am
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Post by am on Oct 11, 2017 21:23:20 GMT
... her son's company ... the incumbant office tenant for this building. Oh no - related company as a tenant - anyone remember "Tenanted Office Building Somerset"? Thanks MRC My first reaction to this was that it should have been moderated. There's nothing inherently wrong with rental agreements between related parties, provided that they are at market rates (to protect other creditors), unless you're questioning the existence of limited liability companies and small pension schemes; financial advisers often recommend that your business premises be owned by your pension. (I can think of three P2P loans which were to the property owner for funds to be injected into the tenant. There were risks - the tenants were in financial trouble so the rent was not guaranteed - but I saw nothing unethical in these arrangements. In this case the parent has a property that is standing empty, and the son has a company which needs offices - the solution is obvious.) Comparison with a loan which might be described as notorious is beyond what I consider fair comment. (Judging by the number of likes on the post this seems to be a minority opinion.)
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am
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Post by am on Oct 11, 2017 11:03:58 GMT
Is there scope to add a board for financial education by discussion focused primarily not exclusively on P2P? (Many interesting issues, such as how to read a balance sheet, are of wider relevance.) I was thinking that we could start one or two threads focused on specific topics per week. There's a wealth of experience here, but there are also possible problems arising from Dunning-Kruger syndrome and imposter syndrome. What brings this matter to my attention is the recent discussion on PGs on the MTAB822 thread, combined with comments on the thread I started on financial exclusion. I had thought the "PGs are not worth the paper they are written on" was hyperbole, and that people understood that what was meant was that 1) some PGs are nearly worthless, and 2) PGs are difficult to value, but I'm now wondering whether everybody did. A more focused discussion may leave less scope for people to draw the wrong conclusions.
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am
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Post by am on Oct 11, 2017 9:54:29 GMT
This makes for an interesting read. "Between 2007 and 2013, electricity, gas, and fuel costs rose by 61%. Over the same period, food prices increased by 31%, and transport costs by 25%" I had realised that the inflation rate experienced by the poor (and the frugal) was higher than the headline rate, but I hadn't thought it was that bad. (Subsequently food prices may have fallen as supermarket margins have been squeezed, but the period of deflation in clothing prices that I perceived seems to have ended). On the subject of financial exclusion, a bank tried to sell me a credit card once, and then refused me on the grounds that I had no salary, pension or benefits, even though I had over £100,000 on deposit with them. (Like several here I retired early, though in my case it wasn't particularly intentional.)
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Post by am on Oct 10, 2017 23:25:14 GMT
Hi Ed MoneyThing - would it be worth putting a line in the loan descriptions to mention the PG when it applies? Hi. Will discuss this tomorrow and see if we can add this into all the loan descriptions. We had not to date only because lenders on here seem to hold such little weight/regard for PGs. Regards, Ed. IMO, whether a personal (or corporate or other guarantee) is involved should always be disclosed as a matter of transparency of loan conditions. That lenders may place little value on PGs should not affect this. Again, IMO, the problem with PGs is determining their value. Because of this conservative lenders may discount them when evaluating loans, just as they may discount hope value in valuations. But their existence does effect investment decisions at least at the margin. I'm still thinking about this loan, but the presence of a PG might be the feather than tips the balance. (I was meaning to get my thoughts in order and contact you about the lack of clarity about the involvement of the various legal entities involved, which is what is currently worrying me - there's the principal, the company mentioned in the valuation report, the overseas company that owns the company mentioned in the valuation report, the company that was cited for HSE violations at the property, and several other companies which appear to have or have had some connection to the property.) With regards to PGs I expect lenders would like information to make a judgement on the willingness and ability of the guarantor to pay. I recently crystallised my opinion on ethical loan investment - you shouldn't lend if you think that the borrower's expected return averaged over the projected spectrum of outcomes is negative, or, simplified, if you think the borrower will lose out on the deal. (A less sharp condition is that the benefits of the loan should be shared "fairly" between borrower and lender, but that is a fuzzier criterion.) I find this a cleaner concept of lending ethics than trying to draw a line between predatory and non-predatory interest rates. In the case of this loan the borrower appears to be a "big boy" and can look after himself, so there's a case that I can defer to his judgement of the risks on his side. But I can invest with a clearer conscience if there is a business plan that I believe is feasible. (Your supplementary information partly addressed that, though the key question of occupancy rate should have, IMO, have been addressed in the VR.) Looking at the risks on my side, my problem is that the larger valuation in the VR is effectively a valuation of the business as a going concern rather than of the property, so is not relevant in the event of default as presumably the business would have failed, and there is as far as I could see no indication how the smaller valuation (which you are using) was obtained. Without your supplemental information I would have sat out this loan - not because of positive reasons to reject it, but because I couldn't make an informed judgement. With your supplemental information I'm still in two minds, and information on the strength of the PG could tip the balance either way. I recognise that respect for borrower privacy may get in the way of providing that information.
