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Post by westonkevRS on Aug 13, 2015 9:25:00 GMT
Comrades, I know some lenders think that the MR is quite volatile recently, due to the new methodology based on actual trades rather than offers. This is probably true, but the shift was required because this is clearly a better way to set a price, i.e. on actual buy/sell activity. No point harxking back, the change is done. YR had to change because it was flawed, although ideally we'll get a working "stop loss" "stop buy" type functionality one day. However any short term trends in lender returns should not have been impacted by this, although I admit the return between MR and active ratesetting may have increased. I'm not allowed to speculate on fair rates of return or where they might go in the future (that's my prime/only limitation on what I can say on this forum), however I do think the recent near 7% returns as abnormal and not in line with long term trends ( www.ratesetter.com/lend/statistics ). The attached Share Magazine screenshot (sorry the article is too large to post, if you DM me your email I'll send it to you) on the impact of the IF ISA has a quote from Liberum " Loans are now returning an average of 5%..... This is partly because the volume of lending has risen dramatically and the expected surge of lenders in April could drive the returns dramatically lower". And that's just talking normal lenders, whereas institutional lenders (on the other large platforms) have already had quite an impact. But that's another debate. I do feel some lenders are upset that the recent high returns have dissipated, but this isn't due to changes in calculation or cash back, its part of the longer term trend for the industry and RateSetter as it matures and becomes lower risk. It was a few days in the sun, and not a new normal, IMHO. If you want the higher returns, you'll need to take a gamble elsewhere. . Kevin.
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gnasher
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Post by gnasher on Aug 13, 2015 9:52:53 GMT
Kev, you say "I know some lenders think that the MR is quite volatile recently".
Speaking for myself it is not MR volatility that is the marked change, it is the spread of rates that are matched during say a 24 hr period. This used to be a max of say .1% or .2% as I recall. It is now often up to 1%, and I believe we may have had 1.4%ish yesterday. MR orders being matched at low rates a few hours earlier than active lenders orders waiting higher in the queue. This has turned RS from safe, boring and predictable into more of a casino with active lenders getting up to say .5% on average more than the passive MR lenders. I could be wrong in my guestimates, but that is how it looks.
I guess it is still raining on Mull otherwise you would be out enjoying yourself! - now put that PC/tablet thingy away, ignore us for now and have a good holiday.
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jonbvn
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Post by jonbvn on Aug 13, 2015 11:00:28 GMT
Comrades, I know some lenders think that the MR is quite volatile recently, due to the new methodology based on actual trades rather than offers. This is probably true, but the shift was required because this is clearly a better way to set a price, i.e. on actual buy/sell activity. No point harxking back, the change is done. YR had to change because it was flawed, although ideally we'll get a working "stop loss" "stop buy" type functionality one day. However any short term trends in lender returns should not have been impacted by this, although I admit the return between MR and active ratesetting may have increased. I'm not allowed to speculate on fair rates of return or where they might go in the future (that's my prime/only limitation on what I can say on this forum), however I do think the recent near 7% returns as abnormal and not in line with long term trends ( www.ratesetter.com/lend/statistics ). The attached Share Magazine screenshot (sorry the article is too large to post, if you DM me your email I'll send it to you) on the impact of the IF ISA has a quote from Liberum " Loans are now returning an average of 5%..... This is partly because the volume of lending has risen dramatically and the expected surge of lenders in April could drive the returns dramatically lower". And that's just talking normal lenders, whereas institutional lenders (on the other large platforms) have already had quite an impact. But that's another debate. I do feel some lenders are upset that the recent high returns have dissipated, but this isn't due to changes in calculation or cash back, its part of the longer term trend for the industry and RateSetter as it matures and becomes lower risk. It was a few days in the sun, and not a new normal, IMHO. If you want the higher returns, you'll need to take a gamble elsewhere. . Kevin. We are investing for higher returns elsewhere. To imply that it is akin to gambling is beneath you
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Post by davee39 on Aug 13, 2015 11:27:00 GMT
Gamble seems to a perfectly valid term to describe a higher risk investment!
gamble
ˈɡamb(ə)l/
verb
1.
play games of chance for money; bet.
