4 ms·

Not to mention that he seemed to forget about the 3.5% or so transaction fee that is usually associated with the 0% loans. This makes most safe investments lik

Not to mention that he seemed to forget about the 3.5% or so transaction fee that is usually associated with the 0% loans. This makes most safe investments like CDs in today's rates a negative return.

nirvana 15y ago
I mentioned CDs in my article. Did you stop reading at the first mention of gold? Further, CDs are not a "safe investment" because the real rate of inflation (not CPI, but actual monetary inflation) is greater than the return of the CD, by quite a lot. Another risk of CDs is that the bank might fail. Since the FDIC hasn't been collecting reasonable premiums against this risk, and banks are failing left and right, the deficit is made up via inflation, which means, you get paid back in lower value dollars than you lost. This is also what makes gold a relevant possibility for this type of arbitrage. Since gold's supply is relatively fixed, as the dollar declines due to inflation, the gold price will appreciate. So, even if there were no increasing interest in gold from investors (e.g.: no appreciation due to increased demand) you'd be arbitraging the delta between the exchange rates of the two currencies. Borrowing in dollars and buying gold. This could be, as I mentioned, done between any two currencies. Or, in the case of CDs, which I mentioned in my original comment, within the same currency. But I guess that since I mentioned gold it is Very Important for you lot to say that gold is risky, and that I'm obviously falling to "mention" those things that I, uh, er, mentioned.
- fuzzythinker 15y ago
  Hmm, not sure why you and others respond so negatively on my comment. I am merely pointing out that your original reply did not account for the usual 3-3.5% transaction fee on these 0% loans. Your only mention of such fee may be the "could borrow at %1 (on the "zero interest" plans)", which isn't anywhere close the 3-3.5% that I see. So taking that into account, "safe" investments like CDs will actually give negative return. Meta: Not only did I read your whole initial parent post, I had also not mentioned a single word about "gold". So I am really intrigued by your negative tone and accusation of me jumping on the "anti-gold argument" bandwangon. Btw, I really enjoy reading your HN posts. But that doesn't prevent me from pointing out flaws in your logic. If my original reply sounded like an attack, then I guess I should be more careful in my wordings.
  - nirvana 15y ago
    You responded to someone attacking me for mentioning gold with "not only that, he..." EG: You agreed with him. My original reply did account for the transaction fees in "pay no interest loans". I didn't use the same figure you did, but to pretend like I ignored it is wrong. If you had read my post, you would notice that I said that a "safe investment" like a CD would not give you a sufficient return at current CD rates, and so I talked about a hypothetical %6 CD. Your original reply came as piling on, and since you didn't (and still haven't) recognized that I had addressed the issue you're bringing up, there's no way to distinguish you form the others who are jumping in and telling falsehoods about me based on their own financial ignorance. I am quite dismayed that nobody has responded on the original point-- using arbitrage to finance your startup-- and instead people are trying to score points by attacking me as if this were reddit. I'm already pretty hesitant to post to this site due to an expectation that I won't useful discussion in response. This is just convincing me more of it.... so, if you do enjoy reading my HN posts, know that I try my best when posting to avoid stepping on any of the land mines that will result in people attacking me, and I post as if I'm walking on eggshells. I thought that mentioning gold might be tolerated here, but I was wrong.
- wisty 15y ago
  Once again, you say: > Since gold's supply is relatively fixed, as the dollar declines due to inflation, the gold price will appreciate. You are assuming that gold is "safe". It's not. If gold dives right when you need to pay back the card, you will start paying massive rates on the card. Not cool. Not even gold bugs suggest gold is a safe "no brainer" 6 month investment - there is a chance it will fall. Big call - that gold will appreciate. Some people think that since the P/E of gold is effectively infinite, gold should be worth essentially nothing. Now, I'm fairly bullish on gold at the moment, but it's not guaranteed to appreciate. As credit collapses, cold hard cash becomes valuable, as you need it to buy the distressed assets of former paper-millionaires, or to invest in a much less congested market, or buy old tires to repair the soles of your kids shoes, so you actually go into deflation. And the US can sell off gold reserves if it gets in trouble (though there are conspiracy theorists who say this has already happened), and that would hurt gold prices. If you get $10,000 from zero-interest credit cards, and put it a 6 month term 2% / year deposit, you debt is $10,000 (really $9,000 after massive inflation), while you get back $10,100 (really $9,090). So you made $100 (really $90, with some crazy inflation sucking up your winnings). A free $100 is arbitrage. And old (and very similar) scheme was "Check kiting" - you cash a check (possibly for a very large amount), then deposit the money in your savings account (or use it as an emergency loan). Before the first check clears, you cash another check, and use it to cover the first one. If you miss a beat, you go to jail. Instead of arbitraging the interest rates, you could make a leveraged bet on gold, houses (they always go up, because they 'aint makin' any more land, you know, and the population keeps increasing), shares, options, pork bellies, or cans of sardines. But the danger is, that some wacky market dynamic will wipe out your position, leaving you with a credit card debt you can't repay. Maybe you are a great investor, and know how to pick winners (and cover your downside) but great investors don't often need to borrow a few thousand off a credit card.
deleted 15y ago
[deleted]

