Re: [LTC-GLOBAL] - ART - building a open art studio [week 32]

[EskimoBob]

If this statement has becomes unreadable in your e-mail client, please see https://bitcointalk.org/index.php?topic=130947.0
or
http://forum.litecoin.net/index.php/topic,980.0.html



February statement.

One of the most expensive piece of equipment arrived and on time.
Room for the kiln was not ready as expected so there is no income generated for the February.

While waiting for the workshop rental agreement etc, I decided to go to local business incubator and test out my business model and the idea. I had to apply for the admission by presenting my open art studio idea. Guess what, I passed and I in. This is going to open some really interesting doors for the ART project.

Bad news is, our kiln has to spend few more dais in the warehouse before I can move it to our new studio.

Here are the financial reports:
(see comments at the end of the report)

Code:

Account Balances by Type (Y to M)
01.01.2013 through 28.02.2013
All currencies converted to Litecoins
Account                  Amount (comments)
Asset
  Current Assets           0.00
  Depr. Kiln 01            0.00 (1)
  Fixed_Assets             0.00
  Kiln 01 60S          41487.14
  Wheel RK3E#1         21551.76 (2)
  Total Asset          63038.90

  Cash
  BankAccount - EUR        0.00
  Bitcoins             41981.82
  Litecoins             2795.61
  Petty Cash               0.00
  Total Cash           44777.43

  Checking
  ART-LTC (Brokerage)    665.14 
  Total Checking         665.14 (3)

  Stock
  ART                      0.00
  Total Stock              0.00
  Grand Total         108481.47



Net Worth By Month (Y to M)
01.01.2013 through 28.02.2013
 
All currencies converted to Litecoin
 
Account                      Jan        Feb
Asset
  ART-LTC                 479.05       0.00
  ART-LTC (Brokerage)       0.00     665.14 (3)
  Current Assets        54620.11   44777.43
  Fixed_Assets          43493.84   63038.90
  Total Asset           98593.00  108481.47

  Liability
  Total Liability           0.00       0.00
   
  Grand Total           98593.00  108481.47

(1) There is no depreciation for unused equipment
(2) Pottery wheel
(3) Income generated from buying back ART share below IPO price. This will be distributed as dividends for February.

[usagi]

Is that you at 970 shares? Cool

No I sit on top of that. I just placed another order, I'm on the bid and left my previous order up.

I'm glad to see that your share price is increasing because of the exchange rate. I guess I was wrong about you losing money. But right that it was time to buy I hope I can pick up some cheap shares here!

[EskimoBob]

Someone went kinda crazy last night in litecoinglobal.com and dumped all sorts of stuff, including ART.
I guess it was not apparent from the statements, that we are still holding a nice amount of BTC and LTC.
I know I know, this it *coin blaa blaa blaa make believe world but the harsh reality is, we all are still operating in the fiat based world. My point is - fiat sets prices and *coins do not Let me clarify this by a question.

If Co operates in fiat wold (like we all actually do) where all the prices, even if presented in *coin, are are actually calculated form fiat, what is the correct currency to use for reporting. Is it fiat or *coin or both?
I have reported everything in LTC (we operate in EUR) and plan to keep doing so. Maybe I need to add fiat reports too?

BTW, I managed to get the gnucash use LTC, BTC and PPC using this method: https://bitcointalk.org/index.php?topic=29884.msg1492068#msg1492068 I am going to use those in parallel for a month or so and then decide.

Week 10 update is - moving day.
I am going to move the kiln and wheel to a new location and finally get those two to work for us.

[gabbynot]

So how much of the original IPO proceeds is still in LTC?

[EskimoBob]

So how much of the original IPO proceeds is still in LTC?

Code:

....
Litecoins             2795.61
....

[Deprived]

Well we know that the fiat part of assets have more than halved in LTC value and the BTC part have about halved.  So it's reasonable to guess currently value of assets/shares is around 3.5-4.5 LTC.

Of course their value in fiat has increased (and their value in BTC decreased by not by so much).  But rather obvously the value of shares in LTC has dropped - as income/share will have dropped as well (assuming prices are set in fiat) as well as assets/share.

