20% above cash guaranteed: Would you invest?

[doctorj]

. I am gob smacked that no one has seen the leverage I would get for my initial "investment" after the first year. What kind of exceptional wealth (Tech )that would create compounded for 5 years for example, assuming (thats for you gooner ) that I can crack a system that has positive expectancy greater than 20% per year.

comments??

But who cares how much you make? In fact, I'd much prefer you make a decent clip - it would protect my interest in the scheme as well. To my mind, the risk of fraud would materially increase if your own return was materially less than your expectation.

The killer is, as always, the system. 20% for a decently sized account is no mean feat. Especially when you consider that a material drawdown just can't happen (I'm assuming investor's funds are available at a 1 day call) or the whole system is dead in the water.

So the question is, how would the scheme work?
1/ Independently reviewed evidence of making these returns over a meaningful period using this strategy
2/ Guarantee funds held in some sort of trust structure
3/ The development of some sort of mandate to dictate the way you trade (instrument, max risk, holding period)
4/ Regular, independently audited accounts & review of compliance to mandate
5/ The addition of some sort of independent governance etc etc
7/ Investors funds held in individual accounts per your diagram
8/ Etc

 

[basilio]

Hasn't this discussion moved along

My original point was that in the "real world" guaranteed 20% returns were almost always a come in sucker sign.

Anyhow I went back and read the original threads that trembling hand has started and perhaps there is something there in the system and TH's capacity to effectively play the game.

But I still suggest it is a big call to go from running a relatively small program with your own money to handling other punters money on a far bigger scale and over a longer time. Human nature and fluctuating markets are potent issues.

But I do like the seeming transparency of the hypothetical proposition. If one could have clear access to your own funds perhaps the punt could be worth it.

It does sound like a unique proposition.

 

[Temjin]

FFS!! Are you serious??

Let me start ALL over again.

The hypothetical situation is as follows,

The offer is a guaranteed 20% + AUD Australian Dollar LIBOR (based on brokers overnight cash holding amounts) see here,

the LIBOR rate is in the bag as every account is in cash overnight and gets that. OK? cash rate taken care of.

The guarantee comes from MY funds put into escrow to cover the investor from two things. 1. I don't make over 20% from the investor funds. 2. I lose money and hit a 20% DD. Account closed investor gets my money. Simple investor win, I'm the fool.

The guarantee is for every $100 an investor puts in I lock away $40 in an escrow account satisfactorily to a bean counters wildest AA satisfaction under the best Ambulance Chasers 40 page contract protecting the investor.

First year for me I gain little. BUT please dudes what does it look like for me year 2 year 3 etc????

Compounding OPM.
Correctly capitalising a big biz.

Hey TH,

Have been following this thread through but I would like to raise a few comments.

Why would you choose this over the traditional managed future account model? That is, you managed each individual account on an advisory account in which you have complete control over all trading decisions. The client would have the ability to make deposit/withdraw/trading permission in his/her trading account depending on the original agreement with you. You would, as per normal hedge funds, charge 2/20 fee or whatever you feel appropriate.

This is in essential the same as compounding other people's money as what you are doing.

Yes, your method is quite unique and unheard of. Your biggest risk would be your explicit guarantee of 20% return p.a. regardless of your trading result. You expect yourself to make more than that, but one should know that no strategies would ever work forever, and unexpected drawdown (and the length in which the account is in) has to be take into account.

Look at it from another perspective, what you are doing is essential no different to establishing a loan for your trading account at an interest rate of 20% p.a. You then secure 20% of the borrowed money (or less after taking market rate interest into account) as a security to your "loan" and use the remaining 80% (or less) as your additional trading capital.

However, I would agree that it would be extremely difficult to sell such a proposition to the general public especially when most people would be extremely wary of the "guaranteed" return of loan. In fact, I'm sure our local regulatory bodies would spend so much of their time "hassling" you so (despite of your good will/intention) that it may not worth the effort.

In fact, your "fee" is quite expensive if you have the confident to generate higher than 20% (let say 40%) per year on your trading account, you are effectively charging a 50% performance fee to your clients. And if you generated 60% return, it's 66.6% performance fee.

