6 ms·

Financing Investment In A World Without Maturity Transformation

48 points by timf 13y ago

PaulHoule 13y ago
The "accredited investor" thing has to end. There are ETFs today that anybody can buy that will only give complete information to "accredited investors". That doesn't protect consumers.
- Daniel_Newby 13y ago
  We need a constitutional amemdment to apply the equal protection clause to the federal government.
- deadbags 13y ago
  What on earth are you talking about? There is no law that says accredited investors get more information about an ETF than other investors. This does not happen. Paul will not be able to provide a credible source because what he wrote is completely and totally wrong. If I'm wrong I'll eat my hat, but I'm not wrong.
  - pja 13y ago
    iShares certainly has language in their website T+Cs which states that accredited investors can get access to information on the website which is not available to retail investors. http://ca.ishares.com/misc/disclosure_pop.htm http://ca.ishares.com/misc/disclosure_pop.htm Whether this is ETF specific data, I've no idea.
    - mynegation 13y ago
      It is not ETF specific data. iShares offers some types of investments that are not available to non-accredited investors by law and offering information on performance of these investments would be a waste of time for both iShares and investors. If ETF is offered to general public, its performance is available to general public, end of story.
  - PaulHoule 13y ago
    Ok, the products are ETNs rather than ETFs, but people won't notice the difference... Take a look at this form to get monthly reports http://www.velocityshares.com/monthly-reports-request http://www.velocityshares.com/monthly-reports-request I can say if you don't check the 'accredited investor' box you never get the reports, in fact you never even get a message saying you won't get the reports. Does your hat taste good?
    - simonh 13y ago
      Where's the law that says they have to require that? If it is a legal requirement, how do they ensure that you are actually accredited, because if they sent you the info and you had lied surely they'd be breaking the law?
    - nknighthb 13y ago
      If you're not an accredited investor, you're not going to be allowed to invest in anything that they require accredited investor status to receive information about.
    - deleted 13y ago
      [deleted]
    - deleted 13y ago
      [deleted]
    - deadbags 13y ago
      > people won't notice the difference. No intelligent investor could mistake an ETN for an ETF. They're wildly different products. One is a bond with a collection of complex derivatives attached. The other is a portfolio of stocks. The mistake is made, but only by the dumbest of money. > Take a look at this form to get monthly reports So an ETN advisor offers some reports to accredited investors. This doesn't prove that there is a law demanding that certain info is kept from retail investors. Anybody with a price feed could create those reports and use them as sales literature. > Does your hat taste good? Why would I be eating my hat? All you did was prove that you're financially and logically illterate. You also proved that you argue dishonestly, moving the goalposts when it becomes clear that your original post was 100% wrong. So no hat-eating for me, thanks.
- acro 13y ago
  Usually it's the other way around. By law normal investors have to be educated about all possible risks involved. Accredited investors don't need such information since they supposedly know those things already.
- dev_jim 13y ago
  If it trades on the public U.S. equity markets then there's no special information available to accredited investors.
antocv 13y ago
I liked the part where he says Kickstarter sucks because you donate your money to them without a stakeholder position or ownership in your investment of any kind. Its the reason Ive kept my money in my wallet and not thrown it around on kickstarter-projects, instead donated to FSF, EFF and Wikileaks among others. Any takers to start up a kickstarter-clone without donation but part ownership? With pledges for more money to throw into project when it reaches a threshold and so on. Basically what we had 100 years ago with normal public stock traded companies but in a digital world.
- pja 13y ago
  My understanding is that doing this is complicated because selling securities which are not tradeable on open liquid markets to non-accredited individuals is frowned upon by the SEC (and similar entities in the EU). That's not to say that it's impossible to do: there's just a legal thicket to navigate & the legislators have teeth! (This might be why VCs have stayed away? They must have been pitched this idea over and over again in the last couple of years. Of course funding a competitor for your own revenue stream might not be something that your average VC is going to do either :) ) Kickstarter is fantastic for funding things which are ready to go but just need the capital to pay for volume manufacture up front. If the product isn't ready to ship in that form & their asking for funding to get it into that state then it's much more risky. I've funded things on kickstarter which were pretty much "I'd like to print this comic / book / whatever, if I can get a bunch of pre-orders in up front then everyone wins." Kickstarter is amazing for those kind of creator-driven projects.
