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Questions about a potential bond
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Darth Bane
Polly want a cracker
#1 - 2012-01-11 03:01:07 UTC
I'm interested in gathering some information on a bond but before it is opened I have several concerns that I would like addressed by people with more experience in a virtual market.

- I am a market trader with all current liquid assets tied up in market orders. With no real collateral to give, what security or peace of mind can I give my investors?

- With an uncollateralized bond of 15b, is 8% ROI over 3 months enough? I would definitely understand if potential investors sought a higher return on a more risky investment.

The isk will be used to purchase 3 jump freighters to be used in and out of low sec transporting purchased goods to trade hubs for a high margin. The influx of business has been so acute that I need the added safety and speed of a jump freighter making trips deep into low sec several times a day. If needed, I have more than enough isk tied up in the market to liquidate and pay back any amount borrowed within 24 hours of a request, as well as any interest earned to that point. This would also be the case in an extreme scenario where one of the JFs are destroyed.

Would anyone be interested in such a bond? I would put a 100mil minimum loan just for the ease of keeping up with investors.

I appreciate any input that can be given. I will open this bond if enough people are interested.
Block Ukx
420 Enterprises.
#2 - 2012-01-11 03:14:03 UTC


If you had 15B to lend, what would it take to convince you that the borrower is not going to run with your money?
Jacob Stiller
The Scope
Gallente Federation
#3 - 2012-01-11 03:19:43 UTC
What I've seen on this subforum, uncollateralized loans pay out at least 10% interest monthly.
Darth Bane
Polly want a cracker
#4 - 2012-01-11 03:20:48 UTC  |  Edited by: Darth Bane
Block Ukx wrote:


If you had 15B to lend, what would it take to convince you that the borrower is not going to run with your money?




Absolutely a valid argument, but obviously this has been overcome before - loans are given out from this forum quite regularly. I suppose the answer to that question is trust. The last thing I would expect is one person loaning me 15b, it is much more realistic to split the loan across several investors which poses less risk to the individual (though obviously there is going to be risk.)

I don't have an answer to those who don't want to risk an uncollateralized loan. I do, however, promise a fair ROI on those who would like to be a part of this investment.

I am simply asking if the terms of my bond are fair.


Jacob Stiller wrote:
What I've seen on this subforum, uncollateralized loans pay out at least 10% interest monthly.


That's a fair adjustment, and that is exactly the kind of input I am looking for. Thank you.
Mu-Shi Ai
Hosono House
#5 - 2012-01-11 03:40:13 UTC
Darth Bane wrote:
...which poses less risk to the individual (though obviously there is going to be risk.)


Why do people still insist on talking about risk in these terms? In the real world, risk refers to the possibility of an investment failing (i.e. a stock plummeting in price due to the failure of the company). In that case, we can say, "Okay, we'll compensate for the increased risk by promising increased reward should the investment succeed."

Whenever risk is mentioned around these parts, it's almost always in reference to the risk that an investment will be stolen outright, and yet we pretend--against all reason--that the same remedies for risk in real life will cross over to that entirely different premise.

Ultimately, no matter how small the individual investments are, no matter what interest rate you pay out, none of that mitigates the risk, or says anything about the chances, of you running off with the money.
Jacob Stiller
The Scope
Gallente Federation
#6 - 2012-01-11 04:29:46 UTC  |  Edited by: Jacob Stiller
Still, if the scam rate is x%, you can find an interest rate of y% per month where you'll come out ahead in the long run if you regularly invest in uncollaterized bonds. That being said, I have no isk to spare for bonds of any sort.

However, the following quote could be a Freudian slip:

Darth Bane wrote:
The last thing I would expect is one person loaning me 15b, it is much more realistic to split the loan across several investors which poses less risk to the individual (though obviously there is going to be risk.)


Make of that what you will.
Darth Bane
Polly want a cracker
#7 - 2012-01-11 04:41:56 UTC
Jacob Stiller wrote:
Still, if the scam rate is x%, you can find an interest rate of y% per month where you'll come out ahead in the long run if you regularly invest in uncollaterized bonds. That being said, I have no isk to spare for bonds of any sort.

However, the following quote could be a Freudian slip:

Darth Bane wrote:
The last thing I would expect is one person loaning me 15b, it is much more realistic to split the loan across several investors which poses less risk to the individual (though obviously there is going to be risk.)


