james
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Post by james on Mar 30, 2016 18:55:44 GMT
Unless you're blessed with predictive powers We're all potentially blessed with predictive powers, since it's been shown that the cyclically adjusted P/E is a predictor of future stock market performance. In most markets today it's above the long term average and a good time not to be in the market. I'm planning on having very little in the way of equity investment within the year, P2P being most of what I'm doing instead, VCT being most of the remaining equity. This is purely temporary, of course. After a market drop of 40% I'd happily jump back in.
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stevio
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Post by stevio on Mar 30, 2016 19:20:15 GMT
I understand diversibility, but if your S&S are being eroded by inflation and charges with very little gain, is that a wiseman who sticks with it, screaming 'must stay diversified, must stay diversified' as his pension slowly whittles away
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j
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Penguins are very misunderstood!
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Post by j on Mar 30, 2016 19:35:23 GMT
I understand diversibility, but if your S&S are being eroded by inflation and charges with very little gain, is that a wiseman who sticks with it, screaming 'must stay diversified, must stay diversified' as his pension slowly whittles away Unless you catch the market at a very bad time when you want to retire & cash out, then most stock market based pensions should do decently due to law of averaging over a 20-40 year period (combined with hopefully picking a half-decent all-share tracker index fund). Even then, if you're able to defer cashing in for a while until the market picks up then you should hopefully still be OK
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Post by eascogo on Mar 30, 2016 20:33:57 GMT
Many people are saying that putting all of your investment capital in P2P is foolish. What I cannot understand is, isn't it also foolish to invest everything in S$S? Also, can someone explain what added advantage I can get by having my investment distributed between P2P and S&S?As I see it, if the economy goes pear shaped, all parts of it will somehow be effected. I understand the raised eyebrow about stocks and shares but to my mind P2P lending involves a relatively narrow sector -- mostly working capital, expansion, refinancing, land development, bridging looans -- hence strongly exposed to cyclical humps and bumps with platform risks to boot. Shares on the other hand can be selected to offer much greater diversification across sectors, foreign and insular. In good times P2P wins hands down because high returns are easy to achieve but holding shares to balance risks is a good policy. Cashing shares at the bottom of the cycle is of course not recommended so are not suited for everyone. For example my exposure to a chunk of the recently collapsed FTSE100 is not a problem because I can hold onto them till they bop up again -- even if it takes years. You might not agree but I think that a well-diversified portfolio of shares is unlikely to hit the ground in the way a P2P portfolio might. I haven't seen on this forum any discussion as to how P2P platforms might cope with a sudden sharp dip and the ensuing panic among investors.
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Post by propman on Mar 31, 2016 7:46:44 GMT
I agree that stocks and shares can provide diversification, although less so with a tracker (I assume that bank shares would be strongly correlated with P2P for example as might commodities). But a well run P2P is unlikely to lose more than say 10% IMHO (I agree that there is fraud risk that could massively exceed this if it crystallised), while 20% falls in stock markets lasting >12 months are common. In addition, it would be interesting to know the performance of the major stock markets since the dotcom highs. Not just the index, but the index after reinvesting dividends. I know that this is an unusual period and may be an aberration, but it is conceivable that increased competition, low inflation and desperate and flawed attempts by many companies to merge their way out of trouble is the "new normal", with losses weighing heavily on modest growth, especially as the indexes have been supported by monetary policy.
In short, how long does a trend have to continue to defy the long term average before the earlier data is removed as no longer relevant to today's conditions?
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brin
I am trying to stay calm.
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Post by brin on Mar 31, 2016 19:52:28 GMT
I agree that stocks and shares can provide diversification, although less so with a tracker (I assume that bank shares would be strongly correlated with P2P for example as might commodities). But a well run P2P is unlikely to lose more than say 10% IMHO (I agree that there is fraud risk that could massively exceed this if it crystallised), while 20% falls in stock markets lasting >12 months are common. In addition, it would be interesting to know the performance of the major stock markets since the dotcom highs. Not just the index, but the index after reinvesting dividends. I know that this is an unusual period and may be an aberration, but it is conceivable that increased competition, low inflation and desperate and flawed attempts by many companies to merge their way out of trouble is the "new normal", with losses weighing heavily on modest growth, especially as the indexes have been supported by monetary policy.
