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totaleclipseofthebank
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September 06, 2012, 01:41:31 AM
 #721


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The problem is that if Goat buys back bonds, he still has the Pirate deposits that were backing them. If pirate pays out later, it will be impossible to pass-through those payouts to the bondholders. This would not be acting as a true pass-through. The pass-through operator should just be moving money from A to B, and buying back some bonds at a discount would be causing a distortion.
Not at all. He just pays through precisely the same way and winds up paying some of the money to himself. It is no different from anyone else buying the bonds -- it just happens to be him. (Again, assuming he doesn't leverage information he gained as the operator. By the way, if it were me, and I had any good reason to believe a payout was imminent, I would freeze bond transfers to protect bond holders from others who might get word early.)

Think about this: Imagine the Greek govt used their current funds to buy back their own bonds for pennies on the dollar. They would have much less debt outstanding, right?

This is a breach of their bond contract because as the issuer of a bond you (and only you!) are obligated to pay back bonds at face value, and using funds to buy back at a discount is an improper use of available funds.

Now, if you are saying that if Goat makes a distinction between his personal speculation on GLBSE and Tygrr operations, we run into the whole insider trading debate. Should the CEO of a company be allowed to short the company's shares in his own e-trade account? No. Shareholders should demand that their CEO does not create conflicts of interest via his personal trading/security positions.
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September 06, 2012, 01:44:00 AM
 #722



Think about this: Imagine the Greek govt used their current funds to buy back their own bonds for pennies on the dollar. They would have much less debt outstanding, right?


Right, and entities do indeed buy back their own debt at steep discounts when they see the opportunity. See http://www.investopedia.com/stock-analysis/2009/Four-Companies-Buying-Its-Own-Debt-XLNX-CIT-AMKR-AN0218.aspx#axzz25eLn0FJ4 .

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September 06, 2012, 01:46:24 AM
 #723

Think about this: Imagine the Greek govt used their current funds to buy back their own bonds for pennies on the dollar. They would have much less debt outstanding, right?
Yes, that's right. This does a huge service to their borrowers, allowing them to have a certain payment rather than a payment at risk. And it helps the Greek government, because they pay out at a reduced rate. It also increases the value of their debt, which benefits their current debt holders (since their bonds are worth more) and the Greek government (because they can borrow more money at reduced interest because of the higher bond values). Everyone wins.

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Greek debt and even other riskier debt markets are likely to plummet and initially show virtually non-existent trade in the case of default, as investors back off. The situation is comparable with a drying-up in emerging market liquidity in early 2009, during the global financial crisis.

But the debt could get a boost if the European Financial Stability Facility (EFSF) rescue fund buys it up.

Russia's recapitalisation of its banks in 2009 enabled them to buy their own debt back at 50-60 percent of face value, kickstarting a recovery in emerging market debt.
http://www.reuters.com/article/2011/10/13/uk-greece-debt-emerging-idUSTRE79C4BM20111013

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This is a breach of their bond contract because as the issuer of a bond you (and only you!) are obligated to pay back bonds at face value, and using funds to buy back at a discount is an improper use of available funds.
I don't agree. The point of a bond is to raise money that you can do whatever the hell you want with. I don't agree that it's an "improper use of available funds". I don't agree that the concept of "available funds" is even coherent in that sense.

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Now, if you are saying that if Goat makes a distinction between his personal speculation on GLBSE and Tygrr operations, we run into the whole insider trading debate. Should the CEO of a company be allowed to short the company's shares in his own e-trade account? No. Shareholders should demand that their CEO does not create conflicts of interest via his personal trading/security positions.
As I said, I'm only arguing the case where he has no inside information.

I am an employee of Ripple.
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totaleclipseofthebank
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September 06, 2012, 01:49:08 AM
 #724



Think about this: Imagine the Greek govt used their current funds to buy back their own bonds for pennies on the dollar. They would have much less debt outstanding, right?


Right, and entities do indeed buy back their own debt at steep discounts when they see the opportunity. See http://www.investopedia.com/stock-analysis/2009/Four-Companies-Buying-Its-Own-Debt-XLNX-CIT-AMKR-AN0218.aspx#axzz25eLn0FJ4 .

