rolosrevenge
Dr. EVS
Thanks for that, I got 250 shares as well. This is a good start. i expect it to sink a little in the coming days before popping up again.
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Lending Club
- Thread starter austinEV
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Thanks for that, I got 250 shares as well. This is a good start. i expect it to sink a little in the coming days before popping up again.
I wish I had a fully fleshed-out analysis of LC as a stock. On one hand, they have historically experienced exponential growth in business. They are a tiny part of their market (consumer lending, even smaller if you consider all lending as they are). They have a good, driven ceo. They have a good product that I know well and like a lot. By all those criteria have had occasional thoughts that I should go in in a major way, like 50% of account value major way.
On the other hand, the very value they bring to the market place that makes them a good product is that they take minimal fees. As such, it seems they don't make much money. That is bad. Furthermore, they don't seem to have any new revenue sources or anything on the horizon to look forward to.
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The bull case it seems, is that it doesn't matter if they take small fees if they keep growing to enormous levels. Many of their costs are probably fixed, so growth should flow through to the bottom line.
The bear case is that they have to pay marketing costs to acquire that new business, so growth will not mean higher gross margins and they will forever be sorta barely profitable.
thoughts?
NuclearPowered
Member
I am looking to setup a LC portfolio similar to yours. Are you screening deeper into each loan beyond these filter parameters? Do you bother even reviewing each loan in FolioFn or do you feel comfortable enough with the filtering to just mass buy the notes? Are these parameters still up to date?
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Nikxice
Active Member
Glad that I just happened to click "Off Topic" and stumble across this thread. I've been doing LC since 2007 or 2008. I started with a few thousand dollars. In 2010 LC changed their IRA policy to no fees, so I sold off a couple of old IRA mutual funds and moved the cash into a LC IRA. I use CAMA as a third party transfer agent and LC picks up the yearly fee. CAMA is located in PA, but I believe that LC is now working with a different company. Mine is set up as a regular IRA, not a Roth, but the nice thing is that I don't have to deal with the yearly IRS computation hassles. If you currently have a taxable LC account, you or your CPA has to deal with calculating earned interest vs. charge offs or bad debt every year. Someday I'll just pay the IRS fees as regular income, based on my future yearly withdrawals.
Overall I'm pleased my results. I'm looking at over 7000 loans that are current and valued around 160K. I like risk, average loan at 17.5%. For Dec 2014 I had more than 40 defaults that were charged off to the tune of 1065.00 bucks. I'm now looking at just over 200 loans that are 31 to 120 days late. Certainly another 40 to 50 will be charged off this January. Ouch, right? Not really! The interest payments into my account for December exceeded $2200.00. I'm hovering at around 9.3 NAR. As austin has described, it's a bit of a part-time job. I use a couple of loan screening filters that make the job easier. I have several filters set to specific preferences. I'll just list a couple for now, along with my rational. I only loan to individuals that hold a mortgage. I'll still see defaults, but I believe there's less potential for LC to process a fraudulent loan. Because borrowers do not put up any collateral, investors have virtually no control over who gets approved. There are always some bad guys out there looking to game the system. Also, I do not loan to anyone with a public record. Whether it's an old bankruptcy or just some bad store credit, if they've walked away once, that temptation will likely always exist.
The successful LC IPO is great news. Good for stockholders, borrowers, and lenders. More states can now participate in this lending model. Just like TSLA stock, the key will be the ability for LC to generate future growth. LC has made a couple of purchases recently of small loan companies and I think that some of the IPO money will be headed into this kind of growth.
Now that I'm aware of this thread I'll check back again. Safe driving and good luck to all!
Overall I'm pleased my results. I'm looking at over 7000 loans that are current and valued around 160K. I like risk, average loan at 17.5%. For Dec 2014 I had more than 40 defaults that were charged off to the tune of 1065.00 bucks. I'm now looking at just over 200 loans that are 31 to 120 days late. Certainly another 40 to 50 will be charged off this January. Ouch, right? Not really! The interest payments into my account for December exceeded $2200.00. I'm hovering at around 9.3 NAR. As austin has described, it's a bit of a part-time job. I use a couple of loan screening filters that make the job easier. I have several filters set to specific preferences. I'll just list a couple for now, along with my rational. I only loan to individuals that hold a mortgage. I'll still see defaults, but I believe there's less potential for LC to process a fraudulent loan. Because borrowers do not put up any collateral, investors have virtually no control over who gets approved. There are always some bad guys out there looking to game the system. Also, I do not loan to anyone with a public record. Whether it's an old bankruptcy or just some bad store credit, if they've walked away once, that temptation will likely always exist.
The successful LC IPO is great news. Good for stockholders, borrowers, and lenders. More states can now participate in this lending model. Just like TSLA stock, the key will be the ability for LC to generate future growth. LC has made a couple of purchases recently of small loan companies and I think that some of the IPO money will be headed into this kind of growth.
