Investing in the finance crisis
The Wall Street domino has toppled just about everything in sight: U.S. stocks large and small, within the financial industry and outside of it; foreign stocks; oil and other commodities; real-estate investment trusts; formerly booming emerging markets like India and China. Even gold, although it has inched up lately, has lost 10% from its highs earlier this year. Not even cash seems entirely safe, as money-market funds barely averted a “run on the bank.”
So reads the Wall St Journal’s “Intelligent Investor” for September 30th. Me, I’ve paid off my car loan–I figure JPMorganChaseLehmanWashigtonMutual could really use some more cash, and it’s a guaranteed 6% for me.
But that was my last debt, which means that I have no other safe returns. As I think about the crisis, one element that jumps out is how poorly the financial sector has matched money to risk. But I figure I might be able to do better. So I started looking at the well-publicized Kiva, to make loans, but it seems that these loans are all of the ‘feel-good’ variety, which is to say there’s no premium or return. And while I might place some money through Kiva for feel-goodness, I don’t want my best outcome for investing to be “and I don’t lose money.” So I’m looking at organizations like Prosper or Zopa (personal loans) or Fynanz (student loans).
I like the dis-intermediation aspects of these services and their chaotic and libertarian nature. Do any of our readers have experience with these, or services like them? Should I instead look to loan to people I know?
It seems that as the entire financial system of the US is consolidated into three institutions, there’s room and demand for some interesting and new structures to emerge from the chaos.