Make of that what you will.


It's not a psychological blip, it's just ignorant to think anyone interested in investing in my bond wouldn't consider the possibility of a scam. Mu-Shi Ai is right, there is nothing stopping anyone who is lent money in eve from just keeping it.

That said, you're on to something that I have not thought of before. If the scam rate is (hypothetically) 2%, and your return is 12%, over several investments of the same amount you would come out on top by 10%.
Jacob Stiller
The Scope
Gallente Federation
#8 - 2012-01-11 07:11:34 UTC  |  Edited by: Jacob Stiller
That last segment of my post was just me having a little fun. If you lurk in this subforum for a while, you'll see that many of the regulars are paranoid as hell. They'll probably give you a thorough grilling sooner or later.

And you'd come out ahead by 9.76% per month on average with your assumptions. The going rate for collateralized loans is around 5% per month while uncollateralized go for 10% per month. Though the latter does depend somewhat on how much people trust you. This implies that this subforum thinks that the chance of a scam happening on any given month is around 4.5%.
Jacob Stiller
The Scope
Gallente Federation
#9 - 2012-01-11 07:21:17 UTC  |  Edited by: Jacob Stiller
Mod please delete. Accidentally hit quote instead of edit.
Mu-Shi Ai
Hosono House
#10 - 2012-01-11 07:44:49 UTC  |  Edited by: Mu-Shi Ai
Jacob Stiller wrote:
Still, if the scam rate is x%, you can find an interest rate of y% per month where you'll come out ahead in the long run if you regularly invest in uncollaterized bonds. That being said, I have no isk to spare for bonds of any sort.


If a person is going to scam, and you give them the opportunity to do it, there is a 100% chance that a scam will occur. That is really the only statistic that matters. What some other guys did in previous bond offerings bears no relation to what this guy will do on his. Talk of a "scam rate" is silly.

And I'm not trying to grill the OP. I'm just saying, how people talk about risk around here, thinking that they can provide any mitigation against scamming by simply boosting the interest rate or collecting smaller investments, is utterly silly.
Avensys
The Waterworks
#11 - 2012-01-11 07:56:14 UTC
Mu-Shi Ai wrote:
Jacob Stiller wrote:
Still, if the scam rate is x%, you can find an interest rate of y% per month where you'll come out ahead in the long run if you regularly invest in uncollaterized bonds. That being said, I have no isk to spare for bonds of any sort.


If a person is going to scam, and you give them the opportunity to do it, there is a 100% chance that a scam will occur. That is really the only statistic that matters. What some other guys did in previous bond offerings bears no relation to what this guy will do on his. Talk of a "scam rate" is silly.

It's not silly as long as you take into account that a higher interest rate comes with some degree of adverse selection (legit business owners care about interest rates, scammers don't).

No sensible investor expects to make a profit on any single investment. It's always about profit over a long series of investments none of which represent a large share of his capital.

Based on how you define risk, a smaller investment does indeed reduce risk (as variance increases quadratically).


You seem to suggest that there is a difference between:

(a) There is a x% probability that the investee is going to scam. The dice is thrown as soon as he writes his offering and the result will be revealed to me directly after I send isk.

(b) There is a x% probability that the investment will fail. The dice is thrown after I have sent isk but before the principal is returned.
Mu-Shi Ai
Hosono House
#12 - 2012-01-11 08:25:28 UTC  |  Edited by: Mu-Shi Ai
Avensys wrote:
You seem to suggest that there is a difference between:

(a) There is a x% probability that the investee is going to scam. The dice is thrown as soon as he writes his offering and the result will be revealed to me directly after I send isk.

(b) There is a x% probability that the investment will fail. The dice is thrown after I have sent isk but before the principal is returned.


The difference is that in the latter case, the investor and the investee are both talking about dice, more or less. In the former case, only the investor is.

