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Mo-

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Everything posted by Mo-

  1. I've been following cryptos since 2013. Most people in financial services are extremely skeptical of Bitcoin. The same amateur investors that are attracted to it are the ones who were attracted to CFD Forex trading, except the difference being with the massive price rises in crypto people with 0 (or in fact a negative understanding) of financial markets such as housewives from Japan and Korea are throwing their money at it. The fact is, BTC doubled in value in less than a month and has also lost half its value within less than a month, that isn't the behaviour of a normal asset. Ripple is on a private blockchain, so it is useless to launder money with. They aren't aiming to create a cryptocurrency but they are using blockchain to create a new transfer system. You can consider XRP to be similar to a stock owning the RippleNetwork but without voting rights or cash dividends.
  2. haha i missed a 0.09 indeed!
  3. http://www.tandfonline.com/doi/full/10.1080/13504851.2014.995359?scroll=top&needAccess=true
  4. 1. My understanding at least was that it comes from the idea that we live in an age where currencies are regulated, and an unregulated currency upsets the current order. It can also be seen as relevant to the UK because a large number of Muslims conduct foreign transactions through remittances to places like Somalia, Pakistan, Bangladesh, etc., and transparence in these remittances and where they are going is really important on a national level for reasons of security. 2. Extreme gharar is probably best seen as anything resembling a bubble. If price picks up suddenly for no visible and apparent reason, and a large number of experts in economics/markets call an event a bubble, then it holds extreme gharar. 3. With crypto in general numerous experts have stated that it is primarily used for money laundering, typically for drugs, illegal weapons and other services outside the scope of the law. It may be accepted for use by various vendors, but BTC transactions by these entities are far and few. Re US dollar benefitting from the stuff you mention: the primary driver of the US dollar is by and large the US consumer market, which remains until today the largest in the world. To put it simply, the situation you describe of the US dollar is the inverse of Bitcoin. I would say probably less than 0.01% of US dollar dealings go into sketchy stuff with 99.99% being with normal things, whereas with Bitcoin it is likely the inverse (0.01% in normal stuff and 99.99% in sketchy). edit: bad maths
  5. Bitcoin had a massive tumble today - 27%. Expect more drops as more clampdowns are rolled out.
  6. Government-issued currencies are only relevant when a government has a monopoly on coinage. In reality anyway governments don't really issue money. The money supply is generally controlled by the banking system, it is similar in a sense to how telecoms companies own broadcasting concessions.
  7. 1) but the loss is not proportional and is deemed an externality. In a bet, the loss is explicit and contracted between two parties, therefore it is gambling Islamically. When Walmart decides to open a new store, it isn't betting against the local stores, in fact due to agglomeration it is expected some local stores could even see an increase in customers. 2) speculation in Islam is halal.
  8. If there is a counterparty (i.e. there is a losing side and a winning side) it is haram. Otherwise it is just speculation. Technically speaking, in the case of a 70%-30% chance random walk, the cost of participation would increase on the more biased side and decrease on the losing side as the market wouldn't allow an arbitrage to exist.
  9. Ok so I asked Sh. al Judai about a wide range of topics and their Islamic perspective. He told me some things to hold into generality: The four major madhabs do not have significant differences on what they consider halal and haram when it comes to modern financial transactions, as they did not deal with the same things we dealt with today. There are however minor differences on some points Modern scholars, irrespective of madhab, take from a variety of sources (i.e., other madhabs and opinions, including those of non-traditional sources such as some trustworthy Shia sources (e.g. Sh. Muhammad Baqir al Sadr's book on banking has been cited by many) when it comes to Islamic finance. There is a lot of Ikhtilaf between scholars on numerous points, coming from both a lack of specialization and a large requirement for Ijtihad. These things are important because, people often ask what a specific madhab says about a certain transaction, but due to the nuances of Islamic jurisprudence today and the rapid rate of innovation in fian Firstly, some definitions I learned (or improved upon): Qimar (gambling): Gambling occurs when two parties enter into an agreement that based on an outcome related to probability or chance, one party will win and the other will lose (e.g. a coin toss with a winner and a loser). Gharar (risk, in finance, risk arising from speculation, synonymous with uncertainty): Is in Islamic business terms, when the outcome of a transaction bears some level of uncertainty. Investments with extreme Gharar are generally considered haram, for example, investing in something that is priced irrationally like a bubble with abnormal returns. Mudaraba (speculation): When an investor/market participant holds a certain view of the future and enacts a transaction based on this view (e.g. buying stock in a company deemed profitable). [Note: the common definition people use for this is the idea of the Mudaraba contract, which is a very narrow element of the actual theory]. Mudaraba al Sila' (speculation on a good/service/commodity): When a market participant purchases something for a holding period in the hope its price will change in the direction they favor by the end of this holding period (e.g. buying a barrel of oil and keeping it for sale at a later date for a higher price). Mudaraba al Si'ir (speculation on price): Where a market participant invests purely speculating on the price of something, and not on the thing itself (e.g., a contract for difference). This is haram as it is a form of gambling. Bay' (sale): the exchange of goods or services. Bay' al Salam (deferred sale): when a sale takes place, with the payment upfront and the good/service delivered at a later date. In this sense, this type of sale can take place in two manners in modern terms: Cash paid today for the provision of a good or service later; A good or service is provided today for the provision of cash later. Bay' al Inah (cash buyback): when a deferred sale takes place, but the good is sold back immediately at a lower price. This has major ikhtilaf, the Shafi'i's say it is permissible, but the other madhabs say it is generally not. All madhabs however agree that if the intention of the person is to essentially create an interest bearing loan in all but name (i.e. a heela [a work around]), it is haram. Cryptocurrencies: On Bitcoin, he informed me that the UK Fatwa Committee (which consists of himself, Sh. Suhaib Hasan and several other prominent UK based scholars) had decided putting money into Bitcoin (and cryptocurrencies in general) were not halal at the current time for multiple reasons: It is not currently recognized as legal tender in its current form, and several governments have instituted bans on it. This is contrary to the idea that Muslims should obey the laws of the countries they live in. It acts as a