webwiz
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Post by webwiz on Dec 7, 2015 17:15:01 GMT
Some dire warnings from other platforms.
ABL introduced a SM of such intricate complexity that I gave up investing with them.
FS introduced a SM of such idiocy that I gave up investing with them.
AC had a wiz idea - an account for holding cash pending investment that paid 3% interest. Consequence it got submerged in a wall of money gushing in and out and they were unable to explain how they would deal with a default in one of the loans that supported the 3%. So I gave up investing with them.
SS had another wiz idea to make the share out of oversubscribed loans fairer - a pre-funding system that worked well for a few nano seconds until everyone started pre-funding by rapidly increasing multiples of what they actually wanted. However I continue to invest with them in the hope that they can fix it. I have told them how.
MT my advice is keep it simple and thoroughly test any contemplated "improvement". By "test" I don't mean only the code, I mean the behaviour of users.
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Post by bracknellboy on Dec 7, 2015 17:35:40 GMT
... MT my advice is keep it simple and thoroughly test any contemplated "improvement". By "test" I don't mean only the code, I mean the behaviour of users. Which of course 95% of the time can be adequately done by taking a few relatively sane and not even necessarily particularly smart individuals, putting themselves in the position and with the motivations of users devoiding themselves of any thoughts of the platform's internal objectives and motivations, and simply role playing/brain storming. No code and no code investment needed to identify and chuck out most of the 'bad design' upfront.
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ablender
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Post by ablender on Dec 7, 2015 19:17:34 GMT
... ABL introduced a SM of such intricate complexity that I gave up investing with them. AC had a wiz idea - an account for holding cash pending investment that paid 3% interest. Consequence it got submerged in a wall of money gushing in and out and they were unable to explain how they would deal with a default in one of the loans that supported the 3%. So I gave up investing with them. SS had another wiz idea to make the share out of oversubscribed loans fairer - a pre-funding system that worked well for a few nano seconds until everyone started pre-funding by rapidly increasing multiples of what they actually wanted. However I continue to invest with them in the hope that they can fix it. I have told them how. ... Perhaps a bit unfair. ABL's secondary market is probably the closest to a real market of all the P2P platforms. The analytics on amortizing loans are completely screwed up, however, which is fairly unforgivable given how easy that is to code and that has caused issues. Other than that it only requires a basic understanding of the price-yield relationship and time value of money. If you don't understand those then you should at least question why you are investing in fixed income loans.AC's QAA is probably not actually investing in anything, except for milliseconds during the loan draw-down phase. What the QAA is really doing is saving AC around 12-24% per annum in fees. You are simply providing them with dirt cheap funding and they give you back a rather small 3.75% in return. So lenders are getting a terrible deal but what happens in default is probably not actually relevant. SS's pre-funding is not a bad idea at all. The problem is because of the massive supply-demand imbalance (caused by a under-appreciation of the risks of SS's loan portfolio), lenders believe they can overbid in large multiples with impunity. That will change once an SS loan goes wrong and lenders realize the loans are not as riskless as they thought: the supply-demand imbalance will probably flip overnight, liquidity will vanish and lenders will fail on purchases and/or not be able to exit concentrated positions. That will be simply be fun to watch. The reason why I invest in p2p is that, to my understanding, p2p is meant for ordinary people to lend directly to borrowers. There is no need to be able to understand a lot of technicalities. Other platforms have simplified this, why not ABL? Obviously the current problem with numbers not showing what they are intended to show does not help someone to understand. With this I do not mean that someone should be involved in p2p without trying to understand the risk involved.
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webwiz
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Post by webwiz on Dec 7, 2015 20:11:39 GMT
Perhaps a bit unfair. ABL's secondary market is probably the closest to a real market of all the P2P platforms. The analytics on amortizing loans are completely screwed up, however, which is fairly unforgivable given how easy that is to code and that has caused issues. Other than that it only requires a basic understanding of the price-yield relationship and time value of money. If you don't understand those then you should at least question why you are investing in fixed income loans.
Perhaps a bit condescending. Just look at the forum and you will see a lot of confusion in the ranks. AC's QAA is probably not actually investing in anything, except for milliseconds during the loan draw-down phase. What the QAA is really doing is saving AC around 12-24% per annum in fees. You are simply providing them with dirt cheap funding and they give you back a rather small 3.75% in return. So lenders are getting a terrible deal but what happens in default is probably not actually relevant.
This is not my understanding, which is that the QAA is supported by a portfolio of loans, and if one of the loans defaults and AC cannot afford (or chooses not to) make it up themselves nobody knows who will take the hit. SS's pre-funding is not a bad idea at all. The problem is because of the massive supply-demand imbalance (caused by a under-appreciation of the risks of SS's loan portfolio), lenders believe they can overbid in large multiples with impunity. That will change once an SS loan goes wrong and lenders realize the loans are not as riskless as they thought: the supply-demand imbalance will probably flip overnight, liquidity will vanish and lenders will fail on purchases and/or not be able to exit concentrated positions. That will be simply be fun to watch.
You may find it fun to watch other people suffer financially, not everyone will. The point is that these "improvements" were made in response to requests and complaints from users, but the extra complexity made for at least as many problems as were solved. They were well intentioned and in principle good ideas which did not turn out so good.
