Return on Investment (ROI)

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Return on Investment

A Method of Comparing Investment Opportunities

Any investment has the potential for rewards and risk. Regardless if you are a small investor of a large bank’s portfolio manager, how one approaches the task of evaluating potential opportunities can make the biggest impact on the success of that individual or fund. Today we are going to examine one of the most commonly used ways to quickly assess Return on Investment (ROI) in order to examine its performance as well as compare to similar business models.

What is ‘Return On Investment?

Return on Investment is a performance measure that is used to evaluate how efficient an investment is, or for efficiency comparisons of numerous investments. ROI measures how much return you will receive on an investment relative to the cost of the investment.

To work out the return on investment as a percentage or ratio, you divide the return or benefit of an investment by the cost of the investment.

The formula is as follows:

ROI= (Gain from Investment- Cost of Investment) / Cost of investment

In this case, ‘Gain from investment’ means the proceeds that have been obtained from selling the investment in question.

Because ROI is expressed as a percentage, it allows for easy comparison against returns from other investments, which means you can measure a range of types of investments against each other.

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Keeping Your Bitcoin and other Cryptocurrency Taxes Current

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Taxes, everything Cryptocurrencies like Bitcoin and Ethereum stand against. A centralized tax on a deregulated currency sounds oxymoronic to the ears. Despite this, I get asked about the new taxes the United States Internal Revenue Service recently announced and can understand the confusion. The truth is that tax and cryptocurrency are nothing new and the IRS has had a Frequently Asked Questions about cryptocurrency since 2014. Since these are relatively new laws, it is much less complicated than to backtrack and find what rules are current.

The Federal government recognizes virtual currency as property and is treated as such. As far your own Bitcoin spending and crypto-based taxable responsibilities are concerned, the IRS expects you to treat it as any other domestic property exchanged for goods or services, and or, sold for loss or profit. Before you get ready to file your tax returns as normal, there are some critical distinctions that the IRS has made about reporting investment income activity the selling of virtual currency in regards to this 2014 IRS Notice.

In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability. This notice addresses only the U.S. federal tax consequences of transactions in, or transactions that use, convertible virtual currency, and the term “virtual currency” as used in Section 4 refers only to convertible virtual currency. No inference should be drawn with respect to virtual currencies not described in this notice.

The IRS expects you to keep accurate investing records. So if you are one of the thousands of people who joined the cryptocurrency community within the past three years, Uncle Sam expects you to amend your previous year’s return for the last three years, or from two years to the date of final payment on that year’s tax liability.  To do this, just file Form 1040X, Amended Tax Return, along with the corrected or additional documents you did not originally file with your return. If you think that this may be a big bother over nothing, maybe I should remind you of this.

Most people are finally asking questions about virtual currency tax liabilities because of the profits made from the recent swelling of Bitcoin and Ethereuem market caps. The Federal Government knows that these markets are stabilizing at these historic highs, giving early investors ample opportunity to convert those extremely high returns to U.S. Dollars. As Fortune reported, Through an Investigation and federal summons and ugly lawsuits with the exchange Coinbase, the IRS found out that less 1,000 people were actually following through on their crypto-tax responsibilities.

IRS agent David Utzke reveals additional information about how the agency is conducting the investigation. Specifically, Utzke explains he ran a computer analysis against the IRS’s repository of hundreds of millions of tax records, and found fewer than a thousand people filed a Form 8949 to account for a “property description likely related to bitcoin.

Fortune.com – Jeff John Roberts -” Only 802 People Told the IRS About Bitcoin”

Mar 19, 2017
Regardless of the outcome of the IRS’s probe into Coinbase or other cryptocurrency exchanges, the intent of government seems to point at more transparency in cryptocurrency transactions as well as building cases against tax evaders and money launderers. In one sense, these actions may lead to a more trusted outlook on bitcoin from tradition investors as the eventual death of the historic bull market looms, but that remains to be seen. While we wait for the outcome of the battle for centralized control over deregulated markets, the best we can do is keep accurate records and stayed informed. Coinbase offers its users a tool to help comply with IRS reporting regulations by exporting all transactions. The exhange also goes so far to give taxpayers the link to to the above-sourced notice from 2014, in this article. So one can logicly assume that these laws are current.
It breaks down to this. If you pay someone in virtual currency or receive income based on a convertible virtual currency, meaning trades like a currency on an exchange like, Coinbase, Kraken, etc. you should report the item accordingly as a capital gain or loss on a form Schedule D, or in the case of income from non-employee compensation, Forms and Associated Taxes for Independent Contractors.  Many Independent and Third-Party Contractors are adapting virtual currencies to either pay for labor or allow customers to tip for services or to pay for in-app purchases. I feel these, tax laws will be necessary to know for both small business owners and freelance contract labor as I am of the personal opinion that tradition brick and mortar retailers will have to adopt these virtual currencies to curve the overall decline in physical sales lost to online transactions.
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2016 Filing Status And Income

