Topic: [BitFunder] TU.SILVER -- Interim Report April 12th, 2013 - page 4. (Read 12890 times)

Thank you for allowing me this opportunity to correct your misunderstanding. I quote the contract:

"3. SILVER will sell covered call options and invest the cash position to generate revenue and pay for secure storage fees."
(https://btct.co/security/SILVER)

The contract clearly states that the income will be used to a) generate revenue and b) pay for the expenses of the fund. As with most companies, there is no set amount to be paid as distributions. That is one of the reasons why I am asking for shareholder's opinion. I don't need to state anything about it in the contract. The rest of the description clearly states what our objectives are in this regard. I'll quickly touch on those points as you are unfamiliar with them.

The "Executive Summary" section exists to explain "what you do and why". In "Executive Summary" under "Returns" we state:
"While most metals funds guarantee a long term loss due to storage fees and management fees, TU.SILVER expects a positive return due to our trading strategy. We expect to generate distributions of 3 to 6% per year." (https://btct.co/security/SILVER)
This satisfies what we do (our trading strategy) and why (to be the only fund with a positive EROI).

The "Business Description" section exists to inform investors with regards to our "Mission statement (business purpose), Company vision (statement about company growth), Business goals and objectives." among other things. In "Business Description" we clearly state:

"a) We sell covered calls to generate income for unit-holders.
b) We keep approximately 1/3rd of net profit for company operations, 1/3rd towards management fees, and 1/3rd for distributions.
c) Dividends will be issued at least monthly, along with a financial report prepared by an independent auditor." (https://btct.co/security/SILVER)

Finally, the "Financial Management" section exists so that investors can know, among other things, "Projected balance sheet (1 year forward), Projected income statement (1 year forward), Projected cash flow statement (12 months forward)."

In this section I clearly explain that our goal is to "...retain 1/3rd of net profit into the company's cash position, take 1/3rd as management fee, and pay 1/3rd as distribution to shareholders." (https://btct.co/security/SILVER)

The contract is clear. The Executive Summary is clear. The Business Description is clear, and the Financial Management section is clear. Therefore, your "as far as I can tell" strikes me as contentious. I'm sorry you don't agree with how I run my company, I really am. But it is not (and cannot) be the job of an LTC-GLOBAL moderator to decide whether or not it is "too risky" to run a company like this. That is the investor's decision. The fact is, I've clearly stated my business plan, I am executing on that business plan, and I am making money for the people who are invested in Tu.SILVER.


I hope your concern that investors won't benefit from reinvested income has now been alleviated! If you have any further questions please don't hesitate to ask.

Not sure why it's even an issue.

The fund was founded on the basis that Silver is a good investment.  The updates from the fund all talk about how Silver is going to outperform BTC in the medium term, how BTC is likely to fall back within the next few months, how silver is underpriced etc.

Then the second the fund has some idle funds you want to try to find ANY alternative to silver to keep them in!  It reads almost as though you believe silver is a bad investment (compared to holding BTC) but have to pretend otherwise to sell shares.

I mean, if the fund won't keep it's OWN idle funds in silver then how do you expect to convince potential investors that THEY should buy silver?

I have read the contract. It states very clearly,

Since a share represents a fixed amount of silver, keeping x% for future investments doesn't benefit shareholders because shareholders gain nothing from the additional investments.

I think the fund should keep x% for future investments, but pay out a significant portion right now as dividends. Soften the blow for those of us who bought in before the explosion in the btc price and who hold shares worth significantly less because btc/silver has gone in the opposite way we desire.

Take some money off the table (trading table) and cash in some profits (for the shareholders)

If you haven't read the contract you probably think this should operate as a mining bond. That's not quite correct. Keeping it simple, management of the company (like other companies in the real world) will periodically decide how much to pay out to investors in the fund, how much to pay management (themselves), and how much to keep for the company. In this case, company money is separate from the investment position. This is represented by funds held in the TU.SILVER Kitty at [1Kitty8g4AMrU8QaLCntESmrvJNmz1QUGk]. This money will be used by the company to pay for secure storage fees and probably other expenses such as shipping once it gets large enough. Go ahead, click on the link. The money is all there. The other money (on bitfuinder, or other places, as marked in our books) is used to execute on our trading strategy and generate positive cashflow. Right now we have a lot more money than I thought we would make because of JAH. We're in the black now, and stand to leverage the price of silver should it rise.