Now that I'm aware of this thread I'll check back again. Safe driving and good luck to all!
I keep letting the parameters slide. I generally do this:
phase 1: super picky
13%ytm
at least 6 payments made
<1% markup
36 month notes
rising credit score
At this point there is usually zero notes that meet that criteria. if there is 1-2 I buy them.
Phase 2: less picky
13% ytm
at least 4 payments made
<1% markup
36 or 60 month
rising credit score
there might be 10-15 at this point. buy them sight unseen.
Phase 3: even less picky
13% ytm
at least 4 payments made
<1% markup
36 or 60 month
rising or flat credit score
Usually quite a few notes. Buy sight unseen. sometimes I quit, sometimes I go on
Phase 4: get it done
15% ytm
at least 6 payments made
< 2% markup
36 or 60 month
rising credit score
Now I am swimming in notes. I order by highest ytm. I think lots of people filter for markup.
No I never look at note details anymore. It's a numbers game for me now.
edit: all of these are also "never late"
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Nov and Dec were rough. Haven't dug into why yet.
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Nikxice
Active Member
austin, I'm surprised at the volatility, but it's good to see that your portfolio is bouncing back! It probably has to do with the large cash infusion that you made just over a year ago, and the returns vs. defaults that are just settling out. Although I set up a folio account with LC a few years ago, I've stuck with investing solely in original, new loan offers. Some day I'll probably try folio, but right now it looks more complicated than it probably is. My return holds steady around 9.3% and that's adjusting NAR for potential defaults over the next 120 days. Without that factor it shows up around 10.7%, plus or minus .1% on any given day. To get a handle on my real return I plan to track all of 2015 to more closely calculate my gains.
On another note, have you or anyone else tried the LC website in your Tesla? I've found that it works fine, although a little slow and quirky. For example, I typically have to tap on the screen twice to fill in number fields or access an icon. I'm not a computer nerd, but maybe it has something to do with the Linux platform that Tesla uses. Most active LC users are aware that new loans are issued 4 times a day. When I'm on the road I've found the 3G signal handy on several occasions. A couple of times I've had friends onboard when I've pulled into a parking lot to pick loans. When they express interest in my financial hobby, I usually start off with a line like, "I enjoy loaning tens of thousands of dollars, to thousands of perfect strangers over the internet!" The look on their faces is usually priceless. However, that look often goes away after I explain that each month I earn enough money to pay the equivalent of a Tesla car loan. Then the questions really start flying!
On another note, have you or anyone else tried the LC website in your Tesla? I've found that it works fine, although a little slow and quirky. For example, I typically have to tap on the screen twice to fill in number fields or access an icon. I'm not a computer nerd, but maybe it has something to do with the Linux platform that Tesla uses. Most active LC users are aware that new loans are issued 4 times a day. When I'm on the road I've found the 3G signal handy on several occasions. A couple of times I've had friends onboard when I've pulled into a parking lot to pick loans. When they express interest in my financial hobby, I usually start off with a line like, "I enjoy loaning tens of thousands of dollars, to thousands of perfect strangers over the internet!" The look on their faces is usually priceless. However, that look often goes away after I explain that each month I earn enough money to pay the equivalent of a Tesla car loan. Then the questions really start flying!
NuclearPowered
Member
Austin,
I am reading this. I've had my portfolio for over a month now and have an initial NAR of about 15%. Mostly comprised of C,D and E notes.
I have been buying using filters similar to yours, and immediately placing up for sale all the notes at a 2% premium. About 5% sell within the first week or so. One slipped to grace period, which I sold immediately for a 12% discount.
Please keep updating.
I am reading this. I've had my portfolio for over a month now and have an initial NAR of about 15%. Mostly comprised of C,D and E notes.
I have been buying using filters similar to yours, and immediately placing up for sale all the notes at a 2% premium. About 5% sell within the first week or so. One slipped to grace period, which I sold immediately for a 12% discount.
Please keep updating.
That is what I am thinking too. This might be an echo of the large number of purchases I made a year ago.
No I haven't messed with the LC website on the Tesla console. I have learned not to depend to much on that browser, it is indeed glitchy.
Austin, thanks for your posts. It is interesting to read about your thinking and learning process and how you transform that into action.
I have been following, for educational reasons and curiosity. Investing in LC seems to require continuous attention and work. That hurdle prevents me from investing, but I like the concept.
I have been following, for educational reasons and curiosity. Investing in LC seems to require continuous attention and work. That hurdle prevents me from investing, but I like the concept.
It takes me 5 minutes, twice a week to buy notes. I spend 5 min 1-2 other times a week to take data for this exercise (just checking the website and getting a few numbers.). It isn't that bad.
