Author Topic: Worst Month Yet  (Read 160152 times)

Rob L

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Re: Worst Month Yet
« Reply #435 on: February 26, 2017, 12:34:49 AM »
"If it weren't for bad luck I'd have no luck at all ..."

Gloom, despair and agony on me. Deep dark depression, excessive misery. If it weren't for bad luck I'd have no luck at all...Gloom, despair and agony on me ;)

Heard this tune sung many times on a deeply philosophical tv show named HeeHaw during the late 60's!!!
https://www.youtube.com/watch?v=BkzE23pyME4
That was hilarious! My wife and I reminisced about watching that show on Sunday nights with our families. We just watched several youtube videos.

BTW, I currently have 51 IGPs and I'm at the fairly conservative end of the note grade investor!!

Dang it...had that song echoing through my mind yesterday...finally got rid of it after a couple of hours....now you just went and started it up all over again. :o

Hee Hee Hee, Haw Haw...
Hee Hee Hee, Haw Haw...

LOL  ;D

BruiserB

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Re: Worst Month Yet
« Reply #436 on: March 01, 2017, 12:14:06 PM »
After conclusion of February, both my Taxable and IRA accounts have Year to Date XIRR of -1.35%  :-(

jheizer

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Re: Worst Month Yet
« Reply #437 on: March 03, 2017, 09:14:38 AM »
Monthly statements are up...

Not worst month yet, but still pretty crap.



My interest - losses netted $0.27.  Glad this chart doesn't account for the 1% payment fees....

I also decided to plot a new piece of data the other night.  This is the total number of loans in each status for a given month going back 14 months.   While the graces have been holding high, the lates are dropping.  But check out that Charged off curve!

« Last Edit: March 03, 2017, 09:17:20 AM by jheizer »
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apc3161

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Re: Worst Month Yet
« Reply #438 on: March 03, 2017, 09:45:08 AM »
I got crushed in February, my worst month since I started more than 3 years ago. That makes two months in a row with personal record-setting net losses and judging by the amount of loans I still have going into grace, late, default and early payoff, It's likely I could be booking a rather big net loss in 2017. It hurts to think about erasing gains from prior years.

I stopped reinvesting in June of last year and it has been painful ever since, monthly net losses in 5 of the last 8 months, with charge-offs accelerating each month and interest dropping fast.

I know I keep harping on this but more than 1,100 of my notes to date have paid off in full early. That's a lot of borrowers whose interest I needed each month to offset this nagging problem of defaults. I don't think it's fair that LC brushes over this pre-payment phenomenon. We know they give second loans to borrowers and we know that some percentage of borrowers use their second loans to pay off their first ones. As someone who is probably going to lose more than $1,000 this year with LC, I think it's long overdue that LC eliminates the 1% penalty assessed to investors on early pre-payments and that LC discloses everything it knows about pre-payments and allow us to decide how to act on that data.

I do not appreciate that LC refers to retail investors as resilient in an earnings call, while going on to talk about how banks are basically their only priority.

I want to know everything they know about early payoffs. I want the 1% penalty eliminated. I don't want to hear about how resilient I am while looking down the road at losses while they pat themselves on the back for transparency and celebrate how many banks they've brought on board.

This was also my worst month. Sadly, the only thing you can do is stop investing money there, withdraw, and explain to them what they need to do in order to get your money brought back into LC.

apc3161

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Re: Worst Month Yet
« Reply #439 on: March 03, 2017, 10:28:37 AM »
Looking at LC most recent quarter statement (see attached), it's clear retail investors have been pulling out to a large extent (rightfully so, we just don't feel like a priority at all). We are now a small percentage of their funding. Either LC will take large steps to retain us by addressing all of our concerns (such actions will be obvious), or they will simply write us off as not worth the trouble, address none of our concerns, and be content with us leaving and focus more on banks, hedge funds, etc.

nonattender

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Re: Worst Month Yet
« Reply #440 on: March 03, 2017, 12:27:06 PM »

  • A retail investor buys the note of a borrower's first loan with LC
  • LC offers borrower a 2nd loan after positive performance
  • A bank (or any other investor) buys that note
  • Borrower pays off their first loan with their second loan
  • Retail investor gets hit with a 1% penalty on outstanding principal for an early payoff
  • Retail investor loses a good paying note
  • Bank gains a tried and tested borrower at the expense of a retail investor
  • Bank wins, retail investor foots the bill

Edit, above.  I realize it's tempting to blame the banks, but the notes are callable (as you are discovering) with no call cushion (prepayment penalty), which leads to reinvestment risk, at scale, when either borrowers seek to refinance to a lower rate / longer duration or when originators seek to refinance those borrowers, pull vs push, due to either borrower or platform's discovery of an altered perception/profile of risk.  That part, I believe, you have generally correct.  But this can affect any investor, not just a retail investor - unless you've discovered that banks are getting some preferential treatment, as far as being the lenders on new notes resulting from the call of the existing notes.  I think that may just be an artifact of the reinvestment risk / no prepayment fee / no front-end loading of interest that you've "newly" discovered, since banks invest primarily in A/B/C notes, anyway, and would most likely therefore be the benefitors of this cycle.  (Joke:  "How do you best invest in E/F/G notes?  Wait 9 months and buy A/B/C notes!")

