Topic: [LTC-GLOBAL] LTC-ATF (Read 25457 times)

Yeah the price got silly high - especially as profits hadn't been ridiculously high since LTC rose massively vs BTC.  But none of the ways for me to control it were feasible:

1.  I could hardly say "stop paying high prices for it" - or I'd immediately get (rightly) criticised by anyone who just bought high.
2.  I couldn't sell loads of my own shares to force it down - as I was committed to keeping over half the ownership myself.
3.  I couldn't sell new units - as the fund didn't need more LTC-denominated capital : if I did that I'd just be losing value for ALL current investors.

The problem arose largely because I was protecting existing investors by trying to maximise their profits through keeping capital at optimal levels for available opportunities.  That meant no real supply of new units (other than half of what I received in management fees) and led to massive price inflation due to being about the only profitable fund around.  Which, on closure, was great for long-term investors - but pretty horrid for anyone who bought in recently.

But when you buy ANY BTC/LTC investment you're ALWAYS betting not just on the isser but also, to varying extents, on the exchange (not so much where all their action is off the exchange - but when they hold funds on an exchange and trade securities on it then the exchange closing is ALWAYS going to cause some immediate losses and massive loss of confidence).

Without the closure of LTC-Global/BTC-TC we'd have been continuing in fairly hard times - but I'm sure we'd have continued making small profits with the occasional good week.  There WILL still be profitable opportunities - but they'll be a lot fewer.  And trading spreads as a bread-and-butter element had been dieing off largely for a while.

I have no current plans to start another fund.  If I do then it would likely be structured differently - with more of a focus on piling in on profitable opportunities rather than spreading cash more widely.  And it would definitely be in BTC not LTC - reflecting where nearly all our action was.

I don't think those few who believe LTC-ATF should continue properly understand the situation - especially in respect of the bonds.

Buying the bonds out would be very expensive - but would be almost inevitable if we continued.  That's because of immediate losses looming up + the cost of relisting LTC-ATF and bonds.  Then add in the fall in LTC which was inevitable with LTC-Global closing and we'd be over the acceptable ratio on bonds.  Meaning we either had to sell more units of LTC-ATF or recall bonds.  With under-utilised BTC capital, recalling bonds would be only option - meaning more losses.

And that ignores that converting to BTC denominated totally breaks the contract - and means recalling BOTH bonds at 105% of NAV/U (an immediate 5% drop in LTC-ATF NAV/U).  And without the agreement of EVERY investor I couldn't relist with a totally new (BTC-denominated) contract anyway - you just can't make fundamental changes to contracts like that.

This is precisely the sort of situation meant when I said "if manager can't continue running the fund".  In theory I could have run it for another week - until trading closed - but that would have been irresponsible.  When something is closing because of legal pressure you don't want to leave funds on longer than you have to.  Also the closure was BOUND to spark a fall in LTC vs BTC - this way gave investors a chance to get out first if they wanted.

The market, in general, was already falling.  These closures are going to cause it to fall further - due to concerns over things like is Bitfunder also exposed (it also is run by someone in the US) and a general wariness of exchanges (whether warranted or not).

You mention the options on BMF as being profitable and me getting to keep them.  Do you want them?  I'll sell you the shares + warrants + sellback rights if you want.

BMF lost 25% of its NAV/U.  Sure - in theory our sellback protects against loss - but how are we supposed to make a profit?  The plan for profit was to sell on the market then be able to buy back on the market later if price sell.  Price crashing immediately was never part of the plan - and is one of the explicit bad scenarios I described when I explained the decision to buy.  Unless it recovers majorly (and it's not even relisted anywhere yet) there's NO chance of profit - just a likelihood of getting initial money back in 2 months and a non-zero risk of being defaulted on (whilst I expect usagi to honour the sellback right I can't guarantee he will).  Not sure how you see that as profitable: but if you do then you're welcome to buy LTC-ATF's 50 BTC worth AND my own 100 BTC worth and I'll even give you a small discount on what was paid.

Or maybe you'd like the ASICMINER we held?  Which I'd already mentioned being written down once - and in fact sold yesterday for slightly less than they were valued for on our books.

Or do you want the Ice-Drill we were flipping - where the price fell so I'll be lucky now to sell for what we paid.

Or the Kenilworth I was flipping - where I won't be able to sell until after the merge with Bitfunder and then will be lucky to get back what we paid as there'll be loads selling.

On what we held it's likely I'll take around a 10% loss.  Had I closed down strictly by contract then you'd be waiting 2 months to get everything back - and get back less than you received now.

So why didn't I continue?  Well firstly consider what we'd be trading:

1.  No LTC-denominated securities whatsoever.
2.  Pretty much nothing on BTC-TC - as nothing there that wasn't listed elsewhere has been relisted yet or has even announced relisting.

So we'd only really be trading on Bitfunder (Havelock only occasionally has worthwhile opportunities).  That means we'd use NONE of our LTC-denominated capital and only about half of our BTC-denominated capital.  But we'd still have to pay full interest on both sets of bonds.  On the bonds the ONLY way for me to buyback at face-value was to close LTC-ATF.  In all other circumstances any buyback would have to be at 5% over face value.  So to reduce capital we'd have to lose significant NAV/U.

