Poll

Considering recent events are you investing in new notes at LC

I'm still investing in new notes
35 (56.5%)
I have stopped investing in new notes but will start up again once things settle down
11 (17.7%)
I've stopped investing in new notes but would start up again if LC sets up a BRV for notes
10 (16.1%)
I've stopped investing in new notes and don't intend to start up again
4 (6.5%)
I'm selling all my notes on Folio...LC is doomed.
2 (3.2%)

Total Members Voted: 62

Author Topic: Are you investing in new notes at LC  (Read 11038 times)

ktrdsl23

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Are you investing in new notes at LC
« on: May 24, 2016, 06:16:24 PM »
I've been reading a lot about different people's thoughts on the issue and thought this would be a good poll.  I'm currently somewhere between choice 2 and 3, probably more towards 3 (which is what I selected).

jz451

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Re: Are you investing in new notes at LC
« Reply #1 on: May 24, 2016, 06:28:57 PM »
I plan to continue buying only notes on Folio like I have done since I opened my account two months ago. With only a $1000 investment I can only buy 1-2 notes a month anyways and if I lose it all it's a small drop in the bucket anyways.

fliphusker

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Re: Are you investing in new notes at LC
« Reply #2 on: May 24, 2016, 08:57:08 PM »
I plan to continue buying only notes on Folio like I have done since I opened my account two months ago. With only a $1000 investment I can only buy 1-2 notes a month anyways and if I lose it all it's a small drop in the bucket anyways.
I am currently only buying on FOLIO too.  Deals have been too good to pass up.  If the deals were not so good, I would be buying notes normally on LC
I did vote for new, as there was no option for only FOLIO. 

jz451

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Re: Are you investing in new notes at LC
« Reply #3 on: May 24, 2016, 09:02:30 PM »
Unlike you and others however I have been buying notes at a 2-3% premium. My most recent buy last week was at a slight discount, .2% I think.

nmay2k

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Re: Are you investing in new notes at LC
« Reply #4 on: May 24, 2016, 10:06:45 PM »
I would buy new notes if any matched my criteria, but I don't think this will happen for a long while....

andy3109

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Re: Are you investing in new notes at LC
« Reply #5 on: May 24, 2016, 10:48:21 PM »
I've stopped. After 6 years I've realized that there are better investments out there that doesn't tie my money up for 3-5 years, and isn't unsecured. I'm going to wind down my account for now and invest in CF RS until LC interest rates go up.

investny

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Re: Are you investing in new notes at LC
« Reply #6 on: May 25, 2016, 03:27:29 AM »
I've stopped. After 6 years I've realized that there are better investments out there that doesn't tie my money up for 3-5 years, and isn't unsecured. I'm going to wind down my account for now and invest in CF RS until LC interest rates go up.

CF RS?

Fred93

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Re: Are you investing in new notes at LC
« Reply #7 on: May 25, 2016, 04:50:55 AM »
I've stopped. After 6 years I've realized that there are better investments out there that doesn't tie my money up for 3-5 years

The average dollar returns to you at the midpoint of the loan if there are no prepayments.  LC loans have quite a lot of repayments, so the wait is even shorter.  On the average your money is tied up 1 to 2 years.

dompazz

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Re: Are you investing in new notes at LC
« Reply #8 on: May 25, 2016, 11:50:51 AM »
You definitely need "Stopped buying new notes but am buying on Folio only"

BruiserB

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Re: Are you investing in new notes at LC
« Reply #9 on: May 25, 2016, 03:40:56 PM »
I've decided I probably have too much in Lending Club in general.  I had been thinking this before the recent news, but now I am actually doing something about it.  I'm not at all panicked by the situation but I'm doing the following.

I had recently added to an IRA account and I'm continuing to invest the idle funds that are there with new note purchases.  I keep hearing of the opportunities on Folio but really haven't had the time to figure that world out.  I will continue to reinvest payments into further notes and as of now will continue to fund the IRA with future contributions.

I am decreasing my taxable account holdings by not reinvesting payments.  As of now I haven't reinvested since the news dropped and I am withdrawing the cash from my account weekly after the Thursday payments credit to the account.  I am deploying these funds in various stock and bond ETFs.  I haven't yet decided if I will just stop reinvesting all together until my LC account drops to my desired value or if I will go with a withdraw for a month, reinvest for a month, alternating strategy for a while.  I would like to continue to keep some newer notes in my account and I had been moving to a more conservative strategy already, so this would help get that balance sooner.

