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How is margin trading pretty safe if the margin trading side of things can buy more value than they're borrowing?

This is my first go at understanding margin trading vs lending. I'm trying to understand all the risks associated with it. I understand if the exchange goes down things can be jacked up, but for the purpose of this discussion lets ignore that scenario. I've searched on YouTube and found some videos, but haven't found anything yet that cleared it up for me. I see a LOT of people say that how Poloniex does it (with the collateral liquidation) makes it almost risk-free unless there's something massive that happens with the price in a very short period.
Poloniex's web site gives the following example:
Current Margin: The percentage of your Total Borrowed Value that your Net Value currently is (in other words, Net Value over Total Borrowed Value). Current Margin is a critical value, because if it dips below your Maintenance Margin, your account will undergo a forced liquidation. For example, suppose you have 1.5 BTC in your margin account, and your Maintenance Margin is 20%. Borrowing 3 BTC, you open a long position in the XMR market. Now, in order to avoid a forced liquidation, the Net Value of your margin account must remain above 20% of the 3 BTC you just borrowed, or 0.6 BTC. If the price of XMR starts declining, the amount of BTC you can get by selling the XMR you just purchased diminishes, and you start to incur a loss. This is reflected in your P/L and Net Value. If the amount of this loss, together with the lending fees you owe, reaches 0.9 BTC, the net value of your margin account will be 0.6 BTC (1.5 BTC minus 0.9 BTC in unrealized losses) and a forced liquidation will trigger.
Is this saying that the borrower must maintain a value of at least 3.6 BTC in their margin account? If so, it makes sense why this seems risk-free aside from an issue with the exchange going offline or very steep fluctuation in price...
submitted by Webnet668 to CryptoMarkets [link] [comments]

IBKR: Downside Protection + Massive Potential

IBKR: Downside Protection + Massive Potential
Rant:
Of late, there’s been too much low-quality, bullshit DD on here. I’ve come to rescue you from your own retardation—a formidable task, I might add. Fortunately, I’m not going to do it alone. I’ll be doing it with the help of Thomas Peterffy, a Hungarian refugee who revolutionized the brokerage industry, and in so doing went from penury to multi-billionaire-hood.
Peterffy is the founder of $IBKR, or Interactive Brokers Group, Inc. Here’s a description I definitely did not rip directly from CapitalIQ:
“Interactive Brokers operates as an automated electronic broker worldwide. It specializes in executing and clearing trades in securities, futures, foreign exchange instruments, bonds, and mutual funds. The company custodies and services accounts for hedge and mutual funds, registered investment advisors, proprietary trading groups, introducing brokers, and individual investors. In addition, it offers custody, prime brokerage, securities, and margin lending services. Further, the company provides electronic execution and clearing services. It serves institutional and individual customers through approximately 120 electronic exchanges and market centers. The company was founded in 1977 and is headquartered in Greenwich, Connecticut.”
Essentially, IBKR is inverse Robinhood. It has a shockingly bad user interface, is not designed to gamify investing, and does not have a retarded userbase. However, it does have better fills, better tech, a wider variety of options (both literal and figurative), more client AUM, etc. This is why you might not have heard of it. But rest assured, it’s a massive company; it is, essentially, the engine mobilizing much of the market machine.
I’m bullish for two main reasons:
  • Upcoming earnings (July 22nd) and July EOM numbers report
    • Comparable companies have shown huge growth (e.g. $VIRT in Q1, which reported three weeks after IBKR and caught more Covid-trading)
    • IBKR releases monthly KPIs, the last batch of which came out recently, validated the theories described herein, and sent us on an upwards trajectory
  • Momentum: this stock is an inverse POS, which recently tends to go up with SPY but not down
TL;DR: IBKR 8/21 $55 C, $60 C for higher risk
Business Pros:
  • High moat business with tons of IP
  • IBKR releases monthly metrics; these have been very strong as mentioned above:
    • 1,862 thousand Daily Average Revenue Trades (DARTs), 131% higher than prior year and 13% higher than prior month.
    • Ending client equity of $203.2 billion, 33% higher than prior year and 7% higher than prior month.
    • Ending client margin loan balances of $24.9 billion, 3% lower than prior year and 7% higher than prior month.
    • Ending client credit balances of $71.0 billion, including $3.1 billion in insured bank deposit sweeps, 30% higher than prior year and 1% higher than prior month.
    • 876,000 client accounts, 36% higher than prior year and 4% higher than prior month.
    • 487 annualized average cleared DARTs per client account.
  • IBKR makes most of its money from loans by acting as a quasi-bank
    • More total client AUM is very good for revenue (see third and second bullet from bottom above)
  • We’ve just seen banks with a focus on trading outperform, again emphasizing what a large role trading activity is playing in this market
  • IBKR also be seen tech company—but it’s not above its pre-Covid high unlike most
  • Serves as a volatility hedge, because volatility is profitable for the company (cheap IV)
    • This can be seen in part by it’s relatively low market correlation (B = .63)
    • Volatility will almost certainly increase as we enter earnings season
  • Great international focus
    • Recently opened an office in Singapore
    • 69% of their clients are outside the U.S. (international account growth rate at 23% vs 15% in US) which gives broader revenue base
  • Relatedly, the biggest opportunity driving Net Interest Margin (NIM) income is from key customer segments. There’s only around <0.5% of target asset market (TAM) penetrated in fields of global retail clients through intro brokers, financial advisors and hedge funds.
    • Peterffy has spoken to the idea that IBKR could capture more TAM and become a high multibagger long term by capturing more TAM.
  • Major holder of $TIGR, which has done extremely well
    • $IBKR netted over $1 billion so far off the $TIGR IPO, and the stock has been strong recently
  • 8% short float w/ high days to cover
    • Not really short-squeeze material, but somewhat squeeze-like conditions existent
      • Earnings could squeeze this, especially because management owns so much of the stock
  • Comparables like $VIRT have done super well; IBKR might not be as explosive but certainly should do better than it has been
  • Aligned interests:
    • “The CEO I admire most is Thomas Peterffy of Interactive Brokers. He came to the U.S. penniless and built a massive fortune and, more importantly, a great company. His is a story of innovation; he was one of the first to use computers for market making. Peterffy was smart enough to see the applications of technology to online brokerage, and brave enough to pursue what could effectively kill the market-making business— and he is a great executor. The business has profitably and steadily grown the account base, growing brokerage accounts by 15%+ per year like clockwork. Peterffy still personally owns over 70% of the company, and all but ten of the company’s approximately 1,400 employees own shares. He has built a company with the lowest costs and highest margins, a very long runway for growth, a history of execution, and a highly aligned team.”
  • CEO explicitly called it a “stay-at-home stock”
    • Trading volume was 3X normal and account openings were 4x normal back in April—more people have gotten into the game since then!
    • “Despite markets down about 9% year-on-year, our total client equity rose 9% to $161 billion, the second highest quarterly total in our history.”
      • The above is only from Q1
  • Momentum, momentum, momentum. Some of you need to learn that.
Business Risks:
  • They have fuckups, and recently got a ton of bad PR due to the oil contango fiasco!
  • Not the greatest customer service, certainly (does anyone really give a shit, though?)
  • Diverse customer base leaves it susceptible to geopolitical and geoeconomic risk
  • Stock was in a downtrend since 2018 before recent turnaround—who knows where momentum is now
  • The high (85%) percentage of shares owned by management means that shareholders are effectively a minority interest
    • To me, this is good, as it indicates a longer term focus, but it might not be good for short term results
  • Highly valued (possibly fundamentally overvalued) at a PE of 24.9x
  • Lower interest rates—which will remain for the foreseeable future—are a headwind
    • That being said, IBKR is less susceptible to them than other brokers
    • Interest rate risk is lessened as they adopt a relatively fixed net interest margin (NIM) spread.
      • Client balances receive 50bps below the Fed Funds rate, and excess cash is invested in repos & treasuries, while margin rates are typically 25bps – 150 bps above the Fed Funds, with rates depending on the size of margin.
  • Most major risks on the downside (refinance, credit risk, interest rate risks etc.) are limited. The main risk is that if they’ve already largely penetrated their TAM and are unable to drive success by broadening appeal to their other market segments valuation is overly rich at these levels.
  • This market is volatile, and IBKR is in no way immune to volatility in SPY. So you might want to hedge this play.
Summary:
Interactive Brokers (IBKR) is a tech-focused, low cost brokerage firm. It is also a quasi-bank, making money through interest on client assets. It benefits when:
  1. Interest rates increase
  2. When account signups increase (they have a paid Pro version); this is minor
  3. When total user AUM increases
  4. When DARTs volume increases
While interest rates have declined, IBKR is comparatively less susceptible than are its competitors. And for various reasons outlined above, we can rest assured items 2 through 4 will continue to rise dramatically. This should result in significant appreciation.
Is there room to run? Certainly. The ATH is $79.70, which also arrived after a period of volatility (remember, volatility is good for IBKR!). Of course, there’s a time-lag element to the results of volatility, which I map out below. We’re just getting into the good part now:
nut
For all of these reasons, I believe that Earnings + EOM KPI updates will pour gasoline on the recent fire. Or, as George Soros crustily uttered between denture fittings:
“You want to be long the things that are going up, and short the ones that are going down.”
TL;DR: IBKR 8/21 $55 C, $60 C for more risk/reward
Positions (wanted to let it run a bit before helping out you tardigrades):

https://preview.redd.it/32ru2d00i8b51.png?width=1416&format=png&auto=webp&s=0b592f1b956daa8f1dff04544f4bdb6a27e55d24
Disclaimer: not investment advice! do your own DD. I have a position, obviously. Do not yolo. Hedge your bets.
submitted by newguysofly to wallstreetbets [link] [comments]

Review and Observations [SPOILERS]- AEW DARK - Tue., Aug.25

Just finished watching Tuesday's (longest ever?) episode of Dark.
The show ran just short of two hours, with thirteen matches on tap. Since Dynamite isn't on until Thursday this week, more action offered to tide you over.
Commentary - Veda Scott, Taz, Tony Schiavone
1) Best Friends vs. Storm Thomas & Demetri Jackson
A new found anger on display with Best Friends starts the show against two newcomers. Storm Thomas was solid but didn't stand out. Demetri Jackson had a fluid sequence of offense early that shows he's got some skills! He also avoided a bad bump by just tucking his head under in time from Trent's planking rope suplex. Trent did most of the heavy lifting in this one, scowling through much of his attacks. He's obviously still upset over his mom's van. Back-to-back low piledrivers on Jackson allowed Chuck Taylor to get the pin. Orange Cassidy approved. Good workout for all involved.
2) Shawn Spears vs. Jessy Sorensen
Two brutes beat the crap out of each other. That sums up this slugfest of strong style, little flash competitors. Spears ultimately hits his Death Valley Driver to secure the win. And yes, he sadistically adds some post match punishment. Spears hits Sorensen's "surgically repaired neck" with a deliberate strike from his loaded left glove. Intro by Justin Roberts made sure to emphasize "legendary Four Horseman member" Tully Blanchard, keeping the tease alive for a new version. Subtle cool when Tully removes his facemask at this moment, inadvertently mimicking an outlaw from the old West like a true horseman would.
3) Red Velvet vs. Mel
Mel's mean stare usually means bad things for her opponents. On the receiving end in this dull match was Red Velvet. Mel's size advantage was glaringly apparent. She "rag dolled" Red with a choke slam to win easily. Mel has a "Lance Archer" assassin vibe about her. She needs a little more polish in the ring, but can be a force in the women's division.
4) Lance Archer vs. D3
COMMENTARY MOMENTS
Veda Scott, "I talked to D3 before this match. I'm glad because I don't think he'll be available after it." (Awesome!)
Taz, "D3 might be D.O.A. in a sec." (!) and, "He almost caught rain on that chokeslam."
Archer continues his "Everybody Dies" campaign (second only to MJF's #NotMyChampion campaign) by tossing around Italian newbie D3. Once again, size difference is almost uncomfortable to watch - I said almost! Archer's push in AEW seems to be stuck in limbo since his TNT Championship Tournament run ended. I wonder what storyline he wants to pursue and against whom in the short term. I would like to see him have matches against the likes of Wardlow, Cage, and Hager. But with no audience in attendance yet, that would be wasted for pop. They better do something with him soon as this squash match run is getting old.
5) Luther & Serpentico vs. The Initiative
Last week, Cutler's "polyhedral die" roll landed on 15. This week, it landed on a symbol (just above an upside down 14). Is there a non-number symbol on the die? I thought it was just 1-thru-20. I'm sure someone can comment below and inform the masses!
Fun match yet again involving our loveable losers The Initiative (Peter Avalon, Brandon Cutler). Avalon emphatically swore (in Monday's "Being The Elite" episode) to do whatever it takes to win! He almost secures that win with a rollup on Luther but only got the "two-and-a-half" count. Luther kept using his partner Serpentico as a bodyslam accent on top of their opponents several times. I'm not sure Serpentico enjoyed that. Avalon's obessesion to get a win comes back to haunt him as he mistakenly strikes Cutler with "the book". Luther holds a dazed Cutler (a la Jim Neidhart of the Hart Foundation) as Serpentico leaps and hits a double-knee to Cutler's face on the way down. 1-2-3. The Intiative's tag streak continues, now 0-and-11. Booooo!
6) Nyla Rose vs KiLynn King
Rose and manager Vicki Guerrero come out quite confident as KiLynn King awaits. King is getting many viewers' attention each time she performs. Her sleek build, and long legs lend themselves well to her in-ring style. Her spin kick resembles that of Luchasaurus. She even gets a momentary upper-hand on Rose when she hits a Crucifix (or Samoan drop) on Rose for a close two-count. But ultimately she falls, thanks in no small part to Vicki. As if Rose needs outside interference to win, Guerrero shoves King from the top rope as she set up to jump for a move. Rose distracted referee Aubrey Edwards long enough to let that happen. Rose then hit her devastating power bomb for the pin. Aubrey! Turn around next time! Sheesh.
Post match, Vicki gets on the mic (oh no) to coin their alliance, "The Vicious Vixens". Viva la Vixens!
7) Billy and Austin Gunn vs. Frank Stone & Baron Black
Not too much to say on this match. The Gunn Club prevailed without dominating their opponents much. Frank Stone looks like an up and comer with good power. Austin Gunn nailed his "quick draw" tuck suplex off the ropes on Black for the pinfall. Not sure where the Gunn Club is going yet, stay tuned?
8) Penelope Ford vs. Heather Monroe
A whole lotta platinum blonde goin' on in this match. Ford is strong in her offense yet again. Her opponent, Heather Monroe, the "Killer Bae" in Championship Wrestling From Hollywood, is used to being top of the class. In AEW, she's just getting started. She shows enough in this match on the heels of her Dynamite match against Shida to have confidence. Ford hits her "FisherLady Buster" (thanks Taz!) for the pinfall. (Heather - just lift your free shoulder! No? Why? LOL).Newsflash - Kip Sabian is not only Ford's boyfriend, but also her #1 fanboy.
9) Santana & Ortiz vs. Metro Brothers (Chris & J.C.)
Proud and Powerful prevail easily with a thorough dismantling of debuting team Metro Brothers. Highlight of the match was Santana's triple suplex sequence without letting his opponent go during it. They used the same power bomb into a facekick finish for the pinfall. Post match (you knew it was coming), Best Friends came flying out to throw hands with them. Out on the floor, through the ringside table, and up the ramp to the parking lot is where they traded blows. No love lost. I was hoping for a chair shot from Best Friends to repay PnP for the van. Not yet!
10) Ricky Starks vs. Shawn Dean
Team Taz in the ring represented by Absolute Ricky Starks. His back is still showing signs of Darby Allin's tacked skateboard. Ouch. Shawn Dean keeps getting good opponents in his matches and shows a bit more each time out, as he does again here. But in the end, Starks hits his rochambeau reverse face down suplex for the win. Strong pin position on display with his full arm extension and weight pressed down on Dean. Excellent technique Ricky! Love the expression too.
11) Jake Hager vs. Marko Stunt
I thought wrestling always had weight classes. No? Oh, AMATEUR wrestling - got it.
Marko Stunt (120lbs.!), why do you sign these match contracts? Jake Hagar? Oh no. And why are your tag partners Luchasaurus and Jungle Boy never out to support your solo matches? You're always out to support their matches. Mmmmm?
Jake doesn't seem eager and confirms with referee Bryce Remsberg that this is a mismatch. He even lets Stunt headlock him once before telling Marko to leave. "You don't belong in this ring with me." Stunt kicks the bottom rope to nutjob Hagar in response. Stunt also does his floss dance to further infuriate the MMA man.
That's it. Hagar proceeds to treat Marko like any other man in his way and destroys him. Even chokes him out for the submission win. Oh, NOW Jungle Boy and Luchasaurus come from the back - a little late, guys! "Don't do it, he's a kid," Luchasaurus pleads. Hagar still knees Stunt into next week before fleeing. Dang you Inner Circle!
12) Frankie Kazarian vs. Kip Sabian
I was caught off guard with the finish of this one. Members of SCU have been marginalized recently from the tag team division. Scorpio Sky is "concentrating on his singles career". Daniels and Kazarian have been in singles matches separately. And their tag team isn't even in the Gauntlet match this Thursday on Dynamite. I was fully expecting Sabian to take this one, especially with Ford's interference prevalent. Sabian should have pinned Kazarian with a feet-on-ropes added rollup. But surprisingly, Kaz kicked out. Then, he countered Sabian's suplex attempt into a "version of a Scorpion Death Drop" (thanks Taz!) to gain the pinfall. Great form on the winning pin with Kaz close-fisted around Sabian's shoulders and pressed down fiercely atop him. Frankie also gets a closeup shot to say he's "tired of being overlooked, and under appreciated", I think. Respect. New storyline needed for these guys.
13) Sonny Kiss & Joey Janela vs. The Hybrid 2
The main event lived up to its top billing. Both of these tag teams are fluid and quick throughout the multi-move bumps and tumbles. Highlights include Angelico's low ground, multi-limb leg tie-up of Kiss. That was great, and is worthy of a submission win in future for sure! Janela's 1-on-2 move from the top rope also looked sensational. He leaps into a reverse neckbreaker on Angelico, who inadvertently DDTs Evans (who was stuck in his gut after Janela threw him there).
Agonizingly, Kiss goes to the top rope one too many times and is punched silly by Angleico. Evans retrieves Kiss from the top buckle, and backslides him into an inverted spider web clamping pin. Excellent form, and greatly believable.
Super match for all four performers.
Dynamite at 8pm on Thursday night! Take care. [end]
submitted by Turnbuckle_Jones to AEWOfficial [link] [comments]

