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Mar Lee
An Army of None
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Posted - 2011.01.30 01:01:00 -
[1]
So I've been paying more attention to markets and trading recently (yay spreadsheets online) and I have a question for those of you who post requesting loans, bonds, offering investments, etc.
Why?
Let me clarify. Investors tend to insist - at least here on MD - that loans, bonds, and such be collateralized and backed up by a third party. So if I want to offer a 1 billion bond at 2.5% interest monthly, I'd better have a billion ISK worth of collateral to give to a third party to back that up.
Here's the problem. Imagine I want 1 billion ISK to play the market, and I have a rigged Bhaalgorn worth 1 billion ISK. As it seems to me, I have two options.
Option 1: - find a reputable third party and have him hold the Bhaalgorn as collateral - look for investors on MD; slowly collect 1 billion ISK - keep records of who has invested what - pay them interest every month - eventually shut down the bond, pay the original 1 billion back to investors, and collect my Bhaalgorn
Option 2: - sell the Bhaalgorn - invest my own money, pay nothing to investors - if I want a Bhaalgorn, I buy a new one
Option 2 seems to be faster and more profitable all the way around. The only reason I could think of to take Option 1 is if the collateral is something you absolutely cannot buy back later, e.g., a ship or item that can't be obtained in game anymore. And how many people have one of those? :)
So I guess this is a question to people who look for loans or offer bonds: why did you choose a public investment business model instead of staying private?
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Breaker77
Gallente Reclamation Industries
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Posted - 2011.01.30 01:04:00 -
[2]
Originally by: Mar Lee The only reason I could think of to take Option 1 is if the collateral is something you absolutely cannot buy back later, e.g., a ship or item that can't be obtained in game anymore. And how many people have one of those? :)
Alliance tourney winners would like to have a word with you
http://www.eveonline.com/ingameboard.asp?a=topic&threadID=1341805
There are plenty of other reasons to use collateral.
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Tutskii
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Posted - 2011.01.30 01:15:00 -
[3]
In the real world interest rates match risk, this is to say an uncolateralized loan would have a much higher rate due to the increased risk.
This is sometimes mirrored in MD, other times, an interest rate of 10% or higher is expected in addition to collateral (ridiculous).
However a main problem with replicating a functional banking system in EVE is that there is no central bank with standard rates so that there is a benefit in lending money. The cost of the money you borrow is the same for you as for he who lent it who tends to lend it out of a lack of desire to micro manage his whole fortune.
Honestly you can make a decent WH ship and get the money required for most any venture easily yourself. This does not scale to say super capital production, but then it is unlikely you will get that amount of investment capital from MD unless you are a quite skillful conman (or group of conmen)
TLDR: you are right, getting the money yourself is a better option.
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Kirichan
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Posted - 2011.01.30 01:30:00 -
[4]
Eve loans are more like borrowing money from a pawn shop.
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Caldariftw123
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Posted - 2011.01.30 01:33:00 -
[5]
There are several reasons to take out a loan with collateral, here are three ..
1) The Bhaalgorn may not sell for what it is worth (IE you may not get the price of ships AND rigs) and not as fast as you need the isk - using it as collateral will ensure you keep the ship and rigs in tact and get your isk when it is needed 2) the PIA of selling it and getting a new one might just outweigh it a bit for you 3) the most useful collateral is something that can increase in value, examples of this is either speculation items you think are going to go up or something like a BPO that can be researched/copied in the mean time. This allows you to utilize the isk held up by it and pay a small interest rate, in exchange for having the ability to make MORE isk with the borrowed isk+collateral value increase combined.
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Raid'En
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Posted - 2011.01.30 01:35:00 -
[6]
from what i read on MD before the only things which seems logic for me is for traders who hold some items waiting for price to raise, and use them as collateral while they use new funds to buy other things. but i don't have the impression that most of the guys asking for loan use this. so i'm also wondering like Mar Lee. i often though about asking a loan but ; if i want money it's because i don't have enough, so i can't give a collateral if i want money i need LOTS of, cause if not i could earn it myself with less pain than asking a loan. so i won't find a loan without collateral for that much isk ... so can't do a loan... like lots of people i suppose. ---------------- ** Wormhole Trading ** |
egola
Amarr
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Posted - 2011.01.30 01:55:00 -
[7]
well now a reason to put up a collateral (say lets use your bhaalgorn for instance) is that there are sometimes unbreakable assets that can't be sold at the time (rigged ships, speculative products etc) without losing isk, so instead of selling those items at a net loss you can always put it up as collateral for the isk. plus you can think of it as a hedge against future rising bhaalgorn costs if you will, and that the rigs you already have on it is an extra. (thats assuming that you aren't adamant at selling that bhaalgorn for the full cost through contracts)
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Elise DarkStar
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Posted - 2011.01.30 02:16:00 -
[8]
Originally by: Tutskii However a main problem with replicating a functional banking system in EVE is that there is no central bank with standard rates so that there is a benefit in lending money. The cost of the money you borrow is the same for you as for he who lent it who tends to lend it out of a lack of desire to micro manage his whole fortune.
