Topic: [LTC-GLOBAL] LTC-ATF - page 8. (Read 25457 times)

WEEKLY REPORT




There's a few additions to the spreadsheet this week:

CoinBR added as a location we hold BTC at.

A section for pass-through assets has been added.  This lists the shares we operate pass-throughs to and for each lists:
The number we hold on CoinBR.
The number we've sold in our pass-through (this MUST never be higher than the number we hold on CoinBR).
Their price (in BTC) - this will be roughly the mid-point between highest Bid and Lowest Ask on MPEx.
Their value - this is the value of (Number we hold - Number we've sold) so represents the value of them that the fund holds on its own behalf (which counts towards our Gross and Net Asset Values).

Ticker cost has also reappeared as a Miscellaneous item.  We paid 500 LTC for the two tickers which will be depreciated to 0 over a period not exceeding 20 weeks.  As we had a rather good week I've already knocked 30% (150 LTC) off of this.

This was a very good week for the fund - made to look even better in the results because of LTC diving vs BTC.  Before management fee (but after ticker depreciation and bond dividends were paid) our NAV/U grew by 22.61%.   If we apply calculation to remove the effect of the currency change from that we end up with a figure of 14.14% growth in NAV/U due to trading.  Not quite a record for us - but still very respectable.

The pass-throughs (especially S.DICE) have started off nicely.  Now the initial flurry of purchases is out of the way trade on them will probably die down a bit until something happens causing major interest in either.  S.DICE price has dropped back a bit since we launched the pass-through - but there's still few sell orders up to .007 so no great resistance to it rising back over the price when we launched.  S.BBET has had little trading on MPEx and the price is currently pretty stable - with Bids at just over .001 and lowest ask at .0013.  I'd expect major activity on that when the first results for it come in - it could shoot right up or drop right down.  The results for first month won't actually be that meaningful (it'll be a partial month and the business model means profits SHOULD be way lower than usual in it anyway) but I'd still expect an over-reaction in one way or the other when they are published and dividend distributed.

Trading has been pretty slow on most platforms - though we made a respectable profit on BTC.CO on fairly low volume.  Both BTC.CO and Bitfunder have their fair share of dead/dieing ex-GLBSE assets that are using them as a retirement home in which to quietly die.  Those assets get very little trade - current investors want to sell for a price that won't cause them much loss, noone else wants to buy in above real current value which is a LOT lower.  Crypto-Stocks remains pretty much dead - but will leave the few BTC we have on there as there are a couple of decentish trading opportunities that show up from time to time.

With the velocity slowing down on pass-through sales we'll need no extra cash for that - so at present I see no need to issue extra bonds.  The fund is bidding on some assets being sold during the closedown of the various assets run by usagi.  If we win a lot of our bids then this may need to be revisited (most of them are things that I believe we can sell at good profit over a longer period than usual).  I'll give an explanation of why I bought any assets that we won - as the record of my pruchase would be public (and it's a one-off) there's no harm to the fund in my explaining why I was willing to pay what I paid.

Bid at : 25.2
Higher bid (because of contract change) : 26.5

I should clarify a point in the above post.

When I refer to a trading profit of 8% per week that's measured as a percentage of the fund's own capital.  The capital actually used is the fund's profit + bond-raised capital, so the percentage return on capital USED is actually lower (though for most historical results there were no bonds - so historically it's actually pretty accurate).

A limit is set on number of bonds that can be issued (face-value of 150% of fund's own capital) and on interest rate payable (1/3 average trading profit %) such that the rate paid isn't allowed to exceed the returns generated on actual capital used anyway (if it falls near there then I have to start buying back bonds - if it falls below it I have to force-recall all bonds at a markup to face value).

The 0.6% profit comes from LTC-ATF's trading.  To take a snap-shot right now (we're up a bit since last report):

The total assets LTC-ATF manages (ignoring shares SOLD in pass-throughs as those aren't tradable) are:

47.07 BTC worth of BTC cash and BTC denominated securities
plus 9.6k LTC worth of LTC cash and LTC denominated securities

Bonds sold have a face value of 35 BTC

All of those funds are used for trading and (now) to run the pass-throughs.

Now if we didn't have the bonds issued we'd only have 12.07 BTC in BTC cash or BTC-denominated capital - which means we couldn't do anything like the amount of trading the fund actually does.  That leads to two questions:

1.  Is the extra trading profitable by enough to pay for the bonds?
2.  Would the fund be better off selling more units in itself (where there's no commitment to pay dividends) rather than selling bonds?

The answer to both of these questions is a resounding yes in my view.

The cost to support the bonds is 0.6% of face value per week - so with 35 BTC worth of them out there that's a whopping 0.216 BTC per week we need to make in extra profit to pay for them.  That's buying 2 shares at 1.0 and selling them at 1.1.  Every week since starting the bonds they've generated far more profit than that.