###Wall Street Breakfast: The Week Ahead

Jun. 07, 2020 8:43 AM ET take what you will and tell me what you think, I think they named most of the stocks out there. What are your favorites?

Welcome to Wall Street Brunch, our preview of stock market events for investors to watch during the upcoming week. You can also catch this article a day early by subscribing to the Stocks to Watch account for Saturday morning delivery. Podcast listener? Subscribe now to receive Wall Street Breakfast by 8:00 a.m. every trading day on Seeking Alpha, iTunes, Stitcher and Spotify

Fed Reserve Chairman Jerome Powell will be in the spotlight next week when the Federal Open Market Committee meets on June 9-10. Powell is expected to face questions on the central bank's role in the economic recovery and what tools are still available to use. "We think right now they’re just trying to get this Main Street lending program to work. The question is are they going to do more things around what they do in terms of forward guidance and next steps of macro easing," previews Bank of America economist Ethan Harris. On the economic front, reports on consumer prices, producer prices and consumer sentiment will be watched closely. The weekly jobless claims numbers due out on June 11 will be crucial for sentiment after May’s employment report showed a surprising record gain of 2.5M jobs. On the corporate side of things, Lululemon (NASDAQ:LULU) reports earnings with shares sitting near their all-time high and a board battle at GameStop (NYSE:GME) goes to a vote.
Earnings spotlight: REV Group (NYSE:REVG) and Stitch Fix (NASDAQ:SFIX) on June 8; Signet Jewelers (NYSE:SIG), AMC Entertainment (NYSE:AMC), Chewy (NYSE:CHWY), Five Below (NASDAQ:FIVE) and GameStop on June 9; Guess (NYSE:GES) and Red Robin Gourmet Burgers (NASDAQ:RRGB) on June 10; Adobe (NASDAQ:ADBE), Dave & Buster's Entertainment (NASDAQ:PLAY) and Lululemon on June 11. Go deeper: See Seeking Alpha's complete list of earnings reporters
IPO watch: Online car seller Vroom (VRM) is offering about 18.8M shares in an expected range of $17 to $19. The timing for the IPO is intriguing with the pandemic leading to more online shopping for cars, but sales and margins under pressure. How well the Vroom IPO is received by investors could be of interest to Carvana (NYSE:CVNA), Cars.com (NYSE:CARS), TrueCar (NASDAQ:TRUE), AutoNation (NYSE:AN) and even Tesla (NASDAQ:TSLA) as the concept of online car shopping heads more mainstream. Vroom is expected to have a market capitalization of around $1.92B if it prices at the higher end of the indicated range. Across the Pacific, Chinese gaming company NetEase (NASDAQ:NTES) is looking to raise $1.2B in a Hong Kong listing to fund strategies for international expansion. Shares are expected to start trading on June 11. Also in the IPO world, the quiet period expires for ADC Therapeutics (NYSE:ADCT) on June 9 and IPO share lockups end on XP (NASDAQ:XP), Bill Holdings (NYSE:BILL), OneConnect Financial (NYSE:OCFT) and Sprout Social (NASDAQ:SPT) later in the week. There are also secondary offering lockup expirations on Tilray (NASDAQ:TLRY) and BlackRock (NYSE:BLK) to keep an eye on. Go deeper: Catch up on all the latest IPO news.
M&A tidbits: Gaming officials in New Jersey meet to discuss the Caesars Entertainment (NASDAQ:CZR)-Eldorado Resorts (NASDAQ:ERI) merger. The tender offer on the Menarini Group pickup of Stemline Therapeutics (NASDAQ:STML) is also due to expire. Keep an eye on Western Union (NYSE:WU) and MoneyGram International (NASDAQ:MGI) for reports on if the companies are in talks and expect a little more drama around the Tiffany (NYSE:TIF)-LVMH (OTCPK:LVMHF) merger.
Projected dividend changes (quarterly): W.R. Berkley (NYSE:WRB) to $0.12 from $0.11, Casey's General Stores (NASDAQ:CASY) to $0.34 from $0.32, National Fuel Gas (NYSE:NFG) to $0.445 from $0.435, Realty Income (NYSE:O) to $0.2330 (monthly), Urstadt Biddle (NYSE:UBA) to $0.14 from $0.28.
Spotlight on Snap: Snap (NYSE:SNAP) has its partner summit event scheduled for June 11. The virtual event will feature a keynote address by Snap co-founders Evan Spiegel and Bobby Murphy, as well as talks from other team members from across the company. New product features and partnerships will be announced around Snap's augmented reality offerings and a stripped-down version of its platform that partners can embed in their own apps is expected to be unveiled. Developers are expected to be able to use a toolkit provided by Snap to build a Snapchat-like mini-app right in their own websites. The Snap event takes place with the company under a brighter spotlight for how it curates its promoted content on the Discover page. Heading into the summit, shares of Snap are up more than 50% over the last 90 days.
Airlines: How high can the airline sector fly? After a series of reports on improved bookings trends, airline stocks are showing positive momentum. American Airlines (NASDAQ:AAL) paced the sector with a 77% gain last week, while Spirit Airlines (NYSE:SAVE) +75%, JetBlue (NASDAQ:JBLU) +36%, Delta Air Lines (NYSE:DAL) +36%, Hawaiian Holdings (NASDAQ:HA) +34% and SkyWest (NASDAQ:SKYW) +33% also reeled off big gains. Traffic reports for May are due out next week, which could include more market-moving metric updates.
Healthcare watch: At ENDO Online, OPKO Health (NASDAQ:OPK) is due to present data on Somatrogon on June 8 and Neurocrine Biosciences (NASDAQ:NBIX) will present on Crinecerfont. Virtual presentations scheduled for the European Hematology Association conference starting on June 11 include bluebird bio (NASDAQ:BLUE) on LentiGlobin data, Merus (NASDAQ:MRUS) on MCLA-117, Altex Industries (OTCQB:ALTX) on Nomacopan, Vertex Pharmaceuticals (NASDAQ:VRTX) on CTX001, AstraZeneca (NYSE:AZN) on AZD1222 and Agios Pharmaceuticals (NASDAQ:AGIO) on AG-348.
Analyst meetings and business updates: Equifax (NYSE:EFX) has an investor update scheduled for June 8. Intel (NASDAQ:INTC) CEO Bob Swan will talk ESG in a discussion with JUST Capital on June 8 and Ericsson (NASDAQ:ERIC) has a business update call scheduled for June 9 covering networks and digital services. Avery Dennison (NYSE:AVY) has a conference call scheduled with R.W. Baird on June 9. Salesforce.com (NYSE:CRM) cloud exec Mike Micucci is participating in the Citi Virtual Software Bus Tour on June 10. Finally, Overstock.com (NASDAQ:OSTK) has an Investor Day scheduled for June 10 and Centene (NYSE:CNC) has a Virtual Investor Day presentation scheduled for June 12.
Conferences rundown: Cowen hosts a conference covering the "New Retail Ecosystem" with virtual presentations from Vince Holdings (NYSE:VNCE), Lands' End (NASDAQ:LE) and Macy's (NYSE:M). Also next week, William Blair has a growth stock conference with online talks by execs from a long list of companies, including Pluralsight (NASDAQ:PS), Appian (NASDAQ:APPN), TransUnion (NYSE:TRU), Arista Networks (NYSE:ANET), CyberArk Software (NASDAQ:CYBR), QAD (NASDAQ:QADA), Talend (NASDAQ:TLND), Workday (NASDAQ:WDAY), SmileDirectClub (NASDAQ:SDC), DocuSign (NASDAQ:DOCU), Chewy (CHWY), Zendesk (NYSE:ZEN) and Varonis Systems (NASDAQ:VRNS). The hodge-podge list of companies due to participate at the Stifel 2020 Virtual Cross Sector Insight Conference include Starbucks (NASDAQ:SBUX), Donaldson (NYSE:DCI), HubSpot (NYSE:HUBS), S&P Global (NYSE:SPGI), Autodesk (NASDAQ:ADSK), Archer-Daniels-Midland (NYSE:ADM), MasTec (NYSE:MTZ), Lindsay (NYSE:LNN), Dycom Industries (NYSE:DY) and Cronos (NASDAQ:OTC:CRON). Meanwhile, the Deutsche Bank 11th Annual Virtual Global Industrials & Materials Summit 2020 will also run next week with presentations ranging from airline companies, paper producers, construction concerns to home builders. Appearances are expected from MYR Goup (NASDAQ:MYRG), WillScot (NASDAQ:WSC), Berry Global (NYSE:BERY), Builders FirstSource (NASDAQ:BLDR), Cabot Corp. (NYSE:CBT), Canadian Pacific (NYSE:CP), Clearwater (NYSE:CLW), Crown Holdings (NYSE:CCK), AMETEK (NYSE:AME), ArcelorMittal (NYSE:MT), Ahland Global (NYSE:ASH), AXTA, Delta Air Lines (DAL), Dow Inc. (NYSE:DOW), Fluor (NYSE:FLR), Garrett Motion (NYSE:GTX), Rio Tinto (NYSE:RIO), Saia (NASDAQ:SAIA), Silgan Holdings (NASDAQ:SLGN), Sonoco Products (NYSE:SON), Summit Materials (NYSE:SUM), Target Hospitality (NASDAQ:TH), Vulcan Materials (NYSE:VMC), Westlake Chemical (NYSE:WLK), XPO Logistics (NYSE:XPO), Meritor (NYSE:MTOR), nVent Electric (NYSE:NVT), Peabody Energy (NYSE:BTU), PPG Industries (NYSE:PPG), PQ Group (NYSE:PQG), REVG, Alcoa (NYSE:AA), Rexnord Corp. (NYSE:RXN), Canadian National (NYSE:CNI), CSX Corporation (NASDAQ:CSX), Union Pacific (NYSE:UNP), Kansas City Southern (NYSE:KSU), Honeywell (NYSE:HON), Ball Corporation (NYSE:BLL) and O-I Glass (NYSE:OI).
Eating out: The week ahead will see the eat-at-home vs. restaurants trade be hashed around again. Nielsen data could show a deceleration in the stockpiling benefits for Campbell Soup (NYSE:CPB), J.M. Smucker (NYSE:SJM), B&G Foods (NYSE:BGS), Blue Apron (NYSE:APRN), Hain Celestial (NASDAQ:HAIN) and General Mills (NYSE:GIS) - while restaurant stocks like Cracker Barrel (NASDAQ:CBRL), Denny's (NASDAQ:DENN), Dine Brands Global (NYSE:DIN), Brinker International (NYSE:EAT) and Red Robin Gourmet Burgers (RRGB) will look to scrap back from their YTD losses with more people eating out.
Notable annual meetings: GameStop may generate the most drama of the annual meetings next week with the company's board up for re-election. Two proxy firms are backing candidates from stakeholders Hestia Capital and Permit Capital for board inclusion, while Michael Burry's Scion Asset management is voting in favor of the board's slate. The annual shareholder meeting arrives with shares of GameStop down 32% YTD. Other annual meetings to watch this week include MercadoLibre (NASDAQ:MELI), SeaWorld Entertainment (NYSE:SEAS), Shake Shack (NYSE:SHAK), Target (NYSE:TGT), Wingstop (NASDAQ:WING), TJX Companies (NYSE:TJX), Mattel (NASDAQ:MAT), Nvidia (NASDAQ:NVDA), Best Buy (NYSE:BBY) and Dollar Tree (NASDAQ:DLTR).
Betting on betting: The brand-new Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ) heads into its first full week of trading just ahead of the re-emergence of major sports in the months ahead. The Roundhill Sports Betting & iGaming ETF is designed to offer retail and institutional investors exposure to sports betting and iGaming industries. Holdings include DraftKings (NASDAQ:DKNG), Flutter Entertainment (OTCPK:PDYPY), Penn National Gaming (NASDAQ:PENN), William Hill (OTCPK:WIMHF), Scientific Games (NASDAQ:SGMS), GAN (NASDAQ:GAN), Churchill Downs (NASDAQ:CHDN) and PointsBet (OTCQX:PBTHF).
Barron's mentions: Twitter (NYSE:TWTR) makes the cover this week with the company in the middle of the political firestorm. For investors, the bigger issue than the culture debate is that the stock is valued at a sales multiple lower than social media peers. Food suppliers Sysco (NYSE:SYY), US Food Holdings (NYSE:USFD) and Performance Food Group (NYSE:PFGC) are recommended with sales volume slowly recovering. The publication notes that large investors like KKR and Trian Fund Management are taking an interest in the sector. There is also a reminder that COVID-19 drug trials are progressing. Eli Lilly (NYSE:LLY) is testing its antibody in a Phase 1 trial. Regeneron Pharmaceuticals (NASDAQ:REGN) is also set to begin testing this month, while a collaboration between Vir Biotechnology (NASDAQ:VIR) and GlaxoSmithKline (NYSE:GSK) will begin trials later this summer. If the trial results are positive and the pandemic remains intense, emergency authorization of some of the drugs could follow.
Sources: Bloomberg, Reuters, CNBC, BioPharmCatalyst, EDGAR
submitted by abiech to Winkerpack [link] [comments]

Box Spread Financing for extremely cheap 0.85% margin interest rates.

Want to max out your margin/buying power to make wild plays in this market but don't want to pay usury 8-10% margin interest rates to your broker? The answer is SPX Box Spread Financing.
Right now Mr. Market is offering you a 0.85% APR loan that isn't due until 1014 days from now. Selling the box on SPX on 16 DEC 22 will cost you 2.5%. 2.5%/1014 days to expiration * 365 = .85% annualized percentage rate. I got filled for 70k cost on a 2.8 million box spread. 70k/2.8 million = 2.5%.
10% interest rates for a fully secured loan is usury. I can balance transfer to my checking account for 3% for a year on my credit card.
https://i.imgur.com/ledfKiU.jpg

How box spread financing works

https://www.theocc.com/components/docs/about/press/white-papers/2016/box-spreads-options-strategies-for-borrowing-or-lending-cash.pdf
Short the box = borrower. Long the box = lender.
Everyone here remembers GUH. The issue with Robinhood was they added the credit received from box spreads and other option selling premium as if it were a cash contribution. There is a legitimate use of box spreads though! However at a real broker say TD Ameritrade the cash is held secure. However it offsets your debit balance! You're no longer paying 10% interest to your broker but to the market!