There are certainly quite a number of managed funds out there that would generate these sort of returns and with less fee, especially when you take advantage of their notional funding if provided. (i.e. minimum opening account is $100k, but notional minimum is $50k, or even $25k, effectively give you 200% or 400% leverage on his/her trading results)

Anyway, at least you have something unique in mind. Good luck with it.

Cheers,

Temjin

 

[Cartman]

Hey TH,


In fact, your "fee" is quite expensive if you have the confident to generate higher than 20% (let say 40%) per year on your trading account, you are effectively charging a 50% performance fee to your clients. And if you generated 60% return, it's 66.6% performance fee.

There are certainly quite a number of managed funds out there that would generate these sort of returns and with less fee, especially when you take advantage of their notional funding if provided. (i.e. minimum opening account is $100k, but notional minimum is $50k, or even $25k, effectively give you 200% or 400% leverage on his/her trading results)

Temjin

could be wrong here Tem, but i'm assuming TH's plan doesnt even touch the punters original capital ---- so there is in fact no fees as such ---- in a normal managed fund situation, what happens if the main honcho stuffs up and loses half of the companies capital base --- all the little punters get burned !! ---- TH may correct me if wrong, but in his scenario i am assuming he is putting his own cash on the line to make the profits, but just using the punters cash as a means to gain the necessary leverage ...

that would represent a fund manager with both ballz and credibility ..... nah thats impossible

 

[sjx]

I would most definitely invest if it was guaranteed.

 

[gooner]

could be wrong here Tem, but i'm assuming TH's plan doesnt even touch the punters original capital ---- so there is in fact no fees as such ---- in a normal managed fund situation, what happens if the main honcho stuffs up and loses half of the companies capital base --- all the little punters get burned !! ---- TH may correct me if wrong, but in his scenario i am assuming he is putting his own cash on the line to make the profits, but just using the punters cash as a means to gain the necessary leverage ...

that would represent a fund manager with both ballz and credibility ..... nah thats impossible

Cartman

If you think that you can use customer's money as "leverage" without putting it at risk, then you belong on South Park

 

[skyQuake]

Cartman

If you think that you can use customer's money as "leverage" without putting it at risk, then you belong on South Park

But its guaranteed isn't it? When up to 20% is lost the fund swallows itself and you get ur 80% back + 20% set aside.

 

[gooner]

But its guaranteed isn't it? When up to 20% is lost the fund swallows itself and you get ur 80% back + 20% set aside.

That is 100% back or initial investment. That is not 20% returns guaranteed which should mean you get 120% back (this was the initial proposal).

If my $100 is in a separate account, then how can it be used for leverage? If it is being put up as security, then it is at risk and is thus not guaranteed. If it is locked off in a separate account can can not be touched or used as security, how can this therefore be used to provide leverage?

 

[trainspotter]

I have my prayer mat positioned to where you live TH. You are the true master.I am a mere disciple. Read the links below to see how it is bearing fruit.


https://www.aussiestockforums.com/for...ad.php?t=12683

and here from page 2,

https://www.aussiestockforums.com/for...=weekly+income

I think these need to be read first ... comment second. Opened my eyes up like this

 

[Mr J]

TH, I think you'd create less controversy by offering a 50/50 split and presenting a bit of a track record. My plan, providing trading works out.

 

[trainspotter]

Would I place money into an account that is cash based with my name on it with an interest rate at 20%? SHEEEEEEEEEEEEEET YEAH I WOULD. Trade your @rse off Trembling Hand. Give me my 20% any day !

(for those who do not know what TH does you sould read more first and ask questions later) IMO

 

[Trembling Hand]

But who cares how much you make? In fact, I'd much prefer you make a decent clip - it would protect my interest in the scheme as well. To my mind, the risk of fraud would materially increase if your own return was materially less than your expectation.

Yes I like that way of thinking about it. You don't get nothin' for nothin'. You could even see it happening like this,

each 1/4 I put up 20% in escrow for DD protection. And 5% of funds from my own money to the Client (locked away) and I get to margin the client funds.

end of period client get to keep my 5% and doesn't even know how much I made margining his funds . Sounds a bit sinister but that could work.