Here's some of the very early trades I did on S-Dice - prior to that I'd made another deposit and bouhgt some as a float for the pass-through.

01/16/2013 22:17PM    863    Sell    S.DICE    500    0.005807    2.9035    -0.0145175    8.51370531
01/16/2013 22:13PM    861    Buy    S.DICE    500    0.00539589    -2.697945    -0.01348973    5.62472281
01/16/2013 22:08PM    860    Sell    S.DICE    500    0.00569016    2.84508    -0.0142254    8.33615754
01/16/2013 21:59PM    857    Buy    S.DICE    500    0.00525471    -2.627355    -0.01313678    5.50530294
01/16/2013 21:27PM    541    Fund    BTC    1    6    6    0    8.14579472

You can see that after 2 buys and 2 sells all of 500 shares we'd made .35 profit - that's more than this week's bond payment already covered.  And we wouldn't be on that platform at all were it not for the bonds.

We also have made far more than that on BTC.CO this week - so if you took ALL BTC profits and allocated a percentage of it to bonds you'd still easily see the bonds covered.

But that's just the tip of it.

Consider the 2 pass-throughs - which again couldn't be run without the bonds capital providing the liquidity to keep orders refreshed.  The fund makes around 1-1.5% profit on each sale (more if we manage to buy below lowest ask).  On what we've sold so far in the few days the pass-throughs has been running that's made 0.4 BTC + whatever we've made by buying on bids rather than asks.  And that last bit is where the real profit potentially comes from.  Consider the very first S.DICE I bought (these are the very first transactions on my CoinBR account - immediately before the ones above.  Note that the tat end is available balance - which was altered by other orders that hadn't filled yet so doesnt mean much here).

01/16/2013 20:29PM    855    Buy    S.DICE    500    0.00503208    -2.51604    -0.0125802    0.64553972
01/15/2013 12:07PM    803    Buy    S.DICE    500    0.00462803    -2.314015    -0.01157008    1.67441492
01/15/2013 01:52AM    541    Fund    BTC    1    7    7    0    7

Those blocks were bought at .0046 and .005 but sold at the lowest ask of around .006 - another 0.5 BTC profit.

So just from looking at the first few trades on CoinBR and adding worst-case profits from the pass-through we see a bit over 1.2 BTC profit - over 5 weeks of dividend for ALL the bonds when under half the capital from them is used for that area.  And that's ignoring that once shares in a pass-through are sold the funds gets 1% of their dividends as well.  There's been more profit on there since - and a fair bit on BTC.CO as well this week (none whatsoever on Bitfunder or Crypto - but they've both had weeks when they made enough for 3 months of bond dividends for ALL bonds)

The bonds were issued for two reasons:

1.  To reduce the fund's own exposure to BTC - giving more control to investors to choose and manage their own exposure to different currencies.
2.  To retain as much profit as possible for holders of actual units in the fund.

Point 2 works precisely because  the average profit we make per week on capital is far over 0.6% (ignoring currency movements its actually over 8% on average).  That has built in assumptions that profit is similar on BTC to LTC and that the extra capital can be put to use with similar profitability to old capital (or, more importantly, with a profitability significantly greater than the liability the dividends represents).  So far I'm confident those assumptions are valid (some weeks our BTC stuff does better than our LTC stuff - other weeks its the other way round, but it balances out).

But do bear in mind the fund is still tiny - the rates of profit being achieved wouldn't be deliverable if it was an order of magnitude larger (unless the BTC/LTC securities market also increased by an order of magnitude).  And there IS a not insignificant risk with the bonds - as the fund itself absorbs all trading losses, leveraging bond capital does leave open the possibility of larger losses if something gos badly wrong.  I try to mitigate that by diversification and by selling out positions at the first sniff of trouble (unless I'd already priced it in) even if that means taking a small loss.

If you want to invest you're welcome - however the hard part would be getting units of the fund in the first place.  The only units on sale are a few of my own at prices of around double current NAV/U - and I can't see any reason why the fund itself would sell new units when we can sell bonds that only pay out 0.6% of profit.  Which isn't to say bond-holders get a bad deal either - with LTC falling vs BTC this week the face value (at which they can redeem at ANY time for a small admin fee) has shot up as did their dividend (expressed in LTC) though obviously it was still only 0.6% of the new higher value.

But if you put up bids at a good markup you may find a seller (it won't be me).

I have a question. Where is the 0.6% per week interest coming from on your bond? I'm not saying your not making money, I'm just asking if it's profitable to run the bond. I'm considering investing in it since I.... (can't believe I'm saying this) like what your doing with ATF.

Well both pass-throughs are now live and there's been a decent amount of trade, especially on S.DICE.