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Post by am on Oct 10, 2017 21:23:29 GMT
I think the primary focus should be on regulating providers, not on regulating customers. I mostly agree, but I would add educating customers (or more precisely, providing the tools so that customers can educate themselves). I don't disagree - I was trying to keep the post simple, rather than tie myself in knots trying to cover all bases.
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am
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Post by am on Oct 10, 2017 18:39:48 GMT
One of the problems with financial regulation is that it adds to financial exclusion. Excluding people from financial services in an injustice. Yes, we (as a society) do want to protect the naive, the vulnerable, and the desperate, from the unscrupulous. But we shouldn't allow that desire to cause us to prevent them accessing the benefits of financial services, and to stop them becoming less naive, less vulnerable and less desperate. I would argue that the focus should be on excluding the unscrupulous, not the naive, the vulnerable and the desperate.
I think the primary focus should be on regulating providers, not on regulating customers.
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Post by am on Oct 10, 2017 18:20:49 GMT
The problem is chris that a great deal of information being posted by the platforms is meant (in their eyes at least) to be taken as gospel. Carrying out basic DD usually reveals what could be interpreted as deliberate omission by the platform. If the platforms operated in a more mature way then there would be little or no requirement for members to carry out their own DD - but that's not how it is. So somewhere we need a balance between fiction and fact. As far as platform involvement is concerned - if only springs to mind. Yes, they start off with the usual fanfare, promising the earth, moon and stars and quickly go to ground once they hit a bump. I believe everyone expects defaults from time to time but the cavalier attitude shown by platforms to lenders funds leaves a great deal to be desired. Nonetheless, lenders are 'incentivised' to invest by headline rates and of course the FCA. Having carried out DD on some platforms, it is beyond belief how they gained FCA authorisation but as I used to be governed myself by the old FSA it really shouldn't come as any surprise. Platforms, although not all, would prefer if the P2PIP did not exist albeit only a tiny minority of investors are members and that is the savoir of many a poorly run platform. Copy'n'paste disclaimer: this is personal comment not as a representative of AC. IMHO holding discussion in private does not hold those platforms to account. Crowd DD is one of the most powerful tools platforms and lenders can rely upon but that includes being able to see people's thought process so you can audit the auditors. There are plenty of nervous and jumpy lenders who get rather excitable about the tiniest bit of misinformation that proper dialogue with a platform or the borrower can clarify, or where calmer heads within the forum can prevail. Equally there are major omissions made and times when platforms need to answer tough questions. As I said if platforms do not engage then there will be alternatives. Simply closing off this valuable process to a select few and publishing the results reduces its worth to all I suspect. That is an argument for a private forum. A private forum isn't a perfect solution, but it gives the opportunity for misinformation to be corrected before it escapes into the wild.
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Post by am on Oct 10, 2017 12:44:26 GMT
If this was a proposed retail outlet for almost anything more normal than "arts, crafts and artisan stuffthings" I think I'd feel more confident. But I know absolutely nothing about that industry (?) or the appetite for its products. Does anybody have any insight? Plus point: North Staffordshire seems to have an active collectables market due to the historical involvement in the production of ceramic products. Minus point: North Staffordshire (especially the Potteries) is not a wealthy area. Minus point: A similar business has recently opened in Hanley, in a disused church on the edge of the central commercial area. Newcastle-under-Lyme is a wealthier area, but Hanley (the city centre) has a bigger footfall. Other nearby businesses are Dagfields (which is closer to Nantwich, which is a wealthy area) and Slater's Craft Village. I've glanced at Dagfields's accounts at Companies House but they're not informative.
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Post by am on Oct 10, 2017 11:18:38 GMT
Discuss and explain why FC is now safer and more suitable for the “unsophisticated” investor than pre 18/09/2017. Because unsophisticated investors can now expect to achieve the published average return. Previously unsophisticated investors got the dross that was rejected by the sophisticated investors, so they could expect to underperform against the average return. They can't. They can expect to receive a return lying on a bell curve centred on the published average return. (On the other hand, if your point was that their collective mean return is that of the market as whole, that is true - except that FC seem to have lowered returns.) I wasn't personally bothered by bots (but did disapprove of the hoovering up of D and E loans), as I wasn't in competition with them - I ran a conservative portfolio, and stopped adding SME loans when the information provided became unacceptably (to me) scanty.
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Post by am on Oct 10, 2017 11:12:43 GMT
Also, some lenders select loans on rate, ignoring risk. In the new FC model you can't buy a portfolio of solely (D and) E rate loans. (In theory higher risk loans give you a higher return, but the variance is also higher, and if you're insufficiently diversified you can come a cropper. See ReBS?)
