sl125
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Post by sl125 on Jun 30, 2017 7:05:23 GMT
Up until now, I've made a pretty decent return from flipping.... buy heavy in a D or (if I'm lucky to get hold of one) an E then try to sell before the first, second or third payment.
Buying heavy introduces a black swan risk: the rare occasion that I'm still holding a heavy stake whilst the company goes belly up by the first or second payment.
Within a few days I've had a fast food business go late on the first payment leaving me exposed to the sum of £1500. Then today 37958 has been defaulted just three weeks after taking out the loan. Bang goes another £1600.
The fast food business is particularly... interesting... a quick search on Companies House shows that the director appears to have a history of indebted businesses that get struck off....
Ah well, I shall chalk it down to experience. It does confirm a point I was making a few weeks ago that those who bemoan the "guaranteed" returns of the flippers don't necessarily accept that it is still quite a risky approach.
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kaya
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Post by kaya on Jun 30, 2017 8:03:29 GMT
All us ordinary investors who dutifully pay our premiums to you flippers are no doubt right now smugly gloating feeling rather sorry at this misfortune.
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adrian77
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Post by adrian77 on Jun 30, 2017 8:11:02 GMT
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sl125
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Post by sl125 on Jun 30, 2017 8:17:51 GMT
All us ordinary investors who dutifully pay our premiums to you flippers are no doubt right now smugly gloating feeling rather sorry at this misfortune. Hah ha, absolutely. schadenfreude and all that. Although it's quite a shock to the "system", as it were, I'm not too dis-heartened, as I crunched the numbers of the loan book and found that this is a rare event. So in the long term it is still within my acceptable risk profile, but the risk creates these occasional big shocks.
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kt
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Post by kt on Jun 30, 2017 8:29:51 GMT
How on earth did such a company get past FC's DD?  ? You say that as if to imply that FC have DD  The onus is on you as the savvy investor to ensure you are comfortable with your investment choices.
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kaya
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Post by kaya on Jun 30, 2017 8:33:22 GMT
Alas, it might be becoming a less rare event as we all might hope, as the quality of borrowers that FC is willing our money out to, continues on its downwards slide. Although I do grudge the paying of premiums, I also recognize that you guys perform a service that allows us to come along later and pick & choose what we want (which is very little these days).
Anyway, do FC not have a policy of bearing the loss if no repayments at all are made?
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sl125
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Post by sl125 on Jun 30, 2017 8:33:28 GMT
How on earth did such a company get past FC's DD? ? I was thinking that myself, but then I thought about the size of the two loans concerned: the were both for about £10k. I've always advocated that one has to take into account the labour cost of due diligence - from our perspective as investors, that's the time we spend deciding whether to invest in individual loans, managing our accounts, etc. If I've invested £100k in FC returning 10% pa, then £10k pa isn't much if I'm spending 10 hours a week doing due diligence. So it must be with FC's due diligence: presumably the effort they expend is commensurate to the size of the loan, as it wouldn't make commercial sense for them to have to pay more for the due diligence effort than they could recover in fees.
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adrianc
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Post by adrianc on Jun 30, 2017 8:58:05 GMT
How on earth did such a company get past FC's DD? ? You say that as if to imply that FC have DD The onus is on you as the savvy investor to ensure you are comfortable with your investment choices. <cough>autobid</cough>
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blender
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Post by blender on Jun 30, 2017 9:02:43 GMT
All us ordinary investors who dutifully pay our premiums to you flippers are no doubt right now smugly gloating feeling rather sorry at this misfortune. Hah ha, absolutely. schadenfreude and all that. Although it's quite a shock to the "system", as it were, I'm not too dis-heartened, as I crunched the numbers of the loan book and found that this is a rare event. So in the long term it is still within my acceptable risk profile, but the risk creates these occasional big shocks. Failure to make the first payment is a rare event; it used to be a very rare event, so rare that FC had a practice of refunding lenders. But it is the future that matters, and that will not be so rare. The computer cannot go round and kick the tyres, still less can it find those debts that will suddenly and so unexpectedly turn into CCJs. FC used to be about loans and lenders and borrowers and had a care for the principles of peer to peer lending. Now, inevitably, it is just about numbers, and there are few opportunities to game it and beat the averages. I think sl125 and I go back a long way with FC and are in danger of relying too much on what it was, rather than what it is evolving into. I used to complain about flippers, but it was FC that not only created the opportunity, but shamelessly exploited it by allowing high interest rates on large loans (before fixed rates) and more obviously gave the 2% cash back that was essential to grow the property loan book. Yes we all try to get the best return, and I sell property loans early, but please remember that FC laid out the pitch and wrote the rules, and rewrote the rules and ... and ... .
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Post by yorkshireman on Jun 30, 2017 12:35:43 GMT
How on earth did such a company get past FC's DD? ? What, questioning FC’s DD? If you have been with FC for any length of time you must surely know that the majority of loans offered are copper bottomed, AAA Investment Grade regardless of their own grading system. 
