james
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Post by james on Nov 3, 2015 10:23:38 GMT
The SavingStream model works at the moment because there is far more demand from lenders than supply of loans and because many lenders are selling to diversify. I don't expect either of those factors to be permanent.
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webwiz
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Post by webwiz on Nov 3, 2015 10:24:21 GMT
Maybe what we need is a tertiary market (TM). The SM would be simple like SS but in case there is ever a lack of liquidity on the SM there is a route for sellers to offer at below par on the TM - which could be ignored by RR and anyone else not interested. However unless there was a cut to MT on the TM it would not be fair to expect them to provide it.
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huxs
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Post by huxs on Nov 3, 2015 10:31:30 GMT
I vote for keeping it simple, the SS model works lets see how it works on MT and only if it fails should we think about tinkering with it.
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james
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Post by james on Nov 3, 2015 10:36:19 GMT
I vote for keeping it simple, the SS model works lets see how it works on MT and only if it fails should we think about tinkering with it. What mechanism do you think can identify money that doesn't end up on the platform at all because of the way the secondary market? That's currently where the money that I'd put into SavingStream is: somewhere else. Not solely because of the way their secondary market works but it's a factor. Or how do you measure the loans that people don't put up for sale or don't buy because they don't think that par correctly represents the value to them? It doesn't have to be hard to use a more flexible market. If you want to sell at par or buy at par just go ahead and do it if you can fund the supply or demand when people are given the choice. You can usually find both offers to buy and offers to sell some loans on the Ablrate market at par or so close that it makes no difference. Same over at Bondora.
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ablender
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Post by ablender on Nov 3, 2015 11:04:47 GMT
Maybe what we need is a tertiary market (TM). The SM would be simple like SS but in case there is ever a lack of liquidity on the SM there is a route for sellers to offer at below par on the TM - which could be ignored by RR and anyone else not interested. However unless there was a cut to MT on the TM it would not be fair to expect them to provide it. A TM might end up a bit like a black market.
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rogerbu
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Post by rogerbu on Nov 3, 2015 11:26:00 GMT
Please, please, keep it simple!!!!
We are talking about mostly 6 month loans here.
Partial or full holding sales Buy/sell at par No fees Seller interest to day of sale. Buyer interest from day of sale+1
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Post by ogwellian on Nov 3, 2015 12:22:01 GMT
Another thing which I do not understand. What is wrong with flippers? (BTW I love dolphins) I love a bit of SM flipping. When PBL 59-61 had cashback added, I topsliced my diversied portfolio and bought loads. Since then I've sold the bulk and am fully diversified again. Only 0.5%, but every little helps!!
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Post by mrclondon on Nov 3, 2015 12:27:40 GMT
AC have put a huge amount of effort into rewriting their website so that SM discounts are catered for (and premiums if at some point in the future there is a business need). However, very few people have taken advantage of the ability to sell at a discount - I have buy orders at 1% discount on the 5 trade loans and only very rarely am I picking anything up. FK have a pitiful volume of SM trades as almost everything is listed at a premium. I have had autobuy orders on a number of loans to buy at par for months, not a sniff. There is no justifcation based on the financial performance of those companies to justify a premium on their debt yield. FE have a pitiful volume of SM trades as almost everything is listed at a premium. There is no justifcation based on the financial performance of those companies to justify a premium on their debt yield. TC have to allow premiums on the SM as the loan parts can include substantial accrued interest. But there is almost no liquidy for loan parts listed at a premium. SS has good liquidity in almost all loans which trade at par. My thinking on this subject has changed over the last 12 months. I did argue strongly for discounts at AC (but no premiums) as a mechanism to allow trade in distressed loans. However, AC have concluded (I suspect for regulatory reasons) that allowing trade in loans that the security can not be valued (see my post on the Ipswich, Epping & Kent thread on the AC board) is not sensible. The mildly distressed loans that AC have enabled trading in can all be argued to have a fair value of par. Even for those that argue that premiums are a good thing, its hard to see how the underlying security can appreciate sufficiently (over and above what could reasonably have been anticipated at the start of the loan and hence incorporated into the yield being offered) after a 6 or 12 month loan term to justify a premium on the debt yield. At this stage of the p2p sector's life, and bearing in mind the need for simplified "accounts" (think AC or W&Co ) for ISAs, my current feeling is that SM trading should be conducted at par.
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star dust
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Post by star dust on Nov 3, 2015 12:33:29 GMT
I wouldn't worry too much, there may well be others, but on this thread we seem to have a lone dissenter, and the proposition as Ed posted it I'm sure would keep most of us happy.
If you won't invest in a six/12 month secured loan at 12% I think you don't really like the proposition in the first place! There are a number of platforms I don't invest in because I don't like the offering, but others do, there isn't going to be one platform that pleases everyone. If a platform has become so illiquid you have to sell at a discount, I think we will all be in a different ball game and the whole proposition may need re-thinking. But, for the moment at least, I think MT is definitely on the right track.
