Does this mean more money for P2P?

bg bang on, Brexit, Socialism and Russia is moving money out of the UK.

Well, I'm currently doing my annual investments review - deciding where to shift my money to, how to use next year's ISAs, etc. And I have to say its the hardest one of these I've done: not because of my personal circumstances, but because of the uncertainty and threats out there.

Some may fear a socialist government: actually, that's near the bottom of the my list. Far worse is the fear of an unstable government that is unable to take any action at all, in the midst of a botched brexit (was there ever going to be any other kind?), looming trade wars and international instability. Inflation? Currency effects?

Just where, exactly, are we supposed to stash our cash? I'm not greedy: protecting my capital (in real terms) is all I seek.

However, back to the question - and the focus of this forum. Is P2P the place to keep your money safe in a storm? IMHO the answer to that one is a definite "no". That's not to say I will pull out completely, as I think P2P has a place in a diversified portfolio, having perhaps slightly different risk factors from the alternatives. But if the brown stuff hits the fan, then consumers, SMEs and property developers are all likely to be badly hit and there will be losses. 70% LTV on secured property doesn't look so smart when property values are falling and there is a half-finished building on the site that has been abandoned by a bankrupt borrower!

Holding cash may mean a guaranteed loss (in real terms) of 1-2% pa, but there are times when that's the best on offer!

UK investors tend toward being somewhat income obsessed and "carry monkeys" rather than focussing on the growth or value of the underlying companies and looking at total returns. Hence the popularity of HYP strategies, equity income funds and certain ITs. Many UK companies know this and as a result keep paying out dividends that simply are not justified by their free cashflow. The end result after a decade or so is that FTSE dividend cover ratios are starting to look pretty weak so the stocks underperform.

For example if you take the FTSE350 LIX (low yield) and FTSE350 HIX (high yield), over the past 15 years or so, you'll find that in capital terms the FTSE350 LIX has outperformed by around more than 4%/annum compared to a current yield difference of around 2.5%. So that's around 1.5%/annum underperformance by the FTSE350 HIX.

Essentially, I see high dividend stocks as often sub-optimal as an investment strategy. It's generally far more effective to own a stock which pays no dividend but where they can reinvest 100% of the free cashflow back into the business because this is being reinvested at book value. To generate income you then simply sell a proportion of the portfolio at a multiple of book value. Obviously some companies struggle to find anything to invest in to generate higher net worth for the company and perhaps dividends are then the best policy. But why would I want to own that sort of company unless there are some big barriers to entry.

Well, that's a brave but ultimately unsuccessful attempt at blowing your own horn, there, IMHO!

Yes I do know about diversifying, thank you.

The point was - and is - that P2P is far from being a safe place in a storm, and therefore (to answer your opening question) I don't think that troubles in the equity markets are going to lead to much of an influx into P2P. Or, at least, they shouldn't.

there will be anarchy before that