- fennecfoxen 13y ago
  He doesn't say that. He says "I have nothing against the kickstarter approach" but it's insane and it sucks that they're legally forbidden from giving you an ownership stake. way-to-keep-the-little-guy-down etc
- pja 13y ago
  NB The JOBS act is supposed to enable this kind of crowdfunding for startups, but the SEC are dragging their feet over it apparently: http://www.nytimes.com/2012/12/27/business/smallbusiness/why-the-sec-is-likely-to-miss-its-deadline-to-write-crowdfunding-rules.html http://www.nytimes.com/2012/12/27/business/smallbusiness/why...
rayiner 13y ago
> And the answer is that rates would be lower than they would be in a maturity-transforming system. Maturity-transforming banking is redundant – it only gives us recurrent financial crises. The idea that in the absence of bank maturity transformation, lending rates would explode has been disproven. First, serious writers don't need to bold their punch-line sentences so you know that they're punchline sentences. Second, showing low P2P lending rates in a tiny market during a period when lending rates are generally in the toilet does not "disprove" the need for banks.
- simonh 13y ago
  Indeed. In a tiny market, with low to non-existent legal and regulatory overhead. I know, let's make it a 'proper' market with legally enforceable terms and contractual relationships, leading to lots of legal and regulatory overhead. That's bound to fix the problem!
lake99 13y ago
> I have nothing against the kickstarter approach. But it is insane to allow individuals to collectively donate millions to dollars to ventures without any ownership stake while at the same time barring them from funding the same projects and receiving an ownership stake in return. In other words, "I have nothing against kickstarter, but it is insane to allow kickstarter to exist as it is". Contradiction alert! > Almost all the criticisms of capitalism are derived from the pathologies of institutional fiduciary capitalism. Having read on and discussed the topic extensively, I'd say that "almost all" is completely unjustified. > However we can do better than allowing individuals to donate money on a hope and a prayer. Odd seeing such a claim from a self-confessed supporter of capitalism. > If we want capitalism to become less selfish, we need to enable each individual to become a capitalist. Does he mean like owners of capital assets doing what they wish with it, as long as it doesn't infringe on the rights of others?
- sp332 13y ago
  That comment isn't anti-Kickstarter. It's saying: since KS exists, why aren't we also allowed to do this better thing?
  - positivejam 13y ago
    Exactly. The article is not saying it's insane to allow Kickstarter donations, it's insane that current law makes it just fine to donate to a risky venture but not to invest and get a chance to share in the venture's upside.
    - macroresilience 13y ago
      author of the post here - this is exactly what I meant.
      - lake99 13y ago
        Thanks for confirming the clarification. I'm all for power-to-the-people.
      - 13y ago
kfk 13y ago
So, I invest/lend 100. The SME fails. Who is persecuting them? I don't want to chase each failed SME to get the money back. I mean, you still need middle men. Nobody has willing, knowledge or time to rate, follow and persecute a bunch of SME's. I would love laws and tools to lend to companies I know well although. Like companies of friends or friends of friends. But that is impossible now. Another big topic is discounting invoices, somebody here? Interesting topic with real hassle.
- cowls 13y ago
  I think you misunderstand, If you invest in a business that fails, you lose your money.. You dont get to "persecute" anyone. Thats the risk of the investment
  - brazzy 13y ago
    So con men who do nothing but run sham businesses and live off invested money have nothing to fear? There must obviously be some sort of redress in the case of ouright fraud. But then, how do you distinguish malice from incompetence? That's how the SEC got started...
    - cowls 13y ago
      Yes thats different.
microcolonel 13y ago
Banks are big because people's money is forced in by monetary supply inflation; it loses value when they actually save it. Banks are crap because of regulation in a forced market: You basically have to put your money in a bank to counteract inflation, but becoming a bank is VERY difficult, so is competing with ones which will always be bailed out. U.S. has the same issue with healthcare. Becoming a healthcare provider in the U.S. is incredibly difficult, even moreso becoming a healthcare insurer, and as such they consolidate and crapify as far as they can without making it bad enough to justify competing with them despite the regulatory barriers. Then all your drugs have to be FDA approved(which takes more than a decade at least), and many of them will be produced under one or more patents which also raise the cost of the medication.

