Where are you parking your cash?

conwy said:

Ok, I haven't looked into Plenti much, but from a quick search, it looks like peer-to-peer lending. I believe that would entail some risk of losing principle.

Don't get me wrong – I'd happily consider adding peer-to-peer lending to my risk asset allocation. But for the risk-free, stable part of my portfolio, I'm not sure that there is any debt security that could match a government bond in the home country.

What do you think?

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After taxes and inflation the government bond is guaranteed to lose.

In the last 10 years since Plenti started not a single investor has lost $1 in Plenti, they have a provision fund that covers losses if someone doesn’t pay their loan, there is currently $13 Million dollars in the provision fund, which is more than twice what is needed to pay the expected losses.

Even then if the provision fund was wiped out your loans are diversified across many many loans, so even then the higher interest paid on the good loans would cover the losses on the bad ones eg is if wiped out some of your interest you just end up with the lower return as you would get in a government bond.

Thanks for this interesting perspective.

Can I ask you some questions to try and understand this line of reasoning better?

divs4ever said:

i disagree , most nations can not maintain a balanced budget ( or a surplus ) , therefore i cannot feel secure owning debt of an entity that shows little fiscal responsibility ( if your quote was sarcasm , i guess i missed it completely )

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Suppose Australia cannot maintain a balanced budget, and for this reason, eventually defaults on its bond-holders.

In that case, do you think they might also be forced to liquidate all superannuation accounts?
Do you think they might also be forced to eliminate the pension?
And do you think this would cause the country's currency to plummet?
Finally, in this kind of severe crisis, could the government even be forced to expropriate some of the wealth of its citizens, including peer-to-peer lending accounts such as Plenti?

I'm trying to picture in my mind the scenario in which Australian bonds are defaulted on, but all else stays the same, and I confess I have difficulty. I have even more difficulty imagining a scenario in which bonds, cash and index funds all plummet but only peer-to-peer lending accounts survive.

I don't mean to make a caricature or straw-man of this argument. Maybe it has merit and I'm just lacking some insight.

Also I suppose anything might happen, so diversification is generally a good idea, so probably to be fully diversified I should have a bit of wealth in peer-to-peer accounts such as Plenti and in various individual indeces and stocks as well as in Crypto, etc. just in case.

To be honest sometimes I worry I've been duped by academic research. Though a lot of good comes out of academia, I can't help but worry that there's also a truck load of political bias, and also that the data on which their "evidence" is drawn is always backward-looking and might not be a reliable guide to predicting the future.

Do I sound conspiratorial?
Do you have any general thoughts on the above?

divs4ever said:

currently split ( unevenly ) between a ( higher interest ) saver's account , and a holding account at one of my trading platforms , in theory , ready for quick deployment into the stock market

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Cool - I forgot to mention but I also have small amounts in my trading platform for the same purpose, and also in multiple currencies.

Value Collector said:

After taxes and inflation the government bond is guaranteed to lose.

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I did some calculations and it I believe that particular bond, GSIU27, at its current price of ~$113.28 and adjusted face value of ~$115.52 would not lose in terms of nominal value + CPI, if held to maturity, and assuming tax rate of 40% on both the coupons and principle adjustment (the highest tax bracket). In fact it would gain a small amount.

That said...

Value Collector said:

In the last 10 years since Plenti started not a single investor has lost $1 in Plenti, they have a provision fund that covers losses if someone doesn’t pay their loan, there is currently $13 Million dollars in the provision fund, which is more than twice what is needed to pay the expected losses.

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This sounds very reliable the way you put it. Perhaps I should look to diversify into Plenti as well.

I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off, Oct-Dec 25.

If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.

I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13. Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid. Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.

againsthegrain said:

I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off, Oct-Dec 25.

If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.

I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13. Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid. Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.

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Plenti does have other shorter term markets, but the interest rate is lower.

One thing to consider though is that the plus market can contain loans up to 5 years, the monthly repayments are principle and interest, so you don’t have to wait the full five years to get your cash back, the capital is paid back over the 5 years.

Also, a lot of borrowers make additional payments or pay their loans off early, so it’s not like a term deposit where your full capital amount is locked away for 5 years.

(The 9.2% note market is locked away for the full 3 years though, although interest is paid monthly).

conwy said:

Thanks for this interesting perspective.

Can I ask you some questions to try and understand this line of reasoning better?



Suppose Australia cannot maintain a balanced budget, and for this reason, eventually defaults on its bond-holders.

In that case, do you think they might also be forced to liquidate all superannuation accounts?
Do you think they might also be forced to eliminate the pension?
And do you think this would cause the country's currency to plummet?
Finally, in this kind of severe crisis, could the government even be forced to expropriate some of the wealth of its citizens, including peer-to-peer lending accounts such as Plenti?

I'm trying to picture in my mind the scenario in which Australian bonds are defaulted on, but all else stays the same, and I confess I have difficulty. I have even more difficulty imagining a scenario in which bonds, cash and index funds all plummet but only peer-to-peer lending accounts survive.

I don't mean to make a caricature or straw-man of this argument. Maybe it has merit and I'm just lacking some insight.

Also I suppose anything might happen, so diversification is generally a good idea, so probably to be fully diversified I should have a bit of wealth in peer-to-peer accounts such as Plenti and in various individual indeces and stocks as well as in Crypto, etc. just in case.

To be honest sometimes I worry I've been duped by academic research. Though a lot of good comes out of academia, I can't help but worry that there's also a truck load of political bias, and also that the data on which their "evidence" is drawn is always backward-looking and might not be a reliable guide to predicting the future.

Do I sound conspiratorial?
Do you have any general thoughts on the above?



