I want to invest in very short term loans and have set autoinvest to do this. In the last two days only one loan has been added to my portfolio and my cash is all sitting doing nothing.
Meanwhile the secondary market has loads of recent short term loans at a premium, which makes it pointless to buy them (do the math). So it looks to me like some people are grabbing all the short term loans and immediately selling them at a premium on the secondary market (to people who then make no money on them or even a loss). Is this really any way to run things?
Please toms viventor stop this madness and disallow secondary market premiums. They are serving no useful purpose and are preventing ordinary investors from using the platform as you would wish. At the very least do not allow premiums on loans with less than a year left to run.
The problem could be eased (perhaps even solved) now by forbidding secondary market premiums, as several other platforms have done to avoid shortages of loans being made worse (or even being created) by this kind of activity. Surely the purpose of the secondary market is to provide liquidity. Only discounts are required to do that. For very short term loans premiums are particularly senseless.
An update on this 2 days later is that the autoinvest has now managed to invest all of the 2000 euros, so perhaps the problem is not so bad as I initially thought. I still stand by my other comments though.
You are pointing out a real problem, but your solution is not going to solve it. You seem to assume that secondary market premiums somehow make people buy more primary loans. But I don't see that relationship. The fact that all these loans are listed on the secondary market is because they don't sell, so the buyers of the primary loans have their money invested already.
Secondary market selling with a premium is a helpful function of P2P platforms. If someone owns a lot of loans, he basically owns all the future payments of those loans. Other parties may want to buy the loans, even with a premium, if market conditions change (many things can change, both internally and externally). The loan seller is compensated for having the right loans at the right time. Selling loans without premium does not make sense, just as buying loans with too much premium does not make sense.
swift , the connection between the premiums on the secondary market and the shortage of loans on the primary market is an extremely simple one: by buying loans on the primary market and selling them on the secondary market for more you can make an immediate profit. People want to make a profit (obviously!) so they buy much more on the primary market than they would otherwise, solely in order to sell on the secondary market for more money. This extra buying creates a shortage on the primary market due to more being bought ( for resale purposes) than would occur if resale did not create a profit.
Please explain what about this you do not understand and I will try to make it even simpler and more obvious.
You say that selling loans without a premium does not make sense. This is not true. Selling a loan without a premium makes perfect sense if you want/need to use the money for another purpose such as spending it or investing it elsewhere. This seems very obvious to me.
Again please explain your understanding problem and I will try my best to engage with you.
Last Edit: Dec 28, 2016 23:22:43 GMT by gusgorilla
If people are buying these secondary market loans then it's fair game IMO. I suspect that these rarely get bought anyway so don't see the harm.
In the end it's just swings and roundabouts. If people don't buy them they will be competing for your primary market loans. If they do buy them then the seconadry market seller will be competing with you. Makes no difference.