Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: bcartpa on June 01, 2016, 10:02:42 PM

Title: Email from Lending Club
Post by: bcartpa on June 01, 2016, 10:02:42 PM
Just got this email from Lending Club about 30 minutes ago.  Looks like a pretty strong statement of commitment to retail investors.


Hello ______,
 
I wanted to check back in.
 
Some of you responded to my first email with a note about your continued support; others of you are talking to our Investor Services team to get your questions answered.
 
The most common question we're getting is this: Are we committed to individual investors?
 
Emphatically, yes.
 
You're the heart of our marketplace.
 
We started Lending Club with the simple but revolutionary idea that we could democratize access to consumer credit. That idea - and our commitment to it - will never change.
 
Our mission is to make people's lives better. That's true for borrowers - helping them get access to responsible credit - as well as investors. We want to help you build your financial future.
 
You've always been the foundation of our marketplace. You helped us start Lending Club in 2007; now our individual investor base is over 150,000 members strong. We've also improved the platform based on your feedback. We created Automated Investing, simplified the IRA investment process, and integrated our platform with TurboTax.
 
We're doubling down on our efforts to serve you. We're staffing up on our Investor Services team and are eager to connect with you to see how you're doing. We're also dedicating more engineering resources to you to ensure you have a great investment experience.
 
We want your ideas on what else we can do.
 
To prove our commitment and thank you for investing with us, we're offering a bonus for new funds transferred to your account by July 15, 2016.1 The more you invest, the bigger the bonus you could receive.

$5,000 - $9,999 - bonus $100
$10,000 - $24,999 - bonus $200
$25,000 - $49,000 - bonus $500
$50,000 - $99,000 - bonus $1,000
$100,000+ - bonus $2,000
 
In the meantime, keep your ideas and questions coming. Our Investor Services team is here to help.
 
Sincerely,
 
Scott Sanborn
Lending Club President & Acting CEO
Title: Re: Email from Lending Club
Post by: RT45 on June 02, 2016, 02:16:17 AM
I did not receive this email. Do you think they are sending out based on $ amount invested? What type of account did you have?
Title: Re: Email from Lending Club
Post by: bcartpa on June 02, 2016, 08:37:20 AM
I did not receive this email. Do you think they are sending out based on $ amount invested? What type of account did you have?

I have a regular individual account and have a substantial amount invested.  My pace of investment in new notes has slowed recently.  Not sure if it's my account balance or the change in behavior that triggered the email.  I'm putting more cash into notes for sale on Folio these days as there have been some good deals out there.
Title: Re: Email from Lending Club
Post by: hessinger on June 02, 2016, 09:43:48 AM
The most common question we're getting is this: Are we committed to individual investors?

I find that hard to believe if this forum is any indication.
Title: Re: Email from Lending Club
Post by: avid investor on June 02, 2016, 09:59:36 AM
I got it, too.  Could easily have been triggered by my changed behavior.  I have turned off all 5 of my daily auto-investing cron jobs, which invest in all 4 accounts.  Haven't invested for at least a week.
Title: Re: Email from Lending Club
Post by: fliphusker on June 02, 2016, 01:43:25 PM
The most common question we're getting is this: Are we committed to individual investors?

I find that hard to believe if this forum is any indication.
The questions that they field are all wrapped into one for the most part.  "Why not BRV?"  LC "We are committed to making profits for an individual investor as we always have."  Thus trying to wrap the individual investor in a security blanket to make them feel safe.  When I think of BRV I always think of the scene in Tommy Boy when he is talking about guarantees.  :)
The 2-3 letters that LC has sent out, is nothing more then assurance that things will go as usual for retail investors. 
Title: Re: Email from Lending Club
Post by: Boatguy on June 02, 2016, 02:09:20 PM
The questions that they field are all wrapped into one for the most part.  "Why not BRV?"  LC "We are committed to making profits for an individual investor as we always have."  Thus trying to wrap the individual investor in a security blanket to make them feel safe.  When I think of BRV I always think of the scene in Tommy Boy when he is talking about guarantees.  :)
The 2-3 letters that LC has sent out, is nothing more then assurance that things will go as usual for retail investors.
I agree.

I have three substantial accounts and I did get the email, though only to one account.   I agree that it's nothing more than "trust us".  The "we're doubling down" rings hollow when the commitment is to have more customer service people to soothe our complaints and some engineering resources to do what?  Clean up the web site?

We're not looking to be soothed by customer service reps (who are content free in my experience), or new graphics on the web site.  We're looking for tangible changes in the way LC operates and communicates with retail investors.  And the promotional pitch really tells the whole story by unmasking the true motivation for the email.

It's actually quite an Orwellian communication in that LC is claiming to "double down" when in fact they are actually asking retail investors to "double down" by investing more at a time when even continuing to re-invest existing funds with the company is in question.

I'm still giving Mr. Sanborn ninety days to make, or at least announce, a tangible change in their approach to retail investors.  But if he thinks a 2% bonus will cause retail investors to "double down", I think he is mistaken.
Title: Re: Email from Lending Club
Post by: bobeubanks on June 02, 2016, 02:27:39 PM
It's actually quite an Orwellian communication in that LC is claiming to "double down" when in fact they are actually asking retail investors to "double down" by investing more at a time when even continuing to re-invest existing funds with the company is in question.

Orwellian indeed or perhaps Mr. Sanborn has never played blackjack and doesn't actually know what double down mean.
Title: Re: Email from Lending Club
Post by: .Ryan. on June 02, 2016, 11:24:08 PM
I've stood by LC throughout this whole ordeal, and kept reinvesting all payouts.

I'll be pretty disappointed if I don't receive the offer. Not a good way to reward the ones that supported LC through the past few weeks.
Title: Re: Email from Lending Club
Post by: fliphusker on June 03, 2016, 01:35:48 AM
I've stood by LC throughout this whole ordeal, and kept reinvesting all payouts.

I'll be pretty disappointed if I don't receive the offer. Not a good way to reward the ones that supported LC through the past few weeks.
Check your spam folder, no doubt why most have not go LC letters.  I am sure it will be posted on LC's page.  I am sure you will not have to put in a code. 
Title: Re: Email from Lending Club
Post by: nmay2k on June 03, 2016, 07:00:38 AM
I believe this offer is for non-IRA accounts, so if that is the only account you have that could explain why you did not see the offer.   

I am sure if you were about to transfer $5000 to your LC account to invest, you can call them and ask about the bonus. But I suspect they already emailed the folks most likely to do so. For example, if you pulled $5000 out in the last month, you may not be on the DL. 

I am definitely thinking about this one.
Title: Re: Email from Lending Club
Post by: DLIFVOIP on June 03, 2016, 09:33:22 AM
The questions that they field are all wrapped into one for the most part.  "Why not BRV?"  LC "We are committed to making profits for an individual investor as we always have."  Thus trying to wrap the individual investor in a security blanket to make them feel safe.  When I think of BRV I always think of the scene in Tommy Boy when he is talking about guarantees.  :)
The 2-3 letters that LC has sent out, is nothing more then assurance that things will go as usual for retail investors.
I agree.

I have three substantial accounts and I did get the email, though only to one account.   I agree that it's nothing more than "trust us".  The "we're doubling down" rings hollow when the commitment is to have more customer service people to soothe our complaints and some engineering resources to do what?  Clean up the web site?

