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Messages - Fred93

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Borrowers - LC / Re: Documentation advice?
« on: January 21, 2020, 01:27:41 AM »
Just send them what they asked for and find out.

Foliofn - LC / Re: Getting data for one's own sold notes
« on: January 20, 2020, 06:52:02 AM »
On the LC web site, go to the HOLDINGS page, then select NOTES.  At the bottom of the 1st page, there are two little links that download spreadsheets. 

Does one of these provide the information you are looking for?

« on: January 19, 2020, 10:13:27 PM »
You summarize the situation well. 

I've had these same concerns for several years now.  I don't get very good answers from LC.  I suspect that the code for the secondary market gets very little maintenance, and the people who answer questions for customers are pretty far from knowing anything about how it works, so you get stock answers.

I agree that it is just astonishing what a large fraction of note purchase attempts result in NOTE_NOT_AVAILABLE.  It happens so much that it seems surely something other than "some guy got there before you" is going on. 

Because this market makes no transaction data available, there's no way to diagnose this from outside LC. 

Playing in the LC secondary market has not been a worthwhile effort.  The money I have invested is doing ok, but I can't get enough invested to be worthwhile.  However, most of my costs are sunk costs (ie the effort to write and debug the software), and there is very little cost associated with letting it run, so I have let it run 24 hr/day, every day, since Oct 2016. 

Pardon me if this has been asked before, but I could not find any mention.

I'm looking at a borrower with a Revolving Credit Balance of about $8K. They request a loan of $15K for Credit Card Payoff.
How does this make sense? It would seem they are obviously requesting a loan for $7K worth of something else. Or am I misunderstanding what these terms mean?

You understand, and you've hit on a valuable concept, tho things are not always cut & dried, ie these aren't precise concepts.

LC pulls credit info from one credit reporting agency.  Every credit card company does not report to every credit reporting agency.  Therefore you can never be sure that the info from the credit reporting agency includes every card.  Etc.

Also, when someone clicks the "credit card payoff" box, they may not be interpreting that to mean "credit card payoff and NOTHING ELSE".  Maybe he's also thinkin' about the $5k he owes his bookie.  In other words, these concepts are a bit fuzzy, so a bit of mismatch doesn't mean the guy is being intentionally dishonest.  Maybe it's an indication of sloppy thinking, or just imprecise planning.

However, many lenders use the comparison that you are making, and it has been shown to have value. 

If you work with the historical data, you can see that folks who borrow an amount close to their revolving balance have a lower default rate than folks where those numbers mismatch.  You can download the data yourself and write software to examine statistics such as this, or you can use to do the work.  It takes a bit of work to make nsrplatform do this test, as you have to define a "formula".  I defined a formula which was balance divided by loan amount.  After you do that you can plot variables such as return or default rate vs this ratio.

In the end, if it has value in a statistical sense, then it is something reasonable for lenders to use, even if the concepts are fuzzy.

Even tho I've studied this criteria, and know it has value, I don't use it.  My problem is that my other criteria are such that I have trouble finding enough loans, so adding this criteria would restrict my selection too much.

Suggestion: Don't try to track loan by loan.  Just track your account balance.  Of course you'll have to track when you make deposits.

Investors - LC / Re: What Returns Do You Expect Going Forward?
« on: January 12, 2020, 05:56:37 PM »
First banks acquire deposits from customers, say savings accounts, and pay their customers interest (say it's an online bank like Ally that pays a high interest rate of 1.6%, the national average savings account now pays 0.09%). Through the magic of fractional banking the bank may lend up to 10 times the amount of deposits it holds. So the leverage is 10:1. The bank's cost of the money it's loaning is 1/10 * 1.6% = 0.16%.

No. A bank may not lend 10x the amount of deposits it holds.

Fractional reserve banking is widely misunderstood and incorrectly described on the internet.

It is NOT some magic thing that lets banks multiply up their returns.

Banks take in X in deposits, and are then allowed to lend something like 0.9 X.  The remaining part of the deposits is held in reserve.  That is fractional reserve banking.  A fraction of what they take in as deposits must be held in reserve.

The talk of multiplier effect comes from academic economists who think about the effect of these loans on the money supply.  That's an entirely different discussion, and those equations don't apply to the bank's returns.

When talking about the bank's returns, note that the bank has to pay out interest on those deposits ... ALL of those deposits, the entire X.  Right now interest rates are low, so the bank pays out maybe 1% interest on X deposits, but it is still on the entire X.  No magic multiplier.

The bank receives interest income on the amount they loaned out, which is 0.9 X .  This is LESS than X.  Not some magic multiplier MORE.

In this sense banks are EXACTLY like you and me.  I don't lend out ALL the cash I have.  I reserve some for a rainy day.

In the above discussion I presumed the reserve requirement was 10%, but in actual practice it is not a single number, but thousands of pages of rules.  The reserve requirements are different for different kinds of accounts (ie saving vs checking) and for different kinds of loans (ie mortgages vs line-of-credit) and for different kinds of investments (ie treasuries vs other kinds of bonds vs money the bank has deposited at the federal reserve).

You are correct to say that banks are paying very low rates on deposits these days.  The rates vary wildly between 0.05% at some stock brokers to 1% or 1.5% at other institutions, with the occasional bank offering teaser rates on CDs over 2%.

So you can see that what banks earn is actually LESS than the difference between the incoming and outgoing interest rates multiplied by the amount of deposits.  It is certainly not some multiple of this difference.

So where does all the talk of a "multiplier" effect come from?