Exchange-rate : 0.004 (it seems to be dropping through this having climbed back a little overnight).
Adjusted NAV/U : 24.8175
Bid at : 24.2
Higher bid (for those unhappy with the motion passed) : 25.4

The pass-throughs are making a slow but steady profit for us - and we realised some decent profit from S.Dice I bought before the motion was passed (when it became obvious price was going to break through to well over 5.0).  I also traded some profit for us on S.Dice.

We ran out of cash on CoinBR last night to keep selling more pass-through shares (deposits are manually approved - there were 3 there for operator when he logged in this morning).  I've increased the cash we use to operate the pass-throughs (pulled a bit from BitFUnder - where it was no longer needed as I've totally stopped trading S.Dice passthrough there and on BTC.Co).  If necessarily I'll sell some more bonds to increase capital available further - but will wait to see whether trade volume dies down before doing that (the cost of bonds is small to us - but ANY cost is less profit for us if we can get by without it).

I'm expecting this to be a record week for us in terms of profit (though maybe not in terms of actual trading profit - a decent chunk of current profit comes from the exchange-rate change though we're over 10% in actual trading profit already).

I'll be posting pass-through news in this thread (to avoid bumping multiple threads).

S.Dice saw a small drop overnight.  Up until just now there was one sell order significantly below the rest - so some LTC Global investors got some pretty cheap shares.  As I type I have the last of that batch up for sale - after which price will rise again to match the new lowest Ask (unless another cheap order shows up).  As LTC seems to just have started dropping again, price may rise as well due to that.

S.BBet still has around same trading ranges as yesterday.  Bids at .001,  Asks at .0013 then a big hole in asks up to .002.  Yesterday I obtained some at just over .001 and sold 1k of those at just over that (I bought 20 then someone else scooped the other 980 I sold).  Prices at moment reflect the lowest ask of ~.0013 but we DO have a bid up just over .001 and will sell some at that lower price if it gets filled.

Before buying shares in either pass-through I'd advise anyone to take a look at the markt for them on MPEx and at the exchange-rate and work out roughly what price you should be paying.  Because I'm trying to match the market as best I can, I can't leave large blocks sitting up unattended (too much risk to the fund) so at times the lowest asks on LTC Global will be from resellers - and they may not always be especially good deals.

Exchange-rate : .00419 (currently very volatile)
Adjusted NAV/U : 23.607
Bid at : 23

Higher bid placed at 24 to buy-back at over NAV/U from anyone disagreeing with the motion to run pass-throughs.  This is pretty irrelevant as there's significant higher bids already up.

Trading profit for the week has now passed 10% - in fact it'd be even higher but I've already written down 20% (100 LTC) of the ticker costs for the pass-throughs (as with previous ticker I'll be aggressively marking it down quickly).  A fair chunk of that is due to currency movement - but actualy profits from trading ignoring currency impact are around 7% (8% if you counted in the marked-down ticker fees).  We also have some decent unrealised profits in a few assets (valued on book at below what I could sell at) so looking like another good week for us.

Both pass-throughs got moderator approval overnight - and the first units of S-DICE are up for sale.  S.DICE price has been rising over the last few days and is likely to shoot up into a bubble before long in my opinion (there's very little asks left before a 10% -15% rise).  If anyone wants to gamble on that, now would be the time - though you'd be taking a risk on whether I'll be around to process sells back if you try to sell out at peak.

S.BBET won't be put up for sale just yet - as previously (and elsewhere) discussed.

Ended up creating pass-throughs for both S-Dice and BitBet.  Had an exception thrown first time I tried to make the S-Dice pass-through so tried again and got same exception.  Then spotted that it had actually charged for two securities and created them - seems the exception was thrown after creation whilst trying to notify moderators.

Having made two tickers - and planning to make the second in next few days anyway - I got burnside to rename the second, so both are now up for voting.  There's discussion threads for the pass-throughs on both BTCtalk and LitecoinTalk.

Assuming they get past the moderators I'll begin selling shares in the S-Dice one immediately (I've already done a bit of profitable trading on S-Dice covering about our first 4 months of fees to CoinBR and 10% of our listing fees) as we hold shares in it.  The BitBet one I don't plan on selling shares until the trading range narrows - I don't want to buy at top of range and run the risk of trading moving to the bottom in return for a gain of 1.5% if we sell shares.  I will, of course, sell shares in the pass-through for it if either someone commits to buying at the Ask price or I manage to pick some up at the Bid end of the range.

Hopefully my contracts have covered everything - I tried to make them shorter and simpler than the previous ones.  If anyone spots something that need correcting please point it out.

Sounds great to me.  You have my vote.

There's no way the fund at present can justify spending 30 BTC on registering with MPEx.  Maybe at some point down the line we'll be able to - and the contract for the pass-throughs will explicitly make provision for that.  At present I don't have a clear view of the extent to which the fund can usefully trade on MPEx (the only way to get a clear view is by actually doing so - for example I have no way of knowing whether two competing orders are from the same person unless one of them's mine).

