Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: CircleT009 on November 15, 2017, 11:30:57 AM

Title: Dear LC
Post by: CircleT009 on November 15, 2017, 11:30:57 AM
Been a while since I last posted, but have been following the forum and reading.

It seems like this is the only thing I post (when I do), but maybe just maybe one time LC will hear me.

So your investors have seen significant decreases in returns and for quite a few of those investors they are experiencing a loss.  HELLO.

Your new credit model is great, but it is not going to change anything until you raise interest rates to the levels they used to be.  And I am referring to 09/10 level interest rates.  I would have a hard time believing your volume of originations would decrease in any meaningful manner if you raised rates.  Most of these borrowers need to refi from a higher rate.  A savings on the interest they pay is a savings, I doubt they have an alternative.

Just my .02.
Title: Re: Dear LC
Post by: Rob L on November 15, 2017, 01:00:30 PM
Doesn't seem they are listening, but who knows. There's always hope.

This past quarter LC originations by self-managed individuals dropped from 13% to 9% of total originations.
Managed account originations dropped from 31% to 24% of total.
Banks dropped from 44% to 42% of total.
Only Other institutional rose from 12% to 15% of total.
And, oh yeah, almost forgot, loans originated and held by LC on their books rose from 0% to 9% of total.

LC's stock is trading at this moment at $4.08 per share, down another -2.16% on the day.
It has not traded at this level since 7/12/2016, after the "discrepancies" in mid-May were revealed and the CEO was fired.

Meanwhile LC recently dropped the interest rates of two A subgrade loan categories.
I remember you posted "Once interest rates on A's fell below 8%, I stopped buying A grade loans."

Seems that neither the stock investors nor most categories of lenders are doing well.
Sorry, but I wanted to put my .02 in too. As a consistent nattering-nay-bob-of-negativism my response may do more harm than good.

Title: Re: Dear LC
Post by: storm on November 15, 2017, 02:27:53 PM
From where I'm sitting, LC needs to really improve their underwriting and collection efforts.  My last statement shows 58% of my YTD interest is negated by charge-offs.  I am well diversified in the middle grades.  I would rather have fewer quality low-interest loans to pick from than the garbage they are peddling now.  The ROI guidance is complete fiction.
Title: Re: Dear LC
Post by: rawraw on November 15, 2017, 08:57:56 PM
I recently took out a peer loan. LendingClub has lots of competition and their rate offered to me was much higher with an origination fee. I went with an alternative. I think you guys have been net savers for too long and don't understand what the consumer loan market place looks like. That's my two cents
Title: Re: Dear LC
Post by: Ran on November 15, 2017, 09:28:16 PM
I regularly receive mails from discover bank, chase or AMEX offering personal loans. Do not know how their rate compares to LC, but the terms are very similar. I always think traditional banks have stronger client relationship so their marketing cost is lower than LC, but their branches are way more costly. But a lot of us are wrong thinking LC can easily beat traditional banks just by lower operating cost. One side though is that China p2p companies almost entirely rely on Apps for consumer lending, but LC never saw the need to let borrower take out loans using App. Why not?.
I recently took out a peer loan. LendingClub has lots of competition and their rate offered to me was much higher with an origination fee. I went with an alternative. I think you guys have been net savers for too long and don't understand what the consumer loan market place looks like. That's my two cents
Title: Re: Dear LC
Post by: Fred93 on November 15, 2017, 09:41:09 PM
I recently took out a peer loan. LendingClub has lots of competition and their rate offered to me was much higher with an origination fee. I went with an alternative.

Yep.  LC lowered rates because of competitive pressure (on the borrow side).  Unless that pressure magically disappears, or they make some great marketing discovery, LC's loan rates aren't gonna go back up any time soon.

If they had been more transparent, and just admitted this, it would have saved many retail lenders a lot of pain and doubt as returns fell.
Title: Re: Dear LC
Post by: Lovinglifestyle on November 15, 2017, 09:44:30 PM
I wouldn't care about returns falling if I didn't have any charge-offs!
Title: Re: Dear LC
Post by: rawraw on November 15, 2017, 10:04:04 PM
I wouldn't care about returns falling if I didn't have any charge-offs!
These things are cyclical. We have had several years of hardly any losses and things got loose, especially in the low FICO stuff
Title: Re: Dear LC
Post by: CircleT009 on November 16, 2017, 09:22:40 AM
I hear you guys, but I guess my main point is that LC will never work if people are losing money.  Eventually the institutional guys will start to lose money as well.  Once word starts getting around that if you invest on LC you will lose money, you will have no new funds coming in the door and all current funds slowly leaving. 

