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Post by davee39 on Apr 27, 2015 9:44:12 GMT
Comments on both of the recent themes.
1) The bidding system is not going to change, although there will moves towards fixed rates. To play the FC system I am only interested in getting better than average.
2) I have had significant recoveries from several defaulted loans as a result of the guarantee, the only total write off was as a result of bankruptcy, which I believe was genuinely a factory owner desperately trying to keep a business afloat.
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Post by yorkshireman on Apr 27, 2015 10:09:21 GMT
I’ve said it several times, personal guarantees are worth sweet FA as is office furniture as a security whereas bricks and mortar focus the borrower’s mind. I couldn't disagree more with this - it's the personal guarantee that makes the loan worth anything , since without it, it's merely a promise from a paper entity to pay back the loan for however long as it exists itself. A loan with a personal guarantee, is basically in essence an unsecured personal loan. If unsecured personal loans were worth "Sweet FA", then people wouldn't offer them either, but the fact is that most banks do, and often at rates far lower than those available on FC. Having several years experience when I was younger both underwriting and collecting unsecured debt, I'm aware of just how many methods the creditor has at their disposal, and how difficult it is for the borrower to just walk away from the debt (if they have some means to pay) without consequences. The borrower won't always have the means to repay the loan after the company goes under , but where they do (hence my point about loan size being relevant to the value of the guarantee) , the guarantee will compel them to do so. Have you read the threads on this forum about Bent Lawyers, Breath of Foul Air aka Air Con Artist and Crappy Scrappy? If not, could I respectfully suggest that you do and then you will see why some personal guarantees aren’t worth the paper they’re written on and shouldn’t be considered as security. I appreciate that these are probably the most notorious examples and my statement doesn’t necessarily apply to all guarantees but as ever, Caveat Emptor!
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TitoPuente
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Post by TitoPuente on Apr 27, 2015 10:34:23 GMT
Pardon me if I've missed something but you do not seem to have allowed for the very particular premise to this discussion that at the close everyone would get the marginal rate, even if they had bid at the MBR. So why bid higher than the MBR? You would only bid at MBR if you are happy with the possibility of ending up with the MBR. The marginal rate equals the MBR in all bids that close at MBR. In general, you would only bid at the minimum rate you could live with. Bidding lower than your personal threshold can leave you with an undesired rate and would not increase your probability of getting anything better.
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Post by yorkshireman on Apr 27, 2015 10:34:51 GMT
You ought assume he has at least 10x or 20x that much being flung around ( .. maybe a lot more), since I don't see him managing to flip what he buys (at £960 a piece) all that fast. Perhaps his surname is Cowell?
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chrisf
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Post by chrisf on Apr 27, 2015 11:13:03 GMT
You ought assume he has at least 10x or 20x that much being flung around ( .. maybe a lot more), since I don't see him managing to flip what he buys (at £960 a piece) all that fast. Perhaps his surname is Cowell? I think that guess is out by around 12 inches
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Post by goldservice on Apr 27, 2015 12:02:46 GMT
In the 'all bidders get the marginal rate' regime - if others wish to bid above the MBR and spend their time undercutting each other and risking the auction closing before they have rebid, then that is fine with me. I would just bid at MBR and reap the benefit of the marginal rate that others have established. This reduces to an absurdity (that we all get MBR) either when there are enough MBR bids to fill the auction, or when everyone copies my strategy.
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Post by GSV3MIaC on Apr 27, 2015 12:27:11 GMT
Well you'd be welcome to a lot of auctions on that basis .. personally there are few, if any, I'd take at marginal rate. But yep, if there were enough lemmings willing to go with the flow on a loan, then you'd all get MBR (and I'd not be in any of them). If there are not enough lemmings, then whoever has half a clue will determine the marginal rate, and all the lemmings will be saved from themselves (which is what MBR was there for in the first place, when the lemmings used to bite anything at 4%).
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Post by goldservice on Apr 27, 2015 13:28:08 GMT
'whoever has half a clue will determine the marginal rate' - what interests me here is that this is a market so how do you individually determine the marginal rate? And the bigger the group who are determining the rate, the lower it will go which is not what you want. And when did lemmings ever get a guarantee that after they had jumped off they could still get the same deal as those who did not jump? I'm not knocking your suggested regime, gsv - I'm just saying that I would exploit it as described and others would do the same.
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registerme
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Post by registerme on Apr 27, 2015 13:47:41 GMT
Is it a market, or a reverse auction?
(Perhaps they're not mutually exclusive).
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coop
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Post by coop on Apr 27, 2015 13:52:19 GMT
'whoever has half a clue will determine the marginal rate' - what interests me here is that this is a market so how do you individually determine the marginal rate? And the bigger the group who are determining the rate, the lower it will go which is not what you want. And when did lemmings ever get a guarantee that after they had jumped off they could still get the same deal as those who did not jump? I'm not knocking your suggested regime, gsv - I'm just saying that I would exploit it as described and others would do the same. If by exploit it you mean get a load of crud at low rates! If I think a loan with an MBR of 8% isn't worth investing below 10%; and was a steal at 15% I would bid incrementally between the two points; therefore the higher the rate the higher investment i made. If the rate drops below 10% I get nothing; but it wasnt worth investing in for me. With your strategy you effectively let everyone else decide what the minimum rate you will accept is. I prefer to decide fo myself; even if I miss out on 99% of loans - as I do now!