As with most investment income, profits from selling or converting virtual currency or stock held less than a year are considered short-term and typically taxed at the taxpayer’s Ordinary Tax Rate *see above.  In the Case of Long-Term holdings, or more than one-year, The levy on the sell-for-profit of cryptocurrency is  10% to 15%, unless the filer is classified a High-Income Taxpayer, then the tax becomes 25% to 28%

Please remember that this is not investment or tax advice. You should check with your own tax professional in regards to converting between other virtual currencies or the Treasury Department and IRS, who understand that taxpayers may have questions. The appropriate contact information for an IRS opinion on this topic is, Notice.Comments@irscounsel.treas.gov. Taxpayers should include “Notice 2014-21” in the subject line. OR alternatively:

Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2014-21)

Room 5203 P.O. Box 7604

Ben Franklin Station Washington, D.C. 20044

Thank you for reading, I plan to follow this up with another installment soon, soon please follow this blog and leave your questions in the comments section below. If you feel like this has helped you and you would like to support this blog.

Bitcoin: 1Q5v1vUT9YXMB9aWz85HfYrpBeGywH3bxk.

Ethereum: 0x13cF24A3636568Bd0f15CFDdDEaE3D8d6261aeb2

Follow me on Twitter.  @a_m_faulkner

and check our cryptocurrency discussion group on facebook.

Happy Mining, Good Luck Trading Everyone.  

-AMF 

 

Oh Shit! Did We Just #Warcrime?

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While we can debate among ourselves the modern day refugee situation stemming from conflict in the Islamic world, we have a responsibility to objectively examine all aspects of every individual’s natural rights.

Funny how our binary society 0 or 1, true or false, for or against, forces us into conflict, not only with the Islamic states but with ourselves.We need to look at a 3rd option or “The Man” wins again.


(ANTIMEDIA) On Saturday, Reuters obtained a report conducted by U.N. experts advising the U.N. Security Council that the U.S.-backed, Saudi-led coalition’s attacks in Yemen “may amount to war crimes.” The report investigated ten coalition air strikes between March and October that killed over 292 civilians, including some 100 women and children.

“In eight of the 10 investigations, the panel found no evidence that the air strikes had targeted legitimate military objectives,”the experts wrote. “For all 10 investigations, the panel considers it almost certain that the coalition did not meet international humanitarian law requirements of proportionality and precautions in attack…The panel considers that some of the attacks may amount to war crimes.”

Saudi Arabia is leading a military coalition made up of Bahrain, Kuwait, Qatar, the UAE, Egypt, Jordan, Morocco, and Sudan. Out of all of these countries wreaking havoc on Yemen, the poorest country in the Middle East, only Sudan makes Trump’s ban list of refugees. Yemen, the victim of the onslaught, also makes the list.

Even before the start of the Saudi-led war in March 2015, Yemen was already suffering a humanitarian crisis, including widespread hunger and poverty. Over 14 million people are starving, and seven million of them do not know where they will get their next meal.

To date, the Saudi-led coalition has struck over 100 hospitals, including MSF (Doctors without Borders)-run hospitals. The coalition has struck wedding parties; factoriesfood trucks; funerals; schools; refugee camps; and residential communities.

Read more via Think Banning Refugees Is Bad? You Need to Know How They Were Made

Google AI Can Create Its Own Crpyto

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Recently it was discovered that the artificial intelligence experts of The Google’s Brain project were able to create A.I. that is capable of developing its own secure secret language or cryptography.

The accomplishment is leaving some with more questions than answers currently available.

It seems that nobody at Google has any idea how this extra layer of encryption actually works, not even the A.I.

In an experiment, the A.I. networks were created, two were instructed to communicate securely with each other using a shared secret key, while the third was assigned the task of intercepting and decrypting those communications.

The result, the two communicating networks were able to develop their own crypto layer that the third network was unsuccessful at cracking.

Importantly, the AIs were not told how to encrypt stuff, or what crypto techniques to use: they were just given a loss function (a failure condition), and then they got on with it. In Eve’s case, the loss function was very simple: the distance, measured in correct and incorrect bits, between Alice’s original input plaintext and its guess. For Alice and Bob the loss function was a bit more complex: if Bob’s guess (again measured in bits) was too far from the original input plaintext, it was a loss; for Alice, if Eve’s guesses are better than random guessing, it’s a loss. And thus an adversarial generative network (GAN) was create

via Google AI invents its own cryptographic algorithm; no one knows how it works | Ars Technica UK

Camping World IPO Holding Early Returns

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Camping World Holdings met Friday’s opening bell with its IPO that placed 11.4 million shares placed at $22, raising $251 million.

At its peak, the stock reached $24.35 but by 2 P.M, the company’s ticker, CWH, was holding a %5 return on 10 million in volume but closed at $2.50 or %2.27.

The company believes they have a competitive edge due to their diverse holdings and claims says to the largest network of RV-focused retail locations in the U.S.

Driven by top and bottom line growth spread throughout 36 states with a total 120 outlets the company has increased its annual revenue to $3.33 billion in 2015. With less consistent growth, Net Profit has also shown a steady annual increase, up from $5.4 million in 2011, to $178 million in 2016.

