Author Topic: LC What's working these days?  (Read 1244 times)

howler99

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LC What's working these days?
« on: July 14, 2018, 01:35:35 PM »
Like most LC investors I've had a tough time the last couple of years. However, June was a "monster" month, and I netted nearly .6% across all my LC accounts. This was by far by best month in long over a year, and my crudely calculated annual investment return is 3.4%, so I don't anticipate this going forward.

My question is what's working for people these days? I'm not asking for your finely tuned credit filters...but just some insights on how the different note grades, etc.  are doing over the last 6-12 mos.

I come from "old school" LC of investing in the highest note grades filtering on a few of the more profitable criteria, but obviously that strategy crashed and burned a while back. I haven't kept up with recent returns, but for the last year I've just been investing A, B, C, with maybe only 20% in A...and filtering on a few things, inquiries etc..

In the old days I knew where to look for this analysis, but I've lost track as my returns have disappointed.. Even some pointers/links on how to do this analysis would be appreciated.

Thanks.






.Ryan.

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Re: LC What's working these days?
« Reply #1 on: July 21, 2018, 09:49:18 AM »
I'm not sure what, if anything, is working any longer.

I've started the process of liquidating my personal investment accounts over a year ago. This process in itself has proven to me that any investment of significant size in LC or P is HORRIBLE idea. The liquidity on these are horrendous, and watching your RoR vaporize while running off your accounts is PAINFUL.

That being said, I kept my small LC IRA open for fun. I had solid secondary market filters that were creating high single digit returns fairly consistently. Now those filters don't match against nearly as many loans (I often end up with small cash piles), and the short term returns are wavering around 4.5%

An investment returning 5-6% usually has my interest. But keep in mind that nothing out signals that this return from LC/P will ever rise from that. The economy & job market are doing fantastic, and default rates are low(er). This should be the golden age for P2P investing, and the reality is that returns only have a path to get worse. MUCH WORSE in my opinion with a bad economy & job market.

I just don't feel like the risk of holding an investment with mediocre returns when times are great is worth it. Especially when it is so difficult and tedious to liquidate (and accelerating liquidation by using the secondary market is a total PITA!) when you do want to exit. FDIC insured 5 YR. CD rates are nearing 3.5%, which leaves you 0 default risk - At this point the choice is clear for me.

Already leaving LC/P has given me back 20+ hours a week I was spending on trying to learn/understand/monitor/beat the system. That time back with my family is priceless! 


SLCPaladin

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Re: LC What's working these days?
« Reply #2 on: July 21, 2018, 12:14:10 PM »
Ryan, you've articulated much of my own sentiments. I never invested in the secondary market because I always dreaded what the tax implications was since my own personal tax situation has been relatively simple and I didn't want to add complexity with having to account for cost basis on hundreds of notes. At one point my investment in LC was over 100k and I'm now down to about $30k including all accounts. My main gripe has been that the interest rates are not high enough to offset the tax implications and the increased default risk that we've seen over the past few years. As I've drawn down my account, almost all of my funds have been going to 3.3% FDIC insured CDs.

dr.everett

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Re: LC What's working these days?
« Reply #3 on: July 21, 2018, 01:04:45 PM »
Ryan, you've articulated much of my own sentiments. I never invested in the secondary market because I always dreaded what the tax implications was since my own personal tax situation has been relatively simple and I didn't want to add complexity with having to account for cost basis on hundreds of notes. At one point my investment in LC was over 100k and I'm now down to about $30k including all accounts. My main gripe has been that the interest rates are not high enough to offset the tax implications and the increased default risk that we've seen over the past few years. As I've drawn down my account, almost all of my funds have been going to 3.3% FDIC insured CDs.