We're not looking to be soothed by customer service reps (who are content free in my experience), or new graphics on the web site.  We're looking for tangible changes in the way LC operates and communicates with retail investors.  And the promotional pitch really tells the whole story by unmasking the true motivation for the email.

It's actually quite an Orwellian communication in that LC is claiming to "double down" when in fact they are actually asking retail investors to "double down" by investing more at a time when even continuing to re-invest existing funds with the company is in question.

I'm still giving Mr. Sanborn ninety days to make, or at least announce, a tangible change in their approach to retail investors.  But if he thinks a 2% bonus will cause retail investors to "double down", I think he is mistaken.

Below is my reply to his email.  More should write their own email and send it.

Dear Scott,

While your below gesture is appreciated, it does not really do much for the retail investor.  I love a deposit bonus as much as the other guy, but lets be honest, this really helps Lending Club more than it helps the retail investor.  You need new deposits due to the slowing of institutional investors and this is a good way to get those new funds. 

One of the real issues facing retail investor is facing is loan volume.  Or should I say lack of loan volume relating to what most of us who have been doing this for a while would call “quality” loans.  A vast majority of volume is still being funneled to the institutional or whole loan market.  That only serves to limit the volume of loans available to the retail investor.  Lending Club needs to make 100% of loans available to the retail investor and then give the institutional investor / whole loan market the leftovers that we as retail investors are not funding.  If the institutional investors say they only want whole loans, internally you can simply split the borrowers loan into a retail and “whole” loan.  It is bit more programming for your guys, but that would really show the retail investor you care.

Secondly, I am guessing that the most common question you are getting really relates to a Bankruptcy Remote Vehicle for the retail investor.  We do not need you to double down on efforts to serve us, you have great customer service, the website is fine, folioFn is fine.  We need the same level of protection you are providing to the institutional investor or the same level of protection your competition is providing to its retail investors.  Your below offer is simply asking the retail investor to take more risk without any further reassurance that we will be protected. 

At the end of the day Lending Club needs to do something for the retail investor that only benefits the retail investor and I truly believe the only answers are to first offer 100% of loans to retail investors and second provide retail investors with a BRV.

Again, I appreciate the proactive steps you are taking, but think that Lending Club gains from it more than those you are saying you care about.
Title: Re: Email from Lending Club
Post by: SLCPaladin on June 03, 2016, 10:24:32 AM
I received this email yesterday as well. Here are my thoughts:

1. This offer is certainly better than a sharp stick in the eye, but it essentially skirts the issue that, I believe, is top-of-mind for most retail investors. I actually quite appreciate that there is some sort of enticement to lure back skittish retail borrowers. It shows that management is actively trying to reach out. What's more, adding 2% to my yield is nothing to sneeze at. But at the end of the day, like many on this forum have pointed out, the offer doesn't address the fundamental issue of no BRV being in place for the retail investor. When I analyze my own financial situation, this is still the overarching concern which prevents me from returning to buying loans. As great as this 2% may be, the "unknown unknowns" (it's the uncertainty, stupid) of what my notes would look like if things get ugly fast outweighs a 2% bump in yield. That is how I see it, anyway. Others may feel different, or have a different risk tolerance.

2. While this may not lure me back to reinvesting, let alone incite me to deploy large amounts of new capital, hopefully this carrot is sufficient for enough retail investors to prevent a massive funding shortfall that creates a further self-defeating crisis of confidence. Let's face it, what we're essentially dealing with is a classic run on the bank, or crisis of confidence. I don't think there are any major systemic issues (although I could be wrong) that suddenly went into play a few weeks ago. If all institutional investors and retail investors suddenly decided to start reinvesting all at once, then the RL affair and all the drama that it entails would be a blip on the radar screen. What we are dealing with is a crisis of confidence. The FDIC is in place to prevent bank runs. A BRV is the type of vehicle that is needed to prevent a crisis of confidence for some segment of retail investors. When all is said and done, this RL debacle could turn out to be a blessing in disguise in that it awakens the board and upper-management to the need to think long and hard about funding sources in crises situations. When Mario Draghi promised to "do whatever it takes" to stop the Euro-zone crisis, it had the intended effect of stopping the panic and prevented the ECB from doing a lot more. Mr. Sanborn needs to heed lessons from the past 8-9 years and come out with what is effectively bazooka, not just an enticement to pad returns. In a panic, investors are more interested in return of investment than return on investment.

3. I don't see what is happening behind the scenes. I don't know what the temperature is among other retail  investors, or what funding shortfalls may, or may not, exist. It may very well be that many retail investors are somewhat oblivious to what has transpired in the past few weeks and are reinvesting as if nothing ever happened. I may be a minority voice, I don't know for sure. If this is the case, then the 2% enticement may essentially do the trick. LC has all the data on their investors and they can measure the impact of their communication and offer. If this is enough to right the ship, then maybe LC is right to focus on the silent majority and not the vocal minority. If, however, this forum is a proxy for a wider cross-section of LC investors, LC may need to rethink their approach to shoring up confidence.
Title: Re: Email from Lending Club
Post by: bcartpa on June 03, 2016, 10:26:27 AM
Quote
A vast majority of volume is still being funneled to the institutional or whole loan market.  That only serves to limit the volume of loans available to the retail investor.  Lending Club needs to make 100% of loans available to the retail investor and then give the institutional investor / whole loan market the leftovers that we as retail investors are not funding. 

I am curious why you think we (retail investors) deserve the "pick of the litter" and the institutional investors deserve the leftovers?  I can see an argument for equal access but I'm curious what basis we have for getting better access than the "big money."

I would love if this were the case, as it certain serves my interests.  But I've not felt I had an argument for this in my conversations with Lending Club.  So I'm curious what I might be missing from your argument.
Title: Re: Email from Lending Club
Post by: nmay2k on June 03, 2016, 01:09:39 PM

1. about BRV, if prosper has it then go there. I am not sure there is any reason to start BRV at LC. If you want a burger, go to the burger joint.

2. This is not a run on the bank (especially if you don't think there are any systemic issues). Like stocks, these are not FDIC insured and everyone was fully aware of the risk when investing so no need to change the rules in the middle of the game. You want FDIC insurance go to the FDIC insured joint.

3. All LC needs is more retail investment. This is our queue to step-in the game and show them what we are made of. Do we believe in the p2p model or not? Do we believe in it only if it is insured against loss? Do we believe it whether there is a 2% bonus or not?

4. I don't think retail investors should be second class to institutional investors. Institutional investors have bank charters and can lend money out themselves, but they are too lazy to do it can conveniently mooch off LC. They get the tax breaks we don't on the same returns. Why should we be the second class citizens here? We are the p2p, we are the ones paying the premiums (taxes) to use this. We are the ones picking the loans 1 by 1 versus using the robots. We are the one sitting down at the pc every 4 hours to invest in loans. We are the ones getting the lower class loans because we are not using the API to suck up the loans faster than you can say go. We are the foundation to this whole thing. Without retail, by definition there is no p2p.
Title: Re: Email from Lending Club
Post by: lender90530 on June 03, 2016, 01:28:53 PM
I agree with you concerning the BRV. For those of us who do not want to take equity like risk on a startup without the potential for equity like returns, LC is a lousy deal. That's why I am moving to Prosper.
Title: Re: Email from Lending Club
Post by: SLCPaladin on June 03, 2016, 03:19:33 PM

2. This is not a run on the bank (especially if you don't think there are any systemic issues). Like stocks, these are not FDIC insured and everyone was fully aware of the risk when investing so no need to change the rules in the middle of the game. You want FDIC insurance go to the FDIC insured joint.