Indeed there's a non-zero risk of Jurov being hit by a bus: same as there is for me.  Jurov has already offered that, in the event I vanish, he would accept a list of investors and settle with them.  He will also have authority to verify that I hold shares to back the pass-throughs (GPG signed statements verifying this are already in his plans) and to delay any withdrawals I make if there is any question over that.  So at least investors will be gaining some mitigation of risk in return for the additional counter-party risk using a broker adds.

Exchange-rate : 0.0043
Adjusted NAV/U : 22.91129
Bid at : 22.4

Profit for the week has continued to grow - in part from weakening LTC and in part from actual trading profit.  So far this week all profits have been on LTC-Global and BTC.CO (last week the biggest profits were on Bitfunder - with good performance on Crypto and very little profit on BTC.CO : showing the benefits of operating on a range of platforms).

The motion passed with no votes against it (majority of shares held by people other than myself voted yes as well).  As I did last time a motion changed the contract, I will be offering to buy back shares at above NAV/U for the next week (until 23:59:59 GMT on 23rd January).  At present there's a bid up by the fund for 50 units at 23.5.  I will reimburse from my personal funds the 1.1 LTC above the fund's normal price for any units sold back (At this juncture I am inclined NOT to relist them for sale as we have more than sufficient LTC-denominated capital for the immediate future).  If anyone wants to sell back more than that - or wants me to update the order before selling (in case NAV/U has risen) then feel free to PM me.

I will shortly create the asset and contract for our first pass-through which will be to Satoshi Dice.  I HAD intended to to BitBet first but at the moment the price is in a small slump (it was to be expected due to the way the IPO is being done - which I'll explain when I do get around to doing it).  Creating a pass-through when the price is falling is very risky for our fund - as we could easily end up buying shares then selling the pass-through to them at a loss (to be accurate - the risk isn't in creating the pass-through, it's in populating it with stock).  S-Dice, on the other hand, is rising at present with a very narrow spread which is ideal both for us and for potential LTC investors.  In fact my fear is that the price of it may over-shoot its reasonable range before we get approval for the pass-through listing (there's remarkably little of it for sale and a very heavy order book).

Accounting for the pass-throughs will be very straightforward.  All shares we hold to which we operate pass-throughs will be listed as long-term with the total volume held shown in each week's report.  These will be valued  at the mid-point between highest bid and lowest ask.  The number of units sold of each pass-through will also be listed - and that number of underlieing asset discounted when calculating both total assets and net assets (those shares 'belong' to the investors in the pass-though and can't be traded - so aren't assets of the fund in any meaningful sense).  The value of shares committed to pass-throughs also (pretty obviously) can't be counted as BTC assets towards the ratio we need to hold to ensure bond backing - but unsold ones (equally obviously) can.

As with all other assets we invest in, I will be aiming not to commit more than 10% of total assets to a single share.  This will slow down the rate at which we can sell shares in the pass-throughs but is absolutely necessary to ensure we don't over-expose ourselves to a single asset.  For S-Dice (which is traded on BTC.CO and BitFunder) our exposure is considered to be all units we hold or have bids on across all platforms less the number of sold shares in our own pass-through.

I think CoinBr is a great platform.

Have you considered going direct to MPEx?  The up-front cost is steep, though there is a referral discount I believe, but the transaction fees are lower, (0.2% to the seller, 0% to the buyer) there is no maintenance fee, and the risk to the passthru assets is lower.  I think rini17/Jurov is a good op and we've discussed the security of CoinBr at length (it's pretty good) to where I'd be comfortable using the platform personally.  When you're operating a passthru you have to set the gold standard and the risk of Jurov getting hit by a bus is non-zero.

Cheers.

I'm now putting a motion up for vote:

The following motion is being put up to vote on :

--- MOTION BELOW THIS LINE ---

This motion is to make an addition to the contract for LTC-ATF:

A new section to be added to the contract as follows:

PASS-THROUGH OPERATION

The fund manager is authorised to run pass-throughs on LTC-GLOBAL to securities issued on exchanges other than LTC-GLOBAL. 

Costs associated with creating these pass-throughs will be charged to the fund and treated as an non-realisable asset depreciated to zero over a period not exceeding 20 weeks.  No additional management fee may be taken for administering these pass-throughs (any profit from them would be treated as normal LTC-ATF profit and management fee applied as usual).

The following restrictions are placed in respect of these pass-throughs:

1.  With a single exception LTC-ATF must always hold at least as many units of a security to which a pass-through operates as (units outstanding + units for sale).
a)  The exception is that this may briefly be theoretically broken whilst buying back pass-through units from an investor.