48 points by timf 13y ago

The "accredited investor" thing has to end. There are ETFs today that anybody can buy that will only give complete information to "accredited investors". That doesn't protect consumers.

Daniel_Newby 13y ago
We need a constitutional amemdment to apply the equal protection clause to the federal government.
deadbags 13y ago
What on earth are you talking about? There is no law that says accredited investors get more information about an ETF than other investors. This does not happen. Paul will not be able to provide a credible source because what he wrote is completely and totally wrong. If I'm wrong I'll eat my hat, but I'm not wrong.
- pja 13y ago
  iShares certainly has language in their website T+Cs which states that accredited investors can get access to information on the website which is not available to retail investors. http://ca.ishares.com/misc/disclosure_pop.htm http://ca.ishares.com/misc/disclosure_pop.htm Whether this is ETF specific data, I've no idea.
  - mynegation 13y ago
    It is not ETF specific data. iShares offers some types of investments that are not available to non-accredited investors by law and offering information on performance of these investments would be a waste of time for both iShares and investors. If ETF is offered to general public, its performance is available to general public, end of story.
- PaulHoule 13y ago
  Ok, the products are ETNs rather than ETFs, but people won't notice the difference... Take a look at this form to get monthly reports http://www.velocityshares.com/monthly-reports-request http://www.velocityshares.com/monthly-reports-request I can say if you don't check the 'accredited investor' box you never get the reports, in fact you never even get a message saying you won't get the reports. Does your hat taste good?
  - simonh 13y ago
    Where's the law that says they have to require that? If it is a legal requirement, how do they ensure that you are actually accredited, because if they sent you the info and you had lied surely they'd be breaking the law?
  - nknighthb 13y ago
    If you're not an accredited investor, you're not going to be allowed to invest in anything that they require accredited investor status to receive information about.
  - deleted 13y ago
    [deleted]
  - deleted 13y ago
    [deleted]
  - deadbags 13y ago
    > people won't notice the difference. No intelligent investor could mistake an ETN for an ETF. They're wildly different products. One is a bond with a collection of complex derivatives attached. The other is a portfolio of stocks. The mistake is made, but only by the dumbest of money. > Take a look at this form to get monthly reports So an ETN advisor offers some reports to accredited investors. This doesn't prove that there is a law demanding that certain info is kept from retail investors. Anybody with a price feed could create those reports and use them as sales literature. > Does your hat taste good? Why would I be eating my hat? All you did was prove that you're financially and logically illterate. You also proved that you argue dishonestly, moving the goalposts when it becomes clear that your original post was 100% wrong. So no hat-eating for me, thanks.
acro 13y ago
Usually it's the other way around. By law normal investors have to be educated about all possible risks involved. Accredited investors don't need such information since they supposedly know those things already.
dev_jim 13y ago
If it trades on the public U.S. equity markets then there's no special information available to accredited investors.

antocv 13y ago

I liked the part where he says Kickstarter sucks because you donate your money to them without a stakeholder position or ownership in your investment of any kind. Its the reason Ive kept my money in my wallet and not thrown it around on kickstarter-projects, instead donated to FSF, EFF and Wikileaks among others. Any takers to start up a kickstarter-clone without donation but part ownership? With pledges for more money to throw into project when it reaches a threshold and so on. Basically what we had 100 years ago with normal public stock traded companies but in a digital world.

pja 13y ago
My understanding is that doing this is complicated because selling securities which are not tradeable on open liquid markets to non-accredited individuals is frowned upon by the SEC (and similar entities in the EU). That's not to say that it's impossible to do: there's just a legal thicket to navigate & the legislators have teeth! (This might be why VCs have stayed away? They must have been pitched this idea over and over again in the last couple of years. Of course funding a competitor for your own revenue stream might not be something that your average VC is going to do either :) ) Kickstarter is fantastic for funding things which are ready to go but just need the capital to pay for volume manufacture up front. If the product isn't ready to ship in that form & their asking for funding to get it into that state then it's much more risky. I've funded things on kickstarter which were pretty much "I'd like to print this comic / book / whatever, if I can get a bunch of pre-orders in up front then everyone wins." Kickstarter is amazing for those kind of creator-driven projects.
fennecfoxen 13y ago
He doesn't say that. He says "I have nothing against the kickstarter approach" but it's insane and it sucks that they're legally forbidden from giving you an ownership stake. way-to-keep-the-little-guy-down etc
pja 13y ago
NB The JOBS act is supposed to enable this kind of crowdfunding for startups, but the SEC are dragging their feet over it apparently: http://www.nytimes.com/2012/12/27/business/smallbusiness/why-the-sec-is-likely-to-miss-its-deadline-to-write-crowdfunding-rules.html http://www.nytimes.com/2012/12/27/business/smallbusiness/why...