Yes, this is of course not a run on the bank. Nevertheless, there are similarities. When a run on the bank occurs, people fear the worst-case-scenario and it is their combined actions that work as a self-fulfilling prophecy to create a vicious, downward cycle. Likewise, if sufficient investors are spooked and it leads them to all collectively hit the pause button, this will create a huge dip in LC originations. That, in turn, will drastically reduce profitability and cause LC to bleed cash. So even though LC has a huge balance sheet and is healthy, and even if there are nothing amiss in the quality of the loans, if investors merely believe there is a problem at LC and act accordingly, they may unwittingly create the very problem they hoped to avoid. It is a self-fulfilling prophecy. That is why I believe a bazooka (BRV) is needed.

I don't mean for this to be a jab at the industry; I am a huge believer in the P2P model. But I only believe if everyone else believes.  So right now I'm the guy on the sidelines saying, "You jump in the water first and tell me how it is." I'm going to wait until next quarterly results and see what the impact has been to originations before I deploy more capital or reinvest in LC notes. I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio. In the meantime, I will shift new investments over to Prosper because of the BRV. Paradoxically, if enough people are taking the same approach as I do, it creates the very negative outcome that is in none of our interests.
Title: Re: Email from Lending Club
Post by: Fred93 on June 03, 2016, 04:07:26 PM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
Title: Re: Email from Lending Club
Post by: rawraw on June 03, 2016, 04:52:27 PM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.
Title: Re: Email from Lending Club
Post by: AnilG on June 03, 2016, 05:35:50 PM
In May, Lending Club new loan listings were down 40% on retail platform from April. Also, the retail demand was soft in May as suggested by higher number of average total loans on the platform. At Prosper new loan listings were up 6.8% on retail platform from April. The retail demand was also soft at Prosper. I posted the charts for monthly new listings and average total loans on platforms to my Twitter feed https://twitter.com/anilkg. This should give you a good benchmark how things are going on the retail platforms for Lending Club and Prosper at least. Based on the news reports and emails, it appears LC management is doing quite a few different things (making the right moves) to shore up funds for originations and trying to minimize using cash on its own balance sheet for loan originations.

Prosper has retail BRV. Prosper has never been about retail lenders since Prosper 1.0 days. It is more focused on institutions. Retail will always be second unless management changes focus. While LC management claims that allocation to whole and retail platforms are random, Prosper has never made such claims. Prosper also doesn't have strong enough secondary market. Retail tools on Proser platform are lacking  Shifting from LC to Prosper most probably not going to gain you much.

I don't mean for this to be a jab at the industry; I am a huge believer in the P2P model. But I only believe if everyone else believes.  So right now I'm the guy on the sidelines saying, "You jump in the water first and tell me how it is." I'm going to wait until next quarterly results and see what the impact has been to originations before I deploy more capital or reinvest in LC notes. I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio. In the meantime, I will shift new investments over to Prosper because of the BRV. Paradoxically, if enough people are taking the same approach as I do, it creates the very negative outcome that is in none of our interests.
Title: Re: Email from Lending Club
Post by: SLCPaladin on June 03, 2016, 07:14:40 PM

Prosper has retail BRV. Prosper has never been about retail lenders since Prosper 1.0 days. It is more focused on institutions. Retail will always be second unless management changes focus. While LC management claims that allocation to whole and retail platforms are random, Prosper has never made such claims. Prosper also doesn't have strong enough secondary market. Retail tools on Proser platform are lacking  Shifting from LC to Prosper most probably not going to gain you much.


Good points Anil. I have had a great run with LC and generally agree with your sentiment: LC has been more retail investor focused. I have accounts at both Prosper and LC. I slowly shifted away from Prosper a few years ago because the volume was so thin and I could never find loans I liked. The only thing Prosper has on LC is the BRV. But right now, that seems to be a strong selling point. But to your point, LC has traditionally been more retail-investor focused. I may just hit the pause button altogether with this asset class until the picture becomes clearer.
Title: Re: Email from Lending Club
Post by: sommers on June 04, 2016, 04:52:52 PM
I received this email yesterday as well. Here are my thoughts:

1. This offer is certainly better than a sharp stick in the eye, but it essentially skirts the issue that, I believe, is top-of-mind for most retail investors. I actually quite appreciate that there is some sort of enticement to lure back skittish retail borrowers. It shows that management is actively trying to reach out. What's more, adding 2% to my yield is nothing to sneeze at. But at the end of the day, like many on this forum have pointed out, the offer doesn't address the fundamental issue of no BRV being in place for the retail investor. When I analyze my own financial situation, this is still the overarching concern which prevents me from returning to buying loans. As great as this 2% may be, the "unknown unknowns" (it's the uncertainty, stupid) of what my notes would look like if things get ugly fast outweighs a 2% bump in yield. That is how I see it, anyway. Others may feel different, or have a different risk tolerance.

2. While this may not lure me back to reinvesting, let alone incite me to deploy large amounts of new capital, hopefully this carrot is sufficient for enough retail investors to prevent a massive funding shortfall that creates a further self-defeating crisis of confidence. Let's face it, what we're essentially dealing with is a classic run on the bank, or crisis of confidence. I don't think there are any major systemic issues (although I could be wrong) that suddenly went into play a few weeks ago. If all institutional investors and retail investors suddenly decided to start reinvesting all at once, then the RL affair and all the drama that it entails would be a blip on the radar screen. What we are dealing with is a crisis of confidence. The FDIC is in place to prevent bank runs. A BRV is the type of vehicle that is needed to prevent a crisis of confidence for some segment of retail investors. When all is said and done, this RL debacle could turn out to be a blessing in disguise in that it awakens the board and upper-management to the need to think long and hard about funding sources in crises situations. When Mario Draghi promised to "do whatever it takes" to stop the Euro-zone crisis, it had the intended effect of stopping the panic and prevented the ECB from doing a lot more. Mr. Sanborn needs to heed lessons from the past 8-9 years and come out with what is effectively bazooka, not just an enticement to pad returns. In a panic, investors are more interested in return of investment than return on investment.

3. I don't see what is happening behind the scenes. I don't know what the temperature is among other retail  investors, or what funding shortfalls may, or may not, exist. It may very well be that many retail investors are somewhat oblivious to what has transpired in the past few weeks and are reinvesting as if nothing ever happened. I may be a minority voice, I don't know for sure. If this is the case, then the 2% enticement may essentially do the trick. LC has all the data on their investors and they can measure the impact of their communication and offer. If this is enough to right the ship, then maybe LC is right to focus on the silent majority and not the vocal minority. If, however, this forum is a proxy for a wider cross-section of LC investors, LC may need to rethink their approach to shoring up confidence.