Good find, but there is a difference between convertible bonds with a buyback clause (where the buyback conditions are explicitly described in the bond contract). Certain corporate bonds have conditions where the issuer can buy back on the secondary market, but I don't see TBP as one of these bonds as it is described in the contract.
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September 06, 2012, 01:52:39 AM
 #725

Good find, but there is a difference between convertible bonds with a buyback clause (where the buyback conditions are explicitly described in the bond contract). Certain corporate bonds have conditions where the issuer can buy back on the secondary market, but I don't see TBP as one of these bonds as it is described in the contract.
There were a lot of things missing from the PPT contracts. It's not clear what we should assume to fill in the gaps in many places. Since this is win/win though, I can't see any sensible reason to prohibit it. (And that's not typical. Normally, you can buy your own debt. So far as I know, there's no prohibition on insider trading that would cover this absent actual inside information.)

I am an employee of Ripple.
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September 06, 2012, 01:54:10 AM
 #726

If pirate pays out and Goat uses the money to buy back bonds, that is a breach of contract. The pass-through as described passes through as dividends.
All he would have to do is use some other money to buy back bonds slightly before passing through the payments as dividends. It's a pretty scummy thing to do, but it's not an explicit breach of the contract. It might be considered implicit breach, similar to constructive fraud.


Unregulated markets are awesome for insider trading.

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September 06, 2012, 01:56:42 AM
 #727

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And it helps the Greek government, because they pay out at a reduced rate.

Sure it can be a win/win (especially in the case of greece), but it still counts as a default by the bond issuer, depending on the bond contract. If a bond is guaranteed at face value by the issuer, they are breaching their obligations by buying them back on the secondary market at a discount.

I think everyone is making good points, but it might be that the contract on GLBSE of TBP is just too vague to determine whether or not the bond should be bought back. My gut feeling tells me that as a post-default pass-through the bond's face value should be zero, and the market value should be the diluted amount of whatever people think will be coming through the Pirate pipeline as dividends.
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September 06, 2012, 02:55:25 AM
 #728

If a bond is guaranteed at face value by the issuer, they are breaching their obligations by buying them back on the secondary market at a discount.
I don't understand how. If you mean the bond is due presently and they're not paying it, then they're in default. I agree that buying your own debt when you are in default is a problem. You should be using those funds to make proportional payments. But PPT operators are not in default and there is no actual conflict of interest.

I am an employee of Ripple.
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totaleclipseofthebank
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September 06, 2012, 03:10:50 AM
 #729

If a bond is guaranteed at face value by the issuer, they are breaching their obligations by buying them back on the secondary market at a discount.
I don't understand how. If you mean the bond is due presently and they're not paying it, then they're in default. I agree that buying your own debt when you are in default is a problem. You should be using those funds to make proportional payments. But PPT operators are not in default and there is no actual conflict of interest.

Well I think we largely agree. If Goat has some additional money of his own, sure he can buy back some bonds (and pocket their future payments). However, if he is receiving money from Pirate, then that should go through as a dividend, not as a buyback, in order to preserve the pass-through function of the bonds throughout the default process. Anyway, thanks for the interesting discussion! I think even though these are likely moot points it is good practice to discuss things constructively.
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September 06, 2012, 03:25:02 AM
 #730

If a bond is guaranteed at face value by the issuer, they are breaching their obligations by buying them back on the secondary market at a discount.
I don't understand how. If you mean the bond is due presently and they're not paying it, then they're in default. I agree that buying your own debt when you are in default is a problem. You should be using those funds to make proportional payments. But PPT operators are not in default and there is no actual conflict of interest.

Well I think we largely agree. If Goat has some additional money of his own, sure he can buy back some bonds (and pocket their future payments). However, if he is receiving money from Pirate, then that should go through as a dividend, not as a buyback, in order to preserve the pass-through function of the bonds throughout the default process. Anyway, thanks for the interesting discussion! I think even though these are likely moot points it is good practice to discuss things constructively.

I tihnk we all pretty much agree on it. BUT, where does this 'receiving money from pirate' variable keep coming from?

If Pirate pays anyone we will all surely know as soon as anyone else will. And I agree if Pirate pays partial AND makes it clear that he is going to pay more then it would be unfair to do a buyback if more payments are coming. BUT again, that thus far has not been the stated method that Pirate was going to payback.

In the unlikely event that Pirate does pay back, we will keep our pet Goat on a leash and make sure it is stated and understood clearly whether any Pirate payment is a one time lump or if there are multiples planned.

If you're not excited by the idea of being an early adopter 'now', then you should come back in three or four years and either tell us "Told you it'd never work!" or join what should, by then, be a much more stable and easier-to-use system. - GA
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September 06, 2012, 03:57:09 AM
 #731

we will keep our pet Goat on a leash

GLWT

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September 06, 2012, 07:21:10 AM
 #732

If a bond is guaranteed at face value by the issuer, they are breaching their obligations by buying them back on the secondary market at a discount.
I don't understand how. If you mean the bond is due presently and they're not paying it, then they're in default. I agree that buying your own debt when you are in default is a problem. You should be using those funds to make proportional payments. But PPT operators are not in default and there is no actual conflict of interest.

