Why I used to trust Patrick Harnett

[Puppet]

So the real answer is still no, there currently is nothing I can do with my BTC that is better (more profitable) than simply hoarding them.

Right?

Nah, you proved its clearly better to have them in a BCST account. Im so jealous of those returns you are still getting:
https://bitcointalk.org/index.php?topic=97094.msg1157225#msg1157225

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[evolve]

So the real answer is still no, there currently is nothing I can do with my BTC that is better (more profitable) than simply hoarding them.

Right?

I make plenty of money off of speculation. Daytrading/swingtrading on the exchanges is easy as long as you don't let emotion get in the way and set clear entrance and exit points.

Still risky, but way less so than throwing money away with ponzi schemes.

[JoelKatz]

Generally speaking, IMO, buying bitcoins and holding them is usually better than buying mining gear and mining with it.

So the real answer is still no, there currently is nothing I can do with my BTC that is better (more profitable) than simply hoarding them.

Right?

First, I reject the validity of the term "hoarding". It's a loaded term largely based on primitive and discredited economic theories. If you want to argue it, we can do that, but I'd prefer we use a neutral term like "holding" or "saving".

In any event, it's not that simple as "better" or "worse". Investment strategies have to balance risk and reward and have to fit into other investments. If you think Bitcoin will be worth significantly more in two years than it is today, you likely can't do better than holding them.

And, of course, there are lots of real businesses with real business activity that might be a sensible investment.

[Puppet]

The Lending forum is replete with records of such returns.

You should check again, and factor in all the defaulted loans that ended up in pirate accounts, pirate passthroughs, insurance companies insuring pirate debt and other lending pyramids that ultimately usually ended up with pirate, or some other soon to default ponzi scam.

The reality is that there is very little real economic growth going on that could produce these returns. People are borrowing far more to gamble or scam. They may accept high %, but a far higher % will never pay back.

So its easy to get these returns on paper as long as you naively assume almost everyone will pay you back, but the reality is likely a whole lot different. I will be very curious to see how much of his loans Patrick will be able to recover, considering how many of the people he totally trusted have already defaulted and/or are now branded as scammers.

[JoelKatz]

So its easy to get these returns on paper as long as you naively assume almost everyone will pay you back, but the reality is likely a whole lot different. I will be very curious to see how much of his loans Patrick will be able to recover, considering how many of the people he totally trusted have already defaulted and/or are now branded as scammers.

Patrick scammed himself, unfortunately.

[Puppet]

So its easy to get these returns on paper as long as you naively assume almost everyone will pay you back, but the reality is likely a whole lot different. I will be very curious to see how much of his loans Patrick will be able to recover, considering how many of the people he totally trusted have already defaulted and/or are now branded as scammers.

Patrick scammed himself, unfortunately.

Depends. If he pays his creditors out of his own pocket for the losses Im sure he will suffer, then yes. Otherwise, not really.

[DeathAndTaxes]

It is impossible to get risk-free 1.5% weekly interest, I don't care how good you are at "playing the market" or "choosing who to lend to."

This needs to be repeated over and over until people start to get it.

Several of us have actually done this in reality (well not the risk-free part, we do take on a lot of risk).  This needs to be repeated over and over until you realize that it is actually happening.

Some of us have become very good at picking who to lend to and who not to lend to.  Just because you think it is too risky for you and that you would never try to do it does not mean you have to try to make everyone else stop doing it.

Did you factor in your losses from Pirate into your 1.5% net return?
Obviously in lending defaults are subtracted from the gross return.  A bank offering a 7% APR car loan isn't expecting to make 7% APR.  Between their transactions costs, other labor, defaults, repossesion costs, fraud, etc they probably are shooting for a ~5% return on capital (slightly more than inflation).   The bank doesn't make any more on CC or car loans, than say mortgages.  Priced right the costs and losses factored into each product generate the same net return.

1.5% per week after defaults, labor, losses, etc simply doesn't exist.   If it did exist the supply of coins would drive down rates to the point it didn't exist.  That is how markets work.

