ASICMINER vs. Cado.AvalonB3

[jjdub7]

So the Cado.AvalonB3 project has yet to release dividends, but I've done some calculations on its expected performance vs. ASICMINER shares.  All calculations are done under the assumption that hashing power between the two will produce the same amount of variation in block generation (i.e. hashing power from one group is equivalent to the others on a 1 to 1 basis).  The metric used is hashing power per asset price in BTC.

ASICMINER currently has ~8.7 TH/s (from what I could find - this number is probably outdated by around a week).

This means:

8700 Gh/s over 400,000 shares: 0.02175 Gh/s per share.  At a current share price of ~1.47 BTC, this means each share's yield is 0.01479 Gh/s/BTC, or 14.79 Mh/s/BTC.

Cado.AvalonB3, on the other hand, has a total hashing power of 255 Gh/s distributed over 33,000 shares, or a per-share hashing power of 0.007727 Gh/s per share.  Note that this is around a third the hashing power of an AM share.  However at the current price of around 0.04 (average over 7 days, approximate), this means a yield of around 0.1932 Gh/s/BTC or 193.2 Mh/s/BTC (hashing power per 1 BTC invested). 

This means that Cado.AvalonB3 is, in theory under the equal-hashing-power-output assumption, is approximately 13 times more efficient than ASICMINER at the current share price.

So either I'm completely wrong, ASICMINER prices are very overpriced, or (most likely) Cado shares are very underpriced.

Full disclosure: I am long on both Cado.AvalonB3 and TAT's microshare PT of ASICMINER at a 3:1 Cado to AM ratio.

[JimiQ84]

AM has current hashrate around 21 TH/s.

[jjdub7]

Granted - Cado has yet to generate dividends, but the only difference in the asset prices should come from the present-discounted value of the ASICMINER dividends produced in the interim period between now and when Cado begins releasing dividends.

[jjdub7]

Even at 21 TH/s, this would still make Cado 5.4 times more efficient than AM using the same calculations and assumptions.  Thanks for the updated number, I couldn't find it anywhere (although I'm sure its prob posted a number of easily-accessible places).

[JimiQ84]

Even at 21 TH/s, this would still make Cado 5.4 times more efficient than AM using the same calculations and assumptions.

Plus AM has 230 TH/s on the way, deploying few TH/s every week.

[JimiQ84]

Hashrate can be found at BTCGuild as user 67117 and BitMinter user realasicminer :-)

[jjdub7]

Many thanks, I'll bookmark it.  Obviously this posting isn't meant to bash either asset (again, I own both), but rather clarify why exactly investors have chosen to price the assets in such a disparite manner.  If ASICMINER has added future hashing power, this could be a possible reason.  However, you have to wonder if maybe the ASICMINER name has become priced higher than its really worth.

[JimiQ84]

Many thanks, I'll bookmark it.  Obviously this posting isn't meant to bash either asset (again, I own both), but rather clarify why exactly investors have chosen to price the assets in such a disparite manner.  If ASICMINER has added future hashing power, this could be a possible reason.  However, you have to wonder if maybe the ASICMINER name has become priced higher than its really worth.

It's certainly better known than Cado.AvalonB3 :-) Also, does the B3 mean Batch #3? If yes, than you will wait for first dividends about 3 more months.

[ThickAsThieves]

Obviously I am biased since I run an ASICMINER PT, but consider the following and you will see it's an easy choice:

1. AM will be the ones helping raise the mining difficulty, and Cado will be affected a lot by that.

2. Cado still doesn't have a hard date from Avalon on when they will even receive their miners. In those weeks they are waiting, you could have been getting dividends from AM, and could have bought AM while it's still less expensive (the price will keep going up as they add hashrate).

3. Cado has no reinvestment plan, so after a month or so of hashing, dividends will get noticeably smaller and smaller each week, and share price will go down with it.

4. Dividends are paid every 2 weeks for Cado, which is less frequent than AM, which means less chance for you to reinvest for compounded interest.

5. Cado is paying 26 eurocents for electrity, that's pretty damn high.

[furuknap]

Many thanks, I'll bookmark it.  Obviously this posting isn't meant to bash either asset (again, I own both), but rather clarify why exactly investors have chosen to price the assets in such a disparite manner.  If ASICMINER has added future hashing power, this could be a possible reason.  However, you have to wonder if maybe the ASICMINER name has become priced higher than its really worth.

There are several assets on the various markets that yield more or at least similar to AM, even when taking risk into account (or perheps especially when taking risk into account). There are those with potential far greater than AM but also at a considerable risk. There are those that provide steady and predictable income with little or no risk, but again with lower yield.

I do believe ASICMiner has gotten a lot of positive attention, and that positive attention is now reflected in a high share price. I too believe that AM is priced somewhat high compared to risk at this time, but if they manage to follow through on everything they say, it's undervalued by at least 20-30% in the short term. The risk is definitely high, and a problem with something at this point can crash the price down 30% in a day too.

