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Lending Club Discussion => Investors - LC => Topic started by: rubicon on June 17, 2017, 01:55:35 PM

Title: June seems to be a horrible month for me
Post by: rubicon on June 17, 2017, 01:55:35 PM
Even worse than Jan/Feb. I've stopped re-investing my cashflows
Title: Re: June seems to be a horrible month for me
Post by: apc3161 on June 18, 2017, 12:44:54 PM
Looking at the most recent quarterly report, it is stated that individual investor capital actually increased by $30 million this past quarter. However, it seems everyone on here is slowly withdrawing their money. How are these two observations compatible?
Title: Re: June seems to be a horrible month for me
Post by: rawraw on June 18, 2017, 02:48:28 PM
Looking at the most recent quarterly report, it is stated that individual investor capital actually increased by $30 million this past quarter. However, it seems everyone on here is slowly withdrawing their money. How are these two observations compatible?
Selection bias.  The "type A hyper sensitive do it yourselfers" that would 1) think about joining a forum on LC invesing and 2) maintain activity on that forum over time is a small subset of retail investors IMO.  I do not believe we are representative
Title: Re: June seems to be a horrible month for me
Post by: AnilG on June 18, 2017, 05:18:23 PM
Below is the fractional loans originated on LC platform from the latest historical loan files. There was slight drop off in fractional loan originations (can be considered indicative of interest from retail lenders) since Dec 2016. The increase in March 2017 was most probably driven by LC promotion as well as quarter-end increase in originations.  But numbers are still much better than same time last year. The LC portfolio is not quick to unwind so the decline may show up across longer time interval.

Fractional Loan Originations as of 2017 Q1 1 End, from loan history files
MonthOrigination $ Volume
2017-03138,193,625
2017-02116,734,600
2017-01122,044,275
2016-12127,280,950
2016-11121,435,975
2016-10130,105,400
2016-09128,213,525
2016-08110,971,875
2016-07123,194,600
2016-06118,425,825
2016-05105,480,150
2016-04103,948,125
2016-03107,819,675
2016-0276,007,400
2016-01119,958,325

Platform Loan Originations as of June, 2017, from SEC filings
Title: Re: June seems to be a horrible month for me
Post by: sensij on June 19, 2017, 12:32:48 PM
Looking at the most recent quarterly report, it is stated that individual investor capital actually increased by $30 million this past quarter. However, it seems everyone on here is slowly withdrawing their money. How are these two observations compatible?

"Everyone" is a bit much.  I represent some of the new money, opening a pair of IRA accounts this spring.  Part of the investment hypothesis is that 2017 originations will be better than the 2015-2016 vintages that are causing so much heartache, but time will tell.
Title: Re: June seems to be a horrible month for me
Post by: Tomp on June 24, 2017, 10:48:52 AM
Good God! so you are saying your investment thesis is "hope". lol
Title: Re: June seems to be a horrible month for me
Post by: rawraw on June 24, 2017, 06:16:30 PM
Good God! so you are saying your investment thesis is "hope". lol
Loans are often referred to as credit.  The English word for credit comes from credere, which means "to believe" or "to trust".  There is more hope in this stuff than many realize :)
Title: Re: June seems to be a horrible month for me
Post by: nonattender on June 24, 2017, 08:23:47 PM
Good God! so you are saying your investment thesis is "hope". lol
Loans are often referred to as credit.  The English word for credit comes from credere, which means "to believe" or "to trust".  There is more hope in this stuff than many realize :)

You guys are so cynical.  Next you'll try to tell me that cryptocurrencies are a scam and that I shouldn't do pointless math calcs all day long.
Title: Re: June seems to be a horrible month for me
Post by: AnilG on June 24, 2017, 09:35:15 PM
Cryptocurrencies are ponzi scheme!  8)

You guys are so cynical.  Next you'll try to tell me that cryptocurrencies are a scam and that I shouldn't do pointless math calcs all day long.
Title: Re: June seems to be a horrible month for me
Post by: nonattender on June 25, 2017, 08:57:39 PM
Cryptocurrencies are ponzi scheme!  8)

You're just a hater.  Just in case, I have "diversified" my cryptocurrency retirement portfolio into an ETF-traded basket of ponzi schemes.

