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Mella Elcus
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Posted - 2011.08.14 06:14:00 -
[1]
With MD being filled with almost daily offerings, most of them scams or scams in progress, I'm beginning to wonder if there really is any scenario where someone would definately benefit from raising public money.
Sure, people need money every now and then, but in between lending from corp/alliance, selling assets, buying GTC for isk (which could be "repaid" by buying PLEX's for isk eventually anyway) public funding from MD really seems like a poor choice.
I mean what's with all these station trading bonds? Generating a steady 10% profit on say a 10 billion capital station trading takes some work, and if you went with the MD funding package most of it isn't even yours. People who know how to make that kind of isk should have no trouble funding themselves.
To me it just seems that a bond/offering seldom is worth the effort.
A scam is either A: planned from the start, or B: turned into a scam along the way due to boredom. B just proves my point...
For example, did Bad Bobby really need to keep returning for more and more public money? Wouldn't he had done just fine by himself with less hassle too once he got started? I can't remember what the other recent bitter vets scams were all about (cosmo, brock etc) and what their reason to ask for funding here in the first place were, but please fill me in.
There seems to be only four reasons to start a bond/offering: 1. Scam - obviously 2. RP - Look at me I'm a bank director in space (also known as for fun) 3. Patch speculation - And how often is that possible at a large enough scale? 4. Noobs - I don't know better and/or I don't want to buy a GTC to get started trading even though it will most likely pay off in the long run (5. Supercap construction?: The only type of manufacturing that actually requires a lot of isk to setup?)
Seriously, are bonds here on MD nothing more than scams and RP projects?
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Elise DarkStar
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Posted - 2011.08.14 06:39:00 -
[2]
Public offerings - Any justifiable reason (besides fun)?
no
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Stormhammer Investments
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Posted - 2011.08.14 06:45:00 -
[3]
You're looking at it wrong. It doesn't matter if the offering is a scam or not. There's a probability it is a scam
Perhaps most of them are.
What you should be looking at are the people investing. They know they could be scammed. They are taking a gamble and they are doing it every time. They know this. You know this too if you think about it.
It's the same with real life trading. All gamblers.
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Kethas Protagonist
Protagonist Ventures
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Posted - 2011.08.14 07:45:00 -
[4]
Edited by: Kethas Protagonist on 14/08/2011 07:46:15 ...Ngh. Okay. Where to start.
First: MD's hardly "filled with almost daily offerings." It comes in cycles. Right now we're in a boom and there's a bunch of offerings floating around. Eventually someone will scam, investors will become more skittish, and it'll quiet down. Temporarily.
Second: Cosmo wasn't a "bitter vet scam." According to him, at least, he was a ponzi from the start.
Third: Are you referring to collateralized, or uncollateralized, loans? I think/hope we can all agree that collateralized loans provide an important service - letting people leverage their assets - with minimal risk.
Point the fourth: Are you asking if it makes sense to invest in (uncollateralized) loans, or issue them? For issuing them - being the debtor - I think it's pretty straightforward. If you can borrow money at 10%, and if you know ways to put capital to work that earns better than 10%, it makes sense to borrow. I know plenty of ways to invest capital that earns better than 10% (or I claim to, at least; you're free to doubt me), so for me, personally, it makes sense to borrow. Other borrowers may or may not. I have no idea.
If instead you're talking about the investors, then I actually agree with you. Handing isk over to people I don't know, with no real guarantee of getting it back, seems too risky to me.
There are two important caveats, though. First: that's a gut feeling based on what I, personally, know and think. Other would-be investors might know more and thus make better-informed decisions. For example, the creditors in my current loan might have spent a week tailing me in a fleet of anonymous alts flying covops ships, watched me fly from POS to hub to hub to POS to hub to hub to... and become convinced that I'm a legit industrialist before bidding. They're thus more informed.