Well I think we largely agree. If Goat has some additional money of his own, sure he can buy back some bonds (and pocket their future payments). However, if he is receiving money from Pirate, then that should go through as a dividend, not as a buyback, in order to preserve the pass-through function of the bonds throughout the default process. Anyway, thanks for the interesting discussion! I think even though these are likely moot points it is good practice to discuss things constructively.

I tihnk we all pretty much agree on it. BUT, where does this 'receiving money from pirate' variable keep coming from?

If Pirate pays anyone we will all surely know as soon as anyone else will. And I agree if Pirate pays partial AND makes it clear that he is going to pay more then it would be unfair to do a buyback if more payments are coming. BUT again, that thus far has not been the stated method that Pirate was going to payback.

In the unlikely event that Pirate does pay back, we will keep our pet Goat on a leash and make sure it is stated and understood clearly whether any Pirate payment is a one time lump or if there are multiples planned.

Many people are talking about the fact that Goat could buy the cheap bonds before paying out ... yes he can as well as anybody else who has the information ... but there is only very small part of the bonds offered on the market ... so I don't care.

The contrat says "The bond will not be bought back unless BTCST refunds the deposit." so one could wonder what would happen in case of partial refund but we have also "This bond is not guaranteed but will be honored at best effort." clause in the contract so I would expect that we would get even any partial refund passed to us as dividend or buyback.

I don't like Goat selling his part of deposit at pirate. Not because it could be considered as against contract but because before we knew he was personally interested to go after pirate and this way as he has sold his position already at loss he won't be personally interested in those "collection efforts". :-(
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September 06, 2012, 07:28:33 AM
 #733

I don't like Goat selling his part of deposit at pirate.

Did he sell his BTCST account?

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September 06, 2012, 07:30:51 AM
 #734

I don't like Goat selling his part of deposit at pirate.

Did he sell his BTCST account?

No, he jk about it

Sorry for my bad english Wink
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September 06, 2012, 07:33:08 AM
 #735

I don't like Goat selling his part of deposit at pirate.

Did he sell his BTCST account?
No, I don't think so ... but he probably sold (according to the number of bonds out of issuer account) his personal part of money deposited in his BTCST account in form of TYGRR.BOND-P bonds.
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September 06, 2012, 01:02:36 PM
 #736

I don't like Goat selling his part of deposit at pirate.

Did he sell his BTCST account?
No, I don't think so ... but he probably sold (according to the number of bonds out of issuer account) his personal part of money deposited in his BTCST account in form of TYGRR.BOND-P bonds.

as far as we know he had monies deposited with Pirate outside of tygrr.bond-p as well.

did ya, Goat?

If you're not excited by the idea of being an early adopter 'now', then you should come back in three or four years and either tell us "Told you it'd never work!" or join what should, by then, be a much more stable and easier-to-use system. - GA
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September 09, 2012, 09:48:34 AM
 #737


Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
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September 09, 2012, 10:35:15 AM
 #738

Why would I shit myself wathing you doing exactly what I once asked you to do?

So how is it going Goat with you suing Pirate - still planing doing it?
Because I really don't think so - you will be the one who gets sued. You and Nefario.
And you will both end up in jail, so you are definitely the ones who should be shitting themselves now Smiley

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
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September 09, 2012, 10:50:06 AM
 #739

Why would I shit myself wathing you doing exactly what I once asked you to do?

So how is it going Goat with you suing Pirate - still planing doing it?
Because I really don't think so - you will be the one who gets sued. You and Nefario.
And you will both end up in jail, so you are definitely the ones who should be shitting themselves now Smiley

I know I broke the rule and feed the troll.
Of course - don't feed me, I have no problems feeding myself.

Just remember the last sincere advise from your favorite troll: don't bend down for a soap!

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
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September 09, 2012, 10:56:29 AM
 #740

Why would I shit myself wathing you doing exactly what I once asked you to do?

So how is it going Goat with you suing Pirate - still planing doing it?
Because I really don't think so - you will be the one who gets sued. You and Nefario.
And you will both end up in jail, so you are definitely the ones who should be shitting themselves now Smiley

I know I broke the rule and feed the troll.
Of course - don't feed me, I have no problems feeding myself.

Just remember the last sincere advise from your favorite troll: don't bend down for a soap!

Prediction for what will happen. Nothing.


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