Will this economic event, lead to the fulfillment of.. this?
Here's the old article in full since it's now only on google cache:
Saturday, 22 September 2007
Oh well.. And here I was hoping confidence was coming back to this market. The second half of September has been a perfect storm for the market. With VSTEX having 3 companies simultaneously default on shareholder trust and The Bank folding. What’s the relation? All 4 entities were strongly tied to the management and directorship of one Jasper Tizzy. Fortunately, some of us had insurance on our Deposits, and if Eliale Morigi of The Rock Insurance honors the claims then DGD’s going to be saved a pinch, but I can’t help feel concern for the hundreds of other investors undoubtedly uninsured and stricken by the incident. AIG, formerly the bank that backed the old AVIX exchange, has also highly restricted and appears to be defaulting on some withdrawals. The issue is so severe AIG was delisted from CAPEX for TOS violations under the new management’s guidelines.
Since June, Second Life has been averaging 1 bank default or failure a month. Are they all frauds or is there something much larger and more sinister at play on the horizon? Maybe there is more to this than simple fraud. I’ve done some analysis of the Second Life Economy and the results are very disturbing. It may even be pointing towards the potential end of product life cycle for Second Life as an entity... or that the virtual economy is about to hit a sustained depression.
Sources:
http://secondlife.com/whatis/economy-graphs.php
http://secondlife.com/whatis/economy_stats.php
I cite those early because I wanted you to get them up and review them with me as you read. There are some numbers in there that I view as critical landmarks that indicated the start of this economic crisis and the strength of its potential for deepening.
First, on the stats page you would note that from July to August in world business owners has declined. Secondly, land sales values are in steep decline. An average .5/acre drop is a huge move and likely to continue as LL continues to add land to the system. The rate of sale has also almost halved.
On the graphs page, and this is perhaps the most disturbing of all the data. The beginning of 2007 marked the largest recorded decline, which continues, in USD$ traded on the Lindex in over a year. This means fewer people are buying lindens; less money is coming into the Second Life virtual economy. Will this reverse? That depends on how LL manages their marketing but this event can be traced back to the changes in gambling policy and to the largest bank failure (Ginko) in SL. That chart is akin to the Virtual GDP. It marks the entertainment productivity of Second Life. When it goes in reverse, business will start to struggle and the magnitude of the reversal was not small.
What does this mean for your investment portfolio? It means that you have to be much pickier than usual. It means that you must watch even the most honest CEOs as a troubling environment can encourage more desperate behavior. It means more research time to make sure you’re not ripped off. It also means if you’re not diversified you’re welcoming a bullet to your virtual finances. Diversify even among banks.. and look into insurance if you can with someone with an established reputation of trust in SL insurance. Usually insurance will only take a fraction of your returns on a bank deposit and if the bank defaults it can be worth having assuming your insurer is a reliable vendor of such protection.
Risk is higher than ever, remember to be very careful about where you put your money and whom you trust. A key point to look for to measure trust is disclosure levels. An open book is much easier to discern the content of than a closed book. Find folks willing to talk about their corporate finances, which post clear reports consistent with their business operations. Also, remember that buying at any price is a sure way to lose, be very picky about your price targets for shares if you buy stock.
*************************Note, at this point the situation is now so severe with the policy, I advise against buying any stock or depositing in any bank. In fact, I'm going to start disassembling my links to prevent accidental deposits or investment encouraged by me.
7 comments:
why do you find it necessary to shut down DGD?
It looks like BCX may pull out some sort of deal that will allow it to stay in business.
L&L is going the HUD route.
Stocks are starting to trade back to their pre-announcement price.
It is necessary because of the verbatim terminology of the lab.. and the fact that most of our revenue sources are potentially going to cease to exist.
The verbatim if applied would mean the elimination of 90% of all companies traded in second life, some will survive, but not many.. definitely not enough to support the continued existence of a second life investment fund.
Land operations in second life are also compromised and as the information in the above article indicates, we may actually be heading towards even further economic disasters within the second life virtual environment.
Any company that pays a dividend or interest via an atm will cease to function. And since my company paid returns via dividend which were collected by owners via the atms of SLCAPEX, it would also be one of the ones required to shut down operations.
Acquiring the licensing necessary to continue to operate would also be a waste of investor's money. I'd rather just give it back to them versus expose them to an economy that continues to grow worse and worse.
Essentially, LL's policy was the straw that broke the camel's back even though the camel was plodding along just fine til that point under its burden.
so why aren't all stocks crashing, then?
LL seemed to exclude the exchanges from their new policy.
It's not the exchanges themselves per se. It's the fact that (1) the exchanges themselves are for the most part publicly invested entities, which fall under the same issue as virtual banks, and (2) they facilitate other similar entities. Given that they operate under an ATM system and promote the return of data, they might as well be virtual banks.
Linden Lab's language is fairly specific but it is also open to a wide range of interpretations. Furthermore, LL can add to their policy as they wish, and given that some corporations listed on exchanges are fraudulent, LL would be simply negligent to allow them a pass that they are not granting organisations that operate in the style of a bank. Mael and I believe that if such a prohibition isn't implemented now, then likely it will soon.
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