A day in the life of a pirate.

[Vladimir]

The simple truth is that if one can make 10% per week, one does not need any investments really. One can take some relatively small loan at the most horrible possible rates and simply give it some time until power of compound interest makes one unbelievably rich. 10% per week means that you double your money every 7 weeks. Remember that fable about chessboard and rice grains?

IMO it makes no biz sense whatsoever to seek outside investments and pay 10% per week dividend unless it is a ponzi scheme or some kind or quasi/secondary ponzi scheme or otherwise an extremely risky venture.

[Vladimir]

Some people's reply to that has been that pirateat40's modus operandi needs a *bitcoin*-based loan, so he can't just go to the bank/uncle and get a USD loan.

Is it that difficult to convert USD to BTC? Is it so difficult that one would prefer to pay 6000% annually for BTC instead of USD's horrible 40-70% loan shark interest or 15% on a credit card?

If so come to me and I'll sell you as many BTC as you need at 10$/BTC this would save you tons of money. Ohh wait, btcinstant or bit-pay will do that for only 3-4% not 100% as I just offered.

[Vladimir]

Does it increase risk 100-1000 times?

[Vladimir]

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Why those risks could not be hedged or otherwise mitigated cost efficiently?

Why would anyone want to invest any BTC on GLBSE into such a venture?

[pirateat40]

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Ok lets say your business was in "pet rocks".  Now, there's a demand for them from an active but relatively small community (like Bitcoin) that believe these rocks are worth their weight in gold.  So you run to your bank and withdraw everything you can, hell you might even ask the banker for a loan.  You tell him it's for some home remodeling and because he's known you since grade school you get the loan.  With money in hand you run to the rock market and spend everything you got on certified "Pet Rocks". 

You get your business off the ground while paying off the loan but in the back of your mind you can't shake the thought of "What happens if people find out these are just rocks or if the rock market is overtaken by nano pets?".  You take the risk and keep building your business by reinvesting your profits back into buying more rocks.

You wake up one morning, roll over and look at your phone to see the current price of "pet rocks" to be worthless.  With a ill feeling creeping over your body you start to think about how many rocks you have in the warehouse and how much money you've actually creamed off the top.

Why didn't I just borrow the rocks from the rock community and pay them a portion of my profits?  That way if something was to happen, I made good money doing it and my long time friend (the banker) still likes me.

I don't know about you but that's what risk management means to me.

[Vladimir]

This does not explain desire to pay 2-3 order of magnitude higher interest. This also demonstrates that such GLBSE shares based on value of "pet rocks" would offload some unspecified but huge risks to "investors".

Also you completely ignored BTC risk mitigation options that ought to be by orders of magnitude less expensive than 6000% annual interest rate.

Basically you have failed to coherently answer the 3 questions which really make more sense in combination.

What you said is basically let's suppose BTC are as worthless as pet rocks and it makes sense for me to pay 6000% per annum on those pet rocks.

I am still at loss on why would one prefer to pay 2-3 orders of magnitude more interest only to mitigate currency exchange risk. Based on historical volatility of BTCUSD currency exchange risk is not that big. This in combination with biz prowess allowing one to generate such outlandish returns makes even less sense.

[pirateat40]

This does not explain desire to pay 2-3 order of magnitude higher interest. This also demonstrates that such GLBSE shares based on value of "pet rocks" would offload some unspecified but huge risks to "investors".

Also you completely ignored BTC risk mitigation options that ought to be by orders of magnitude less expensive than 6000% annual interest rate.

Basically you have filed to coherently answer the 3 questions which really make more sense in combination.

What you said is basically let's suppose BTC are as worthless as pet rocks and it makes sense for me to pay 6000% per annum on those pet rocks.

I am still at loss on why would one prefer to pay 2-3 orders of magnitude more interest only to mitigate currency exchange risk. Based on historical volatility of BTCUSD currency exchange risk is not that big.