The new FC regime also stops the exploitative trading practices of a minority of lenders. Originally flippers served a legitimate role in the ecosystem, acting as defacto underwriters, but by the time fixed rates were introduced I don't think there remained sufficient justification for their existence.
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Post by am on Oct 10, 2017 10:43:26 GMT
5 words that show that banning individual loan selection from retail offerings is a bad idea : Funding Circle’s new modus operandi.Discuss and explain why FC is now safer and more suitable for the “unsophisticated” investor than pre 18/09/2017. Really drastic underdiversification is probably harder to achieve. (On the other hand diversification also seems to be capped, and I'm not sure that the level at which it is capped is safe for people investing in the "balanced" product. Lenders are exposed to idiosyncratic risks outside their control. The current situation is analogous to AC's packaged products, but without a provision fund. On the other hand AC's packaged products do involve a greater concentration risk - 15% of my MLIA holding is in a loan that I avoided because I didn't believe that the borrower could service or redeem the loan (the value may have been there, but I didn't believe that the value could be extracted in the time scale of the loan).) If a black box product is wanted something like a property fund, an open ended investment product with capped outflows, would seem to fit the bill. Or some form of minibonds. Edit: crossed with dandy .
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Post by am on Oct 10, 2017 10:17:45 GMT
I'm surprised more platforms have not already gone down the SI/HNWI route. The most obvious example is TC. Most of its lenders (I would guess at least 95% by value) will qualify under at least one of those heads, and frankly it's unsuitable for anyone who is not. AIUI mrclondon is advocating that individual loan selection on all platforms would be restricted to SI/HNWI, with other lenders restricted to pooled products. I don't think that would be overly difficult or complex for the platforms to achieve, and it's probably where some expect to end up. Unfortunately, pooled p2p products, and the risks associated with them, can be every bit as hard to understand (if not more so) than individual loans. The FCA won't let investors trade in shares or funds deemed to be complex without self-certifying as SI/HNWI. I've had to do that for investments which, in my opinion, are simpler than many pooled p2p products. There will be those who argue for less protection generally, which is fair enough. But I can think of no good reason for giving "ordinary" lenders wider access to p2p products than they would have if they were investing in listed shares or funds. It's clear to me that the special place p2p has in financial regulation is anomalous and unstable. The growth in p2p was born of the 2008 financial crisis and the resulting tightening of the banks' purse-strings. It filled a political need at the time. Now that the banks are flush with cash again there is no upside for the FCA or their political masters in maintaining the status quo. On the other side, I get the impression that who can access ETFs is overrestricted, though ETFs run the gamut on complexity and risk (but so do shares).
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Post by am on Oct 9, 2017 22:23:27 GMT
400 dealers and small businesses doing precisely what? And with what target number of customers within a sensible radius, excluding those who come for an initial poke about on days one to seven? A critical mass of occupied units would be essential to attract people in sensible numbers, week after week. How many of the 400 units are presently allocated - even for a month? Maybe somebody should count the car park spaces. Unless the traders bring new stock in a wheelbarrow, and customers all live within walking distance. I did. I counted ~85, not 100, but the borrower might plan to reconfigure the car park; I think there's scope for a more efficient layout. As part of the business plan I would like to see how they plan to extract income from the car park. Metered customer parking? Delivering stock might not be too much of a problem - I can visualise the traders driving up to a delivery bay, dropping off the stock, and driving away.
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Post by am on Oct 9, 2017 22:14:23 GMT
"We are not aware of the current level of building reinstatement insurance cover and therefore cannot comment upon the adequacy of the same. However, we would recommend that the building be insured for a minimum sum of £3,500,000 (three million five hundred thousand pounds) in its present condition. This sum allows for demolition, site clearance, full reinstatement, professional fees, but excludes loss of rent provision and any allowance for inflation, and should accordingly be updated on an annual basis to keep pace with rising costs. " Can insurance reinstatement cover give any further reassurance as to the fire sale value? Not necessarily. My father's house (grade II listed sandstone terrace) sold for £110,000; the recommended reinstatement reinsurance value was several times higher. Reinstatement insurance value is what it would cost to rebuild if the building was damaged beyond repair. The fire sale value depends on what income people think can be extracted from the property, less whatever discount they think they can get away with.
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Post by am on Oct 9, 2017 19:29:26 GMT
I think this is taking rental income into account, which to be fair is not guaranteed income. No, it's the full vacant possession valuation. The valuation gives rented and vacant values, for normal and 180 day sales. Unless I've missed something no justification has been given for the vacant possession valuation. If it turns out that the proposed business is not viable, and it has to be sold, presumably it has to be sold for another use. This might involve planning costs; it almost certainly involves costs reconfiguring the property. You'd need a discount on the value of the property in its new usage to cover that. stokeloans : what happened to the old Sainsburys site in Newcastle? what I know is that it stood empty for some years before being demolished. (This might have some bearing on the marketability of sites in Newcastle.)
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