So, I'm safe.  8)
Title: Re: June seems to be a horrible month for me
Post by: sensij on June 26, 2017, 12:42:21 PM
Good God! so you are saying your investment thesis is "hope". lol

If you can't recognize the element of "hope" aka "risk" in your own investments, you are doing it wrong.  There are reasons to believe that more recent vintages will outperform 2015/2016, and reasons to believe they will not.  If you have information to share to quantify that risk, I'd love to see it.
Title: Re: June seems to be a horrible month for me
Post by: au88 on July 08, 2017, 11:02:20 PM
Keep in mind the borrow default curve. If you stop reinvesting, then you stop getting interest from all of the new loans that probably haven't defaulted yet. The defaults keep rolling in though. June was also my worst month yet.
Title: Re: June seems to be a horrible month for me
Post by: MichaelHollis on July 10, 2017, 07:28:47 AM
Cryptocurrencies are ponzi scheme!  8)
Yeah, I thought that too. That explains the ups and massive downs.
Title: Re: June seems to be a horrible month for me
Post by: hcharris on July 12, 2017, 11:54:40 AM
I have had a number of bad months. I invested understanding that there were going to be defaults. But I also invested looking at the percentage of defaults I could expect. The current default rate is well over that and looks to get worse.

I have stopped investing and I'm slowly withdrawing my money. I wonder if borrowers look at Lending Club as an easy mark.
Title: Re: June seems to be a horrible month for me
Post by: nonattender on July 12, 2017, 04:22:22 PM
Cryptocurrencies are ponzi scheme!  8)
Yeah, I thought that too. That explains the ups and massive downs.

There's a ton of crap to sort through with all the different cryptocurrencies.  The only one that ever interested me is XRP (Ripple), which is a transaction platform with actual utility for foreign exchange, interbank, etc - it was sort of imagined to be a complement to SWIFT or what retail customers might think of as the ACH network.  I can't bring myself to try to differentiate it from the rest, as I'd need to rest my wrists for an hour (and maybe want to slash them) after I got done explaining, but it's had self-settling contracts ('smart contracts') from the beginning and is currently in use or in testing by a number of international banking consortiums and central banks.  Bank of England just did a trial run with it recently, etc.  I own some of the platform currency (XRP) from back when I played around with it, like five years ago  - happenstance, actually, I'd totally forgotten that I'd even bought some to do some testing.  It was started by Prosper's founding CEO and came to my attention because of that, at the time.  Now, it's apparently getting popular with individuals - in addition to all the government/government-sized institutions.  Who knew?  Maybe I'll make a buck or two.  Individuals can use it, and buy it, but it's almost harder to figure out than all the rest of them and doesn't have many small scale applications in its user ecosystem - mostly just the big institutional kids --- or so I thought...   One of the interesting things about it is that it's got a very granular set of "graphs"; "quantification of trust" (per aspect/entity/node) or built-in risk-management (capable of 'contagion-control', probably why the central bankers like it so much) mechanism/system being one of those sets of interlaced/interpolated graphs, almost a realtime network trust graph, with each node having currency gnostic/agnostic, per entity, credit / timing / window controls........ anyway... if anyone cares, go play with it a bit - that's the best bet to get anywhere close to understanding it.

I think I understand bitcoin - and I'm not interested.  Ethereum is new to me, but it looked very similar to something I'd seen years ago.  The new craze of "initial coin offerings" look a lot like vaporware (same as most of the other coins, but with slight - sometimes very, very slight twists - like almost "sleight of hand" twists) and only promise to be "useful" in some way way in the future, after the people who take all the money for the coins use their millions to actually develop some sort of software/platform that will make billions of dollars in transaction fees because it's just so damned useful (according to the notes that they hashed out at Panera Bread on a napkin, before selling the coins to the public)...

