Author Topic: Lendit 2017 questions  (Read 5688 times)

Fred93

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Lendit 2017 questions
« on: March 11, 2017, 05:21:17 PM »
The http://lendit.tv website has videos of a number of the talks now.

So was it all silicon valley happy talk? 

... or did anyone address the serious issues of loan quality and/or performance degradation?
« Last Edit: March 11, 2017, 05:31:11 PM by Fred93 »

jheizer

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Re: Lendit 2017 questions
« Reply #1 on: March 13, 2017, 10:24:44 AM »
But but microservices blockchain!

A real question.  http://www.lendit.com/usa/2017/videos/investing-in-future-sanborn  Around 13:30 minutes.   He mentions those of us that API grab loans fast.  He then talks about making manual adjustments in their pricing.  It makes me wonder if loans that we all gravitate to are being bumped up in grade because there is so much demand.  Or something like that at least.

Besides that his talk seems more like the kind of things a stock investor would want to hear and not a note investor.  Sell their tech to anyone that'll take it.  He seems to just want to copy Amazon.
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rawraw

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Re: Lendit 2017 questions
« Reply #2 on: March 13, 2017, 11:13:47 AM »
I'm not sure what the prior conferences were like, but didn't seem to get discussed much. The conference is much broader than just LendingClub and Prosper. I mostly attended things that involved bank partnerships.  Some of what LendingClub said in their keynote sounded scary to me (pricing based on demand, for example).

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Rob L

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Re: Lendit 2017 questions
« Reply #3 on: March 13, 2017, 02:04:56 PM »
I'm not sure what the prior conferences were like, but didn't seem to get discussed much. The conference is much broader than just LendingClub and Prosper. I mostly attended things that involved bank partnerships.  Some of what LendingClub said in their keynote sounded scary to me (pricing based on demand, for example).


Doesn't LC do that already?   ???

rawraw

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Re: Lendit 2017 questions
« Reply #4 on: March 13, 2017, 02:13:33 PM »
I'm not sure what the prior conferences were like, but didn't seem to get discussed much. The conference is much broader than just LendingClub and Prosper. I mostly attended things that involved bank partnerships.  Some of what LendingClub said in their keynote sounded scary to me (pricing based on demand, for example).


Doesn't LC do that already?   ???
To my knowledge, demand is not a pricing variable. And the way they spoke about it, doesn't seem like it is currently. But could be!

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SLCPaladin

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Re: Lendit 2017 questions
« Reply #5 on: March 13, 2017, 03:23:31 PM »
Not sure how I feel about demand pricing. It could be interesting, but a lot would hinge on the specifics of how it is implemented. I could envision a scenario where the interest rate that is set by LC underwriters was the floor and then for every X days that a loan goes before it is 100% funded, the borrower's interest rate increases X number of basis points. Something like that which would mitigate the effect of cash drag and might be an investor win. On the other hand, I could also imagine an implementation that would be bad for the retail investors and which would favor in-house quants who have more robust tools and analytics at their disposal.

Rob L

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Re: Lendit 2017 questions
« Reply #6 on: March 13, 2017, 06:28:01 PM »
I'm not sure what the prior conferences were like, but didn't seem to get discussed much. The conference is much broader than just LendingClub and Prosper. I mostly attended things that involved bank partnerships.  Some of what LendingClub said in their keynote sounded scary to me (pricing based on demand, for example).


Doesn't LC do that already?   ???
To my knowledge, demand is not a pricing variable. And the way they spoke about it, doesn't seem like it is currently. But could be!

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My comment was a somewhat lame attempt at humor. Marking down price is easy with OPM (other people's money).
Didn't envision the prospect of marking up the price.

Fred93

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Re: Lendit 2017 questions
« Reply #7 on: March 14, 2017, 05:31:08 AM »
There are more videos on the lendit.tv site today.  A section titled "investor insights" has appeared. 

These sessions are really disappointing.  Never seen so many people talk so much without addressing real issues (not counting the election). 

Case in point: There's a session there titled "Every originator will launch a fund."
http://www.lendit.com/usa/2017/videos/every-originator-will-launch-fund

Nothing but happy talk.  Everybody on the panel agrees that every originator should launch a fund.  All the talk was that they are good, because they're yet another way to get money.  Gotta have lots of ways to get money. Yea! 

It was just a talk about how to package up something so you can sell to some more people.  A sales talk.

How stupid.  This session occurs on the heels of the crash of the first of these funds... LC's Broad Based fund. 

Nobody addressed this elephant in the room.  I actually think they're oblivious to what has happened.  Clueless.

Nobody talked about how to structure a fund so that it doesn't have the hazards that crashed the BB fund.  The fundamental issue that killed BB is that a loan fund's distribution among loan vintages depends on when money comes in.  As more and more money comes in (exponential growth), the fund ends up heavily weighted in later vintages.  When one of those vintages turns out to be a poor performer (in LC's case 2015), then fund returns drop.  Once returns drop, then new money coming in slows and people start calling for withdrawals.  The need to meet withdrawals keeps the fund from rolling forward into newer (hopefully better) vintages.  As the old vintages roll off, the fund ends up even more weighted in the bad vintage.  In BB's case, the returns have driven down month after month, and in recent months are approximately zero.  A fund with this history will never draw new funds. 

In response to this situation, LC has opened a "new" fund with a different name.  (This is what all fund managers do when they crash a fund!)