And then we'd be trading in a falling market.  It's VERY hard to make profit in a falling market - especiallly one where even on the few securities not dropping fast, volume has fallen right off.

And then there's the problem of relisting.  I CAN'T relist denominated in BTC without totally rewriting the contract.  I have no right to do that.  Which means only way to continue right now would be list on Cryptostocks - and exhange which has twice been hacked and had funds taken from it, which is horrible to use, where the owner changed the contract on his own shares mid-IPO and then stole from his own investors.  And where, from his OWN accounts, he doesn't even have even cash to cover all the money of depositors on his currency exchange.  That wasn't an option.

Running it off an exchange is theoretically possible - but then there's no liquidity and a lot of extra work for me.  Take no liquidity, an immediate drop in NAV/U (to close down LTC-ATF.B1 at 105% - which we'd have to do), likely more drops over a few weeks as other positions are cleared and what do you think you'd be able to sell the units for (if you even could)?

Try looking at the other funds running - are you seeing all these big profits there?  The opportunities to make big profits on the closure came for those who were around immediately after the closure announcement - when some people sold dirt cheap into any bids that were up.  I'm in the wrong timezone for that - by time I was aware of the situation all the real bargains had gone.

I'm not sure why you're accusing DMS of selling LTC-ATF.B1 or LTC-ATF.  It's sold LTC-ATF.B1 in the past - but hadn't sold any for many weeks (it's never held any LTC-ATF).  It has a public portfolio and its holdings are reported every day.  Its LTC-ATF.B1 got bought out at face value exactly the same as everyone else's.

After I saw the announcement I didn't trade ANY of our securities - I just locked them then moved funds around and paid them out.

Continuing was NOT an option for me.  There was nowhere reasonable to relist in LTC and relisting in BTC wouldn't be valid under the contract.  Plus it's hard to relist ANYTHING right now - Havelock aren't taking new listing at all and Ukyo's not in a rush to take much.  Running it off an exchange was also not an option I'd consider.

Whilst I'm sorry if people bought high, expecting me to run for a long time (which WAS the intention) I can't take responsibility for what people do on the market.  The NAV/U was clearly defined every report - and reinforced by the huge bid-wall from the fund.  I've NEVER placed bids to try to drive it up - but have placed Asks to try to stop it getting too silly (generally selling half my management fee so as to keep my portion of units at a bit over 50%).

I took on the likely losses on current holdings personally to try to reduce the losses for anyone who bought in recently - not because I believed any of them very profitable (of about 12 different securities we held there's 1 that will probably make a reasonable profit and 2 that may make a small one: the others will - or already have - break even or worse.

What I did was the ONLY real option after the closure announcement.  There was NO viable way to continue running as we were.  I had no more information about the closure than anyone else - and only began to suspect it as being likely shortly after making the BMF deal (rather obviously I wouldn't have done the deal had I known closure was likely - as the deal was always very unlikely to make a profit if BMF took heavy losses very shortly after the deal).

I don't know what the closure cost you.  It's cost me, so far, probably 25-30 BTC and still rising : plus I have a bunch of securities from LTC-ATF that, overall, are unlikely to make any profit so are tieing up cash with no benefit.  So don't assume I made out like a bandit on this - you're nowhere near the truth.  If I DO come out well from this it'll have nothing to do with anything LTC-ATF would have been doing.

The way I see it, anyone who bought LTC-ATF way over NAV must have known they were either gambling on the fund continuing to do well for a long time, or were just purely speculating on short-term price movements. They only have themselves to blame for their loss. I looked at LTC-ATF and decided not to buy based on the crazy valuation.

I ended up buying something else that tanked, but not by as much as this did. I'm not blaming the operator of that security for something we both had the same visibility of. It was my choice to invest.

Deprived, any chance of you starting another fund elsewhere?

This really could been handled in a different way. There was a year, or with a disclamer on the stock, displaying: PLEASE DONT BUY THIS SHIT WE WILL SELL MORE STOCKS AN STOLE YOU.
https://bitcointalk.org/index.php?topic=108485.0;all

This wasnt a situation to be predicted, i didnt lost my money taking some excesive risk, they just shut off the thing, you only were lucky, all this litecoinglobal junk, is after all just a pyramidal scheme, deprived, burnside are all on the same basket. my error was to trust these people. I dont know what happened on my mind to put money on that crappy basic php site.
Sure we can do nothing, this is internet, the only thing we can is identify/remember them with this thing to prevent people to get scammed again.
If there were any good will, they simply solve this issue moving servers to other country or the stock to other exchange, like some other stock owners are trying to solve.

It is never a good idea to buy above NAV/U.

As much as I like LTC-ATF, I sold all my units when they started to be traded way above NAV/U.

Please do the math next time, do not throw your money on the wind.

Nobody, absolutely nobody can guarantee consistent stellar performance for years, and this is what you was hoping for when you bought above NAV/U. You just haven't put any thought into this, what do you expect now, somebody to compensate for your unreasonable expectations?

Lots of things in your post to comment on, but lets start with the above and have a look at the LTC.AFT contract at LTC-global.
From LTC-AFT's Contract with it's shareholders we read the following:

"LIQUIDITY & FUND CLOSURE

The fund does not pay dividends - so the only way for investors to realise
profits (or losses) is to sell their units. The fund shall attempt at all times
hold at least 5% of fund value in LTC for the purpose of buying back units.
When the manager is online (and has an accurate current valuation of the fund)
this shall be done by bid-walls placed on LTC-GLOBAL at between 95% and 99% of
NAV/U (the precise value within that range may be set by the manager - based,
primarily, on volatility of the LTC/BTC exchange rate).