Pros and cons of box spreads

Pros:
Cons:

Mechanics of Box Spread Financing

First: Find a European style 1256 contract eligible index options chain like SPX.
Borrower: Short 1,000 points of SPX = borrowing $100k. Lender: Long/Debit 1,000 points of SPX = lending out $100k.
Type of options trade: COMBO/ Iron Condor option. You must do all 4 legs at once.
Limit/Market order: LIMIT If I need to explain why then box spread financing isn't for you.
Pair up a vertical call spread with a put spread in both the same strikes.
Place your combo order and carefully use confirm dialog/ option modeling software to absolutely be sure it's uniform max loss no matter how SPX moves. Start off with the most favorable price you want then slowly work it. Box spreads take time to fill and quote. Lender algorithm trading boxes hunt for them and it takes time for the options exchange to match order flow. It's essentially a shadow auction at the exchange.
You need to direct route these orders to an exchange. You can try smart routing first but it seems to work better getting quoted. Direct routing may bypass some limitations your broker attempts to prevent you from getting better interest rates.

Wide strikes vs multiple contracts

Obviously less contracts = less commissions. You can think of commissions as a lending charge/etc.
Brokers hate retail plebs getting institutional margin rates through the market. I had a lot of trouble filling my $2.8m box in a real account on TOS. TD Ameritrade simply won't send a box order to an exchange if there is no quote. So I had to resort to multiple contracts.
Multiple contracts near the money = faster fill, possibly at better rates. Simply put there is more action and liquidity at the money. The options exchange software can possibly match your box legs to 4 different traders at the money and fill everyone making everyone happy. Box spread lending is one reason why the zero sum argument in options trading is bunk. 4 traders get whatever position they want and internally they're all lending money to you. That's a win/win where both sides profit.
Fewer contracts way out the money = only getting fills from people who want to be box spread lenders.
In my experience I found, while more costly, near the money boxes are much easier and less frustrating to be filled.

Conclusion

I hope learning about box spread financing helps you YOLO even more efficiently.
Edit 2: You need a margin account to make use of this. Box spreads DON'T give you leverage (when the broker implements it correctly). You can't use a cash account to borrow on box spreads, only lend.
Edit:

TL;DR spoon feed me the trade/position

Stick to your 10% margin interest rates/ robinhood gold subscription. This isn't a trade but a financing strategy.
submitted by Adderalin to wallstreetbets [link] [comments]

Is the Cure Worse Than the Disease? Social Distancing and Economic Costs

TDLR: Trade-offs between lives and well-being are something that economists think about and society deals with on a number of fronts. With respect to current social distancing measures and the economic pain they cause, most people’s preferences would probably align with maintaining them for now. We can’t be certain, but evidence from past pandemics and what little we know about COVID-19 suggests that we aren’t facing a trade-off between lives and the economy right now
R1 I was gonna write an R1 on bad takes about public transit, but then COVID-19 happened, and no one wants to ride the train right now. Before I start, I want to say that I am neither a public health expert, epidemiologist, health economist, nor a macroeconomist. Research on this is moving at a breakneck pace, and if y’all have anything to add on these fronts, it would be greatly appreciated.
In this post, I want to address claims that social distancing is “worse than the disease,” that the suffering caused by shutting down wide swathes of the economy is worse than the probable deaths that would be caused by letting COVID-19 run rampant. Anecdotally, I’ve seen this sentiment shared frequently online. There are the protests against various measures, and as time goes on, and the economic pain of social distancing increases, sentiment against social distancing is likely to increase. This sentiment was probably most clearly enunciated by Texas Lt. Governor Dan Patrick when he said that, “People his age should be willing to sacrifice themselves for the sake of their children.” This statement attracted a lot of hand-wringing over the value of human life vs economic activity, but also some support. When polled, a large number of Americans say they fear catching the virus or someone they know catching it, more say they are a worried about the economy. Now, you can still be worried about the economy and think social distancing is important. Indeed, social distancing, seems to be broadly followed, but with recent protests, it’s not a sentiment shared by everyone.
Now, let’s delve into the trade-off that the Lt. Governor is describing. Sure it’s macabre, and maybe we don’t like thinking about it. However, is it a fair statement that we can turn a dial between economic well-being and people dying? Does this trade-off currently exist with respect to social-distancing and coronavirus, and is the trade-off worth making on the current margin?
I will claim that while this is a trade-off worth thinking about, social distancing was, and probably still is, probably necessary to prevent mass death and the economic pain that detractors of it claim to care about. I am not claiming that social distancing will always be necessary or that we as a society won’t have to make trade-offs about risks in the future. More this is to claim that social distancing likely is a first-best solution compared to the counterfactual of letting the virus run rampant right now. There are plenty of intermediate steps we could take, but this post is meant to mostly to counter idiots complaining that this is just like the flu and more importantly, hopefully help provide us a framework for thinking carefully about these trade-offs without spitting out platitudes.
Value of Statistical Life
How much is a human life worth? You might say “priceless”, that no price is too high to save a human life, but think about your own situation. Let’s say I offer you a certain amount of money, but there is a small chance you die instead. Obviously, it will depend on the amount of money offered, the risk, and your personal preferences. Indeed plenty of people risk death for money everyday; many of us drive to work, which has a non-zero chance of death.
Now that’s our own preference. We can choose to put ourselves at risk. Why do policymakers have to butt in? Well, there are various market failures that can make this difficult. There might be information asymmetries, like not knowing how much arsenic is in your food. There are also externalities that affect large numbers of people and that we can’t reach a Coasian bargain with them. For instance a highly infectious disease that is asymptomatic or mild for most people, but highly virile and deadly for others. Eichenbaum, Rebello, and Trabandt have a simple paper that makes the case that allowing the economy to operate as normal is much worse than the shutting things down, but how do we determine this value? This is where something called the “value of statistical life” (VSL) comes in.
VSL can roughly be thought of as the marginal rate of substitution one has between a composite good and one’s risk of mortality. To be clear, this is not the value of a human life. If a kid is trapped down a well, rescuers aren’t gonna ignore her because saving her is expensive. VSL is a bit more detached than that. It isn’t people volunteering to die, just seeing what people are willing to accept in terms of risk if they are compensated for it, but who decides this?
The Office of Management and Budget (OMB) manages them, and different agencies use different estimates based on what they’re regulating. For instance, the Department of Transportation might look at how much people spend on safety features as part of their analysis, and the EPA will look at pollution avoidance measures that people take. These estimates rely on a lot of extrapolation and assumptions about human behavior. They generally come from meta-analyses used through the years. In 2020 dollars, they range from $6.2 million according to Miller (2000) to 13.3 million according to Kochi et. al.. Most estimates that are currently used put the VSL at around $10 million.
For instance, different risks might be more salient than others, and that can impact estimates. There’s also the problem of heterogeneity. Different people might have different preferences that affect their willingness to pay. More to the point, inequality can impact things here. If I’m rich, I might be more willing to spend more to reduce my mortality risk by 10% than a poor person might be willing to spend to reduce their risk by 50%. Is the poor person more risk-loving, or do they just have fewer outside options?
This is worth keeping in mind where as of April 8th 1/3 of hospitalizations from COVID-19 complications were among African Americans. This probably at least part reflects the geography of the outbreak to some degree, but even then it shows large disparities in who is at risk. Who is actually at risk of exposure is hard to pin down. An analysis of which jobs could be done mostly from home shows that less exposed occupations are things like computer work, which tend to pay more than maintenance and cleaning jobs, which are the most exposed.
The upshot of this is that even if we knew the “true” willingness to pay of people to avoid being exposed to the outbreak, that might not fit within fairness criteria that we might care about. Economics doesn’t give the answer on that, but it is worth keeping in mind. VSL has serious limitations, and we shouldn’t put it down as the intrinsic value of human life, but it is a useful starting point in thinking about how the public trades-off risk. However, the idea that society can and does trade-off mortality risk and economic well-being is a sound one.
What about this and COVID-19?
OK, so we have a framework to start with, but what does it say about the costs and benefits of social distancing? Here we’re working with a lot of assumptions. Even public health officials don’t know. 538 has an article from April 2nd that show an incredible range of estimates of the predicted death toll. It’s really hard, and we don’t know a lot about the disease, and these models rely heavily on these assumptions about facts that we just don’t know. That has a major effect on predictions.
We don’t know what the infection rate for COVID-19 is, and estimates are highly sensitive to different estimates of these parameters. For instance, Iceland tested a large percentage of their population, and found that a very large percentage of the population is asymptomatic. This might be good, because ceteris parabis, it means fewer people might die from being infected, but on the other hand, it means that the disease can spread more easily. The above paper examines a set of models called SEIR models, which are kind of like DSGE models, where you need to solve a system of equations and plug in parameters to figure out the likely spread. Another option is using agent-based models, where we model outbreaks as complex systems that can’t be easily captured with a few equations.
The IHME model, that the White House is currently using is a bit different, it updates off the past experience of other cities, particularly in Italy and China, to project death tolls. They’ve shown a serious drop in projected deaths, from 100 to 240 thousand US deaths, even with social distancing to less than 70,000 more recently. Does this mean that we’re all just overreacting?
Well no, for one thing, social distancing measures seem to have reduced disease morbidity. How much is hard to know, and I won’t deign to throw out calculations here for a counterfactual if we had no social distancing. That’s hard to know, and we’ll need to know more about the R0 and mortality rate of the disease. Maybe 500,000 people would die without social distancing interventions, which would be valued at 18% of GDP at a VSL of $7 million, but we just don’t know. Maybe it’s a lot lower, we don’t know, but there are some bits of evidence which suggest that we should probably be risk adverse and that opening up prematurely won’t fix things.
Economic Impact of Pandemics:
There are a lot of factors that can determine how important lowering the infection rate is. For one, our healthcare system only has so much capacity. There are only so many healthcare workers, equipment, and beds for patients. You’ve probably seen infographics about “flattening the curve” because without that, we can only take so much. Indeed, some basic modeling, shows that it wouldn’t take that much to overwhelm our healthcare system, which could rapidly raise the mortality rate.
We can also examine the historical impact of pandemics on the economy. Over the long-run pandemics tend to lower output as they kill people, make survivors less productive, and halt economic output from people isolating, even without government directives.
The closest parallel is probably the 1918 H1N1 flu pandemic, sometimes erroneously called the “Spanish Flu”, which probably originated in either China or the United States. This disease killed at least 50 million people worldwide and at least 675 thousand in the United States. For comparison, World War I, which happened concurrently killed about 10 million worldwide and about 116 thousand Americans. The flu was noteworthy, because while it spread across the entire country, different localities had different responses. Many cities, particularly out West, quickly put aggressive social distancing interventions in place, while other cities were slow. More aggressive cities saw lower mortality rates than less aggressive cities, and less bad secondary waves, which were also a huge feature of the pandemic. Furthermore, it appears that aggressive cities did not see a relative decline in manufacturing employment. Now an important difference with the 1918 flu is that the most vulnerable people were young, prime-age adults, compared to today, where the disease tends to be more virile with older people with other health conditions. Still, as with the equity issue we brought up earlier, comparing between groups is hard, and we can’t just handwave them away.
Now that’s all terrible, but what about the very real economic pain now where millions are unemployed? Surely, we can’t dismiss them, and we can’t. However, there are a couple of things to note here. Firstly, ending social distancing prematurely might not bring the economy back. People can still be nervous about doing certain things like going out to eat. Most Americans report being risk-averse about doing things again when directives allow them too. If they perceive the outbreak as still present, they will still exercise caution, regardless of what policymakers say. Besides, if distancing ends prematurely, this can lead to a 2nd wave, and you have to redo everything.
Secondly, as for the pain and misery of joblessness, that needs to be acknowledged and worked on. The government should absolutely boost UI, stimulus payments, and boosting critical sectors like health care. The Fed is currently keeping interest rates low, being accomodating towards fiscal policy in many unprecedented ways, including lending to small businesses and state and municipal governments. Also while, the pain of joblessness is awful, and suicide rates do tend to correlate with joblessness, there doesn’t seem to be a strong link with overall mortality and economic downturns, and if anything mortality rates go down during downturns as behavior changes. This isn’t to minimize this suffering, but more to counter arguments that more people would die anyway, so there aren’t any gains to distancing in terms of mortality.
So in conclusion, there are serious reasons to be critical of the Lt. Governor’s remarks. While conceptually, they could have some merit, it’s hard to see that is currently the case, as of mid-April 2020. Overall, we just don’t know the counterfactual of not social-distancing. However, there is reason to err on the side of caution. It is very probable that not distancing will result in a magnitude of deaths that outweigh any benefits to the economy. Also, historical experiences show that the economic pain of pandemics are real, and often outweigh the pain of mitigation. In the coming months, this debate will continue. We’ll have to figure out how we navigate this world. There are some plans out there, and well none of them look that cheery. We are going to have to make painful trade-offs, but when it comes to containing this outbreak, the evidence leans towards social distancing for the time being.
Through this all, it’s important to remember that the job of economists is not to maximize the monetary value of traded goods. It is to help people manage trade-offs to maximize their well-being. We are facing painful trade-offs in the largest disruption in this country since World War II. It will require social solidarity, patience, and acceptance of uncertainty.
submitted by DrunkenAsparagus to badeconomics [link] [comments]

Box Spread Financing for extremely cheap 0.85% Margin Interest Rates

Want to max out your margin/buying power to make wild plays in this market but don't want to pay usury 8-10% margin interest rates to your broker? The answer is SPX Box Spread Financing.
Right now Mr. Market is offering you a 0.85% APR loan that isn't due until 1014 days from now. Selling the box on SPX on 16 DEC 22 will cost you 2.5%. 2.5%/1014 days to expiration * 365 = .85% annualized percentage rate. I got filled for 70k cost on a 2.8 million box spread. 70k/2.8 million = 2.5%.
10% interest rates for a fully secured loan is usury. I can balance transfer to my checking account for 3% for a year on my credit card.
https://i.imgur.com/ledfKiU.jpg

How box spread financing works

https://www.theocc.com/components/docs/about/press/white-papers/2016/box-spreads-options-strategies-for-borrowing-or-lending-cash.pdf
Short the box = borrower. Long the box = lender.
Everyone here remembers GUH. The issue with Robinhood was they added the credit received from box spreads and other option selling premium as if it were a cash contribution. There is a legitimate use of box spreads though! However at a real broker say TD Ameritrade the cash is held secure. However it offsets your debit balance! You're no longer paying 10% interest to your broker but to the market!

Pros and cons of box spreads

Pros:
Cons:

Mechanics of Box Spread Financing

First: Find a European style 1256 contract eligible index options chain like SPX.
Borrower: Short 1,000 points of SPX = borrowing $100k. Lender: Long/Debit 1,000 points of SPX = lending out $100k.
Type of options trade: COMBO/ Iron Condor option. You must do all 4 legs at once.
Limit/Market order: LIMIT If I need to explain why then box spread financing isn't for you.
Pair up a vertical call spread with a put spread in both the same strikes.
Place your combo order and carefully use confirm dialog/ option modeling software to absolutely be sure it's uniform max loss no matter how SPX moves. Start off with the most favorable price you want then slowly work it. Box spreads take time to fill and quote. Lender algorithm trading boxes hunt for them and it takes time for the options exchange to match order flow. It's essentially a shadow auction at the exchange.
You need to direct route these orders to an exchange. You can try smart routing first but it seems to work better getting quoted. Direct routing may bypass some limitations your broker attempts to prevent you from getting better interest rates.