If all these guys who want to launch new funds and don't realize that the first of these funds, the one they're modelling after, has just crashed, what happened, and why, then they're just clueless.  No one should originate more copycat funds until they come up with a structure that mitigates this hazard.  ...a hazard that is not theoretical, but just happened right before your eyes to the primary fund of the biggest oldest company in the field.

Lendit is no longer relevant to investors -- except to the extent that it exposes how weak most of the folks in this industry are now.

Fred93

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Re: Lendit 2017 questions
« Reply #8 on: March 14, 2017, 07:01:47 AM »
Here's a useful session.  These guys are mostly guarded, but they let slip some attitude here and there toward the end of the session.

"Risk Management & Credit Analysis for Mispriced Opportunities"
http://www.lendit.com/usa/2017/videos/risk-management-mispriced-opportunities

"the risk is that the company isn't gonna do what it thought it was gonna do."

"we spend the vast majority of our time ... not looking at interest rates and not looking at the jobs report... we think about continuously analyzing our own portfolio, and looking for situations in which a lender's expectations they're setting with us are not something they're going to be able to meet.  ... You gotta pour over your book ... You know your curves.  You know exactly how many people are supposed to be making a default on their 2nd payment, their 3rd payment... When those numbers move around its usually a sign that something's happening.  Not in the industry, but to that lender

"The problem with most statistics is ...you know... they're backward looking."

"There's always a period of time where different originators or asset classes are considered quote unquote new, and there's a runway time before banks want to get involved.  Its our job to be that first set of capital."  [Is he saying it's too late?]

"Look I ultimately believe that things go in cycles so I think its only natural to see what's goin' on.  At some point... I won't speak for other people on this panel ... but its probably inherent in the way the system works that we'll get priced out."

"First thing that you want to do is get away from competing with the bank cost of capital.  They pay 70 bps.  You want 8%, 10%, 12%.  You don't want to be competing with banks."

rawraw

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Re: Lendit 2017 questions
« Reply #9 on: March 14, 2017, 07:24:59 AM »
The guy from Lightstream made a point that he doubts Fintech can compete with banks for prime borrowers and instead will service borrowers banks do not desire, like Subprime. I think there is some truth to that

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nonattender

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Re: Lendit 2017 questions
« Reply #10 on: March 14, 2017, 08:55:26 AM »
The guy from Lightstream made a point that he doubts Fintech can compete with banks for prime borrowers and instead will service borrowers banks do not desire, like Subprime. I think there is some truth to that

I assume the guy who probably spoke truth and said that was Todd Nelson of Lightstream, though SunTrust, proper, also recently appointed a "VP of Fintech" for whatever else might be in the pipeline...  I dug pretty deep into SunTrust's LightStream operation before taking a position in the stock (STI) last year.  They impressed me as smart.  What conference track or talk was that in?  If that one goes up, I'll watch it.

I didn't even bother watching Sanborn's keynote, LC shares I'm holding notwithstanding... but this talk of "demand pricing" has me curious and I might have to go take a look.  Only two I bothered with (so far) ---  Kenneth Lin (CreditKarma), which very politely said "we're watching how people interact with the site and building our own predictive models" (something I'd mentioned in passing to someone there, years ago, along the lines of "hey, anyone watching what happens to profile/scores when people for some reason 'simulate' what might happen if they... go late on a payment?" - so, funny to see being put into practice, on a larger scale, now) and then "Nigel Morris' Travelling Metaphorical Stageshow, Multiple-Dialectical-Level-Balancing-Act and Game of Animal / Vegetable / Mineral" - all rolled into one.  I couldn't resist - learned nothing, but enjoyed it!  If he ever gets bored enough or, heaven forbid, goes bust, he could easily go on tour just telling fun business stories to well-heeled audiences.  I'd happily pony up to listen to stories about older deals, where he's not kinda-sorta-pitching-something and is a little more incented to be totally honest (the more brutally so, the better). :)
« Last Edit: March 14, 2017, 09:01:04 AM by nonattender »
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jheizer

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Re: Lendit 2017 questions
« Reply #11 on: March 14, 2017, 09:26:40 AM »
Don't watch the blockchain one.  As a tech guy I understand the concept and think people are generally crazy when they throw that word out there.  So when this super expect guy was going to talk I was like hey maybe I can finally get some insight into actual use cases.  But it too was mostly blah blah.  I should shoe horn it into our financial software so when some day a potential clients asks we can be like yes yes we do have that!
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rawraw

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Re: Lendit 2017 questions
« Reply #12 on: March 14, 2017, 09:42:36 AM »
The Lightstream talk was bank partnerships, I'm pretty sure. You are correct on the speaker. I'm not sure if it's been posted yet

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nonattender

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Re: Lendit 2017 questions
« Reply #13 on: March 14, 2017, 10:14:06 AM »
Don't watch the blockchain one.  As a tech guy I understand the concept and think people are generally crazy when they throw that word out there.  So when this super expect guy was going to talk I was like hey maybe I can finally get some insight into actual use cases.  But it too was mostly blah blah.  I should shoe horn it into our financial software so when some day a potential clients asks we can be like yes yes we do have that!

we're a cynical bunch...

btw, don't forget to throw in some "AI"... minsky's dead, but the bullshit will never die.
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jheizer

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Re: Lendit 2017 questions
« Reply #14 on: March 14, 2017, 10:19:27 AM »
But Watson can do my taxes!
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