source of extreme Gharar. Whilst the idea itself does not go against Islamic principles (i.e., crypto in of itself isn't haram), the fact that it is primarily used for money laundering (whether by Chinese people going against capital controls or people who have illicit income through black market places), means it is currently unsuitable for use. Online trading: The Sh. corrected me on the point that speculation is not gambling Islamically, unless two parties are involved. I explained to him that, other than traditional retail brokerages which only generally sell vanilla stocks and bonds, most retail investors only have access to websites that provide CFD's (contract's for difference). He informed that this is equivalent to gambling if the speculation is being made in this case purely for the hope of an increase in price and contains two contracted parties. However in the case of actually owning the commodity/bond/stock, without a contract for difference, there is no problem with speculation as long as it does not carry extremely high risk. Insurance: Most scholars today say insurance is haram, but Sh. al Judai said it is halal generally speaking and there have been modern scholars from all backgrounds who hold the same view. He says this because, Bay' al Salam can be considered a primitive form of insurance and has generally been allowed. The issue with insurance comes down to contract specifics and the type of insurance (naturally for example, life insurance would be particularly troublesome Islamically). Insurance in itself can be sold in the form of an investment (e.g. an insurance company invests the money you give them for a particular policy in liquid assets, and grows a large enough balance sheet to pay off any claims) or it could be in the form of relying on the collective yearly payments from clients outweighing the collective yearly claims. The contracts themselves ultimately vary too and it really depends on a case by case basis. I asked him a bunch of other things in my time and went of plenty of examples for my own project. I can share those too but I felt what I included here were things related to the questions in this thread in particular.
  10. I have a nice write-up I'll do tonight inshallah
  11. On the first question: It is a generally accepted definition yes. It is based on chance because in essence, if you are speculating purely on price movements, then you're completely ignoring the underlying value of the asset itself. This is because of the reality of the random walk, whereby the future price of any given asset cannot be predicted. When it comes to investing in a company, the random walk in a stock price generally has a trend upwards or downwards based on its prospects as a company. By analyzing the prospects of a company you can assess the risks and based on your preferences and expectations of the performance of those prospects, you can speculate on the general motion of the trend of the random walk (e.g. with the Exxon example, say they won a new oil contract in Peru and Peru is assumed to have x amount of recoverable oil assets that Exxon will now be in charge of marketing to the world). If you're speculating purely on the random walk itself, and not the trend which is defined by underlying value, then it is the exact same as a Martingale. You might respond to this with "Well Bitcoin has a trend! That trend is up!", which in itself is a fallacy because it still conforms to the Martingale property of a random walk even if it appears to have a trend. Why do I say this? Because the underlying value of Bitcoin is in its value as a means of exchange, but because it is not a functioning means of exchange (proof of this is in the volatility of currency itself, for something to be a viable means of exchange it has to have stability relative to the prices of goods), it has as a result even lost its underlying value as a currency. On the second question: Ripple is different because the value of the currency is driven by the Ripple Network. But buying XRP doesn't mean that you own part of the network or are creating value, because unless you're an institutional investor it'll be impossible for you to have a stake large enough to be considered in granting rewards for proof of stake when the consensus of any ledger is applied. If you want to invest in the future of the technology, then your best bet is to buy Ripple shares when the company itself goes public or invest in banks adopting the tech. The banks themselves aren't buying or transacting in XRP, but they're using the code and technology developed by the company to simplify transaction costs. On the third question: As far as I know, unless you offer currency exchange services then simply investing in currency is gambling too. It makes 0 sense to buy USD on the notion that you believe the USD will increase in value (same goes with most commodities that are simply stored, e.g. gold, oil, palladium, etc.). I haven't read the article but tomorrow I am going to have a long session with Sh. Abdullah al Judai where I will spend around 5 to 6 hours one to one breaking down financial concepts in their simplest terms and seeking answers on whether they are haram or halal.
  12. I would like to add, blockchain itself and the concepts around it are generally very innovative and could lead to some major changes in the way we handle transactions by enhancing speed, security and allowing for a return to decentralization (similar to the free banking era of the past). The main issue with this of course is how it will affect government finances who are dependent on measures like quantitative easing/tightening where they can effectively print money or burn money. We've had central banks for the good part of the past century and they are essential for the existence of big governments.
  13. We have to define the differences between the two primary sorts of speculation: 1. Speculative investing (halal), 2. Gambling (haram). An example of speculative investment, for example, would be purchasing Exxon Mobil stock because you believe that they will outperform their peers and the market. This means that you inherently believe that the company is going to generate value for you over time and that is why you want to own its stock. An example of gambling, would be purchasing Exxon Mobil stock because you think the price will go up. Not because you inherently believe the company will generate value in the future, but simply because you are of the belief that the price of the stock itself will go up as a result of market momentum or another market force unrelated to underlying value. Now you're probably asking "didn't both examples contain the same action?". Of course, but the intentions were different. How do you then apply this rule to Bitcoin? In the case of Bitcoin, or cryptocurrency in general, it isn't generating any value. Any movements it makes are driven by market momentum in one direction or another and are unrelated to any sort of underlying value. Why? Because Bitcoin isn't a value generating asset (like a house that can be rented, a company that produces goods or services, a cow that produces milk, etc.) in the traditional sense, in that you as an owner can't do anything with it that would generate value. The only way to generate value with cryptocurrencies is through the ones that operate a proof-of-stake model, but very few people would be able to acquire the amount of necessary cryptocurrency in a reputable PoS network. tl;dr unless you have enough for PoS on a reputable network, crypto is effectively gambling.
  14. An awesome shirt i found, Proud to be Muslim.

