Topic: [BitFunder] TU.SILVER -- Interim Report April 12th, 2013 - page 7. (Read 12890 times)

Thankfully doing the books is not something I really need to worry about, as I've hired someone else to worry about the books. I just need to worry about making sure there's documentation (disclosure) for everything I do. But I will make sure our advisor gets this information and does a reasonable job. I think the worst that will happen is that we will publish all the important information, but it will be in a nonstandard format. Then we'll take advice and criticism and do it better the next time around. All that really needs to be reported is what the total value is that we hold and the amount and nature of the risks. I'd like to keep it as simple and easy to understand as possible. Your other advice was valuable too, thanks.

If you're selling covered calls then your valuation should include a liability in respect of them (there's pretty standard ways to value holding an option - as issuer you'd have a liability equal to that value).  The cash doesn't all become yours unencumbered when you sell the option - it's not all finally the fund's until the option expires unexercised.

It would be reckless to dividend out fees for contracts that hadn't expired - and misleading to include those fees in their entirety into accounts without also having the liability in respect of them noted.  You should be able to do this in a spreadsheet easily enough - and I'm sure the parameters for valuing silver options (or the liability of ones you isseued) are available easily enough.

I have to respond to this as it's a pet peeve of mine.

If someone just SAYS their name is X then it adds zero security at all.  If they're genuine then it's likely their real name - if dishonest then it's not their real name.  As just stating a name is something both honest and dishonest asset-issuers can do it gives no indication at all of whether they're more or less trust-worthy than someone who doesn't claim to reveal their name.

That's in no way an attack on the guy behind those funds - or a claim that I have any reason to believe he's lieing.  I'm simply pointing out that it's entirely illogical to think that an unsupported claim to an identity is any indication at all of trustworthiness.  It's similar to another fallacy that many make - that paying dividends for a few months is somehow proof of not being a scam.

I'd agree with your other comments about his funds - unlike many he actually does maintain bids as well as asks (and keeps them updated in a timely fashion).  For those who don't know if they plan to invest short/medium/long term that's a massive advantage.

I'll be asking our accountant/advisor to present net asset value in terms of AG/unit + cash position.

So if we have 13 oz. of silver and 6.5 bitcoins over 130 issued shares, the fund will be worth 1/10th of an oz. per share plus 0.05 cash per share.

As an interesting aside, to properly value a fund like TU.SILVER you need to know what added value is present besides "silver". For example, I guarantee investors will be able to withdraw a minimum of 5 shares (1/2oz) at a time, as brand-new, sealed 1/2oz rounds. This means we must charge a $2 to $3 premium to the spot price, since that is the coin premium on 1/2 oz. rounds. For more info on that you can check out apmex.com -- I like apmex.com because they list the price as "spot + premium", which is more interesting to me than other stores which just list the compbined price.

Also of note, like BTC-GOLD and similar funds, TU.SILVER charges a small markup to pay for vault storage and company operations. We also need to pay for shipping on any new silver we add to the fund.

For example; today we are looking at silver spot/10th oz of .1759. After a $2 premium that price rises to .1871. Then we add 6% to pay for vault storage fees and to match our existing cash position. Finally, shipping costs tend to push the price another 7%. This gives us a target sale price of about 0.212 today. This may sound expensive but buying shares of TU.SILVER is still cheaper than most online BTC silver stores, and the coin premium is very nice. This makes TU.SILVER and other funds convenient, inexpensive alternatives to holding the metal yourself. In fact, now that I have your attention, I might as well go full tilt here.

The following is my opinion only. ;-)

A comparison of Bitcoin-based Precious Metals Investments
January 27th, 2013

Dear investor; it is our pleasure to present the following free report. Today’s date is Sunday, January 27th, 2013. First let’s run down today’s price action in the markets:
Source   Gold   Silver
kitco.com   $1659.30   $31.18
24hgold.com   $1658.20   $31.13
Mt. Gox Weighted Average   $17.23207   $17.23207
Average Price in Bitcoins   96.2595 BTC/oz   1.8080 BTC/oz