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Post by manxfinch on Nov 3, 2015 17:44:07 GMT
Hi All - been lurking for ages but this thread has prompted me to make my very first post on the forum and it is to support the "keep it simple" proposition.
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ablender
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Post by ablender on Nov 3, 2015 18:50:25 GMT
Hi manxfinch, welcome.
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james
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Post by james on Nov 3, 2015 22:27:07 GMT
Even for those that argue that premiums are a good thing, its hard to see how the underlying security can appreciate sufficiently (over and above what could reasonably have been anticipated at the start of the loan and hence incorporated into the yield being offered) after a 6 or 12 month loan term to justify a premium on the debt yield. These are loans, not equity investments. The value doesn't go up and down just the value of the security goes up and down. Though if it drops to an unfavourable LTV that would matter. Interest rate changes in the general market and different people's view of the value and different tax situations cause different value opinions. Or just a desire to sell when there's less demand from buyers, so a premium can help buy increasing the expected return (XIRR). In the most mature P2P secondary market I know of, that at Bondora, the majority of trades happen at premiums or discounts, only 14.9% at par. For comparison 18.3% were 6%+ from when that became possible. I've traded at a wide range of premiums and discounts, from +40% (with XIRR above 80% for the buyers) to -39%. Those prices at the edge were all for impaired loans. More usual are premiums or discounts in the single digits, enough to shift the return a few percent up or down. They publish their trade history so anyone who is curious can do an analysis of the trades. 78,000 offers resulted in no sale, either being cancelled or timing out after a month. Cancelling to try another premium or discount is normal. For the 210,220 successful trades until 28 October 2015: 22,441 were at a discount of 6% or more with mean discount 21%, of these: -90 to -100 : 369 probably transfers to the same person because of the selling pricing in this market which is based on sale price -80 to -89 : 11 -70 to -79 : 69 -60 to -69 : 266 -50 to -59 : 935 -40 to -49 : 1611 -30 to -39 : 2401 -20 to -29 : 4235 -10 to -19 : 9099 (5731 7 or more days late at start, 1479 not late at all at start) -6 to -9 : 3447 (2060 7 or more days late at start, 327 not late at all at start) 19,703 were at -1 to -5% (8613 7 or more days late at start, 7026 not late at all) 31,273 were at par (6783 7 or more days late at start, 20234 not late at all) 114,952 were at +1 to +5% (8628 7 or more days late at start, 98221 not late at all) of which 3214 at +1, 14316 at +2, 40926 at +3, 17930 at +4, 63850 at +5, the former maximum premium From 24 July 2014 it became possible to use premiums above 5%. 21851 of the 119248 deals from that time used a 6% or higher premium, 18.3%. +6 to +9 : 12642 (665 7 or more days late, 11518 not late at all) +10 to +19: 7778 +20 to +29: 998 +30 to +40: 453 (maximum permitted is +40%) With 6% and higher premiums more popular with buyers and sellers than dealing at par in this very high volume market it doesn't seem useful to think of par as being a correct price when buyers and sellers are actually given a choice. It's just what some platforms force people to use, while a couple, Zopa and RateSetter, force discounts or at best par on sellers.
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david42
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Post by david42 on Nov 4, 2015 0:11:58 GMT
I used to favour the ability to sell at a discount or premium. Logic would suggest that every loan is different and it should have different value, so an efficient market should allow the price of a loan to change.
But I have realised that I cannot calculate the value accurately, assessing the value takes time and effort, and the existence of varying prices introduces a lot more room for error in choosing my price.
As a result I now focus on the easier platforms and I find that over 50% of my P2P money is in Saving Stream because of the simple fixed rate offering for buying and selling. I hope that MoneyThing will decide to be an easy platform.
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ablender
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Post by ablender on Nov 4, 2015 5:12:30 GMT
james: If I understand your argument properly, what you are saying is founded on the lender being in a position to continuously value the security. I do not think that I am in that position so I will still favour a simpler par SM.
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james
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Post by james on Nov 4, 2015 9:25:31 GMT
james: If I understand your argument properly, what you are saying is founded on the lender being in a position to continuously value the security. I do not think that I am in that position so I will still favour a simpler par SM. I'm not sure which of the possible meanings of security you're using so I'll do a two case reply. Case 1: the security for the loan, meaning the building with planning permission or whatever else that will be seized and sold if there is a default. I don't expect anything other than substantial issues like refused planning permission to make much price difference here unless there is a default. Case 2: a security meaning the loan contract. There's no need to continually value this, just if selling or buying to pick a price that seems fair, then if a buyer decide whether to accept that. Or decide to offer to buy at a set price if the market allows buyers to place such offers, then a prospective seller can decide to accept that price or not. If the secondary market has offers to buy then someone who wants to buy at par can make such an offer if they happen not to find one in the list of offers to sell. Ablrate is the only P2P platform I know at present that has both offers to sell and offers to buy and I've made use of both types and transacted with both types. While you may not think you can do it the vast majority of transactions at Bondora that aren't at par show that lots of buyers and sellers are comfortable enough doing it.
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