You should stop posting here. You're an idiot.
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Tutskii
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Posted - 2011.01.30 02:20:00 -
[9]
Originally by: Elise DarkStar
Originally by: Tutskii However a main problem with replicating a functional banking system in EVE is that there is no central bank with standard rates so that there is a benefit in lending money. The cost of the money you borrow is the same for you as for he who lent it who tends to lend it out of a lack of desire to micro manage his whole fortune.
You should stop posting here. You're an idiot.
No U.
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Brock Nelson
Caldari T2 Technologies Unlimited SRS.
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Posted - 2011.01.30 03:21:00 -
[10]
Couple of things.
1. Ships are rarely accepted as collateral, even if it was, it would be valued very low as the market is pretty flux when it comes to pricing ships.
2. Blueprints are a better collateral. Simply because the price is basically set in stone by NPC. Another reason is that if you use your researched Chimera blueprint, you'd at least get it back at the end of the terms rather than having to buy another one at npc price and then spending couple of months researching it.
3. Most people would go public because private is not an option. If you're a couple months old player in this game, chances are that you probably don't know many players with lots of isk available to loan to you. Personally, I think anybody that ask for public isk should have already exhausted the private option.
Originally by: Rheeii
Whats he going to be probing with CORE probes?
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Cyaxares II
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Posted - 2011.01.30 09:17:00 -
[11]
Investors asking for collateral is just their maximum demand - it doesn't have to be the actual outcome of any negotiation.
If you agree to an audit that can confirm your trading/industrial history, chances are you will get investment.
And if you give MD the right "vibe" and have put some effort into a reasonable business plan you will probably get investment, too (there are certain types of personas that MD just loves).
Also don't underestimate the willingness of people to invest in a likely scammer because they believe he is still in the build-up stage (why scam for 1b when he can use that offering to gain some rep and scam for a much larger amount later on - small offerings tend to be pretty safe).
The "collateral or gtfo"-type comments only represent a small part of investors
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Corcyrus Endymion
Caldari Excessum Corporation Excessum Gaming
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Posted - 2011.01.30 10:05:00 -
[12]
As far as going public using collateral: I agree. Only in the case of things that *do* have a set value, but are slow to sell due to external reasons, can I see the validity of doing so.
However I went public without using collateral because I saw profit I could attain that I couldn't with the level of isk I had at the time. If you have valid reasons to ask for public isk i.e. you can get a higher RoI than you pay in interest, then and only then does it make sense to come on MD and start a IPO/Bond/etc.
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Raid'En
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Posted - 2011.01.30 11:01:00 -
[13]
forgot about the bpo RD thing... but it's a bit hard for me to understand why some 3rd party will bother securing that for months ; cause i take an alt stucked in a corp with lock role... but for each deal the guy need an alt... or else he'll need to put investissor bpo on his own lab, but then this cost him money and / or RD slots i don't really get it ---------------- ** Wormhole Trading ** |
PinkFish
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Posted - 2011.01.30 13:55:00 -
[14]
I successfully used Technetium as collateral to barrow ISK to buy Technetium. This is a good example of when selling your collateral would be counter-productive to the nature of your bond.
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I AM SPARTACUS
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Posted - 2011.01.30 14:48:00 -
[15]
Because of scam.
I AM SPREADSHEETICUS!
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Breaker77
Gallente Reclamation Industries
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Posted - 2011.01.30 15:15:00 -
[16]
Originally by: Raid'En forgot about the bpo RD thing... but it's a bit hard for me to understand why some 3rd party will bother securing that for months ;
On the BPOs I hold as collateral they get researched. It's a win-win situation. I make ISK and they get researched BPOs when the term is up.
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Dethmourne Silvermane
Gallente Northstar Cabal R.A.G.E
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Posted - 2011.01.30 17:38:00 -
[17]
Originally by: I AM SPARTACUS I AM SPREADSHEETICUS!