Wide strikes vs multiple contracts

Obviously less contracts = less commissions. You can think of commissions as a lending charge/etc.
Brokers hate retail plebs getting institutional margin rates through the market. I had a lot of trouble filling my $2.8m box in a real account on TOS. TD Ameritrade simply won't send a box order to an exchange if there is no quote. So I had to resort to multiple contracts.
Multiple contracts near the money = faster fill, possibly at better rates. Simply put there is more action and liquidity at the money. The options exchange software can possibly match your box legs to 4 different traders at the money and fill everyone making everyone happy. Box spread lending is one reason why the zero sum argument in options trading is bunk. 4 traders get whatever position they want and internally they're all lending money to you. That's a win/win where both sides profit.
Fewer contracts way out the money = only getting fills from people who want to be box spread lenders.
In my experience I found, while more costly, near the money boxes are much easier and less frustrating to be filled.

Conclusion

I hope learning about box spread financing helps you YOLO even more efficiently.
Edit 2: You need a margin account to make use of this. Box spreads DON'T give you leverage (when the broker implements it correctly). You can't use a cash account to borrow on box spreads, only lend.
Edit:

TL;DR spoon feed me the trade/position

Stick to your 10% margin interest rates/ robinhood gold subscription. This isn't a trade but a financing strategy.
submitted by Adderalin to investing [link] [comments]

M&B Reading 10: FOMC

For our schedule and other discussions, see the Money and Banking — Summer 2020 master post.
For today (August 14th), we read from a 1952 report to the Federal Open Market Committee (parts one, two, and three) about how the Fed plans to run monetary policy after the Treasury-Fed accord of 1951.
From the course website:
The report itself is on 2005-2034 plus appendices (especially Appendix D 2053-55). The response of the NY Fed is on 2055-2079. We see here a kind of re-negotiation of the relationship between the Fed and the private security dealers, as part of the transition away from war finance conditions toward an imagined post-war normalcy. As always in American monetary affairs, this is a negotiation between the money interest motivated by profit and the public interest motivated by stability. In 1952, the concern was about exit from the abnormal financial conditions of wartime. At present, our concern is about exit from the abnormal financial conditions of the global financial crisis. One way to connect the document to the money view that we are studying is to think of the Fed transitioning from making the inside spread (pegging price), to making the outside spread (preventing disorderly conditions), and from holding the price of money constant to adapting the price of money to current economic conditions.
This is the previously secret Fed document that Perry Mehrling mentions in Lecture 19. I found it useful to reread the preface multiple times to make sure I really understood it before working through the main text. The report gives us a snapshot of the inner workings of the FOMC, and what the money market and monetary policy looked like at the beginning of the 1950s. It is largely concerned with how to ensure a deep and liquid market for government securities (Treasuries) and the preface explains why this is an important policy objective.
Much of the report is a response to feedback they received from market participants. They went out and interviewed the money-market dealers and solicited feedback on how they could be doing their job better. Lots of stuff in here about the different kinds of complaints that various parties had and recommendations for how to address those complaints.
P.S. Whoever finds the most typos in this document wins.

Preamble

Effect on the Treasuries Market
The impact of these operations is not measured by the volume of transactions alone. It is much greater, for example, than the impact of a similar volume of purchases and sales by a private investor. The Federal Open Market Committee releases or absorbs reserve funds when it operates in the Government securities market. When the Committee buys, it augments not only its own holdings of Government securities but also the ability of other investors to enter the market on the bid side. Conversely, when the Committee sells Government securities, it does much more than add to the market supply of such securities. The reserves that it absorbs substract (sic) also from the capacity of the banking system to carry Government securities.
If the government buys a Treasury, then, as far as the rest of the economy is concerned, the Treasury has been replaced with reserves. On the other hand, if a private investor buys a Treasury, then as far as the rest of the economy is concerned, the Treasury has been replaced with deposits.
In both cases, one asset has been swapped for another. But the government purchase adds reserves to the banking system as a whole whereas the private purchase does not.
If the government buys Treasuries, then the effect is normally greater than if a private investor does. The exception would be if the private investor used cash to purchase his Treasuries. In that case, the effect should be identical because otherwise inaccessible reserves are being released into the banking system in either scenario.
They cause changes in the prices of the specific issues bought or sold, and affect opportunities for arbitrage as between various issues and sectors of the market. As a result, a new pattern of yields emerges as between all different issues and sectors of the market. When the readjustments have worked themselves out, both the prices of Government securities and the pattern of their yields will have been affected.
Mehrling emphasized the reserve effect when he described the monetary policy transmission mechanism back in Lecture 12, but I think it's also important to keep in mind the direct effect on Treasury prices as well.
In many contexts, we can think of deposits as being substitutes for reserves, but not if we're looking at the market for deposits. In many contexts, we can think of Treasuries themselves as being close substitutes for higher forms of money, but not if we're looking at the market for Treasuries.
Interest Rate vs. Credit Availability
When such borrowing is low, the tone of the money market is easy, that is, funds tend to be easily available at going interest rates for all borrowers who are acceptable as credit risks. When member banks themselves are heavily in debt to the Federal Reserve banks, the tone of the money market is tight, that is, marginal loans are deferred and even better credit risks may have to shop around for accommodation.
These responses seem to be independent, to some extent, of the level of interest rates, or of the discount rate. For example, the tone of the money market might be easy even though the discount rate were 4 percent. This would happen mainly in a situation where the volume of member-bank borrowing was low. Conversely, the tone of the money market might be on the tight side when the discount rate was 1% percent. This would occur when member banks were heavily in debt.
Hmm. So the tightness or easiness of the money market can move independently from the interest rate. I suppose one way to think about it is that banks are always going to lend at whatever the going rate is, but if money is tight, they're going to lend less. Of course, the way they lend less is by quoting higher rates.
So the question is why the tight conditions don't push up interest rates. Or maybe they do, but the interest rates hit a ceiling at the discount rate? And just because the interest rates hit a ceiling doesn't mean the tightness in the money market hits a ceiling. The tightness is then reflected in more and more banks going to the discount window. I'll have to think about this more.
Unlike the prototypical goods market, it is not true that there's just one price for everyone, and that if you pay the price, you can buy the thing. Lowering the interest rate (price of money) might create an incentive for creditworthy borrowers to borrow more, but it doesn't directly make a particular borrower creditworthy.
This connects up with CMT a little bit when we think about simultaneously paying out a basic income and tightening monetary policy at the same time. On its own, the basic income gives people more money to spend without borrowing, but it also makes borrowing easier at whatever interest rate we already happen to be at. Basic income eases the tone of the money market. So we'd have to tighten monetary policy not only to compensate for the fact that that we're supplying money directly to consumers instead of forcing them to rely—directly or indirectly—on borrowing, but also push back against the easier tone of the money market.
Discount Rate vs. Open Market Operations
The fact that the tone of the money market is responsive to the level of member bank borrowing at the Reserve banks gives a unique character to the role of open-market operations in the effectuation of credit and monetary policy. They can be used flexibly to offset the net impact on bank reserves of other sources of demand and supply of reserve funds in such a way as to result in an increase or decrease of member-bank borrowing, or, if desired, to maintain a level of such borrowing that is fairly constant from week to week, or month to month. This means that when the Federal Open Market Committee decides that a tone of tightness, or ease, or moderation, in the money markets would promote financial equilibrium and economic stability, it has the means at hand to make the decision effective.
Changes in the discount rate cannot be used in this way. They can exert powerful effects upon the general level of interest rates, but cannot be counted on to insure that the relative availability or unavailability of credit at those rates will be appropriate to the requirements of financial equilibrium and economic stability.
Again, the point that's being made here is that because the interest rate and the availability of credit are two separate variables. Even if credit would hypothetically be more available at a lower interest rate, it's also possible to make credit more available at the current market interest rate—i.e. change the "tone" of the money market. Open market operations help with changing the tone, whereas changing the discount rate does not.
Maybe one way to think of this is that you can plot credit availability on one axis against the hypothetical interest rates on another axis. Easing the tone of the money market means moving the whole interest-rate curve in the direction of more credit availability.
In short, open market operations are not simply another instrument of Federal Reserve policy, equivalent or alternative to changes in discount rates or in Reserve requirements. They provide a continuously available and flexible instrument of monetary policy for which there is no substitute, an instrument which affects the liquidity of the whole economy. They permit the Federal Reserve System to maintain continuously a tone of restraint in the market when financial and economic conditions call for restraint, or a tone of ease when that is appropriate. They constitute the only effective means by which the elasticity that was built into our monetary and credit structure by the Federal Reserve Act can be made to serve constructively the needs of the economy. Without them, that elasticity would often operate capriciously and even perversely to the detriment of the economy.
It's interesting that the Fed ended up using open-market operations as a way of targeting interest rates, when this text is emphasizing the important differences between open market operations and interest rate policy. I wonder what they would have had to say about a world with interest on excess reserves in which reserves are not a constraint on the banking system.

Main Text

The Fed's Influence
(10) The Federal Reserve stands in a key position with respect to the entire money and capital market in this country and particularly with respect to the Government securities market. System contacts with the market for United States Government securities take four main forms—transactions in Government securities made for the account of the system, extension of credit by a Federal Reserve bank to the nonbank recognized dealers through purchases of short-term securities under repurchase agreement, transactions made as agent for Treasury and foreign accounts or for member banks, and the gathering and dissemination of information on developments in the Government securities market. Aside from some transactions executed by the other Reserve banks for the acount (sic) of member banks, these points of system contact with the market are focused at the trading desk at the Federal Reserve Bank of New York.
Mostly in this class, we focus on the first two of these. We probably take the hybridity of the Fed for granted by now. They influence the private markets by dealing in government debt.
Debt Monetization
(14) The policy of confining open market account business to a small group was adopted by the Federal Open Market Committee in 1944 in an attempt to deal only with that portion of the market where the final effort at matching private purchases and sales takes place. This approach was based on the hope that by operating closely with a small group of key dealers responsive to its discipline, the Federal Open Market Committee could peg a pattern of low interest yields in a period of heavy war financing with minimum monetization of the debt.
It's interesting that they were trying to achieve low yield pegs without monetizing the debt. In other words, they wanted to prop up the price of government debt without buying it outright. It's not clear to me how they would be able to achieve this by working with the primary dealers. Were they asking the dealers to hold the excess government debt on their own balance sheets so the Fed doesn't have to? If so, it's not clear to me how private dealers promising to hold excess Treasuries would have much of a different effect from the Fed holding them outright.
(122) The present system of official dealer recognition instituted by the Federal Open Market Committee in 1944 was an element in a technique of open market operations designed to peg the yield curve on Government securities and at the same time minimize the monetization of public debt. This technique was based on the hope that the yields on Government securities could be pegged with only a few securities monetized by the Federal Open Market Committee if all offers to the committee had to pass first through a very limited number of dealers with whom the committee would maintain intimate and confidential relations, and who would be required by the committee to make strenuous efforts to find other buyers for securities in the marketplace before they looked to the committee for residual relief.
Maybe the key is that the private dealers don't add reserves to the system when they buy the debt? This allows the Fed to keep credit conditions tight (tone of the money market) while keeping interest rates low. In other words, the government can borrow cheaply without making it too easy for everyone else to borrow? Since the dollar was still connected to gold back then, maybe this made more sense than it would today. Today, I'm not sure if there's a downside for the government to be paying higher interest rates on their borrowing.
There's a limit to how far we can go with the reserve story though. Just because the base-money reserves are constrained doesn't mean there can't be an expansion of lesser reserve instruments further down the money-credit hierarchy, like we saw with correspondent banking or the Eurodollar market in which reserves can be deposits at another institution. My guess is that banking regulations and other legal constraints play a role in keeping base-money reserves special and shaping credit conditions, at least at some levels of the hierarchy.
(123) The inexorable march of events on which that hope foundered is now a matter of history. The facts are that debt was monetized in volume and that the country suffered a serious inflation until the Federal Open Market Committee abandoned the pegs. The basic reason, therefore, that seemed to justify a small privileged dealer group no longer exists. The technique of which it was an integral part did not work out according to expectations and failed of its purpose.
Well, that at least partly answers that question. Maybe keeping interest rates low while avoiding debt monetization was just something that wasn't really doable?
Concealing the Fed's Operations
(18) Transactions for the open market account are normally handled by any 1 of 4 or 5 persons who maintain constant direct contact between dealers and the account. Transactions for the Treasury, foreign agencies, or member banks are usually handled by an individual on the trading desk who is not one of the persons regularly contacting dealers for information or normally trading for open market account. Thus, the dealers can generally distinguish between agency transactions and those for the open market account on the basis of the origin of the call from the trading desk. There are also other clues in the trading operation which dealers can use in appraising the source of a transaction. At times, however, the regular procedures of the desk may be changed in order to conceal the operations of the open market account. Orders for the account may be channeled through the individual who ordinarily handles foreign agency and member bank business, or those who usually trade for the open market account may take over business to be done for agency or foreign accounts. Pending the weekly report of condition of the Federal Reserve banks, the actual operations of the account may thus be screened from the market or the market may be led to believe that the Federal Open Market Committee was active at a time when it was not.
Sounds like the FOMC sometimes wanted to hide what it was doing. They wanted to influence the market without the market knowing that the changing market conditions were coming from the FOMC. Kind of the opposite of forward guidance, I suppose. Instead of influencing the market by telling people what you're intending to do, you influence the market by going undercover and pretending to be ordinary dealers.
Negative Carry
(30) The only serious qualification that the subcommittee makes to these generalizations relates to certain deficiencies in the credit facilities available to dealers. During recent months, the rates paid by dealers to carry their portfolios of United States Government securities have averaged above the yield on these portfolios. This amounts to a negative "carry" and obviously affects seriously the ability of the dealer organization to maintain broad markets. This problem has become more serious since the discussions with the dealers. At the time of those discussions, the dealers dealt at length with the problem of negative carry but they were referring, for the most part, to periods of stringency of very limited duration, not to the kind of continuing stringency that prevailed in most of the third quarter of 1952. The subcommittee advances suggestions to correct this deficiency later in the report.
This seems like this could be a consequence of the low yields / non-monetization combination. The dealers are holding long positions in Treasuries without being compensated for it. I'm curious how the Fed was even able to get these dealers to hold Treasuries unprofitably in the first place. Was there some kind of arrangement where the price you pay for having the privilege of being a primary dealer is that you have to eat some negative carry sometimes?
(94) * Use of the repurchase facility.—The role occupied by repurchase agreements and the terms of settlement in the technical operations of the Federal Open Market Committee is a subject of considerable controversy within the dealer organization, and many conflicting points of view are present. Recognized nonbank dealers are quick to point out that their bank-dealer competitors have direct access to the Federal Reserve banks and therefore are in a position to borrow at the Reserve banks at the discount rate in order to carry portfolios when money is tight. Nonbank dealers, on the other hand, borrow at the money market banks at rates that frequently rise above the bill rate. A negative "carry" thus develops which makes it expensive and at times prohibitively costly to maintain adequate portfolios. This problem is particularly acute when money is tight over a period of weeks or months, and also when a holiday falls on Friday or Monday, necessitating a 4-day carry. In these circumstances the nonbank dealers are at a serious competitive disadvantage in their ability to make markets. In the endeavor to mitigate this situation, they try to borrow from out-of-town banks and also use credit accommodation from corporations on repurchase agreements.*
Ah. Interesting. So the negative carry problem is mostly affecting the non-bank dealers who can't borrow at a low enough rate to profitably fund the holding of T-bills.
Depth, Breadth, Resiliency
(36) In strictly market terms, the inside market, i.e., the market that is reflected on the order books of specialists and dealers, possesses depth when there are orders, either actual orders or orders that can be readily uncovered, both above and below the market. The market has breadth when these orders are in volume and come from widely divergent investor groups. It is resilient when new orders pour promptly into the market to take advantage of sharp and unexpected fluctuations in prices.
I think "resiliency" maps most closely onto our concept of liquidity. But it feels like depth and breadth are mainly important because they support resiliency.
(45) When intervention by the Federal Open Market Committee is necessary to carry out the System's monetary policies, the market is least likely to be seriously disturbed if the intervention takes the form of purchases or sales of very short-term Government securities. The dealers now have no confidence that transactions will, in fact, be so limited. In the judgment of the subcommittee, an assurance to that effect, if it could be made, would be reflected in greater depth, breadth, and resiliency in all sectors of the market.
Part of the argument here is that mucking around with shorter-dated securities is going to be less disruptive to the money market overall, while still eventually transmitting to prices all along the yield curve. Maybe this makes sense if the FOMC's operations are unpredictable or unexpected. Maybe that's how open market operations felt back in the early '50s, but my sense is that they've become a lot more standardized. There are some countries, like Japan, that have been intervening all across the yield curve for a while now. And everything everywhere has been changing since the 2008 crisis, quantitative easing, and now the corona crisis.
"Never bet against the Fed" is a popular maxim for traders. But you can only avoid betting against the Fed if you actually know what the Fed is going to do. I think another part of what the authors are getting at that by standardizing the FOMC's monetary policy, you can assure the market that they won't be caught off guard by the FOMC's actions.
For convenience, CMT goes so far as to assume that the Fed's monetary policy is basically endogenous to fiscal policy and market conditions. Whenever that's true, the dealers basically have nothing to worry about from the Fed. That's a step in the right direction, but it still doesn't assure them that fiscal policy or market sentiment is going to be predictable. A basic income calibrated to the economy's natural level would ensure even smoother sailing, especially when it comes to financial market instability.
Treasury/Fed Overlap
(68) In contrast to this view is the position which holds that debt-management and reserve-banking decisions cannot be separated. While the Treasury is primarily responsible for debt-management decisions, that responsibility under this second view is shared in part by the Federal Reserve System, and while the Federal Reserve is primarily responsible for credit and monetary policy, that responsibility must also be shared by the Treasury. According to this position, the problems of debt management and monetary management are inextricably intermingled, partly in concept but inescapably so in execution. The two responsible agencies are thus considered to be like Siamese twins, each completely independent in arriving at its decisions, and each independent to a considerable degree in its actions, yet each at some point subject to a veto by the other if its actions depart too far from a goal that must be sought as a team. This view was perhaps unconsciously expressed by the two agencies in their announcement of the accord in March 1951. In that announcement they agreed mutually to try to cooperate in seeing that Treasury requirements were met and that monetization of debt was held to a minimum.
CMT views the government as a whole as being constrained by price stability of the currency. To maintain an ideal standard of value for the market, the government is not allowed to do anything that would cause inflation or deflation. But, since the Fed is the institution with a mandate for maintaining price stability, at least today, that essentially means that the fiscal authority does what it wants and the Fed's monetary policy is endogenous to fiscal policy, as ultimately constrained by price stability.
The fiscal authority is in the driver's seat.
The Seeds of Quantitative Easing
(76) The two exceptions should be carefully explained to the market. They would occur (1) in a situation where genuine disorderly conditions had developed to a point where the executive committee felt selling was feeding on itself and might produce panic, and (2) during periods of Treasury financing. In the first case, the Federal Open Market Committee would be expected to enter more decisively in the long-term or intermediate sectors of the market. In the second case, intervention, if any, would be confined to the very short maturities, principally bills. The subcommittee recommends most strongly that the Federal Open Market Committee adopt the necessary measures and give this assurance.
By saying that they might need to intervene in the long-term or intermediate sectors of the market, they're basically saying that they might need to do QE someday. They're imagining a scenario in which they need to backstop a panic and act as a dealer of last resort in the markets for government debt. In 2008, liquidity froze up, monetary transmission mechanisms broke down, and the longer-dated securities needed to be backstopped.
QE is about more than just adding reserves to the system. We already have open market operations for that. QE is about ensuring orderly function (or preventing disorderly function) of the financial markets.
Price Stability
(137) In an even more general sense, the Federal Open Market Committee stands in a fiduciary relationship to the whole American economy. It could be called special trustee for the integrity of the dollar, for the preservation of its purchasing power, so far as that integrity can be preserved by its operations. It is especially charged, also, to use its powers to provide an elastic currency for the accommodation of agriculture, commerce, and business; i.e., to promote financial equilibrium and economic stability at high levels of activity.
I like this. The economy requires a stable standard currency against which to set prices. If the Fed fails to ensure reasonable enough stability of the dollar, not much else of what they do will matter much. The FOMC faces a price stability constraint.
Structure of the FOMC
(138) This unique structure of the Federal Open Market Committee was hammered out after long experience and intense political debate. Like other components of the Federal Reserve System, it exemplifies the unceasing search of the American democracy for forms of organization that combine centralized direction with decentralized control, that provide ample opportunity for hearing to the private interest but that function in the public interest that are government and yet are screened from certain governmental and political pressures since even these may be against the long-run public interest.
I'm actually not sure how much the structure of the Fed or the FOMC has changed since this document was written. But it's remarkable how often one of the most well-functioning institutions of our democracy is derided for being "undemocratic."
(142) Should all or part of the staff of the Foreign Open Market Committee be separate and distinct from the staffs of the Federal Reserve Board and the Federal Reserve banks? However paid, should they wear one hat, and one hat only, devoting all their time exclusively to the operations of the Federal Open Market Committee? There are both advantages and dangers in this suggestion which must be weighed. The Federal Reserve System is a family, and the Federal Open Market Committee urgently needs the knowledge, the judgment, and the skill of all the memebrs (sic) of that family. It would be extremely difficult to build up a new and independent staff as qualified as the personnel which It now enlists to work on its problems. It would be equally unfortunate to lose the contributions of that staff to System problems that fall outside the limited area of responsibility of the Federal Open Market Committee. Yet there are equal dangers in a situation where the time of no one person on the whole staff of the Committee is wholly devoted to its responsibilities, where everyone wears two hats, and where each must fulfill duties separate and distinct from those imposed by the Federal Open Market Committee.