The killer is, as always, the system. 20% for a decently sized account is no mean feat. Especially when you consider that a material drawdown just can't happen (I'm assuming investor's funds are available at a 1 day call) or the whole system is dead in the water.

Yes many will roll their eyes but a DD as always is on the cards, But a large and more importantly quick one if not likely. Using normal MM of 0.5 to 1 % at risk per DAY not per trade things move alone in either direction smoothly. (watch the them bring up the "ya but what if a plane flies into the ...")

So the question is, how would the scheme work?
1/ Independently reviewed evidence of making these returns over a meaningful period using this strategy
2/ Guarantee funds held in some sort of trust structure
3/ The development of some sort of mandate to dictate the way you trade (instrument, max risk, holding period)
4/ Regular, independently audited accounts & review of compliance to mandate
5/ The addition of some sort of independent governance etc etc
7/ Investors funds held in individual accounts per your diagram
8/ Etc

Some good points here.

1. yep
2. Absolutely
3. Absolutely
4. yep
5. I guess that getting beyond the capability at a theoretical start up.
6. where is it? or is that fine print I see
7. I really think thats a very important one. To enable a so called "client" to log in daily if they feel like it and see real time progress - or lack of it. Logistically it already possible.

 

[Trembling Hand]

Why would you choose this over the traditional managed future account model?

Why? I have no interest in 2/20. For lots of reasons. One of them being that you would be just another fish in the sea of tossers looking to ride the 2/20 gravy train. Have had enough experience in other types of biz to know the quickest way to slavery and failure is to try and copy whats been done before.

Look at it from another perspective, what you are doing is essential no different to establishing a loan for your trading account at an interest rate of 20% p.a. You then secure 20% of the borrowed money (or less after taking market rate interest into account) as a security to your "loan" and use the remaining 80% (or less) as your additional trading capital.

Yes thats exactly right, for the FIRST year. After that the equation swings greatly in my favour. Its like leverage & compounding & OPM super charged yet risk to me 20% of initial funds And without exposing my "clients" to risk thats not covered.

However, I would agree that it would be extremely difficult to sell such a proposition to the general public especially when most people would be extremely wary of the "guaranteed" return of loan. In fact, I'm sure our local regulatory bodies would spend so much of their time "hassling" you so (despite of your good will/intention) that it may not worth the effort.

I would never bother selling this to the public. remember this is just a hypothetical.

In fact, your "fee" is quite expensive if you have the confident to generate higher than 20% (let say 40%) per year on your trading account, you are effectively charging a 50% performance fee to your clients. And if you generated 60% return, it's 66.6% performance fee.

There are certainly quite a number of managed funds out there that would generate these sort of returns and with less fee, especially when you take advantage of their notional funding if provided. (i.e. minimum opening account is $100k, but notional minimum is $50k, or even $25k, effectively give you 200% or 400% leverage on his/her trading results)

Anyway, at least you have something unique in mind. Good luck with it.

Yes it is expensive when you compare it to the 2/20 crowd. But they will also exposure to the 2/-20 return. I think a guaranteed 20% separates this from any comparison. IMO.

 

[Trembling Hand]

could be wrong here Tem, but i'm assuming TH's plan doesnt even touch the punters original capital ---- so there is in fact no fees as such ---- in a normal managed fund situation, what happens if the main honcho stuffs up and loses half of the companies capital base --- all the little punters get burned !! ---- TH may correct me if wrong, but in his scenario i am assuming he is putting his own cash on the line to make the profits, but just using the punters cash as a means to gain the necessary leverage ...

that would represent a fund manager with both ballz and credibility ..... nah thats impossible

Nah Chartman gooners right ya got to 'use' the funds.

My cash is to protect against DD and or not hitting 20% or over.

 

[Trembling Hand]

That is 100% back or initial investment. That is not 20% returns guaranteed which should mean you get 120% back (this was the initial proposal).

If my $100 is in a separate account, then how can it be used for leverage? If it is being put up as security, then it is at risk and is thus not guaranteed. If it is locked off in a separate account can can not be touched or used as security, how can this therefore be used to provide leverage?