That's the beauty of what makes people different, you don't have to understand.  I do

[Vladimir]

That's the beauty of what makes people different, you don't have to understand.  I do

Of course, I do not have to understand. But until I understand, Occam's razor suggests this https://bitcointalk.org/index.php?topic=82849.msg915121#msg915121 .

[pirateat40]

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Ok lets say your business was in "pet rocks".  Now, there's a demand for them from an active but relatively small community (like Bitcoin) that believe these rocks are worth their weight in gold.  So you run to your bank and withdraw everything you can, hell you might even ask the banker for a loan.  You tell him it's for some home remodeling and because he's known you since grade school you get the loan.  With money in hand you run to the rock market and spend everything you got on certified "Pet Rocks".  

You get your business off the ground while paying off the loan but in the back of your mind you can't shake the thought of "What happens if people find out these are just rocks or if the rock market is overtaken by nano pets?".  You take the risk and keep building your business by reinvesting your profits back into buying more rocks.

You wake up one morning, roll over and look at your phone to see the current price of "pet rocks" to be worthless.  With a ill feeling creeping over your body you start to think about how many rocks you have in the warehouse and how much money you've actually creamed off the top.

Why didn't I just borrow the rocks from the rock community and pay them a portion of my profits?  That way if something was to happen, I made good money doing it and my long time friend (the banker) still likes me.

I don't know about you but that's what risk management means to me.

So you don’t really believe Bitcoin will be successful (or at least you don’t know if it will) so you’re not going to risk any of your own money when you can risk the money of others. In the mean time you can milk the cow dry and make money for as long as it lasts with limited personal risk. That’s perfectly rational and a very sound personal risk management strategy.

He he... see I knew this was coming but figured it would be from Vladimir.  I personally believe in Bitcoin and do hold a few of them but like I've said in the past, this is a small market and no one really knows where it's headed.  So until I do, this is my model for managing risk while being able to focus on my next move.

[pirateat40]

So you don’t really believe Bitcoin will be successful (or at least you don’t know if it will) so you’re not going to risk any of your own money when you can risk the money of others.

No no, in the current scenario being discussed, pirateat40's not reneging on any promises.

The lenders *agreed* to be paid back in bitcoins.

So, yes, their btc are worthless, but that's part of their contract and their choice.

Ok, I think I got it. So if the whole thing falls apart tomorrow no one will really care because the premise was never expected to last or return profit for anyone except pirate. I guess that's ok then. Everyone’s eyes are open.

Ummm, what?

[Vladimir]

My point is very simple. When some company pays "investors" 10% per week when capital could be obtained otherwise at 2-50% per annum, no matter whether it is listed on NASDAQ or GLBSE or elsewhere, there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

[ineededausername]

CBH: What.

He believes in Bitcoin, but not enough to risk hundreds of thousands of USD on it.  Are you really going to question that decision?

[JusticeForYou]

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Ok lets say your business was in "pet rocks".  Now, there's a demand for them from an active but relatively small community (like Bitcoin) that believe these rocks are worth their weight in gold.  So you run to your bank and withdraw everything you can, hell you might even ask the banker for a loan.  You tell him it's for some home remodeling and because he's known you since grade school you get the loan.  With money in hand you run to the rock market and spend everything you got on certified "Pet Rocks". 

You get your business off the ground while paying off the loan but in the back of your mind you can't shake the thought of "What happens if people find out these are just rocks or if the rock market is overtaken by nano pets?".  You take the risk and keep building your business by reinvesting your profits back into buying more rocks.

You wake up one morning, roll over and look at your phone to see the current price of "pet rocks" to be worthless.  With a ill feeling creeping over your body you start to think about how many rocks you have in the warehouse and how much money you've actually creamed off the top.

Why didn't I just borrow the rocks from the rock community and pay them a portion of my profits?  That way if something was to happen, I made good money doing it and my long time friend (the banker) still likes me.

I don't know about you but that's what risk management means to me.