If significant bids already exist at above 99% of NAV then the manager is
released from the obligation to place bid-walls - but not from the obligation to
hold sufficient liquid LTC to place such walls if the need arises.

If circumstances arise such that the manager is no longer able to continue
operating the fund then the manager shall dispose of all assets held by the fund
and distribute the proceeds to unit holders. Such process shall be conducted in
as timely a fashion as is possible without incurring major loss by selling into
under-priced bids."

 
The contract say "If circumstances arise such that the manager is no longer able to continue
operating the fund..", it dosen't say if the exchage the fund is listed on were to close down.
I can't see that it would be stranger to run a fund denominated in LTC on an BTC exchange (like Bitfunder or Havelock) than having bonds denominated in BTC on an LTC exchange.....
So BTC-TC and LTC-GLOBAL's closing is not really a reason for closing the fund according to the contract, that is not an option that excist for you to take in this type of situation(it would have been another situation if there woould have been no btcstocktrading platforms or exchanges left or if you had been seriously ill and couldent continue things because of that) accourding to the contract as it's possible to continue running the fund either on another exchange or totally without any exchange, so that looks like a breach of the contract.


The only slight problem i can see in the contract is this line:

"The manager is entitled (and expected) to buy back units. This may only be done
on the LTC-GLOBAL exchange at prices below the current NAV/U."

And i can hardly think investors would object to having trades of the share be done at another exchange instead and the wording in that sentance dosen't mean the funds have to close just because you can't buyback shares at that specific exchange after the 7 october ....


So the action you took on LTC-AFT, LTC-AFT.B1 and LTC-AFT.B2 looks to have been taken to quick and be incorect ones. The coming 2 weeks on LTC-golobal and BTC.TC may also result in a lot of profitable situations for you and your fund so there's probably lots of BTC's and LTC's for the fund and you to make in that period so closing the fund now seemes like a very bad decition for the shareholders and bondholders.
Also the BMF position the fund recently took just a few days ago looks like it can be a very profitable one with those options rights to.


There's also the fact that some(/many ?) people that invested in your fund relatively late will make big losses on the action you decided to do while closing things down, witch probably was in breach of the contract(s) they made there investment based on.

LTC.AFT.B2 has probably for most periods only been trading at max at 4% over face value, but LTC.AFT.B1 for example has at times traded at over 30% or so over face value and even worse the LTC-AFT itself that has been trading at around 300% NAV for quite a while now.

Therefore i think the least thing you should do if you stand by your decition that things should be closed down for good is to compensate those shareholders/bondholders that made a loss on this action you took(as it most likely was a incorrect one), whether they have bought LTC-AFT stocks at above NAV value, LTC-AFT.B1 or LTC-AFT.B2 bonds above face value and havent made there investments back on them sofar, as the LTC-AFT shoulden't have been closed accourding to the contract and therefore neither the bonds should have been bought out.
It also looks like many/most of those LTC-AFT.B1 bonds and LTC-AFT stocks that has been sold at high market prices recently has been sold by either you personally or your other fund DMS that you also own significant amount of shares in, so your quick decition to close things down in what looks like a very profitable situation for shareholders/bondholders if things would have been carried on gives a very bad taste...

Well this is disgusting will never put money on these sites, a total loss of 100 ltc, i dont even wanna think about share holders with big capitals on this stock. Much information, much reports, but on the moment of fulfill shareholders, happens things like that, yes i would have read the terms, look and morals can be disguised too well. Im not statisfied with the final handling of this stock.
this is the price i paid to yell.

A dividend of 0.69148904 LTC per share has been submitted for immediate processing in full and final settlement in respect of LTC-ATF's closure.  I returned my own shares to the fund first - so the total paid is under half the NAV that the fund had at closure.

That payment represents the adjusted NAV/U as of late yesterday evening when I locked the spreadsheet ready for this week's report.  I haven't attempted to mark things down because of the collapse in value of them today.  I'd been intending to do a much longer report than usual to celebrate the fund's 1 year anniversary.  We never quite reached it (the anniversary is still 3 days away).

It's been fun - and profitable - and who knows, maybe I'll start a new fund somewhere else in the future.

P.S.  Both bonds have also been repurchased in full at face value.  The pass-throughs aren't closed yet - but I'll personally take liability for those and will try to get them closed out as well before the exchange closes.

In view of the imminent closure of BTC-TC and LTC-Global, LTC-ATF will be closing its doors.  In theory we could move to another exchange - but there's nowhere which supports securities denominated in LTC so a major restructure would be needed with a massive change to the contract.

The following will happen today, assuming the exchanges are up and the necessary functionality works:

1.  All bonds will be recalled at face value.  The contracts are explicit that redemption is at face value in the event that LTC-ATF closes.
2.  I will buy out all LTC-ATF shares at the NAV/U as of yesterday.  The adjusted NAV/U (i.e. post management fee) was 0.69148904 LTC per share.