The Crystal Ball says:
Spot price for Silver today is down about 0.03 BTC from last session, as cheap metal continues to flood the markets. Gold continues to hold the mid-90 range as investors recover from the holiday season.
Today’s special is a series on the various Precious Metals vehicles available to cryptocoin investors.
Here’s the list of funds we will discuss today:
Exchange   Symbol   Manager   Redeemable   1Y/5Y/10Y EROI   Advantage
BTC-TC   GOLD   John Galt   S&H +5%   -1% -5% -10%   trust, low fee
BTC-TC   BTC-GOLD   Carnth   S&H +3%   -13% -13% -13%   backed by gold
LTC-TC   LTC-SILVER   SaltySpitoon   S&H +3%   -2.5% -12.5% -25%   trust, backing
BitFunder   TU.SILVER   TU group   S&H +2%   +3% +14% +25%   income, backing

EXECUTIVE SUMMARY
Investing in a Precious Metals fund has many benefits over storing the metals yourself. Besides increased liquidity (since BTC exchanges are open 24 hours), lower fees, and convenience, these funds offer a way to hedge against drops in the value of BTC.
It is important to understand the differences between each fund and choose the fund that meets your investment objectives. Do not blindly throw money into a precious metals fund; you may end up making less money than you expected, and maybe even losing money. In such a case you would only have yourself to blame.
This report exists to compare some of the more important risks and rewards of four gold and silver funds across three popular exchanges: GOLD, BTC-GOLD, LTC-SILVER and TU.SILVER. We hope that you learn something from this report but the most important take-away is that you should investigate any investment before you buy it. Please consult a registered investment advisor before investing. 
Let’s begin with John Galt Asset Management’s GOLD fund (also known as LGT on LTC-TC). John Galt’s funds exist to represent beneficial ownership of the underlying gold, according to the full contract. In return for storing shareholder’s gold, John Galt operates a spread and charges a 1% annual fee. John Galt has also agreed to absorb the first $1,000 (~58 bitcoins) worth of fees and legal expenses generated by the fund. This is exemplary. The main advantage with GOLD vs. BTC-GOLD is probably the fact that gold is added at the spot price. With no premium on gold added, we expect the majority of short-term investors to hold GOLD versus other funds.

BTC-TC
GOLD
John Galt
Our first impression is that GOLD is a rock-stable issue representing the “gold standard”, if you will, of what a gold backed security should be.
•   Redeemable in bullion by unitholders
•   Trust Advantage & easy to contact John personally
•   Adds value (stores gold on behalf of customers)
JUSTIFICATION
John Galt is one trustworthy guy. He put his name behind his fund and that is to be respected. He also seems to know what he is doing, based on his extensive and well-worded contract. The premium on GOLD is very low due to John Galt Asset Management operating a tight spread of +/- 3.75%. This keeps the market liquid -- you will be able to enter or exit at a decent price within a reasonable time. John Galt adds gold to GOLD at spot price. So the fund pays any purchase premium for you. This is ideal for short term and medium term (1 to 10 years) investors. Additionally, we had no problem contacting John with questions about his fund. He responded right away and was very patient and pleasant to deal with. If one were interested in holding a gold position for the short or medium term, GOLD is an excellent choice.
CONCERNS
There are no outstanding issues we can see. When we asked John about the safety of his gold, he told us that it was kept in the vault of a bank. Although it is not insured against theft, we feel it is secure enough for our purpose.
CONCLUSION
We like GOLD for short-term trading or as a vehicle for buying gold bullion using cryptocoins. We would look for a less-expensive long-term position if we wanted to invest in precious metals for say 7 years or longer.
Pro Tip: GOLD is ideal for short term investors. It has a 3.75% spread and adds gold at spot price!
-----
Our next stop on the list is Carnth’s BTC-GOLD fund (and it’s version on LTC-TC, LTC-GOLD). There are important differences between GOLD and BTC-GOLD, but the most visible difference is that each share in BTC-GOLD is backed by 1/100th gram of physical gold. The small denomination may surprise, but at $1700 gold conveniently works out to just under 0.001 BTC per share.

