

Meanwhile usagi has been doctoring his shareprices so much it becomes a bit of a joke really. My numbers come straight from glbse API, anyone can verify them, how usagi now gets 60% higher NAV with the same shares and sharecount is... interesting.
He is just putting numbers what he thinks it ought to be worth? Or putting random prices until the NAV gets close enough to the 0.5 he thinks BMF is worth?

[Puppet]

BTW, not to sure what to make of DMC. He claimed he sold them for 0.1, but he still lists them. Diablo himself calculated his NAV to be 0.065 (he owns just 3 or 4 different shares, thats it, so not much confusion there). If you want to pretend its worth twice that, and put that in your books, be my guest, but unless he actually sold them for 0.1,  fair valuation for DMC would be 0.065 tops, and api is what it is.

edit: its now trading for 0.55.. someone is having fun pushing it up and down. Dont be fooled, 0.065 is what its worth tops.

[Puppet]

Nice try. For a 6 year old. Perhaps you can put up a single BMF share for sale on bitmit for 50BTC and claim that is the market price?
Thats not market price, thats ask price and its for a single which is readily available, unlike yours.

Edit your link actually also shows singles for sale 30BTC. Did you notice?

[Puppet]

Edit my link actually also shows singles for sale 145BTC. Did you notice?

Yes, and if you really think that means anything you are even dumber than I thought. Also, if you think this kind of juvenile arguing convinces anyone reading this that you are competent and sincere  and that it is reasonable to value your recently ordered hardware 28% above list price and shares at 2x GLBSE 3 month high, you are insulting their intelligence.

IOW, stop wasting my, your and their time, you are as transparent as a quartz glass.

[Factory]

Dear mods, all of Factory's posts in this thread are off-topic. Please move them and all responses to them to the Scam Accusations thread. I actively encourage people to speak their minds -- in the right place. And this ain't it. Thank you moderators.

I am not accusing you of being a scammer. I am using basic math to illustrate a grave inaccuracy made by you.

All of my posts relate directly to the topics at hand and are completely founded on information provided by you (Usagi.)

[Deprived]

No. It is YOU who are misinformed. In fact this is so simple I seriously suspect you are trying to mislead people. Go back say 4 months, or whatever, when BTC was $5. At this point you have a CHOICE. You can CHOOSE to buy and hold a BTC, or you can CHOOSE to buy and hold a share of BMF. Your COST is precisely $5. There are no iffs, ands, or buts. You spend $5 and your choice is: BTC or BMF.

Fast forward to today. If you sell out your BTC for $, you now have $12 USD, a gain of 140%. Stupendous! Multiply by 3 (4 months x 3 = 1 year) and you see an approximate annual ROI of 420% NICE!

Now, what about the investor in BMF? He sells out his 1 share of BMF for .50, and his .10 in dividends. That .6 BTC is worth $7.2 USD. For a gain of 44%. (it's a little more now since BMF has paid out more in divs).

There is no escaping this fact: The BMF holder made 44%.

The fact that other investments did better means nothing.

Which would all be well and good IF your investors bought their shares with USD.

They didn't - so mostl of your post is totally irrelevant.  What about non-US investors?  Did they make a different profit/loss due to their currency not being pegged to the USD?

The profit/loss on a security is measured in the currency it's denominated in.  BTC in your case.  Not in whatever other currency you can find (after the fact) that happens to be able to make it look profitable.

[Factory]

The fact that other investments did better means nothing.

Except that the other 'investment' in my example is one both Investor A and investor B made.If BMF had a positive ROI, Investor B in my example would have a higher return than investor A.

ROI = return for a specific investment, based on the currency the investment is denominated in. What was invested? Bitcoin ws invested. Therefor, ROI is based off of return in bitcoin (not fiat.)

The 41% you are talking about is total Return on Investment if someone had done usd to btc and bought BMF; not Return on Investment from strictly BMF.

In this case, total ROI ≠ ROI.

Let me create another example to illustrate this:

Original cost of 1 share of BMF = 1 bitcoin.
1 bitcoin on June 1st was worth 5.16z (z, for this example, is a fiat currency that has strengthened vs btc over the time period covered)
1 bitcoin on Sept 19 was worth ~2.16z

Investor C has 5.16z on June 1st, buys a bitcoin, and decides to hold it. Today, he has ~2.16z worth of bitcoin.

