Daytrading

I am half serious but the above graph is quite telling. I do not remember how long ago (I was taking a bus so before lockdown and it was cold, January?) in the Animal Spirits podcast, Ben asked Mike why there was not a BarStoolSport for finance. I do not follow BSS but it looks like an ESPN for millennials, with bloggers and podcasts. Mike rightly pointed out that the audience for sport is way bigger than people that follow the market…but that was the world before COVID. When there is no more sport to watch, and consequently no more betting, what is the most convenient way to release the adrenalin for the addicted? The first one to realise it was ElPresidente himself, who has now his audience to watch him while he day trade stocks and allegedly lose more than a million bucks. Recently he was also featured on CNBC.

After years of listening to people affirming that stock investing is like betting, the punters are now in the game for real.

What is has to do with p2p investors? As you can see from p2p-banking, volumes in April cratered. Feels like a stock screen of late March, lots of big red numbers. Bloggers monthly portfolio updates have vanished from my timeline. A (small) partial reason should be that platforms themselves tightened their lending standards and lowered the offer of new loans but cannot be the only reason, or the main one. Where investors have gone? Where are YOU?

The Asset Allocator

In March I decided to re-invest part of my p2p gains into more traditional assets: stocks, high yield bonds and commodities. If you plan to invest X% amount of your wealth in p2p, when the value of the other assets drops it make sense to re-balance your allocation (even if, as discussed before, I think that also p2p loan values went down, the issue here is to have the correct mark-to-market picture). With lower valuations, you can also expect future returns on those assets to be higher: if in January the return spread between p2p and corporate bonds was 7% and now is 5%, a different mix of p2p and corporate bonds will grant you the same return for a lower amount of risk. In my case, the shift was small because my p2p allocation is less than 10% of investable assets; the market also bounced back fast, leaving few pockets of really cheap assets to take advantage of. Were you part of this category as well?

The One looking for a free lunch

My hunch is that the biggest part that flew belongs to this category, investors attracted by the high yield that assumed came with no risk attached. In the recent past multiple platforms revealed themselves as scams, therefore the witch hunt to find the next one started with vengeance. If in 2019 the typical (and unfortunate) due diligence was:

  • it has a website ✔
  • it says that there is a buyback guarantee ✔
  • it says above 10% returns ✔

now I see multiple reviews of investors re-assessing their process…and abandoning platforms. The pendulum swung from full trust to overall scepticism; better late than ever on due diligence but as it is common in investing, the risk now is to throw away the proverbial baby with the hot water, as loans sold at 70 cents on the dollar on secondary markets demonstrate.

Investors were accepting the ‘lack of action’, the missing adrenaline typical of the stock market because they could see their gains accumulating everyday. Little by little, but miles faster than a saving account. Once that element was gone, the spell was broken, dreams of richness vanished. So back to the casino, where there are sure bets like investments in Amazon, Google & Co. that always pay.

Bonus Topic: say goodbye to your financial guru that never was

There is this guy that was a coder for Airbnb for five years; he accumulated a good number of company stocks during his tenure and was looking for the most promising IPO of 2020 to become a millionaire, retire and launch his own podcast. Then the virus arrived, the IPO got cancelled and Airbnb laid him off along with 25% of its workforce. He is now unemployed…but with a lot of time to launch his planned podcast. He is still the same guy: same skills, same interests, same books read, same advice.

Just. Fucking. Broke.

Would you listen to him? Would you listen to him the same way if he was a young, rich, successful living by the beach dude?

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