I agree. If we’re not going to have bidding we should have this.
I think it is very reasonable for R2G rates to go up over time. This is reasonable because R2G portfolios become more “valuable” over time – as each month passes they have a longer out of sample track record. The increased confidence is worth something to me and I’m willing to pay for it.
In the past, I’ve paid for R2G subscriptions for several months without investing any money in the model because I wanted to have a place if the model held up. I’d be happier to not have to do this. I would prefer to wait until the there is enough out of sample results to satisfy my “due diligence” sensibilities. The only way there would be a spot for me in the future is if the designers were allowed, even encouraged, to raise their rates until one or two openings appeared in the subscriber list.
I’m not an R2G designer, but I think the designers with fully subscribed R2G models should be allowed, even encouraged, to raise their rates as time goes by.
Regards,
Brian
Here is the combo: 45% Hemmerling S&P 500 Market Neutral Strategy + 40% Keating’s Ultra Defensive Portfolio + 15% Best(MAC-UPRO).
Annualized Return about 20%
Max drawdown -12%
Sharpe 1.74
Sortino 2.59
Alpha 15.7
Liquidity - huge
Cost - low: $84 pm
My 2 cents:
I really like the idea of slot bidding or generally adjusting prices for NEW subscribers. By the way, I am a subscriber and have not launched R2G models myself.
It is important that existing subscribers are treated fairly and there should never be a chance to kick out existing subs or raise prices on them. The designer should also always be loyal and reward early subscribers that subscribed when the track record was young or may have had (temporary) drawdowns.
- This is a marketplace and it is all about supply and demand. So to get a model started and earn some early income for the designer he can start with low fees and as slots fill up he can increase pricing and charge more. Nothing different than in the airlines, hotels, advertising, etc. industries.
- As already mentioned, there is significant value of a long track record. As the successful OoS track record grows, the more confidence into the model. So why should the subscriber not pay for this? If anyone wants to invest cheap or is fast he can still subscribe early.
- There are other great models, so when prices become too excessive, there will always be other cheaper models available that become more competitive, so really, a marketplace where price is determined by supply and demand.
- The bidding mechanism (definitely should not been real-time) shall also contribute to price finding for a model
- The bidding mechanism should be able to act on. A price the subcriber sees for an open model shall be tradeable, otherwise it is counter-productive. For a closed model, there could be a waiting list where the subscriber sets the desired price. The waiting list will be ranked by price and the highest price will be visible for all prospective subscribers. The “fill” should be automatic and the subscriber should be billed, when a slot opens up, so he cannot cancel when a slot fills up to avoid marking up the price. Basically an Ebay model could be applied but just not real-time.
- The designer may set a pre-defined schedule (for example 0-5 subs → USD 10; 6-10 → USD 20, …) or adjust it discretionary after he sees low or high demand when slots fill or empty.
- If a designer opts to decrease prices, then it is up to the subscribers to figure this out on their own and unsubscribe and subscribe to the new price, just as how it works in the telco industry with new plans coming out every week.
I hope Marco and team can make this work technically. This will be good for everyone.
I don’t have a problem with pricing going up even for existing users. There are some currently free models that may have a cost associated with them at some point in the future. That is ok. We need to motivate developers.
After your model is released, I’m going to take a look at 85% Hemmerling S&P 500 Market Neutral Strategy + 15% Best(MAC-UPRO).
Walter
I think bidding for models sounds crazy because it opens a massive can of worms.
If you have a system of bidding, then it means subscription prices could theoretically be set in real time, responding to supply and demand. If every month the price of subscription floats up and down, then in effect, you have invented a new product, just like an equity, that has “value”, and spots could be sold on etc. What are the legal ramifications of that?
Also, in my view, there would would have to be a “dutch auction” style system, where everyone pays the amount of the lowest successful bidder. This is not just in the interest of fairness, but the problem comes that if you do not have such a system, then people will bid tactically. In a dutch auction they have an incentive to put what they are really willing to pay.
To my mind bidding overly complicates things, quite a lot of people, designers and subscribers appreciate having known quantities in advance. Designers will not know their revenue, as this will fluctuate on the number of seats taken, but at least subscribers know how much it will cost, month after month, to commit to a particular strategy. And I do say that word, because I think you need to follow a strategy for at least a year, preferably three or more to have a good chance of getting a successful result.
In any event, why not just have a waiting list?
I tend to agree with the sentiment expressed by Micheal Sandel - there should be limits on what money can buy.
Agree just have a waiting list based on FIFO.
First come first serve is not the right framework because you are not actually waiting in line: there is NO cost associated with waiting in line, so you can just “grab a number” for every full model. Just because you saw it first doesn’t mean much, standing in line and waiting does. The only way it would work is that you can only be waiting in line for ONE model. If you want to wait in line for a different model, you’d have to give up your spot in the current queue.
But it’s all starting to sound like a Madonna concert. And then… a black market for queue spots begins. oh joy.
Easiest thing for us is to send emails exactly when a sub unsubscribes, in essence making the email send times random. First one to act on the email IS first come first serve.
I though that’s how it works now. I’ll check
And I question why this is even necessary.
There several seemingly good open models . Also I’m not so sure I would jump on every spot that opens. Maybe there’s a reason they left.
In terms of bidding / pricing adjustment I did not propose real-time bidding where prices fluctuate up and down without control or where neither designer nor sub would know in advance how much they earn or how much they spend. This would be too complicated. I was refering to a very simple model.
Let’s say a model is full and there is a charge of 30 USD with 30 subs, then if a slot fills up, the designer should be free to offer this slot for any minimum amount (say he wants to earn at least 30 for this slot) and let the new subscribers determine how much they want to pay to get this slot. Let’s say 24 hours waiting/bidding time (determined by designer). There could be also a fixed price option first-come-first serve for say 60 USD. So the designer can choose: olikea does not like this model, so he just chooses 30 USD (so all pay the same). Others may have seen that their OoS track record is really good and subscriber love the R2G, so he could just offer any new slots that come available for a minimum of 40 while remaining subscribers continue to pay 30. Everyone knows every price. No problems at all. Overall more market, more revenues, more stickiness.
I also think this is likely the best solution but the catch is in the commitment. If you click AUTO then you are committed to at least one month when the spot opens. The only way out is if you deselect AUTO before the spot opens. I would deem it unfair if someone takes a spot in the queue and has a time limit for acceptance after a spot is open. Therefore only when you are finally subscribed would you get an email to notify you of your commitment. If you forgot that you were in the queue then to bad, so sad, you pay for one month.
If there was such a queue I don’t think the designers should get to see the number in the queue. This could lead to queue stacking like you see night clubs do to attract attention. Once the line has a few people in it then the designer might just open a bunch of spots and stop with 1-2 remaining to build a new queue and keep the port fully sub’d.
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I would be very happy with this solution - this is what I suggested with my original post.
-Debbie
Marco, can you help me understand how models are combined such as the Hemerling S&P Market Neutral + Keeting Ultra Defensive that you pointed to in the earlier post of other fine models to choose from with open spots? Is this available for members to do at the Investor level?
Thanks,
Doris
@Doris - You can combine R2G with Live Books. The Investor level allows 2 Live Books and 10 Book sims, I think. Just go to the Book selection and open a new book. Under Assets, add the R2Gs you want to work with.
Thanks, Marco. This is extremely interesting and powerful!
I think I just got a promotion! 
Walter