2.  No pass-through may offer any guarantees in respect of the performance of the underlieing asset.  Specifically, no guarantees may be offered by the manager in respect of either future prices or dividends of any security to which a pass-through is operated.

3.  Risk of failure of any asset to which a pass-through is operated, along with risk of failure/default of any platform on which those assets are held or transacted MUST be passed on to purchasers of units of the pass-through.

Manager has authority to define the detail of how pass=throughs will be managed as he sees fit within the above parameters.

--- END OF MOTION TEXT ---

As with bonds I've kept detail out of the motion - so as to avoid the need for modification of the contract if any minor change needs to be made to current or future pass-throughs.

At present it is my intent only to offer pass-throughs to investments on MPEx - starting with S.DICE and S.BBET.  These will be purchased vis CoinBR - where we now have a working account and can trade MPEx securities on behalf of the fund as well as for pass-throughs.

I am proposing the following fees on them:

1.  A spread of around 2.5% on buys/sells.  Around 1% of this will be eaten up by fees to us (transaction fees, currency conversion fees, currency movement fees).
2.  A fee of 2% on dividends.  These would be converted based on exchange-rate mid-point, meaning we actually only make around 1% ourselves sometimes - depending on whether we need to actually convert currency or not.

The biggest potential profits come for LTC-ATF in the following situations:

1.  The traded range of a security to which we run a pass-though moves significantly and we can either sell or buy on the pass-through at a significant profit compared to buying/selling the underlieing asset.
2.  We manage to buy shares at Bid price then sell them on the pass-through at Ask price.

The risks to LTC-ATF are two:

1.  There is little/no interest in something we run a pass-through to - and we lose the 250 LTC ticker fee for it.
2.  We buy shares to sell in a pass-through and their price drops before we sell them, forcing us to sell at a loss.  This is balanced by the chance that we buy and the price rises before we sell - allowing us to sell at more than our standard 2.5% markup.

CoinBR has a 0.09 BTC per month fee (plus 0.5% per transaction).  We need to trade a volume of about 5 BTC in total pass-throughs per month to cover this.  As we'll be trading on our own behalf anyway this is largely irrelevant.

To cover the costs of a ticker for a pass-though, my estimate is that we need to trade around 25 BTC-worth of that security.  That could be 25 BTC of sales or 12.5 BTC of sales and 12.5 BTC of buy-backs.  Provided I pick securities with decent value I don't see that being a problem - there's a lack of good investment opportunites on LTC-GLOBAL right now.

Our actual margins are slightly lower than those of most pass-throughs (when you take into account that we're absorbing exchange-rate conversion fees and movement fees) which will hopefully make our offerings fairly attractive: our profit will hopefully come from volume and from smart trading on my part to increase our actual profit above the headlined 2.5%.

There is no guarantee the motion will pass - I currently personally hold just under 50% of units in LTC-ATF (I sold some recently at steep markups to NAV/U and bought a chunk of our bonds) so at least one other investor will need to vote yes for the motion to pass.  If there's any significant opposition (No votes) then I'll vote No myself anyway and run the pass-throughs personally (I have no inclination to drive out long-term investors by making changes/extensions to what the fund does against their wishes).  If the motion passes then, as with the previous motion, I'll offer a buyback above NAV/U for a week afterwards for anyone who disagrees with it (that option has been available for a while anyway - with buys over NAV/U up from myself and others).

We already have an account on CoinBR - setup last night - and have some funds there (and orders up).  I moved funds from BTC.CO to there (as we had most spare funds there and there was no fee for the transfer).  Will sell some more bonds now to replace the BTC.CO funds - even if we don't go ahead with the pass-through we'll still want to trade on CoinBR/MPEx.

One last unrelated point - I've now received confirmation that we do actually hold 10 units of ASIC-MINER.  Had been hoping we held 16 - but the 10 in spread-sheet was correct: we must have sold some shortly before GLBSE went down (explaining the extra 0.7 BTC we received as I'd guessed).

Exchange-Rate : 0.00448

Adjusted NAV/U : 22.66454
Bid at : 22

We've made a decent start to the week - though not quite as spectacular as the growth may at first seem to show.  Although on first glance we're up over 5% a decent chunk of that is due to LTC falling significantly vs BTC (with ~25% of our holdings BTC-denominated a drop in LTC/BTC rrate of 10% converts into a rise of ~2.5% in NAV/U).  If we look at actual trading profits we're only up just over 3% - which is still reasonable for only being 1 day into the week.  We'd be up more if I hadn't had to liquidate a holding at a loss to avoid exposure to bASIC (where there's now significant questions over when and even IF their ASICs will be available).

I'm out for most of the rest of the day - will see about making some progress on getting our pass-throughs sorted tomorrow.