"he gambles on football"
synonyms: bet, wager, place a bet, lay a bet, stake money on something, back the horses, try one's luck on the horses; More
2.
take risky action in the hope of a desired result.
"he was gambling on the success of his satellite TV channel"
synonyms: take a chance, take a risk, take a leap in the dark, leave things to chance, speculate, venture, buy a pig in a poke; More
noun
1.
an act of gambling.
"Dad likes a bit of a gamble"
synonyms: bet, wager, speculation; More
2.
a risky action undertaken with the hope of success.
"we decided to take a gamble and offer him a place on our staff"
synonyms: risk, chance, hazard, speculation, venture, random shot, leap in the dark;
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Post by GSV3MIaC on Aug 13, 2015 14:04:01 GMT
MR is too volatile, just look at the graph .. 3 YR market being probably the craziest. I'm recycling interest at 6%, and matching every few days .. If I'd opted for MR I'd be well screwed. Bring bck YR as stop loss please! How about averaging MR over a week, of the last million quid, or something?
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c88dnf
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Post by c88dnf on Aug 13, 2015 16:17:58 GMT
Comrades, I know some lenders think that the MR is quite volatile recently, due to the new methodology based on actual trades rather than offers. This is probably true, but the shift was required because this is clearly a better way to set a price, i.e. on actual buy/sell activity. No point harxking back, the change is done. YR had to change because it was flawed, although ideally we'll get a working "stop loss" "stop buy" type functionality one day. However any short term trends in lender returns should not have been impacted by this, although I admit the return between MR and active ratesetting may have increased. Kevin As a lender I appreciate Ratesetter's openness and your personal contributions to this forum. It's one of the things that made me heavily committed to RS emotionally and financially. That commitment is now greatly reduced. The cashback offer caused rates to crash: of itself that was entirely predictable and no great concern. It's happened before and rates have recovered quickly. This time that hasn't happened, partly because RS' sales have not increased as a result of the cashback initiative. Quite the reverse: RS' sales over past months have been at best flat, arguably declining slightly, with two good weeks over the cashback period. In addition, the change to the YR/MR rates' operation have - IMHO - made an utter mess of the marketplace, greatly increasing both intra-day and inter-day volatility and depressing MR. RS used to have a reputation for being "boring": a very good thing in my view of financial matters. Steady and boring makes me happy. Today's volatile and unpredictable RS does not. So, I am taking the only logical course and moving my money elsewhere. Substantial amounts of it. Still within the P2P world and still with (again IMHO) a relatively cautious approach. The funny thing is, I'm getting better rates than at RS, so comments about declining rates within the industry just don't ring true. Ratesetter still has a place in my portfolio, but my inherent trust in RS' way of doing business and instinct to reinvest in RS as a matter of routine have gone. It's such a shame.
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Post by closetotheedge on Aug 13, 2015 17:23:06 GMT
Thank you westonkev for your views. As ever I appreciate your frank approach to the forum.
Having looked around I am still pro RS. I am getting 6%+ by careful recycling at present and I still think this a fair return for the risk. I would rather stick to a platform with a track record and sizeable provision fund as getting my money back is the priority not getting the very highest rate in the short term.
I would like a return to steady rates rather than the 1%+ spread over a 24 hour period but this I think will happen over time.
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Post by westonkevRS on Aug 13, 2015 17:35:07 GMT
If you want the higher returns, you'll need to take a gamble elsewhere. We are investing for higher returns elsewhere. To imply that it is akin to gambling is beneath you Fair enough, overly strong word, although you could consider a lot of "investments" a gamble depending on your definition (including Rate Setter). I suppose I'm talking about perceived rates of 10% plus, as this level of return cannot be risk free.
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Post by westonkevRS on Aug 13, 2015 17:39:39 GMT
I would like a return to steady rates rather than the 1%+ spread over a 24 hour period but this I think will happen over time. You and gnasher make a good point about volatility, i.e. that the lender return intra day whether MR or otherwise is an interesting point. And of course this can be measured statistically which I think I'll organise on my return. I'll post the results here, although no promises on timescales as it'll be a side project. That said, forum members could download the data themselves if they have time and the excel/statistical knowledge. @ westonkevRS
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Post by contangoandcash on Aug 13, 2015 18:34:08 GMT
As someone who trades for a living, the word gamble is absolutely appropriate, and should apply to virtually all investments that contain a probablistic element (can't think of any right now that don't tbh). The common issue with that word is that it is associated with unquantified risk taking... which is more a problem for the people taking those risks rather than the concept.
