I did not invest in Kuetzal and given recent news, probably I would never get the chance to.
I tend to gravitate away from ‘the new kid on the block’, sometimes it means that I miss the generous yield new investment opportunities offer to get traction and attract investors, sometimes it saves me money (as in this case). Maybe this is the reflex after I got burned investing in IPOs in 2006, maybe I am getting (older and) wiser.
My intention is not at all taking a victory lap here, even if I still remember multiple silly reviews like I invested in [insert platform X] for 1 month and I got 20%!!!1! you should too because in 1 month I did enough due diligence! (Narrator voice: no, you did not). Weeks ago I found this post and I could not decide if they were running a scam and were bold about it or were simply naive. In any case, this shows quite well how far complacency went; another good proxy of these bubbly times is that essentially all the good names for platforms are taken, every time I type Kuetzal I have to back and check the spelling (a marketing genius called its platform Lenndy because Lendy was already taken by a defaulted one…free advertising!).
I want to briefly discuss what this is going to mean for the rest of the p2p universe, on which I am still very bullish.
First, this event will (probably) clean away the weak hands from the market. Like 20% drops for stocks, these events bring investors down to Earth, remind that associated with outstanding returns there are outstanding risks and you are less smart that you thought. Investors screaming on forums, asking for their 6,75% risk-free return can go, pick up their DMC DeLorean and fly back to 2004.
At the end of the book about Jim Simons there is a table with the returns of the best money managers ever: five of them had annual returns above 20% for their career. Five. And those figures more often than not, as for Jim case, are the result of a collective effort. If you think that you can, most likely alone, achieve even 15% on a consistent basis, Mr Market is going to teach you an expensive lesson.
Less demand will bring yields up, or at least they will stop going down: people bidding recklessly for loans will start to re-assess each project, now that they know what buy-back guarantee really means. Platforms will also review their plans, having realised that the collective illusion is gone: look at Envestio precipitous U-turn regarding its COO.
Unfortunately frauds like this tend to swing the pendulum on the opposite side: if before investors were seeing only the gains and none of the risk, after even platforms that are managed responsibly will have hard times running their business. I hope this time will be different, since K)ç*;!$ was a young platform with few investors and journalists will find it hard to Google the company name, killing on the spot all the coming bad press for the sector.
Greed and fear baby, greed and fear.
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