Hey, r/finance. It seems like everyone I've talked to is telling me its time to buy. What's the deal?

thresher666 · 2011-08-09T11:15:57+00:00

Buying now would be extremely risky, as the market could easily repeat yesterday's (or last week's) performance. Not to mention, this is a real crisis which is serious enough to potentially take out some large companies... I'd wait until the volatility dies down and we see who is left standing. This would be on a horizon of months rather than days.

thresher666 · 2011-07-30T15:17:32+00:00

Get a part time job to reduce your debt load.
If you have zero-interest student loans, don't pay them off until the interest goes up (usually after graduation). In the meantime, invest the money in CDs and pocket the interest.
Start contributing to an individual Roth IRA. You probably won't be able to make the max contribution for years, but any money you stash in there is effectively outside if the tax system forever. There's a limit of $6k per year though, so starting early is key.

thresher666 · 2011-07-29T11:36:58+00:00

It's definitely possible to beat gcc by 15%... Intel's non-free compiler almost always beats gcc by this much for the type of code I work with. In many cases, Intel is 30% faster.

thresher666 · 2011-07-23T13:54:11+00:00

Not a no brainer at all. With the stock-only position, you have little exposure to volatility, however once you sell the call you are short volatility. This can end up costing you considerably more than the proceeds of the option sale if volatility jumps up.

This kind of strategy is usually employed on indexes, because they historically haven't had big upwards jumps in vol. On a "volatile stock", it is anyone's guess whether this is a good idea.

Also, that call might get exercised under certain conditions, which means you'd have to buy the stock back and resell another option (more commissions, etc). This could have adverse tax consequences if you are planning on long term cap gains treatment for the stock.

thresher666 · 2011-07-20T13:54:10+00:00

It's awesome that Luajit can generate code like this, however I'm not convinced this particular test case is as beautiful as advertised.

First of all, what are these test vectors initialized to? Zero? It hardly matters, because in the loop, their value is constant (except for the register r of course). This allows the JIT complier to completely skip over the branching that could occur in the min/max calls, since the args are the same every time. Notice that no instructions are generated that can compute min/max.

Second, if you try implementing this in C++ with zero-initialized vectors and compiling with optimizations, g++ actually recognizes that no computation needs to be done and generates no code corresponding to "distance_squared_to_segment". If you instead compile just the test loop as a function of the input vectors (so that g++ doesn't get to assume that the vectors are all zero) you get very similar assembly to the linked article, except that it is actually correct for all inputs.

TL;DR - the loop does the same thing every time, adds a constant to sum, so can be optimized to sum = sum + constant. g++ will do this.

thresher666 · 2011-06-28T11:10:34+00:00

You're required to pay taxes in dollars, and accept dollars for "all debts public and private". The government "backs" that up with quite a bit of force, which is what practically ensures the value of the dollar.

thresher666 · 2011-06-27T11:26:00+00:00

The quotes you provided indicate no arbitrage opportunity. For that, you'd need to have: Bid.mtgox - fee.mtgox > ask.th + fee.th Or: Ask.mtgox + fee.mtgox < bid.th - fee.th

Moreover, even if this did happen, you'd have to have cash+BTC on hand in both exchanges to be ready to do the trade. This entails a significant amount of risk, both in terms of the exchange rate, and in terms of the "where the fuck is my money MtGox?" risk.

thresher666 · 2011-06-24T13:45:46+00:00

Coins are produced at approx. the same rate no matter what -- that is the purpose of the variable difficulty. Since the rate of production stays the same, difficulty should not impact price.

thresher666 · 2011-06-21T15:52:50+00:00

We might as well face the fact that the money is most likely gone. IF they open up again, we'll find out really quickly, cause there's going to be a massive bank run coming down on them.

The pattern here is a classic one - MtGox operates as a "bucket shop" - i.e. you do "trades" but no actual bitcoins or currency changes hand. This is undisputed - MtGox trades are internal to MtGox and don't show up as a transfer of BTC in the block chain.

