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Club-FX, Peter Buchner’s view on establishment of a reserve fund to dawg, in Golden Talk

from dawg, Golden Talk

it is not possible unless half of profit goes to the reserve. it is really quite simple math.

lets pretend the total fund is $1,000 (and for simplicity, we also start off with $1,000 reserve)
lets say that you make 30% per month, and pay 20% to all accounts
now lets say you are so generous that you put all of the remaining 10% into the reserve

after 1 month:
fund value: $1,200
reserve value: $1,100

as you can see in one month the reserve already fell short $100. the only way that it could keep up is if you added 20% per month. which of course means that you would have to produce 40% per month minimum (assuming you take no profit yourself.)

about what you are saying about no negative reserve fund.. will you let members know how much we are at loss or not? my concern comes from a very lengthy PM discussion i had with you a while back where your final answer to my questions was basically that you will pretend everything is okay when accounts are losing money.

Hey dawg,

I’m trying to answer you carefully, because you do have a valid point and your questions are not without merit. however i am looking at the situation from a “privileged” position in that I know what ratio of withdrawals are being made so far, and with that consideration and the average earnings we have managed to accumulate (excluding my drawings), i am able to see that if we carry on the same road that it is possible to both grow the reserve fund over time… and have enough for me. As a matter of interest I have not drawn more than 3k from my share of the profits. (the greater portion of which comes from my own capital which is included in the main fund).

Let me explain it this way…

I have not started the reserve fund yet, I’ve drawn a very small portion of my share of the profits (money over and above the 20% needed for members) so the main fund as it stands is larger than the members contributions including the earnings added to their accounts. So with this in mind consider that if I earn exactly 20% (for arguments sake) it is still more than what i need to pay the members. Remember the extra profits that I’ve made has been placed back into trade. As the fund stands right now, I need to earn about 9% (off the top of my head) to cover the required 20% of the members portion. because the added profits and my own money added to the members share is quite a lot more than the members contribution.

Maybe I should have clarified for you, that if I can grow the members share of the main fund first to 2x members contributions, then it will be a lot easier to maintain a reserve fund at 100% of the members contributions since the required earnings are a much smaller percentage of the fund value. I know this sounds a little complicated in words, but if you work it out you will see what I mean.

And I will never pretend that things are okay if they are not. Sorry if I gave you that impression. But I’ll stand by what I think i might have meant and that is that if we have a month or even two where we are a little under the required targets then i will continue to pay members out of my own pocket until we are back in the race. If it is very bad and too much for me to carry then I’ll let everyone know and we can decide what to do then… (and I hope and pray we NEVER get into a situation like that) But I would be arrogant to say that will never happen, we all know there are risks, it’s these very risks that make it possible for us to make money like we do.

The plan that I’ve laid out above is a double barreled protection for both myself (since I am trading a lot of my own money) and the members. I think in the absence of any guarantees, that is the safest pace i can take the fund to and is what I am aiming for.

I think that helps you understand where we are at and where we are going, just remember this will take time, especially when members are joining in the first few months like they are, once we reach a plateau (of contributions) then this plan will start to take shape. If you are looking for any kind of time frame then lets say probably around a year from now. that’s to grow the fund to the 2x contributions and have some kind of reserve fund started.

Best regards
PeterB

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