Second: not every offering on MD is a scam. Some percentage of EVE players actually want to earn their income fairly, and that becomes a matter of demographics, not a matter of general skepticism towards every offering. Knowing what proportion of MD offerings end up actually being scams would be valuable information. I think RAW23 hired some people to review MD offerings going back a couple years - not sure what the results of that were, and indeed I'm not even sure if he'd would want to share it instead of keeping it to himself.
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Bad Bobby
The Dirty Rotten Scoundrels HYDRA RELOADED
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Posted - 2011.08.14 08:07:00 -
[5]
Originally by: Mella Elcus For example, did Bad Bobby really need to keep returning for more and more public money? Wouldn't he had done just fine by himself with less hassle too once he got started?
I was borrowing very large sums at 2%-4% interest. It's very easy to make a profit on that. So it was certainly worthwhile for me.
Why anyone would invest at such low rates is another question entirely.
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2011.08.14 12:17:00 -
[6]
Originally by: Mella Elcus I'm beginning to wonder if there really is any scenario where someone would definitely benefit from raising public money.
Yes.
_
Akita T USEFUL EVE LINKS collection |
TornSoul
BIG Gentlemen's Agreement
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Posted - 2011.08.14 13:41:00 -
[7]
Originally by: Mella Elcus I'm beginning to wonder if there really is any scenario where someone would definitely benefit from raising public money.
(Numbers are exaggerated for illustrative purposes)
Say you have 100M and are making 15% profit on that each month. That's 15M ISK/month.
Say you take out a bond for 10B ISK @ 10% - and can still make 15% on that. That's 500M ISK/month profit for you still.
In one month you've sex-tupled your NAV - Simply by borrowing ISK.
So even when you pay back the bonds, you're way better of, and much faster (this is the key point) than you would have been without the loan.
Pretty much a no-brainer.
BIG Lottery |
RAW23
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Posted - 2011.08.14 14:57:00 -
[8]
There are lots of good reasons for borrowers to borrow isk in game and they correspond precisely to the same reasons one would want to borrow money for in real life - to take advantage of opportunities that exceed your liquid capital. Any opportunity that will earn you more than the cost of borrowing will be worthwhile for you. At various times I have wanted to hold speculation stocks, run industrial operations, loan out isk and carry on trading all at the same time when my personal capital might have allowed me to only do one or two of these things. Sometimes the advantages are marginal (borrowing at 3% and lending at 5% for a 2% profit per month) whilst at other times they are very large (very active station trading or industry can bring in returns in excess of 100% per month at a cost of 3%).
So far, so good. A separate question is whether there is any need to be constantly expanding the amounts of isk you seek to raise and in this case your examples are more pertinent since activities are often not scalable beyond a certain point and diversification can only be pushed so far without running out of time. There can still be good reasons for seeking to borrow large amounts of isk but, on the basis of history, it seems that the majority of large offerings have pruposes that ultimately boil down to RP or scam.
This feeds in to the parallel question of whether it is worth investing. Collateralised investing is certainly worth doing if you hold the collateral and have spare isk that would otherwise be idle (or can raise extra isk for this purpose). And it is also pretty easy to make more than you lose when investing in uncollateralised offerings as long as you have some minimum standards, diversify your investments, treat large offerings as high-risk regardless of the reputation of the offeror and, most importantly, don't scale the investment to the size of the offering. On a purely quantitative scale, the vast majority of investment come good. However, the majority of large, high-rep investments scam or fail and it is these that give investing an overall big deficit when comparing total profits to total losses (think about how many sub 10bil investments would have to close successfully at 5% to compensate for the losses generated by EBANK and T4U).
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RAW23
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Posted - 2011.08.14 15:13:00 -
[9]
Originally by: Kethas Protagonist
Knowing what proportion of MD offerings end up actually being scams would be valuable information. I think RAW23 hired some people to review MD offerings going back a couple years - not sure what the results of that were, and indeed I'm not even sure if he'd would want to share it instead of keeping it to himself.
Unfortunately, most of my hirelings rapidly realised how tedious the data collection was and found other things to keep themselves occupied, so that project is currently becalmed until I get more time to organise it properly.