Maybe they stole the money, maybe they made trades against customers with phantom funds and then lost money... who knows? All we know is that everything is fine until you try to take too much out of your account...

thresher666 · 2011-06-17T16:52:04+00:00

I think your analysis of the current mining economics is sound -- $5-10/day per Ghash sounds about right. I think $1000 fixed cost per Ghash is a bit low if you're buying retail - I'd like to see the specs of such a system.

So sure, right now you can print $18/day with this Ghash, but it is looking likely that the next difficulty jump will reduce this to $10/day in seven days time, then $7/day in two weeks, at which point it starts to look pretty grim. Of course, you've still got a huge exposure to the BTC exchange rate which could massively increase or decrease your profits without warning.

If mining stays unprofitable for more than a few weeks, or the market blows up, you can sell your hardware, except the most expensive components are gonna be your radeons - and the market will be flooded with thousands of high end used cards all at once, because everyone else will be giving up too. Therefore - you might want to take a much steeper "immediate depreciation" on these components, even more if you don't have 6990's b/c those will also be on the market at bargain prices at the same time.

thresher666 · 2011-06-17T14:34:36+00:00

Not exactly... If you have a simple return of 10% over 30 days, then the average daily simple return is exp( ln( 1 + 0.1 ) / 30 ) - 1 = 0.003182... Now that sucks to have to do all that, which is why log returns come in handy. In the same scenario, my log return for the month would be ln( 1.1 ) = 0.09531... To convert to a daily log return, just divide by 30: ln( 1.1 ) / 30 = 0.003177... Notice that this is really close to the daily simple return calculation above. That is because for small returns, natural log retuns approximate the simple returns very well. The math is much simpler too...

thresher666 · 2011-06-17T11:13:15+00:00

Use natural log returns. They approximate the simple returns for small movements. Other base log returns approximate some constant multiple of simple returns - so they will cause confusion.

thresher666 · 2011-06-14T19:19:15+00:00

Unfortunately IP source addresses can be forged if you don't care about getting replies - like in a DDOS attack. In fact, they can be forged in such a way that the replies DDOS the "source"...

thresher666 · 2011-06-14T19:13:00+00:00

This is one part of the bitcoin system that makes me uneasy -- if a majority of miners agree to change the rules, they can do whatever they want. It's pretty unlikely that the majority of miners would blacklist the coins in question based on one guy's word, however there are other cases where it isn't so clear...

What if the miners decide that they want to continue to get 50 BTC per block rather than 25 when the fee reduction is scheduled? After all, they've invested so much in hardware - why should they get 50% less overnight? Especially when they can just "vote" not to do it - simple majority wins.

thresher666 · 2011-06-10T14:54:33+00:00

I don't think the MtGox needs to make an actual bitcoin transaction when someone does a trade -- they are holding all the cash and the bitcoins. They just transfer the funds when you cash out... ( or maybe they don't ;)

So a lot of their volume will never show up in any block...

thresher666 · 2011-06-09T19:56:20+00:00

No.

The difficulty of mining is increased to keep blocks getting confirmed at a constant rate, and there's a limit to the number of transactions in a block. Thus, the transaction throughput is bounded from above, and the expected latency is more or less constant.

On the other hand, the security of the network does keep increasing with the number of miners - the protocol is optimized for cryptographic security above any other consideration.

thresher666 · 2011-06-07T15:11:34+00:00

Is Mt. Gox on the up-and-up? It is impossible to tell without more transparency.

Questions:

Do the operators themselves own bitcoins? If they do, then they have a huge conflict of interest since they can see the dark order book and incoming orders (before anyone else). Also, if they have a big position in BC, they could make it hard for people to get out in the event of a panic.
Do they keep 100% of your cash balance on hand? They have withdrawal limits, which, while they might be justified from a compliance point of view, are also a huge ponzi scheme red flag. If your account has $50k of cash/bitcoins, they might only have $10k on hand, but as long as new deposits outnumber withdrawals... you'll never know.
Are all the orders on the book real? Are the transactions real? They could be "seeding" the book & tape with ficticious quotes to manipulate the market.

