Quote from: cusdog on June 14, 2013, 04:34:23 PM

Deprived, speaking of investing, have you considered in future offerings (i.e. when the current batch goes to zero) limiting the issuance size? I ask because if this becomes a popular instrument you might end up having cash drag become a problem for later iterations.

There's a secondary point here that I've meant to address in more detail for a while - the issue of how long this fund will run for.

I believe a lot of people are massively misunderstanding the fund - and incorrectly assume that it will close down in a matter of months with me then starting up a new iteration. I don't believe that to be the case. I fully expect that in a year's time this fund will still be running - just with much lower prices for the 3 assets. There's three ways in which the fund can close - let me address them in order from least likely to most likely and then focus on the main one.

1. I decide to stop running it. I don't see any likely reason for this - but it's a theoretical possibility.
2. Capital falls below 100 days dividends for MINING and there's a forced closure. For that to happen in the next year difficulty would have to stop rising VERY soon - I don't believe anyone thinks that ASICs are suddenly going to stop being sold.
3. SELLING votes to close the fund.

For 3 to happen, two things have to occur: I have to put up a vote for closure and SELLING investors have to pass it. Now the contract says nothing about when I'll put such votes up. There's nothing sinister in that - my policy is simply that I'll raise such a vote if the market tells me SELLING investors would want a vote. How can I tell when SELLING investors want a vote? Well that's actually VERY easy. Let's do a bit of quick math. We'll focus on the normal situation (where capital is in the 390-410 days range). It'll never be above that - or SELLING would get the extra - and if it's below 365 then SELLING would never want closure (as they'd get zero back).

So let's say capital is at 400 days dividend - which is ALWAYS where it would be after a dividend to SELLING. And SELLING's best place to end is always going to be immediately after a rise in difficulty.

If the fund were to close, 365 days of that would go to MINING and 35 to SELLING. i.e. MINING would get over 91% of the remaining capital.

What does that tell me? It tells me that unless MINING is trading at nearly 10 times SELLING there's no way SELLING would vote for closure.

Why? Because any SELLING investor who WOULD vote YES to closure would be better of selling their SELLING on the market than voting YES and then receiving back less.

So there's a really easy way for me to tell whether there's any point in having a vote. Now consider this question:

How long do you think it is going to take before SELLING trade at around 1/10th the price of MINING?

Because until then there's no likelihood of closure in the most common scenario. And I don't see that point being reached this year at all.

And let's end by getting back to the other point - about limiting supply of PURCHASE. The above is ONE of the reasons why it's undesirable to limit PURCHASE - without a supply of PURCHASE I couldn't rely on market prices to assess whether closure was worth discussing : as MINING+SELLING=PURCHASE would no longer be (approximately) imposed as fact on market prices.