Why did submitter take a cash advance? Typically, you can get 0% purchase APR. The correct course of action is to cash advance the minimal amount you need and pay for every purchase you make with your 0% cards. Would have saved this guy a few hundred dollars.
Don't try this at home. How credit card arbitrage funded my first company.
91–100 of 107 posts
Re: Don't try this at home. How credit card arbitrage funded my first company.
#92This is the second article I've read on HN in as many days from this blog that ends every post with "my new company $x is going to change how the world does $y"!
The title is also inaccurate linkbait.
I appreciate self-promotion as much as anyone, but I think this isn't the way to go about doing it.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#93Earlier quoted context omitted.
I, in fact, did not say that, making this a non-sequitor.
The problem is you assumed it even if you did not say it. The are basically two ways to do arbitrage one is to execute the trades fast enough that the prices are fixed. Or do a closed transaction where the underling commodity price is irrelevant and you make money even if the price spikes or drops. AKA buy a directive of a stock and short that same stock. You can still be bitten if one of the counter-party does not f…
No, in point of fact, I said the opposite. It is a shame that HN has become a place where people don't bother to understand the point someone is making, lie about them, and then the person gets down voted to negative territory when they try to defend themselves.
Not a single response to my comment has been on the actual topic of this submission. Most of them have been frankly, dishonest, and the only thing I'm concluding from this is that this site is inhabited by people who are such financial neophytes that they think there's such a thing as a "riskless transaction".
So, no, you don't get to assert that I assumed something and then call me a liar when I point out that I didn't say it, especially in the face of me pointing out the difference between leverage investments or margin investments and arbitrage in the original comment, which is proof positive that I didn't say they were the same.
Or, well, you can do that, but you force me to conclude that this is not a place where intelligent discussion can take place.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#94Setup an Adwords campaign say $0.25 CPC. Funnel the traffic to a page where you have Adsense ads paying $0.30 CPC. That's arbitrage for you. Not sure why you guys using gold and CDS as examples on HN.
You're forgetting something: click through rate. Unless it's somewhere above 90% (in which case you're one hell of a marketer -- or you're paying for the traffic), then you're essentially burning your money.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#95Earlier quoted context omitted.
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…
Hmm, not sure why you and others respond so negatively on my comment. I am merely pointing out that your original reply did not account for the usual 3-3.5% transaction fee on these 0% loans. Your only mention of such fee may be the "could borrow at %1 (on the "zero interest" plans)", which isn't anywhere close the 3-3.5% that I see. So taking that into account, "safe" investments like CDs will actually give negative…
You responded to someone attacking me for mentioning gold with "not only that, he..." EG: You agreed with him.
My original reply did account for the transaction fees in "pay no interest loans". I didn't use the same figure you did, but to pretend like I ignored it is wrong. If you had read my post, you would notice that I said that a "safe investment" like a CD would not give you a sufficient return at current CD rates, and so I talked about a hypothetical %6 CD.
Your original reply came as piling on, and since you didn't (and still haven't) recognized that I had addressed the issue you're bringing up, there's no way to distinguish you form the others who are jumping in and telling falsehoods about me based on their own financial ignorance.
I am quite dismayed that nobody has responded on the original point-- using arbitrage to finance your startup-- and instead people are trying to score points by attacking me as if this were reddit.
I'm already pretty hesitant to post to this site due to an expectation that I won't useful discussion in response. This is just convincing me more of it.... so, if you do enjoy reading my HN posts, know that I try my best when posting to avoid stepping on any of the land mines that will result in people attacking me, and I post as if I'm walking on eggshells. I thought that mentioning gold might be tolerated here, but I was wrong.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#96Earlier 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…
I'm afraid you don't understand the point of arbitrage, at all. As others have said, by definition, an arbitrage is risk free (or, in practice, nearly risk free). Buying extremely risky Greek Bonds, with borrowed USD, is just making a leveraged investment. Considering the transaction costs you'll pay, as a small time buyer, and the various worked in charges, you will certainly be losing out, when the risk etc is fact…
The problem is you do not understand risk at all. You compare things with many orders of magnitude different risks as if they were equally risky. In fact, in my original post, I addressed the issue of risk, and mentioned hedging that risk using put options. Yet, you think that because you're not sophisticated enough, or didn't bother to actually read my post, you think you can spout off and accuse of saying things I did not say. In fact, you claim that I "don't understand the point of arbitrage, at all", on the basis that you are unable to price risk accurately, or do not understand the concept of hedging.