I agree that these losses could be cyclical (I only have 3 months in last 8 years with loses), but I do not think trying to improve underwriting or the credit model is going to work.  You have to get interest rates back to where they were so that the losses can be absorbed.

I have said it before and will say it again, once LC started focusing on going public and crazy growth, the loan quality went down and the interest rates followed.  More risk and less return, it will never work. 

I will add that it seems like most of the loans I am selling off over the last year are loans that have repaid 50-75% of the principal balance, compared to a few years ago it seemed like most loans I would sell off only had paid bacK 10-20%, anyone else noticing this?  Problem is I used sell off a lot fewer loans and now I am selling off a ton.

Title: Re: Dear LC
Post by: Fred93 on November 16, 2017, 02:08:13 PM
I will add that it seems like most of the loans I am selling off over the last year are loans that have repaid 50-75% of the principal balance, compared to a few years ago it seemed like most loans I would sell off only had paid bacK 10-20%, anyone else noticing this?

I think you're saying in a different way what I've been saying about vintage.  Loan quality was poor during 2015 and leading into 2016. 
Title: Re: Dear LC
Post by: Rob L on November 16, 2017, 04:55:58 PM
I will add that it seems like most of the loans I am selling off over the last year are loans that have repaid 50-75% of the principal balance, compared to a few years ago it seemed like most loans I would sell off only had paid bacK 10-20%, anyone else noticing this?

I think you're saying in a different way what I've been saying about vintage.  Loan quality was poor during 2015 and leading into 2016.

Do you think loan quality (as measured by say NAR by vintage) since the poor vintage period you cited has improved?
Perhaps improvements in lower risk categories but not higher ones, or in 60 but not 36 month term, etc.? I dunno.
Seems CircleT009 might think that the poor performance was/is a calendar period period problem, not a vintage one. Did I get that right?

I can't readily tell from https://www.lendingclub.com/info/demand-and-credit-profile.action (https://www.lendingclub.com/info/demand-and-credit-profile.action).
The chart "NET ANNUALIZED RETURN BY VINTAGE" would be helpful but it is a full year out of date. It has no data for 2017 (LC has released data through 2017 Q3).
That's curious since the table "LOAN PERFORMANCE DETAILS" just above it does contain data through 2017 Q3. Unfortunately there's no way to segregate 36 and 60 month term loans in this table! IMO that makes it pretty useless. Would be nice if LC would remedy these two problems and we would have a bit more visibility into this question.
Title: Re: Dear LC
Post by: Fred93 on November 16, 2017, 06:40:18 PM
Do you think loan quality (as measured by say NAR by vintage) since the poor vintage period you cited has improved?
Perhaps improvements in lower risk categories but not higher ones, or in 60 but not 36 month term, etc.? I dunno.
Seems CircleT009 might think that the poor performance was/is a calendar period period problem, not a vintage one. Did I get that right?

Well, NAR is particularly ill-suited for this sort of comparison, because it means a different thing at different points in a loan's life.

LC publishes delinquency & default data broken out by vintage and age, and in that data you can see that different vintages have performed differently.

I believe there is some component of BOTH vintage and calendar period in the results.  I just think the vintage differentiation is stronger.


I can't readily tell from https://www.lendingclub.com/info/demand-and-credit-profile.action (https://www.lendingclub.com/info/demand-and-credit-profile.action).[/quote]

Agreed.  Not enough breakout.  Try this alternative...
https://www.insikt.com/#/invest/mycro/vintage/cumLoss?po=Partner&or=LendingClub&fr=Quarterly&tY=2017&tM=10&fY=2016&fM=1&fi=creditRating&sGO=B&lt=36,60

This web site lets you break out the data various ways.  You have to play with it awhile to get familiar with the UI.  I think you can see that in 2015 and much of 2016, newer vintages were worse than the one before them, and this has stopped.  Depends of course on which grades and terms you break out, which measure you look at (late 30, late 60, default).  It is very easy to get so many curves that you can't see the more recent ones, so you have to set it for a large date range to get context, and then set it for a narrow date range to see the relative position of recent quarters.

You can also download the delinquency and chargeoff by vintage spreadsheets from LC.  The links are quietly hidden at the bottom of one of the statistics pages.  The spreadsheet lets you choose grades, and displays a matrix with vintage columns and month (payment) number rows.  I copy & paste this to another spreadsheet where I draw charts from it.  I haven't updated in a long time.  Another thing you can do is simply look at a row.  For example, pick the 12 month row, and just look across vintages to see if newer vintages are worse or better at 12 months, etc.
Title: Re: Dear LC
Post by: sensij on November 16, 2017, 06:51:26 PM
For what its worth, here is an update of the a chart @Fred93 has presented before (and is mentioning in the post just above this one, from the downloadable chargeoffs spreadsheet), suggesting 2016 Q2 and Q3 are the worst and some improvement since then, although there is some grade dependency.