WEEKLY REPORT




We ended the week with a trading profit of just over 14%.  At one stage it looked like we may not make any profit at all (the CryptoStock scare) then shortly after that it looked like we may make almost 20% (LTC dropped heavily for a while before recovering today).  I'd estimate that we make 2-3% trading profit per week from normal buying and selling of shares - with good weeks (such as this one and last) coming when I manage to get one or two highly profitable deals in addition to the normal fare.  Don't assume that I always make profit on deals either - there have been a few occasions when I've had to sell off assets for less than I bought them for (one this week I sold at a loss about 5 minutes after I noticed my buy order had been filled) or have had to mark assets' value down in the book.  In general I'm more aggressive about marking things down in value than marking them up - I'd rather undervalue our holdings than overvalue them.

I've given plenty of consideration over the past week about how to resolve our current surfeit of LTC-denominated capital.  My suggestion last week was to dividend some of it out - then replace it with more BTC-denominated bonds (either directly allocated to investors in lieu of dividends or just sold on the open market).  That still remains a feasible option - however we then run the risk that if our need for capital grows we could reach the point where we can't sell more bonds without massively exposing ourselves to heavy losses if only 1 or 2 investments go bad.

What I'm now considering is expanding our operations a bit.  Specifically, I'm looking into this fund running some pass-throughs (on LTC-GLOBAL).  The two assets I'm considering for initial pass-throughs are SatoshiDice and BitBet.  Both of these are listed on MPEx - I wouldn't bother running pass-throughs to anything on BTC.CO/BitFunder as there's no barrier of entry to anyone just making an account there and buying the originals themselves.

The fund would:

Cover the costs (ticker for each and  0.09 BTC/month brokerage fee)
Buy the shares that were then sold in the pass-throughs

All profits from the pass-through (cut of dividends plus margins made on buying/selling) would be treaeted just like any other profits the fund makes.

There's two specific risks the fund takes on if we do this:

1.  That we buy shares then their price collapses and we either can't sell them or have to sell them for less than we buy for.  This is actually almost irrelevant - as it's precisely the risk we take on in every trade I make already.
2.  That there's insufficent interest in the pass-throughs to make back the cost of tickers and cover broker fees.

Risks that we DON'T face are:

1.  Exchange-rate exposure,
2.  Changes in value of the underlieing assets.

All sold shares in the pass-throughs would give neither of the above risks to the fund - as the liability due to the investors in the pass-through would be exactly matched by the value of the underlieing assets we held.  And the two would move in tandem.

As both of those assets are BTC-denominated, the capital used to buy them would be largely bond-raised - but it would still soak up some of our surplus capital.  The actual capital needed would be pretty small - as we'd be buying small batches as and when needed: not buying some huge chunk then praying we could sell them.

I need to do some proper calculations to work out exactly what level of interest we'd need to make this a profitable proposition for the fund - and obviously won't intend to proceed unless I'm confident the fund will make some extra profit from it.  Any thoughts/feedback on this are welcome.  Note that I COULD just run the pass-thoughs myself and keep all profit (or loss) for myself.  I'd prefer, however,  to have everything run from one account - and to be able to use all funds where they're needed rather than keeping seperate wallets and having to do pointless currency conversions.

Management fee this week is 6 units (rounded down from 6.07) which will be transferred shortly after posting this.

I've updated the OP of this thread with up to date results history and have also updated the indication of where our funds are typically held.

Looks like Crypto situation is resolved.  BTC withdrawals have been reenabled and are working there and on Vircurex (same problem and same owner).  Seems like they lost some funds but are covering it themselves.  Obviously I can't be sure they actually have enough cash to cover all deposits - but I could never be sure of that anyway (and same's actually true for ALL exchanges we operate on - none have public segregated deposits on display).

I withdrew just under half our balance on there anyway (as for a semi-related reason we don't need quite so much there) leaving us with just 3 BTC there.  I'm now trading again on there.

Exchange-rate : .00495

Adjusted NAV/U : 21.5477
Bid at : 21.0

The LTC/BTC exchange-rate has seen a lot of movement in last few days (prompted undoubtedly by BTC rising vs USD which nearly always triggers a fall in LTC/BTC due to arbitrage - with the low level of orders making the price fluctuate around a bit before settling). Will almost certainly do our weekly report tonight as not sure how much I'll be around tomorrow.  With crypto back functioning it's definitely been a very good week for us.

Not such good news today I'm afraid - whether it's bad news or not isn't yet clear.

At some point overnight the wallet on Cryptostocks was compromised (not OUR wallet - the site's own one).  At present there's just a news item up saying "Withdrawals are currently deactivated."  When I first logged into the site maybe an hour ago there was a longer news item saying that their main wallet had been compromised and that everyone would need to use new deposit addresses and that withdrawals would be suspended.

No information has been provided on how much (if any) actual funds were stolen/transferred.

At present our balance on Cryptostocks is 5.982 BTC and we hold no other assets there (the 1.15 BTC increase in this since last report is the profit we'd made on there so far this week).