:swoon
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Mr Stoatcakes
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Posted - 2011.01.30 20:12:00 -
[18]
I've always been slightly confused by the majority of loan requests. I'm not some uber, incredible trader by any means and I'd never claim to be. I'm a day-trader between regions, who's done his homework and what I make is enough to enable my main to blow up whatever ships he fancies, get a "free" sub for the account and keep a nice chunk of dough in the emergency wallet.
But I've got to that point through learning. And of course in Eve, that means learning through making some truly awful, terrible mistakes and losing a lot of money in the process. I'm not suggesting that I consider every sub-billion request to be a scam by default - just that if you don't have that billion ISK to invest yourself, why on earth would anyone have any confidence in the investor?
Is it just me?
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Dzil
Caldari Caldari Independent Navy Reserve
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Posted - 2011.01.30 20:17:00 -
[19]
Originally by: Mar Lee
So I guess this is a question to people who look for loans or offer bonds: why did you choose a public investment business model instead of staying private?
In the case of a ship, or other easy to sell collateral, you're right: it does make far more sense to simply liquidate the collateral rather than pay out millions/billions for someone to hold it. And folks that might have made the top ten most trusted individuals in EVE have turned up scammers in the past year or two, so it's not like the collateral option is without risk. BPOs can work out a little better since you can improve the BPO through research while it is held. Depending on your corp ties, POS setups can function similarly: you can continue to use/benefit from them while their ownership (and thus ability to seize) is in someone else's hands. But at the end of the day, you could often liquidate any of these assets near cost and come out ahead of where the interest payments put you.
Now that said, if you can earn enough of a reputation that you can borrow isk without needing to collateralize it, then you have something beneficial. I remember not long ago Kwint came by looking for like 10 bil, offered his loan Dutch auction style, and ended up borrowing the isk at 0% interest. You cannot deny that's a benefit of reputation and good connections. Some are accused of trying to "grind MD Rep" like it's some meter in WOW, but in essence this is partially true: there's an intangible benefit to continuing to play nice in the MD market space. Therefore in my opinion, the collateralized loan is a tribute paid to network with those wealthier individuals in the public realm that you have no connections with in the private one.
Retired from corp sales. Time to spend some of this on pretty explosions :) |
Cheque Please
Hot Like Mexico
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Posted - 2011.01.30 20:36:00 -
[20]
Originally by: Mr Stoatcakes I'm not suggesting that I consider every sub-billion request to be a scam by default - just that if you don't have that billion ISK to invest yourself, why on earth would anyone have any confidence in the investor?
Is it just me?
I opened up my first bond with roughly 800m in my wallet, and I can say from experience that the extra 4.7b of investor isk helped me immensely. When station trading (which is really not very hard -- even bots can do it), sometimes you just don't have the money to capitalize on obvious market trends. Even with the 4.7b of investor money I was running on empty; and still, despite the fact that I am now Mr. Moneybags with a NAV of over 8.22 Trillion, I usually have < 50m in my wallet at any given time.
While that is all anecdotal evidence, the point I am trying to make is that bonds can be very helpful to shortchanged newcomers who may not necessarily know ALL the market tricks, but have enough sense to turn a decent profit.
tl;dr version: invest in offerings that contain haikus --- RL Meeting w/ Chribba
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Captain WitchHunt
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Posted - 2011.01.30 21:23:00 -
[21]
Edited by: Captain WitchHunt on 30/01/2011 21:23:16
Originally by: Cheque Please
Originally by: Mr Stoatcakes I'm not suggesting that I consider every sub-billion request to be a scam by default - just that if you don't have that billion ISK to invest yourself, why on earth would anyone have any confidence in the investor?
Is it just me?
I opened up my first bond with roughly 800m in my wallet, and I can say from experience that the extra 4.7b of investor isk helped me immensely. When station trading (which is really not very hard -- even bots can do it), sometimes you just don't have the money to capitalize on obvious market trends. Even with the 4.7b of investor money I was running on empty; and still, despite the fact that I am now Mr. Moneybags with a NAV of over 8.22 Trillion, I usually have < 50m in my wallet at any given time.
While that is all anecdotal evidence, the point I am trying to make is that bonds can be very helpful to shortchanged newcomers who may not necessarily know ALL the market tricks, but have enough sense to turn a decent profit.
tl;dr version: invest in offerings that contain haikus
Fair enough, I probably just lack the imagination/balls to go for the big stuff
Edit - alt fail, this is Mr Stoatcakes
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Hybok
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Posted - 2011.01.31 10:51:00 -
[22]
Edited by: Hybok on 31/01/2011 10:51:10 the only reason to use option #1 is to build some trust on the market to get access to more funds / more profit ...
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