It look like 2012 Q4 was that last *great* time to be an investor in the higher risk grades.  I didn't plot earlier than that because volume was so thin (only 432 notes in 2011 Q4, grades D-G, for example, increasing to 753 in 2012 Q1)
Title: Re: Dear LC
Post by: Fred93 on November 16, 2017, 06:59:20 PM
Thanks Sensij.  Another thing you can see from those charts is that not enough time has elapsed to really know how 2017 loans are going.  It looks like things are headed in the right direction, but its a noisy data series, so we really would like to see more data.  Just have to be patient.
Title: Re: Dear LC
Post by: CircleT009 on November 17, 2017, 10:21:53 AM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return. 

Title: Re: Dear LC
Post by: apc3161 on November 17, 2017, 10:44:11 AM
I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

I've wondered this myself. At 4-6 and perhaps even 5-7, I can't see the argument for p2p versus corporate bonds secured by actual assets.
Title: Re: Dear LC
Post by: Fred93 on November 17, 2017, 01:27:40 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

My answer: it will take the big institutional customers, ie banks, saying "Whoa, that's too low."  I have no idea when that will occur. 
Title: Re: Dear LC
Post by: SeanMCA on November 17, 2017, 03:29:17 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

My question is... the banner says "solid" returns. Are they really that solid?
Title: Re: Dear LC
Post by: .Ryan. on November 17, 2017, 06:29:38 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

My question is... the banner says "solid" returns. Are they really that solid?


When I joined, they touted that no one (or almost no one) with a diversified (500+ note) portfolio had ever lost money.

I wish I had a screenshot. My how things have changed.
Title: Re: Dear LC
Post by: rawraw on November 17, 2017, 06:49:38 PM
I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

I've wondered this myself. At 4-6 and perhaps even 5-7, I can't see the argument for p2p versus corporate bonds secured by actual assets.
What is a 3 year secured corporate bond going for these days? Is it even more than 1%?

I don't see the banks getting upset. These are adequate yields for the type of loans. A lot of people forget one of the reasons banking is profitable is because of the leverage. The return on assets in banking is quite low
Title: Re: Dear LC
Post by: Rob L on November 18, 2017, 11:34:50 AM
I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

I've wondered this myself. At 4-6 and perhaps even 5-7, I can't see the argument for p2p versus corporate bonds secured by actual assets.

What is a 3 year secured corporate bond going for these days? Is it even more than 1%?

I don't see the banks getting upset. These are adequate yields for the type of loans. A lot of people forget one of the reasons banking is profitable is because of the leverage. The return on assets in banking is quite low

It appears there has been a loss of confidence in LC's ability to deliver the returns is advertises (at least for us "sticky money" individual investors). Lots of folks simply don't believe them any more, whether it's 4-6, 5-7 or whatever.

You can own a AAA rated bond from Microsoft maturing 11/2020 with a YTM of 2.08%. That's the best I found.

Or you can get a 35 month CD from Fort Knox FCU paying 2.40% (anyone can join), or a 36 month CD from Goldman Sachs Bank paying 2.00%; both federally guaranteed up to $250k. There are a lot of institutions with offers between these two rates. CD's are unencumbered with the tax inefficiencies of LC notes that I've heard others mention and are completely liquid (given a pre-payment penalty that can be pretty reasonable). Interest rates are impossible to predict but one doesn't have to go too far out on a limb to expect they will continue slowly rising given the Fed's announced plans. Within the next 6-9 months it's not hard to imagine 3 year CD's commonly paying 2.75% to 3.00% with special deals above 3.00%. Where interest rates will be in 3 years time is anyone's guess, but if they go back towards pre-crisis rates I'd sure like to have liquid funds to invest.

Title: Re: Dear LC
Post by: Rob L on November 18, 2017, 12:27:58 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

My question is... the banner says "solid" returns. Are they really that solid?


When I joined, they touted that no one (or almost no one) with a diversified (500+ note) portfolio had ever lost money.

I wish I had a screenshot. My how things have changed.

Is this what you had in mind? From the way-back machine 23 Jan 2013:
https://web.archive.org/web/20130123013417/http://www.lendingclub.com/public/steady-returns.action (https://web.archive.org/web/20130123013417/http://www.lendingclub.com/public/steady-returns.action)
Title: Re: Dear LC
Post by: rawraw on November 18, 2017, 01:23:37 PM

You can own a AAA rated bond from Microsoft maturing 11/2020 with a YTM of 2.08%. That's the best I found.