Obviously worst case is the site is bust and we lose that ~6 BTC.  Best case is they only lost a small amount (or nothing) in a hot wallet and our funds are intact.  If a clear (and credible) statement is made that all depositors' funds are intact then we'll continue trading there as before.  If withdrawals are reactivated without any such statement then I'll immediately withdraw all our funds.

For now I'll be placing Bids by the fund as though the money had all gone - but I doubt that's actually the case.

In the absolute worst case (funds there totally worthless) it basically just wipes out this week's profits.  So I've already decided that even in that event, all of the loss would be applied to the fund - and the face value of bonds would not be reduced.  I've also checked and even if those funds were totally vanished we already still meet all necessary targets for servicing the bonds - i.e. we still have sufficient BTC-denominated capital etc.

Exchange-Rate : .00499

Adjusted NAV/U (assuming funds on Crypto intact) : 21.364
Adjusted NAV/U (assuming funds on Crypto gone) : 19.1349

Bid at : 18.7

Trading is possible as normal on Crypto (and our balance shows as intact) - but I won't be buying anything until the status of funds is clear.  I'm performing a clear of all orders on LTC-GLOBAL so noone is left with a bid over NAV/U up that they wouldn't want up with this new information.  I'll then place a bid with my personal funds at just over full NAV/U - so any smaller investors who want out can get out.  I personally expect our funds will become available in full - but have no right to make others act on that belief: hence the fund's own bid being placed conservatively as though the funds will not be returned (so there's no risk of dilution of value for investors if some sell out).

Obviously I am making no trades myself on LTC-ATF until after I've cancelled the order book.

Exchange-Rate : .00514

Adjusted NAV/U : 21.014388
Bid at : 20.5

Had a few decent trades overnight (I bought the shares before going to bed and they sold whilst I was asleep) which pushed us up over 10% adjusted NAV/U growth so far this week.  LTC falling in price has also contrbuted to apparent profits - without the exchange-rate movement we'd only be at about 9.85% profit for the week so far instead of at 11.4% (Those percentages are trading profit - increase in adjusted NAV/U is lower due to project management fee deduction).

Exchange-Rate : .00538

Adjusted NAV/U : 19.4900979
Bid at : 19.1

Off to a steady, if not spectacular, start this week.  In contrast to previous few weeks the majority of profit so far has been on LTC-Global (though we've already made enough BTC-denominated profit to cover this week's dividend on the bonds).  Hopefully this pickup in activity on LTC-Global continues now the holiday season is out of the way.

New securities (mainly GLBSE relistings) are popping up on BTC.CO and Bitfunder - which means more opportunites for profit.  It also means more opportuniteis for fuckups - as someone found out when they overlooked (due it not being publicised well) that there'd been a 30:1 split on RSM and bought shares at what would have been a bargain pre-split but was about 15 times value post-split (our fund wasn't involved in this trade at all).

New bonds are being issued up to a total of 2500 - with funds from this batch earmarked for Bitfunder (in fact the funds are already on their way there).  Bitfunder doesn't allow leveraging same funds across orders on multiple securities in the same wat LTC-Global/BTC.CO do - so unfortunately we have to keep more capital there to maintain same volume of orders.  Because of that I have to pass up marginally profitable trades - but there's enough decent opportunities there to still make trading there worthwhile.

Weekly Report




Well, officially it didn't quite manage to be a 10% profit week.  We got over 10% trading profit then LTC rose significantly vs BTC pushing profits down below 8%.  Then LTC fell back against BTC, not quite getting back to 10% profit for us on the week as I type this (it may well be there by time I finish posting - but have to take a snapshot at some point to do the report).  In fact we still DID make over 10% trading - just it doesn't show in results as I wrote off the last 150 LTC of the bond ticker cost.

We have 1900 bonds in the wild now - I sold 100 to an order on the market when exchange-rate rose past the price it was at.  Of course exchange-rate then moved back other way - so whoever I sold to won't have any complaints.  Despite that we still have over 20% of fund capital exposed to exchange-rate changes.  As discussed previously, the obvious two solutions (sell more bonds and/or convert some BTC back into LTC) aren't really all that feasible - as we just don't need more LTC-denominated capital right now.

I have, however, figured out a wait around it.  What we ideally want to achieve is ALL of the following:

1.  Decrease or at least not increase our LTC-denominated capital.
2.  Keep our BTC-denominated capital the same (or a small increase wouldn't do any harm).
3.  Reduce the percentage of fund exposure to BTC.
4.  Ensure we keep bonds measured as a percentage of BTC-denominated capital below 90% (around 85% would be ideal - right now its 64%).

This can ALL be achieved by one simple measure - increase the number of bonds without actually selling any.  So the amount of capital the fund controls would be unchanged - just the BTC-denominated portion would now consist far more of bonds, lowering the fund's exposure to currency movements.