The Recreational Vehicles market has seen steady growth as recession-riddled millennials and retired baby boomers look for alternative leisure activities.

While it is estimated that in the largest transfers of wealth the baby boomer generation will be left behind $30 trillion to their Gen X and Millennial children.

This may help CPW begin to look like a candidate for a potential Millennial themed portfolio and we will continue to watch this one from the sidelines.

 

News orgs sue FBI for details on San Bernardino iPhone exploit — TechCrunch

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The Associated Press, Vice Media and Gannett, the parent company of USA Today, sued the FBI today in an attempt to uncover information about how the law enforcement agency was able to unlock an iPhone used by Syed Farook, one of the San Bernardino shooters. The Justice Department initially sought to force Apple to create custom…

via News orgs sue FBI for details on San Bernardino iPhone exploit — TechCrunch

A Review of The Intelligent Investor – By Matthew Waterman

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Book Review: “The Intelligent Investor”, by Benjamin Graham 4th edition with liner notes by Jason Zweig.

I believe I first read “The Intelligent Investor” at some point around 2005. It was really an incredible coincidence that I ran across it during the time I did. I was looking to expand my own knowledge base, and at the same time, I just happened to be working at Countrywide financial, which ended up being one of the largest players in the mortgage meltdown in 2007.

I was just so perfectly prepared for that bear market because of that. I had very recently taken my first two accounting courses in college as well, and had been tinkering with individual stocks before that. What happened was that I was working this part time gig for a few hours each night with this accounting firm, because I didn’t feel like I had a good understanding with what my teacher had taught vs. what made an investment successful .

There used to be an older gentleman who would be in that office from time to time, and I remember that I found out he was into the stock market, and I mentioned how well my Sirius Sattellite Radio had done that day, up something like 5%. The response he gave was something I’ll never forget: “Do you really think that 5 or 10 years down the road, that number would be meaningful?”. Answered honestly, I couldn’t say that I had any idea. He directed me to start reading about Warren Buffett.

So I did. The first book I read about Buffett was a biography, “Buffett: The Making of an American Capitalist” by Roger Lowenstein, and the other was Mary Buffett’s “Buffetology”. Those two books overwhelmingly pointed to Benjamin Graham as the source of Warren’s investment mentality, and so I picked up the 4th edition of “The Intelligent Investor”. I took to the material immediately, and had never seen anything else like it. Inside of just a couple of pages I understood what I was doing incorrectly. I was chasing momtentum and news, and what Graham taught me to do instead was look at the business as if I were the owner, and try to estimate it’s intrinsic worth from there.

Graham changed everything for me. I immediately understood where both my strengths and weaknesses were, and when the 2007 housing market crash hit, I was so well prepared that I took in more than a 400% gain before 2008 ended. That volatility continued well into the next year, and I doubled my holdings inside nearly every couple of weeks during that madness. I haven’t tracked my performance for a while now, but I know that by 2012 I was sitting an an increase approaching 50,000% of my initial capital.

What Graham really hit home with in his writing was on buying companies that earned profits. To that point I had been purchasing stocks on news, and on dips in their charts. I had thought that was what “Buying Low” was. Graham tought me to think about the future of a business, not it’s past, but by using the businesses’ past as your guide.

Graham ‘s core concept is centered around a “Return to mean”. A business that’s been doing the same things for a long time tends to keep doing them, so you get in there and buy them when they are having a temporary, but solvable problem. Alternatively, he gives you tips on how to value the assets on a company’s balance sheet, so that you can know if a true catastrophe is in the cards for a struggling company. You learn to find greater chances for rewards with substantially less risk involved.

More than anything, he teaches you to be fearless in the face of a fearful, easy dismayed stock and bond market. You learn to prepare for these times, and how to hedge your losses when there is risk involved. Best of all, you learn that all of these things are entirely within yourself to control. Graham’s book is so complete that you could probably never read any other and outperform at least 80% of the market easily. With a bit of fine tuning that comes from practice, I think I’ve got this number into a range of 98%.

Since that time, I’ve become a contributor for Seeking Alpha as well as a few smaller sites, and have introduced a couple of new concepts to the field. I have a chart named after me called the “Waterman Life Cross”, and am developing a new method around what I call “Insult Theory”, which is a way of using investor sentiment to guage if there is serious interest in a stock, or if the owners don’t understand the business at all. Graham was the foundation for both methods, and I believe that anything good that comes in the future will also be due to his writings.

Matthew Waterman, Contributor at Seeking Alpha

If you would like to read more please follow Matthew on Seeking Alpha and Twitter.

 

 

Sydney Stock Exchange Confirms Public Blockchain Platform for Instant Settlements – CCN: Financial Bitcoin & Cryptocurrency News

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The Sydney Stock Exchange is pressing ahead with a new blockchain settlement system that will position itself as a low-cost alternative to the current clearing and settlement system delivered by the Australian Securities Exchange (ASX).

via Sydney Stock Exchange Confirms Public Blockchain Platform for Instant Settlements – CCN: Financial Bitcoin & Cryptocurrency News