Or you can get a 35 month CD from Fort Knox FCU paying 2.40% (anyone can join), or a 36 month CD from Goldman Sachs Bank paying 2.00%; both federally guaranteed up to $250k. There are a lot of institutions with offers between these two rates. CD's are unencumbered with the tax inefficiencies of LC notes that I've heard others mention and are completely liquid (given a pre-payment penalty that can be pretty reasonable). Interest rates are impossible to predict but one doesn't have to go too far out on a limb to expect they will continue slowly rising given the Fed's announced plans. Within the next 6-9 months it's not hard to imagine 3 year CD's commonly paying 2.75% to 3.00% with special deals above 3.00%. Where interest rates will be in 3 years time is anyone's guess, but if they go back towards pre-crisis rates I'd sure like to have liquid funds to invest.
Is that Microsoft bond secured though?  I'd suspect it is unsecured.

35 month CD?! So you want an instrument with twice the duration and a third of the return (assuming 6%)?  I mean, go for it. . .

And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Is LC having the best spree?  No.  Are my low grade notes the source of almost all my losses? Yes.  Is my high grade notes still doing fine?  Yes.  Have I been talking about this risk of low grade notes since the beginning of my activity on this forum?  Yes.  It was an expected risk and it has manifested itself.  I've personally had to shrink my taxable LC portfolio because I've hit the ceiling on tax losses.  I haven't decided if I should invest in tax free LC yet -- I don't like illiquid vehicles in those sort of accounts. 

But at the end of the day, I think the doom and gloom on this forum is a bit overdone
Title: Re: Dear LC
Post by: Fred93 on November 18, 2017, 02:40:30 PM
What is a 3 year secured corporate bond going for these days? Is it even more than 1%?

You can own a AAA rated bond from Microsoft maturing 11/2020 with a YTM of 2.08%. That's the best I found.

Its even worse than that.  A 3 year bond pays you back mostly at the end.  The average amount of time you wait for your money is slightly less than 3 years.  The technical term for this is "duration". 

A 3-year LC loan, on the other hand, pays you back uniformly over the entire 3 year period (presuming that it does not prepay).  For such a loan the duration is 1.5 years.  In fact tho, a significant fraction of LC loans do prepay, so their duration is around 1 year.

If you look at bonds with a duration of 1 year, you would find much lower interest  rates.  More like 1%.
Title: Re: Dear LC
Post by: OleBill on November 18, 2017, 03:33:35 PM
In hindsight, I'd have been better served by investing in a high yield corporate bond ETF (like JNK). I'd gotten higher returns and it's very liquid asset. I'm afraid I'm going to pass away in the next 3-4 years and leave my wife with a mess of notes left in Lending Club. That was not my intent when I started with Lending Club. My bad, sorry girl.
Title: Re: Dear LC
Post by: SLCPaladin on November 18, 2017, 03:41:17 PM
Quote
It is hard for me to imagine CD rates of 3% in 6-9 months.

I've been making 3.1% for 5 years now when Pentagon Federal Credit Union had a black Friday sale of CDs. As I draw down my LC account, I am putting in 5 year CDs at 2.6% and local credit unions here in Utah. There are tons of 2.6% for 5 years federally insured products out there. It's not hard for me to see another bump up above 5%.

LC needs to raise rates in order to attract/retain my money. If competitive pressure prohibits this, then this is not a viable investment vehicle for me, which is sad because I was one of the biggest advocates of LC (and Prosper) back in the day. I had well over $100k invested at the peak with LC, but it's less than half that now.
Title: Re: Dear LC
Post by: CircleT009 on November 18, 2017, 05:11:46 PM
I spent a few hours today and put together a summary of some of my LC data to shed some light on what I have been seeing.

I completely understand this is not a perfect analysis and does not answer all questions.

Few things I want to point out.  In the Sales + Charge Off Data section, the sales + charge offs by year are based on the year the loan was purchased.  So a loan purchased in 2013 and sold in 2014 is listed in the 2013 row.  In the Purchases Data section, the purchases are for that year and the interest amount represents the interest in that year.  The Gain section is not that great, because it is not comparing the vintages correctly.  Meaning it is comparing sales + charge offs data by vintage to interest in the calendar year, not interest by vintage.  I do that analysis at year end and did not feel like doing it, sorry.  But this does allow you/me to look at sales + charge offs of a specific vintage compared to purchases in that year.  Purchases represents all purchases (includes reinvestment of payments).  No, I do not have $1.8M invested. 

Looks like 2016 is going to be way worse than 2015.

So I will say this again, I still do not understand how people are losing money.  I currently have an average interest rate of 11.57%, so a loss % of 4.5% still represents a good return.  The reason I complain at all, is because I used to have an average interest rate of 12.5%-13% and a loss % of 2%.  I understand that as my portfolio grew I would divert to the mean, but I could live with my current loss % if the average interest rate would increase.