As you have said yourself Kev, platform risk is perhaps the elephant in the room. This is the risk as lenders that we should all be trying to yield above by the largest margin...given we also have to outwit inflation, fees and tax, the real yield is potentially far lower than the rates we're getting. Hopefully the risk is low, but it would seem to me to be something of a fat tail - something unexpected occurs and there's a run on funds/liquidity, everyone jumps ship and suddenly the business isn't viable... that's the gamble.
With that in mind, I quite like rates being higher! Though I know you make a compelling case that lower rates bends the curve back downwards risk wise, it would seem to me that the platform longevity could need to rise steeply (exponentially? can't be bothered to spend time working it out or thinking too deeply about it) the lower the rates are to make this worthwhile.. I definitely think the ISA money will push things right to the brink of breakeven (if indeed we are above it right now).
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jonbvn
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Post by jonbvn on Aug 14, 2015 8:50:00 GMT
As someone who trades for a living, the word gamble is absolutely appropriate, and should apply to virtually all investments that contain a probablistic element (can't think of any right now that don't tbh). The common issue with that word is that it is associated with unquantified risk taking... which is more a problem for the people taking those risks rather than the concept. I disagree. Gambling to me conjures up images of casinos and slot machines and the fact that the "house" never loses.
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Post by yorkshireman on Aug 14, 2015 9:10:07 GMT
Gambling to me conjures up images of casinos and slot machines and the fact that the "house" never loses. An apposite description of the financial sector as a whole if you allow the thieving barstewards to get away with it.
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am
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Post by am on Aug 14, 2015 10:11:22 GMT
Gambling to me conjures up images of casinos and slot machines and the fact that the "house" never loses. An apposite description of the financial sector as a whole if you allow the thieving barstewards to get away with it. One possible distinction is that the expected mean return on investment is positive, and the expected mean return on gambling is negative.
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Post by contangoandcash on Aug 14, 2015 15:04:28 GMT
"Conjures up images" is adding your own layer of interpretation on it though, that's what 'gambling' is sold as to society in general. 'Take risk in the search for reward' is the definition that is important here, that is what you are doing when you invest money anywhere - including the casino and RS. The fact that it is EV- at the casino is not really important definition wise, that applies on an individual investment/gamble level, where people are making a poor choice taking risks at a casino in the hope for reward. But it is no different to investing in shares, RS, sports, insurance etc etc. There are people in the city, trading, doing 99% of what goes on in bookmakers every day, the difference is, they make more effort to quantify their expected value and only take the gambles that are EV+ (in their opinion). All of them are gambles by the dictionary definition.
Our gamble with RS is platform failure. Be it tomorrow (miniscule chance) or the next economic cycle (higher chance, but still hopefully reasonably small!).
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wapping35
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Post by wapping35 on Aug 20, 2015 7:16:38 GMT
I see the MR is down to 5.7% today.
And yet my money placed at 6.1% on Monday & Tuesday has all been matched at just before 7am this morning. (3-4 hours after that 5.7% MR money got matched).
Yesterdays YR 6.1% is £36k from the front and todays 6.1% is £56k from the front. So for today I should get same day matching as the MR and achieve 0.4% more.
I did perform a analysis of the volatility of the MR using the RS down load data comparing the MR's August 1-18 (new MR) with June 1-18 (old) and it turned out the standard deviation was x2.25 higher under the new MR process. (New MR started June 24th)
Effectively whilst we always had the MR rising gradually during the month to peak at between 20-25th of the month, we now have a "New MR" trend in which rates fall (by between 0.8%-0.4%) during each week reaching a floor Wednesday or Thursday and then rising again to peak on Sunday.
With the new MR system I estimate I am out performing the "new" MR by at least 0.3% (in the 5yr market) and still getting matched within 2-3 days and often (Thursday-Friday) the same day.
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