But in a more general sense, running a motion has absolutely nothing to do with the situation being straightforward or not. Asking investors which way the fund should go means that any large financial interest which wants to buy in can be assured their financial interest will be represented. If it is not, they are free to advise me or direct the fund themselves. I can even be replaced. I'm one of the only companies around who makes that blatant. You try doing that with any other fund, no names no names, and you will see how fast your vote gets shot down one way or another. I don't even own any units of TU.SILVER. My fee is simple; 1/3rd of trading profits. The investors are even free to raise a motion to vote me out of my 1/3rd and pay it out to as a distribution if that's what they want to do. I'm sure they will if they feel I am mismanaging the company, so I am certain the investors like me and agree with how I am running the fund.

It seems straightforward to me.  If the money belongs to shareholders, the best thing to do is pay a dividend and let the shareholders that want to invest it do so. There is no good reason to withhold money from shareholders or to invest it for them.  If the money is yours, then do as you please. If it is not clear who the money belongs to, then you have a big problem.

The best option is investing in your own company. For instance buying back cheap shares. Or a bulk silver buy.

I'm thinking of running a poll.

1. Reinvest the money into the business (essentially, advertise)

2. Search for acquisitions (i.e. takeover a copmany like LTC-SILVER)

3. Buy stock back (ongoing -- we just bought back 23 shares)

4. Invest in some other venture (i.e. ASICMINER, BTC-BOND, to be discussed)

5. Pay out a larger dividend

Thoughts welcome.

Not sure what you are talking about but yes, throwing the money in the cash kitty is one of the ideas I was discussing with our financial advisor. i was looking for something a little more "active" though. Do you have any idea what a good investment might be?

 Given your shitty investment history you probably should be avoiding securities. It cant hurt to simply hold BTC till you actually need it since you might be able to buy a lot more silver if the price shoots up much more.

The danger in buying more silver is that sales have dried up right now, probably due to the extreme volatility in the BTC price. So it would be tying up the money without meaningfully expanding the fund. I'm not sure that's the wisest thing to do right now.

I'm thinking, if I want to attract investors to the fund in a down market I am going to want to provide sustainability and dividend. Or I could provide added security. I could make the move to the vault now, or I could advertise. I'm leaning towards advertising right now but will make a final decision later. I'm basically looking for input. I'm pretty close to just dumping it in LTC-GLOBAL  or maybe, BTC-BOND, ATF.B1, etc.

Buy more silver?   

I am pleased to present this week's Tu.SILVER report.

http://kongzi.ca/silver/TSR/20130310TSR.pdf

Relevant quote:

During the preparation of February’s report, our financial advisor commented on how difficult our books were to understand. I responded by selling all our investments and moving entirely into JAH on BitFunder. This was at a price for JAH between 6.5 and 9 bitcents. Right after I did this, ASICMINER started paying dividends and JAH exploded to over 30 bitcents a share. I could not believe our luck!

As a result of this, TU.SILVER has about 30 bitcoins available to be invested somewhere. Thus I put it to you, the investors. What should TU.SILVER do with the money we've earned? We could advertise. Maybe we should invest in something (ASICMINER?) or maybe we should pay a special dividend. I'm not sure at this point. Sales have dried up due to the extreme volatility in the price of BTC. So perhaps we should throw it in something stable and tied to BTC like BTC-BOND or LTC-ATF.B1?

Please share your ideas on what TU.SILVER can do with the money. Should we buy S.DICE? What would you do if you had an extra 30 bitcoins?

I am pleased to announce our Amagi Metals order has arrived. We now have twenty 2013 Canadian Maples IN STOCK!