In short, how long does a trend have to continue to defy the long term average before the earlier data is removed as no longer relevant to today's conditions? hi propman, good point, at the dot com high the ftse was 6900 and odd, i got stung big time, the share price as far the overall footsie is concerned has never really recovered since, the smart people were rubbing there hands, because if you know how to play the markets, there is big money to made in a bear or bull market, never been my cup of tea personally, too stressful.
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brin
I am trying to stay calm.
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Post by brin on Mar 31, 2016 20:33:23 GMT
Many people are saying that putting all of your investment capital in P2P is foolish. What I cannot understand is, isn't it also foolish to invest everything in S$S? Also, can someone explain what added advantage I can get by having my investment distributed between P2P and S&S?As I see it, if the economy goes pear shaped, all parts of it will somehow be effected. For example my exposure to a chunk of the recently collapsed FTSE100 is not a problem because I can hold onto them till they bop up again -- even if it takes years. In 1999/2000 at the dot com high, the ftse was over 6900 and odd, as far as i know, it has only gone over 6900 for a month or so in 17 years. I personally hate shares, (because i am not a savvy share dealer) I was given a tip from a share dealer friend of a friend in Feb last year... Lloyds Bank @ 84p, its a nailed on, undervalued stock, i was promised. Today 68p. Depending on the shares you hold, you may end up having to sit on them for many, many years, just to get your investment back.
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bg
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Post by bg on Mar 31, 2016 20:55:46 GMT
I have a 7 figure sum in P2P and I disagree with some of the points above.
In a bad downturn I would expect liquidity to dry up and the sale down of loans to be extremely difficult. I do not think that leads to a high level of losses necessarily.
I generally do secured lending (AC, SS, FS, MT, MI) but I'm wary of loans secured by commercial property with a high LTV (around 70%) as in a downturn prices can fall rapidly (if there's a buyer at all). Residential property however, with 70% LTV - fine. I can't see losses here. (Even in 2008/9 how much did the market fall?) Commercial property with LTV around 50% I'm also happy to invest in on a diversified basis.
The other point I'd make is that central banks are uber dovish. They're supporting markets and aren't going to allow a big slowdown. I can't see that on the horizon for a long time yet. Perhaps the biggest risk to P2P is that they keep policy too loose for too long and we get inflation shocking to the upside. Aggressively higher rates would be very bad for P2P but that's not on the horizon for now.
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brin
I am trying to stay calm.
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Post by brin on Mar 31, 2016 21:19:39 GMT
I have a 7 figure sum in P2P and I disagree with some of the points above. In a bad downturn I would expect liquidity to dry up and the sale down of loans to be extremely difficult. I do not think that leads to a high level of losses necessarily. I generally do secured lending (AC, SS, FS, MT, MI) but I'm wary of loans secured by commercial property with a high LTV (around 70%) as in a downturn prices can fall rapidly (if there's a buyer at all). Residential property however, with 70% LTV - fine. I can't see losses here. (Even in 2008/9 how much did the market fall?) Commercial property with LTV around 50% I'm also happy to invest in on a diversified basis. The other point I'd make is that central banks are uber dovish. They're supporting markets and aren't going to allow a big slowdown. I can't see that on the horizon for a long time yet. Perhaps the biggest risk to P2P is that they keep policy too loose for too long and we get inflation shocking to the upside. Aggressively higher rates would be very bad for P2P but that's not on the horizon for now. Hi bg... always better to quote a post if you have a disagreement then we can follow your point. i am interested in your post but not sure which one your talking about, sorry about that.
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bg
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Post by bg on Apr 1, 2016 6:52:17 GMT
Hi bg... always better to quote a post if you have a disagreement then we can follow your point. i am interested in your post but not sure which one your talking about, sorry about that. Hi, it's no one comment in particular...just a general theme, some people think there will be significant P2P losses in the next economic downturn. They may well be right, but i can't see residential property falling 30-40% to cause these losses...unsecured defaults would rise but maybe from 1% to 3% (i think that's roughly right historically, and that's with higher rates). I'm a little more cautious on commercial property but even then i think its more of a liquidity issue than big losses. Also, i really struggle quoting a post on an iphone or ipad unless i want to quote the entire post.