So take your gross return subtract your 10K Pirate loss (and other defaults) and tell me again you are making 1.5% per week.

[DeathAndTaxes]

Generally speaking, IMO, buying bitcoins and holding them is usually better than buying mining gear and mining with it.

So the real answer is still no, there currently is nothing I can do with my BTC that is better (more profitable) than simply hoarding them.

Right?

Lending however no real business is going to take loans at 200%+ APR. 

We have borrowed a line of Credit at 0.5% per week.  Our creditors have enjoyed a return on their capital.  Even 0.5% per week is kinda unrealistic but given all the Pirate nonsesne and unrealistic demands of creditors we had to go that high to compete.  When we renegotiate it likely will be lower.

In our business we can use the LoC to allow instant trades without tying up our capital or being long huge amount of BTC.  The cost we pay in interest is worth the utility we gain.  At "asinine" interest rates the utility isn't worth the interest.

[DeathAndTaxes]

Can you name one please?

Tangible Cryptography LLC

Then again we didn't offer 7% per week sucker rates so you likely missed the offering.

[DeathAndTaxes]

I already agreed with Joel that borrowing in order to lend was a bad idea.

That wasn't my point.  My point is that even if you use your own money and lend @ 1.5% per week you aren't going to NET 1.5% per week.  The higher the interest rate the worse the customer you will attract.  At 1.5% per week you are essentially only attracting bums, scammers, and people very bad at math.  You would be lucky to have a positive net return at all. 

[jbreher]

A bank offering a 7% APR car loan isn't expecting to make 7% APR. 

What a brick-n-mortar bank can make is irrelevant in bitcoin world, if only due to the fractional-reserve nature of their currency. As far as gross, as figured from a return on reserves, that 7% loan results in much more than 7% revenue. Nine out of every ten dollars they loan you does not exist before the loan is made. They don't truly 'loan' you their reserves. The vast majority of the money they loan you is zapped into existence by the very act of loaning it to you.

As such, they gross much more than 7% on _their_ money when they loan you at 7%. And that's before charging you loan origination costs.

[DeathAndTaxes]

Way to miss the point.

ANY LENDER ON ANY CURRENCY DOESN'T REALISTICLY EXPECT TO PROFIT 100% OF THE INTEREST CHARGED.

So just because there are loans @ 1.5% per week and just because some of them pay back on time doesn't mean 1.5% per week on capital loaned is sustainable or realistic.  
Any lender will experience default losses and those losses will reduce the net return.

Taditional banks.
Finance companies.
Payday lenders.
Bail Bondsman.
Bitcoin lender.

It doesn't really matter.  

Looking at the gross rate on the lending forum is naive.  Take a look at all the defaults.  Take all the amounts loaned, and all the repayments.  Be sure to factor in late/defaulted loans repaid over longer period sometimes without interest.   The net return for all lenders collectively isn't 217% APR.  Hell it probably isn't even a positive number.

[JoelKatz]

And, of course, there are lots of real businesses with real business activity that might be a sensible investment.

Can you name one please?

Not without it looking like I was suggesting people invest in it, which I'm not willing to do. But I will say that none of those businesses, even the ones related to Bitcoin, can take bitcoins as an investment in any way other than selling them for USD. You can invest in bitcoins, but there aren't really any sensible investments denominated in bitcoins to my knowledge. The currency is just too volatile right now.

[Bjork]

OK, lending is too risky, I do not want to day trade, what can I do with my BTC?

spend it like a normal currency

[Mousepotato]

Don't trust anyone. Only invest money that you can live without.

Well, except you can probably trust people who like big butts. Because they can not lie.

[nimda]

OK, lending is too risky, I do not want to day trade, what can I do with my BTC bullion?

OK, lending is too risky, I do not want to day trade, what can I do with my BTC PPUSD?

OK, lending is too risky, I do not want to day trade, what can I do with my BTC AAPL stocks?

Instantly, the answer appears.