I will try to answer questions, but this analysis may not allow for answers to all questions.
Title: Re: Dear LC
Post by: .Ryan. on November 18, 2017, 05:49:21 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

My question is... the banner says "solid" returns. Are they really that solid?


When I joined, they touted that no one (or almost no one) with a diversified (500+ note) portfolio had ever lost money.

I wish I had a screenshot. My how things have changed.

Is this what you had in mind? From the way-back machine 23 Jan 2013:
https://web.archive.org/web/20130123013417/http://www.lendingclub.com/public/steady-returns.action (https://web.archive.org/web/20130123013417/http://www.lendingclub.com/public/steady-returns.action)

Hah! That is it! Thanks for the memory!
Title: Re: Dear LC
Post by: rawraw on November 18, 2017, 07:35:49 PM
Quote
It is hard for me to imagine CD rates of 3% in 6-9 months.

I've been making 3.1% for 5 years now when Pentagon Federal Credit Union had a black Friday sale of CDs. As I draw down my LC account, I am putting in 5 year CDs at 2.6% and local credit unions here in Utah. There are tons of 2.6% for 5 years federally insured products out there. It's not hard for me to see another bump up above 5%.

LC needs to raise rates in order to attract/retain my money. If competitive pressure prohibits this, then this is not a viable investment vehicle for me, which is sad because I was one of the biggest advocates of LC (and Prosper) back in the day. I had well over $100k invested at the peak with LC, but it's less than half that now.
No offense intended, but it's funny to me to hear the "hot money" depositors complain about LC returns. I personally think LC would be better served not attracting this sort of retail money. It was a mistake when they started but it seems like they are tuning it down to not attract such retail investors. Yes of course you can find random cd specials. We are talking averages here, there are people with much higher LC returns than 6 percent.
Title: Re: Dear LC
Post by: Rob L on November 18, 2017, 07:43:28 PM

35 month CD?! So you want an instrument with twice the duration and a third of the return (assuming 6%)?  I mean, go for it. . .


I'm not assuming 6%. That's where we differ (but I hope you are right).
Title: Re: Dear LC
Post by: Reginald on November 18, 2017, 09:17:53 PM
- please show the curves for 2017 - Perhaps even worse.

The good news is that Goldman wont short lending club when it collapses, because they are in the same market. 

Late night thoughts of mine.

PS . I'm No longer a true believer, trying to weigh the options to get out!

Title: Re: Dear LC
Post by: Rob L on November 19, 2017, 09:52:58 AM
So I will say this again, I still do not understand how people are losing money.

Can't have been that hard; I found away. :)
Just stop reinvesting monthly payments while now primarily holding risky D & E notes issued between 7/1/2015 and 1/20/2017 and there ya go.

I must say my first few years were much more profitable than I ever imagined and my losses now are tiny in comparison. It's definitely been a very good run.
Title: Re: Dear LC
Post by: SLCPaladin on November 19, 2017, 11:54:01 AM
Mountain America Credit Union just upped their 5-year yield to 2.8%:

https://www.depositaccounts.com/banks/mountain-america-cu.html

4-6% returns at LC with unfavorable tax treatment is not enough to compensate me for the risk when I can CD ladder at 2.8% risk-free yield. I'm not hot money, I've been here for years. But things have changed pretty substantially. I stay around because I am hoping there is some canary in the coal mine that signals we've somehow turned a corner. I have yet to see anything convince me otherwise. I'm worried the macro economy will hit a snag and we'll take another step downward on the sliding return ladder.

As Sean has pointed out, who knows if it will even be 4-6 with the downward trend we are seeing. There is enough uncertainty in the direction of returns, and certainly a high degree of volatility, that LC's interest rates should be higher to compensate. Yet they don't move. Retail lenders are probably a lot less "hot" than institutional money. But we're so insignificant now in the grand scheme of things, I get why we wouldn't register on LC's radar.
Title: Re: Dear LC
Post by: nonattender on November 20, 2017, 07:35:38 AM
And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Where's that bookie?
Title: Re: Dear LC
Post by: Rob L on November 20, 2017, 10:38:23 AM
And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Where's that bookie?

The bookie is your favorite CME futures brokerage.

According to the futures markets http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html) there is a 100% chance the Fed will hike next month at its December meeting. That's 91% favoring a 25bps hike and 9% favoring a 50bps one. There is 55% chance of at least two more 25bps increases by 11/2018. I can't find any futures out to 2020 forecasting the FFR. Think maybe 2020 was a typo but s/b 2018; right?

The Fed also plans to let bonds wind down to reduce the size of its balance sheet (some have called this, maybe tongue in cheek, as "quantative tightening"). This should also put upward pressure on interest rates.