    I know I was baiting him lol
  15. An awesome shirt i found, Proud to be Muslim.

    Did you find this shirt or make this shirt?
  16. Listening to...

    Nah it's just dumb of you to belittle his interests. What is wrong with videogames?
  17. Is insurance a scam?

    Swaps exist in many forms. Interest rate swaps are usually what banks use to hedge interest rate risk. Basically a bank can use interest rate swaps to substitute fixed rates for floating ones, or vice versa. Why would a bank do this? Because yields determine duration, and yields are affected by interest rates, so in order to achieve a duration that is better suited to the banks needs they'll use interest rate swaps.
  18. Listening to...

    Hurt - Nine Inch Nails the drums in that song are fantastic against the industrial noise
  19. What are you reading?

    I'm still reading Leviathan by Hobbes. Haven't had much time for leisure reading if I am being honest.
  20. Economics as Religion

    Economist (in academia or at a central bank or even any corporation) Journalist Banker Hedge fund analyst Portfolio manager Teacher in maths, history, stats, etc., Management consulting Manager in a corporation Politician Policy advisor Researcher (like at a think tank or an economic institution) Etc. Pretty useful degree. For employability, the best sequence is probably STEM undergrad and then a masters in economics.
  21. Is insurance a scam?

    Insurance is a zero sum game. Insurance policies will always be tilted in favour of the insurer because they look to make a profit, which is only natural because they are offering the service of assuming your risk and then paying out based on that risk. It’s pretty much a commercialized of hedging. Big financial services companies actually sell each other insurance all the time in the form of interest rate swaps so that their risk positions end up neutral.
  22. just binged stranger things 2

    1. Show previous comments  5 more
    2. cubster

      cubster

      So all episodes really are available? That's awesome. I went to download this first episode and saw the entire list and had a bit of a squeal but wasn't sure if it was all or just weird links lol

    3. Ishavemychesthair2

      Ishavemychesthair2

      Just finished season 2.  Well all but 6 minutes of the last episode.

    4. Mufasa

      Mufasa

      I thought it was great.

  23. The Investments Thread

    It would by definition dilute the other shareholders shares too. The only way to dilute share ownership is to issue new shares to new investors. You wouldn’t see any loss in value as the new cash from investment would either be held as an asset or pay off other liabilities, leaving your net equity position the same. The only change that would occur is both you and the other fellow would have less significant stakes in the company.
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