When economists think about the money supply, ie the available amount of money for all of us to use, they note that making loans CREATES money.  It works like this.  (To keep this simple, lets assume the reserve requirement is 0%, and I deposit $1 in my account.)  Money in my account allows the bank to lend money (perhaps you borrow $1 for the new home you're building).  You don't spend that all right away.  The day you take out the loan, you deposit the money in your bank account.  Now there are two bank accounts with $1 in them.  But now the bank has $2 on deposit and has loaned out only $1, so they can make another $1 loan to Joe.  He begins by putting that in his bank account, and the process repeats.  The amount of money in all our bank accounts is larger than the amount of money we started with.  Even when you eventually take money out of your account to pay your architect, this just gets deposited in the architect's account, so is still counted in the total of all bank deposits.  (Might be at a different bank, but economists don't care, as they study the economy as a whole.)  In this simple example, the reserve requirement is 0% and the multiplier is infinite, as this can go on forever.  In actual practice the reserve requirement is greater than 0, say maybe 10%, so the multiplier is something like maybe 10.  In general, the multiplier is the reciprocal of the reserve requirement. 

It is important to understand that this notion of a "multiplier" is not science.  It is just a heuristic that economists have devised to explain the effect that lending has on the economy as a whole.  It teaches, for example, that one can have some control on the money supply by controlling bank reserve requirements.  This is of interest to economists, but mostly not to you and me.

More info (without conspiracy theory hype) at...

Foliofn - LC / Re: Stale Credit Scores.
« on: January 11, 2020, 05:31:27 PM »
I am sure other people have brought this up, because I've seen this issue discussed on this forum many times over the past few years.

Ok, I went and did a search, but could only find this discussion: Odd FICO trend.,4250.0.html

Yea, I also did a search and can't find the discussions I remember.  My memory is that there was one guy who would look every month on the day he expected the FICO scores to update and call LC when they didn't.  My impression from that discussion was that the process to put the update scores into the database probably contained a manual step, so someone had to get around to it, which made the update variable by many days.

Investors - LC / Re: What Returns Do You Expect Going Forward?
« on: January 11, 2020, 05:18:48 PM »
I think to a substantial degree banks are getting preferred choice of loans and would not be willing to take many of the loans going through the retail platform, at least not on the terms that they are being offered.

Do you have any evidence?

LC has many times said it doesn't happen.

You're not the first to suggest this, but none of the other folks had any evidence.  Just sour grapes, conspiracy theory, etc.

Investors - LC / Re: What Returns Do You Expect Going Forward?
« on: January 10, 2020, 05:30:29 PM »
Since LC still receives the retail based funding they need even though returns continue to diminish, there is little incentive for them to implement change to benefit the investor.

They receive most of their cash from institutional investors, and most of that from banks.  Why banks are satisfied with such low yields is beyond me, probably because I'm not a bank.   ... but we have to consider that these days we're competing with banks.

Foliofn - LC / Re: Stale Credit Scores.
« on: January 08, 2020, 08:00:22 PM »
I am sure other people have brought this up, because I've seen this issue discussed on this forum many times over the past few years.

Question for you Fred.... Have you noticed a sharp decline in the number of notes that match your criteria?

Absolutely, and I've repeatedly complained to LC about this, to no avail.

They're allocating fewer and fewer of their loans to this marketplace.  Their interest is in institutional customers now, and these customers buy loans, or syndications of loans, rather than the notes that you and I buy.

I continue to get about 6% return. 

You can do a little better than average by being selective, but not much.  The days when you could do several percent above average are gone.

Investing - General (not P2P) / Re: Steel Parners Holdings
« on: December 19, 2019, 04:26:27 AM »
Anyone have thoughts on SPLP?

Yup, largely of the "this stock price should be higher" variety.

Dear nonattender ... good to hear your voice.  Happy to see that all the oldtimers are not gone.

The confusing thing about this stock is that if we value it based on how we would value a company run by normal people with normal motivations, then it seems undervalued.  (plus or minus my ability to understand the 10k with the complexities of multiple businesses, etc)

Normally motivated management would operate the thing to show a profit.  Looks to me like management is motivated differently, and I realize that I don't know when they might change their style.  The market won't drive the stock up until there are either earnings or huge sales growth (ala Amazon) or huge hype and scandal (ala Tesla), and none of those things may occur in our lifetime.  Most people look at P/E or momentum or fads.

I am thinking maybe management will change their tune at some point so that their stock holdings go up and they can sell some, but when that point might occur is beyond me.  For all I know they plan to let their heirs make that change.  (Hey, low valuation makes low estate tax.)

It does seem safe at least.  But the common stock could continue its downtrend.  Its kind of in an uncharted territory, where no simple price guidelines apply.

On the other hand, if it goes low enough, someone will take it over, and run it like normal folk.

On the other hand, who the hell would buy a company this complex?  Not a company looking to acquire a specific technology.  Who buys out a tiny conglomerate?  Would have to be some hedge fund type guy.  Those folks are dangerous managers (reference Sears).

On the other hand, nonattender likes it.

I own some of the preferred stock.  This was a judgement about yield vs seeming relative safety.  I know small companies pay high yields in general, especially one showing erratic earnings.  Even if disaster occurred, and the thing went into bankruptcy, I figure some of the businesses are worth more than enough to pay off the preferred stock.

The common stock still leaves me confused.

Investors - LC / Re: Participation Cap in Fractional Market
« on: December 13, 2019, 04:34:29 PM »
Really?  Gee.  I guess maybe I should adjust my self-imposed limit!

General P2P Lending Discussion / Re: Peer-to-Peer Lending Sites - Full List
« on: December 12, 2019, 03:01:22 PM »
You left out Bondora, Lending Club, Prosper, FundingCircle USA, ...

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