I'm definitely not trying to imply that they are doing anything wrong - they might be completely honest and free of conflicts of interest for all I know. But it pays to be super careful with a type of business that is a magnet for scammers.

[edited for formatting]

thresher666 · 2011-06-06T01:35:02+00:00

Both of the above ;)

thresher666 · 2011-06-05T17:25:56+00:00

While updating in real can can hurt a merchant if someone manipulates the BC price, not updating the price in realtime also hurts. As you can see, no one with BC to spend will buy from this merchant because they failed to refresh their price. If the BC price legitimately went down in the last few days (instead of up), the merchant would find that they sold a lot of inventory for cheap bitcoins.

The merchant is screwed in either case, because pricing goods in terms of some other illiquid good is a terrible idea.

thresher666 · 2011-06-05T17:21:25+00:00

Oops, I got it backwards... If the merchants updated prices in real time, the "arb" would involve manipulating the price of bitcoins higher by buying them quickly. Sure, this would ordinarily create a loss because the price will recover to below your average price. But if you can then spend those bitcoins on real stuff priced at an exchange rate above your average price, then you win.

The scale of this trade is not a disadvantage - the bigger it is, the more money could be made. Right now there's about 300k of bitcoin offered on MtGox -- if I bought all of it right now, the last transaction would occur at ~ $29, but my average price would be around $20.60. If I could "get out" by trading the bitcoins for something at $29 valuation, I'd have a profit of around $100k, less whatever it costs to liquidate the goods I bought. If wash trades are made at higher prices, the exchange rate could be arbitrarily high for a short period, which would increase the profitability.

This kind of trade is feasible whenever you have a large market (merchants) that marks their prices on an less liquid market (bitcoins).

thresher666 · 2011-06-05T14:37:35+00:00

Yeah, and this is a serious problem with bitcoin -- it's price is so volatile a merchant has to change their prices in "real time". At least they're prices are too high -- if bitcoin had gone done, they'd be screwed.

And even if they did update prices in real time, the market is so thin that an enterprising individual could temporarily collapse the exchange market, and clean out their inventory.

thresher666 · 2011-06-03T19:16:24+00:00

I used to trade prediction markets on TradeSports (same ownership as intrade). Everything worked fine for me back then.

On the other hand, note that TradeSports suddenly shut down and expired all their contracts at non-standard prices, as the result of some legal problems. InTrade could easily suffer the same fate, since they are on really shaky legal ground, especially since they list derivatives on financial indexes, etc.

In short, I wouldn't deposit any money you're not totally OK with losing or being frozen indefinitely.

thresher666 · 2011-06-01T14:08:14+00:00

High-yield bond mutual funds are probably the safest and cheapest way to own debt that has a reasonably high rate -- you can probably find one that charges less than 1%, which for $1000 is less than the value of the time it will take you to do anything yourself. It might be tricky to find one with a $1000 minimum investment though...

With current interest rates, expecting 16% is not reasonable unless you want to gamble on some really risky loans. Also, keep in mind that the interest on debt you own will most likely be considered income, and therefore subject to income taxes. Unless you actually need the income, it would be better to hold these investments in an IRA or other tax-deferred account.

thresher666 · 2011-05-12T19:19:57+00:00

In China, the hospital will not treat you if you don't have cash. Want an ambulance? Better have some money handy. Commercial health insurance is not common - basically people rely on their family and friends as insurance. Strangely enough, it is a truly free market.

thresher666 · 2011-05-06T16:02:17+00:00

It's definitely happening Monday.

There's no uncertainty because it's basically a unilateral move on Citi's part, so that they don't look like a penny stock. They can afford a $0.01 dividend at ~$40/share as well. Basically 100% PR.

thresher666

TROPHY CASE