by The Investor
on May 6, 2009
Alas it seems Zopa, the UK peer-to-peer lender, isn’t immune to the downturn – at least not if my recent experience is anything to go by.
Readers may recall I was worried that bad debts would rise at Zopa as far back as March 2008.
My fear was that consumers starved of finance by the credit crunch would get loans at Zopa (which claims to have more rigorous credit checks than the banks) before eventually succumbing to their debts.
Rising interest rates were obviously attractive to Zopa lenders, but did it suggest consumers were more desperate?
This is important because with Zopa, unlike a bank saving account, you can lose your money if your borrowers default.
Do not mistake Zopa for a savings account! Read my earlier article for more on the pros and cons of Zopa.
It seemed like my fears were misplaced as recently as January, when bad debt was still below Zopa’s projections. I’d not seen any bad debts!
But in the past few weeks two of my late payers have officially been written off as bad debts. That’s out of the 100 minimum-sized loans I’ve originated, and it represents 17% of my earnings to date from lending, though less than 2% of my initial Zopa ‘pot’.
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by The Investor
on May 5, 2009
This series has previously looked at the general principle of investing during a crisis, as well as how you might react to particular headline news events.
But crisis investing is also relevant to particular company stocks.
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by The Investor
on May 2, 2009
Every week I read a large number of personal finance and investing articles. Here’s my latest weekly shortcut to the best.
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by The Investor
on April 29, 2009
Part one of this series introduced crisis investing and looked at the opportunity to profit when vague fears affect the stock market.
But how should you react when a specific event makes headline news?
Some events can be very significant for both history and stock markets, such as the fall of the Berlin Wall or the two Gulf Wars. Yet their long-term consequences are hard to anticipate.
For instance, German reunification following the collapse of their Berlin Wall actually depressed the German economy for several years.
In contrast, Bush Sr. and Jr.’s two Gulf Wars saw stock markets decline until the onset of hostilities, and then rally hard when war broke out.
Specific significant events can provide opportunities
‘Buy on the sound of cannons, sell on the sound of trumpets’ is one of investing’s less palatable maximums, but one that makes sense in the context of the uncertainty discussed in part one.
While individual companies might well profit from war, I don’t believe buying on the cannons reflects a blood lust at the heart of capitalism.
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