Topic: Why Miner corps, bonds and other assets are THE WORST INVESTMENT YOU CAN MAKE. - page 2. (Read 3942 times)

I think the part we are all overlooking here is that there is a camera with a naked ladies picture on it, and I haven't read anything about the picture being developed to put on the internet.

Why'd that piss me off lol. If BTC went back to 5 then Jane wouldn't have to contend with the 5/12 part, just with the 1.5/2.1 mn part. And if difficulty also went down, it'd be even. And if she also recanned a can of worms in a smaller can than the original she'd prolly make pancakes out of water droplets and spontaneously materialize unicorns and nice thoughts.

There's a reason nobody [without the backing of the free money printing press] buys Spanish or Italian bonds IRL. That reason is "currency risk".

 Obviously, investments on the "THE BTC Stock Exchange" would have made you 100% profit.

OP's TL:DR  Mining corporations in their current state have currency risk.

Nice job pointing that out. Hate to piss you off, but wouldn't the value of those assets go up a lot if we go back to June prices? According to EMH this is just as likely as us doubling again.

TL:DR Duh!

Can you talk about how people who bought BFL stuff on preorder are screwed over for the same reason?

To grasp the obvious we must first understand the wonders of depreciation. Suppose you have a single use Polaroid camera. If this camera is used to make a picture all its value is consumed, and it is subsequently worth zero (maybe a little more for its usefulness as a doorstop). Thus, if you take your Polaroid to the nude beach, take a picture of a naked lady and sell that picture for $10 you have not made $10. You have made $10 minus whatever the Polaroid cost you. If the Polaroid cost one dollar then you made nine. If the Polaroid cost twenty you lost ten. It's what it is.

Now suppose Jane, Joyce, and Josephine each have one thousand bitcoins on April 13, 2012 (it's a Friday).

Jane goes out and buys miner gear, either directly (FPGA or w/e) or indirectly (buys shares in mining company, buys miner bonds, w/e). Joyce invests her money in any non-mining related bitcoin denominated assets. Josephine just sits on her bitcoins.

Today is August the 13th (not a Friday) and the comparison between the girls is as follows:

Jane owns about 66% of the mining stuff she used to own (she nominally owns exactly the same amount, but the increase of diff from 1.5mn to 2.1 mn has taken a bite out of it). To add insult to injury, the new market value of this 66% fraction of what she used to own is a little under half. To wit, if one item cost 100 dollars in April it could be bought with ~20 bitcoins. Today, due to BTC being ~12, the same item can be bought with a little over 8. Thus, what used to be worth 1000 bitcoins back when Jane bought it (on a Friday) is now worth 1000 x 0.66 x 5 / 12 = 275. That's right, an eye popping QUARTER of what it used to be.

This is depreciation.

If Jane's investment paid her dividends of 10% each month, calculated in BTC at the nominal value she has 400 BTC to sweeten the 725 BTC loss, leaving her to eat about half that. By comparison to Josephine, who just sat on her BTC, Jane has realized a 32.5% loss through depreciation provided her mining stuff did in fact pay 10% a month. If it paid a more actually-in-the-market 3% she's looking at a 50% loss. In fact, in order to fully compensate her depreciation, Jane's assets would have needed to pay no less than 181.25 BTC each month, which is a nominal 18.125%.

So, when comparing her yields with Joyce's, Jane is well advised to subtract 18.125% monthly. Obviously if Joyce invested on GLBSE the odds are pretty good she realized a negative too, but that's obviously a story for a different time.

Fun?