The upsides, as I see them, is a short but proven track record of making promises and keeping them. Sure, they've been delayed deploying their first 50 TH/s, buit that's a drop in the ocean compared to other actors in the market. If AM continues to keep their promises, they'll have 30% of the network for at least six months of the year, which is a huge profit for investors.

The downsides or risks, again as I see them, is the lack of transparency in accounting and capital management plus the normal uncertainties about deliveries, equipment performance, and so on. I've gotten some answers from friedcat as well as a promise of more transparent books, but if their 2nd generation ASICs fail to impress, then they're looking at some serious competition that is probably ready to deploy better hardware before them.

Overall, I'm positive to AM and if I were to give an advice to anyone, I would say that compared to anyone that hasn't delivered for any reason and doesn't have experience operating a mine, AM is a safe bet. Whether it is correctly priced, I just can't tell. I think maybe it's a bit high at the moment, but that's just my risk profile talking.

BTW: never take financial advice from me, I suck at it.

.b

[MPOE-PR]

This means that Cado.AvalonB3 is, in theory under the equal-hashing-power-output assumption, is approximately 13 times more efficient than ASICMINER at the current share price.

This is the dirty little secret the people pushing AM don't really want out.

So either I'm completely wrong, ASICMINER prices are very overpriced.

FTFY.

[JimiQ84]

This means that Cado.AvalonB3 is, in theory under the equal-hashing-power-output assumption, is approximately 13 times more efficient than ASICMINER at the current share price.

This is the dirty little secret the people pushing AM don't really want out.

So either I'm completely wrong, ASICMINER prices are very overpriced.

FTFY.

As of right now, AM is infinitely more efficient than Cado.

[phantastisch]

This means that Cado.AvalonB3 is, in theory under the equal-hashing-power-output assumption, is approximately 13 times more efficient than ASICMINER at the current share price.

This is the dirty little secret the people pushing AM don't really want out.

So either I'm completely wrong, ASICMINER prices are very overpriced.

FTFY.

Still butthurt over Asicminer not listing on your exchange, heh?

Cado.AvalonB3 income will decline much faster than Asicminer when you are looking at the next 6 months and it is still uncertain when the miners arrive. So any calculations at this moment are more like TA, maybe dividends go up , maybe they don't.

[lophie]

My opinions on this:
1. The marginal cost for ASICMINER is much lower.
2. ASICMINER is the developer of the chips. So they can sells as they develop better chips (Hence the latest 50 blades auction)
3. They have a headstart, A relatively long one at that.

I agree on the fact that the shares prices are overpriced at the moment in regard to the current hashrate. But this gap is getting smaller everyday and ASICMINER investors are speculating on what is going to happen after crossing the line of one ASICMINER share being entitled to more hash power than the price could buy.

My personal estimate is also considering speculation price increase after that so a share would be traded at 2BTC+

My humble opinion on the matter.

- Lophie

[ThickAsThieves]

My opinions on this:
1. The marginal cost for ASICMINER is much lower.
2. ASICMINER is the developer of the chips. So they can sells as they develop better chips (Hence the latest 50 blades auction)
3. They have a headstart, A relatively long one at that.

I agree on the fact that the shares prices are overpriced at the moment in regard to the current hashrate. But this gap is getting smaller everyday and ASICMINER investors are speculating on what is going to happen after crossing the line of one ASICMINER share being entitled to more hash power than the price could buy.

My personal estimate is also considering speculation price increase after that so a share would be traded at 2BTC+

My humble opinion on the matter.

- Lophie

AM will likely be paying out .011 - .017 per share in divs in at least the short term.

If you buy AM shares at 1.5btc each, that's a rate of 48%-58% APR, roughly. (That does not include compounded interest if you are reinvesting...)

Are you suuuure it's overpriced?

[jjdub7]

I mean the determination of an asset being over or undervalued is really subjective because everyone has different preferences for risk and when they want to be paid.  I just think it would be useful for investors to keep tabs on these kind of figures to make sure the markets are really running efficiently.

[ineededausername]

ASICMINER has 266 TH/s total, Cado.AvalonB3 has 255 GH/s total, ASICMINER has 1000 times more hashpower over around 10 times as many shares.  0.04 for Cado turns into 4 BTC per ASICMINER share.

"But wait! ASICMINER hasn't deployed their 266 TH/s!"
Well, if we're comparing current hashrates... then ASICMINER actually has 21 TH/s as opposed to Cado's 0 GH/s.  ASICMINER is infinitely more efficient

If you compare apples to apples, ASICMINER is clearly winning on both counts.

[lophie]

Are you suuuure it's overpriced?

No and yes, Look I have been around while GLBSE was on and I am sure you were too. When choosing to buy shares in a mining company it is normal to choose the one which gives you the best bang for your BTC (MH/s), For a second disregard anything else and focus on the fact that ASICMINER is a continuation of uMining. Just consider the facts, The current hashrate, Then yes it is overpriced because other mining assets would give you more (MH/s) per share.

However the no part is because of the other things we momentarily disregarded here are the whole point. Gradually and at a fast pace ASICMINER is closing this gap in MH/s per share and soon would be the dominant. So that is why I have been reinvesting all dividends in ASICMINER.

