When I wondered how Rand could definitively say that VG will never be a
commercial success, I admit I was thinking in terms of whether revenue
could cover operational costs and generate a cashflow profit, not thinking
about return on investment for the development costs. If the $600 million
number is accurate, then that's quite a chunk of change, even by dinospace
standards. Maybe they will never get that back (and a decent return), but
at the same time I respect risk-takers who use their own money instead of
someone else's. I'm sure glad they tried something with some risk instead
of investing their money in T-bills to finance the US government's debt
(and by extension, projects like Constellation/SLS that are at a similar
state of development and uncertainty).
Paul M
On Fri, Apr 6, 2018 at 8:50 PM, William Claybaugh <wclaybaugh2@xxxxxxxxx>
wrote:
Henry:
I generally use the 10 year treasury rate at the time of investment for
discounting; that is the lowest risk alternative investment. Corporate
investors often use their cost of capital, which is always much higher than
the treasury rate.
That said, VG’s investors would be better off today if they had put their
money in a non-interest bearing checking account; they would only have lost
1-2% per year....
Bill
On Fri, Apr 6, 2018 at 8:36 PM Henry Vanderbilt <
hvanderbilt@xxxxxxxxxxxxxx> wrote:
Meanwhile, the competition for a prudent investor includes 10-year
T-bills at around 2.8%, and a very volatile stock market at an average
P/E over the last year of 23.5 and over the last 10 31.7. IOW, ~3-4%
earnings, plus of course any potential cap gains (currently extremely
uncertain over the medium term.)
Which is mainly to question some of your detail assumptions, not your
overall methodology. The investment benchmarks to beat aren't currently
(or likely in the medium-term) nearly as high as the longer-term numbers
you indicate.
Even so, yes, VG having spent something north of $600m to achieve its
limited results to date is not encouraging.
Entirely aside from that, I'm inclined to question VG as an investment
based on their dogged pursuit of large nitrous hybrids in the face of
still-after-ten-years unresolved technical uncertainties.
At least until I see uncut video of a full-duration flight burn with no
obvious evidence of serious roughness or instability. (Possibly they've
solved all that, mind, and I do wish them the best. But viable
full-performance propulsion hasn't been publicly demonstrated yet.)
Henry
On 4/6/2018 6:01 PM, William Claybaugh wrote:
Please read more carefully: *in the long run* 10 year treasury billswrote:
yield 7% *on average*.
A prudent investor buys when they are above average and holds to
maturity; I fondly remember the 17% t-bills of the late 1970’s....
Bill
On Fri, Apr 6, 2018 at 6:55 PM Paul Mueller <paul.mueller.iii@xxxxxxxxx
<mailto:paul.mueller.iii@xxxxxxxxx>> wrote:
I thought T-bills were about 4% and equities about 7% (and hardly
safe). Those banks and mortgage companies must be pretty dumb to
loan for 30 years at 4.5% (and have to deal with the occasional
foreclosure) if they could get 7% guaranteed from T-bills in only 10
years. Doesn't pass the sniff test to me. We are both talking APRs,
right?
On Fri, Apr 6, 2018 at 5:45 PM, William Claybaugh
<wclaybaugh2@xxxxxxxxx <mailto:wclaybaugh2@xxxxxxxxx>> wrote:
Paul:
In the long run, ten year treasury bonds average 7%. Equities
average 11-12%.
It is way past too late for the investors in VG to get there
money back; that is just math that you can do yourself: some
things are knowable in advance.
Bill
On Fri, Apr 6, 2018 at 3:25 PM Paul Mueller
<paul.mueller.iii@xxxxxxxxx <mailto:paul.mueller.iii@xxxxxxxxx
wrote:
I'm aware of the concept of time value of money. 7% is a
pretty good return, especially for "safe" investments (even
after interest rates finally went up recently after about a
decade of being paltry). I guess we should all buy houses
and get mortgages at 4.5% interest, rent them out, and then
take the rent money and invest it at 7%. Pretty sweet deal!
It took 7 years for Amazon to generate a profit, and it's
doing OK from what I hear. I'm not saying that VG will be
commercially successful, just saying it's still too early to
KNOW that it will fail.
Changing out fuel grains can be more of a hassle than
loading liquid propellants, but not necessarily. They will
probably need some flight-line infrastructure to do it,
similar to what the AF uses to load 2000-lb bombs (and
bigger) onto aircraft. I don't see that as a show-stopper
but it will probably take some time to develop a mature
operational process. Liquid propellants also have hassles of
their own...ground infrastructure or tanker trucks (limited
to smaller vehicles). Nitrous can be more of a hassle than
LOX, but at least it can be stored and transported without
loss. Once again, a good operational process may take some
time to develop.
On Fri, Apr 6, 2018 at 2:15 PM, Henry Spencer
<hspencer@xxxxxxxxxxxxx <mailto:hspencer@xxxxxxxxxxxxx>>
On Fri, 6 Apr 2018, Paul Mueller wrote:
I'm also not clear on what is inherently wrong with
their
concept...horizontal launch, reusable first stage
(WhiteKnight), suborbital
only, hybrid propulsion, nitrous oxide oxidizer,
feathering, horizontal
runway landing? Or a combination of these? Or
something else entirely?
I can't speak for Rand, but I would guess it's hybrid
propulsion, with a side order of nitrous oxide oxidizer.
:-) The rationale for the choice of propulsion system
was weak from the start, got weaker with a fatal nitrous
accident, got weaker still with all the fuel
difficulties they've been having, and definitely isn't
going to hold up well in sustained use.
A nitrous hybrid might perhaps, arguably, have been the
preferred way to win the X-Prize. But anybody's who's
got to load a new multi-ton fuel grain into the vehicle
for every flight is not planning for a serious flight
rate. To make money, you *want* a serious flight rate,
and that puts a *big* premium on a vehicle design whose
only consumables are liquids you pour into tanks.
There are some other issues with things like CG
management, but the sheer awkwardness of refueling is
probably at the top of the "why big hybrids are a bad
idea for reusables" list.
Henry