Based on current fund breakdown this would be done by issuing to every owner of units in the fund 2 LTC-ATF.B1 bonds for each unit they hold of the fund.  I would then further need to convert around 3 BTC-worth of the fund' LTC reserves into BTC.  We'd then end up with slightly more BTC capital than now (3 BTC more), slightly less LTC (3 BTC-worth less - around 550 or so) and exposure to BTC for the fund down from 20%+ to 12%ish.  Investors would still own the same percentage of fund as before.  NAV/U of fund units would drop by the value of 2 bonds - and future growth on those units would be at a higher percentage (assuming we make over 0.6% profit per week).  Total value of 1 unit + 2 bonds would be identical to the value of 1 unit had the bond issue not happened - and exposure/total profit for an investor would also be unchanged if you just held onto the bonds.  But of course you can then choose to decrease your BTC exposure by selling the bonds (or increase it by obtaining more on the market).  Were this to go ahead I'd offer to buy bonds at 100% face value from anyone who didn't want them (buy them with my personal account that is) and, of course, would offer a buy-back at over NAV/U on fund units if anyone simply didn't like the idea at all.

The principle behind what I'm suggesting is simply to try to reduce (as far as possible whilst maintaining obligations to bondholders) the fund's exposure to BTC - so that investors who WANT such exposure can choose to gain it to the extent they want (either by buying our bonds, holding BTC or doing anything else they choose).  Personally I actually WANT a decent amount of BTC exposure - but the correct way for me to get that is by investing seperately to the fund in BTC (obviously my preference is the fund's own bonds) so that I control the ratio.

The change would have minimal impact on management fees - I'd actually lose out on spread-sheet calculated fee due to bond payments being made before fee is worked out (so i'd lose out on 10% of the new bonds' weekly dividends).  But that would be balanced out by unit price being lower, so rounding down having less impact.

As the change would lower NAV/U, should new units need to be issued in the future (only likely if trade volume on the exchanges grows much faster than we make profit - we'd still have space to issue another 30 BTC or worth of bonds even before making ANY more growth) then I'd commit to offering them first to existing investors at NAV/U in ratio to current holdings - so noone lost out on the percentage of fund they hold due to the devaluation of units followed by issue of new units.

There's also a simpler alternative - issue a one-time dividend on the fund (of around 3.5 LTC per unit) then just sell new bonds on the market.  Easier for me to adminstrate - and could do it in conjunction with allowing investors to reserve 2 Bonds per unit they hold which they can buy for the value of the dividend (Dividend would be precisely the value of 2 bonds).  That would mean investors who didn't want bonds could just do absolutely nothing - and those who DID want bonds would just need to do an email exchange with me confirming the account name from which the dividend would be returned (and to which bonds would be sent).  I'd tend to go with the latter approach - as it avoids anyone who doesn't want bonds having to do anything at all.

Summary of Suggestion :

1.  A one-off dividend to unit-holders of 0.02 BTC (paid in LTC obviously).
2.  Sale of new bonds with a face-value equal to the total amount dividended.
3.  Unit holders would be entitled to purchase up to 2 bonds for each unit of LTC-ATF they hold at exactly face value (locked in at exchange-rate at time of dividend) - remainder would be sold on open market at usual rate.

Summary of impact of Suggestion :

1.  Reduced exposure to BTC for LTC-ATF - allowing investors better to balance their own exposure and minimising exchange-rate caused fluctuations in NAV/U.
2.  NAV/U of LTC-ATF units would fall by 0.02 BTC.
3.  Fund would have lower NAV - but same capital under its control.
4.  Funds controlled would be slightly less LTC-denominated and slightly more BTC-denominated - reflecting where growth is more likely and reducing need to issue more bonds in the short-term.
5.  Growth of NAV/U in future would be expected to be a slightly higher percentage - but a slightly smaller absolute number (ino change in either when aggregated for any investor who accepted and held 2 bonds per unit).
6.  Management fee would tend to decrease slightly as a percentage of profits but increase slightly as a number of units (very small difference in both cases - and often probably unchanged on both counts due to rounding).

Feedback (from anyone - but especially from investors) welcome - it may well be that noone except me actually cares about what extent the fund has exposure to BTC (or about accurately balancing their own exposure).  There's no desperate rush on it - so it's not an actual proposal yet.  It's just a suggestion on how the fund could address an issue that - whilst hardly disastrous - is presently not ideal.  Do note that originally there was no plan at all to deal with this - as back then nearly all trade was in BTC on GLBSE so there was no alternative other than massive BTC exposure.

Bid at : 18.6 or thereabouts (looks like currency has moved whilst typing all this up - so will calculate it after sending management units).

Management fee of 4 units - which will be transferred shortly.