This is an expedited version of the closure procedure defined in the contract.  If I were to strictly follow the contract then bonds would be paid out now (once I was sure all funds were going to be accessible) then LTC-ATF investors would get back cash slowly as shares were sold.  Some of the investments we hold are NOT going to sell for full value - e.g. the 500 LTCI we picked up a day or 2 ago to flip (which will lose a load of value because of holdings LTC-GLobal shares which obviously aren't going to be worth a lot).  There would also be signficant delays realising some assets - e.g. the BMF shares where I can't sell them back for nearly 2 months.

As maximum losses are under 100 BTC I've decided I'll just eat whatever losses there are myself and save my self the hassle of sending small bits out as we sell stuff - and then having to send out to lots of people directly after October.  I'd hope all investors would appreciate that this isn't something I was obliged to do, will definitely cost me some BTC (probably only 20-25 BTC unless usagi defaults on the BMF deal) and is better for investors than if I stuck rigidly to the contract.

Those of you who invested at the start will have made very slightly under 900% profit denominated in LTC, 5550% denominated in BTC and something with even more digits if you measure it in USD.  Thanks for your support - and hope you're happy with the return you received for putting your trust in me.  For those who invested more recently, buying at well above NAV/U, I can only apologise for your losses.

DMS will be dealt with seperately in its own thread.

For the BBET and MPOE pass-throughs, for now I'll fill any asks where I can sell at that price into orders on MPEx.  Down the line I'd be aiming to do a forced buyback before LTC-Global gos offline at whatever price I can sell the underlying at.  I'll address those in more detail once I've got the easy ones (bonds and LTC-ATF itself) out of the way.

Thanks for the clarification.  I hadn't actually considered selling them - though they definitely have value.  Any sales or exercising of them will, of course, be recorded here.

BMF shares will be valued in accounts at .032 unless/until they have a higher value AND there's significant bids at above that.  The warrants, as with all options we hold, will be value at zero.  Though options/warrants often have a clear value that value tends not to be immediately realisable so shouldn't be recognised in NAV/U.  If the situation arises where their value IS realisable then I'd value (and that report that value) appropriately.

Yes, once exercised in either direction they expire.
The buyback is for 1 share and 1 warrant (it's just a reversal of the original trade). Should Deprived choose instead to exercise them as purchase warrants, they would be spent in the process.

So in essence they can only be used once -- either to sell a share back to BMF at 0.032, or to buy a new share at 0.032.

Deprived can also sell these warrants if he so chooses, he doesn't even have to inform us of the sale (although in that case we would only accept his authorization to exercise them).

It was nearly all PMBs - and did depreciate.  Now it's nearly all bonds with just a few PMBs left.  After taking a haircut on DMS.MINING he swapped to DMS.SELLING.

I addressed your question to an extent already in the second post.  Bottom line is I'm confident he'll make good on option exercises if he possibly can.  You need to look pretty carefully at his past behaviour to see why I believe that.  I'm not going to expand on that as it falls into the area where it isn't in the financial interest of LTC-ATF investors for me to do so.

Time to get into the meat of it - why is the investment +EV for LTC-ATF?  It's useful here to consider the worst and best cases to determine a range within which likely results will fall.

I won't, hereafter, be discussing default by issuer - which is always the worst case.  I explained in the first post why I don't believe default on the agreement by usagi is likely - but obviously it can't be totally discounted and is the true worst case.  That's always the worst case for all securities we hold - the only important point with it is that I don't believe the default risk is higher than usual here.  There's some mitigation as far as default is concerned as well - on most securities we're also exposed to some extent to exchange default.  Here we're largely immune to that - as the repurchase agreement means we're theoretically immune to losses to the security caused by the exchange failing.

So bear in mind the above when reading on - I'm not saying default risk doesn't exist just that, as always, there's no point dwelling on it : the key is determining that likely profit makes a small default risk acceptable.

For the remainder of this post when I refer to 'value' it is somewhat ambiguous : it could refer to NAV/U or it could refer to market price.  Which I refer to in practice is very situational - at times NAV/U will drive decisions I make and at other times market price matters more.  I'm making no effort to disambiguate such references.

Worst Case Scenarios

There are two different scenarios which are potentially the worst case ones - it's not immediately clear which is actually worst.

1.  Short-term heavy loss for BMF with no medium-term recovery.  In this scenario the value of BMF falls immediately and massively and hasn't made any significant recovery after 2 months.  We end up sitting on the shares for 2 months then selling them back at the purchase price.  The loss to LTC-ATF in this is the cost of 50 BTC for 2 months - which can be approximated as being 60 days of paying dividends on LTC-ATF.B2 on 50 BTC (as that's where we raise new capital now) or 1.5 BTC.  There's no larger opportunity cost as we could sell more LTC-ATF.B2 into the market without problem.

2.  Whilst the above is the obvious worst-case scenario there's actually another which potentially ends up worse.  That's where the value of BMF drops slightly then stays there.  And remains there for 6 months.  In that scenario we can never sell at or above .032 on the market - as the value is just too low - but because the fall is small there's a strong disincentive to sellback after 2 months as by doing so we would surrender our right to the 1 year warrants.  In that situation we end up selling back after 5 months or so - so it costs us a lot more in capital servicing.  Of course during that period we ARE receiving dividends - and as the value hasn't fallen a lot those are likely to cover a significant part of what would otherwise be our losses (if the value has fallen AND dividends were tiny then we'd be selling back earlier and the outcome would be roughly like 1.).  So it's a bit of a toss-up which is the worst.

