Market Discussions

Only "issue" is that the collateral holders are likely/should be already aware of this.
Also why I would never accept AT ships, T2 BPOs, or similar as collateral. Nor should any other 3rd party really.

Otherwise, if you lack moral - it would work

I had considered doing this (not the scam part! ) when AT ships were rapidly appreciating a couple of years ago and I was taking a break, using PLEX or AT ships for the initial loan and then using the funds to purchase more AT ships, which I would also get loans on. In the end I decided against it in case I wasn't able to access EVE, although looking back everything would've been fine and I could've doubled the returns I got from investing in AT ships at the end of 2013.

As for AT ships, if you're paying any attention to them then you know what a safe price to value them at is, they're able to be quickly liquidated for 10-20% below retail. T2 BPOs are a bit more difficult to price, but there's a whole bunch of sales threads and completed contracts out there if you search a little.

@ Angelica Everstar: aren't your bonds leveraged, as in you initially put up a certain amount collateral, but not the bond's whole amount, exchange it for an appropriate amount of ISK, which is then used to buy more items that are to be used as collateral and so on?

I recommend seeing the movie "The Big Short" from 2015 if you haven't already. It touches on this subject.

The circular potential of this really intrigues me.
You set up a gamble, then another then another.
Only cash in the good ones, leave the bad ones on someone else's plate.
Each good one will cost you a small fee in interest and 3rd party charges, but you know what they are up front.
The bad ones you can dump at any time by defaulting on the interest payments, or extend if you believe the market might change by paying the interest payments.
Depending on how much you have to sink into the scheme you could make an absolute fortune on this.

Yeah that's exactly what;'s going on.

Have done this on a very small scale back the first time I speculated on pirate battleships (the day the pirate frigate rebalance was announced). I didn't have much capital at the time - maybe 25b total wealth.

It worked - I used 1150m of my money to buy 5 rattlesnake BPCs, then 'mortgaged' them for 1000m, then used that to buy 4 more. My ability to repay the loan was never in question, but a strategic default was an option if the projected price increases did not eventuate.

I've also unintentionally done this - during the leadup to the recon rebalance I borrowed five billion to buy Gallente T2 components (Magnetometric Sensor Cluster, Photon Microprocessor, etc) to build Lachesis hulls, and the collateral was other

I considered doing it again with three asset types over the last six months - morphite at the announcement of the zyd/mega ore rebalance (not doing so was a big mistake here), robotics at the time I was publically predicting the recent rise in price (I was less certain on this than morphite, although again it was a missed opportunity), and (ITEM REDACTED - MARKET OPSEC).

I've never gone deep on it though. Part of the issue is that people willing to lend tens of billions or more usually think much more about what the consequences are of using specific goods as collateral and the market impact of a firesale. Getting someone to accept 5 billion worth of Magnetometric Sensor Clusters as collateral, or 12 billion worth of Oneiros hulls, is much easier than getting someone to accept 75b of Magnetometric Sensor Clusters or 180b of Oneiroses.

As an example of this in action - I have about ten thousand Light Neutron Blaster II in hangars at the moment. Buy orders for them exist at 550k in several places, but there is no way I could liquidate all 10000 at 550k/unit - and that's a very high volume item.



Edit: I would *love* to see someone do this with PLEX; they might be able to spike the price gamewide by 200m if they do it over a while.

It would be like holding equities as collateral today. High risk assets should not be considered collateral.

Edit: And yes, a third party should not consider high risk assets as collateral, or if they do they should over-collateralize the loan because they are risking their reputation...and once that is damaged, good luck rebuilding it.

To be clear, if a third party is taking high risk assets as collateral then, eventually, it will blow up in their face and it will destroy their reputation and they will be done as a third party as suddenly people are out billions, maybe hundreds of billions or even a trillion ISK.

We have seen what happens when banks and investment banks do this. It blows up in their faces. Only difference here is that there is nobody to bail out the third party...or more accurately, the creditors the people loaning ISK in the first place--i.e. do this often enough and you'll destroy the credit market in the game.

Prudence...you are either prudent and we have a credit market or you are not and we don't have a credit market.

Recommended reading:

Lombard Street: A Description of the Money Market by Walter Bagehot.

All that means is you don't value the collateral at 100% of market price, for Tritanium there are buy orders at 6.00 ISK for 10b units currently, in addition around 10b units of Tritanium change hands per day so 1b even without buy orders would not take very long to liquidate. That many PLEX might take a while longer, but certainly not an unreasonable amount of time, PLEX have been a very safe place to put ISK in the past, and when CCP keeps adding uses to them, a minor blip of some expensive BPOs being introduced shouldn't worry anyone too much.

Agreed. Basically, people are being prudent, but even being prudent does not insulate you completely.

Very much so.

Damn copy'n'paste :D