Ooof.. already tired of thinking about it.
Title: Re: June seems to be a horrible month for me
Post by: jasondhsd on July 18, 2017, 11:57:41 AM
Yup June and July are sucking with over 1000 loans my return has dropped under 3%.  It just keeps falling.
Title: Re: June seems to be a horrible month for me
Post by: dbsb3233 on July 18, 2017, 02:02:11 PM
I stopped reinvesting at the start of the year and started withdrawing all cash every few weeks from my 3 year old account that I'd grown to $274k. 

My June statement shows a monthly loss of $457 (-2.0% annualized rate). 
YTD I'm squeaking out a measly $1089 profit (+0.8% annualized rate). 
For 2016 I showed a +4.6% profit.
For 2015 I showed a +8.7% profit. 

That's in my after-tax LC account.  It's easier to phase that one out by simply xfering money every few weeks.  I also have an IRA account with LC with substantial money in it as well ($234k).  Got another year before I hit age 59 1/2 where it will be easier to start withdrawals from it, so I'll just keep it going and reinvesting.  It's too much trouble to processes rollover transfers from it over and over as proceeds roll in.

Fortunately, that account is doing better... 
June profit is $1600 (+8.2% annualized).
2017 YTD profit is $5340 (+4.5% annualized).
For 2016 I showed a +5.7% profit.
For 2015 I showed a +7.5% profit.

The only real difference in the 2 accounts is that I started the IRA in 2015 and the regular account a year earlier in 2014, so I have more "aged" notes in the regular account that's doing terrible.  All my notes are 36mo, so my regular account has already cycled fully through some of the notes by now.
Title: Re: June seems to be a horrible month for me
Post by: rawraw on July 18, 2017, 02:35:35 PM
$274k in a taxable account?  Seems like a terrible idea.  How much tax loss carryforwards did you create?  Or are you taking lots of losses elsewhere?
Title: Re: June seems to be a horrible month for me
Post by: dbsb3233 on July 18, 2017, 04:32:35 PM
That's another of the reasons I'm phasing out the taxable account.  The first year I had less money in it and the tax implications were not an issue.  But as I liked the early returns, I added a lot more money the 2nd and 3rd years before realizing the way taxes are calculated on it produced more losses than I would be able to fully offset.  I'll readily admit to not fully understanding the rather confusing tax treatment.  Oops.  Fortunately I was already retired and had little income to claim (I guess you could say I'm savings rich but income poor) so the actual tax impact wasn't huge.  Still though, it did cost me a little. 

In fact, that was the real impetus toward phasing out my taxable account, but leaving my IRA account in place.  The increasingly poor returns on the taxable account just further sealed the deal.
Title: Re: June seems to be a horrible month for me
Post by: SLCPaladin on July 19, 2017, 11:57:39 AM
Thanks for sharing your experience. I like to peer into the thoughts, actions, and rationale of individuals who have deployed significant funds in this asset class. Your experience largely mirrors mine. I stopped reinvesting because the more conservative end of the spectrum where defaults are (theoretically) lower isn't providing me with a high enough return relative to other risk-free assets (such as FDIC-insured CDs). The problem for me with notes in the B and C grade is that I am generating far too many losses that I can't offset with any other capital gains (largely because I have stayed out of the stock market rally for the past 2-3 years, and don't plan to step in with CAPE numbers at all-time highs).
Title: Re: June seems to be a horrible month for me
Post by: lascott on July 20, 2017, 11:01:49 PM
Thanks for sharing your experience. I like to peer into the thoughts, actions, and rationale of individuals who have deployed significant funds in this asset class. Your experience largely mirrors mine. I stopped reinvesting because the more conservative end of the spectrum where defaults are (theoretically) lower isn't providing me with a high enough return relative to other risk-free assets (such as FDIC-insured CDs). The problem for me with notes in the B and C grade is that I am generating far too many losses that I can't offset with any other capital gains (largely because I have stayed out of the stock market rally for the past 2-3 years, and don't plan to step in with CAPE numbers at all-time highs).
I had a similar significant sum and was using LC as an alternative to bonds per my thread: http://forum.lendacademy.com/index.php/topic,3221.0.html
I've removed 2/3s of my LC funds from an all time high. I'm leaving more in my ROTH now.  My taxable fund losses are too high and I did not have capital gains to offset since all my money is in IRAs/401K vs taxable investments.
LC just lost my trust after last year CEO fiasco as well as the ~2015 vintage.
Title: Re: June seems to be a horrible month for me
Post by: AnilG on July 21, 2017, 02:52:07 AM
I wonder if we are overreacting! Closing the barn door after horses already bolted. I know some of you were over-exposed to this asset class. In a way, these events of past year were good in making you act on reducing exposure. I still believe you benefit from some exposure to this asset class in your portfolio, may be not the extent of replacing most of your bond/fixed income portion of portfolio with Lending Club loans. The Lending Club has already back-tracked somewhat from credit expansion of 2015-2016. It is typical of lending industry to expand credit when credit demand is high and when credit starts going bad, pull back.  I expect (hope) that newer loans may perform better than those issued in last two years.