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Post by goldservice on Apr 27, 2015 14:24:02 GMT
'If by exploit it you mean get a load of crud at low rates!' - actually, I would get the same rate as GSV and everyone else who had any bids at the close. Remember, we are talking (in this sort of sub-topic) about GSV's suggested regime where at the close every one gets the marginal rate (which is the highest rate still in the bidding at the close.) So in what way would I get low-rate crud?
ps I would be delighted if GSV's regime worked but I think it might be gamed to death.
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adrianc
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Post by adrianc on Apr 27, 2015 14:56:03 GMT
'If by exploit it you mean get a load of crud at low rates!' - actually, I would get the same rate as GSV and everyone else who had any bids at the close. Remember, we are talking (in this sort of sub-topic) about GSV's suggested regime where at the close every one gets the marginal rate (which is the highest rate still in the bidding at the close.) So in what way would I get low-rate crud? ps I would be delighted if GSV's regime worked but I think it might be gamed to death. Let's picture an auction for a very small loan with only five parts and six bidders. A bids 8% (MBR) B bids 9% C bids 10% D bids 11% E bids 12% F bids 13% So F doesn't get a part. The loan rate is 12%, and A-E all get that rate. Now let's say that A-E all bid 8% MBR, but F still bids 13%. F still doesn't get a part, but A-E all get the prevailing rate - MBR. A-E have all lost out on 4% because of bidding MBR in the presumption they'd be guaranteed a good rate, because it'll always go to max bid, rather than the minimum rate they were actually prepared to accept. My gut reaction, though, is that it'll lead to either the lender rates falling or the borrower rates soaring and loans not being taken up. Go back to that first scenario. With that bid spread, the borrower's current rate would be (8+9+10+11+12)/5 = 10%. At 12%, the borrower might well say "Sod that", and not take the loan. If the bidding comes out to a max of 10% being accepted, then D and E have lower-rate parts than they would have done under the current setup. Thinking about most of the parts I hold, I'd be fairly ambivalent at borrower rate - take the debts/fees into account, and there's definitely better places to put the money.
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coop
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Post by coop on Apr 27, 2015 15:10:14 GMT
'If by exploit it you mean get a load of crud at low rates!' - actually, I would get the same rate as GSV and everyone else who had any bids at the close. Remember, we are talking (in this sort of sub-topic) about GSV's suggested regime where at the close every one gets the marginal rate (which is the highest rate still in the bidding at the close.) So in what way would I get low-rate crud? "actually, I would get the same rate as GSV and everyone else who had any bids at the close" So you would have the best rate as all the lemmings; whilst others have left the loan alone as the risk/reward isnt right. "So in what way would I get low-rate crud?" Because you would still be investing in loans at low rates which sensible investors would have left alone once it fell through a certain rate. With your strategy you are effectively saying any loan on FC you invest in you would happily invest in at MBR.
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Post by goldservice on Apr 27, 2015 15:31:44 GMT
'If by exploit it you mean get a load of crud at low rates!' - actually, I would get the same rate as GSV and everyone else who had any bids at the close. Remember, we are talking (in this sort of sub-topic) about GSV's suggested regime where at the close every one gets the marginal rate (which is the highest rate still in the bidding at the close.) So in what way would I get low-rate crud? "actually, I would get the same rate as GSV and everyone else who had any bids at the close" So you would have the best rate as all the lemmings; whilst others have left the loan alone as the risk/reward isnt right. "So in what way would I get low-rate crud?" Because you would still be investing in loans at low rates which sensible investors would have left alone once it fell through a certain rate. With your strategy you are effectively saying any loan on FC you invest in you would happily invest in at MBR. No, I am not happy to invest at MBR. But in GSV's suggested regime things are different. If I bid at MBR, I would not necessarily get MBR. If there are not enough bids to fill at MBR (that goes for many if not most auctions at present), then I get the marginal rate - which is actually the highest rate in the auction at the close. I am very happy to get that - it's difficult to hit that exactly at present. Are you forgetting that all this is just a very hypothetical kite that GSV is flying - with the premise that at the close all bidders, including those who bid at MBR, get the marginal ie highest rate?
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adrianc
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Post by adrianc on Apr 27, 2015 16:09:16 GMT
No, I am not happy to invest at MBR. So why stick your hand up and say "I'll have that at MBR!"...? Indeed. You "would not necessarily", but you might... Yes, you do. Even if that marginal rate is near to MBR, and even though you don't actually want the part at a rate that low. Congratulations. You've just bought some un-resellable chod that you don't even want. Why on earth would you bid at MBR, instead of bidding at the minimum you'd want to accept? If the marginal rate goes lower than you bid, then you didn't want it anyway, so it doesn't matter if you've missed out on it.
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