Seen reference to this all over Twitter but can't figure out what the hell it is exactly?

Is Michael...

Buying up players make up?
Loaning?
Staking?
Cross booking?

Even Haralabob chimed in claiming it was brilliant except for the whole interwebs element. What do you guys know?

The twitter account is pretty clear: you can't short sell in the marketplace so Mike Mcdonald is doing it himself plus some other type of market clearing activities: offering the possibility to players to leverage themselves in certain events essentially.

If someone is selling a package at a high markup he'll offer you to buy it at a lower markup (which is ggod for you if you think the ROI of the player in question justifies the markup quoted by Timex). If the person cashes, he pays you out of his pockets the winnings. If not he pockets the money you paid him. So he's "shorting" the player's package.
If you someone plays the main, but they actually want to be in for 20k, they can ask Mike to quote them a price for the other 10k. The prices I've seen quoted are quite high though.
It's very cool.

Hmmm at what point do regulations and such kick in?

There must be SOME limit to how many quasi-securities one individual can create...

And all kind of financial ideas are considered "brilliant" until something goes wrong.

^ yeah by irrational, results-oriented thinking ppl

I don't quite get how he makes money.

He makes money by getting people to pay high markups for players he doesn't think are worth it.

http://en.wikipedia.org/wiki/Short_(finance)

Timex obviously thinks the markups people are charging are way to high, He is basically offering odds against players cashing/winning tournaments

If you are worried about it then don't participate. Why are you worried about the VOLUNTARY interactions of other people?

Marchese bought 20% of himself at 1.65 to the 5k PLH event

$5,000*1.65 = $8,250; 20% * $8,250 = $1,650 paid to Timex

Timex pays 20% of whatever Marchese cashes for.

Is that correct?

But what if THE MULTI BILLION USD market of poker staking blows up because of all this. THINK ABOUT THE CHILDREN.

So Timex could sell any players at a certain markup with no involvement from the player, as long as the player plays the tournament.

So in the Tom Marchese example, Timex thinks Marchese isnt worth 1.65 so takes the action.

-Timex believes players who sell shares are charging exorbitant markups on those shares.

Ex. Player A is selling shares for the main event at 1.5 MU. Thus if you want 1% of his action, you pay $150 instead of the $100 at face value.

-Timex believes that Player A is not good enough to warrant 1.5 MU, and assesses Player A's value at 1.3 MU.

-Timex then offers to sell pieces of Player A's action at a price inbetween those two values - perhaps at 1.45 MU. He pockets the money if Player A fails to cash, and pays out the percentage if Player A cashes. If he is an accurate predictor of MU and sells at a price that is above breakeven, he'll make a profit in the long term.

He's also offering action on any player, likely at MU lower than we're used to but what he still feels is overpriced (so he can make a profit).

Winners in this scenario:

1. People who buy shares. They're able to get a cheaper price investing in players, and are able to invest in any player they desire - even if the player would never publicly sell shares himself (Eg. Ivey, Blom). Timex is also highly respected in the poker world, and payouts from him are all but guaranteed (on twitter he claims to have a bank of ~10m between himself and his investors).

2. Timex. If the market is as overpriced as he believes, he'll be able to offer a service as well as make a profit - until the market corrects itself. If he's a good predictor of MU (Which I imagine he is, given that he's offering this service). Basically, he thinks players aren't as good as they claim, and is willing to undercut their staking prices (to a degree - he'll still be charging more than what he believe their true value to be).

He's also charging high markups on people who don't usually offer shares, exploiting the current market failure.


Losers:

1. People who overprice their shares and are denied action in favor of the BoT.




tl;dr - He's shorting the entire poker staking market, because (according to him) people aren't as good as they think they are.

I would sell myself at a negative markup to subsidize my main event dreams.

How do negative markups affect his calculations?

http://blondepoker.com/forum/index.php?topic=61414.0

Because it's a good idea for the poker community at large to keep checks on itself, so that no one ends up defaulting on an obligation? Scams/defaults (even in good intentions) are bad for the community.

Seriously, there are a few people in the community that can handle these swings, but a medium amount of runbad for the 'bank' coupled with a medium amount of leverage, and all of a sudden the bank can owe out a few million.

It's reasonable for the community to want some sort of escrow or at least to have the bank's positions documented (perhaps even by a trusted 3rd party even if you think it's too invasive to require that this is public) before considering making wagers investments.

you're badly overestimating how much money is at stake on timex's end. these are fractional investments of players playing in tournies where the winner's share is rarely over 550k

Thanks - I get it basically in the Marchese example, Timex thinks 1.65 is still overpriced so takes the action, Marchese either disagrees or doesnt care, plus PLO is so swingy.

So generally speaking this arrangement is -EV for the collection of actual individuals looking to sell packages?

That is true for each individual investment, yes, except for those in (e.g.,) the ME.

But what -- besides his own risk tolerance and his integrity -- would stop him from taking 1000% on someone he felt was badly overpriced in the MP? Now he's got 5.5MM at risk.

My point isn't that what he's doing is inherently bad; I am firmly of the opinion that we should be allowed to make these types of wagers and markets. But, counterparty risk is an incredibly big deal here.

This isn't like dealing with a US Bank, where there is some insurance, and then even if they blow up and you have investments with them and they can't pay out, the gov't will bail them out. I mean look at what happened with FTP -- they had a liquidity event and couldn't pay out. Look how long it's taking people to recover their money.

I'm just saying that some oversight and transparency in the process is a good idea so that we can actually facilitate this type of action.

@Loopshot1

Only bad for those players, who sell with a mark-up that is higher than their ROI. Its standard to take half of your ROI in mu, I think, so 1.20, if you have 40%, but there are lots of people who sell with a MU that is even higher than their true ROI, these players often just binked one big score at higher buy-in and now earn $ with it. Lots...

It all comes down to making investors feel safe and not fear intended collusion-bust-outs. If he can do that, this has potentional to go big, imo.Maybe he should only allow a max wager of xy$ per person, player and day/BAP to look more safe. Openly showing all investors somewhere online, with a nickname, ofc.

Yea, especially with ME bets it's not hard for him to get over leveraged.

eh

look at the action he's booking and offering and it's not like someone's going to show up and say "gimme 50% of x in the main"

if he goes 10-20% across the board at the most on an ME investment, the most he stands to lose on a single wager if the guy ships is anywhere between 700k and 2 million. obv, idk timex's financials but if the absolute worst were to happen in every investment he takes for the main he shouldn't lose more than 3 million, which it seems wouldn't be an over-leveraging