I stopped reinvesting because the more conservative end of the spectrum where defaults are (theoretically) lower isn't providing me with a high enough return relative to other risk-free assets (such as FDIC-insured CDs).
I had a similar significant sum and was using LC as an alternative to bonds per my thread: http://forum.lendacademy.com/index.php/topic,3221.0.html
I've removed 2/3s of my LC funds from an all time high.
LC just lost my trust after last year CEO fiasco as well as the ~2015 vintage.
Title: Re: June seems to be a horrible month for me
Post by: SLCPaladin on July 21, 2017, 10:11:17 AM
To quote John Maynard Keynes, "when the facts change, I change my mind." While it is true that I am currently drawing down and not reinvesting (my portfolio is about 1/2 of what it once was), if I see evidence that the more recent vintage curves default rates are more in line with what I am expecting, then I will consider wading back in. I like the charts over at Insikt to compare vintages. LC could make several changes that would make me feel better about wading in (e.g., raise interest rates, better align LC incentives with investors, fix the early pay-off problem that saps returns, etc.)

But right now I just feel like I'll count myself lucky if I can get all of my funds out before any downside surprise or correction on the overall US economy. The things that worry me from a macro front are frothy asset prices, increasingly unaffordable home prices in much of the US, auto loan defaults, high student loan debt, and commercial real estate being decimated by online retailers.

It is possible that new loans will perform better than the past two years, but I'm fine potentially missing out on some of those gains while other LC investors play guinea pig for a bit.

I wonder if we are overreacting! Closing the barn door after horses already bolted. I know some of you were over-exposed to this asset class. In a way, these events of past year were good in making you act on reducing exposure. I still believe you benefit from some exposure to this asset class in your portfolio, may be not the extent of replacing most of your bond/fixed income portion of portfolio with Lending Club loans. The Lending Club has already back-tracked somewhat from credit expansion of 2015-2016. It is typical of lending industry to expand credit when credit demand is high and when credit starts going bad, pull back.  I expect (hope) that newer loans may perform better than those issued in last two years.

I stopped reinvesting because the more conservative end of the spectrum where defaults are (theoretically) lower isn't providing me with a high enough return relative to other risk-free assets (such as FDIC-insured CDs).
I had a similar significant sum and was using LC as an alternative to bonds per my thread: http://forum.lendacademy.com/index.php/topic,3221.0.html
I've removed 2/3s of my LC funds from an all time high.
LC just lost my trust after last year CEO fiasco as well as the ~2015 vintage.
Title: Re: June seems to be a horrible month for me
Post by: Rob L on July 21, 2017, 11:10:27 AM
LC just lost my trust after last year CEO fiasco as well as the ~2015 vintage.

I agree with lascott and it's not just that.