Of course, any financial professional will tell you that this should be part of a balanced portfolio. They tend to approach it like toxic mortgage debt. I mean it is "scary" consumer debt. But, so what, this is what banks make billions off of. I can't square this with the idea that this is a risky new idea. This is the unriskiest, oldest banking concept there is.
rolosrevenge
Dr. EVS
yeah, I only bought a little bit since I could never really articulate a good reason to own the stock over the product.
In fact, that might be the best single sentence argument to NOT own the stock, since the stock will always be competing with the product as an investment.
I bought a little bit as well, and it doesn't compare to my "experiment" in LC. Fortunately though, I didn't buy until it had dropped to $20 a share so I'm not feeling much pain yet.
Update for Feb/March
My LC is had 2 good months. No apparent hangover from the odd Nov/Dec of last year. IRR of 9.85% and monthly incomes (net writeoffs) of $1611 and $1897. Try getting that from a bank.
So I am changing my accounting for the better. LC has a good feature that took me a while to get used to. They have two ways to look at your numbers, with a literal switch to switch between them. One is the classic way, in which all of your notes are worth their face value until the moment they get written off, at which time the value goes to zero. The other way is a risk-adjusted look, in which your notes are pro-rated down in value based on how late they are. So if you have a $25 face value note that is 15 days late, they apply the appropriate default risk (say 15%) and value the note at $21.25. Notes that are later get pro-rated down further based on the more dire categories. This is a legitimate way of accounting for this risk, so I am adding new risk-adjusted metrics. Balance with risk numbers, Monthly return with risk numbers and below just a chart of the balance at risk (the dollar value of these discounts-- the amount I can expect to eventually lose).
So, instead of 9.85% I should really say I am getting 9.07% to account for losses in the pipeline. Still quite good.
My balance is edging up because I stopped withdrawing for now.
At risk total in $: This is the amount I should expect to default, statistically. Note it jumps around as notes are written off (causing a drop here, since it is no longer a "risk" it is dead, the loss gets transferred to the actual balance which drops.). It jumps up when notes enter lateness. It jumps down if notes get current too, reflecting a reduction of risk. The question is, is this number growing alarmingly? It is really sparse right now but it is about 12% per month averaged over the last 3 months. (11%, 19%, and 2%). that is at least bad in the sense that it is growing faster than the balance suggesting that yield will go down over time. (I think, I am venturing into second derivatives here)
Thoughts?
My LC is had 2 good months. No apparent hangover from the odd Nov/Dec of last year. IRR of 9.85% and monthly incomes (net writeoffs) of $1611 and $1897. Try getting that from a bank.
So I am changing my accounting for the better. LC has a good feature that took me a while to get used to. They have two ways to look at your numbers, with a literal switch to switch between them. One is the classic way, in which all of your notes are worth their face value until the moment they get written off, at which time the value goes to zero. The other way is a risk-adjusted look, in which your notes are pro-rated down in value based on how late they are. So if you have a $25 face value note that is 15 days late, they apply the appropriate default risk (say 15%) and value the note at $21.25. Notes that are later get pro-rated down further based on the more dire categories. This is a legitimate way of accounting for this risk, so I am adding new risk-adjusted metrics. Balance with risk numbers, Monthly return with risk numbers and below just a chart of the balance at risk (the dollar value of these discounts-- the amount I can expect to eventually lose).
So, instead of 9.85% I should really say I am getting 9.07% to account for losses in the pipeline. Still quite good.
My balance is edging up because I stopped withdrawing for now.
At risk total in $: This is the amount I should expect to default, statistically. Note it jumps around as notes are written off (causing a drop here, since it is no longer a "risk" it is dead, the loss gets transferred to the actual balance which drops.). It jumps up when notes enter lateness. It jumps down if notes get current too, reflecting a reduction of risk. The question is, is this number growing alarmingly? It is really sparse right now but it is about 12% per month averaged over the last 3 months. (11%, 19%, and 2%). that is at least bad in the sense that it is growing faster than the balance suggesting that yield will go down over time. (I think, I am venturing into second derivatives here)
Thoughts?
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scottf200
Well-Known Member
Love your graphs. That is excellent to track them both. I turned on Adjusted Net Annualized Return (ANAR) vs Net Annualized Return (NAR) as soon as I realized what it was. Lending Club has not always had that but I recall reading a pretty good and well distributed/published article that gave them a "hard time" for not account for losses and showing inflated returns.
Personally I overrode the adjustments amounts to be even more conservative. You can do that here: https://www.lendingclub.com/account/investorReturnsAdjustments.action
My settings:
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Good to do if you don't want to fool yourself into thinking you have more than you really do. I considered changing them, but I am comfortable using their numbers since it is based on their statistics. I expect I should get a little worse since my risk profile is a little aggressive. Hmm, maybe I should do it after all.
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