Cool - I forgot to mention but I also have small amounts in my trading platform for the same purpose, and also in multiple currencies.

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not if the Australian Government ( or some State Governments ) were in a default situation ( the non-repayment of due debt ) i would think they would arbitrarily extend the maturity date ( maybe even to 100 years , which is effectively 'perpetual' ) they might do that selectively ( capture cheap debt for extended terms but repay the expensive debt ) or do that across the board , because if normal bond-buyers suspect a potential default , they are unlikely to buy enough bonds to cover the due redemptions

i THINK the Australian ( or State ) government are less likely to get themselves into a situation where they can no longer repay interest commitments ( unlike some nations , who need to borrow to service the outstanding debt )

now corporate and peer-to-peer debt NEED a credit-worthy reputation ( or a very messy restructure process is coming ) so if CAREFULLY chosen corporate debt ( at it's higher interest ) can be an interesting choice

now let's go down a potential rabbit hole and cash disappears ( and turns into a CBDC ) your credit ( currency ) system , is controlled microscopically by a fiscally irresponsible entity whose associate ( the Reserve Bank ) can't reliably predict the economic data despite having the ability to manipulate the said data .

AND they still need to borrow YOUR credits ( along with your taxes ) to keep the system afloat , do YOU still trust them enough to lend them your productivity ( credits )

to extend that further do you let the Government repay existing debt obligations ( to YOU ) in CBDCs after all they will just create them on a server like SBF did

the Pension ??

the pension has been planned to disappear , now for a L-O-N-G time ( since at least the '80's ) ( according to former Government insiders ), HOWEVER there is a problem , how do you kill pensions but leave politicians and government fat-cats on the 'gravy-train for life '

jealousy can be VERY dangerous ,

Keating devised the compulsory superannuation ( to replace the pension .. in time )

however as a former State MP once told me , ' NEVER get between a politician and a pile of money' ( and super looks just like a pile of cash ... outside of the reach of the rightful recipient )

so in 2010 , i liquidated my Super ( as pathetic as it was after fees and charges )

since then i have watched aghast as various entities urged the plundering of managed super funds , including investing in the US and a lesser extent of the EU ( easier to blame than fee-gouging ) ( not to mention the traditional 'safety net' of sovereign bonds )

add in a dash of inflation , and let's see who has a usable nest-egg left in super ( assuming we haven't switched to CBDCs )

diversification into WHAT ?? is the question , what will be safe ( or even profitable , in the future )

** Do I sound conspiratorial? **

the more important question is ... are you right ??

your financial future depends on that

cheers

( question everything )

againsthegrain said:

I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off, Oct-Dec 25.

If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.

I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13. Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid. Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.

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Value Collector said:

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I actually got rejected when applying for note market doing the questionnaire. I think it was the question which asked do I see it as high risk or medium risk, obviously having shares pm some crypto I see the note market as no more then medium risk, or maybe answering I would devote less then 25% of my worth into the investment as they want larger investors? who knows I only applied to have the option there not really jump on it atm

againsthegrain said:

I actually got rejected when applying for note market doing the questionnaire. I think it was the question which asked do I see it as high risk or medium risk, obviously having shares pm some crypto I see the note market as no more then medium risk, or maybe answering I would devote less then 25% of my worth into the investment as they want larger investors? who knows I only applied to have the option there not really jump on it atm

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I think the questions are worded in a way that they are trying to attract certain types of investors to the notes market.

But, but reading the PDS I think I got enough clues into what answers they were looking for in the questionaire.

The notes seem to be targeted to people that would qualify for sophisticated investor status, I think that’s what they are trying to gauge with the questions.

Value Collector said:

I think the questions are worded in a way that they are trying to attract certain types of investors to the notes market.

But, but reading the PDS I think I got enough clues into what answers they were looking for in the questionaire.

The notes seem to be targeted to people that would qualify for sophisticated investor status, I think that’s what they are trying to gauge with the questions.

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Yeah obviously they don't want mums and dads that will lose life savings, I thought I gave them all the right answers. The medium/high risk question was one that stood out to me. Either you come off as a gambler with appetite for risk or willing to take on medium risk as part of a calculated investment strategy.. I guess I didn't take the gamble and chose the high risk option ?

from Christopher Joye (Coolabah) :
.
The Australian Prudential Regulation Authority is reviewing the possibility of raising the equity capital ratio threshold at which point hybrids automatically convert into ordinary shares. Since 2013, this has been calibrated at a common equity tier one (CET1) capital ratio of 5.125 per cent. Given the dramatic improvement in CET1 ratios, there are sensible reasons why APRA might want to lift the trigger level higher on a globally harmonised basis.

Any prospective changes will only apply to new hybrids, not existing securities, and will not be finalised until next year. But if new bank hybrids issued after 2024 carry higher equity conversion probabilities, Coolabah’s modelling implies that these securities should command wider credit spreads (and higher yields) relative to incumbent assets.

APRA has further made the case that banks should be encouraged to do more issuance in the unlisted over-the-counter market dominated by institutional investors. Coolabah has long tried to convince the major banks to issue more OTC hybrids to complement their ASX supply. To date, only NAB has been persuaded.

If there is extra OTC supply, this should come with more attractive spreads relative to ASX securities if the NAB precedents are any indication. There would also be decent switching from ASX hybrids into the OTC alternatives given that high net worth individuals who control the listed market are very active in the OTC space.

There is an unusually large number of hybrid maturities in 2024, which will be supplemented by extra issuance from banks seeking to get ahead of APRA’s changes. All roads would, therefore, appear to lead to wider spreads next year. With the RBA unlikely to cut interest rates any time soon, this should mean superior yields. The principle of higher yields should also apply to any illiquid asset in 2024.