This "offer" is nothing.  It doesn't address my concern/s.  I have been liquidating for three weeks. I suspect I am not alone. This scandal has taken LC note investing off my investment list.  I am embarrassed to admit I had no idea how vulnerable my $ were in these notes.   Plus I see clouds on the horizon---the new sub prime loan scandal is in autos.  I would have to think that a lot of these note borrowers are financing more than just the credit card debt they claim with LC notes.
Title: Re: Email from Lending Club
Post by: Rob L on June 04, 2016, 08:10:38 PM
Stand in line with the embarrassment thing.  I mentioned LC to my nephew a few years ago. We don't get to visit much as he lives on Long Island and I'm in Virginia. My Mom lives up there and I went for a visit in February. The subject of LC came up and the next thing you know I'm helping him get an account set up. Fast forward to May, he's just about fully invested and I have to make the call.. "maybe we should slow down on this a bit, the CEO's been fired by the BOD for not being "forthcoming" and, well, ..... ". My brother-in-law was always skeptical so it's egg on face time. It's a very small deal though. My brother-in-law and I are very close and I will personally guarantee my nephew comes out whole. Still... embarrassing! (And no, if you're thinking I might have gotten an incentive from LC for the reference. I didn't).

Meanwhile LC has done absolutely nothing since 5/9 to make me reconsider exiting the playing field. (I'll help my nephew do the same; with apologies to him and my brother-in-law).
Title: Re: Email from Lending Club
Post by: RT45 on June 04, 2016, 08:58:56 PM
Same boat as you Rob L.

I feel like for every person on the forum, there is a 3-5x multiplier of people they talk about LC with.

In the previous era, LC was like an investment club where everyone could do it together and had a community aspect. Not so much anymore.

Title: Re: Email from Lending Club
Post by: Fred93 on June 04, 2016, 09:06:20 PM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.
Title: Re: Email from Lending Club
Post by: RT45 on June 04, 2016, 10:02:24 PM
@Fred93

https://en.wikipedia.org/wiki/Butterfly_effect
Title: Re: Email from Lending Club
Post by: Fred93 on June 04, 2016, 11:15:34 PM
@Fred93  https://en.wikipedia.org/wiki/Butterfly_effect

Sorry, but that comment is pretty far disconnected from the topic of discussion.  So much that it reminds me of
https://en.wikipedia.org/wiki/Chewbacca_defense
Title: Re: Email from Lending Club
Post by: nmay2k on June 04, 2016, 11:27:03 PM
Sure everyone was taken aback about the resignation and the backdating and sure they would probably try to handle that better given the impact by the way they handled it. LC has enemies and always did. The banks! The banks always bad mouthed them. They tried to partner with the banks sort of like Chamberlain..... but guess what, at the first opportunity these guys will pull a Julius Cesar. So, think of Citi who gets 18% on the credit card and lost this lucrative payment to LC who refies the loan at 13%. Do we really think Citi is going to lend a helping hand to LC? Do we think any bank with credit cards at 18% rate is going to help LC? Are the banks toasting LC's demise right now? Sure. Are they going to compound suspicion on LC? Sure.

But look at their actions rather than their moving lips. Is anybody really liquidating their LC notes? No, way. Sure hit the pause button if you want. More loans for the rest of us. But  no one is really pulling out. They just like to pretend that they are. They want some kind of concession, higher rates, higher security, higher bonuses or have LC evaporate from existence.

There are 16,078 $100 notes for sale on folio. The max markup is 15% and the max mark-down is -8.99%. (Funny to think that they might sell at a 15% mark-up). The median mark-up is 1.41% (half are above that and half are below that) and about 20% (3,200 notes) are priced below 0% mark-up and 6% (900) are priced below -1% mark-up. Amazingly 80% think they can liquidate without giving the buyer an incentive. First time I heard of a liquidation sale with prices above list. I suppose if you want to sell your equity stock quickly (as the market drops) just price it at 1.41% above the market price right?

LC is not going anywhere to the dismay of the banks. But if the banks can rob of rattle LC's retail investor, and even perhaps rattle the guy wanting to refi that 18% credit card payment, then all the better for them. I am not sure sitting on the sidelines is productive in any way. Either get out of the game (go to Prosper, go to Ally, got to a CD, go to the stock market which I really do not recommend) and help the banks take LC down or get in.
 
Title: Re: Email from Lending Club
Post by: smihaila on June 05, 2016, 12:17:35 AM
I don't know why I get this odd feeling that you are actually an LC employee posting here?
Title: Re: Email from Lending Club
Post by: fliphusker on June 05, 2016, 04:29:52 AM
I don't know why I get this odd feeling that you are actually an LC employee posting here?
It is just that not everyone is panicking or even overly concerned. He is just saying the quite a few of us right now are feasting on folio
Title: Re: Email from Lending Club
Post by: rawraw on June 05, 2016, 06:53:19 AM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.
Post #1.  A statement of fact.
Post #2.  Poster #1, you have irrational fear.

You are making lots of assumptions, since there was no logic or conclusion in the statement.  Perhaps I am not the one who should visit my rationality when discussing LC?  It seems people here want to group statements into "bull" or "bear" instead of actually discussing the issues.  This bull vs bear mentality is likely why someone like Rob L has "egg on his face."  Every time I point out a risk that should be considered, I am equated to being on CNBC yelling short LC now.  It's been like this ever since I've been on this forum, but it's especially bad lately.  Just take a deep breath, every statement of risk is not questioning the safety of your investment. . .

Perhaps its because I'm used to dealing with investment professionals.  But there are risks and then probabilities to those risks.  You can't make a conclusion without both. I could assign a 10% probability to LC's cash disappearing or a 90% probability.  Without that data, you are irrationally attacking a risk factor.  You must get very upset every 10Q you get, with all those irrational risks disclosed.

Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 06:56:09 AM
Stand in line with the embarrassment thing.  I mentioned LC to my nephew a few years ago. We don't get to visit much as he lives on Long Island and I'm in Virginia. My Mom lives up there and I went for a visit in February. The subject of LC came up and the next thing you know I'm helping him get an account set up. Fast forward to May, he's just about fully invested and I have to make the call.. "maybe we should slow down on this a bit, the CEO's been fired by the BOD for not being "forthcoming" and, well, ..... ". My brother-in-law was always skeptical so it's egg on face time. It's a very small deal though. My brother-in-law and I are very close and I will personally guarantee my nephew comes out whole. Still... embarrassing! (And no, if you're thinking I might have gotten an incentive from LC for the reference. I didn't).

Meanwhile LC has done absolutely nothing since 5/9 to make me reconsider exiting the playing field. (I'll help my nephew do the same; with apologies to him and my brother-in-law).