So you don’t really believe Bitcoin will be successful (or at least you don’t know if it will) so you’re not going to risk any of your own money when you can risk the money of others. In the mean time you can milk the cow dry and make money for as long as it lasts with limited personal risk. That’s perfectly rational and a very sound personal risk management strategy.

Does the guy paying for Corn or Pork Bellies believe they will be successful? He hopes so, but is aware Soy Beans might displace the Corn. So he doesn't put the bank on Corn and mitigates risks.

[pirateat40]

My point is very simple. When some company that pays "investors" 10% per week, no matter whether it is listed on NASDAQ or GLBSE or elsewhere, there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

What exactly do you think you are doing right now with holding bitcoins?  If no one wants them, you get no money for them.

I'm not paying interesting interest (see I'm just tired) in fiat, it's in Bitcoins.  My lenders do whatever they want with the profits I pay out.

Maybe I'm just tired, but this is the kind of stuff that makes me stop posting in the forums.

[Vladimir]

guys in all your risk management discussions corn vs beans you completely miss the point of 2-3 orders of magnitude higher cost of capital on one as compared to another. It all would be nice an dandy if we were talking about 2-3 times differences, but not 2-3 orders of magnitude.

[drakahn]

as far as i can tell he is only risking his own money...

the pet rocks are borrowed and paid back as pet rocks
if pet rocks crash, pet rocks will be cheap for him to fix up his clients (accounts are in pet rocks)
if pet rocks surge upwards beyond what he can cover, then there would be a loss to him

pet rocks? lol

[pirateat40]

CBH: What.

He believes in Bitcoin, but not enough to risk hundreds of thousands of USD on it.  Are you really going to question that decision?

He is risking a lot of money he just chooses not to risk his own money but that’s fine if everyone is aware. I have no problem with it.

No, I'm not risking a lot of money.  It's Bitcoin!  My lenders know the risks of the market crashing and I hope you do to.

[Vladimir]

I'm not paying interesting interest (see I'm just tired) in fiat, it's in Bitcoins.  My lenders do whatever they want with the profits I pay out.

Oh there are doubts what you are paying interest in. Or more accurately that you prefer to have 2-3 orders of magnitude higher cost of capital when denominated in BTC as compared to cost of capital denominated in USD. This much is clear and really indisputable.

My statement is still not refuted:

there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

Is there a third possibility? If yes what it is? If not, is it 1 or 2?

P.S. I am aware of only one biz model where 10% per month cost of capital would make sense. It is a ponzi scheme.

[rdponticelli]

CBH: What.

He believes in Bitcoin, but not enough to risk hundreds of thousands of USD on it.  Are you really going to question that decision?

He is risking a lot of money he just chooses not to risk his own money but that’s fine if everyone is aware. I have no problem with it.

No, I'm not risking a lot of money.  It's Bitcoin!  My lenders know the risks of the market crashing and I hope you do to.

Is Bitcoin fundamental for the continuity of your business? Or it's just a weird way you found to raise capital?

[jamesg]

I'm not paying interesting interest (see I'm just tired) in fiat, it's in Bitcoins.  My lenders do whatever they want with the profits I pay out.

Oh there are doubts what you are paying interest in. Or more accurately that you prefer to have 2-3 orders of magnitude higher cost of capital when denominated in BTC as compared to cost of capital denominated in USD. This much is clear and really indisputable.

My statement is still not refuted:

there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

Is there a third possibility? If yes what it is? If not, is it 1 or 2?

Regular bitcoin interest rates in the lending sub forums are 10-15% a MONTH. This is because of bitcoins unknown future. So your 2-3 orders of magnitude arguments is kind of nulled because if you need more bitcoins and you don't want to buy them, you will be paying these rates. So pirate is really only paying 2x normal BITCOIN interest rates.

Edit:

Here is a link to the lending subforum for those who may have missed it.

https://bitcointalk.org/index.php?board=65.0