Appendix D: Call Money Facilities

It is fully recognized that one major question regarding the feasibility of a present-day call-money post for loans to Government security dealers would be whether lenders could safely depend on it as an adequate, consistent outlet for credit. Could such a call-loan market be large enough and stable enough to be a reliable mechanism for handling the secondary reserve positions of outlying banks? Obviously, a call-loan market of this size would require time for development. Dealers now are carrying positions which are small in relation to the size of the market. Nevertheless, in view of the fact that dealers are making outside arrangements for credit at considerable cost, it may be worth while to explore the possibility that an organized market might again be developed.
Unless I'm missing something, my feeling is that the repo market has evolved to fill this role. There's not much difference between a call loan and an overnight loan that perpetually rolls over until you choose to stop.
Please post any questions or comments about the reading (or my take on it) below!
submitted by spunchy to cmt_economics [link] [comments]

r/formula1 – I'm an F1 Engineer/Strategist, Ask Me Anything... (pt 2)

Source
Previous post here.
Questions Answers
How many times in a year do you think you get race day strategy 100% correct? I would say we never get it 100% correct. Race day strategy isn't just about picking the correct number of stops and stop laps for both cars.
Did we take every last drop of grip out of the tyres before we pitted? Did we pressure cars ahead the right amount at every point? Did we back off and protect the tyres the right amount at every point? Did we communicate to the driver exactly what we were trying to achieve and therefore get 100% out of them at every instant in the race? Was the modelling accurate and useful? etc. etc.
We will always be searching for marginal/incremental improvements in everything we do.
I’m in high school and am planning on going to school to become a mechanical engineer, so my question is this: how available are engineering jobs in F1, or just motorsport in general? Of course, being an F1 engineer would be a dream, but I have no idea how difficult it would be to actually find a job I have to be honest and say that jobs in motorsport and especially F1 are not plentiful and that they are often oversubscribed many times over.
I would not let that put you off though, at your age you have a lot of time to pick up skills, experiences and knowledge that will help you in the endeavor of getting a job in motorsport.
I would also say that perseverance is almost an essential quality in finding a job in F1. I, and many others I know, were turned down for roles multiple times and at various points thought we would never get our dream jobs in F1.
Hey, Randy! Thanks for doing this awesome AMA. You have talked a lot about getting into F1 for a career as an Engineer. I was hoping you could shed a bit of light in what skillsets/qualifications you look for in candidates who work as the mechanics and the pitstop crew on a given race weekend. Again, Thanks for doing this. I have read through every one of your answers and they were as much fun to read as they were enlightening about the sport we love. So this is not my area of expertise, although I do spend a lot of time working with the pitcrew - so please take this with a pinch of salt but I think below are the main things we look for:
* Some prior experience in building and servicing of race cars or bikes.
* An ability to understand and follow (often complex) procedures.
* A proactive nature (e.g. when reporting faults or build issues).
* Dealing well with a high pressure and time constrained workload and environment.
* An attention to detail and a willingness to learn.
* Ability to read and interpret technical drawings.
* Fabrication and machining skills.
Really cool to hear from you Randy. How have you and the team at McLaren been spending your time with everything that’s been going on with Covid-19? Hope we can see you go racing in Austria in July! So F1 teams have all been subject to an extended "shutdown" meaning that most of us haven't been allowed to work on F1 projects and many of us, consequently, have not been working in recent weeks.
Personally, I've used the time to try and get fit, having averaged c. 4 hours and 15 minutes of exercise every day since April 1st (yes I do have a spreadsheet), as well as trying to learn some new skills like React.
Many of the team have used the opportunity to spend time with their loved ones, which can be difficult with hectic schedules, to improve their cooking skills (I have eaten the best pizza I've ever had during lockdown!), do gardening and so on.
Everyone seems eager to get back to it and most teams will be returning to work over the next fortnight.
Hi Randy. Thanks so much for doing this, the answers so far have been really insightful. Can I ask, as an armchair fan, what can I look for over the course of the weekend to help me predict likely strategic calls on race day? The main 2 factors are tyre behaviour (degradation, wear life and pace difference) and pitstop loss. From here you can get a basic understanding of the strategy before competitors are thrown into the mix.
Pirelli kindly provide some of the information each weekend on tyres and you can estimate the rest from FP2 long runs towards the end of the session. Pitstop loss is also often given by some teams (maybe rounded or slightly noisified - but close enough to give you the right number of stops).
With those 2 things you can work out the baseline strategy if you were racing alone and then you want to be considering the cars that are a pitstop window ahead and behind and see whether you would stop earlier or later than the baseline based on undercutting, traffic and so on.
Thank you so much for doing this AMA! During last year's German GP, I remember that a lot of us fans were interested in contrasting approaches made by two teams as the track started to dry up. One driver saw that the track was dry enough for slicks, called it in, and got the go ahead to take the gamble; he ended up coming very close to a podium. Another driver made similar observations and appealed repeatedly to his engineer to make the switch, but was instructed to stay out for several more laps, costing him points. I understand hindsight is 20/20 here, but if you were the engineer, would you be more inclined to take the driver's word when they potentially contradict the data, or vice versa? Do you believe there's a "correct" approach in situations like these, or a personal preference? Again, thank you so much! (Typed from my “Mclaren Edition” phone...I can't wait for the season to start, and I really wish you guys the best!) Thank you for the kind words!
I think there is a lot you don't see (not your fault) when it comes to strategic decisions, this is amplified many times over in a wet or changeable conditions race, where decisions are extremely difficult, with lots of information, of varying quality/frequency.
I think we have learnt that it depends. Sometimes, we will weight the driver's input higher than anything else, sometimes it will be the least valuable information.
Do you employ many Americans on the team, and if so what does it take? Assuming they have the technical credentials of engineering. So we have nothing against Americans, nor people of other nationalities - having the right to work in the UK is sometimes required although we do also help with visa applications this isn't always possible for us to do.
In terms of Americans on the team, we have Zak Brown, of course and I'll be honest and say I can't think of any others at the moment, although we have had a few placement students in recent years from the United States.
There's no extra requirement for Americans, especially as we're moving to Mercedes powerunits soon, we won't have too many issues with the pronunciation of Renault anymore.
What kind of people do you have in the strategy department? Are they mostly engineers, or like mathematicians and computer scientists? Although we are largely engineers by degree, we don't really discriminate against other backgrounds and are often quite keen to add a diversity of ideas and backgrounds into the mix - a numerate degree is going to be very helpful though.
We are 60% mechanical engineers, 1 engineemathematician hybrid and 1 physicist.
Is it unusual to go from entry-level engineer to head of strategy in 6-7 years? What do you think drove your success? I think it actually happened even a bit quicker than that - which had never been my expectation when I started.
It's hard to say what is unusual, there are so few "race strategists" in the world, let alone in F1 that I think there's not really a "usual" and often timescales can be quite variable based on circumstance (e.g. someone leaving/changing role).
I guess the success is driven by the confidence and belief in the strategy team, of which I am just a part - so the fact that the other members of the team are so good, that management above us let us independently improve and change our processes without blame nor interference etc. is what has really driven it. Also have the much wider strategy team that includes 10s of volunteers to thank - it truly is a team effort and no single person would have the impact they do without the team around them.
Does race strategist cooperate with aerodynamics department in any way? So, I can't go into details but yes we do. Strategy is a really cool role because we end up dealing with pretty much all other areas - as we also cover things like Competitor Intelligence and Sporting matters.
In a more typical sense, just thinking about race strategy, there are a few areas that spring to mind, aerodynamicists and other engineers will be setting things like the wing level and the trades made here can affect performance in qualifying vs. the race, something that we as strategists are well placed to comment on the value of and also for setting cooling levels, we're responsible for weather forecasting and interpretation and so will often liaise with our aerodynamics colleagues about the risks of it being hotter than certain limits.
the below is a reply to the above
Could you unpack a bit on what "competitor intelligence" does? Thanks! "Mr Holmes, I would love to tell you, but then I'd have to kill you."
I'm afraid that in this case the answer is no. All I can say is that we do some pretty neat things using the various kinds of information (audio, video, images, data, quotes, etc.) to gain intelligence on things like relative performance, other teams and so on.
What’s your proudest moment in F1 to date? Another tough one!
What makes me proudest is the Strategy team at McLaren. The team consists of around 5 people at its core and I can honestly say that they are the most talented, motivated, most passionate and smartest collection of individuals I have ever had the pleasure of working with. Everyone's level naturally rises when you work with people of this calibre and although the team is constantly looking for areas of improvement, challenging each other - it is also really just fun. I am very proud that I've played a part in pulling in each of my strategy teammates.
One other thing that gets close (other than Grand Prix which I'll cover in another answer) is Mission Control. McLaren were kind enough to give me the opportunity to manage the project to design a new Mission Control from scratch, build and deploy it. We were responsible for building contractors, ventilation, budget, aesthetic, even unpacking and setting up over 30 machines. The Mission Control room is an awesome facility and we built it together as a team. A lot of it is secret but here's a photo you are allowed to see:
https://pbs.twimg.com/media/EKssMOfWkAAwPE6?format=jpg&name=large
Hello, Do you go on reddit and check this sub sometimes? I would say more frequently than sometimes and I'm not the only one who works in F1 than does.
The content on here can be amazing at times - from some of the photos, to some of the data visualisations - and sometimes it is just fun to read comments and see how different our perspective of a race/event can be to that of fans.
You've talked about refuelling in a previous answer, and how it might affect strategies, but what is your opinion on the current tyres, and how they basically force the teams to do a two-stop strategy? Would you prefer if the tyres were manufactured in a way that makes them more durable? Thank you! So, I would start by saying the tyres don't force teams into 2 stop strategies, however, the front-runners will have a higher propensity for 2 stops over 1 stops in the current regime, which may present a more skewed picture to fans.
I believe and I think my colleagues and competitors agree, that good racing does involve some strategic flexibility and variety and a good sweet spot is to have races that are at crossover between 2 an 3 stop strategies (crossover means the timings and track position work out such as to be roughly equal).
However, Pirelli are in an unenviable position with regards to giving us tyres that would encourage 2 or 3 stop crossover events, as the drivers also need to be able to push the tyres lap after lap to get good racing.
So you can see that Pirelli have to try and balance both concerns and I think with that in mind they are doing a good job of finding a balance.
The strategy with sainz in Brazil was amazing man Thanks for the kind words but the strategy in Brazil (I hope) was as good as in Austria, or Hungary, etc. We didn't do anything particularly special but in this case the outcome was particularly good - we try and judge ourselves on our decisions/processes/analysis rather than the outcome as the outcome/result can be dependent on chance which is outside our control.
Have you found any books in particular helpful when it comes to the soft skills required working in a multi-department environment, also when it comes to the overarching strategic principles. Building on that, how often do you find yourself acting against the data/conclusions presented to you in favour of your own observations or “common sense” I think the most useful book has been Harry Potter and the Order of the Phoenix as it really demonstrates the importance of teamwork. Mark Corrigan's seminal "Business Secrets of the Pharaohs" and Michael Scott's "Somehow I Manage" are also essential reading.
Seriously though, a difficult one, I think a lot of skills are picked up outside of books, things like logical problem-solving, being extremely pro-active, etc. however, some books that I find have been useful are:
* Thinking Fast and Slow (almost essential reading, Thinking in Bets is also good)
* The Intelligent Entrepreneur (very inspiring)
* Outliers (to try and replicate some of the factors)
* Legacy (a great book about teamwork and management)
* Resonant Leadership (given to me by manager and a great read)
Speaking from a career standpoint, does having a background in something like biology factor into a possible role at all? Something of a mix of Biology and Engineering (Biomed, Bioengineering etc)? Thanks! It can do - I specialised in Biomedical Engineering as one of my electives in my final year at university, by the way.
Especially in strategy, different viewpoints/experiences/backgrounds can be very useful.
So we're hearing that Austria and maybe Britain is going ahead, is McLaren prepping for this or are they waiting for official word from Formula 1 I can't comment on the calendar as it stands as that would be breaking confidentiality. However, I can say that Liberty and the FIA are working tirelessly to bring a calendar together and it was something that we all discussed yesterday in the Sporting Working Group and is no doubt being discussed on a daily basis in other forums also.
The teams, including McLaren, are trying as well to prepare for the season starting soon whilst remaining flexible such that if there are changes we can adapt to them quickly and well.
How do you judge a mandatory 2 pit stops instead of only one? Can this make the races more enjoyable in your opinion? Thanks I don't think mandatory 2 stop strategies are a good idea. I can talk about this openly as its something we have debated with other teams, the FIA and Liberty as well and as a group we decided against it.
The reason I don't like mandatory 2 stop strategies is that it is artificial and artificial constraints (I believe) will lead to more strange/bad occurrences than good ones.
The benefit of mandatory 2 stop strategies is that everyone will make 2 stops which on average is more stops than we currently do and we believe that more stops (to a limit) typically lead to more exciting races.
However, the downside is that this is purely artificial. If the race is a clear 1 stop and we add a second stop artificially then it's more likely that that stop could be placed in a strange spot, because the sensitivity to its timing could be low - you may see cars pitting very early or late into the race and therefore the race is still like a 1 stop (you don't get the full benefit on racing of the second stop) - especially with a point for fastest lap.
You may then argue that we could force the second stop into a particular window, or set a limit on stint lengths. This also has issues, with cars likely to be concentrated on one side of the window and then there may need to be more artificial constraints.
I very firmly believe that the best way to encourage more stops is to keep constraints on strategists light and influence the primary factors that determine how many stops there are, that is:
* Pitloss (decrease = positive pressure on number of stops).
* Tyre behaviour (worse behaviour = positive pressure on number of stops).
What's it like working for the most positive and happiest team? Let me ask some of my friends at other teams and I'll get back to you soon.
Only kidding 😁 ! I can't say if McLaren is the most positive/happiest team as I've not been everywhere, but its certainly the most fun, positive, happy, smart, etc. etc. team I've ever worked at.
I love it. It's the people that make McLaren (and I know that's a cliche) special and I enjoy working in such a tight-knit, funny, motivated team.
What was the most difficult race strategy wise in your F1 career? My first race, I think stands outs - the 2013 Australian Grand Prix. I started work on January 2nd that year (my first real job in F1), had no strategy experience, had to do lots of winter reporting and had no strategy mentor (as the previous strategist had left already). I'm not sure "baptism of fire" and "thrown into the deep-end" are mixable metaphors but that's what it felt like.
To make matters more "interesting", the data showed and I was convinced that it would be a multiple stop (probably 3 stop) grand prix, based on what we had observed in Winter Testing and during Friday and Saturday running. This was in sharp contradiction to recent history at the Australian Grand Prix - so there were many heated discussions over this (with the majority of the team heavily disagreeing with it being more than a 1 stop race and every member having much more experience than I).
Turns out lack of experience can be an advantage sometimes. Teams tended to do a 2 or 3 stop race, but the latter was much better. Teams were reluctant to add stops given experience and recent history of the Australian Grand Prix and this pushed many into poor strategies, rather than adapting to the tyre behaviour we were observing.
2013 was an interesting year for strategy, with empirical data and lack of bias being really important to getting the strategies right. If you were to look through those races there are certain teams that flip-flopped a lot and others that quickly adapted to the new 'normal'.