Investor D has 5.16z on June 1st, buys a bitcoin, and buys 1 share of BMF. Today, that 1 share (assuming a NAV of .50 btc) and total dividends (~.10 btc) would be worth ~1.296z of bitcoin.

In this example, investor C had a total Return on Investment of -58.2%. Investor D had an even worse total Return on Investment; -74.9%. Investor D's return was worse strictly because of BMF.

Now lets look at the initial example and the new example together:
Investor A had a total ROI of approximately 132.5%. 132% ROI from capital appreciation vs USD.
Investor B had a total ROI of approximately  39.5%. 132% ROI from capital appreciation vs USD compounded onto a -40% ROI from BMF.
Investor C had a total ROI of approximately  -58.2%. -58.2% ROI from capital depreciation vs fiat z.
Investor D had a total ROI of approximately -74.9%. -58.2% ROI from capital depreciation vs fiat z compounded onto a -40% ROI from BMF.

Now we have 4 different total ROIs, two of which involve investing in BMF. Investor B is the scenario you are using to state "BMF has a ROI of 41-44%." This is false. A correct statement is "For an individual who bought btc with usd and then bought BMF at IPO price and sold today, their total ROI for BMF would be  39.5%."

How did I come up with the figure -40% ROI in the example? All that matters for calculating Return on investment is this:

ROI(r) = Price sold at(c) + earnings received, in this case dividends(d) - initial purchase price(i)]. All of the values must be denominated in the currency the investment is denominated in.

r= (c + d - i)

Usagi argues a nav of .50 btc, lets say we can sell a share for that (our c value.) Lets say BMF has paid .10 btc in dividends (our d value.) The IPO price was 1.0 btc (our i value.)

Time to do some grade school math to find our Return on Investment (our r value.)

r= (.5 + .1 - 1)

r= -.4

ROI = -40%

The BMF holder made 44%. It seems to me, that this has nothing to do with the guy who held BTC.

I will say it again: ROI performance is measured in the currency the investment is denominated in. Including a specific exchange rate does not give ROI on the security, but a total ROI for that entire specific scenario (In your case, the "The BMF Holder made 44%" is the specific scenario. The example of other people who just bought BTC with fiat and held is meant to help clearly illustrate this concept:

Two people bought btc for usd. btc increased in value vs usd. One of the individuals used their btc to buy BMF and ended up having a lower return that the person who just held btc. Therefor, the cause of the lower return was from the only variable between the two investors: the purchase of BMF. Since the return of the holder of BMF was lower, that variable had to be a negative value. That is 100% pure logic.

[matauc12]

Almost anything you invested in dropped by half. Stop being such a retard. The plain and simple truth is that BMF has an annual return of 41%. You hate hearing that, but that's the truth. I did a good job. And nothing you say can change that.

You are completely incorrect.

No, I'm not. The value of most mining securities, the intrinsic value, is the value of their hardware. It is impossible to deny that a $599 single which cost 120 bitcoins + shipping a few months ago has "dropped in value" to less than 50 bitcoins today. It is patently absurd to assume that BMF dropping from 1 bitcoin to 0.50 or even 0.42 was bad management. In fact a drop to 0.41 would be explained completely by a rise in BTC from $5 to $12.

Now, let's see what else you're on about...

This post [the 41% roi post -usagi] shows how misinformed Usagi is. Let me lay this out for everyone.

Snip from above quote:

"On another note, I was just examining the historical prices of BMF. On June 1st, 2012, Mt. Gox USD was $5.16 per bitcoin. We had 1035 shares outstanding at the time. From these humble beginnings we now have over 5,000 outstanding shares, and at current prices BMF is now worth $5.73 per share!"

Original cost of 1 share of BMF = 1 bitcoin.
1 bitcoin on June 1stwas worth ~$5.16
1 bitcoin on Sept 19 was worth~$12

Investor A has $5.16 on June 1st, buys a bitcoin, and decides to hold it. Today, he has ~$12 worth of bitcoin.