BTC-TC
BTC-GOLD
Carnth
Our first impression is that BTC-GOLD is a low-cost alternative to GOLD with strong competitive advantages.
•   Redeemable in bullion by unitholders.
•   Backed by gold (1/100th of a gram per share).
JUSTIFICATION
With 0% annual fees, BTC-GOLD is structured for the long-term investor, yet contains some very attractive features for short term traders. In contrast to John Galt’s GOLD fund, BTC-GOLD is backed by gold on a per-share basis, which aids in establishing a value. We also feel the small denomination per-share will tend to increase liquidity which is also more attractive in the short term.
CONCERNS; COMPARISON WITH “BTC-TC.GOLD”
From the contract we see that the gold is likely to be held in Carnth’s possession . If the gold is not in secure storage there is a risk of loss due to theft or damage. Secondly, while Carnth is a trusted community member, in comparison to John Galt his personal contact information is not provided. Finally, short term traders beware; while the 0% annual fees are attractive in the long term, the fund sells new shares at a small premium to the spot price. Anyone holding for the short term should be aware of this when buying shares of LTC-GOLD.

CONCLUSION
We like BTC-GOLD for medium and long-term exposure to the gold price and we love it’s small denomination shares because it promotes liquidity without being obtuse. We are slightly concerned about the safety of the gold, however we grant trust to Carnth because he is a respected forum member.

Pro Tip: BTC-GOLD has the lowest fees for long-term storage!
-----
We now come to LTC-SILVER. The major initial concern was the contractual similarity to BTC-GOLD, and assets like LTC-PLATINUM and LTCCOPPER. Why are there so many similar contracts run by anonymous forum unknowns? Is it a scam?
SaltySpitoon helped us get to the bottom of this issue quickly. SaltySpitoon is the original author of the contract, and has authorized Carnth to use it as well. That makes us feel a lot safer about investing in LTC-SILVER.

Litecoinglobal.com
LTC-SILVER
SaltySpitoon
The advantages of LTC-SILVER are:
•   Trust (issued by a Staff member at bitcointalk.org)
•   You can redeem your shares for physical for about 3% plus shipping and handling.
•   Backed by 1 gram per share of physical silver.
JUSTIFICATION
At the time LTC-SILVER was founded, there were no Silver funds in the community. SaltySpitoon is a trusted community member. He is a Staff member at bitcointalk.org. We also feel LTC-SILVER’s long history has proven its ability to redeem physical silver. We were able to get in touch with SaltySpitoon easily to ask questions about the fund, so it has excellent customer service. Finally, it has low fees, and SaltySpitoon offers free UPS tracking numbers when you redeem your silver. All in all, it is one of the oldest and most trustworthy precious metals funds available.
CONCERNS; COMPARISON WITH “BTC-TC.BTC-GOLD” AND OTHER LTC-TC FUNDS
There are no outstanding concerns with LTC-SILVER. The initial concern was the large number of similar-looking funds. This turned out to be a non-issue. The second issue was security. When we asked SaltySpitoon how the silver was stored, he told us the silver was kept in a military-grade walk-in safe. We think this is novel, and that thieves will not be getting away with this silver any time soon.
CONCLUSION
We like LTC-SILVER because it offers a novel storage solution compared to GOLD and BTC-GOLD. SaltySpitoon’s contract is very well-written and oft-copied. Finally, each share is backed by one gram of silver in secure storage. We like LTC-SILVER for both long term and short term trading, and can only recommend the fund.
Pro Tip: SaltySpitoon said demand is up and he will be adding more silver. Look for a deal on new shares soon! 
-----
TU.SILVER is the newest Precious Metals fund in the community. How does it stack up against the others? Like all the funds reviewed so far, its job is to store metal for its unit holders. Like most funds it guarantees the metal backing its shares – in this case, 1/10th of an ounce of silver (versus 1 gram of silver for LTC-SILVER). Where TU.SILVER really shines however is in its positive EROI (expected return on investment). Where other funds can only guarantee a long-term loss when indexed to the price of the metal, TU.SILVER expects a long-term gain.