Like all predictions these just that (but they are backed with real money). Maybe right, maybe not. If we get a recession everything changes of course, and if the Fed goes too far too fast we may get one. Plenty of other things could happen as well.

Title: Re: Dear LC
Post by: rawraw on November 20, 2017, 11:26:11 AM
So I will say this again, I still do not understand how people are losing money.

Can't have been that hard; I found away. :)
Just stop reinvesting monthly payments while now primarily holding risky D & E notes issued between 7/1/2015 and 1/20/2017 and there ya go.

I must say my first few years were much more profitable than I ever imagined and my losses now are tiny in comparison. It's definitely been a very good run.
The answer is in your weighted average interest rate.  Lots of people throughout time on this forum have been yield chasers. Now the lessons in volatility are being observed. Even my account had too much higher yield than I historically held, which was largely a function of me not monitoring the third party programs investing for me.  Whenever lascott started preparing the comparison of returns, the one thing I commented on was how people had such high average interest rates but not much higher returns. That was a big red flag to me that things were very fragile.
Title: Re: Dear LC
Post by: rawraw on November 20, 2017, 11:28:00 AM
And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Where's that bookie?

The bookie is your favorite CME futures brokerage.

According to the futures markets http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html) there is a 100% chance the Fed will hike next month at its December meeting. That's 91% favoring a 25bps hike and 9% favoring a 50bps one. There is 55% chance of at least two more 25bps increases by 11/2018. I can't find any futures out to 2020 forecasting the FFR. Think maybe 2020 was a typo but s/b 2018; right?

The Fed also plans to let bonds wind down to reduce the size of its balance sheet (some have called this, maybe tongue in cheek, as "quantative tightening"). This should also put upward pressure on interest rates.

Like all predictions these just that (but they are backed with real money). Maybe right, maybe not. If we get a recession everything changes of course, and if the Fed goes too far too fast we may get one. Plenty of other things could happen as well.
It depends on the contacts trading. Today the latest is June 2019. 2020 was there when I made my comment, but hasn't traded today

http://www.cmegroup.com/trading/interest-rates/stir/30-day-federal-fund.html
Title: Re: Dear LC
Post by: Rob L on November 20, 2017, 06:45:11 PM
Do you think loan quality (as measured by say NAR by vintage) since the poor vintage period you cited has improved?
Perhaps improvements in lower risk categories but not higher ones, or in 60 but not 36 month term, etc.? I dunno.
Seems CircleT009 might think that the poor performance was/is a calendar period period problem, not a vintage one. Did I get that right?

Well, NAR is particularly ill-suited for this sort of comparison, because it means a different thing at different points in a loan's life.

LC publishes delinquency & default data broken out by vintage and age, and in that data you can see that different vintages have performed differently.

I believe there is some component of BOTH vintage and calendar period in the results.  I just think the vintage differentiation is stronger.


I can't readily tell from https://www.lendingclub.com/info/demand-and-credit-profile.action (https://www.lendingclub.com/info/demand-and-credit-profile.action).


Agreed.  Not enough breakout.  Try this alternative...
https://www.insikt.com/#/invest/mycro/vintage/cumLoss?po=Partner&or=LendingClub&fr=Quarterly&tY=2017&tM=10&fY=2016&fM=1&fi=creditRating&sGO=B&lt=36,60

This web site lets you break out the data various ways.  You have to play with it awhile to get familiar with the UI.  I think you can see that in 2015 and much of 2016, newer vintages were worse than the one before them, and this has stopped.  Depends of course on which grades and terms you break out, which measure you look at (late 30, late 60, default).  It is very easy to get so many curves that you can't see the more recent ones, so you have to set it for a large date range to get context, and then set it for a narrow date range to see the relative position of recent quarters.

You can also download the delinquency and chargeoff by vintage spreadsheets from LC.  The links are quietly hidden at the bottom of one of the statistics pages.  The spreadsheet lets you choose grades, and displays a matrix with vintage columns and month (payment) number rows.  I copy & paste this to another spreadsheet where I draw charts from it.  I haven't updated in a long time.  Another thing you can do is simply look at a row.  For example, pick the 12 month row, and just look across vintages to see if newer vintages are worse or better at 12 months, etc.

I have absolutely tortured the insikt data far more than I will bore the readers here. My preferred measurement is cumulative annualized ROI as it includes interest rates and is essentially the bottom line so to speak. All the data below has been compiled for C grade notes, though I've looked at B through E myself. Draw your own conclusions.

(https://i.imgur.com/YAWOwCx.png)

It is just far too early to tell, but perhaps 16Q2 was the low water mark; maybe not. Time will tell.
The following spreadsheets provide a view of the changes by Vintage (across) and by MOB (vertically):

(https://i.imgur.com/91S50C0.png)

I have done much more and will share if there's any interest.