nirvana 15y ago

I mentioned CDs in my article. Did you stop reading at the first mention of gold? Further, CDs are not a "safe investment" because the real rate of inflation (not CPI, but actual monetary inflation) is greater than the return of the CD, by quite a lot. Another risk of CDs is that the bank might fail. Since the FDIC hasn't been collecting reasonable premiums against this risk, and banks are failing left and right, the deficit is made up via inflation, which means, you get paid back in lower value dollars than you lost. This is also what makes gold a relevant possibility for this type of arbitrage. Since gold's supply is relatively fixed, as the dollar declines due to inflation, the gold price will appreciate. So, even if there were no increasing interest in gold from investors (e.g.: no appreciation due to increased demand) you'd be arbitraging the delta between the exchange rates of the two currencies. Borrowing in dollars and buying gold. This could be, as I mentioned, done between any two currencies. Or, in the case of CDs, which I mentioned in my original comment, within the same currency. But I guess that since I mentioned gold it is Very Important for you lot to say that gold is risky, and that I'm obviously falling to "mention" those things that I, uh, er, mentioned.

fuzzythinker 15y ago
Hmm, not sure why you and others respond so negatively on my comment. I am merely pointing out that your original reply did not account for the usual 3-3.5% transaction fee on these 0% loans. Your only mention of such fee may be the "could borrow at %1 (on the "zero interest" plans)", which isn't anywhere close the 3-3.5% that I see. So taking that into account, "safe" investments like CDs will actually give negative return. Meta: Not only did I read your whole initial parent post, I had also not mentioned a single word about "gold". So I am really intrigued by your negative tone and accusation of me jumping on the "anti-gold argument" bandwangon. Btw, I really enjoy reading your HN posts. But that doesn't prevent me from pointing out flaws in your logic. If my original reply sounded like an attack, then I guess I should be more careful in my wordings.
- nirvana 15y ago
  You responded to someone attacking me for mentioning gold with "not only that, he..." EG: You agreed with him. My original reply did account for the transaction fees in "pay no interest loans". I didn't use the same figure you did, but to pretend like I ignored it is wrong. If you had read my post, you would notice that I said that a "safe investment" like a CD would not give you a sufficient return at current CD rates, and so I talked about a hypothetical %6 CD. Your original reply came as piling on, and since you didn't (and still haven't) recognized that I had addressed the issue you're bringing up, there's no way to distinguish you form the others who are jumping in and telling falsehoods about me based on their own financial ignorance. I am quite dismayed that nobody has responded on the original point-- using arbitrage to finance your startup-- and instead people are trying to score points by attacking me as if this were reddit. I'm already pretty hesitant to post to this site due to an expectation that I won't useful discussion in response. This is just convincing me more of it.... so, if you do enjoy reading my HN posts, know that I try my best when posting to avoid stepping on any of the land mines that will result in people attacking me, and I post as if I'm walking on eggshells. I thought that mentioning gold might be tolerated here, but I was wrong.
wisty 15y ago
Once again, you say: > Since gold's supply is relatively fixed, as the dollar declines due to inflation, the gold price will appreciate. You are assuming that gold is "safe". It's not. If gold dives right when you need to pay back the card, you will start paying massive rates on the card. Not cool. Not even gold bugs suggest gold is a safe "no brainer" 6 month investment - there is a chance it will fall. Big call - that gold will appreciate. Some people think that since the P/E of gold is effectively infinite, gold should be worth essentially nothing. Now, I'm fairly bullish on gold at the moment, but it's not guaranteed to appreciate. As credit collapses, cold hard cash becomes valuable, as you need it to buy the distressed assets of former paper-millionaires, or to invest in a much less congested market, or buy old tires to repair the soles of your kids shoes, so you actually go into deflation. And the US can sell off gold reserves if it gets in trouble (though there are conspiracy theorists who say this has already happened), and that would hurt gold prices. If you get $10,000 from zero-interest credit cards, and put it a 6 month term 2% / year deposit, you debt is $10,000 (really $9,000 after massive inflation), while you get back $10,100 (really $9,090). So you made $100 (really $90, with some crazy inflation sucking up your winnings). A free $100 is arbitrage. And old (and very similar) scheme was "Check kiting" - you cash a check (possibly for a very large amount), then deposit the money in your savings account (or use it as an emergency loan). Before the first check clears, you cash another check, and use it to cover the first one. If you miss a beat, you go to jail. Instead of arbitraging the interest rates, you could make a leveraged bet on gold, houses (they always go up, because they 'aint makin' any more land, you know, and the population keeps increasing), shares, options, pork bellies, or cans of sardines. But the danger is, that some wacky market dynamic will wipe out your position, leaving you with a credit card debt you can't repay. Maybe you are a great investor, and know how to pick winners (and cover your downside) but great investors don't often need to borrow a few thousand off a credit card.

deleted 15y ago

[deleted]