LonghornSF

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Re: Are you investing in new notes at LC
« Reply #10 on: May 25, 2016, 04:31:05 PM »
I've stopped reinvesting, although to be fair I had stopped reinvesting for about the past year. There were really a combination of things that did it for me:

1) The tax inefficiency on a taxable account is a killer.
2) The lack of liquidity prevents me from ever investing in size, i.e. >10% of my net worth. Neither Prosper nor LC have taken tangible steps to create a real secondary market, i.e. not Folfio, which is discouraging. I don't want to have so much tied up in an illiquid asset.
3) The rates LC offered most of last year were not that attractive for C and higher grades. A-B were adequately priced but not that interesting to me in terms of total return.
4) Lack of BRV is a long term concern for me, even though LC will remain solvent for at least the next 4-5 years in my view.
5) LC hasn't proven that the business model is that viable. Even in 1Q16, they were only minimally profitable. If originations go down this quarter then LC is probably back in the red.

The scandal last week was the final straw for me. The whole P2P idea was interesting but frankly I'm not interested in taking a ton of risk for maybe a few hundred extra bps in return (at best), especially since almost all that return is given up due to the tax inefficiency. I do think its an attractive asset class for institutional investors though.

Fred93

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Re: Are you investing in new notes at LC
« Reply #11 on: May 25, 2016, 04:39:34 PM »
5) LC hasn't proven that the business model is that viable. Even in 1Q16, they were only minimally profitable. If originations go down this quarter then LC is probably back in the red.

I believe it is an absolute certainty that they will be in the red Q2.  There's just no way to make the arithmetic work to get a profit. 

For me, this is not a significant issue when deciding whether to buy their product (notes).  When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

SLCPaladin

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Re: Are you investing in new notes at LC
« Reply #12 on: May 25, 2016, 04:53:59 PM »
5) LC hasn't proven that the business model is that viable. Even in 1Q16, they were only minimally profitable. If originations go down this quarter then LC is probably back in the red.

I believe it is an absolute certainty that they will be in the red Q2.  There's just no way to make the arithmetic work to get a profit. 

For me, this is not a significant issue when deciding whether to buy their product (notes).  When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

I think LonghorlSF makes very valid points. I came to more or less the same conclusion. I have hit the pause button until I can detect a full return of confidence on the part of retail and institutional investors to the lending markets, or a BRV is in place, whichever happens first. Once I see Q2 results, I may wade back in as long as there seems to be a coherent strategy in place.

Your burger analogy is interesting, but I don't think it's entirely accurate. Picking a place to consume a food item is a one-and-done transaction.  Buying LC note as an investment is a continuous transaction and is based on trust and long-term viability of the issuer, and is therefore very different. The product of LC (its notes) is invariably tied to the solvency and long-term performance of the company. Perhaps a more appropriate analogy would be buying a gift card of, say, several hundreds (or thousands) of dollars to a burger joint which could be used once every month (and only once a month) to buy a certain quantity burgers. In this scenario, the health of the burger joint comes very much into play when deciding whether to buy a long-term gift certificate. If the burger joints finances deteriorate before the gift card is fully expired, then you've lost some of your investment. There is no risk when buying a single meal, but there is a temporal risk when buying long-term investments.

LonghornSF

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Re: Are you investing in new notes at LC
« Reply #13 on: May 25, 2016, 04:57:44 PM »
Quote
When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

 ::) This is a pretty ridiculous analogy and I think you know it. You won't be laughing if LC goes out of business and serious questions arise about who gets the proceeds from the notes.

nonattender

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Re: Are you investing in new notes at LC
« Reply #14 on: May 25, 2016, 08:15:25 PM »
Quote
When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

 ::) This is a pretty ridiculous analogy and I think you know it. You won't be laughing if LC goes out of business and serious questions arise about who gets the proceeds from the notes.

More hamburglary...

http://www.wsj.com/articles/lendingclub-fund-falters-1464218283
http://www.marketwatch.com/story/worrying-signs-from-lendingclub-investment-fund-2016-05-25

« Last Edit: May 25, 2016, 08:29:41 PM by nonattender »
A little nonsense now and then is relished by the wisest men.