For ever $100 raised I put up $40. $20 being the guarantee in trust(or whatever), and $20 being the DD protection for clients.

 

[Trembling Hand]

TH, I think you'd create less controversy by offering a 50/50 split and presenting a bit of a track record. My plan, providing trading works out.

But here is the kicker. I'm not thinking about running a fund. I'm thinking about eventually moving to something not so much bigger but same repeated X 100.

2/20 or even 50/50 simply doesn't work.

 

[pursuitute]

Trembling Hand,

I've read through many of your threads/posts of the past few days and to say that your concepts have caught my interest is an understatement. Be they your trading style, philosophy or this hypothetical venture.

I'm new to trading, so new that I've only made one trade, and I feel a little inept in understanding the terminology and consequently the method by which you achieve what you do. But more on that for the rest of my life I guess

In this hypothetical:

I understand in typical terms that Persons (A), (B) & (C) give money [say $1m each) to Person (Z) and they hope for a return of some %. Be it from building a block of flats, selling lollipops or investing in the market. I also understand that normally, the money handed over could well all disappear.

If I have understood your plan, you want to see that money put into a nice safe spot where the investor still has access to it but you trade it at the same time? You use the $3m to trade your heart out and if you get to a point of losing 20% on the initial capital, you stop the game, give each punter $800k + $200k from the $600k account you had set aside in the beginning - call it your start-up costs that you hope to never actually spend.

Presumably, when you raise $600k, you would set it aside knowing at that point in time, your promise to your investors will be fulfilled and from then on you make your own hay... lots of hay.

Assuming I'm on the right track with this, how would the brakes be applied to guarantee losses cease at 20%? How would I be guaranteed that the $200k would arrive from you to top up my lost capital?

With regard to how, as an investor, I would cope with someone making a killing whilst I get a relative pittence, I have no qualms with that at all - particulalry given that the risk level you are operating at is of no consequence to me. My current business is one where my takings are about 1/20 of my partners but I am happy in that I dodge the hard and risky things they do and my 20th returns me around 80% margin.

I generate a large part of their work for them, they do what they do and they are obliged to buy through me in return. For every $10m revenue I create for them, I get $200k. Am I happy about that? Bloody oath.

I do wonder why though, you don't just borrow the money [or use your own] and do it yourself without having pesky partners crawling all over you?

You're taking all the risk, why give up 20%? Is it because it is easier to raise the capital this way or is it that you simply want to share the love?

It seems a great venture and one that I would be interested in however the kind of money that I can put aside would likely just be used for rounding anomallies. I guess enough anomallies like me would work just as well though.

Anyway, seems like a no-brainer to me. I'd be better off selling the houses, giving you the $ and renting a place. I'd have a lot more disposable cash month to month and the returns would out-strip property by a landslide.

Sounds like a clever plan, nice thinking outside the box

now.... back to my reading

edit - took me a little while to get this out of my head and on to vapour so sorry if questions have been answered in the mean time.

 

[Trembling Hand]

Scott lots there lets see what I can cover.

Firstly the why not just remortgage the house or use surplus funds to increase my current size?

Ok say I can pull $500,000 lazy dollars from the long term portfolio & house etc. look at this.

5 years on @ 40% I've turned $500,000 into $2,689,120. NICE!

or

$500,000 used to raise $1,250,000, $1,250,000 @ 40% = $6,722,800 Much NICER!!!! But I have to give back 20% each year + capital which would be $3,986,400 leaving me $2,736,400. Worst off?? Yes but,

This is the crux of it. Every $40 I earn for myself I can add extra investors by an extra $100. It looks like using my profit to pull more investors, I would end up with $6,00,000 after five years. !! from $500,000 invested.

Now lots of assumption and what ifs doubts about trading size and does the investors take returns or compound etc etc. But if I moved to quarterly figures ie 5% per quarter guaranteed this baby really turns into a rocket. (hopefully not one of the N.Korea type )

 

[trainspotter]

Good thing this is ALL hypothetical. :iagree:

 

[Trembling Hand]

Good thing this is ALL hypothetical. :iagree:

Why of course :engel:



luckily I'm leaving the country in a few days.