I did, however, collect a year's worth of data myself, with a sample of c. 90 offerings that were active in that time. I don't have my notebook to hand but the scam/default rate was under 10% overall (something like 8 scams iirc). Total losses to scams massively outweighed profits from interest payments but that was due very largely to Bobby (who was also responsible for three of the scam offerings (each offering rather than person was counted separately)) but if you diversified your investments equally and didn't scale them on offering size you would have made a very small profit if you invested the same amount in all 90. Once some basic discrimination is added in you get very reasonable returns quite easily (i.e.don't invest in anything over 50bil; only invest in audited offerings, etc).
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Taram Caldar
Royal Black Watch Highlanders Warped Aggression
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Posted - 2011.08.15 02:02:00 -
[10]
TBH this is a pretty dumb question Traders/manufacturers/etc borrow public money all the time to either take advantage of a opportunity or to just more quickly realize larger profit totals due to larger liquid isk to buy merchandise with.
The number of scams vs. the number of valid offerings has, historically, been fairly low. Raw already gave you the rough numbers. Speaking from personal experience I made over 10 billion isk in profits in the course of 1 year investing in ipo's, bonds and loans here in MD.
Scams are fairly easy to avoid if you use a bit of common sense. If you pay attention to how people behave in game and/or on the forums you can quickly get a feel on whether you think they're at all trustworthy. From there you can see from audits whether they can actually do what they say and if they're borrowing a reasonable amount of money.
Anytime you are investigating a potential investment if anything triggers your 'this doesn't smell right' meter then you should not invest. Anyone who watched me invest while I was doing it here will tell you that I was extremely picky about who I invested in. Because of it I made a ton of isk with no real effort. It funded all of my PVP with comfortable profits left over on the side.
So, yeah, it's worth it. You, the investor, just need to use common sense and pay attention to what's going on around you. Don't just invest because XYZ pilot invested. I remember many occasions where I chose to invest in something and like 4 or 5 other people would invest because I did rather than because they did their own homework. In all honesty: Those people were investing unwisely because they didn't take the time to figure out if THEY trusted the opportunity. They just followed what I was doing. Same went for other situations. I remember many investments where someone would invest who had a 'big name' and a dozen other people would band-wagon on just because that 1 person did.
Common sense goes a long way to protecting you from scams. But, as mentioned before, most offerings in this forum have, historically, been legitimate.
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Kethas Protagonist
Protagonist Ventures
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Posted - 2011.08.15 03:30:00 -
[11]
Originally by: Taram Caldar Don't just invest because XYZ pilot invested. I remember many occasions where I chose to invest in something and like 4 or 5 other people would invest because I did rather than because they did their own homework. In all honesty: Those people were investing unwisely because they didn't take the time to figure out if THEY trusted the opportunity. They just followed what I was doing.
If, hypothetically, you (Taram Caldar) do rigorously vet investments, and if, hypothetically, you have a history of investing profitably, what's wrong with following your lead? There's an argument to be made for buying what Warren Buffet buys and selling what Warren Buffet sells.
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Taram Caldar
Royal Black Watch Highlanders Warped Aggression
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Posted - 2011.08.15 05:44:00 -
[12]
Originally by: Kethas Protagonist
Originally by: Taram Caldar Don't just invest because XYZ pilot invested. I remember many occasions where I chose to invest in something and like 4 or 5 other people would invest because I did rather than because they did their own homework. In all honesty: Those people were investing unwisely because they didn't take the time to figure out if THEY trusted the opportunity. They just followed what I was doing.
If, hypothetically, you (Taram Caldar) do rigorously vet investments, and if, hypothetically, you have a history of investing profitably, what's wrong with following your lead? There's an argument to be made for buying what Warren Buffet buys and selling what Warren Buffet sells.