Wow, are they ever good looking coins! They look good!



Please see our profile page on BitFunder for more images of the maples and our other silver inventory.

Oh, and don't forget to redeem your shares for your maples -- first come first served!

I am pleased to announce the March week 1 TU.SILVER report.

http://kongzi.ca/silver/TSR/20130303TSR.pdf

Comments are welcome, I stand by to answer any shareholder's questions about the company.

Yes, as I said, that is true -- however Deprived is actually more correct here because we fix the price of silver in BTC by looking at the price of silver in dollars. I mean, I know you're talking about "silver", and I and he are talking about "TU.SILVER", so I don't disagree. Just commenting on how we do things.


It would be both a misconception and a truth. The markets are not perfectly efficient. So if most of our customers are using euros, that would be a better way to sell silver. Not just more efficient but more in line with public perception. The goal here is to move silver, odolvlobo, so we have to sell to our customers. Dollars, euros, BTC, is all just a red herring. If you traded in colored beads I would quote you a price in colored beads and find an exchange which allowed me to trade in colored beads.

What you are really looking at there is my supply chain. If I source silver in US dollars, I cut a price in US dollars to ensure I make a profit such that I can buy more silver with what I make. If I buy it in Euros, same. The real risk to me and my customers actually has nothing to do with currency of any kind including BTC, because silver is money. Once my customers get their hands on shares of TU.SILVER the price in BTC or fiat of any kind is irrelevant.

They have a guaranteed amount of silver.

That is what TU.SILVER is all about.

I'm saying that you can value something in any currency, regardless of the denomination of the price. If usagi were borrowing BTC (which turns out to be not the case) to buy silver priced in dollars, the important relationship is the price of silver in BTC. Dollars are irrelevant, except that they were used temporarily for the trade.

Think about someone with euros buying silver priced in dollars. They don't need to follow the value of silver in dollars. They just follow the price in euros. The issue of EUR/USD fluctuations is a completely separate story.

It appears that you are saying that (for example) if the silver had a price in euros instead of dollars, then it's subsequent value in BTC would be affected by BTC/EUR instead of BTC/USD. That is the misconception that I am referring to. The fact is that you end up with the same answer no matter which one you use (ignoring discrepancies in exchange rates).

EDIT: The fact that there is very little trade denominated in BTC means that we have to convert to established currencies as an extra step in order to obtain the most accurate information in practice, but in theory it is not necessary.

Odolvlobo is a pretty smart cookie, and he has a point here, as does Deprived -- we do in fact seed our charts with the US dollar price of silver. So it is both true and not true. It is true so long as the US Dollar is the most liquid and stable currency in the world. When it is not true (someday) we will provide continuity by pricing silver in Euros or Yuan or some other currency. Actually one of my goals is to provide open market pricing in BTC, essentially backing BTC with silver. But that won't happen until we get another 100,000 ounces, right?

The "value of the dollar" (whatever you mean by that) isn't the issue - it's changes in the BTC/Fiat (whichever fiat you like - I identified USD as that's what usagi's comments suggested was being used) exchange-rate that give the risk.  As it's highly likely changes in that exchange-rate will impact the BTC price/value of silver far more than any other factor.

Which of course, is all irrelevant, given that the loan is denominated in USD.

EDIT: It seems you're arguing that something can't be valued in USD if you can buy it with a different currency elsewhere.  That's ludicrous.  Usagi identified the savings to be made in USD - pretty clearly indicating that the silver being bought was priced in USD.

I want to point out this popular misconception.

The price of silver is denominated in dollars in the U.S., but it is denominated in euros in the Europe, and pounds sterling in the U.K. In other words, it is denominated in the local currency, not just dollars.

More importantly, it doesn't matter what currency is used to buy the silver, because it can easily be converted from bitcoins. In other words, the denomination of the price is irrelevant when the conversion is trivial (and free).

While agree it would be risky to borrow BTC to buy silver, it has nothing to do with the value of the dollar.