Investor B has $5.16 on June 1st, buys a bitcoin, and buys 1 share of BMF. Today, that 1 share (assuming a NAV of .50 btc) and total dividends (~.10 btc) would be worth ~$7.2.

This is how you claim that BMF has delivered 41%. Now here is where I explain why that claim is not true:

Investor B's gain had absolutely nothing to do with their investment in BMF, and everything to do with their investment in bitcoin. If Investor B would have bought bitcoin and not invested in BMF, they would have experienced nearly an additional 100% gain. Since Investor B's purchase of BMF is the only difference between them and Investor A, we can conclude that BMF was the cause of the lesser return. IF BMF had a positive ROI, then Investor B's return would have been higher than Investor A's.

ROI for a security is measured in the currency it is based in, so all of the blabber about USD in your post is completely irrelevant.

It goes something like this:
1 share of BMF @ IPO cost 1 bitcoin. It can now be sold for ~.50 btc and has paid ~.10 btc in dividends. That would be a ROI of -40%.

You either have nearly 0 understanding of finance or you are trying to deceive investors and the community; or both. This is not me looking to insult you; this is me stating the truth.

No. It is YOU who are misinformed. In fact this is so simple I seriously suspect you are trying to mislead people. Go back say 4 months, or whatever, when BTC was $5. At this point you have a CHOICE. You can CHOOSE to buy and hold a BTC, or you can CHOOSE to buy and hold a share of BMF. Your COST is precisely $5. There are no iffs, ands, or buts. You spend $5 and your choice is: BTC or BMF.

Fast forward to today. If you sell out your BTC for $, you now have $12 USD, a gain of 140%. Stupendous! Multiply by 3 (4 months x 3 = 1 year) and you see an approximate annual ROI of 420% NICE!

Now, what about the investor in BMF? He sells out his 1 share of BMF for .50, and his .10 in dividends. That .6 BTC is worth $7.2 USD. For a gain of 44%. (it's a little more now since BMF has paid out more in divs).

The BMF holder made 44%. It seems to me, that this has nothing to do with the guy who held BTC.

Now let's take it a step further... here we are today.

Whether you have $7.2 or $12 you have to make a choice. You can keep it in fiat, you can keep it in BTC, or you can buy BMF.

Do you really think BTC will appreciate another 400% from here? I don't. I think is is far more likely that BMF will continue to outperform the USD/BTC exchange rate. We didn't just invest in hardware and return your money. We traded like mad, we paid dividends, and we returned 44% to shareholders in outright capital appreciation and dividends.

So let's see. Choice A: Bank on bitcoins going up 4x from today's value in 3 months or bank on BMF to keep doing what it's doing, trading, and doing it's best for shareholders?

I own 550 shares of BMF personally, in my personal account, plus 250 I get to hold on to (and not sell) for management fee accounting. I know where my money is, it's safe, and in the right place. I feel sorry for someone who is still holding BTC expecting it to double twice in the next 3 months.

wow.... so basically... what you are saying is your ROI varies depending on the currency? Lol. Your shares were sold for 1 BTC (btc) B-T-C. It lost over 40% of its value. Your ROI has NOTHING to do with other currencies. Even if you wanna say it was profitable because of the btc/USD deflation, it was still one of the LEAST profitable.

[Maged]

All I can say is: it will be interesting to see how this performs as the BTC price decreases. usagi, you should be proud of how well you did despite the increase in the price of BTC.

[Factory]

All I can say is: it will be interesting to see how this performs as the BTC price decreases. usagi, you should be proud of how well you did despite the increase in the price of BTC.

I am not sure if you understand what has happened. I encourage you to read the entire thread. A purchase of BMF @ IPO and sale today would net a ROI of around -40%.

[matauc12]

All I can say is: it will be interesting to see how this performs as the BTC price decreases. usagi, you should be proud of how well you did despite the increase in the price of BTC.

I am not sure if you understand what has happened. I encourage you to read the entire thread. A purchase of BMF @ IPO and sale today would net a ROI of around -40%.

I am pretty sure that was 110% sarcasm

[Factory]

I am pretty sure that was 110% sarcasm

Probably. Though without any way to definitively detect that by reading plain text, I just took the post to be serious.