Bottom line is that maximum expected losses to LTC-ATF on the 50 BTC investment, ignoring default, are around 2 BTC.

Best Case Scenario

For purely illustrative purposes let me give a humorous best case scenario.  I'm not intending to suggest that usagi WOULD gamble the funds on J-D - take it as analogy for investing in something high-risk and high-reward.

1.  We sell our shares on the market at around the price we paid for them.
2.  Usagi gambles the 150 BTC we paid for them (representing around half the NAV of BMF) on a single even-money roll on Just-Dice.

If Usagi wins the roll then NAV has increased by 50% - we can now start turning in warrants to get shares at .032 and selling them at a signficant profit on the market.

If Usagi loses the roll then NAV has halved.  We can now start buying shares on the market at around .016 and selling back per our right to do so.  And as we do this the NAV MAY fall even lower - as if BMF is paying for the redemptions then the NAV/U of all remaining shares is falling so we get the next batch cheaper.  And as this would end up with us having all the cash and the final NAV/U for everyone else being 0 there's pressure on the other investors to sell first (and get something) allowing us to buy even cheaper.  I say "NAV MAY fall" as it isn't at all clear to me whether if I sell back at .032 when NAV/U is lower BMF or usagi pays the difference - it's a point I deliberately didn't try to clarify as I didn't believe asking the question to be in my/LTC-ATF's interest.

Now ignore the J-D references above and consider what would happen to the share price of BMF if NAV/U either fell or rose significantly due to usagi's investment performance.  It's pretty safe to assume that if he makes heavy losses it won't trade at a premium, and if he makes large profits it likely WILL trade at a premium.  The extent to which that happens depends mainly on his willingness to issue or redeem paper - but the pressure is always going to be in the direction which maximises our profits.

In anything approaching a best-case scenario we can make a signficant profit if the value of BMF EITHER rises or falls by a lot.  That's because we have the ability to execute (what are effectively) options in either direction.  What we absolutely don't want is value stagnation.

More Realistic Scenarios

The best case, as described above, is pretty much guaranteed not to happen.  Whilst the value of BMF could conceivably go up or down a lot there's just no way to shift all BMF shares at near NAV/U in the first place.  That said if anyone wants them I'd sell them all right now at a 5% discount - but only if all sold in one block (there's good reasons why selling a small number at a discount is a bad move).

I'm going to have to be intentionally a bit vague from here on out - as if I were to describe precisely the strategies I plan to use it would make them less likely to succeed.  Some of you will be able to read between the lines or extrapolate from what I say - others won't.  If you're an investor in LTC-ATF and have some brilliant idea of how profit could be made DON'T post it in the thread because:

a) I almost certainly already plan on doing it.
b) Informing other market participants probably reduces either the probability of it working or the profitability of executing it.

For LTC-ATF to make a profit doesn't require that we sell all of our BMF shares - in fact we only need to sell a relatively small amount.  There are a few key factors that we require to occur for us to make a profit:

1.  That the value of BMF is above the price we paid for SOME period within the next few months and that we sell some shares near that price - freeing up options.
2.  That subsequently, but within the next 6 months, the value of BMF moves majorly in EITHER direction.

The best outcome for us is undoubtedly if, whatever it is usagi has planned, makes a significant profit - as we then get to make profit on selling existing shares AND double-dip with warrants.  But provided we free up a fairly small number of options we come out ahead if the value subsequently crashes.

It's important at this point to consider what the portfolio of BMF actually is.  Although it claims to be a mining investment fund at present the vast majority of its holdings are very safe things like bonds - many of which actually pay more than what we pay ourself on LTC-ATF.B2.  So whilst we would ideally like to sell shares quickly we don't face any massive cost if we fail to do so due to dividends reducing the effective cost of holding them (with no change in value) to next to nothing.

I don't know what usagi's planned big investment opportunity is - but it's a safe bet that he isn't just planning to buy more bonds as that wouldn't achieve anything for him other than a nasty cashflow problem in 2 months time when I asked for the 150 BTC back.  I believe it against the interest of LTC-ATF investors for me to speculate further on this.

There's two more things to consider when looking at why this is a decent thing for LTC-ATF:

1.  LTC-ATF can now trade BMF with impunity provided certain guidelines are adhered to.
2.  LTC-ATF can write options on BMF backed by the options we already hold (again subject to certain restrictions).

Hopefully this at least shows that the downside is small compared to the upside : if you do the math then with a downside of under 5% of invested capital usagi doesn't need THAT high a chance of making a profit for this to work out well for LTC-ATF on average.  And that's if we were to totally discard any possibility of profit if BMF were to fall in price.

The key, for me, in choosing to do this deal was that the most likely downside is very small compared to the upside.  It really IS that simple.  It's then just down to me to extract the most possible benefit from it - which I've hinted at above but can't describe in detail for (hopefully) obvious reasons.

The LOL Factor

I'd be remiss if I failed to mention that the humorous side of this DID occur to me when considering it.  I believe the deal is good for LTC-ATF on its merits - but that it was with usagi added an amusement factor which certainly added value for me personally.

