I have several questions:
If the silver is put at risk, can you really guarantee that 1 share will always be 1/10th oz.?
Yes I can. First, if anything goes wrong I am personally liable, as stated in the contract. I have changed the contract to make this more clear. This is not just idle talk -- I have a proven track record here. I have given hundreds of my personal bitcoins to my companies in the past when they were in trouble, and again now that I am closing them. So that's how I justify clause #5 in the contract.
But I think what you are really asking is, how I plan to not get into that position in the first place. The answer is easy, I will only write covered calls if we have the cash on hand to pay for it. This is the meaning of rule 3a. You mention it below:
#3a doesn't make sense. Can you give an example? It seems like you are saying you won't sell an option that can be called. If an option is called the value of the fund will drop, risking the 1 share = 1/10th oz guarantee.
I didn't want to say how we would invest in covered calls at first because I wanted it to be a corporate secret. But how I will do it is to leave the cash position on BTC-TC as collateral for investments in silver covered call funds that have a good track record. This means I never expose the company to the unlimited liability of a price spike. That's the secret. Yes, there is a risk of loss to the cash position (the premium to purchase price of silver which we sell shares at) but in such a case the physical silver will be worth "a ton of money" and the loss of the cash position would become a "welcome loss". Example: If for some reason silver spikes from $30 to $100... a 15% cash position would be worth 4.5% or less on the books. It would then presumably go to zero. Yes, it is true that the company would have lost that 4.5% -- but the value of their shares would skyrocket because the physical silver would be worth 3x more than it was before. An estimate would be, if we sold the shares for 0.22, we would lose the 0.02 premium but the shares would be worth 0.6 (3x more value from the silver). [Edit: this does not mean the shares won't be worth 0.62 or 0.66. They very may well be. But in this example at least 0.6 would be guaranteed from the silver.]
On the flipside, if silver declines in price or remains stable we will be able to pay a reasonable dividend, and still guarantee to be able to exchange each ounce of silver.
It is for this reason I am so excited about running such a fund. But you are right, and thanks for pointing out, that saying "zero risk" is probably not a good idea. To clarify, what I meant was there is zero risk
compared to just investing in silver. Good catch. My idea here is not to be greedy and risk the underlying position. There is no need to risk the physical position like that. I am not trying to get 1% a month on the total investment. I am just trying to cover secure storage fees and pay a small dividend.
You numbers in the Financial Management section don't add up. Also, 100 oz of silver costs about 200 BTC, not 1000 BTC. Also, in order to pay the 80 BTC in expenses, you need to commit 667 (not 100) BTC worth of silver (assuming you can reliably make 12% profit). So, realistically you have to commit all 1000 BTC of silver to make a decent profit. Can you clarify?
Oops, that was an error on my part. Thanks for letting me clarify this. For those of you who didn't notice, I believe what odolvlobo is referring to is in "Business Description" I stated we would start with 100 oz of silver (1,000 shares). However, in "Financial Management" I gave a projection for an entire year and I had guesstimated we would sell 5,000 shares. In that, the 1,100 BTC assumed we would sell the shares for 0.22 each and assumed that spot price was 0.20 BTC/share. In actuality, I don't know what we will be able to sell shares at, but I do guarantee I will not sell shares at a loss or at a price that will not allow me execute on the business plan. Essentially the numbers in "Financial Management" were an estimate, or outline of what I wanted to do with the company in an ideal situation. Additionally I had mistakenly underestimated the profits at 120 BTC. I corrected it to 140 BTC.
My mistake above is actually a really good example of why I will be hiring an accountant to provide basic oversight and prepare financial statements ;-) I want to make it clear I have learned
a lot from running my previous assets! I don't want to fall into the trap that I did last time where I make a simple mistake that gets taken out of context, or there's something I am inexperienced on and I end up causing unintended damage. Yes, there were flaws in my previous companies. I would like to believe I have learned from that and as a result I will do a much better job than someone who has no experience running an asset like this before.
How profits are distributed? You mentioned dividends, but that's all.
About how profits will be distributed; I'm still thinking about that. All of the company's financial information will be prepared by whoever we hire (deprived? maybe smickles? Someone with skills). The net profit will be displayed on that statement and I will announce what will happen once people can see our financial statements. I'll run a shareholder motion if there is any controversy. But right now I am planning to distribute 1/3rd to shareholders, retain 1/3rd for the company's cash position, and 1/3rd to myself as management fees.
Why retain 1/3rd? More lessons from the past. When I ran BMF I had a policy to pay out 95% of incoming dividends. I realized this was a mistake after a few months because it starved the company of growth and the ability to respond to major market moves. So I will decide how to split profits up later but I am leaning towards the 33% - 33% - 33% model above.
How do you plan to benefit from this contract?
I believe that after a while (6 months? 1 year?) there will be a significant amount of money made by this company. Based on my past experience as an issuer, we might sell 25,000 shares over the course of a year. At that size I am estimating 30 BTC a month in net profit. I'm lucky in that it does not take a lot of time to operate this fund. I'm already a silver stacker. I already have a safety deposit box at the bank with gold and silver in it. My bank offers vault storage and is an authorized Perth Mint dealer so I can also store silver in Australia as well as Asia. I already buy silver on a regular basis. What I gain from this is easy to see, if I can order 100 oz at a time I can save money on the silver. Also, I can split the vault fees with the company, which are cheaper than a safety deposit box for larger amounts of silver. Actually now that I think about it, it would be very convenient for me to hold my personal silver as company shares. That is ideal for me. That way I partake in the benefit of being able to trade the shares just like everyone else. That is very convenient for me!
There's one more benefit.. and not such an insignificant one.... if I am given another chance to run an asset I believe people will see I am in actuality a very trustworthy individual. I'm sure there are people that will eat their hat if I am allowed to list. But the truth is I really feel I deserve another chance. If I can just list this company I am certain I can change people's minds and build more trust here. Yes I was a jerk in the past to some people who I feel attacked me and said some pretty ridiculous things, but that doesn't mean I am a scammer or a fraud. As things turned out it's clear I am not a scammer or a fraud. So I see now it would have been better to just deal with those people nicely and let history prove I was right. That's what I have learned. So I will be honest I want to clear my name. That's probably 50% of it for me right there.
You wrote three times that there is zero risk from trading and this cannot be true -- unless you personally guarantee the value of the fund.
Yes that is precisely what I am doing, I am personally guaranteeing the value. But I want to make it clear that's not why I believe I can maintain the backing. I believe I can maintain the backing because the business plan is sound. Yet, I will remain there in case I am needed to pay out anything that is owed. Ok, I think I've answered most of what else you said above so I'll stop here. I hope you can see I'm very enthusiastic about this and I hope that tells you a lot about where I feel I can take this company. Thanks for the questions. I wish more moderators would give me a chance like you did!