[Deprived]

All I can say is: it will be interesting to see how this performs as the BTC price decreases. usagi, you should be proud of how well you did despite the increase in the price of BTC.

I am not sure if you understand what has happened. I encourage you to read the entire thread. A purchase of BMF @ IPO and sale today would net a ROI of around -40%.

Where is the majority of that loss realized? On the securities BMF holds, or the hardware?

On securities - BMF didn't start buying hardware until after the losses had occurred (well, no doubt there's still more losses happening - but the first big batch were before the change in plan to being a miner).

[btharper]

Ok, just asking because some initial loss is understandable (or so I hope, it happened to me) on hardware.
Fees from converting btc-> usd + shipping + any rise in btc + etc, can be a real downer in the initial setup I am finding out.

Some of Usagi's argument is that the hardware is (and same in your case) bought with fiat and stores a relative fiat value, funds raised and paid out however are in BTC, so when the exchange rate changes it can be rough when it's well above a 100% increase in exchange rate. Some of the point of doing the actual mining however is the long-term profit, not just the quick gains.

[Deprived]

Ok, just asking because some initial loss is understandable (or so I hope, it happened to me) on hardware.
Fees from converting btc-> usd + shipping + any rise in btc + etc, can be a real downer in the initial setup I am finding out.

Some of Usagi's argument is that the hardware is (and same in your case) bought with fiat and stores a relative fiat value, funds raised and paid out however are in BTC, so when the exchange rate changes it can be rough when it's well above a 100% increase in exchange rate. Some of the point of doing the actual mining however is the long-term profit, not just the quick gains.

That's an issue which (at root) is one of the big problems BTC faces in gaining wider acceptance - specifically:

1) Most physical assets owned by businesses (e.g. mining rigs) are valued in fiat - and will continue to be valued so whilst the materials and labour needed to make is valued in fiat.
2) Because of 1), the value of those assets (expressed in BTC) is going to vary as the BTC/fiat rate alters.

What this means is that to make profit in a market where BTC is gaining vs fiat (with investment and gains denominated in BTC) your business has to make a profit which exceeds the rate at which BTC climbs.  That's very hard to do.

But for a long-term mining operation that shoudn't be as disastrous as it seems.  In most businesses not only are the assets denominated in fiat - but the product is too: so not only are your assets losing value, so is the value (in BTC) of what you produce.  That's not the case in a mining operation - as what it produces is priced in BTC.

IMO mining operations should be planning from the start to write-off their equipment over a fixed period of time.  That period may vary from item to item - but the expected lifetime of various computer equipment isn't exactly a secret.  Ideally that period should be the warranty/guarantee period for the kit.  If, using sensible projections for difficulty increase/rewards halving, there's no way to make back the original investment before the gear gos out of warranty then there's an immediate red-flag for investors: there's a not insignifcant risk that they'll never make back their initial investment.  Add to that the need to generate some profit, cover the operator's fees and make additional funds to expand and/or be in position to replace equipment as it fails/is superceded.

And that last sentence is the key to why mining isn't necessarily doomed.  If BTC rises vs fiat then sure - your original equipment is losing value at a faster rate (in BTC).  But if X% of mined income is used for expansion then that X% buys MORE replacement equipment as a direct result of the exchange rate varying.

There's another point where many operators screw their investors (probably unintentionally).  That's by including (non-free) power as being covered by their portion of the take (usually with a clause that if it won't cover the costs they can take more or shut down the operation).  When BTC gains value vs fiat then the value of equipment falls - but so does the cost of operating the equipment (as power becomes cheaper expressed in BTC).  Operators with that sort of arrangement get to pocket those savings - whilst passing on all the losses (in the value of equipment) to their investors.

I'm gradually working on a model to allow me to properly assess the long-term viability of mining companies in various scenarios.  One thing I can say without needing a model is that it's scary how readily investors are buying operations where the hardware will only come with a 6 month warranty.  What precisely is the plan if the kit fails after 7 months?

[markm]

Assets which tend upward, and usually rapidly, in value are probably best deployed as collateral for loans denominated in assets that do not go up in value as fast or even go down in value.