Think my major problem is that this fiasco has enlightened me on how LC moved to relying on big money/institutional funding versus little guys (like they purportedly started with).  Common sense tells that the big boys will get better deals--whether reflected in pricing--some kind of discounts or rebates--or first crack at choice loans--or a combination of all..  IF I was a big money institution type---and LC told me that I had to get in line and be a buyer just like some guy with $10K--I'd tell them to go find a different sucker.  So, please don't tell me that everyone is treated equally.  And then we have the misconduct of the departed CEO
I am liquidating and it's an arduous process.  I had been in set and forget mode for 3 years.  Fortunately my auto investing was set at 3 year terms.  I am now realizing how illiquid LC is for us note investors.  Began having concerns about the whole business in February as I was reading about sub prime auto loans being the next problem (on top of student loans--on top of who knows what else kind of loans).  And the trend towards higher interest rates (which assures "old" loans would suffer discounts moving forward
Since early March I ended auto investing and had planned to just let my notes run off (and exit this business) and when this fiasco broke--I started learning about folio and have been selling notes there.  I've worked off about 30% of my inventory and have not gone below par (not counting the 1% selling fee)
I'm about to go discount slowly but surely. 
I BET I'M NOT THE ONLY ONE WHO IS GETTING OUT----I HAVE SEEN ZERO FROM L C TO ASSUAGE MY CONCERNS.  THEIR EMAIL ASSURANCES ARE LAME (AT BEST). I'LL TAKE ON THE NOTE CREDIT RISK (THAT WAS PART OF THE DEAL)--BUT NOT LC'S CORPORATE RISK.  TAKING ON BOTH IS A DEAL KILLER FOR THIS LITTLE GUY.  IF I KNEW MY MONEY WAS SAFE FROM AN L C B-K OR SOME FURTHER SHENANNIGANS---I MIGHT HANG AROUND.  BUT I'VE READ NOTHING THAT ALLAYS MY CONCERN.
SO I AM OUTTA HERE (THOUGH IT'S A WHOLE LOT TOUGHER TO EXIT THAN I HAD IMAGINED)
LIVE AND LEARN
Title: Re: Email from Lending Club
Post by: rawraw on June 05, 2016, 06:58:13 AM
^Remember that LC is a public company and even if they are doing something to protect your position, they have to tell you and investors at the same time if its material. And then they are subject to litigation if something goes wrong.  So I wouldn't mistake their silence for lack of action -- we will see with time

Also, I don't suspect there is going to be a high correlation with subprime auto and prime unsecured lending.
Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 07:02:51 AM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.
Post #1.  A statement of fact.
Post #2.  Poster #1, you have irrational fear.

You are making lots of assumptions, since there was no logic or conclusion in the statement.  Perhaps I am not the one who should visit my rationality when discussing LC?  It seems people here want to group statements into "bull" or "bear" instead of actually discussing the issues.  This bull vs bear mentality is likely why someone like Rob L has "egg on his face."  Every time I point out a risk that should be considered, I am equated to being on CNBC yelling short LC now.  It's been like this ever since I've been on this forum, but it's especially bad lately.  Just take a deep breath, every statement of risk is not questioning the safety of your investment. . .

Perhaps its because I'm used to dealing with investment professionals.  But there are risks and then probabilities to those risks.  You can't make a conclusion without both. I could assign a 10% probability to LC's cash disappearing or a 90% probability.  Without that data, you are irrationally attacking a risk factor.  You must get very upset every 10Q you get, with all those irrational risks disclosed.
I think the problem is that many (like me) had not considered the risk we were taking with a company like L C as our intermediary.  Hey--I'll admit to stupid on that one.  I guess I thought I was making loans to individuals and that was the program.  I never considered the legal standing of my investments (should LC go B-K).  There should be some kind of insurance or assurance (other than gratutitous emails from the new CEO--which have said NOTHING)---whether that's this BRV thing I'm reading people are advocating or whatever. 
I still do not understand my standing should L C go B-K.  I have read a few theories here--but I have not been convinced (assuaged)
Title: Email from Lending Club
Post by: rawraw on June 05, 2016, 07:05:50 AM
Yeah I understand, which is why I try to point them out. For example, we could all get a false sense of comfort from all that cash and then see they funded loans with it. Doesn't mean it's going to happen, but it should be considered when thinking of that protection. Which is why I said "it's not that simple"

Sent from my SAMSUNG-SM-G935A using Tapatalk
Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 07:09:48 AM
^Remember that LC is a public company and even if they are doing something to protect your position, they have to tell you and investors at the same time if its material. And then they are subject to litigation if something goes wrong.  So I wouldn't mistake their silence for lack of action -- we will see with time

Also, I don't suspect there is going to be a high correlation with subprime auto and prime unsecured lending.
Why not ?  I am reading there is increasing credit deterioration through out the economy.  You don't think some of these E F G borrower types haven't gotten some of the "funny money"?  I can't watch TV without seeing these no money down---no credit check auto sales people pitching me on a used car.  It is getting reminiscent of the home loan frenzy--no docs--no downpayment loans on housing.  How about Friday's "employment" numbers?  Some think we are in a recession already.  If your an oil worker---I'll bet your calling it a depression
Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 07:12:34 AM
Yeah I understand, which is why I try to point them out. For example, we could all get a false sense of comfort from all that cash and then see they funded loans with it. Doesn't mean it's going to happen, but it should be considered when thinking of that protection. Which is why I said "it's not that simple"

Sent from my SAMSUNG-SM-G935A using Tapatalk

Desperate people do desperate things---
Title: Re: Email from Lending Club
Post by: nonattender on June 05, 2016, 07:14:02 AM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.

While "squander" was probably the not the right word, the "fear" that LC will have to begin using its own balance sheet to fund loans is not irrational.  They have a finite amount of cash (we can argue over whether it's ~600-800mm, but let's not) with which to do that, while they do several times that amount in originations per quarter.  We're seeing reports from borrowers (anecdotal but we certainly never saw these before a month or so ago) that they're being told to wait 14-30 days for funding and that many loans are being held back from the platform for some length of time, so, it's reasonable to infer that there's a backlog of unfunded loans, already, unknown in size, but sufficient that LC is willing to inconvenience borrowers and give them 2-4 week funding delay estimates when they inquire.

One takes that information, then factors in that LC makes, let's say, ~85% of its revenues on origination fees for newly funded loans - leaving one to wonder what this slowdown/backlog will have done to LC's revenues in the coming quarter (not counting loans lost to possible attrition, as some unknown % of borrowers decide to go get funded elsewhere).  Conceivably, it's rational to assume that a savings has been had in the last month on marketing spend (which has likely been scaled back, though, given that many of the bank partnerships were two-way partnerships, wherein many of the large network of banks who purchased loans also referred customers toward LC to get loans, which was one of the lowest-cost borrower acquisition channels LC used in its managed channel mixture, it's not entirely irrational to think that their borrower acquisition cost may actually have gone up, at least on single unit economics basis).

I could go on, but all signs that I see point to origination shortfall, revenue shortfall, very good possibility of having to deploy cash on hand in order to fund loans, lower marketing spend savings than most people seem to think, etc, leading to lower revenue and some margin compression, on top of that, which, if the inability to attract huge amounts of capital continues, leads LC to tap a warehouse...

And if that happens, which I don't think is irrational, as, if given enough transparency, we could likely put a non-zero probabilty on it - then this idea to which you cling of LC's retail noteholders being at the top of the capital stack would be made "irrational" by LC's tap into further leverage against the balance sheet (loans/lines/warehouse-facilities) in order to fund loans and continue its operations...

I really don't want to argue with you about this - I kind of lost patience for you when you stated in another thread that you "couldn't care less" whether insiders with fiduciary responsibilities to the company engaged in undisclosed and ethically challenging behaves - but when you start tossing around terms like "irrational", in regards to what other people are expressing, I'm going to "call bullshit".

That's a behavioural finance term of art, by the way.  Nothing personal.
Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 08:01:07 AM
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.

While "squander" was probably the not the right word, the "fear" that LC will have to begin using its own balance sheet to fund loans is not irrational.  They have a finite amount of cash (we can argue over whether it's ~600-800mm, but let's not) with which to do that, while they do several times that amount in originations per quarter.  We're seeing reports from borrowers (anecdotal but we certainly never saw these before a month or so ago) that they're being told to wait 14-30 days for funding and that many loans are being held back from the platform for some length of time, so, it's reasonable to infer that there's a backlog of unfunded loans, already, unknown in size, but sufficient that LC is willing to inconvenience borrowers and give them 2-4 week funding delay estimates when they inquire.