Hi Randy, I don't know if this is already over but I'll try anyway. It's no surprise that working in F1 in any capacity must be extremely competitive. Is there any chance for someone considering a career change to be able to get a foot in the door? I work in investment management and realise that I want to be as close to my passion as possible. I'm open to pretty much any job just to get in. Naturally Id hope to have some transferable skills but i would focus on the chance to build skills and potentially go from there. Any advice? Thanks! I think perseverance and desire are key and yes it is possible. Coincidentally, I was working in the investment industry when I was offered the chance to take a full time role in strategy for the 2013 season.
I had worked at Williams for my final year project at university, but had been "out of the game" for a couple years when I got the offer to return.
Hello Randy, I am sorry if this has already been asked. But I would like to know your thoughts on: The new strategy involved on the new regulations/ground affect designs on the new Formula 1 vehicles? Is this a step in the right direction? Love to hear an professional / insider view on these new changes to the sport as the team Engineers do not seem to have a big say in the acceptace of the design limitations from FIA. I personally think the new regulations (Sporting, Technical and Financial) are moving the sport in the right direction and so am looking forwards to them being introduced over the coming years.
I would also say, as it may not be obvious to fans, that teams and engineers are heavily involved in these regulations. Whether that is us helping to draft parts of them, sense check them, vote on them, etc. it is a very open, constructive forum between the teams, the FIA and FOM (and other external experts as required).
Day 5: Mr. Singh is still answering questions. He's now one of us. LEGEND, and thanks to McLaren for allowing this. -Best AMA yet? DCanswered4questions. Haha thank you!
I will probably have to stop soon - but have a few more answers coming on a few families of question I haven’t yet answered. 🙂
Hi, Randy, Your answers are great, thank you! One of my most favorite McLaren performances of recent years was Fernando's insane race in Azerbaijan in 2018, when he had a double tyre puncture but still managed to finish 7th. Were you still his personal strategist back then? What was your role in his success? What were you thoughts when you saw him limping to the pits on two wheels? What did you do after that? What a race, eh? "Personal" strategist, you make us sound like mathematical butlers... 😁.
I wasn't Fernando's strategist at that time, Chris (one of our team) had already taken over by then and I was leading the team. It was not an easy race, although it may look like we sat back and watched, there's a lot of decisions made that you don't see and a lot of decisions made not to do stuff.
It was a good team effort from everyone to stay calm and try and pick up the pieces after the incident on the first lap, when the car rolled into the pits we did consider retiring it - but as a famous paper salesman once said "you miss 100% of the shots you don't take". What outsiders (who get special access) often notice is that the team stays calm, you can't get wobbly or excited over the incident/accident, you need to be calm, methodical and logical.
Great ama I think this is my favourite question so far. 😀
To be honest, the questions are very interesting and I have had so many people answer questions for me when I was in the position of being a fan/student and that changed my life by helping me get my dream job. If I can give back a fraction of the help/information I've received then I'll feel very happy!
How contagious is Landos laugh? I don't know about you but I find it quite grating. Do you know the feeling you get when you hear someone scratch their nails across a blackboard, or when your alarm goes off and you're still tired?
In all seriousness though, Lando is a funny guy and does always keep the mood nice and light.
Hi Randy. Who is your favourite member of the IT team? Sincerely, Definitely not a member of the IT team. Trick question! I don't have a favourite member of the IT team. 😁
Is there any role for physicians/doctors on race teams? As doctors, I would probably say no. Most teams won't employ their own doctors anymore or will do so in a very limited capacity.
However, that doesn't mean we don't have medical support, it tends to come through external organisations that support F1, such as Formula Medicine, for example, or the FIA's Medical Programme.
We also occasionally get applications for strategists who have a medical background - and that isn't something we look down upon, if anything it may provide a skillset/experiences that would be complementary to those of 'mostly engineers'.
I understand you may not answer because this may be sensitive, but Which method of steering the ship do you think is more effective ? The steely dictatorial grip of Ron Dennis or the More lenient managerial approach of Zak brown ? From a fan perspective, I love that mclaren drivers aren’t on such a tight leash. I never really worked under Ron as I joined in mid-2015. I have to say that the management style I’ve experienced throughout has been great - no blame culture, very open and understanding, letting the experts make decisions, etc.
Have you ever sat on the pitwall at the start and said (even to yourself) "And it's lights out and away we go."? I haven’t! I imagine I now will at whichever Grand Prix we get the pleasure of starting first this year.
Is Ferrari’s strategy as much of a running joke in the paddock as it is by the fans and here on reddit? Maybe you can’t really answer that truthfully but I’ve always been curious. It’s obviously a difficult job but I do wonder if they shoot themselves in the foot as often as it seems from the fans perspective. Answered elsewhere in the thread.
It's a difficult, stressful job, so you always have respect for your competitors.
In your experience, would adding flame decals to my truck make it go faster? Where are you going to place them? What colour are the flames?
Hey randy, i am a 15 year old girl who lives in india and my dream is to become a formula one engineer or work in f1 in anyway. What do u think are the educational qualifications needed to become a formula 1 engineer and what exposure do u think i need to even be close to full filling my dream. I have been following mclaren f1 team for quite some while now and love the friendly environment inside the team. As PapaKeth says, hopefully there are some answers to your question about what qualifications are required in my other comments.
Can I say though, don't let being 15, female, or living in India deter you - none of those things are a blocker to getting a job in F1 in the future.
Hi ! Thank you for answering some of our questions ! I've been wanting to ask, in the event of a car failure ( engine failure, hydraulics failure, etc) how do you become aware of it ? Do you have a real time data link to the car as an engineer ? Or is it something you see on a TV ? So we get data from the cars "live", there are hundreds of sensors on each car and this data is transmitted to us at the track and we also transmit it back to HQ in Woking. There are tens of people looking at the data and typically we will spot problems in the data, or based on feedback from the drivers, before we see them on TV.
That doesn't mean that we never spot stuff on TV first - sometimes you don't have instrumentation for certain things and so you may spot it visually first and the TV feed is a good way of sense-checking in some cases as well.
Do you think Stoffel deserved to still be in F1? (Not necessarily with McLaren) 100% - he is a great talent and I'm very glad that he is doing so well in Formula E.
Hi, thanks for doing this Q&A. Working for an F1 team is the dream, though I understand it's very difficult to get in. I'm disabled, would this matter to an employer? Do you have any advice on how I could approach this to someone as I'm just finishing my first year at University and hoping to apply for internships. Also, (sorry if you've answered this question already) I am studying Mathematics probably going to move into Mathematics and Statistics. Would it be possible to apply for a strategist position with a Mathematics degree? Your disability should not matter to an employer and I really believe it will not. We have people with disabilities working at McLaren. Perhaps if it is something you are concerned about or if its a disability that a team (or McLaren) could help make easier to manage (apologies if my wording is not sensitive) then I would highlight that in your application when you apply for a role.
Mathematics is entirely sensible as a background for a strategist role. I started off in Mathematics (& Statistics) before I moved over to Engineering (I found Mathematics at university to be too abstract for my liking). If you are doing Statistics anything that covers stochastic modelling would be particularly relevant to strategy.
I want to work in F1 in the future and preferably an engineer role. Would studying Mechanical Engineering be the best course to get a chance? Thanks I would say the majority of F1 engineers have studied Mechanical Engineering but that doesn't necessarily equate to it giving you the best chance of getting in. Engineering skills (and particularly mechanical engineering skills) will make you suitable for a multitude of roles in an F1 team (from strategy, to design engineering, to race engineering and performance analysis), so naturally you would expect more mechanical engineers.
I would have a think about the role that you would like to do and what qualifications would give you the best chance for that role, it could be that its Computer Science instead, or Aerodynamics, or maybe it is Mechanical Engineering. I would also think heavily about how interested you are in said degree - a degree is not a small investment of time, money and effort and its important you do something you enjoy.
the below is a reply to the above
Hey Randy, this answer was not directed at me but I just want to let you know it really just helped me out. I recently dropped out of mechanical engineering because I wasn't enjoying it and made the switch to computer science. It really pained me for a while thinking about giving up the F1 dream because my career choice wasn't ideal for me. So yeah, thanks. While I'm at it I'd like to add a question about computer science in an F1 team, what kind of roles could I take part of with that degree (specificaly at the track, though I see how that's a bit less likely)? Are there masters degrees or specializations more sought after in certain areas? Again, thanks a lot for you time in answering these questions and apologies for the bad english 😅 Hi, no worries and thank you for the appreciation.
Computer Science is a numerate enough degree at most places that you could lend yourself to any role as long as you can pick up the required engineering knowledge as well. Obviously, something in areas like Software Engineering, IT or Vehicle Science/Modelling may be most relevant/easy but there aren't necessarily many trackside opportunities in those areas.
Hello, First of all, thanks for answering all those questions. It's nice for us students dreaming of F1 to have something to look up to. So I am studying mechanical engineering in France and I am really looking forward to become a Motorsport Race engineer, and obviously F1 would be the dream. What I like the lost in that job is the trackside aspect, travelling, living the race. As I imagine, you need some years of experience to become a trackside F1 engineer. So do you think building experience in lower formulas like F2/F3, FE, or prototypes, GT...as performance/data engineer in smaller teams is a good way to line up for a trackside job in F1 ? Or is it recomended to start as an engineer at the lowest level directly in F1 and try to climb the ladder from there ? What is the proportion of your trackside colleagues that come from other motorsport categories ? Thanks ! Great - I look forward to working with you, or competing against you in the future!
That's a tough one. I wouldn't say trackside experience, per se, is very highly desired for trackside roles, but rather a demonstration of the deep technical/operational knowledge, the ability to deal with stress, etc. that makes people successful in those roles.
For this reason, I would say it's better to be in an F1 team and then attempt to try and go trackside, than to be trackside in a 'lower' formula.
The data, from my experience, suggests the same, the vast majority of engineers are in F1 first and then go trackside, rather than being trackside outside of F1 and moving to be trackside in F1.
That is not to say that experience in 'lower' formulae is not immensely useful to securing a job in F1 (just, I believe less preferred than F1 experience).
[deleted] We have - and not just sports too.
We have met with data scientists from football teams, coaches from the Olympics, rugby teams and professional cyclists - as well as many engineers and drivers from other motorsport series.
We also try and keep learning by working with partners or contacts across the military and commercial fields also.
the below is a reply to the above
Can you expand on the military part? Only at a high level, I'm afraid - as I wouldn't want to give anything away to others.
One area that I can talk about is that many teams will use military or ex-military experts to coach/train/share ideas with their personnel as there is a lot of overlap (as there is with many commercial fields also). So, for example, the military practice high quality communications on a regular basis, in highly stressful/pressured situations - that's an area where many teams have worked with ex-RAF personnel, for example, to share best practice, to coach and teach personnel and to improve processes.
Hi Randy My question is, if there's for example safety car deployed and the decision whether pit or not have to be made quickly, can the race engineer and the driver make a decision without asking you? They can but they shouldn't and I can't think of an occasion when they have.
Strategy decisions are made by the strategy team (not necessarily by me) and we have processes in place for making decisions where we have lots of time (normally measured in minutes), down to decisions where we may have 2 or 3 seconds to decide what to do for both cars and execute the communications/actions to do it.
Sometimes we may pre-make the decision and sometimes we have to make it on the fly or override our original intent - the thing about safety cars is that the cause of them can often change your variables/strategy.
Can you speak on how the sport has changed in the past few years in aspect to big data. How has data gathering and manipulation changed the sport? Specifically when it comes to making decisions based on past and current strategies. What kind of software and hardware have made the biggest changes, and how do you see the future of F1 benefit from AI/Big-data? Thanks for any info you may be able to share. McLaren have always been data-driven, so things haven't changed too much recently. We are finding better ways to analyse the data we have and to draw insights from it. I'm afraid I can't say too much more.
Why is it that you still see signs being held out to the drivers at the pit wall? Surely there can’t be anything said on these signs which can’t be said over the car radio? There’s gonna be a simple answer id imagine. I’ve always thought that it would be hard to try read a sign while travelling at 200 mph? It happens so rarely nowadays but the radio can fail, so the pitboards are a backup for that. The drivers should always give them a look as they go past (and they rarely do!) in case the radio has failed.
In the current times, where radio is public to other teams they could also be used as a way of passing coded messages, but we do watch them and that doesn't seem to be the case.
Hey Randy! Big fan of your work last season! My question is: Other than focusing on optimising strategy through the various instruments you have for every next race, what portion of your work is dedicated to improving the tools you have to work out strategies, or developing new technologies and methods? Is this something done consistently or over the winter? And lastly, how much does McLaren Applied work with you in using the newer tools in their work? Thanks :) Thank you.
With how busy the season is, often it is difficult to spend too much time doing development in the season, so big projects are typically tackled over the Winter period between seasons (although this is also getting compressed).
However, we are constantly, both in race weekends and between, developing our analysis techniques, smaller pieces of software, our understanding of competitors' behaviours, etc. so there is a constant ongoing development battle.
We do work with McLaren Applied fairly frequently across the business - we're not currently doing that on strategy projects.
the below question has been split into two, enumerated
Hi, thanks for doing this AMA! I've spent a lot of time reading your answers!I don't know if you'll answer this too but I'll try asking something anyway 1. What are the possible roles that a computer science graduate could cover? Hi! If you wanted to be very computer science focused, I guess software engineering, IT and some of the compute type roles would be interesting. If you're willing to pick up engineering knowledge then things like Vehicle Science modelling and CFD can open up too.
2. What are the main languages/frameworks used in the F1 enviroment?
3. Are you worried about Daniel coming next year? I mean, probably it will be hard not to laugh for the entire week-end when he's with Lando! Thanks in advance, totally not a computer science student.
Hi Randeep, first of all, thanks for your deep insights into the world of Formula 1 and McLaren. My question to you is, how do McLaren (or any other F1 team for that matter) ensure a stable electrical power supply in the case of a loss of normal power supply (Diesel Generators/UPS/battery banks) at both the factory and less likely to occur but still possible, at the track? Bonus question; how do teams (McLaren) prepare for different types of electrical outlets, voltages and currents all around the world? To start - I’ll say I’m not an electrician - take the below with a pinch of salt.
Most teams will have generators at the track (actually various kinds - to run stuff on the grid, in the trucks at European events and external ones at fly away races) and some kind of UPS system as well. Power supplies at circuits can be ‘temperamental’ and often there are power outages for specific reasons too.
In terms of for electrical outlets - we as end users just bring our UK stuff and plug it in! There’s an electrician and IT team who ensure that everything is set up and good to go and sneak with different voltage, phase, etc. supplies.
How did it feel to be part of mclaren last year? Like it has been in an incredible year with outstanding results. I have to say, I have enjoyed every year at McLaren and I started in 2015 when the results weren't outstanding - I am working with really awesome people and even through the bad times it is great to see the team spirit that pervades through everyone.
Last year was incredible and it's good to get an upswing in performance and to see teammates celebrating the thick after making it through the thin!
Who won the bet where Lando had to have ur face as his lock screen till Abu Dhabi last year? Lando won the bet, but he also clearly has no shame. 😃
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[Part 1] KAVA Historical AMA Tracker! (Questions & Answers)