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webwiz
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Post by webwiz on Dec 8, 2015 8:50:02 GMT
ablender . Regarding ABL. As webwiz says I'm being a bit condescending so I'll apologize. However, you're being somewhat inconsistent when you say that "There is no need to be able to understand a lot of technicalities" and then say "I do not mean that someone should be involved in p2p without trying to understand the risk involved". Well, understanding the technicalities of the cashflow structure is one of the risks involved. Two otherwise identical loans, with same yield or IRR, but varying cashflows can have very different credit risk profiles. Spotting that the yield of an amortizing loan is way below the coupon rate at a price of par should be something that instantly triggers caution. You may want to believe that "p2p is meant for ordinary people" (and the platforms clearly want you to believe that!) but that doesn't mean it's true. It still requires some knowledge but luckily it's not quantum field theory. webwiz . Regarding AC's QAA. AC are less than transparent on the loan portfolio it holds and what happens in a default because I suspect the number of loans being held is very small. They use the QAA to underwrite smaller loans and the fees from that can pay for the 3.75% coupon of the QAA without holding any loans at all. Regarding watching people suffer financially: It's very clear from polls that many forumites have radically more risk appetite than I do given their willingness to run very large concentrations of positions on specific platforms or even individual loans. I have to conclude therefore that they are all so wealthy that the risk of loss is irrelevant to them and they would not suffer if things went wrong. Some even say this is "play money". I wish I was so fortunate. Regarding secondary markets more generally, I think that a simple market (trading at par say) is often a good starting point. However, I reject emphatically the idea that anything other than such a model is an error. We simply don't know what is the right model for an SM for a specific platform since it depends on the product range. Trying to sort of other issues (such as a supply-demand imbalance) via changing the SM is not the correct approach. What I want is a choice of different types of SM, the best SM for that platform, not to be forced to have a simple SM. It's somewhat similar to the trend for provision funds. Most lenders seem to love them because it makes everything so much simpler if they can ignore the risk of default. But I see them as tax on my returns, easily replicated at the individual lender level, completely ineffective in a systemic stress scenario and increasing platform risk. Why should we all have to accept the lowest common denominator? I suspect that we might be inching towards a zone of agreement. But I detect an degree of inconsistency in your views. You say that "understanding the technicalities" is important but you also say "AC are less than transparent on the loan portfolio it holds" and of ABL "The analytics on amortizing loans are completely screwed up,". Lenders' inability to understand the technicalities is a direct result of botched "improvements". You may be right that the people who are taking the most risk must be the richest as I have no way of knowing. But then neither do you. I did not say that "the idea that anything other than such a model is an error", but I am sure that if ABL and FS had known in advance the problems that would occur then they would have done things differently. Just because something seems like a good idea does not make it true (think "Get rid of Saddam and Gaddafi"). Indeed I welcomed both AC's QAA and FS's SM when launched (but not ABL's SM) precisely because they seemed like a good idea at the time, but both quickly ran into problems due to lenders' unforeseen, but completely logical, behaviour.
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Post by Deleted on Dec 8, 2015 9:06:31 GMT
After a lifetime of trying to "manage" people as it is termed in the UK and alternatively letting the people who work for me run the business I can tell you that
1) Humans are very very bright
2) Humans with a lot of time on their hands will work out how to "game" any system, it is just about, when not if.
3) However clever a software writer is, a human with a lot of time on their hands will beat them
The various attempts at a secondary market provide further evidence in support of my contention.
I also spent a fair bit of time putting in computer systems, I quickly discovered that people away from the coal face by more than one inch knew nothing/zilch/nada/niente. Despite constant evidence to this affect people whole feet away kept "knowing" they were experts, they arn't.
KISS is the only answer unless you want to do the sneekie stuff that some of the portals like to do, no names, of course but they may have been mentioned in this thread. Sneekie stuff is where you "gull" lenders into taking lower rates than they want.
I could provide a list of where the gulling has taken place, so could most of us.
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Post by Financial Thing on Dec 8, 2015 21:58:20 GMT
... ABL introduced a SM of such intricate complexity that I gave up investing with them. AC had a wiz idea - an account for holding cash pending investment that paid 3% interest. Consequence it got submerged in a wall of money gushing in and out and they were unable to explain how they would deal with a default in one of the loans that supported the 3%. So I gave up investing with them. SS had another wiz idea to make the share out of oversubscribed loans fairer - a pre-funding system that worked well for a few nano seconds until everyone started pre-funding by rapidly increasing multiples of what they actually wanted. However I continue to invest with them in the hope that they can fix it. I have told them how. ... Perhaps a bit unfair. ABL's secondary market is probably the closest to a real market of all the P2P platforms. The analytics on amortizing loans are completely screwed up, however, which is fairly unforgivable given how easy that is to code and that has caused issues. Other than that it only requires a basic understanding of the price-yield relationship and time value of money. If you don't understand those then you should at least question why you are investing in fixed income loans. AC's QAA is probably not actually investing in anything, except for milliseconds during the loan draw-down phase. What the QAA is really doing is saving AC around 12-24% per annum in fees. You are simply providing them with dirt cheap funding and they give you back a rather small 3.75% in return. So lenders are getting a terrible deal but what happens in default is probably not actually relevant. SS's pre-funding is not a bad idea at all. The problem is because of the massive supply-demand imbalance (caused by a under-appreciation of the risks of SS's loan portfolio), lenders believe they can overbid in large multiples with impunity. That will change once an SS loan goes wrong and lenders realize the loans are not as riskless as they thought: the supply-demand imbalance will probably flip overnight, liquidity will vanish and lenders will fail on purchases and/or not be able to exit concentrated positions. That will be simply be fun to watch. And the search for the perfect (non-existent) p2p platform continues...
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registerme
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Post by registerme on Dec 8, 2015 22:50:21 GMT
Searching for a perfect platform is as irrational as searching for return with no risk.
(in reply to the thread, not optionstrader specificly).
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