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Post by yorkshireman on Jun 30, 2017 12:55:50 GMT
Up until now, I've made a pretty decent return from flipping.... buy heavy in a D or (if I'm lucky to get hold of one) an E then try to sell before the first, second or third payment. Buying heavy introduces a black swan risk: the rare occasion that I'm still holding a heavy stake whilst the company goes belly up by the first or second payment. Within a few days I've had a fast food business go late on the first payment leaving me exposed to the sum of £1500. Then today 37958 has been defaulted just three weeks after taking out the loan. Bang goes another £1600. The fast food business is particularly... interesting... a quick search on Companies House shows that the director appears to have a history of indebted businesses that get struck off.... Ah well, I shall chalk it down to experience. It does confirm a point I was making a few weeks ago that those who bemoan the "guaranteed" returns of the flippers don't necessarily accept that it is still quite a risky approach. Hah ha, absolutely. schadenfreude and all that. Although it's quite a shock to the "system", as it were, I'm not too dis-heartened, as I crunched the numbers of the loan book and found that this is a rare event. So in the long term it is still within my acceptable risk profile, but the risk creates these occasional big shocks. Failure to make the first payment is a rare event; it used to be a very rare event, so rare that FC had a practice of refunding lenders. But it is the future that matters, and that will not be so rare. The computer cannot go round and kick the tyres, still less can it find those debts that will suddenly and so unexpectedly turn into CCJs. FC used to be about loans and lenders and borrowers and had a care for the principles of peer to peer lending. Now, inevitably, it is just about numbers, and there are few opportunities to game it and beat the averages. I think sl125 and I go back a long way with FC and are in danger of relying too much on what it was, rather than what it is evolving into. I used to complain about flippers, but it was FC that not only created the opportunity, but shamelessly exploited it by allowing high interest rates on large loans (before fixed rates) and more obviously gave the 2% cash back that was essential to grow the property loan book. Yes we all try to get the best return, and I sell property loans early, but please remember that FC laid out the pitch and wrote the rules, and rewrote the rules and ... and ... .
Ahem... p2pindependentforum.com/post/194766 
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sl125
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Post by sl125 on Jun 30, 2017 13:41:03 GMT
Yorkshireman: Presumably, you're referring to this quote about an E loan: "Now, how long to keep it, one month or two? Two weeks.  " This may have been in jest, but I'll bite in any case: The difficulty is if you sell an E after only 2 weeks you will not have crystalised a particularly large gain. eg. if you're "lucky" enough to have secured £5,000 on a large E loan, and you offload it after two weeks, the interest will only have been £42. If you hold it for 4 weeks that would have been £84 interest, or £186 over 8 weeks. Now, offset this against the probability of the loan going bad after 2 weeks, 4 weeks, 8 weeks, etc. Other than the one I referred to at the top of this thread, I have never had a loan go south under 3 weeks from the loan origination date, and crunching the loan book I can't see evidence of a material risk at those short timescales. So, one for the maths people: at a given interest rate and given risk profile, what is the optimum time to hold a loan before the risk outweighs the interest rate? |
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blender
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Post by blender on Jun 30, 2017 14:06:13 GMT
Thanks, Yorkshireman. Yes that's my recent post and I was a bit self critical of my delusion in the post above. I have just £1k in that loan, and it is one of only two FC SME loans I have, an impulse buy. Reading sl125's post has convinced my to sell it before the first payment on 13th July. People may buy it now at 3%. We shall see. (The other one a good looking C, which might make three months.) No SME loan is safe.
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blender
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Post by blender on Jun 30, 2017 14:21:57 GMT
Yorkshireman: Presumably, you're referring to this quote about an E loan: "Now, how long to keep it, one month or two? Two weeks. " This may have been in jest, but I'll bite in any case: The difficulty is if you sell an E after only 2 weeks you will not have crystalised a particularly large gain. eg. if you're "lucky" enough to have secured £5,000 on a large E loan, and you offload it after two weeks, the interest will only have been £42. If you hold it for 4 weeks that would have been £84 interest, or £186 over 8 weeks. Now, offset this against the probability of the loan going bad after 2 weeks, 4 weeks, 8 weeks, etc. Other than the one I referred to at the top of this thread, I have never had a loan go south under 3 weeks from the loan origination date, and crunching the loan book I can't see evidence of a material risk at those short timescales. So, one for the maths people: at a given interest rate and given risk profile, what is the optimum time to hold a loan before the risk outweighs the interest rate? 4907 went RBR on the eighth live day, when some surprise CCJs emerged, and it never went live again. This was in the days when FC's love and kindness policy was in place (with our cash) and they were reluctant to default anything that was still warm. To their credit, after 2 years and 9 months FC obtained a full recovery from the guarantor at the doors of the court, but their refund policy was still in place when they started. Do they still do that? Don't rely on it.
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mikeb
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Post by mikeb on Jun 30, 2017 17:28:00 GMT
Anyway, do FC not have a policy of bearing the loss if no repayments at all are made? Surprised no-one's touched this one ... Short answer: No. Longer answer: It was in part of FC's FAQs to investors that they would/could -- where fraud against FC had been detected -- cover this out of their own pocket. Note that when this very subject was brought up on the "Official FC Forum" (RIP) (respectful pause) -- it was initially officially stated that FC had no such policy and had never said they would do any such thing. Then when the page from the FAQs still making this claim was dug up, the response changed to "yes but that's not part of our terms and conditions". So just one of those misleading things a company says to make you feel comfortable, that they hope to weasel out on later. Gotcha. It is very rare for FC to cover these losses from their own pocket, even with/ especially with the "one payment and mysteriously ran out of money" quality loans. It would probably bankrupt them to make this a thing. Never mind policy!
In one case they returned investors money as it hadn't been disbursed yet. I don't count that as an FC goodwill gesture
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