That's one of biggest issues with ALL businesses that have fiat-valued assets and income : if crypto rises then the value of shares falls faster than profit can make up for.

[EskimoBob]

Well we know that the fiat part of assets have more than halved in LTC value and the BTC part have about halved.  So it's reasonable to guess currently value of assets/shares is around 3.5-4.5 LTC.

Of course their value in fiat has increased (and their value in BTC decreased by not by so much).  But rather obvously the value of shares in LTC has dropped - as income/share will have dropped as well (assuming prices are set in fiat) as well as assets/share.

That's one of biggest issues with ALL businesses that have fiat-valued assets and income : if crypto rises then the value of shares falls faster than profit can make up for.

I agree but we still live on a planet, where fiat's rule and our dear LTC, BTC etc are all just tokens for moving fiat from point A to B Nothing wrong with that.
Lets say I was "LTC & BTC only" business. Do I pay myself a fixed number of LTC per month as people usually get in fiat?
If you paid me 200 LTC about a month ago for a service X, same service will cost you only about 100 LTC this month... because fiat sets the prices for good and services no matter how we look at it. People still get the same pay chek at fixed amount in fiat and not in LTC.

Yes, EUR etc have weakened against LTC and BTC massively. In the real world, equipment still cost the same in EUR as it did a month or 3 ago.
Do you remember those guys who bought large number of (still!) nonexistent ASIC's for BTC? Ouch... 
The reserves we have, opened up a new possibilities we did not have before. I can buy more equipment or expand the business if there is demand and opportunity, without the need to increase the number of floated shares. You can say ART went long on crypto coin and has made a nice fat (unrealized) gain if converted to EUR or equipment and tools.

[Deprived]

Well we know that the fiat part of assets have more than halved in LTC value and the BTC part have about halved.  So it's reasonable to guess currently value of assets/shares is around 3.5-4.5 LTC.

Of course their value in fiat has increased (and their value in BTC decreased by not by so much).  But rather obvously the value of shares in LTC has dropped - as income/share will have dropped as well (assuming prices are set in fiat) as well as assets/share.

That's one of biggest issues with ALL businesses that have fiat-valued assets and income : if crypto rises then the value of shares falls faster than profit can make up for.

I agree but we still live on a planet, where fiat's rule and our dear LTC, BTC etc are all just tokens for moving fiat from point A to B Nothing wrong with that.
Lets say I was "LTC & BTC only" business. Do I pay myself a fixed number of LTC per month as people usually get in fiat?
If you paid me 200 LTC about a month ago for a service X, same service will cost you only about 100 LTC this month... because fiat sets the prices for good and services no matter how we look at it. People still get the same pay chek at fixed amount in fiat and not in LTC.

Yes, EUR etc have weakened against LTC and BTC massively. In the real world, equipment still cost the same in EUR as it did a month or 3 ago.
Do you remember those guys who bought large number of (still!) nonexistent ASIC's for BTC? Ouch... 
The reserves we have, opened up a new possibilities we did not have before. I can buy more equipment or expand the business if there is demand and opportunity, without the need to increase the number of floated shares. You can say ART went long on crypto coin and has made a nice fat (unrealized) gain if converted to EUR or equipment and tools.

I don't disagree with any of that - but none of it alters the fact that investors would have been better off (whether measured in LTC OR fiat) had they just kept the LTC rather than bought your shares (of course there's a decent chance LTC will fall back down fast - in which case that will no longer be the case).  And that's what makes a lot of potential investors (myself included) wary of all businesses with signficant fiat assets (less so up to now for LTC investment than BTC - as LTC had previously tended to be pretty stable vs USD).

[MPOE-PR]

I don't disagree with any of that - but none of it alters the fact that investors would have been better off (whether measured in LTC OR fiat) had they just kept the LTC rather than bought your shares (of course there's a decent chance LTC will fall back down fast - in which case that will no longer be the case).  And that's what makes a lot of potential investors (myself included) wary of all businesses with signficant fiat assets (less so up to now for LTC investment than BTC - as LTC had previously tended to be pretty stable vs USD).