If you want a view of the good old days (and 14Q1 wasn't the very best):

(https://i.imgur.com/sQHAHw0.png)

Title: Re: Dear LC
Post by: Fred93 on November 20, 2017, 07:19:59 PM
All the data below has been compiled for C grade notes...
If you want a view of the good old days (and 14Q1 wasn't the very best):
(https://i.imgur.com/sQHAHw0.png)

You've found a beautiful way to display this.  I like this chart best.

Was this 36 month only, or mixed 36 & 60 ?
Title: Re: Dear LC
Post by: rawraw on November 20, 2017, 08:10:57 PM
I like the visual representation. Part of the issue to consider is that we naturally assume prior LC returns are the benchmark, but they could have been too high to begin with. As a result, it may be interesting to separate out impacts from credit quality and impacts from changing interest rates. I imagine that is much harder to calculate though
Title: Re: Dear LC
Post by: Rob L on November 21, 2017, 08:49:00 AM
All the data below has been compiled for C grade notes...
If you want a view of the good old days (and 14Q1 wasn't the very best):
(https://i.imgur.com/sQHAHw0.png)

You've found a beautiful way to display this.  I like this chart best.

Was this 36 month only, or mixed 36 & 60 ?

Thanks for the complement.
All the tables are 36 month only. I haven't looked at the 60's at all. Should have made that clear from the get go.
Title: Re: Dear LC
Post by: Rob L on November 21, 2017, 10:42:17 AM
I like the visual representation. Part of the issue to consider is that we naturally assume prior LC returns are the benchmark, but they could have been too high to begin with. As a result, it may be interesting to separate out impacts from credit quality and impacts from changing interest rates. I imagine that is much harder to calculate though

Okay, I already did that but it was part of the "I don't want to bore you" data I omitted  ;)

The second chart below is very interesting. It appears that LC lowered its lending standards very significantly in 14Q3, 14Q4. One trick to reading the tables is to recognize that equal calendar dates fall on diagonals, For example calendar time 14Q3 MOB 36 is the same as 14Q4 MOB 33 is the same as 15Q1 MOB 30,etc. We know the LC scandal began in mid-May 2016 or half way into 16Q2 MOB 1. If the scandal contributed to an increase in charge offs they should begin to show up maybe 6 months later. The scandal charge off periods include 16Q2 MOB 9-15, 16Q1 MOB 9-18, 15Q4 MOB 12-21, and 15Q3 MOB 15-24. On the earlier side 15Q3 seems to have been completely unaffected by the scandal. I can only conclude that lending standards were significantly higher in this and earlier vintages. They are also past the peak charge off months. But 15Q4 was probably hit with the double wammy of a lowered lending standards by LC and the effects of the scandal. For vintages 16Q3 and later LC's originations plummeted and there isn't enough data determine if lending standards have been raised.

In the final chart (MOB to MOB within Vintage) data has the characteristic shape rising steeply in first 12-18 months then tapering off.
Just what you would expect. Everything is better since 16Q2 but better is relative and still looks pretty dismal. It's early yet so guess we'll tune in later and find out.

So, here it is (LC, Grade C, 36 month term only):

(https://i.imgur.com/bWgR75m.png)
Title: Re: Dear LC
Post by: nonattender on November 21, 2017, 02:27:07 PM
And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Where's that bookie?

The bookie is your favorite CME futures brokerage.

https://www.cnbc.com/2017/11/20/goldman-the-fed-will-need-to-stop-economy-from-overheating-next-year.html

(Glad you're back to doing all that heavy chart work!)
Title: Re: Dear LC
Post by: Rob L on November 21, 2017, 04:47:55 PM
And yes, the Fed has announced plans to raise.  But they will immediately cut the next recession.  These are bets that can make you money (if correct) on which will happen first.  It is hard for me to imagine CD rates of 3% in 6-9 months.  That would be a 100bp increase.  The futures market only expects ~2 increases through 2020.  Again, money can be made if you have conviction in that bet.

Where's that bookie?

The bookie is your favorite CME futures brokerage.

https://www.cnbc.com/2017/11/20/goldman-the-fed-will-need-to-stop-economy-from-overheating-next-year.html

(Glad you're back to doing all that heavy chart work!)