Agreed as well. My money has gone to Fundrise and I've not looked back.

lascott

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Re: LC What's working these days?
« Reply #4 on: July 21, 2018, 04:07:19 PM »
Ryan, you've articulated much of my own sentiments. I never invested in the secondary market because I always dreaded what the tax implications was since my own personal tax situation has been relatively simple and I didn't want to add complexity with having to account for cost basis on hundreds of notes. At one point my investment in LC was over 100k and I'm now down to about $30k including all accounts. My main gripe has been that the interest rates are not high enough to offset the tax implications and the increased default risk that we've seen over the past few years. As I've drawn down my account, almost all of my funds have been going to 3.3% FDIC insured CDs.
I thought I was reasonably conservative in the loans and grades I picked.  Still not doing as well as I thought considering the good economy, etc.
Most of my LC liquidating money has gone to Wunder Capital.  https://www.lendacademy.com/podcast-104-bryan-birsic-wunder-capital/
(Kids will go to Vanguard fund).
IRA accounts (mine/kids): May do the secondary market next year just to try to close out my STRATA (SDIRA) accounts. 
Taxable account: In hindsight, this was a poor choice considering the 1099-OID taxes and $3000 write off limit.
« Last Edit: July 21, 2018, 04:10:07 PM by lascott »
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

BruiserB

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Re: LC What's working these days?
« Reply #5 on: July 24, 2018, 04:27:05 PM »
I'm continuing to reinvest in my IRA account, however I didn't transfer this year's IRA deposit into LC.  I'm using NSR's Fully Managed Aggressive tool in my IRA.  This year my IRA is yielding 7.91% YTD which is up from last year...my history is below. 

Overall Yield   7.36%
2013 Yield   13.10%
2014 Yield   12.86%
2015 Yield   11.11%
2016 Yield   3.69%
2017 Yield   5.87%
2018 YTD   7.91%

I've been letting my taxable account run down, withdrawing cash each Friday morning and putting it into a balanced portfolio of ETFs I've been investing in for the last couple of years.  My return is better this year (I suppose a lot of the defaults have already happened).   I'm contemplating turning reinvestment back on at some point, but still want to get the overall value lower as I've run into the same writeoff limits as lascott.  My taxable account performance is:

Overall Yield   7.48%
2011 Yield   10.35%
2012 Yield   10.76%
2013 Yield   12.17%
2014 Yield   11.20%
2015 Yield   9.75%
2016 Yield   4.12%
2017 Yield   1.12%
2018 YTD Yield   4.57%

rawraw

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Re: LC What's working these days?
« Reply #6 on: August 06, 2018, 05:34:16 PM »
Interestingly, my stress test for my LC account was pretty accurate. I broke even when stuff went bad.  I had to reduce my portfolio because of the tax quirks (I don't use tax advantaged accounts in LC).  And the portfolio I manage for others (mostly As and Bs) has continued to do just fine.

rawraw

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Re: LC What's working these days?
« Reply #7 on: August 06, 2018, 05:38:35 PM »
Also, the benefit of buying all those notes for sale at ridiculous discounts when the CEO got fired has really helped my returns.  I think my regular NAR is like 4% and my traded NAR is like 14%. 

SLCPaladin

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Re: LC What's working these days?
« Reply #8 on: August 08, 2018, 10:41:44 AM »
Most of my cash run-off is going to United States Senate Federal Credit Union. They have a 5-year share certificate (CD) yielding 3.53%. Risk free at that rate seems good as a lot of other assets seem overvalued right now to me.

Rob L

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Re: LC What's working these days?
« Reply #9 on: August 08, 2018, 06:38:41 PM »
Also, the benefit of buying all those notes for sale at ridiculous discounts when the CEO got fired has really helped my returns.  I think my regular NAR is like 4% and my traded NAR is like 14%.

I was one of the "panic" sellers but it first took me a couple of months to write the software to do it.
My traded NAR is 16.73% for 1348 notes, selling after the CEO disclosure.
The notes I sold were "never late" and predominantly at a premium not a discount. You probably didn't buy any of mine.  ;)
I was then and am still now very glad to have dumped them. Should have sold more. Should have never bought another one.

MoMoney

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Re: LC What's working these days?
« Reply #10 on: August 10, 2018, 04:50:31 PM »
Also, the benefit of buying all those notes for sale at ridiculous discounts when the CEO got fired has really helped my returns.  I think my regular NAR is like 4% and my traded NAR is like 14%.