[jbreher]

Way to miss the point.

ANY LENDER ON ANY CURRENCY DOESN'T REALISTICLY EXPECT TO PROFIT 100% OF THE INTEREST CHARGED.

If that is directed to me, I realize this. However, this is irrelevant. If a lender can regularly loan at some percentage interest, he can pay some lesser value to his creditors, absorb some level of defaults, and still make some profit.

Are you claiming you know the finiacials of each lender? Or even of only Patrick, who is being publicly pilloried here in this thread?

Looking at the gross rate on the lending forum is naive.  Take a look at all the defaults.  Take all the amounts loaned, and all the repayments.  Be sure to factor in late/defaulted loans repaid over longer period sometimes without interest.  ... The net return for all lenders collectively isn't 217% APR.

The only such events germane to this discussion are the ones Patrick experiences.

Hell it probably isn't even a positive number.

Speculative statement noted.

[DeathAndTaxes]

jbreher, I will answer your question and then leave you to your delusions.

You cited the interest rates in the lending forum as "proof" that 1.5% per week NET is achievable.  It isn't.  Hell credit card companies or PayDay loan companies don't make that kind of return on capital.  I was just pointing out that just because there are loans in the lending forum at x% per week doesn't mean one can borrow at 1.5% per week and issue loan in excess of that, cover costs, defaults, and still be profitable.

Even if that was possible under normal circumstances (which it isn't according to free market theory) the Pirate situation will destroy any chance of profitability.   What is better than 7% return per week?  How about infinite return per week.  Borrow at x% and deposit it with Pirate @ 7%.  As long as Pirate pays collect the difference.  If/when Pirate defaults just walk away.

Even if a court recognized bitcoin debts they certainly wouldn't recognize usurious bitcoin debts.  If anything they would strike them dawn as unlawful and noncollectable.  A business model built around charging people 300%+ APR on an uncollectable debt is doomed to failure.

Patrick may make his depositors whole, but will only be because he eats the loss himself.

[jbreher]

jbreher, I will answer your question and then leave you to your delusions.

Thank you, O Magnanimous One.

As the rest of your post was mere repetition of your unsupported assertions, I will reply also with repetition - but of a question, not an assertion. To wit:

Are you claiming you know the finiacials of each lender? Or even of only Patrick, who is being publicly pilloried here in this thread?

EDIT: s/TWo/To/

[Frankie]

So its easy to get these returns on paper as long as you naively assume almost everyone will pay you back, but the reality is likely a whole lot different. I will be very curious to see how much of his loans Patrick will be able to recover, considering how many of the people he totally trusted have already defaulted and/or are now branded as scammers.

Patrick scammed himself, unfortunately.

I think that's right.

My thoughts (not that anyone asked):

1. WifeOfStarfish reads like a sockpuppet to me. If I were Patrick, I'd not want to show this to anyone.

2. Joel offered the choice that Patrick is a scammer himself or an idiot, but I'd like to offer a marginally kinder alternative, which I think is the truth: he was duped.

If one really believed in Pirate, one would invest almost every scrap of liquidity in him. That doesn't make him an idiot so much as a mark--very smart people can fall for scams. Cult members have higher than average intelligence. It just happens that some people fall for certain stories. Patrick is also a believer in Bitcoin, and he perhaps he wanted to do his best to foster the supposed bitcoin economy. Given the apparent demand for lending and the apparent market for deposits that were supposedly safe from Pirate exposure, perhaps Patrick can up with the idea for Starfish BS. He might have even done what he thought was the honorable thing by putting his own faith in Pirate, and giving the alleged depositors a pure "non-Pirate" opportunity.

If my theory is right, he's a double victim--first from Pirate, and second from many of the borrowers who were unsurprisingly only paying high rates to scam/gamble/invest in Pirate (same difference). The only question to my mind is whether he coughs up the loses himself or passes some of the pain to his usurious creditors. If he does the former latter, especially if he tries to spread the loses evenly, I'm not sure I could fault him.