One takes that information, then factors in that LC makes, let's say, ~85% of its revenues on origination fees for newly funded loans - leaving one to wonder what this slowdown/backlog will have done to LC's revenues in the coming quarter (not counting loans lost to possible attrition, as some unknown % of borrowers decide to go get funded elsewhere).  Conceivably, it's rational to assume that a savings has been had in the last month on marketing spend (which has likely been scaled back, though, given that many of the bank partnerships were two-way partnerships, wherein many of the large network of banks who purchased loans also referred customers toward LC to get loans, which was one of the lowest-cost borrower acquisition channels LC used in its managed channel mixture, it's not entirely irrational to think that their borrower acquisition cost may actually have gone up, at least on single unit economics basis).

I could go on, but all signs that I see point to origination shortfall, revenue shortfall, very good possibility of having to deploy cash on hand in order to fund loans, lower marketing spend savings than most people seem to think, etc, leading to lower revenue and some margin compression, on top of that, which, if the inability to attract huge amounts of capital continues, leads LC to tap a warehouse...

And if that happens, which I don't think is irrational, as, if given enough transparency, we could likely put a non-zero probabilty on it - then this idea to which you cling of LC's retail noteholders being at the top of the capital stack would be made "irrational" by LC's tap into further leverage against the balance sheet (loans/lines/warehouse-facilities) in order to fund loans and continue its operations...

I really don't want to argue with you about this - I kind of lost patience for you when you stated in another thread that you "couldn't care less" whether insiders with fiduciary responsibilities to the company engaged in undisclosed and ethically challenging behaves - but when you start tossing around terms like "irrational", in regards to what other people are expressing, I'm going to "call bullshit".

That's a behavioural finance term of art, by the way.  Nothing personal.

good post.  your basic run on the bank.  And no one has explained to me what MY notes standing are in case L C's balance sheet blows up (or even if it doesn't "blow up")
It is totally rational for note investors to be worried.  We all have seen too many fiascos in recent times. 
Title: Re: Email from Lending Club
Post by: Fred93 on June 05, 2016, 08:04:13 AM
I kind of lost patience for you when you stated in another thread that you "couldn't care less" whether insiders with fiduciary responsibilities to the company engaged in undisclosed and ethically challenging behaves

I didn't say anything of the kind.  You need to unclench your teeth enough so that you can once again read clearly.

I do care when insiders engage in unethical behaviors.  I was talking about a specific act which I do not think was in any way unethical.  (ie whether Mack loaned his personal money to Laplanche.)  This distinction sorta matters.

I tire of the mob yelling "burn the witch!  burn the witch!"  I'd rather discuss the facts.

Back to what could happen...  I simply have a different assessment about the likelihood of some of the sequences of events that people are proposing.  I do agree that many of these scenarios have a non-zero probability.  I just think their probability is very small.

I would feel more comfortable if LC were to announce a substantial layoff.  That would make it more clear that they are comfortable with slowing growth, which would make it clearly less likely that management would consider doing something panicy like using the balance sheet in new and dangerous ways to pump growth in originations.  (I don't need to go into detail, because you and others have done this for me.)

Like many others, I would be a little bit more comfortable with a BRV, although a BRV is not a panacea. 

Concern is rational.  The panic and trash talking I see here every day is not rational.


Title: Re: Email from Lending Club
Post by: sommers on June 05, 2016, 10:30:13 AM
I kind of lost patience for you when you stated in another thread that you "couldn't care less" whether insiders with fiduciary responsibilities to the company engaged in undisclosed and ethically challenging behaves

I didn't say anything of the kind.  You need to unclench your teeth enough so that you can once again read clearly.

I do care when insiders engage in unethical behaviors.  I was talking about a specific act which I do not think was in any way unethical.  (ie whether Mack loaned his personal money to Laplanche.)  This distinction sorta matters.

I tire of the mob yelling "burn the witch!  burn the witch!"  I'd rather discuss the facts.

Back to what could happen...  I simply have a different assessment about the likelihood of some of the sequences of events that people are proposing.  I do agree that many of these scenarios have a non-zero probability.  I just think their probability is very small.

I would feel more comfortable if LC were to announce a substantial layoff.  That would make it more clear that they are comfortable with slowing growth, which would make it clearly less likely that management would consider doing something panicy like using the balance sheet in new and dangerous ways to pump growth in originations.  (I don't need to go into detail, because you and others have done this for me.)

Like many others, I would be a little bit more comfortable with a BRV, although a BRV is not a panacea. 

Concern is rational.  The panic and trash talking I see here every day is not rational.

LC needs some high  profile people and/or investor/s to step up.  IF they think the little people investors are going to prop this thing up--then we are all in serious trouble.
They have poisoned the well for me (and I'll bet I'm not unique).  I do not have enough knowledge nor certainly confidence to stay in this "game".  I haven't read anything that assuages my fears. 
The simple fact that such a relatively minor indiscretion (by the former CEO) has thrown this business into chaos--is unacceptable.  The returns are simply not high enough to justify the investment risk for me
I am bailing out and will likely take some hits (deep discounts) to get it done
Title: Re: Email from Lending Club
Post by: fliphusker on June 05, 2016, 02:31:52 PM
Quote
Think my major problem is that this fiasco has enlightened me on how LC moved to relying on big money/institutional funding versus little guys (like they purportedly started with).  Common sense tells that the big boys will get better deals--whether reflected in pricing--some kind of discounts or rebates--or first crack at choice loans--or a combination of all..  IF I was a big money institution type---and LC told me that I had to get in line and be a buyer just like some guy with $10K--I'd tell them to go find a different sucker.  So, please don't tell me that everyone is treated equally.  And then we have the misconduct of the departed CEO
I am liquidating and it's an arduous process.  I had been in set and forget mode for 3 years.  Fortunately my auto investing was set at 3 year terms.  I am now realizing how illiquid LC is for us note investors.  Began having concerns about the whole business in February as I was reading about sub prime auto loans being the next problem (on top of student loans--on top of who knows what else kind of loans).  And the trend towards higher interest rates (which assures "old" loans would suffer discounts moving forward
Since early March I ended auto investing and had planned to just let my notes run off (and exit this business) and when this fiasco broke--I started learning about folio and have been selling notes there.  I've worked off about 30% of my inventory and have not gone below par (not counting the 1% selling fee)
I'm about to go discount slowly but surely. 
I BET I'M NOT THE ONLY ONE WHO IS GETTING OUT----I HAVE SEEN ZERO FROM L C TO ASSUAGE MY CONCERNS.  THEIR EMAIL ASSURANCES ARE LAME (AT BEST). I'LL TAKE ON THE NOTE CREDIT RISK (THAT WAS PART OF THE DEAL)--BUT NOT LC'S CORPORATE RISK.  TAKING ON BOTH IS A DEAL KILLER FOR THIS LITTLE GUY.  IF I KNEW MY MONEY WAS SAFE FROM AN L C B-K OR SOME FURTHER SHENANNIGANS---I MIGHT HANG AROUND.  BUT I'VE READ NOTHING THAT ALLAYS MY CONCERN.
SO I AM OUTTA HERE (THOUGH IT'S A WHOLE LOT TOUGHER TO EXIT THAN I HAD IMAGINED)
LIVE AND LEARN
I am curious to why a few are jealous that institutions getting a discount is bad.  Let's say that LC give Citi a 1% discount on 200M worth of notes each year.  How is this discount harming you?  Walmart gets discounts from manufacturers due the bulk amount that they buy for.  You see this same discount structure for everything on the net for sale.  "Spend $50 and you get free shipping."  So do you get mad that you did not spend $50 on Amazon and had to pay for shipping while others spend more and get free shipping?