Disclaimer

As with all investments I make on behalf of LTC-ATF no endorsement of securities we hold should be assumed.  LTC-ATF trades and holds securities because I believe the specific circumstances, terms and context of those holdings make the situation +EV for LTC-ATF.  That should never be extrapolated into a general recommendation to buy, hold, trade or otherwise interact with something.

The sort of points discussed above are things that I consider on most investments/trades we do - having seen how long it took me to type this up only reaffirms my decision not to, in general, discuss the detail of LTC-ATF's dealings.

In the end, I'm guessing the only question we'll have is why you believe Usagi will make good on any option excercises that equate to profit for you, loss to him.

Is BMF the fund that is basically all PMBs and thus guaranteed to depreciate? Admittedely I've ignored much of his workings and offers, so I am speaking with some ignorance.

As promised, here's a lot more detail/explanation on the BMF investment.

Why Invest in BMF/Usagi?

The short answer to this is that I believe making this deal has a positive expectation for LTC-ATF/myself.  There a few general points to consider - I'll get to explaining why it has a positive expectation in a seperate section of this post.

1.  Quality of an investment has never been something which has prevented me trading securities.  Examples where LTC-ATF have traded something that was completely horrible include trading the spread on Obsi's Ponzi AFTER it was known to be a scam and he'd stopped paying interest and holding DMC shares despite it being maybe the most mismanaged fund that wasn't an actual scam (we made 200%+ on our investment due to it being misvalued by the market as they hadn't appreciated the value/liquidity of its ASICMINER holdings).  In short, LTC-ATF holding/trading something has NEVER meant that I believe it to be intrinsically a good investment - just that the circumstances of our trading are such that I believe it to have a positive expectation for us.

That isn't to say that quality is something I ignore - far from it.  But it's important to remember that LTC-ATF's objective is to make profit for our unit-holders - and I always have done that regardless of my views of the actual securities traded.  The most recent such case being Labcoin - where LTC-ATF flipped shares for 150% profits despite there never being any convincing evidence that it was a profitable or sound venture.

In short, it doesn't matter whether I believe BMF is a good investment (or usagi a good manager) or not so long as I believe the deal is profitable (has a positive expectation - as actual profit is never guaranteed) for LTC-ATF.  In fact, as we'll see later, this deal doesn't need usagi to do well for LTC-ATF to make a profit (though the best possible outcome for us IS that he does well).

2.  Risk of issuer default is always an important factor.  I've been (and continue to be) critical of many of usagi's past dealings.  There are specific aspects of his behaviour I've been critical of - it's my belief that those don't present any great risk to us here.  The ONLY risk that matters here (in terms of default) is whether or not he adheres to the agreement.  And the agreement is specific on the most important points:

a) The price at which warrants can be exercised,
b) The right to sell back and the price at which this occurs,
c) The MAXIMUM time he has to perform buybacks in.  This is absolutely critical - as one of my main ongoing criticisms of him has been the ridiculous amount of time (it continues to take) to buyback his Nyan.A.  No explicit time-scale was defined for that - and so there's no date at which 'default' can be declared.  In our case the time-scale is "It may take up to seven days to liquidate your value for large or multiple simultaneous redemption orders (20btc+)."  There's an absolute maximum of seven days defined.

This moves things away from the grey areas - where I believe his judgment has been bad - into something very black and white where there's no way to delay or argue that it means something other than it evidently does.  I believe that usagi will try his hardest to avoid breaking the deal - as doing so would finish him here for good.

3.  It's important to understand what I did and what I didn't 'buy'.

The wrong view to take is that I bought shares in BMF that came with warrants/options as a bonus.
The correct view to take (from my perspective) is that I bought options that could be exercised as PUTs OR CALLs (at the same strike price) and that the premium I paid to get those options was that I had to buy some BMF shares at current NAV/U.

It's important for LTC-ATF investors to understand the distinction between the two - as my entire rationale for making the deal (and strategy going forward) rests upon me having made the decision with the second description reflecting my viewpoint.

So What Do The Warrants Mean?

There's an important point with these which must be considered when looking at my strategy going forward.  Each warrant we hold can ONLY be used in one direction or the other - not both.

LTC-ATF holds 1563 shares of BMF.  We are NOT entitled to do 1563 redemptions at .032 AND 1563 CALLs at.032.  Rather we're entitled to 1563 of any mix of the two.  That's because the terms for redemption at .032 are that a warrant has to be surrendered for each share redeemed.

That restriction is an entirely reasonable (in fact, essential) one for usagi to have imposed - as without it we could make the deal, immediately sellback all shares at the same price and be left with 1563 totally free 1-year CALLs at .032.

For the remainder of this post I'll describe them as options - as holding one warrant effectively gives the right to either PUT or CALL 1 share at .032.

There's no restriction on the size of each execution - and they don't have to all be in the same direction - but we can only execute 1563 options in total (warrants were issued per share, not per purchase, so can be considered as independent).

Potential Conflict of Interest

This point needs to be got out of the way.  As one third of the shares/options were purchased by LTC-ATF and 2/3 by myself personally there exists a potential conflict of interest when an opportunity to trade or exercise options comes around.