I would point out that yes, there's a reason to weigh that into your decision making process but it should NEVER be the only reason to invest. You should always invest as an informed investor and not just try to ride the coat-tails of someone else. There are times when the 'warren buffets' of the world take a 'long shot' that may pay off big just because they can afford to. I've done it once or twice myself. If you jump on when someone is taking a 'long shot' just because they jumped into the investment you could lose your ass :)
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Jerry Pepridge
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Posted - 2011.08.15 05:50:00 -
[13]
would like pledge 20b _________________________________________________
Misty McGinnity Doesn't have an iPhone. |
Vaerah Vahrokha
Minmatar Vahrokh Consulting
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Posted - 2011.08.15 10:24:00 -
[14]
Since I started recording my investments I have invested in 13 offerings and all of them matured succesfully. ROI has been from 4 to 15% a month per investment.
Auditing | Research | 3rd Party | Collateral Holding | EvE RL Charity |
Abdiel Kavash
Caldari Paladin Order Fidelas Constans
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Posted - 2011.08.15 10:36:00 -
[15]
Originally by: Kethas Protagonist
Originally by: Taram Caldar Don't just invest because XYZ pilot invested. I remember many occasions where I chose to invest in something and like 4 or 5 other people would invest because I did rather than because they did their own homework. In all honesty: Those people were investing unwisely because they didn't take the time to figure out if THEY trusted the opportunity. They just followed what I was doing.
If, hypothetically, you (Taram Caldar) do rigorously vet investments, and if, hypothetically, you have a history of investing profitably, what's wrong with following your lead? There's an argument to be made for buying what Warren Buffet buys and selling what Warren Buffet sells.
If, hypothetically, I noticed that people invest into what I invest, I would make an offering with an alt, invest into it, thus get others to invest, and run. Keep the ISK and the rep. ---
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Stealing Honest
Stealing Honest Speculation Group LLC
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Posted - 2011.08.15 22:31:00 -
[16]
The basic reason for a public offering is to take an idea you think is profitable, be it manufacturing, trading , banking .... and make it work using other peoples money. Then you can free up your personal Isk for other ventures, ideas, areas of the Eve world.
Simple Really.
SH
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Tau Cabalander
Retirement Retreat
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Posted - 2011.08.15 23:04:00 -
[17]
My first bond offering was for 10 billion @ 7.5% interest paid monthly, with no collateral, and for a 3 month period. I also paid out 1% bonus interest with the last payment.
By the time the bond finished, I had tripled my production capacity despite having paid out 2.35 billion in interest. Both myself and my investors benefited from the bond.
I could have done this with my own ISK, but it likely would have taken me two or three times as long to achieve the same thing. Most of the bond ISK was sunk into materials, and most of my own ISK went into BPOs.
I expect I'll be running another bond eventually, as I've not yet reached my production goals.
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Cassina Lemour
Minmatar Staner Industries
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Posted - 2011.08.16 16:01:00 -
[18]
In EVE the asymmetry favours the investee, while IRL the investor holds the favoured position.
In EVE the investor takes all the risk for marginal returns, that could in most circumstances be made easily from market making in any large volume market segment. If you can't make more than 5% a month flipping heavy water or pyrite
The investee replaces risk with work satisfying the investors requirements, but once they have the ISK they hold all the cards. There is little or no consequence and will actually be lauded in some circles.
So If you want my ISK tough luck, if you are prepared to give me ISK go ahead.
There is no RP justification for an investor because scammers are not playing that game. There is no financial justification. I don't any reason to be an investor in EVE other than being a gullible fool.
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Taedrin
Gallente Kushan Industrial
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Posted - 2011.08.16 18:07:00 -
[19]
Edited by: Taedrin on 16/08/2011 18:13:39 In an ideal world, you raise public funds in order to finance the rapid expansion of a pre-existing industrial/business project, or to provide the starting capital for someone's first major industrial/business project.
It would be fiscally dubious to raise public funds for any other reason, since following through with your obligations is a negative-sum game when compared with raising your own funds. IMO, the number one most important indicator towards whether a public offering is a scam or not (besides a player's history) is if there is a sound business plan and proper justification for paying the interest on the offering at a later date in exchange for immediate liquid ISK. ----------
Originally by: Dr Fighter "how do you know when youve had a repro accident"
Theres modules missing and morphite in your mineral pile.
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