BitFunder
TU.SILVER
TU group
The advantages of TU.SILVER are threefold: Income, Security, and Silver backing each share.
JUSTIFICATION
No other precious metal issue can expect a positive EROI. For many investors, the choice between a fund which is guaranteed to lose money and one which can expect a positive return is easy. Secondly, with TU.SILVER, your Silver is guaranteed against loss by theft or damage by storing it in a vault. Vault services such as VIA MAT and G4S will store the bulk of the silver. Additionally, the fund operates in Asia. We feel that this is an attractive option to investors seeking geographic diversity.
CONCERNS
If there is a sudden and dramatic increase in the price of silver, the fund would lose its risked capital. This means that TU.SILVER must never issue calls against its position which would cap the majority of gains in the price of silver. A rule of thumb is that the fund aims to retain up to 80% of the gain in any end-game of the silver market. Estimates show that by risking 20% of the silver position, the fund can expect to earn approximately 3.8% per year. This is expected to be realized by shareholders as a distribution of approximately 0.25% per month. In this case, were silver to experience a sudden gain of 1,000% (for example, a violent short squeeze over a holiday weekend) the fund would only be able to cover an 800% return. Although this presents a risk compared to other funds, we feel that it is a risk which investors will find acceptable.
CONCLUSION
TU.SILVER is decidedly a medium-term prospect. It aims to pay a stable dividend in the short term, while in the long term it is guaranteed to get stopped out of any eventual moon-shot in the price of silver. We feel that investors will judge this risk to be acceptable due to the ability to pay dividends and the security offered by vault storage. At the very least, investors have been given the information to decide for themselves whether or not this is a risk worth taking.
Pro Tip: TU.SILVER is the only silver fund available today which expects a positive EROI!
-----
WRAP UP
Regardless of which precious metals fund you choose, one thing to keep in mind is diversification. All of the funds above (and even those we may have missed) represent an investment into physical metal. But there’s a big difference between gold held in New York and gold held in Switzerland; A big difference between silver held in Australia or silver held in Japan. Diversification in precious metals does not just mean a little gold and a little silver, some in long-term vehicles and some in short-term vehicles. It also means making sure that if Gold is confiscated, like it was in the USA in 1933, or declared illegal for trade, like it was in Vietnam in 2010, that your money is safe and you don’t get sent to the poorhouse. A cursory analysis shows that all the funds we’ve looked at operate in the USA, except for TU.SILVER which operates in Asia. Depending where you live, geographic diversity may be even more important to you than fee structure.
Furthermore, the relative anonymity of the fund operator must be considered. While no one is truly anonymous, it is to be respected that John Galt Asset Management has put his name and reputation on the line with GOLD and LGI. Others who do the same can expect greater degrees of trust as well. Consider carefully the track record of each fund manager and ask yourself; Is this someone you trust to hold your money? Have they done the right thing in the past?
We also advise investors to consider carefully the implications of low-denomination funds like Carnth’s BTC-GOLD fund or SaltySpitoon’s LTC-SILVER. These funds are often more liquid because it is easier to trade small value amounts and operate a spread.
Finally, you will want to decide what your opinion is on the precious metals markets themselves. If you believe gold and silver will experience a sudden and violent price increase within the next few years, funds like TU.SILVER will not be able to capture the full return of any giant leap up by the precious metals. In a currency collapse event like in Argentina in the 1990s or in modern-day Zimbabwe, TU.SILVER would be the worst performing asset of the four we looked at today.
In conclusion there are many precious metals vehicles to choose from, but the safest and easiest is probably just buying the physical metal yourself. Gold and silver have alloidial title; it’s owned by whoever is holding it in their hand. Keep this in mind when investing in any silver fund; if they cannot secure the value of your silver as you yourself can by holding it in your hand, then perhaps the risk is greater than the reward. Please consult a registered investment advisor before investing.

It's possible we're talking at cross-purposes (and also I didn't make myself very clear).

Where transactions are conducted in (say) USD then I'm NOT suggesting every transaction should be converted into BTC for the books - that would be confusing and wrong.  If a ledger of some kind is prepared then it needs to reflect the currency in which transactions occur.

However, when it comes to preparing a balance sheet (and/or a list of assets) then that MUST be converted into BTC -as that's the currency in which units are being traded.  The value/unit needs to be given in BTC basically (it would actually consist of a mix of fiat, BTC and silver) to give a snapshot of the realisable value of a unit (no harm giving a fiat one as well of course).  It's only a snapshot - as the exchange-rates for silver and BTC to fiat will change all the time.

An alternative - maybe worth considering - would be to give the fund valuation in terms of Ag/Unit.  As the bulk of holdings would be in silver a valuation in silver per unit would actually be the one least subject to changes due to exchange-rates.  But that could get confusing for some people if the valuation is .1034 oz Ag/Unit but each unit only has a face-value of .1 oz Ag/unit.  But it's interesting to consider treating silver as a currency for the purposes of valuation (and, as I say, would lead to a more stable valuation than using fiat or BTC).

I'd like to hear your reasoning here and maybe a bit about how your internal bookkeeping works.  At any rate, I suspect we both agree that fair value accounting should be followed even if it's in BTC and not USD.