Perhaps the correct approach would be to hedge all investments in fiat-exposed businesses (*) with corresponding options/futures. So if you buy 100 BTC worth of shares in a dollar company you also sell 100 BTC worth of puts at a correctly chosen strike to offset your currency risk.

(*) Not meaning to imply that this trainwreck is a business by any means.

[EskimoBob]

I have bought back some of the virtual shares.
This has resulted about 2000 LTC net and increased our LTC position to about 4700 LTC.
Number of outstanding virtual shares is reduced to 100K.

[Deprived]

I don't disagree with any of that - but none of it alters the fact that investors would have been better off (whether measured in LTC OR fiat) had they just kept the LTC rather than bought your shares (of course there's a decent chance LTC will fall back down fast - in which case that will no longer be the case).  And that's what makes a lot of potential investors (myself included) wary of all businesses with signficant fiat assets (less so up to now for LTC investment than BTC - as LTC had previously tended to be pretty stable vs USD).

Perhaps the correct approach would be to hedge all investments in fiat-exposed businesses (*) with corresponding options/futures. So if you buy 100 BTC worth of shares in a dollar company you also sell 100 BTC worth of puts at a correctly chosen strike to offset your currency risk.

(*) Not meaning to imply that this trainwreck is a business by any means.

That works - provided the expected return from the business exceeds the cost of the options/futures.  An alternative would be for the business itself to hedge in such a manner - that possibly makes more sense as the business is in a better position than investors to know what its degree of exposure is at any time.  But either route ends up with profits being significantly decreased if the hedge isn't needed - and for many businesses could end up pretty much guaranteeing a loss due to premiums on options/futures exceeding actual trading profit.

[MPOE-PR]

That works - provided the expected return from the business exceeds the cost of the options/futures.  An alternative would be for the business itself to hedge in such a manner - that possibly makes more sense as the business is in a better position than investors to know what its degree of exposure is at any time.  But either route ends up with profits being significantly decreased if the hedge isn't needed - and for many businesses could end up pretty much guaranteeing a loss due to premiums on options/futures exceeding actual trading profit.

Then again if the expected profit from the business does not exceed the cost of insuring its fx risk it seems obvious that either the business has no business being in business or else its choice of accounting unit is very very broken.

It certainly does not make sense for the business to hedge in such a manner. This is a bad idea for two reasons: one is that it requires the business operators to become financially competent, which is too high a toll. Even large and promising companies on the operational side (such as for instance asicminer) are completely inept in that field, to their detriment. The other is that the specific insurance required is a function of the investor's portfolio, outlook and other considerations. A one measure fits all insurance will not work for investors who maybe in their own accounting reference the eur, usd, ltc or ggm (gallons of goat's milk).

[Deprived]

I have bought back some of the virtual shares.
This has resulted about 2000 LTC net and increased our LTC position to about 4700 LTC.
Number of outstanding virtual shares is reduced to 100K.

Come again?

When you buy back shares (which are priced in LTC and on LTC-Global) you SPEND LTC ending up with LESS than before you bought back.  It CAN'T increase your LTC position.

If you've got more LTC now than before then it's because you converted some BTC to LTC or something - not because you bought back shares.

Buying back underpriced shares is fine - just make sure you're actually buying them back at below the current NAV/U (in LTC).  From a quick mental estimation it looks like you DID buy back just below NAV/U - but hard for me to be sure as I can't say with certainty what exchange-rates you used in your last accounts (as you didn't provide them).

[EskimoBob]

I have bought back some of the virtual shares.
This has resulted about 2000 LTC net and increased our LTC position to about 4700 LTC.
Number of outstanding virtual shares is reduced to 100K.

Come again?

When you buy back shares (which are priced in LTC and on LTC-Global) you SPEND LTC ending up with LESS than before you bought back.  It CAN'T increase your LTC position.

If you've got more LTC now than before then it's because you converted some BTC to LTC or something - not because you bought back shares.