Hey, everything's changed so much. No so long ago the story was P2P lending. Without the overhead of "bricks and mortar" branches and bank reserve requirements LC claimed an operating expense advantage of 3-4% over traditional lenders. Now the story is MPL and LC is captive to the very "bricks and mortar" entities that initially they challenged. From the forum the consensus best answer to the question "What would you do if you were the LC CEO" was to become a bank. For those that have been around since the P2P days one might say that  it hasn't been us leaving LC, but it has been LC leaving us. Can't blame LC; they gotta go wherever they can get big money to originate.
Title: Re: June seems to be a horrible month for me
Post by: Burned By LC on July 21, 2017, 11:16:41 AM
You are not alone.
Last quarter I had a NEGATIVE return.
Defaults + Fees > Interest

If LC prepares Form 1099 as they did last year, I could be paying taxes on the "supposed" interest, when in reality I'm just incurring losses.

I'm currently liquidating my account by taking distribution of principle and interest.
The secondary market isn't an option for LC Separately Managed Accounts.
Title: Re: June seems to be a horrible month for me
Post by: AnilG on July 21, 2017, 06:17:21 PM
My main disappointment with LC/Prosper and other platforms is that they lost focus on p2p aspects of lending. Without p2p aspects, these platforms have no defensible moats. They will be wiped out by the likes of GS or other "traditional established " institutions that decide to enter the market. But Institutions are like "sheep-herd", once market conditions deteriorate, they all will head to exit at the same time. Then most of these platforms will come crawling back to retail investors.

But agree, wind is blowing against retail lenders.


I agree with lascott and it's not just that.

Hey, everything's changed so much. No so long ago the story was P2P lending. Without the overhead of "bricks and mortar" branches and bank reserve requirements LC claimed an operating expense advantage of 3-4% over traditional lenders. Now the story is MPL and LC is captive to the very "bricks and mortar" entities that initially they challenged. From the forum the consensus best answer to the question "What would you do if you were the LC CEO" was to become a bank. For those that have been around since the P2P days one might say that  it hasn't been us leaving LC, but it has been LC leaving us. Can't blame LC; they gotta go wherever they can get big money to originate.
Title: Re: June seems to be a horrible month for me
Post by: Rob L on July 21, 2017, 07:12:25 PM
My main disappointment with LC/Prosper and other platforms is that they lost focus on p2p aspects of lending. Without p2p aspects, these platforms have no defensible moats. They will be wiped out by the likes of GS or other "traditional established " institutions that decide to enter the market. But Institutions are like "sheep-herd", once market conditions deteriorate, they all will head to exit at the same time. Then most of these platforms will come crawling back to retail investors.

But agree, wind is blowing against retail lenders.


I agree with lascott and it's not just that.

Hey, everything's changed so much. No so long ago the story was P2P lending. Without the overhead of "bricks and mortar" branches and bank reserve requirements LC claimed an operating expense advantage of 3-4% over traditional lenders. Now the story is MPL and LC is captive to the very "bricks and mortar" entities that initially they challenged. From the forum the consensus best answer to the question "What would you do if you were the LC CEO" was to become a bank. For those that have been around since the P2P days one might say that  it hasn't been us leaving LC, but it has been LC leaving us. Can't blame LC; they gotta go wherever they can get big money to originate.

I agree and it's just too bad. The original P2P retail concept seemed like a good one, and I still (naively?) think it could be a very good business going forward. IMO, even without Fed/ZIRP and with Fed balance sheet runoff, intermediate and longer term interest rates are still going to be very low for a very long time. Reaching for yield will continue thanks to the baby boomer demographic and that big risk/reward hole that exists between equities and bonds. The P2P retail "well" was barely tapped when the game changed! Guess LC/Prosper were seduced by the quick and easy money to lend from the brick and mortar folks. Ultimately that may well be their complete and total undoing and I would bet on it today. It's very frustrating to see GS/Marcus use OPM from savings accounts paying a whopping 1.20% make a low risk 200bps or more return when lending to the top most credit worthy borrowers. So, for LC/Prosper it might not be such a bad idea to hit the reset button on retail sooner rather than later. Or, maybe it's just too late for that.