I was one of the "panic" sellers but it first took me a couple of months to write the software to do it.
My traded NAR is 16.73% for 1348 notes, selling after the CEO disclosure.
The notes I sold were "never late" and predominantly at a premium not a discount. You probably didn't buy any of mine.  ;)
I was then and am still now very glad to have dumped them. Should have sold more. Should have never bought another one.

I would say you got lucky but there was no indication that CEO departing for an unrelated reason would have any impact on the quality of the underwriting. I wasn't personally invested in LC notes at the time but if I was I would have a hard time rationalizing selling my notes just because the CEO was departing.

Rob L

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Re: LC What's working these days?
« Reply #11 on: August 10, 2018, 06:56:22 PM »
As Clint Eastwood famously said (Unforgiven); "I was lucky in the order, but I've always been lucky when it comes to killin' folks."
With some modesty I will say I've done alright with my varied investments over a very long period of time. Traded just about everything but pork bellys.
Most would probably consider my lifetime LC overall returns as good. I certainly do, but that party has ended (IMO forever).
I'm an engineer and understand the math. I will never know if I've been good or just plain lucky.
If anyone can answer that question they're smarter than me (or just fooling themselves). Don't know how anyone can know.
I've always had a big problem with that question; but as Clint said, I've been lucky (or maybe good; I dunno and never will).
Guess it could have gone either way.

Rob L

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Re: LC What's working these days?
« Reply #12 on: August 11, 2018, 10:59:13 AM »
I would say you got lucky but there was no indication that CEO departing for an unrelated reason would have any impact on the quality of the underwriting. I wasn't personally invested in LC notes at the time but if I was I would have a hard time rationalizing selling my notes just because the CEO was departing.

One additional observation. The massive decline of lender profitability didn't start with the CEO departure. Actually that time or possibly the next quarter or two may have seen the bottom. Take a look at the table at the link below. Starting in 14Q1 (or maybe before) lender returns declined pretty much every quarter until 16Q2, particularly in the higher risk grades. Some quarters were very severe.  If by the term"quality of underwriting" you mean LC's quants were making significantly less accurate forecasts I disagree. LC knew what they were doing; trading lender returns for increased numbers of loans originated. The increase in consumer defaults didn't start until much later and after LC had greatly lowered lender returns. The CEO departure served as a wake up call. Many lenders took a fresh look at their risk / reward (with a heightened appreciation of the risks) and didn't like what they saw.

https://forum.lendacademy.com/index.php/topic,4785.0.html



nonattender

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Re: LC What's working these days?
« Reply #13 on: August 11, 2018, 06:01:11 PM »
As Clint Eastwood famously said (Unforgiven); "I was lucky in the order, but I've always been lucky when it comes to killin' folks."
With some modesty I will say I've done alright with my varied investments over a very long period of time. Traded just about everything but pork bellys.
Most would probably consider my lifetime LC overall returns as good. I certainly do, but that party has ended (IMO forever).
I'm an engineer and understand the math. I will never know if I've been good or just plain lucky.
If anyone can answer that question they're smarter than me (or just fooling themselves). Don't know how anyone can know.
I've always had a big problem with that question; but as Clint said, I've been lucky (or maybe good; I dunno and never will).
Guess it could have gone either way.

Howdy fellas.  Just checkin' in to say:

https://www.youtube.com/watch?v=J34esa_aJxc

Glad you're all also still not dead.  :)
A little nonsense now and then is relished by the wisest men.

Rob L

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Re: LC What's working these days?
« Reply #14 on: August 11, 2018, 08:56:25 PM »

Howdy fellas.  Just checkin' in to say:

https://www.youtube.com/watch?v=J34esa_aJxc

Glad you're also still not dead.  :)

Hey! Good to hear from you. It's been quite a while.
Also glad you're also not dead nor spending much time in Nebraska.
Just on the road again with Willie, Bobbie, Paul and the gang. :)

Edit: I've never ever been accused of being NORMAL!


« Last Edit: August 11, 2018, 09:16:58 PM by Rob L »