That's not an entirely new situation - a similar position occurred on the LABCOIN IPO where LTC-ATF bought a small amount to flip and I personally bought a much larger amount to flip.  As then (and on one other occasion I can think of) the simple rule I follow is that LTC-ATF gets to go in the most profitable position.  So on LABCOIN I dumped the LTC-ATF holdings right before dumping (the first half of) my own (had to let the market recover a bit before dumping 2nd half).  Here if it would be in the interest of both LTC-ATF and myself to sell/exercise an option then LTC-ATF gets to go in whichever position is the most profitable (be it first or second - in some scenarios going second is best value).

But it does raise the question of WHY I got into this potential conflict of interest in the first place.  The answer to that is very straightforward - that it is far better for LTC-ATF that I hold the rest of the warrants than that anyone else does.  I can avoid Prisoner's Dilemma-type scenarios where each holder does better not cooperating despite the best result for all being cooperation.  I can avoid races to execute options where delaying makes more sense but being second costs.  And I control sufficient votes (at least initially) to block any dumb moves.  Knowing what all other warrant/option holders will do is a massive edge when going from a general strategy into the specifics of tactics.

In short, LTC-ATF will definitely be no worse off - and almost certainly better off - from me holding the remaining warrants than from anyone else having them.

Have been typing a while now - and still probably at best halfway through making the post.  Will post this half now - then, after a quick break, type up a second half where I look at the real substance (why it's likely to be profitable and an overview of strategy).  It's amazing how long it takes to type up crap like this when it only took about 30 seconds to realise it all after reading the offer post.

LTC-ATF Buys shares + Options in BMF

I don't generally disclose investments/trades we make but am disclosing (and will discuss in some length) this one for a few reasons:

1.  It's a matter of public record anyway (which I'm fine with)
2.  It's in BMF (run by usagi) which definitely warrants an explanation from me
3.  It's likely we'll hold the shares for a while - so would be disclosed by me anyway (unless there was a material disadvantage in doing so)
4.  It isn't a straightforward purchase of equity - so is entirely capable of being misrepresented.

In this post I'm just going to quote the terms of the deal then I'll make a second, much longer, one and explain WHY I did it, how it's to the likely benefit of LTC-ATF etc.

The post by usagi offering the deal is here :

https://bitcointalksearch.org/topic/m.3166233

As it's now locked I can't directly quote it, but here's the terms as stated:


Usagi has commented on the agreement here:

https://bitcointalksearch.org/topic/m.3174029

There are two significant inaccuracies in that report:

1.  LTC-ATF has NOT bought a controlling interest in BMF for two reasons:
a) The shares purchased amount to (just) under 50% of outstanding shares.
b) Only 1/3 of the shares purchased were by LTC-ATF, the rest were by myself personally.

2.  Usagi states "As a vote of confidence, Deprived has committed to hold the fund for a minimum of two months.".  That is not accurate.  What I've committed to is not exercising the right to sell back at .032/share for 2 months.  Which is significantly different - as will become apparent in my next post.

I think the first inaccuracy was done for impact - and the second is just a poor choice of words on usagi's part.

I'll post this in both LTC-ATF threads then make a much more lengthy post going into a lot more detail - as there's quite a few points that I want to clarify/explain.

WEEKLY REPORT (status as of 15th September 2013)




No real change since my update on Saturday - think we made a tiny bit more profit and the exchange-rate changed very lightly.  Final results were 2.0% profit of which only 0.48% was from trading with rest due to LTC's drop vs BTC.

Management fee of 58 unit will be transferred shortly.
Fund's own bid is at : .673

As there's nothing new to report I'd like to raise a suggestion I've been considering for a while - ever since LTC last bubbled in fact.  When LTC rises massively vs BTC and is likely to crash again it puts investors in a bit of a bad spot (those who don't like missing out on profits anyway).  IF they cash out of LTC-ATF they can make a decent profit (in LTC) by swapping to BTC then back to LTC after the bubble bursts.  But in return for taking that short-term profit they then have to try to get back into their LTC-ATF position.  This can be expensive and/or very hard in a relatively illiquid market - and it can also cause major price movements when nothing has changed in respect of the actual asset itself.

The same situation can arise for other reasons - ANY reason, in fact, where someone has a short-term profitable position but wants to maintain (or get back) their LTC-ATF position.

Now at present there's a couple of ways to do it:

1.  Sell into the market then buy back via the market.  This would likely be fine for small amounts (a few hundred shares or less) but would lead to massive losses if done with any holding in the thousands of shares.
2.  Take out a loan (and use the LTC-ATF shares as collateral).  Whilst you almost certainly won't get to borrow against full market value of the shares (it being a lot higher than NAV/U) I expect you'd get very near NAV/U.  Except that if LTC is in the middle of major price movement most lenders will be very wary of LTC-denominated collateral.

So in the most significant scenario (major upward movement of LTC that is likely to crash back down + significant holdings) neither of these options really works.  I'd like the fund to offer an alternative.  It's really simple.  Investors would be allowed to:

Sell their shares back directly to the fund.  They'd receive 95% of the NAV/U per share (lower than usual) but also an option to buy up to the same number of shares back at any time in the next month for whatever the current NAV/U was at the time of repurchase + 10%.

It should be pretty obvious how that helps the investor - it allows them to use the capital tied up in their shares whilst reserving their place in the fund - but how does it help the fund?

Well, obviously the fund makes a profit on the spread.  But to understand how it works very well for the fund you need to look at what happens to the fund's capital requirements with a moving LTC/BTC exchange-rate.

