Quote from: Rebelution on August 20, 2013, 05:20:39 AM

Quote from: Vycid on August 20, 2013, 04:55:54 AM

Quote from: tehelsper on August 20, 2013, 04:33:29 AM

Quote from: Vycid on August 20, 2013, 02:46:45 AM

Quote from: DeathAndTaxes on August 20, 2013, 02:34:02 AM

Quote from: rarefied on August 20, 2013, 02:31:34 AM

A PCI-E card with two 8-pin power connectors can draw up to 375 W total. 150 W from each of the two connectors and 75 W from the motherboard connector. This will require large fans a la the latest video cards that draw this much power.

Well it can't pull any power from the motherboard. BFL claims the product can be connected by EITHER PCIe or USB. So when connected by USB that would mean it isn't connected to motherboard's powerlanes. So either it is going to be three 8 pin PCIe connectors or they will need to run it overspec. No I am not making this up.

Yeah, I agree. If I was an AM investor I would be 0% worried about the Monarch (I think more of the Venture Bros. loser supervillain than a butterfly). I'm bearish on AM, sure, but BFL is a tremendous fuckup of a company.

Vycid, I agree as well and know you are bearish on AM, but what is your price target? How low does AM have to go before you think it's fairly valued? 1, 2, 2.5, 3? If it's dividends were to stay stable, I think it's undervalued at its current level, but its priced lower due to risk of dividends dropping, which is definitely a possibility. Right now, I think investing in AM (at least new coins) is a gamble on them beating competition to gen 2 ASICs and shipping/deploying them consistently. If they lose, it doesn't really matter what their current dividends are because they will trickle to nothing within a few months.

I'd say AM is a Hold at the current time, don't buy or sell until some of the uncertainty of gen 2 chips disappears over the next 2-3 months.

If dividends stay stable I'll eat my hat. Or I'll buy a hat and eat it, as appropriate.

In my opinion a lot of AM's potential for value has been expended in the last couple of months. Rather than pursuing aggressive growth options (like becoming a Bitcoin->USD payment system, opening a Bitcoin exchange, opening a trustworthy Bitcoin bank, and offering a USD-denominated Bitcoin wallet, all of which are synergistic growth options), they've paid back all their dividends. That's disappointing. ~0.5 BTC a share is enough money that they could have become all of those things under competent leadership.

Growth companies are supposed to grow. AM is the first "growth" company I have ever seen that has managed to shrink its revenue. I only consider it a growth company because it is priced like one.

"Priced like one?!" you exclaim, "but it's got a 25% APR!"

Right. And how long does that last? Everyone should understand the following, read it very carefully.

AM owned the market for ASICs at the point when they were MOST profitable. This is why their dividends were so incredible. But, even if AM continues to dominate the market for ASICs in the next generations forward, the performance per watt for all ASICs will not vastly increase. This means that the potential profit per ASIC over the cost of electricity will shrink.

Think of what it was like with GPUs for a while. It was very profitable, but then everyone started doing it and electricity costs got in the way. You were fighting the electricity bill. You could run them in low-cost electricity regions, you could tune things to reduce power consumption, but it simply wasn't as profitable as it was when the bitcoins/watt ratio was higher.

AM's ability to sell their hardware at incredible prices (or run it for incredible profits) depends on the PROFIT MARGINS of that hardware, not the potential coins generated. If the value of the coins mined is barely higher than the cost of the electricity consumed (and the competition will make sure that happens one way or another), then AM isn't making much money and the dividends vanish.

This is a http://en.wikipedia.org/wiki/Tragedy_of_the_commons situation, for those familiar with the concept. There are only so many bitcoins to go around, everybody wants some, and it requires resources to get them. Before long the value of the resources expended in obtaining the bitcoins (electricity, hardware manufacturing cost) will approximate the resources required to obtain them, despite the fact that it would be in everyone's best interest to keep the difficulty low (and not waste money on electricity). But humans are greedy motherfuckers.

I should point out that AM's electricity rate is (probably - I only know the rates for Shenzhen, AM's HQ) the worst in China, and not particularly competitive with people smart enough to start up ops in places like North Central Washington.

So, margins cannot and will not remain stable. The dividends will start to drop heavily within the next month, I suspect.

My price target, based on all this? 1.2 BTC per share. Failure to beat the competition would reduce that further.

Wow, what a wall of absurdity. Lets break it down:

"In my opinion a lot of AM's potential for value has been expended in the last couple of months. Rather than pursuing aggressive growth options (like becoming a Bitcoin->USD payment system, opening a Bitcoin exchange, opening a trustworthy Bitcoin bank, and offering a USD-denominated Bitcoin wallet, all of which are synergistic growth options), they've paid back all their dividends. That's disappointing. ~0.5 BTC a share is enough money that they could have become all of those things under competent leadership."

It is disappointing to pay out 5x of your IPO valuation in less than a year?! Are you insane or are you just completely clueless when it comes to investments? As you mention, bitcoin mining may suffer from the tragedy of the commons, so it makes sense for Friedcat to pay out the short-lived economic profit due to our comparative advantage immediately. The other option is to re-invest, but if it is a maturing industry then your rate of return will be lower than your investors' initial rate of return of just paying profits immediately. Therefore it makes sense to disburse the profits to shareholders.

Friedcat has mentioned a couple of times that exchanges are much more higher risk than his operation. Labcoin's fiasco suggests he is not lying. Friedcat's expertise is in crafting mining devices efficiently, running an efficient farm, and delivering devices as promised. He is wise to concentrate on his strengths.

"Growth companies are supposed to grow. AM is the first "growth" company I have ever seen that has managed to shrink its revenue. I only consider it a growth company because it is priced like one."

This point directly contradicts your tragedy of the commons argument. Mining / hardware operations could not possibly be "growth" businesses if it the costs of mining bitcoins exceed the revenue. Instead, as you mentioned it is becoming a mature industry where only competitors with cost advantages will be able to earn economic profit. So it makes sense for Friedcat to make the operation leaner, and seek to achieve cost leadership. You claim that his energy his higher than his competitors, but you do not know that.

Obviously dividends will fall as more miners / companies fire up their ASICs. That is inevitable, but companies that produce low but steady rate of returns are still very valuable. Friedcat has a major longterm advantages with cheap labor, low production costs, and a lean supply chain. His franchising idea is very forward thinking and he has consistently validated his business acumen. AM's value lies not in its short term dividends (although they continue to impress) but in its long term value as a lean mining operation.

It IS dissapointing. What if Microsoft or Apple had gotten to 5x their IPO, then said "OK, we made our shareholders happy!", converted to 100% dividends, and stopped growing?

And no, it doesn't contradict the tragedy of the commons argument. How do you think it does? Because Friedcat has pidgeonholed himself into mining? There is a shared valuable resource (minable bitcoins), and everyone is going to scramble to get them until we begin to approach the point where it isn't profitable anymore (factoring in the cost of labor). Then it will be a brutal cost-cutting battle between ASIC companies. The profit margins will be very small, just like it is for real PCB and electronics assembly companies.

http://en.wikipedia.org/wiki/Foxconn

NT$3.452 Trillion revenue, NT$81.59 Trillion net income, for a margin of 2.36%. Imagine if AM only kept 118 BTC for every 5000 BTC of hardware sold.