But hey, just keep on thinking that gold is very risky.... sucker.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#97Earlier quoted context omitted.
I covered the idea of putting the money into a CD in my comment. Even if you get a CD that returns %6, you'd need $400k in debt to raise the $20k. Maybe mentioning gold is "politically incorrect" and so I'm getting down votes and disagreement, when the gist of my comment was talking about different ways you could arbitrage to raise money for a startup.
No you are talking about different ways you could speculate to fund a startup. Thats not arbitrage.
If you provided a counter argument, I could respect that. Instead you're lying about what I've said, and that's worse than useless.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#98Earlier 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…
You're missing the key point of arbitrage: its risk-free. Say you borrow $100k at 0% for 1 year. You then buy (at $1734/oz) ~57oz of gold. Next year, you plan to sell it and pay off your $100k. But you've taken a risk. If gold is only $1500/oz next year, you're going to lose ~$13k. Of course, if its $2000/oz, you're going to make a nice profit. You're speculating on the gold market. You could build a similar position…
You are assuming the person doing this has not also bought puts against the gold sufficient to cover the long position.
There is no such thing as "not taking any risk" or a "risk free" investment. The idea that arbitrage is without risk is, kinda amusing, if you think about it.
Even buying the put options I described to protect the position involves risk, though it does reduce the level of risk dramatically.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#99Earlier quoted context omitted.
Exactly. I'm guessing people have trouble seeing money as a commodity that can be arbitraged.
Gold is not the same as USD. It is a different asset to USD, and carries different risks. The Greek Bonds you mention, you also consider 'money'. Well, not all 'money' is the same. That's why you get paid more if you buy Greek bonds than if you buy German Bonds, to the same Euro value: risk premium. Its not arbitrage if you are just being paid for taking on risk, by definition.
I wrote my post, presuming anyone who might follow such a strategy was sophisticated enough to understand what risk is. Risk can be hedged. Risk can also be calculated.
You're right that gold is not the same as USD. It is less risky.
You'd do well to not tell me what I believe about various asset classes, especially when it is clear you have not even read the original comment I made.
By definition, people engaging in arbitrage are being paid to take the risk that the arbitrage might fail. The idea that there is such a thing as a risk-free form of property is fallacious.
Thus your arbitrary demand that I be talking about something risk free is an impossible standard (and quite off the point... but then, maybe derailing the possibility of sophisticated financial discussion was your goal?)
I mentioned hedging risk, and everything else you've brought up in my original comment.
Re: Don't try this at home. How credit card arbitrage funded my first company.
#100Earlier quoted context omitted.
I'm afraid you don't understand the point of arbitrage, at all. As others have said, by definition, an arbitrage is risk free (or, in practice, nearly risk free). Buying extremely risky Greek Bonds, with borrowed USD, is just making a leveraged investment. Considering the transaction costs you'll pay, as a small time buyer, and the various worked in charges, you will certainly be losing out, when the risk etc is fact…
The problem is you do not understand risk at all. You compare things with many orders of magnitude different risks as if they were equally risky. In fact, in my original post, I addressed the issue of risk, and mentioned hedging that risk using put options. Yet, you think that because you're not sophisticated enough, or didn't bother to actually read my post, you think you can spout off and accuse of saying things I…
You're claiming gold is not risky? You're like the cheap little ads plastered all over the back of magazines trying to sell you gold. If gold is such a sure bet, why are so many people so desperate to sell it to you?