Buying back underpriced shares is fine - just make sure you're actually buying them back at below the current NAV/U (in LTC).  From a quick mental estimation it looks like you DID buy back just below NAV/U - but hard for me to be sure as I can't say with certainty what exchange-rates you used in your last accounts (as you didn't provide them).

Correct, my wording was off. Maybe this simplified example helps to understand, what I meant.  
Sold 1000 at 1, received 1000 coins. We have 1000 shares on one side and 1000 coins at the other side. 1:1
Bought back 100 at 0.4, spent 40 coins from previously received 1000. Those 100 shares are no longer in the books as outstanding shares.
Now we have 900 shares on one side and 960 ltc at the other side.
Soup got thicker - 1,0666667 coins per share and not 1, as before.
Correct wording is probably that we increased the available coin per share.

[MPOE-PR]

I take it an April statement is incoming or not really anymore?

[Atruk]

Kiln has arrived. My goal now is to get it set up as fast as possible. First, I have to get the room ready. Waiting for the landlord to get her ass in gear etc. and then it's electricians turn.
Do not worry, I am not sitting around and picking my nose I am constantly looking for potential clients, etc.

For people who might be interested in renting kiln time with cryptocoins, where roughly might this studio be located?

Promoting litecoin and bitcoin as a value transfer system is on my list.

It's interesting. I asked for a location and received a platitude.

[EskimoBob]

I'll post the April statement on weekend.

[usagi]

I'll post the April statement on weekend.

BTC has gone from $10 to $100, and ART lost 98.41% of it's investor's money. To point out the obvious, the expected loss was 90%, not 98.41%. Losing that extra 8.41% is much, much larger than it seems. Because accounting for the fluctuation in currency prices, ART went on to lose 84.1% of it's value.

Please explain how you lost 84.1% of your investor's money, or (at current exchange prices) over $60,000.

[Deprived]

I'll post the April statement on weekend.

BTC has gone from $10 to $100, and ART lost 98.41% of it's investor's money. To point out the obvious, the expected loss was 90%, not 98.41%. Losing that extra 8.41% is much, much larger than it seems. Because accounting for the fluctuation in currency prices, ART went on to lose 84.1% of it's value.

Please explain how you lost 84.1% of your investor's money, or (at current exchange prices) over $60,000.

To point out the REALLY obvious, ART was sold in LTC not BTC.  And LTC has gone from $0.06 to $4 (though starting its downwards correction now), so share price/book value could reasonably be expected to have fallen by well over the 90% you mention.

Not sure where the 98.41% is coming from (is there a deleted post or something?) - but the expected (and actual) losses need to be done in the currency it's denominated in.  You can't just pick another currency to use because it's convenient - if you did that then people running losing BTC investments could price in USD prices to pretend to have made a profit and all manner of nasty things.

[usagi]

To point out the REALLY obvious, ART was sold in LTC not BTC.  And LTC has gone from $0.06 to $4 (though starting its downwards correction now), so share price/book value could reasonably be expected to have fallen by well over the 90% you mention.

Not sure where the 98.41% is coming from (is there a deleted post or something?) - but the expected (and actual) losses need to be done in the currency it's denominated in.  You can't just pick another currency to use because it's convenient - if you did that then people running losing BTC investments could price in USD prices to pretend to have made a profit and all manner of nasty things.

This is very simple. It works just like EskimoBob said it did himself. He sold shares at 1. The shares are now worth 0.0159 0.0193 on the bid. This is a loss of 98.41% 98.07% over 99,000 shares. Actually, you made a great point, LTC is now worth $4. I was using old figures. If we base the calculation correctly in LTC, those 99,000 shares used to be worth $396,000. They are now worth precisely $1910.70. EskimoBob lost essentially ALL his investor's money. It's GONE. It's quite obvious what happened here; he used the exchange rate as cover to steal money from his company. He's not on top of shit at all; he doesn't even have his books ready.

You will recall that you yourself pointed out this was a scam from day 1. I agreed. This is the result. This is why the LTC-GLOBAL moderators need a slap in the face. They voted someone in with a highly negative OTC rating. What did you THINK was going to happen?