ETA:  Or, if you're feeling particularly conspiratorial, maybe you should tilt at the windmill of "Does LC solicit bank-owned whole loans for refinance at the same rate that it does for fractionals - or is there something contractual precluding that?"  Good luck with that one... ;)
« Last Edit: March 03, 2017, 12:41:34 PM by nonattender »
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Fred93

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Re: Worst Month Yet
« Reply #441 on: March 03, 2017, 12:30:39 PM »
Here's one potential conflict of interest I see:
  • A retail investor buys the note of a borrower's first loan with LC
  • LC offers borrower a 2nd loan after positive performance
  • A bank buys that note
...

This is a narrative you invented.  That's all.  There is NO evidence that this happens at a rate which makes it significant.  People have found A FEW pairs of loans where the borrower's credit history matches between the two loans, but not enough to make an argument that you are being hurt by this hypothesized behavior.

Here's another potential conflict of interest: A flying saucer lands on the Lending Club roof every day, providing them with information about he future, allowing them to sell to banks the loans that are going to pay off, while dumping the bad loans on you.
« Last Edit: March 03, 2017, 12:59:24 PM by Fred93 »

SeanMCA

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Re: Worst Month Yet
« Reply #442 on: March 03, 2017, 12:45:44 PM »
Rule #1: If it can happen, and they can make money on it, it will happen.

I'm a merchant cash advance veteran exploring the p2p lending waters.

nonattender

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Re: Worst Month Yet
« Reply #443 on: March 03, 2017, 12:57:18 PM »
There is NO evidence that this happens at a rate which makes it significant.  People have found A FEW pairs of loans where the borrower's credit history matches between the two loans, but not enough to make an argument that you are being hurt by this hypothesized behavior.

In Sean's defense, it's a real phenomenon.  We have Renaud Laplanche on the record saying that 14% of orig at one time were refi's...  Reinvestment risk is as real in the bond market as it is with these notes.  The notes are callable and subject to being paid off and refi'd whenever rates and/or risk profiles change (or are perceived to have changed).  The "argument" is over magnitude of the effect - not if there's really an effect.  As far as some guy doing loose-matching with who-knows-what criteria to "identify repeat borrowers", I can do that ninety different ways and come out with just about any answer I set out to find.  Sean's correct that only LC "really knows" the #s.

http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/reinvestment-risk.asp
http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/reinvestment-income-reinvestment-risk.asp

Have fun storming the castle.
A little nonsense now and then is relished by the wisest men.

Fred93

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Re: Worst Month Yet
« Reply #444 on: March 03, 2017, 12:59:50 PM »
I'm hurt that you're not moving forward with the flying saucer idea.

nonattender

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Re: Worst Month Yet
« Reply #445 on: March 03, 2017, 01:02:51 PM »
I'm hurt that you're not moving forward with the flying saucer idea.

I would, but I am too afraid of the black helicopters and have to console myself with inserting links to educational articles at investopedia.
A little nonsense now and then is relished by the wisest men.

jheizer

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Re: Worst Month Yet
« Reply #446 on: March 03, 2017, 01:06:18 PM »
Said loose matching guy had offered to run any combination that anyone wanted FWIW and I even ran out someone's 20% scenario (though you gave no specific details)

Edit: Bah, I crossed names.  Tell me what you want and I'll do it.
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nonattender

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Re: Worst Month Yet
« Reply #447 on: March 03, 2017, 01:15:21 PM »
Said loose matching guy had offered to run any combination that anyone wanted FWIW and I even ran out someone's 20% scenario (though you gave no specific details)

Edit: Bah, I crossed names.  Tell me what you want and I'll do it.

Nothing personal.  I just don't think it can be done very well / don't want to figure it out, personally.  I think that "Grade" (as a dependent variable, set by LC on a case-by-case/combinatoric basis) being included in the analysis destroys any credibility.  I don't see a clear way...

When an "A" can have a FICO of 680 and an "E" can have a FICO of 770, you have to, effectively, reverse engineer LC's Grading algo...

Not my cup of tea - I'll settle for the saucer.
A little nonsense now and then is relished by the wisest men.

investor88

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Re: Worst Month Yet
« Reply #448 on: March 06, 2017, 02:01:16 PM »
If you look at the ‘Understanding Your Returns’ chart, the interest rate falls very far over time.  Once your portfolio is over 18-24 months, the returns really start slipping to between 6-8%

That is misleading.  Most of the data in that chart is from 36 month loans, and with a portfolio of 36 month loans, you really cant get beyond about 15 months average age unless you stop investing.  I believe the data points for higher average age are people who have stopped investing.  It is possible that these people stopped investing because they were doing poorly.  That's a selection bias.

Hi Fred, now that 15 months have passed since you made your comment, I would like to hear what you have to say now that we have the benefit of time.  You said that the people with aged portfolios stopped investing because they were poor at investing at LC.  Sounds like you are the one who wasn't seeing the forest for the trees. The people who stopped investing realized much earlier than you that LC was having poor returns.  With the current 'Understand Your Returns' chart it looks like the people who stopped investing and let their portfolios age out did much better than the currently active investors with portfolios in the 9-15 month range.

JohnnyP

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Re: Worst Month Yet
« Reply #449 on: March 06, 2017, 09:18:49 PM »
Oooo.... ripped.