Where to park some money for perhaps a year
Discussion
Behemoth said:
Yes this is true, Nick. And it's true for all shares, funds, currencies, commodities, assets in free fall. You can only ever sell stuff if there's a buyer.
These things aren't binary! P2P would exhibit a lot more price volatility than larger / deeper markets such as the ones you mention if bearish sentiment were to catch hold.DonkeyApple said:
FC is a prime example though. They do use algo's, they carry no counter party risk and the bidding process makes it impossible to price the risk appropriately. Users only think it's a fair price because bank rates are so low. And the liquidity is only there because it's a bouyant market not because the loans are any good.
The key with P2P is that you are risking 100% of your capital and you are responsible for collecting debts and I very much doubt a retail individual could bring to bear the weight of a bank in collecting on defaulters. All of this amounts to my key point that for what is being done a 7% return is far too low.
I totally disagree that it's impossible to price risk. I do it on every loan I make and on the platform as a whole. Liquidity is entirely price dependant. I don't collect on defaulters, the platform does. And they do it very well. Of course the platform uses algos to categorise and segment. Virtually all financial businesses do. But critically, I see the original loans transparently and individually and there's a great deal of information available so you can sort & divest as required. Without these tools, I wouldn't be investing. I'm aware of the counter party risk and I'm happy with it.The key with P2P is that you are risking 100% of your capital and you are responsible for collecting debts and I very much doubt a retail individual could bring to bear the weight of a bank in collecting on defaulters. All of this amounts to my key point that for what is being done a 7% return is far too low.
Behemoth said:
DonkeyApple said:
FC is a prime example though. They do use algo's, they carry no counter party risk and the bidding process makes it impossible to price the risk appropriately. Users only think it's a fair price because bank rates are so low. And the liquidity is only there because it's a bouyant market not because the loans are any good.
The key with P2P is that you are risking 100% of your capital and you are responsible for collecting debts and I very much doubt a retail individual could bring to bear the weight of a bank in collecting on defaulters. All of this amounts to my key point that for what is being done a 7% return is far too low.
I totally disagree that it's impossible to price risk. I do it on every loan I make and on the platform as a whole. Liquidity is entirely price dependant. I don't collect on defaulters, the platform does. And they do it very well. Of course the platform uses algos to categorise and segment. Virtually all financial businesses do. But critically, I see the original loans transparently and individually and there's a great deal of information available so you can sort & divest as required. Without these tools, I wouldn't be investing. I'm aware of the counter party risk and I'm happy with it.The key with P2P is that you are risking 100% of your capital and you are responsible for collecting debts and I very much doubt a retail individual could bring to bear the weight of a bank in collecting on defaulters. All of this amounts to my key point that for what is being done a 7% return is far too low.
Over the coming years these platforms will be coming under more and more scrutiny as a result of this illusion of true data etc.
Behemoth said:
I totally disagree that it's impossible to price risk. I do it on every loan I make and on the platform as a whole. Liquidity is entirely price dependant. I don't collect on defaulters, the platform does. And they do it very well. Of course the platform uses algos to categorise and segment. Virtually all financial businesses do. But critically, I see the original loans transparently and individually and there's a great deal of information available so you can sort & divest as required. Without these tools, I wouldn't be investing. I'm aware of the counter party risk and I'm happy with it.
What rates are these lenders actually paying?DonkeyApple said:
But you do keep avoiding the key element that you are risking 100% for just 7% and that you simply are not carrying out anywhere near the due diligence that a lender would, in fact worse, you are accepting at face value the information entered into a relatively simplistic form that isn't wholly verified by the facilitator.
No, I am not "avoiding" anything at all, DonkeyApple. I fully understand that risk and am completely content to carry it. As are the institutional investors that pick up the same loan book outside the retail platform. Who knows, maybe you're an investor too, but totally unaware as it's wrapped up for you in some other traditional investment instrument 
I appreciate others may not be aware of the risks but thanks for your concern, I am. I certainly don't accept the info presented at face value and as already mentioned, I do diligence checks until I'm satisfied.
Behemoth said:
No, I am not "avoiding" anything at all, DonkeyApple. I fully understand that risk and am completely content to carry it. As are the institutional investors that pick up the same loan book outside the retail platform.
Serious institutions investors do proper due diligence on the loans and aren't accepting a 7% return for first loss risk.Behemoth said:
Who knows, maybe you're an investor too, but totally unaware as it's wrapped up for you in some other traditional investment instrument
I appreciate others may not be aware of the risks but thanks for your concern, I am. I certainly don't accept the info presented at face value and as already mentioned, I do diligence checks until I'm satisfied.
What interest rates are the underlying investors paying?I appreciate others may not be aware of the risks but thanks for your concern, I am. I certainly don't accept the info presented at face value and as already mentioned, I do diligence checks until I'm satisfied.
Behemoth said:
Great. Is that available to retail investors? Where do I sign up? 
No, but that's where the real risk prices... Behemoth said:
I've seen a fair few defaults recovered with senior status but, yes, it does seem to vary.
If you're seeing 'a fair few defaults' then the stuff your investing in clearly isn't 7% risk debt - what recovery rates?Edited by sidicks on Tuesday 8th November 20:08
Behemoth said:
Sorry sidikicks, I don't have the time fact find for you & I don't represent P2P. iirc recovery rates are updated monthly. That & copious other publicly available info on all this are at the usual interweb sources to those interested
Fair enough. You suggested that the 7% yield was reasonable (given the risk), hence I assumed this was something you'd looked into. Apologies if I misunderstood.Gassing Station | Finance | Top of Page | What's New | My Stuff