Mikeme
Member of DD Central
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Post by Mikeme on Apr 10, 2020 19:51:52 GMT
I watched very similar exchanges on shares bulletin boards right the way through the GFC in many sectors, particularly the banking sector. To give a particularly inappropriate analogy, Northern Rock didn't go bust because people were queuing round the block to withdraw their money. Rather it went bust because it lent money to anyone who could sign their name unassisted - then hedged their risk with derivatives that were actually additional liabilities waiting to be born. In other words, they were a  business run by idiots. The point I'm strangling to death here is that AC will be fine going forward if they have a recognisably (to the professional sector) viable business and whatever anyone here says, or thinks, will have little bearing on that. Jo - There will be a lot of investors here who get royally shafted once all this is done, they really have no idea. Maybe these are just youngsters posting who have never seen a downturn before. This youngster is 70 years old and traded in a small manufacturing business through all recessions from the 80's until I retired 6 years ago. I understood that when I invested through AC that I was lending money to businesses. I/we have a contract with some of those borrowers to lend more. I agree with AC and the decision to, at this time treat smaller investors more favourably than larger ones. I can't be bothered giving the valid reasons that have been written before.
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alender
Member of DD Central
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Post by alender on Apr 11, 2020 12:05:30 GMT
Admonishment accepted. However it was written ( I don't care about what story AC want to fob me off with....I am simply interested in getting my cash back. It really is that simple.) I also took exception on behalf of AC to (AC need the cash to buy easter eggs.) To give a particularly inappropriate analogy, Northern Rock didn't go bust because people were queuing round the block to withdraw their money. Rather it went bust because it lent money to anyone who could sign their name unassisted - then hedged their risk with derivatives that were actually additional liabilities waiting to be born. In other words, they were a business run by idiots. Northern Rock went bust because they funded long term loans with short term money and when the short term loans from the money market dried up they had a liquidity crises followed by account holders wanting their money back. In fact the loans were not that bad as proved by the government recouping the full cost of both Northern Rock and Bradford and Bingley. For me especially painful as my mother left me some BB shares, got 40% inheritance tax on these, shares were later taken by the government with no compensation.
The problem is that some P2P platforms took the Northern Rock approach with AA, i.e. offer low access times to investors in order to pay lower rates where the underlying loans are of much greater duration, I brought this up on the RS board a few years ago. I think the FCA has issues with this as this was acting more like a bank than P2P.
So I can hear people saying if you know this why invest in AA. I took the decision because I do not feel qualified or have the time to access risks on loans in the MLA, the AAs are in a number of loans so spreading the risk, they have a PF, was expecting AC to have a larger buffer to deal with a run on AAs as they have been making good money from the interest rate differential. If all went bad and a lock in occurs I was expecting that at the very least I would get the interest and capital repayments of any loans in my loan book and free cash. What I was not expecting is a reduction in interest rate (borrowers still pay the same) passed to AC by the way of a fee, disproportion distribution of my capital repayments under a set of rules just invented, AC to have made commitments with money they did not have to fund drawdowns and using my capital repayments for that purpose. I believed this to be P2P as advertised so in the event of problems I would own the loans, therefore own the capital repayments and the interest. So apart for the administration costs of keeping the platform running I would receive this money alone with my entitlement of any cash held in the AAs if I so requested.
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business run by idiots.