ATTN: These AMA questions are from Autumn 2019 - before the official launch of the Kava Mainnet, and it's fungible Kava Token.
These questions may no longer be relevant to the current Kava landscape, however, they do provide important historical background on the early origins of Kava Labs.
Please note, that there are several repeat questions/answers.

Q1:

Kava is a decentralized DEFI project, why did you implement the countries restrictions to run the node? Will there be such restrictions by the time of the mainnet?

Q2:

According to the project description it has been indicated that staking reward (in KAVA tokens) varies from 3 to 20% per annum. But how will you fight with inflation?

We all know how altcoins prices are falling, and their bottom is not visible. And in fact, we can get an increase in the number of tokens for staking, but not an increase in the price of the token itself and become a long-term investor.

  • Answer: Kava is both inflationary with block rewards, but deflationary when we burn CDP fees. Only stakers who bond their Kava receive inflationary rewards - users and traders on exchanges do not get this. In this way, rewards are inflated, but given to stakers and removed value from the traders who are speculating like a tax. The Deflationary structure of fees should help counterbalance the price drops from inflation if any. In the long-term as more CDPs are used, Kava should be a deflationary asset by design if all things go well

Q3:

In your allocation it is indicated that 28.48% of the tokens are in the "Token treasury" - where will these tokens be directed?

  • Answer: Investors in financing rounds prior to the IEO have entered into long-term lock-up agreements in-line with their belief in Kava’s exciting long-term growth potential and to allow the projects token price to find stability. Following the IEO, the only tokens in circulation will be those sold through the IEO on Binance and the initial Treasury tokens released.
  • No private sale investor tokens are in circulation until the initial release at the end of Q1 2020 and then gradually over the [36] months The initial Treasury tokens in circulation will be used for a mixture of ecosystem grants, the expenses associated with the IEO as well as initial market making requirements as is typical with a listing of this size. Kava remains well financed to execute our roadmap following the IEO and do not envisage any need for any material financings or token sales for the foreseeable future.

Q4:

Such a platform (with loans and stable coins) is just the beginning since these aspects are a small part of many Defi components. Will your team have a plan to implement other functions, such as derivatives, the dex platform once the platform is successfully launched?

  • Answer: We believe Kava is the foundation for many future defi products. We need stable coins, oracles, and other infrastructure first that Kava provides. Once we have that, we can apply these to derivatives and other synthetics more easily. For example, we can use the price feeds and USDX to enable users to place 100x leverage bets with each other. If they both lock funds into payment channels, then they can use a smart contract based on the price feed to do the 100x trade/bet automatically without counter party risk. In this way, Kava can expand its financial product offerings far beyond loans and stable coins in the future.

Q5:

There are several options for using USDX on the KAVA platform, one of which is Margin Trading / Leverage. Is this a selection function or a compulsory function? Wondering since there are some investors who don`t like margin. What is the level of leverage and how does a CDP auction work?

  • Answer: This is a good #Q . Kava simply provides loans to users in USDX stable coins. What the users do is completely up to them. They can use the loans for everyday payments if they like. Leverage and hedging are just the main use cases we foresee - there are many ways people can use the CDP platform and USDX.

Q6:

Most credit platforms do not work well in the current market. What will you do to attract more people to use your platform and the services you provide? Thank you

  • Answer: Most credit platforms do not work well in the current market? I think that isn't correct at least for DeFi. Even in the bear market, MakerDao and Compound saw good user growth. Regardless, our efforts at Kava to build the market are fairly product and BD focused. 1) we build more integrations of assets and expand financial services to attract new communities and users. 2) we focus on building partnerships with high quality teams to promote and build Kava's core user base. Kava is just the developer. Our great partners like Ripple, Stakewith.Us, P2P, Binance - they have the real users that demand Kava. They are like our system integrators that package Kava up nicely and present it to their users. In order to grow, we need to deepen our partnerships and bring in new ones around the world.

Q7:

KAVA functions as a reserve currency in situations where the system is undercollateralized. In such cases new KAVA is minted and used to buy USDX off the market until USDX becomes safely overcollateralized.

Meaning, there will be no max supply of KAVA?

  • Answer: Yes, there is no max supply of Kava.

Q8:

Why Kava?

  • Answer: ...because people are long BTC and the best way to go long BTC without giving up custody is Kava's platform. Because it is MakerDao for bitcoin. Bitcoin has a 10x market cap of ETH and Maker is 10x the size of Kava. I think we're pretty undervalued right now.

Q9:

How do you plan to make liquidity in Kava?

  • Answer: Working with Binance for the IEO and as the first exchange for KAVA to trade on will be a huge boost in increasing the liquidity of trading KAVA.

Q10:

Most crypto investors or crypto users prefer easy transaction and low fees, what can we expect from KAVA about this?

  • Answer: Transaction fees are very low and confirm if seconds. The user experience is quite good on Tendermint-based blockchains.

Q11:

How do I become a note validator on KavA?

Q12:

It is great to know that KAVA is the first DEFI-supported project sponsored by Binance Launchpad, do you think this is the meaning that CZ brings: Opening the DEFI era, as a leader, you feel like how ?

  • Answer: We are the first DeFi platform that Launchpad has supported. We are a very strategic blockchain for major crypto like BNB. Kava's platform will bring more utility to the users of BNB and the Binance DEX. It feels good of course to have validation from the biggest players in the space like Cosmos, Ripple, CZ/Binance, etc.

Q13:

Since decentralized finance applications is already dominating, how do you intend to surpass those leading in the market?

  • Answer: The leaders are only addressing ethereum. BTC, XRP, BNB, ATOM is a much larger set to go after that current players cannot.

Q14:

What does Ripple play in the Kava's ecosystem, since Ripple is like a top tier company and it’s impressive that you are partnered with them?

  • Answer: Ripple is an equity investor in Kava and a big supporter of our work in cross-chain settlement research and implementations. Ripple's XRP is a great asset in terms of users and liquidity that the Kava platform can use. In addition, Ripple's money service business customers are asking for a stable coin for remittances to avoid the currency heading risk that XRP presents. Ripple will not use USDC or other stable coins, but they are open to using USDX as it can be XRP-backed.

Q15:

Considering the connectivity, Libra could be the biggest competitor if KAVA leverages interchain for efficiency.

  • Answer: With regard to USDX, it is important to understand the users interacting with the Kava blockchain have no counterparty that people could go after for legal actions. A user getting a USDX loan has no counterparty. The software holds the collateral and creates the loan. The only laws that would apply are to the very users that are using the system.

Q16:

Wonder how KAVA will compete with the tech giants

  • Answer: Libra is running into extreme issues with the US Senate and regulators. Even the G7-G20 groups are worried. Its important to understand that Libra is effectively a permissioned system. Only big companies that law makers can go after are able to run nodes. In Kava, nodes can be run by anyway and our nodes are based all over the world. It's incredibly hard for a law maker to take down Kava because they would need to find and legally enforce hundreds of business in different jurisdictions to comply. We have an advantage in this way over the larger projects like Libra or Clayton.

Q17:

In long-term, what's the strategy that KAVA has for covering the traditional finance users as well? Especially regarding the "stability"

  • Answer: Technical risk is unavoidable for DeFi. Only time will tell if a system is trustworthy and its never 100% that it will not fail or be hacked. This is true with banks and other financial systems as well. I think for DeFi, the technical risk needs to be priced in to the expected returns to compensate the market. DeFi does have a better user experience - requiring no credit score, identity, or KYC over centralized solutions.
  • With our multi-collateral CDP system, even with it overcollateralized, people can get up to 3x leverage on assets. Take 100 USD in BTC, get a USDX loan for 66 USDX, then buy $66 BTC and do another loan - you can do this with a program to get 3x leverage with the same risk profile. This is enough for most people.
  • However, it will be possible once we have Kava's CDP platform to extend it into products that offer undercollateralized financial products. For example, if USER 1 + USER 2 use payment channels to lock up their USDX, they can use Kava's price feeds to place bets between each other using their locked assets. They can bet that for every $1 BTC/USD moves, the other party owes 3x. In this way we can even do 100x leverage or 1000x leverage and create very fun products for people to trade with. Importantly, even in places where margin trading is regulated and forbidden, Kava's platform will remain open access and available.

Q18:

In long-term, what's the strategy that KAVA has for covering the traditional finance users as well? Especially regarding the "stability"

  • Answer: Kava believes that stable coins should be backed not just by crypto or fiat, but any widely used, highly liquid asset. We think in the future the best stablecoin would be backed by a basket of very stable currencies that include crypto and fiat or whatever the market demands.

Q19:

Compound, maker they're trying to increase their size via the competitive interests rates. THough it shows good return in terms of growth rate, still it's for short-term. Wonder other than financial advantage, KAVA has more for the users' needs?

  • Answer: Robert, the CEO of Compound is an investor and advisor to Kava. We think what Compound does with money markets is amazing and hope to integrate when they support more than just Ethereum assets. Kava's advantage vs others is to provide basic DeFi services like returns on crypto and stable coins today when no other platform offers that. Many platforms support ETH, but no platform can support BTC, XRP, BNB, and ATOM in a decentralized way without requiring centralized custody of these assets.

Q20:

The vast majority of the cryptocurrency community's priorities is symbolic pricing. When prices rise, the community rejoices and grows. When they fall, many people begin to cast in a negative way. How will KAVA solve the negative problem when the price goes down? What is your plan to strengthen and develop the community to persuade more people to look at the product than the price?

  • Answer: We believe price is an important factor for faith in the market. One of Kava's key initiatives was selecting only long-term partners that are willing to work with kava for 2 years. That is why even after 6 months, 0 private investor or kava team tokens will be liquid on the market.
  • We believe not in fast pumps and then dumps that destroy faith, but rather we try and operate the best we can for long-term sustainable growth over time. It's always hard to control factors in the market, and some factors are out of our control such as BTC price correlations, etc - however, we treat this like a public company stock - we want long-term growth of Kava and try to make sure our whole community of Kava holders is aligned with that the best we can.

Q21:

Do you have any plans to attract non-crypto investors to Kava and how? What are the measures to increase awareness of kava in non-crypto space?

  • Answer: We are 100% focused on crypto, not the general market. We solve the problems of crypto traders and investors - not the average grandma who needs a payment solution. Kava is geared for decentralized leverage and hedging.

Q22:

Adoption is crucial for all projects and crypto companies, what strategy are you gonna use/follow or u are now following to get Kava adopted and used by many people all over the world?

Revenue is an important aspect for all projects in order to survive and keep the project/company up and running for long term, what are the ways that Kava generates profits/revenue and what is its revenue model?

  • Answer: We have already partnered with several large exchanges, long-term VCs, and large projects like Ripple and Cosmos. These are key ways for us to grow our community. As we build support for more assets, we plan to promote Kava's services to those new communities of traders.
  • Kava generates revenue as more people use the platform. As the platform is used, KAVA tokens are burned when users pay stability fees. This deflates the total supply of Kava and should in most cases give rise to the value of KAVA like a stock-buyback in the public markets.

Q23:

In order to be success in Loan project of Cryptocurrency, I think marketing is very important to make people using this service without any registration. What is main strategy for marketing?

  • Answer: Our main strategy is to build a great experience and offer products that are not available to communities with demand. Currently no DeFi products can serve BTC users for example. Centralized exchanges can, but nothing truly trustless. Kava's platform can finally give the vast audiences of BTC, BNB, and ATOM holders access to core DeFi services they cannot get on their own due to the smart contract limitations of those platforms.

Q24:

Currently, some project have policies for their ambassadors to create a contribution and attract recognition for the project! So the KAVA team plans to implement policies and incentives for KAVA ambassadors?

  • Answer: Yes, we will be creating a KAVA ambassador program and releasing that soon. Please follow our social media channels to learn about it in the coming weeks.

Q25:

Currently there are so many KAVA tokens sold on exchanges, why is this happening while KAVA is going to IEO on Binance? Are those KAVA codes fake or not?

  • Answer: For everyone's safety, please understand Kava tokens do not exist yet and they will only exist starting with the Binance IEO. Any other token listings or offerings of Kava are not supported by Kava Labs and I highly discourage you all from trying to get them there. It is most likely a big scam. Please only trust Binance for this.

Q26:

KAVA have two tokens, the first is called Kava - a governance and staking token; the second is called USDX - an algorithmically managed crypto-backed stable coin. What are the advantages of USDX compared to other stablecoins such as: USDT, USDC, TUSD, GUSD, ...?

  • Answer: USDX is one of the few stablecoins to be fully backed by crypto-assets. This means that we do not deal with fiat to back the value, and thus we don't have some of the issues when it comes to storing fiat funds with banks and custodians. This also makes our product fully digital and built for the future of crypto growth.

Q27:

As a CEO, does your background in Esports and Gaming industry help anything to your management and development of KAVA Labs?

  • Answer: Esports no. But having been a multi-time venture-backed foundeCEO and have gone through the start-up phase before has made creating and running a 2nd company easier. Right now Kava is still small, Fnatic had over 80 employees. It was at a larger scale. I would say developing software is much more than doing the hardware at fnaticgear.com

Q28:

Why did Kava choose to launch IEO on Binance and not other exchanges like: Kucoin, Houbi, Gate, ....?

