Did you ever do a credit report with all those cards? It would be interesting to see how having 14 cards with balances affected your score :P
Don't try this at home. How credit card arbitrage funded my first company.
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Re: Don't try this at home. How credit card arbitrage funded my first company.
#52This isn't credit card arbitrage. Let me describe one idea for how Credit Card Arbitrage could work. You take out a bunch of credit cards, as he describes. Preferably ones with zero interest for the first year, or 6 months. You extract as much cash from them as you can. You put a chunk of that cash in the bank to make minimum payments from, and then you put that cash into an asset that will return more over the next…
I don't think what you are talking about is arbitrage, either. You are talking about using interest free loans from credit cards in order to make a leveraged bet on the price of gold; that is not arbitrage. If gold decreases in price - and its close to record highs, however you want to intrepret that - you are taking a huge risk.
Not to mention that he seemed to forget about the 3.5% or so transaction fee that is usually associated with the 0% loans. This makes most safe investments like CDs in today's rates a negative return.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#531. This isn't arbitrage. Arbitrage has a specific meaning (profiting from price disparities in the same item in different markets). This could be described as a carry trade, but it's mostly just an inconvenient way to get a business loan.
2. This isn't even correct. It claims that you can get your credit score for free, which is incorrect. When I notice one error, I suspect there are other errors.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#54Earlier quoted context omitted.
Maybe I should have been more clear. What you're arbitraging is two rates of return-- the interest rate of the loan, and the return of the investment. In more conventional arbitrage, you're buying a commodity at one price in one market and selling it at another price in another market at exactly the same time. Here you're doing that, only the commodity is money. (Gold is money.) You could substitute a foreign currenc…
so by your definition, any leveraged investment is arbitrage.
I, in fact, did not say that, making this a non-sequitor.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#55Earlier quoted context omitted.
Maybe I should have been more clear. What you're arbitraging is two rates of return-- the interest rate of the loan, and the return of the investment. In more conventional arbitrage, you're buying a commodity at one price in one market and selling it at another price in another market at exactly the same time. Here you're doing that, only the commodity is money. (Gold is money.) You could substitute a foreign currenc…
so by your definition, any leveraged investment is arbitrage.
I don't think so. It's about the price of money. If you can buy money for rate a, and sell that money elsewhere for rate b, where a (Where price of money is a synonym for interest rate.)
Re: Don't try this at home. How credit card arbitrage funded my first company.
#56Earlier quoted context omitted.
I don't think what you are talking about is arbitrage, either. You are talking about using interest free loans from credit cards in order to make a leveraged bet on the price of gold; that is not arbitrage. If gold decreases in price - and its close to record highs, however you want to intrepret that - you are taking a huge risk.
Not to mention that he seemed to forget about the 3.5% or so transaction fee that is usually associated with the 0% loans. This makes most safe investments like CDs in today's rates a negative return.
I mentioned CDs in my article. Did you stop reading at the first mention of gold? Further, CDs are not a "safe investment" because the real rate of inflation (not CPI, but actual monetary inflation) is greater than the return of the CD, by quite a lot. Another risk of CDs is that the bank might fail. Since the FDIC hasn't been collecting reasonable premiums against this risk, and banks are failing left and right, the deficit is made up via inflation, which means, you get paid back in lower value dollars than you lost.
This is also what makes gold a relevant possibility for this type of arbitrage. Since gold's supply is relatively fixed, as the dollar declines due to inflation, the gold price will appreciate. So, even if there were no increasing interest in gold from investors (e.g.: no appreciation due to increased demand) you'd be arbitraging the delta between the exchange rates of the two currencies. Borrowing in dollars and buying gold.
This could be, as I mentioned, done between any two currencies. Or, in the case of CDs, which I mentioned in my original comment, within the same currency.
But I guess that since I mentioned gold it is Very Important for you lot to say that gold is risky, and that I'm obviously falling to "mention" those things that I, uh, er, mentioned.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#57Completely deceptive linkbait title and a worthless blog post about racking up credit card debt. THIS is what gets upvoted on HN now? Pathetic...
Re: Don't try this at home. How credit card arbitrage funded my first company.
#58"Learn how to code so you don't need to hire programmers."
That's the hidden gem. Only do this if you enjoy programming, though, because it's hard work, especially in the beginning. Expect a year or two to get fluent, not a month or two.
But once you know how to program, you don't have to spend time finding scarce developer talent, you don't have to spend time communicating requirements et cetera, and most of all you don't have to pay them $X.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#59Earlier quoted context omitted.
so by your definition, any leveraged investment is arbitrage.
I don't think so. It's about the price of money. If you can buy money for rate a, and sell that money elsewhere for rate b, where a (Where price of money is a synonym for interest rate.)
Exactly. I'm guessing people have trouble seeing money as a commodity that can be arbitraged.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#60Is this actually considered arbitrage? http://en.wikipedia.org/wiki/Arbitrage While the 4th credit card company he applies to has imperfect information about what his credit is (at that point) actually worth, it seems like all the deals are independent.
True credit card arbitrage, which is what helped me bootstrap, involves real accretion of money
In my case, it was playing the us mint. They sell 250 $1 coins for 250 with free shipping. Fidelity Amex card gives 2% cash back. So I would order tens of thousands of coins and use the coins to pay the credit card build. 1K roundtrip = $20, and it was pretty scalable. Nowadays there is a limit