When LTC rises vs BTC our debt:equity ratio drops - as we owe same amount of BTC but our own LTC-denominated holdings are worth a lot more BTC.  That causes our effective BTC-denominated capital to rise (and that's what matters in trading terms as we don't do a lot of actual LTC-denominated trading) and we end up in a situation where we have more capital than we actually need, so at that stage buying back units is what we ideally want to do : so allowing people to cash out then is not just acceptable but positively good for everyone else (and doubly so if it's at a lower price than usual).

However if LTC then falls again vs BTC then suddenly we need (or want, or ata least don't mind having) that capital back again.  Now obviously in theory we'd prefer to sell into the market at 2-3 times NAV/U than by allowing execution of an option at 10% over NAV/U.  But fact is that without something like this we'd never have bought the units back in the first place (they'd have been sold into market orders or used as collateral - noone is going to sell back to the fund at NAV/U without the right to get back in).

And in LTC terms not only are we making the 15% spread but if the units were sold back when LTC was high then repurchased when LTC was low then the NAV/U at reinvestment will be higher (in LTC terms - lower in BTC terms of course) than when the units were bought.

The proposal essentially allows existing investors to divest then reinvest (to make profit during the divested period) with the cost to them being lower - but with the cost (to them) of doing it going to LTC-ATF rather than either to market traders or to those giving loans (or, most likely, them just missing out on other profit due to the difficulty of getting back in).  There'd be limits on it - so it would only be available if it didn't take the debt:equity ratio too high, it would be first-come-first-served, it would be manually managed and all such trades would be documented in our reports including who did them (it isn't impossible I'd do it - though that's a lot less likely now than it was in the past due to my LTC-ATF investment only being a fairly small part of my portfolio now).

Any thoughts, comments or suggestions?  This isn't urgent (right now debt:equity is too high to do it - am planning ahead to whenever LTC gets on Gox or bubbles for some other reason) and I don't intend on having a vote soon - but it's something to consider anyway.

Exchange-rate : .02
Adjusted NAV/U : 0.6858
Fund bid at : .672

Before management fee, NAV/U is up by just under 2% on the week with an estimated .45% from trading and rest because of the drop in LTC/BTC exchange-rate.  It's better than I thought but still not a very good week.  Those figures already include full provision for tonight's LTC-ATF.B1 dividend so shouldn't change much by the final report (unless we get some good trades, the exchange-rate moves or price of shares we hold falls and they have to marked down).

WEEKLY REPORT (Data for 8th September 2013)




The week ended with only 0.56% growth in NAV/U but with estimated profits from trading of 3.01%.  The difference, of course, being LTC rising significantly vs BTC.  The exchange-rate is pretty much back where it was 2 weeks previously - and it can be seen if you compare NAV/U now (.6746) to that at the start 2 weeks back (.6481) that we've grown a bit over 4% as expected with pretty much exactly the same exchange-rate.  Actual growth doesn't exactly match my stated trading profits for a few reasons:

• They're estimates.
• Exchange-rate isn't exactly the same.
• Percentage of holdings in each currency has moved.
• My estimated trading profits are pre-management fee whilst the change in NAV/U over any longer period has had management fees deducted.

I'm still no nearer to getting the new securities done.  Problem I've run into is a practical one at my end.  The plan was to move the existing bot over to a different computer/net connection whilst testing the new bot (all the transfer bots were intended to run on the other connection anyway).  The second net connection is a backup mobile broadband connection I have.  Unfortunately in testing the move it became apparent that there's far more bandwidth being used than that connection can support - it only has a pretty small allowance per month (and ridiculously expensive fees for any excess).

At present the only API call to obtain your transaction history provides the full history - which is already well over half a MB for the DMS account.  When you're calling that every few minutes it eats up mobile broadband allowances very rapidly (a test-run showed it using half a GB per day) and that figure is only going to increase.  The ASICMINER pass-through would need a similar download on the main LTC-ATF issuer account (which already has a pretty large history) and on a second account (so as to support transfers in both directions).  The other new set of securities need similar downloads on 2 more new accounts.

Burnside has indicated he'll provide an API call that only provides a few days data - which will solve that issue and allow us to finally get things running.  The ASICMINER pass-through pretty much needs the automated transfer facility so as to allow a market on LTC-Global to be made by any investor who wants to : with the price of the underlying share moving a lot AND the exchange-rate of LTC/BTC being very fluid it's not something I could personally market-make on 24/7 without charging massive premiums on LTC-Global which I don't want to do.  I'd like the prices on LTC-Global to stay very close to the ones on BTC-TC with our profit coming, not from price-gouging on sales, but from a small cut of dividends and a small fee for transfers in both directions.  I believe that is far better for investors and also offers better long-term profit for LTC-ATF.

Longer-term I still intend to develop a proper trading bot with BTC-E integration at which point it could automatically arbitrage for LTC-ATF whenever exchange-rate and/or price-movements made doing so profitable.  But that's still a fair way off.

Management fee of 16 units will be transferred shortly.  I'll then post a brief update with current NAV/U and the fund's own bid price (there's been hardly any net trading profit this week - what profit I made has been wiped by having to mark down some shares I bought with bad timing - but NAV/U will still be up a bit because of LTC falling vs BTC).