  • Answer: Kava had a lot of interest from exchanges to partner with for IEO. We decided based on a lot of factors such as userbase, diverse exposure across multiple regions and countries, and an amazing team that provides so much insight into so many communities such as this one. Binance has been a tremendous partner and we also look forward to continuing our partnership far into the future.

Q29:

Currently if Search on coinmarketcap has 3 types of stablecoins bearing the USDX symbol (but these 3 stablecoins are no information). So, what will KAVA do to let users know that Kava's USDX is another stablecoin?

  • Answer: All these USDX have no volume or listings. We will be on Binance. I am not worried.

Q30:

In addition to the Token Allocation for Binance Launchpad, what is the Token Treasury in the Initial Circulating Supply?

  • Answer: This is controlled by Kava Labs, but with the big cash we have saved from fundraising, we see no reason why these tokens would be sold on the market. The treasury tokens are for use in grants, ecosystem growth initiatives, development, and other incentive programs to drive adoption of the platform.

Q31:

How you will compete with your competitors? Currently i don't see much but for future how you will maintain this consistency ? No doubt it is Great and Unique project, what is the main problem that #KAVA is currently facing?

  • Answer: Because our industry is just starting out, I don't like to think of them as our direct competitors. We are all working to grow the size of the pie rather than get a larger slice from a small pie. The one thing that we believe will allow us to stand apart is the community we are building. Being able to utilize our own community along with Cosmos and our other partners like Binance for the IEO, we have a strong footing to get a lot of early users onto our platform. Also, we are also focusing on growing Kava internationally particularly Asia. We hope to build our platform for an even larger userbase than just the west.

Q32:

How do you explain your project to a random person who has never heard of your project?

  • Answer: non-crypto = Kava is a lending platform for users of cryptocurrencies.
  • crypto = Kava is a cross-chain DeFi platform for loans and stablecoins backed by BTC, BNB, XRP, ATOM and other major cryptocurrencies.

Q33:

Will KAVA team have a plan on implementing DAO module on your platform since its efficiency on autonomy, decentralization and transparency?

  • Answer: All voting is already transparent on the Kava blockchain. We approved a number of proposals on our test net.

Q34:

how to use usdx token :only for your platform or you have plan to use usdx for payment ?

  • Answer: Payments is a nice use case, but demand for crypto payments is still small. We may choose to focus here later if demand for crypto payments increases. Currently it is quite small with the bulk of use remaining in trading and speculative use cases.

Q35:

Do you have plans to spread KAVA ecosystem across other continents. if yes, what are the strategies and how can I as a community member contribute to making it possible?

  • Answer: We are already across many continents - I don't think we are in antarctica yet. Africa might be light on nodes as well. I think as we grow on major exchanges like Binance, new node operators will get interested and help decentralize Kava further.

Q36:

Maker's CDP lending system is on top in this market and its Dominance is currently sitting on 64.90 % , how kava will compete will maker and compound?

  • Answer: adding assets like bitcoin which have more value and more users than ETH. It's a bigger market that Maker cannot compete with Kava in.

Q37:

Currently, the community is too concerned about the price. As prices rise, the community rejoice and grow, when falling, many people start throwing negatively. So what is KAVA's solution to getting people to focus on the project rather than the price of the token?

What is your plan to strengthen and grow the community to persuade more individuals to look at the product than the price?

  • Answer: We also share similar concerns as price and price direction is always a huge factor in the crypto industry. A lot of people of course are very short-term focused on flipping for bigger profits. One of the solutions, and what Kava has done, is to make sure that everything structured is for the long-term. So that makes sure that our investors and employees are all focused on long-term gains and growth. Locking vesting periods are part of that alignment. Another thing is that we at Kava are very transparent in our progress and development. We will be regularly posting updates within our own communities to allow our users and followers to keep up with everything we're up to. Please follow us or look at our github if you're interested!

Q38:

How did Kava get on Piexgo?

  • Answer: We did not work with Piexgo. We have not distributed tokens to any exchange other than Binance. I cannot speak to what is going on there, but I would be very wary of what is happening there.

Q39:

Why was the 1st round price so much lower than the current price

  • Answer: It is natural to worry that early investors got better pricing and could dump on the market. I can assure you that our investors are in this for the long-term. All private sale rounds signed 2 year contracts to run validators - and if they don't they forfeit their tokens. You can compare our release schedule to any other project. We have one of the most restricted circulating supply schedules of any project EVER and its because all our investors are commiting to the long-term success of the project and believe in Kava.
  • About the pricing itself - it is always a function of traction like for any start-up. When we made our public announcement about the project in June, we were only a 4 man team with just some github code. We could basically run a network with a single node, our own. Which is relatively worthless. I think our pricing of Kava at this time was justified. We were effectively a seed-stage company without a product or working network.
  • By July we made severe progress on the development side and the business side. We successful launched our first test net with the help of over 70 validator business partners around the world. We had a world-wide network of hundreds of people supporting us with people and resources at this point and the risk we would fail in launching a working product was much lower. At this point, the Kava project was valued at $25M. At this point, we had many VCs and investors asking for Kava tokens that we turned away. We only accepted validators that would help us launch the network. It was our one and only goal.
  • Fast forward to today, the IEO price simply reflects the traction and market demand for Kava. Our ecosystem is much larger than it was even a month ago. We have support from Ripple, Cosmos, and Binance amongst other large crypto projects. We have 100+ validators securing our network with very sophisticated high-availability set-ups. In addition, our ecosystem partners have built products for Kava - such as block explorers and others are working on native integrations to wallets and exchanges. Launchpad will be very big for us. Kava is a system designed to cater to crypto traders and investors and in a matter of days we distributed via Binance Launchpad and put in the hands of 130+ countries and tens of thousands of users overnight. It doesn't get more DeFi than that.

Q40:

What is the treasury used for?

  • Answer: Kava's treasury is for ecosystem growth activities.
  • Investors in financing rounds prior to the IEO have entered into long-term lock-up agreements in-line with their belief in Kava’s exciting long-term growth potential and to allow the projects token price to find stability. Following the IEO, the only tokens in circulation will be those sold through the IEO on Binance and the initial Treasury tokens released. No private sale investor tokens are in circulation until the initial release at the end of Q1 2020 and then gradually over the [36] months The initial Treasury tokens in circulation will be used for a mixture of ecosystem grants, the expenses associated with the IEO as well as initial market making requirements as is typical with a listing of this size. Kava remains well financed to execute our roadmap following the IEO and do not envisage any need for any material financings or token sales for the foreseeable future.

Q41:

Everyone have heard about the KAVA token, and read about it. But it would be great to hear your explanation about it. What is the Kava token, what is it's utility? :)

  • Answer: The Kava token plays many roles. KAVA is the native staking token of the Kava blockchain and is used for securing the network. KAVA is delegated to validators, basically professional node operators that run highly-available servers to secure the Kava blockchain. The top 100 validators by weight of staked KAVA earn block rewards that range from 3-20% APR based on the total amount staked in the network. These rewards are split between the validators and the KAVA holders.
  • When users of the platform repay their loans, they must a stability fee (a percentage of the loan) in KAVA tokens. These tokens are burned by the system, effectively deflating the total supply overtime as more users use the CDP system.
  • KAVA is also the primary token used in governance of the platform. KAVA token holders can vote on key system parameter changes and upgrades such as what assets to support, how much USDX in total can be loaned by the system, what the debt-to-collateral ratio needs to be, the stability fees, etc. KAVA holders have a very important responsibility to govern the system well.
  • Lastly, Kava functions as a "Lender of Last Resort" meaning if USDX ever gets undercollateralized because the underlying asset prices drop suddenly and the system manages it poorly, KAVA is inflated in these emergency situations and used to purchase USDX off the market until USDX reaches a state of being over collateralized again. KAVA holders have incentive to only support the good high quality assets so risk of the system is managed responsibly.

Q42:

No matter how perfect and technically thought-out a DeFi protocol is, it cannot be completely protected from any unplanned situations (such as extreme market fluctuations, some legal issues, etc.)

Ecosystem members, in particular the validators on whom KAVA relies on fundamental decision-making rights, should be prepared in advance for any "critical" scenario. Considering that, unlike the same single-collateral MakerDAO, KAVA will be a multi-collateral CDP system, this point is probably even more relevant here.

In this regard, please answer the following question: Does KAVA have a clear risk management model or strategy and how decentralized is / will it be?

  • Answer: Simialar to other CDP systems and MakerDAO we do have a system freeze function where in cases of extreme issues, we can stop the auction mechanisms and return all collateral.

Q43:

Did you know that "Kava" is translated into Ukrainian like "Coffee"? I personally do love drinking coffee. I plunge into the fantasy world. Why did you name your project "Kava" What is the story behind it? What idea / fantasy did your project originate from, which inspired you to create it?

  • Answer: Kava is coffee to you.
  • Kava is Hippopotamus to Japanese.
  • Cava is a region in Spain
  • Kava is also a root that is used in tea which makes your mouth numb.
  • Kava is also crow in Hindi.
  • Kava last but not least is a DeFi platform launching on Binance :)
  • We liked the sound of Kava it was as simple as that. It doesn't have much meaning in the USA where I am from. But it's short sweet and when we were just starting, Kava.io was available for a reasonable price

Q44:

What incentives does a lender get if a person chooses to pay with KAVA? Is there a discount on interest rates on the loan amount if you pay with KAVA? Do I have to pass the KYC procedure to apply for a small loan?

  • Answer: There is no KYC for Kava. Its an open blockchain software platform where anyone with a computer can connect to it and use it.

Q45:

Let's say, I decided to bond my cryptocurrency and got USDX stable coins. For now, it`s an unknown stable coin (let's be honest). Do you plan to add USDX to other famous exchanges? Also, you have spoken about the USDX staking and that the percentage would be higher than for other stable coins. Please be so kind to tell us what is the average annual interest rate and what are the conditions of staking?

  • Answer: Yes we have several large exchanges willing to support USDX from the start. Binance/Binance-DEX is one you should all know ;)
  • The average annual rates for USDX will depend on market conditions. The rate is actually provided by the CDP fees users pay. The system reallocates a portion of those fees to USDX users. In times when USDX use needs to grow, the rates will be higher to incentivize use. When demand is strong, we can reduce the rates.

Q46:

Why should i use and choose Kava's loan if i can use the similar margin trade on Binance?

  • Answer: If margin is available to you and you trust the exchange then you should do whatever is cheaper. For a US citizen and others, margin is often not available and if it is, only for a few asset types as collateral. Kava aims to address this and offer this to everyone.

Q47:

The IEO price is $ 0.46 while the price of the first private sale is $ 0.075. Don't you think that such price gap can negatively affect the liquidity of the token and take away the desire to buy a token on the exchange?

  • Answer: It is natural to worry that early investors got better pricing and could dump on the market. I can assure you that our investors are in this for the long-term. All private sale rounds signed 2 year contracts to run validators - and if they don't they forfeit their tokens. You can compare our release schedule to any other project. We have one of the most restricted circulating supply schedules of any project EVER and its because all our investors are commiting to the long-term success of the project and believe in Kava.
  • About the pricing itself - it is always a function of traction like for any start-up. When we made our public announcement about the project in June, we were only a 4 man team with just some github code. We could basically run a network with a single node, our own. Which is relatively worthless. I think our pricing of Kava at this time was justified. We were effectively a seed-stage company without a product or working network.
  • By July we made severe progress on the development side and the business side. We successful launched our first test net with the help of over 70 validator business partners around the world. We had a world-wide network of hundreds of people supporting us with people and resources at this point and the risk we would fail in launching a working product was much lower. At this point, the Kava project was valued at $25M. At this point, we had many VCs and investors asking for Kava tokens that we turned away. We only accepted validators that would help us launch the network. It was our one and only goal.
  • Fast forward to today, the IEO price simply reflects the traction and market demand for Kava. Our ecosystem is much larger than it was even a month ago. We have support from Ripple, Cosmos, and Binance amongst other large crypto projects. We have 100+ validators securing our network with very sophisticated high-availability set-ups. In addition, our ecosystem partners have built products for Kava - such as block explorers and others are working on native integrations to wallets and exchanges. Launchpad will be very big for us. Kava is a system designed to cater to crypto traders and investors and in a matter of days we distributed via Binance Launchpad and put in the hands of 130+ countries and tens of thousands of users overnight. It doesn't get more DeFi than that.
  • TLDR - I think KAVA is undervalued and the liquid supply of tokens is primarily from the IEO so its a safer bet than other IEOs. If the price drops, it will be from the overall market conditions or fellow IEO users not due private sale investors or team sell-offs.

Q48:

Can you introduce some information abouts KAVA Deflationary Fee Structure? With the burning mechanism, does it mean KAVA will never reach its max supply?

  • Answer: When loans are repaid, users pay a fee in Kava. This is burned. However, Kava does not have a max supply. It has a starting supply of 100M. It inflates for block rewards 3-20% APR AND it inflates when the system is at risk of under collateralization. At this time, more Kava is minted and used to purchase USDX off the market until it reaches full collateralization again.
  • TLDR: If things go well, and governance is good, Kava deflates and hopefully appreciates in value. If things go wrong, Kava holders get inflated.

Q49:

In your opinion what are advantage of decentralized finance over centralized?

  • Answer: One of the main advantages is not needing to pay the costs of regulation and compliance. Open financial software that is usable by anyone removes middle men fees and reduces the barrier for new entrants to enter and make new products. Also DeFI has an edge in terms of onboarding - to get a bank account or an exchange account you need to do lots of KYC and give private info. That takes time and is troublesome. With DeFi you just load up your funds and transact. Very fast user flows.

Q50:

Plan, KAVA how to raise capital? Kava is being supported by more than 100 business entities around the world, including major cryptocurrency investment funds like Ripple and Cosmos, so what did kava do to convince investors to join the project?

  • Answer: We have been doing crypto research and development for years. Ripple and Cosmos were partners before we even started this blockchain with Kava Labs. When we announced Kava the DeFi platform they knew us already to do good work and they liked the idea so they support us.
submitted by Kava_Mod to KavaUSDX [link] [comments]

Is Margin Lending a Good Idea? Margin Lending 101 How to Use Binance Lending Margin Lending Margin trading brokers?//share market Margin Lending

The fact is that when you get right down to it, there are significant differences between contracts for difference (CFDs) and conventional shares trading or margin lending. Many of these are advantages, but you should also know about the disadvantages so that you can make a balanced decision on the type of financial instrument you want to use. Increase Your Profit Potential With Margin Trading Spot trading is a popular way for investors to access the crypto market in a straightforward manner. It’s mainly fiat-to-crypto trading, as well as crypto-to-crypto trading. It’s simple, you get a crypto wallet, you buy a token with fiat currencies, and then once the price has increased, you […] Cash accounts can benefit from a securities-lending approach. Margin accounts must maintain a certain margin ratio at all times else the client is issued a margin call. When trading on margin A margin loan from Fidelity is interest-bearing and can be used to gain access to funds for a variety of needs that cover both investment and non-investment needs. Margin borrowing can be used to satisfy short-term liquidity needs similar to how you may use a home equity line of credit or to buy more securities than you could on a cash-only basis. A margin loan is like a line of credit loan. Margin lending is better for those who look at a longer term approach and comes with franking credits. Perhaps an advantage of taking a margin loan to trade stocks (as opposed to a CFD) is that with a margin loan you will only pay interest for the amount and time you use the loan for.

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Is Margin Lending a Good Idea? Margin Lending 101

This educational video will teach you about how margin lending works, benefits and risks of using margin. Capital CS Group, LLC is a Registered Investment Adviser. Understand what a Margin Loan is and how it can be used as part of your investing strategy. ... What is a Margin Loan? What is Trading on Margin? - Duration: 11:05. Aussie Wealth Creation 4,084 views. Name list of broker, starting margin trading Facebook.com/sharemarketguidenbthapa #margintrading #marginlending #brokersofmargintradinglending #nbthapa Share... 📌Binance SHORT TRADE Tutorial Binance Margin Trading FULL Tutorial Margin Trading Beginners - Duration: 20:03. ... Staking vs Lending vs Holding - Duration: 9:37. Sgt. What is margin trading? What is a margin? What is the difference between a cash account and a margin account? In episode #34 of Real World Finance we dive de...

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