A risk assessment only applies if I can be sure (under various legal guarantees) that the investee means to put all his/her skills to bear in order to make the proposed investment succeed. A risk assessment can't tell me anything if the investee intends to run off with the cash from the outset.
Scott Ryder
Ministry of War
Amarr Empire
#13 - 2012-01-11 10:33:12 UTC
Provide collateral and I'll gladly cover it myself at half the interest rate.
papamike
Aliastra
Gallente Federation
#14 - 2012-01-11 12:06:17 UTC
Mail sent ingame
Gatan Hahran
Brukterer
#15 - 2012-01-11 12:54:05 UTC
i think there is zero chance that you will raise 15 billion isk for a lowsec operation and with no MD history. Even if it was a hisec operation the chance would be 1% probably.
i saw you bought a carrier pilot 2 months ago, its ready for supercap now? heard that ships go for 14-15b these days :)
Darth Bane
Polly want a cracker
#16 - 2012-01-11 12:59:29 UTC
Gatan Hahran wrote:
i think there is zero chance that you will raise 15 billion isk for a lowsec operation and with no MD history. Even if it was a hisec operation the chance would be 1% probably.
i saw you bought a carrier pilot 2 months ago, its ready for supercap now? heard that ships go for 14-15b these days :)


With further research you'll also see that he was sold a little over a week ago so that I could put more isk into the market.
(buy thread: https://forums.eveonline.com/default.aspx?g=posts&m=330719)
(sell thread: https://forums.eveonline.com/default.aspx?g=posts&t=50795)

I appreciate the constructive replies, I will open the bond this evening and see what interest I can gather.
Gatan Hahran
Brukterer
#17 - 2012-01-11 13:03:44 UTC
Darth Bane wrote:
Gatan Hahran wrote:
i think there is zero chance that you will raise 15 billion isk for a lowsec operation and with no MD history. Even if it was a hisec operation the chance would be 1% probably.
i saw you bought a carrier pilot 2 months ago, its ready for supercap now? heard that ships go for 14-15b these days :)


With further research you'll also see that he was sold a little over a week ago so that I could put more isk into the market.
(buy thread: https://forums.eveonline.com/default.aspx?g=posts&m=330719)
(sell thread: https://forums.eveonline.com/default.aspx?g=posts&t=50795)

I appreciate the constructive replies, I will open the bond this evening and see what interest I can gather.


Further research is usually done in the bond thread. Threads like this one are suited for the light-hearted surface-trolling.
Darth Bane
Polly want a cracker
#18 - 2012-01-11 13:05:12 UTC
Gatan Hahran wrote:
Darth Bane wrote:
Gatan Hahran wrote:
i think there is zero chance that you will raise 15 billion isk for a lowsec operation and with no MD history. Even if it was a hisec operation the chance would be 1% probably.
i saw you bought a carrier pilot 2 months ago, its ready for supercap now? heard that ships go for 14-15b these days :)


With further research you'll also see that he was sold a little over a week ago so that I could put more isk into the market.
(buy thread: https://forums.eveonline.com/default.aspx?g=posts&m=330719)
(sell thread: https://forums.eveonline.com/default.aspx?g=posts&t=50795)

I appreciate the constructive replies, I will open the bond this evening and see what interest I can gather.


Further research is usually done in the bond thread. Threads like this one are suited for the light-hearted surface-trolling.


Fair enough.

I'm surprised people aren't more concerned about giving isk to the sith.
Darth Tickles
Doomheim
#19 - 2012-01-11 14:19:40 UTC
Avensys wrote:



You seem to suggest that there is a difference between:

(a) There is a x% probability that the investee is going to scam. The dice is thrown as soon as he writes his offering and the result will be revealed to me directly after I send isk.

(b) There is a x% probability that the investment will fail. The dice is thrown after I have sent isk but before the principal is returned.


The difference is in the "information asymmetry".

http://en.wikipedia.org/wiki/Information_asymmetry
Vaerah Vahrokha
Vahrokh Consulting
#20 - 2012-01-11 17:22:17 UTC
Darth Bane wrote:

Absolutely a valid argument, but obviously this has been overcome before - loans are given out from this forum quite regularly. I suppose the answer to that question is trust. The last thing I would expect is one person loaning me 15b, it is much more realistic to split the loan across several investors which poses less risk to the individual (though obviously there is going to be risk.)


Well, the risk concept goes deeper than that.

- Amount that is risked

- Percentage of scam chance.


The former is indeed mitigated by sharing the investment across multiple investors but then, the reward is also collectively shared.

The latter is not mitigated at all. A scam will subtract 100% of capital + interest off everyone, be it 1, 10 or 1000 investors.

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