Yeah but I feel like I owe CircleT009 an apology for gunking up what has been a very interesting and important thread with this stuff.
Sorry  :'(
I should have started another thread and put the charts there.
Meanwhile, I hope this thread gets back on topic (LC interest rates), where the forest rather than the trees is at the forefront.
Title: Re: Dear LC
Post by: lascott on November 22, 2017, 11:53:10 PM
...Meanwhile, I hope this thread gets back on topic (LC interest rates), where the forest rather than the trees is at the forefront.
(https://i.imgur.com/WDDHpVb.jpg)
Title: Re: Dear LC
Post by: hcharris on November 27, 2017, 09:46:53 AM
Like storm, I have seen my interest received offset by losses. Since inception, I have lost 70% of the interest received to defaults. I was using auto invest but no longer; as I accumulate cash balance, I withdraw it. I understand I should expect some losses but this is a little much for me.

I think LC does not do enough to collect from those who default. Most of mine were not very far into their payments when they defaulted.
Title: Re: Dear LC
Post by: Tomp on December 02, 2017, 08:23:00 AM
For the 100th time. They need to FIRE the CIO. It's that simple. They need to fire the CEO. That's even simpler.
Title: Re: Dear LC
Post by: michael49 on December 02, 2017, 08:29:12 AM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

I never expected huge returns from LC but I did not anticipate negative returns in the long run. 

I stopped re-investing about a year ago in my main account and at this point I’m in the red every month, withdrawing funds as they become available. Current ANAR: 3.58%.  I invested using mostly BlueVestments Bluepicks aggressive algorithm in my main account (BlueVestments still claims a 11.7% return!!! - I wonder how they can justify that on their website still).

I am still re-investing in my IRA account where I have only a small amount invested, using Bluepicks moderate algorithm (they still claim 7%) and I’m still in the red each month. Current ANAR: 0.57% :(.  We’ll see. 
Title: Re: Dear LC
Post by: apc3161 on December 02, 2017, 12:24:46 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

I never expected huge returns from LC but I did not anticipate negative returns in the long run. 

I stopped re-investing about a year ago in my main account and at this point Im in the red every month, withdrawing funds as they become available. Current ANAR: 3.58%.  I invested using mostly BlueVestments Bluepicks aggressive algorithm in my main account (BlueVestments still claims a 11.7% return!!! - I wonder how they can justify that on their website still).

I am still re-investing in my IRA account where I have only a small amount invested, using Bluepicks moderate algorithm (they still claim 7%) and Im still in the red each month. Current ANAR: 0.57% :(.  Well see.

Bluevestment has had the worst modelling of all the 3rd party applications in my opinion.
Title: Re: Dear LC
Post by: Tomp on December 03, 2017, 08:36:26 PM
No doubt 2015 and 2016 are bad vintages.

I guess what I do not understand is how low of a return is LC willing to advertise before something changes.  I am referring to the banner they post all over the place.  Attached.

It used to say 8-10, then 7-9, then 6-8, then 5-7 and now 4-6.  How low will they go, before they realize people are not willing to invest in this asset class for that return.

Indeed, it must be each time it goes down, the CIO (SID) gets a raise.  Also-I'd wager that giving away United Air miles to invest in securities registered with the SEC is not quite Kosher. Suck at credit, suck at marketing.

My question is... the banner says "solid" returns. Are they really that solid?
Title: Re: Dear LC
Post by: SeanMCA on December 03, 2017, 10:02:27 PM
They're back to advertising how it's virtually impossible to lose money again.

Of course the buried footnote says that doesn't include F or G notes. I guess since they just stopped offering those notes, they think it's ok to pretend previous losses to investors never happened. It's misleading at best but I think it's more securities fraud than anything else. Lending Club's management has been made up of just the worst kind of people.
Title: Re: Dear LC
Post by: hcharris on December 04, 2017, 06:56:32 AM
I would like to think I could get my original investment back but that now seems out of reach. I'm at 1.1% returns. Ally is beginning to look really good. 
Title: Re: Dear LC
Post by: Tomp on December 04, 2017, 05:53:34 PM
They're back to advertising how it's virtually impossible to lose money again.

Of course the buried footnote says that doesn't include F or G notes. I guess since they just stopped offering those notes, they think it's ok to pretend previous losses to investors never happened. It's misleading at best but I think it's more securities fraud than anything else. Lending Club's management has been made up of just the worst kind of people.

Yes-it is likely a violation of SEC return advertising. Agreed-but its been an amazing short.  They need to accept any buyout offer now.
Title: Re: Dear LC
Post by: Tomp on December 07, 2017, 09:39:22 AM
Down 18% today. That's some rocking C-Suite you got there.
Title: Re: Dear LC
Post by: CircleT009 on December 07, 2017, 04:58:01 PM
Re: Today's happenings.

So wait a second, you are telling me that your revenues/forecasts are decreasing at the same time a majority of your investors are have seen their returns decrease.  Man, I wonder if the two are related.  Who knows, anytime you are ready to get back to where you were just let me know Mr. Sanborn.