rayiner 13y ago

> And the answer is that rates would be lower than they would be in a maturity-transforming system. Maturity-transforming banking is redundant – it only gives us recurrent financial crises. The idea that in the absence of bank maturity transformation, lending rates would explode has been disproven. First, serious writers don't need to bold their punch-line sentences so you know that they're punchline sentences. Second, showing low P2P lending rates in a tiny market during a period when lending rates are generally in the toilet does not "disprove" the need for banks.

simonh 13y ago
Indeed. In a tiny market, with low to non-existent legal and regulatory overhead. I know, let's make it a 'proper' market with legally enforceable terms and contractual relationships, leading to lots of legal and regulatory overhead. That's bound to fix the problem!

lake99 13y ago

> I have nothing against the kickstarter approach. But it is insane to allow individuals to collectively donate millions to dollars to ventures without any ownership stake while at the same time barring them from funding the same projects and receiving an ownership stake in return. In other words, "I have nothing against kickstarter, but it is insane to allow kickstarter to exist as it is". Contradiction alert! > Almost all the criticisms of capitalism are derived from the pathologies of institutional fiduciary capitalism. Having read on and discussed the topic extensively, I'd say that "almost all" is completely unjustified. > However we can do better than allowing individuals to donate money on a hope and a prayer. Odd seeing such a claim from a self-confessed supporter of capitalism. > If we want capitalism to become less selfish, we need to enable each individual to become a capitalist. Does he mean like owners of capital assets doing what they wish with it, as long as it doesn't infringe on the rights of others?

sp332 13y ago
That comment isn't anti-Kickstarter. It's saying: since KS exists, why aren't we also allowed to do this better thing?
- positivejam 13y ago
  Exactly. The article is not saying it's insane to allow Kickstarter donations, it's insane that current law makes it just fine to donate to a risky venture but not to invest and get a chance to share in the venture's upside.
  - macroresilience 13y ago
    author of the post here - this is exactly what I meant.
    - lake99 13y ago
      Thanks for confirming the clarification. I'm all for power-to-the-people.
    - 13y ago

kfk 13y ago

So, I invest/lend 100. The SME fails. Who is persecuting them? I don't want to chase each failed SME to get the money back. I mean, you still need middle men. Nobody has willing, knowledge or time to rate, follow and persecute a bunch of SME's. I would love laws and tools to lend to companies I know well although. Like companies of friends or friends of friends. But that is impossible now. Another big topic is discounting invoices, somebody here? Interesting topic with real hassle.

cowls 13y ago
I think you misunderstand, If you invest in a business that fails, you lose your money.. You dont get to "persecute" anyone. Thats the risk of the investment
- brazzy 13y ago
  So con men who do nothing but run sham businesses and live off invested money have nothing to fear? There must obviously be some sort of redress in the case of ouright fraud. But then, how do you distinguish malice from incompetence? That's how the SEC got started...
  - cowls 13y ago
    Yes thats different.

microcolonel 13y ago

Banks are big because people's money is forced in by monetary supply inflation; it loses value when they actually save it. Banks are crap because of regulation in a forced market: You basically have to put your money in a bank to counteract inflation, but becoming a bank is VERY difficult, so is competing with ones which will always be bailed out. U.S. has the same issue with healthcare. Becoming a healthcare provider in the U.S. is incredibly difficult, even moreso becoming a healthcare insurer, and as such they consolidate and crapify as far as they can without making it bad enough to justify competing with them despite the regulatory barriers. Then all your drugs have to be FDA approved(which takes more than a decade at least), and many of them will be produced under one or more patents which also raise the cost of the medication.