It is not just fiat that is going down relative to bitcoin, you can leave fiat out of it and just treat "electronics" or "mining gear" as an asset class directly and see that it goes down itself, in fact usually even faster than fiat does.

Because it goes down relative to fiat, it can make sense to to use fiat as collateral to borrow gear, but doesn't make much sense to use fiat to buy gear unless you have some productive use you can put that gear to.

Similarly because fiat goes down relative to coin, it can make sense to use coin as collateral to borrow fiat, but doesn't make much sense to use coin to buy fiat unless you have some productive use you can put that fiat to.

There is a double-whammy if you in effect use coin to buy gear.

-MarkM-

[odolvlobo]

Assets which tend upward, and usually rapidly, in value are probably best deployed as collateral for loans denominated in assets that do not go up in value as fast or even go down in value.

It is not just fiat that is going down relative to bitcoin, you can leave fiat out of it and just treat "electronics" or "mining gear" as an asset class directly and see that it goes down itself, in fact usually even faster than fiat does.

Because it goes down relative to fiat, it can make sense to to use fiat as collateral to borrow gear, but doesn't make much sense to use fiat to buy gear unless you have some productive use you can put that gear to.

Similarly because fiat goes down relative to coin, it can make sense to use coin as collateral to borrow fiar, but doesn't make much sense to use coin to buy fiat unless you have some productive use you can put that fiat to.

There is a double-whammy if you in effect use coin to buy gear.

-MarkM-

Very nice post. I wonder if these same issues explain the mystery of why the values of gold mining companies have not risen nearly as much as the gold they mine.

[bitcoinBull]

Wow what an announcement. If you gave any money to usagi, now you can get half of it back (when the bids are there). High yield indeed.

[MPOE-PR]

That's an issue which (at root) is one of the big problems BTC faces in gaining wider acceptance - specifically:

1) Most physical assets owned by businesses (e.g. mining rigs) are valued in fiat - and will continue to be valued so whilst the materials and labour needed to make is valued in fiat.
2) Because of 1), the value of those assets (expressed in BTC) is going to vary as the BTC/fiat rate alters.

What this means is that to make profit in a market where BTC is gaining vs fiat (with investment and gains denominated in BTC) your business has to make a profit which exceeds the rate at which BTC climbs.  That's very hard to do.

The counter to this is that a vast majority of companies have no business being listed in BTC, seeing how in fact they have little to do with it. If your diner serves American hamburgers to American citizens you wouldn't list it in Yen on the Tokyo SE would you? Just so, if your business is purely fiat a BTC listing makes zero sense.

BTC is for BTC companies not for fiat companies.

I'm gradually working on a model to allow me to properly assess the long-term viability of mining companies in various scenarios.  One thing I can say without needing a model is that it's scary how readily investors are buying operations where the hardware will only come with a 6 month warranty.  What precisely is the plan if the kit fails after 7 months?

This is a good point, and one of the chief reasons MPOE has no mining rigs and no plans to acquire any. But I'd be very interested to see that model.

Very nice post. I wonder if these same issues explain the mystery of why the values of gold mining companies have not risen nearly as much as the gold they mine.

Indeed so.

[Puppet]

Back to the topic of BMF and creative accounting. Usagi's spreadsheet is becoming more and more interesting with this new "real value" column. Looking over some of the holdings.

Usagi has 210 shares in ABM and has been buying more recently. ABM IPO'd at 0.25 and has a 5 day avg of 0.255 BTC/share.
210x0.255 = 53 BTC.
Usagi lists the "real value" of his shares as 73.5 BTC

So I had a look if that was defensible

Ive asked the operator to confirm this, so perhaps Im wrong, but as far as I can tell, ABM has as only asset one BFL single, thats mining with horrendous electricity costs and no ASIC upgrade path. 25% of the mining revenue is kept to cover costs. ABM has issued 1000 shares.

So, usagi thinks the "real value" of this one $599 single is 1000*73.5/210

350 BTC

or ~$4000

or

0.42 BTC per MH

Usagi, can you explain to your shareholders why you think 350 BTC is the "real value" for ABM, and not, say, 75% of ~40 BTC going rate for a used BFL single?