That's what I figured.

I could see the value in people with a pile of bitcoins investing in a fund that then paid them out dividends in fiat.  I suppose it wouldn't be anonymous but it would be legit taxable income.

You're not missing anything.

Investments in PM are pretty much either a hedge against BTC falling or a short on BTC (and, at the same time, a bet that PM rises vs fiat - otherwise you'd do better just converting to fiat and holding it).  If BTC rises faster than PM then you make a loss.

Disagree on this - investors are buying shares with BTC so accounting should be in BTC.

That's my concern with something like this.  If holding and incomes is PM or FIAT and as an investor you are long on BTC then even positive returns can get wiped out easily in exchange, or am I missing something?

Not sure if SILVER will have this problem too but if you're preparing financial statement-like things please keep values in fiat and use standard fair value accounting for any silver or BTC.  This company may not keep much BTC around but you did have this problem with the earlier Usagi companies where you did all your reporting in BTC which is useless.

The public

FFS dude who do you think you are to tell me how to act in public?

The right answer is "Fuck off, none of your business!"

Not really an ouch, i'm just ignoring MPOE-PR so I didn't see his question. His question doesn't belong in this thread, so I've taken the liberty of answering this in the correct thread. Thanks for pointing it out.

ouch

Is this no doubt significant pile of bulion acquired from the proceeds of selling your guitar or from the advance against future pay at your place of virtual employment?

I understand your concern, and others probably share your concern as well. So thank you for allowing me to point out my earlier response to
odolvlobo: "I'm lucky in that it does not take a lot of time to operate this fund. I'm already a silver stacker. I already have a safety deposit box at the bank with gold and silver in it." Please do not remain concerned. You may have noticed I am selling my personal gold and silver to offer a bonus package to my shareholders as I close down my companies. It actually saves me a lot of time to just issue these shares in SILVER (as announced) versus dealing with individual customers then driving all the way into the city to the post office to ship the silver by hand.

Please rest assured this will actually save me time and afford me more options to make my shareholders happy as I close down my other companies. At any rate, if you are concerned about BMF or NYAN's shut down process, please post your questions in the appropriate thread. I've taken the liberty of quoting your message and responding to your other question on the NYAN shutdown thread. Thanks and have a great day!

Hi Monster Tent, thank you for allowing me to answer this question today. Although you seem to have forgotten to quote the post you are responding to, I believe you are referring to this:


In the above post I clearly laid out a sequence of events:
1. assuming we get the votes (and list) by the end of the month
2. we will be able to get the silver
3. and begin trading around the second week of February.

This isn't a promise not to list "until after I shut down BMF..." etc. What the EDIT: states is simple; I was advised to clarify my earlier statement to point out we will not begin trading until after my other companies have shut down. Deprived gave me the advice, because he felt pointing that out might make some LTC-GLOBAL moderators vote YES. But it's clearly not a condition I placed anywhere on the application form or in the contract; it's just something that was going to happen because it was going to happen.

So why did we offer shares for sale early? Simple. We have 14 oz. of silver on hand right now. You will notice in my response to w. I stated we would be able to sell around 100 shares at launch based on silver we already had. I have provided photographic evidence of my ownership of this silver on BitFunder.

This actually works out better not just for the company but for people like you. You can see how we operate with a very small amount of silver (14 oz.) before I start buying monster boxes. You can use this time to make an evaluation of how I actually do business and if you see any problem, you can point it out now and we can correct it before it becomes a serious problem.

Thanks again for asking such a great question. Keep 'em coming, and together we can make SILVER the best asset in the community.

Sincerely,

usagi

p.s. A condensed version of this will be put up in the FAQ section. Please make sure to edit your quote of the FAQ post because it's out of date now.

I'm disappointed that you've gone ahead with this before closing your other companies down.

At present you have their assets up for auction - yet your comments on a LOT of those securities is just 'will contact asset issuer soon'.  There's assets there that I'd have bid on had I even been confident your claim was acknowledged by the issuer (without them being relisted anywhere yet).  It's unfortunate for investors in your previous companies that you're now going to focus on SILVER rather than giving them your full attention for the last week of your closing down process.

I'm no silver expert but I suspect silver would still exist in a week's time had you chosen to focus on closing down your other assets for the next week before starting this.