That is basically my whole rationale on this.

[MPOE-PR]

Still butthurt over Asicminer not listing on your exchange, heh?

I don't particularly care one way or the other that Friedcat decided to fuck his investors over and they're too stupid to realize it. Far as I'm concerned that's the best possible outcome then.

Do some simple math. 0.007 + 0.007 + 0.007 + 0.007 on a 1.x stock that has no future, as mining is a fixed income gig. Consider this:

The domestic textile industry operates in a commodity business, competing in a world market in which substantial excess capacity exists. Much of the trouble we experienced was attributable, both directly and indirectly, to competition from foreign countries whose workers are paid a small fraction of the U.S. minimum wage. But that in no way means that our labor force deserves any blame for our closing. In fact, in comparison with employees of American industry generally, our workers were poorly paid, as has been the case throughout the textile business. In contract negotiations, union leaders and members were sensitive to our disadvantageous cost position and did not push for unrealistic wage increases or unproductive work practices. To the contrary, they tried just as hard as we did to keep us competitive. Even during our liquidation period they performed superbly. (Ironically, we would have been better off financially if our union had behaved unreasonably some years ago; we then would have recognized the impossible future that we faced, promptly closed down, and avoided significant future losses.)

Over the years, we had the option of making large capital expenditures in the textile operation that would have allowed us to somewhat reduce variable costs. Each proposal to do so looked like an immediate winner. Measured by standard return-on-investment tests, in fact, these proposals usually promised greater economic benefits than would have resulted from comparable expenditures in our highly-profitable candy and newspaper businesses.

But the promised benefits from these textile investments were illusory. Many of our competitors, both domestic and foreign, were stepping up to the same kind of expenditures and, once enough companies did so, their reduced costs became the baseline for reduced prices industrywide. Viewed individually, each company's capital investment decision appeared cost-effective and rational; viewed collectively, the decisions neutralized each other and were irrational, just as happens when each person watching a parade decides he can see a little better if he stands on tiptoes.

After each round of investment, all the players had more money in the game and returns remained anemic. Thus, we faced a miserable choice: huge capital investment would have helped to keep our textile business alive, but would have left us with terrible returns on ever-growing amounts of capital. After the investment, moreover, the foreign competition would still have retained a major, continuing advantage in labor costs. A refusal to invest, however, would make us increasingly non-competitive, even measured against domestic textile manufacturers. I always thought myself in the position described by Woody Allen in one of his movies: "More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray we have the wisdom to choose correctly."

For an understanding of how the to-invest-or-not-to-invest dilemma plays out in a commodity business, it is instructive to look at Burlington Industries, by far the largest U.S. textile company both 21 years ago and now. In 1964 Burlington had sales of $1.2 billion against our $50 million. It had strengths in both distribution and production that we could never hope to match and also, of course, had an earnings record far superior to ours. Its stock sold at 60 at the end of 1964; ours was 13.

Burlington made a decision to stick to the textile business, and in 1985 had sales of about $2.8 billion. During the 1964-85 period, the company made capital expenditures of about $3 billion, far more than any other U.S. textile company and more than $200-per-share on that $60 stock. A very large part of the expenditures, I am sure, was devoted to cost improvement and expansion. Given Burlington's basic commitment to stay in textiles, I would also surmise that the company's capital decisions were quite rational.

Nevertheless, Burlington has lost sales volume in real dollars and has far lower returns on sales and equity now than 20 years ago. Split 2-for-1 in 1965, the stock now sells at 34-on an adjusted basis, just a little over its $60 price in 1964. Meanwhile, the CPI has more than tripled. Therefore, each share commands about one-third the purchasing power it did at the end of 1964. Regular dividends have been paid but they, too, have shrunk significantly in purchasing power.

This devastating outcome for the shareholders indicates what can happen when much brain power and energy are applied to a faulty premise. The situation is suggestive of Samuel Johnson's horse: "A horse that can count to ten is a remarkable horse, not a remarkable mathematician." Likewise, a textile company that allocates capital brilliantly within its industry is a remarkable textile company, but not a remarkable business.

My conclusion from my own experiences and from much observation of other businesses is that a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row (though intelligence and effort help considerably, of course, in any business, good or bad). Some years ago I wrote: "When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact." Nothing has since changed my point of view on that matter. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

So now. Next time you feel the itch to dick about in the general direction of MPEx people, not just me personally, try and hold on to the understanding that you're just some random Internet fuckwit and we're professionals, with a pro level understanding of business (something which incidentally is significantly above what's required for a business phd). This means that what you think is probably wrong, and the reason invariably is that you misunderstood something (most often something fundamental). And also lurk moar.

[johnny5]

Thanks for the updated number, I couldn't find it anywhere (although I'm sure its prob posted a number of easily-accessible places).

Nice pretty graphs of ASICMINER's horsepower:
https://docs.google.com/spreadsheet/ccc?key=0AkPdXsQFT-vIdHRVUjQ5Ql9BQWR6OENLMkhyUktUblE#gid=14

As of this posting, this graph shows 20.2 TH/s, spread amongst pools.