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brin
I am trying to stay calm.
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Post by brin on Apr 1, 2016 7:31:15 GMT
Hi bg... always better to quote a post if you have a disagreement then we can follow your point. i am interested in your post but not sure which one your talking about, sorry about that. Hi, it's no one comment in particular...just a general theme, some people think there will be significant P2P losses in the next economic downturn. They may well be right, but i can't see residential property falling 30-40% to cause these losses...unsecured defaults would rise but maybe from 1% to 3% (i think that's roughly right historically, and that's with higher rates). I'm a little more cautious on commercial property but even then i think its more of a liquidity issue than big losses. Also, i really struggle quoting a post on an iphone or ipad unless i want to quote the entire post. Hi bg, I am in same camp as you on this, has there ever been a big downturn in resi property in the last 50 years?, even in 2008, up here in the midlands we did not see anything other than a leveling out for a couple of years, for those that live in the big smoke, then they may see some downturn, but not for long.
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bg
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Post by bg on Apr 1, 2016 7:36:47 GMT
Hi, it's no one comment in particular...just a general theme, some people think there will be significant P2P losses in the next economic downturn. They may well be right, but i can't see residential property falling 30-40% to cause these losses...unsecured defaults would rise but maybe from 1% to 3% (i think that's roughly right historically, and that's with higher rates). I'm a little more cautious on commercial property but even then i think its more of a liquidity issue than big losses. Also, i really struggle quoting a post on an iphone or ipad unless i want to quote the entire post. Hi bg, I am in same camp as you on this, has there ever been a big downturn in resi property in the last 50 years?, even in 2008, up here in the midlands we did not see anything other than a leveling out for a couple of years, for those that live in the big smoke, then they may see some downturn, but not for long. I agree. While i don't buy the common argument that 'house prices always go up' (people should look at Japan or the US), we have a massive supply and demand imbalance in the UK along with very low mortgage rates so I can't see a significant correction (super prime London aside which is just bonkers). Biggest risk is probably that the UK votes to leave the EU and we get a panic knee jerk with prices down 5% maybe. I can't see a 40% correction under virtually any scenario.
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Post by jackpease on Apr 1, 2016 8:09:05 GMT
My view is that nobody should imagine 12% property based platforms will behave like and directly track the property market on which they are based.
It's not that property will only go down by 20% at worst (say) - it's that the property market may freeze up and property we are lending against in the 12% platforms will neither be sellable nor good to re-borrow against.
A wholly property-based platform then may struggle and what looks like a risk-free gift horse today will leave many licking their wounds and feeling hard done by and blaming platforms/regulators/politicians anyone but themselves.
Jack P
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brin
I am trying to stay calm.
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Post by brin on Apr 1, 2016 8:22:32 GMT
My view is that nobody should imagine 12% property based platforms will behave like and directly track the property market on which they are based. It's not that property will only go down by 20% at worst (say) - it's that the property market may freeze up and property we are lending against in the 12% platforms will neither be sellable nor good to re-borrow against. A wholly property-based platform then may struggle and what looks like a risk-free gift horse today will leave many licking their wounds and feeling hard done by and blaming platforms/regulators/politicians anyone but themselves. Jack P Blaming politicians.... i like the sound of that. 
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nick
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Post by nick on Apr 1, 2016 11:44:49 GMT
My view is that nobody should imagine 12% property based platforms will behave like and directly track the property market on which they are based. It's not that property will only go down by 20% at worst (say) - it's that the property market may freeze up and property we are lending against in the 12% platforms will neither be sellable nor good to re-borrow against. A wholly property-based platform then may struggle and what looks like a risk-free gift horse today will leave many licking their wounds and feeling hard done by and blaming platforms/regulators/politicians anyone but themselves. Jack P We should also recognise that the property loans on the 12% platforms are generally the highest risk in the market with average LTVs > 50% - the higher risk stuff that knocked the stuffing out of the banks in the past crisis....
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