Choice loans -- I have seen this discussed a number of times since RL stepped down.  What is a choice loan or note?  Your definition and mine are going to be completely different, I assume.  Right now there are 19 of what I consider choice loans that pass my stringent filter.  That is the most there has been since I joined in Feb. 
No reason to mash your caps locks key to dust, we can read.  Clearly by the poll about what direction people are going here, you are not the only one getting out.  You are in the minority though. 
It is easy to get out on the FOLIO market.  All you have to do is squander all your profits on the notes you have been sitting on for a couple of years, and break even.  People will buy your perfectly good notes at 3-5% discounts, depending on their YTM and payment history.  That is what I have been paying for notes on FOLIO.  20% YTM for notes 8 months old with discount of 6% with zero payment issues that meet my filters, ya man, I am all over that. 
As I am sure nonattender has missed my gambling analogies, will toss one out.  You know the only guaranteed money you will ever get in Vegas?  Cash out of the ATM.  :)
Title: Re: Email from Lending Club
Post by: mchu168 on June 05, 2016, 02:49:30 PM
For all of you scared away from investing in LC loans, please continue to stay on the sidelines.  I'm having a much easier time finding loans nowadays, and LC now seems to have more incentive to make the returns attractive for investors going forward vs. the days where any crappy loan was getting funded in 250ms.

As for the risks, I think well informed people can make their own judgement. I certainly didn't come here looking for deep insight and I haven't been disappointed.  It does boil down to a bull-bear debate for me, because as is always the case there are some who have negative biases on a story and some who see the glass half full.  If a newbie comes here and reads 50 negative posts from "bears" they will leave here with an unrealistically "bearish" view.  Thank goodness for Fred93 (a voice of reason among the herd).  Anyways, I think it's useful to understand posters' biases...

Title: Re: Email from Lending Club
Post by: Fred93 on June 05, 2016, 09:50:43 PM
Just got this email from Lending Club ...
$5,000 - $9,999 - bonus $100
$10,000 - $24,999 - bonus $200
$25,000 - $49,000 - bonus $500
$50,000 - $99,000 - bonus $1,000
$100,000+ - bonus $2,000

Whoa!  I got my copy of this mail on June 3rd, but the amounts are different!  My bonus amounts are exactly half of the above numbers.

Different bonus amounts for different investors.  I don't know why.  My guess is that they rolled this out slowly so they could see investor reaction, and reaction was so good that they cut the bonus in half before they got to me.  Alternately, maybe they just don't like me.
Title: Re: Email from Lending Club
Post by: sommers on June 06, 2016, 05:07:11 AM
Quote
Think my major problem is that this fiasco has enlightened me on how LC moved to relying on big money/institutional funding versus little guys (like they purportedly started with).  Common sense tells that the big boys will get better deals--whether reflected in pricing--some kind of discounts or rebates--or first crack at choice loans--or a combination of all..  IF I was a big money institution type---and LC told me that I had to get in line and be a buyer just like some guy with $10K--I'd tell them to go find a different sucker.  So, please don't tell me that everyone is treated equally.  And then we have the misconduct of the departed CEO
I am liquidating and it's an arduous process.  I had been in set and forget mode for 3 years.  Fortunately my auto investing was set at 3 year terms.  I am now realizing how illiquid LC is for us note investors.  Began having concerns about the whole business in February as I was reading about sub prime auto loans being the next problem (on top of student loans--on top of who knows what else kind of loans).  And the trend towards higher interest rates (which assures "old" loans would suffer discounts moving forward
Since early March I ended auto investing and had planned to just let my notes run off (and exit this business) and when this fiasco broke--I started learning about folio and have been selling notes there.  I've worked off about 30% of my inventory and have not gone below par (not counting the 1% selling fee)
I'm about to go discount slowly but surely. 
I BET I'M NOT THE ONLY ONE WHO IS GETTING OUT----I HAVE SEEN ZERO FROM L C TO ASSUAGE MY CONCERNS.  THEIR EMAIL ASSURANCES ARE LAME (AT BEST). I'LL TAKE ON THE NOTE CREDIT RISK (THAT WAS PART OF THE DEAL)--BUT NOT LC'S CORPORATE RISK.  TAKING ON BOTH IS A DEAL KILLER FOR THIS LITTLE GUY.  IF I KNEW MY MONEY WAS SAFE FROM AN L C B-K OR SOME FURTHER SHENANNIGANS---I MIGHT HANG AROUND.  BUT I'VE READ NOTHING THAT ALLAYS MY CONCERN.
SO I AM OUTTA HERE (THOUGH IT'S A WHOLE LOT TOUGHER TO EXIT THAN I HAD IMAGINED)
LIVE AND LEARN
I am curious to why a few are jealous that institutions getting a discount is bad.  Let's say that LC give Citi a 1% discount on 200M worth of notes each year.  How is this discount harming you?  Walmart gets discounts from manufacturers due the bulk amount that they buy for.  You see this same discount structure for everything on the net for sale.  "Spend $50 and you get free shipping."  So do you get mad that you did not spend $50 on Amazon and had to pay for shipping while others spend more and get free shipping?

Choice loans -- I have seen this discussed a number of times since RL stepped down.  What is a choice loan or note?  Your definition and mine are going to be completely different, I assume.  Right now there are 19 of what I consider choice loans that pass my stringent filter.  That is the most there has been since I joined in Feb. 
No reason to mash your caps locks key to dust, we can read.  Clearly by the poll about what direction people are going here, you are not the only one getting out.  You are in the minority though. 
It is easy to get out on the FOLIO market.  All you have to do is squander all your profits on the notes you have been sitting on for a couple of years, and break even.  People will buy your perfectly good notes at 3-5% discounts, depending on their YTM and payment history.  That is what I have been paying for notes on FOLIO.  20% YTM for notes 8 months old with discount of 6% with zero payment issues that meet my filters, ya man, I am all over that. 
As I am sure nonattender has missed my gambling analogies, will toss one out.  You know the only guaranteed money you will ever get in Vegas?  Cash out of the ATM.  :)
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero). 
Title: Re: Email from Lending Club
Post by: SLCPaladin on June 06, 2016, 01:12:29 PM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.
Title: Re: Email from Lending Club
Post by: AnilG on June 06, 2016, 01:44:22 PM
You are conflating price movement with change in yield when comparing utility stocks with LC. LC investment is not readily traded so there is no price movement. Most users are valuing their LC portfolio notes at remaining outstanding principal rather than the market value. As utility stocks are readily tradable, their price (market value) moves frequently and thus published yield. A fair comparison is when LC yield is compared with yield from utility stock at the time of utility stock purchase. Any price movement of utility stock and resulting change in yield after purchase is irrelevant when comparing with LC yield.

Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

Instead of comparing with utility stock, a better comparison (still not perfect) for the LC yield is with that of junk/high yield bond from consumer financial services firms such as Ally and Capital One or even Junk/High Yield ETFs. I have seen some large retail lenders applying the price movement of such bonds to LC account value to figure out imputed value of their LC investment.


Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.
Title: Re: Email from Lending Club
Post by: jz451 on June 06, 2016, 02:20:50 PM
This is my view also, that people need to think of LC in comparison to junk bonds/bond funds which are the most similar in terms of structure and level of risk.  Everything else is apples to oranges.


You are conflating price movement with change in yield when comparing utility stocks with LC. LC investment is not readily traded so there is no price movement. Most users are valuing their LC portfolio notes at remaining outstanding principal rather than the market value. As utility stocks are readily tradable, their price (market value) moves frequently and thus published yield. A fair comparison is when LC yield is compared with yield from utility stock at the time of utility stock purchase. Any price movement of utility stock and resulting change in yield after purchase is irrelevant when comparing with LC yield.

Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

Instead of comparing with utility stock, a better comparison (still not perfect) for the LC yield is with that of junk/high yield bond from consumer financial services firms such as Ally and Capital One or even Junk/High Yield ETFs. I have seen some large retail lenders applying the price movement of such bonds to LC account value to figure out imputed value of their LC investment.


Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.
Title: Re: Email from Lending Club
Post by: fliphusker on June 06, 2016, 02:48:02 PM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).
Please do not take this in a personal way.  When I started in LC, I like many others did not know FOLIO very well.  I got into LC knowing full well that every single dime I put into it could be lost, just not any investment that is not insured.  I like others, came for the big fat nice returns.  Wearing blinders and investing is sloppy at best.
I have loftier goals then 5% and I am willing to roll the dice on my investment here.  I am probably one of the few here who do not care about a BRV.  Sure it would be nice, but not going to demand a change in game because I got scared by what I see as a one time issue, not a systemic problem with LC. 
I have learned the FOLIO market to a certain extent.  I am by far no expert though, but I want to think I am doing alright.  Is it liquid?  Absolutely depending on the losses you want to incur.  That depends on your panic level.  If you believe that LC has enough cash to weather a storm for three years, then why would you sell any notes that mature in that time or rake out enough profits to pay for the upfront cost?  I am buying notes from panicked investors who are offering deep discounts.  Am I smart for doing this?  We will see in five year's time.
It is all up to you though, if you want to lose all the profits or even take small losses, that is easily done.  As it is a buyers market though, you are not going to make much of a profit selling on FOLIO right now.
Title: Re: Email from Lending Club
Post by: Fred93 on June 06, 2016, 02:58:23 PM
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Whoa.  You can sell that utility stock quickly, but there is no guarantee that you will get your money back.  You think losing 3-5% is "a bad investment" ?  When you try to sell that utility stock you may find the price down -10%, -20%, -30%.  That's the way the stock market works.

Title: Re: Email from Lending Club
Post by: sommers on June 06, 2016, 07:27:40 PM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Title: Re: Email from Lending Club
Post by: Rob L on June 06, 2016, 07:45:43 PM
Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

I think you've hit the nail on the head so to speak. The term "counter party risk" is well established and well defined. Depending on your view counter party risk has remained relatively unchanged or has increased. It's the ultimate bottom line to the "bulls bears" or what ever you want to call it discussion.
Title: Re: Email from Lending Club
Post by: Fred93 on June 06, 2016, 08:24:20 PM
Utility stock don't experience "wild swings".

You set the bar by claiming disgust at losing 3-5%, and claimed utility stocks would not lose you this much.  That's not correct.  Utility stocks certainly vary more than this.  Now you change the vocabulary to "wild".

Take one of the big standard stable utilities, such as ED.  Closing prices (from google)... 1998 Dec 18 $54.00, then if you suddenly decided to sell on 2000 Feb 25, you find the price is $26.188 .  That's down 51.5%   You can find plenty of 30% drops.  This is common in the stock market.

Quote
The CEO commits some relatively minor fraud ... and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.

You did better than the ED investor trying to get out on 2/25/2000, and you did better than the General Public Utilities investor trying to get out right after Three Mile Island.  (GPU since merged, so the stock chart isn't on Yahoo or Google, or else I would have posted it.)  You did a hell of a lot better than the BP investor after the gulf spill.  The list goes on.

Also, you didn't have to liquidate.  Nobody forced you.  You could have held the notes, and done fine.  You could have liquidated more slowly and taken a smaller hit.  The hit was a result of your panic.  You exercised your choice ... that's fine.  You decided to take a loss.
Title: Re: Email from Lending Club
Post by: fliphusker on June 06, 2016, 09:02:35 PM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire. 
Title: Re: Email from Lending Club
Post by: bobeubanks on June 07, 2016, 01:45:00 AM
Utility stock don't experience "wild swings".

SO dropped about 5% in just one day (Aug 24, 2015)
Title: Re: Email from Lending Club
Post by: sommers on June 07, 2016, 06:05:04 AM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire.

I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus L C hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus an L C note with who knows who on the other end of it (especially with the questionable underwriting standards many are suggesting are being employed). 
For this thing to go into crisis this fast---should scare everyone.  This is uncharted territory and hope is not a strategy
Title: Re: Email from Lending Club
Post by: fliphusker on June 07, 2016, 08:24:54 AM
Quote
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire.

I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus L C hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus an L C note with who knows who on the other end of it (especially with the questionable underwriting standards many are suggesting are being employed). 
For this thing to go into crisis this fast---should scare everyone.  This is uncharted territory and hope is not a strategy
What I guess scares too many here is a bad portfolio strat.  They came here and dumped way too much into one sector.  Now they are scared, and want out.  The problem is they do not understand how to get out.  Sommers, you have been in this forum since Dec. 2014.  You do not understand how FOLIO works?  I am a fricking novice.  Man I have to look up half the shit that is said here, on Google, to find out what it means.  But one thing I think I understand, is how FOLIO works, and what panicked people will price notes at.  Sure, most notes do not sell at -3 discount, but I sure lap the ones that sell for -6 as quick as I can. 
You want out, you do not have to take a loss, all you have to do is squander all your profits you have made in the past year and a half.  Take that beatdown and price your notes to break even, not hard to figure out. 
I apologize for being incentive.....  Just annoying when people bitch about things they were ignorant to in the first place due to well their own..... lack of research.
Title: Re: Email from Lending Club
Post by: SLCPaladin on June 07, 2016, 11:22:49 AM
Quote
I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus LC hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus.

I'm not worried about Southern going out of business per se, mainly because they seem to be embracing renewables. But since you brought up utilities as a low-risk play, I think you might want to revisit some of those assumptions. Some utilities are in for a wake-up call in the next few years. I see this out here in the midwest (NV Energy, Vivint).

Sun Edison's financial chicanery aside,  solar is a real threat to the profit models of quite a few utility companies. Low cost PV panels + federal and state tax credits for renewables + improving better battery technology (i.e. Tesla Powerwall et al) = decoupling from utilities. Utility companies are panicking in some places and are trying to squash the nascent industry by gouging net metering customers. THey are trying to lobby state politicians to erect barriers to prevent their monopoly (much like traditional car dealers are trying to prevent Tesla from selling direct-to-consumer). Technology may prove disruptive, even in boring, "safe" utilities.

That is not to say you are wrong about the very real risks you've cited with LC, but the alternatives you've suggested are anything but low risk. You want low risk? You need to be talking about treasury bonds and FDIC insured CDs, which are paying 1% - 2% interest, so slightly below inflation.