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Messages - mikedev10

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1
Investors - LC / Re: Lending Club loan default prediction model question
« on: February 13, 2019, 07:51:09 PM »
Thanks for all of the replies.  I should have shared a little about myself and my methods.  I have experience building predictive credit models in financial institutions.  My primary tool of choice to build predictive models is R.  I'm very fond of the GLMNET package and my methods resemble Frank Harrells "Regression Modeling Strategies".

Very good. Thanks for the tip on the book.
Please share a bit more of your experience if you will. It would be so interesting so see how things are now.
Claim "secret sauce" where appropriate.

1) Is LC offering enough loans that meet your criteria for you to be able to stay fully invested? Would it be too much to ask that $ amount?
2) Presumably you are using the API to access new loans at the four "feeding times". Is there still a race? Do you consider speed important?
3) What's the Term and Grade allocation of your portfolio 36(%A, %B, ...) and 60(%A, %B, ...) where %x is a percent of the total $ principal invested?

TIA

there's literally nothing to pick from at those 4 times a day in the primary market.  i made a very picky algo and my algo never buys anything, because of the 1000 loans issue today, i think the majority are bought as whole loans, then the remainder is bought by retail investors with a simple rules mix of grade and duration, then a few loans dribble out to the api - like 20-30 a day.


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I find it works to add two figures from the LC Holdings page: Account Total + Pending Settlement. However I only buy on the secondary market. I don't know whether this would work if you buy on the primary market or sell on the secondary market.

thanks, that looks about right to me.

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Investors - LC / Re: Notes Disappeared
« on: February 07, 2019, 02:04:45 PM »
what did support say :)?

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Investors - LC / Re: Notes Disappeared
« on: February 06, 2019, 04:50:17 PM »
i have no idea and am a newb - do they stop counting charged off ones though?

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Foliofn - LC / Re: taxes...?
« on: February 03, 2019, 10:46:57 PM »
does LC do that all correctly?

yes.

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if interest is ordinary income no matter what, then the only way i have a capital gain to pay tax on is if i actually successfully sell my note at a premium right?

That's close.  You use the word "premium" which is usually used to mean difference between selling price and the principal on the note.  That's not quite right.  In this case what is important is the difference between your selling price and your tax basis.  Tax basis starts at what you paid, and as principal payments are paid to you, your tax basis is reduced.  If you sell at more than your tax basis, then you have some capital gains which are taxed.  If you sell at less than your tax basis, you have a capital loss, which may reduce your tax.

I can't explain the whole US tax system to you in forum messages.  I suggest you read up on taxation of bonds in the IRS booklets, which are all available online.

At the Lendingclub web site, if you go to the "tax forms" tab on the "statements" page there is a link to "download the 2018 tax form guide".  I suggest you download a copy and try to follow it.  This guide has several sections.  The LAST section describes taxation of folio transactions.  It isn't a complete explanation, but does tell you what goes where.

In the explanation of tax basis of notes you bought on folio, they wrote this...
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Purchase price of Note less principal repaid, plus accrued interest sold and less accrued interest purchased (through Folio Investing). Note: This is the cost basis that is reported to the IRS.

You need to wrap your head around that sentence.

Sale proceeds minus tax basis is call capital gains, and is taxed at the capital gains rate.

thanks for all the info.  sounds like the real way to escape taxes is via a roth ira.

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Foliofn - LC / Re: taxes...?
« on: February 03, 2019, 06:52:24 PM »
Yes, you got it pretty much right.  Interest is ordinary income.  Sale and default are capital gain/loss.

LC sends you a form 1099.
You copy the numbers to your tax forms.
You don't need to itemize every loan.

so just to confirm this again
- buy secondary note $20
- receive payments $19.60
- sell secondary note $1

i'm up 0.60
i owe taxes on 0.60 at the capital gains rate

so we're all kind of incented to sell the last 1 or 2 loan payments?
Look at the interest part of the payment on the last 1 or 2 loan payments.  You are going to sell this for $1 ?!?  and do it consistently on 100s ... 1000s of notes to make a profit that is worth it



well, what if i buy yours, and you buy mine?  there are people selling loans with 1-2 payments left with ytm of 5%, i assume someone still buys those and is able to make 5% picking up pennies, right? 

so just to confirm this again
- buy secondary note $20
- receive payments $19.60
- sell secondary note $1

i'm up 0.60
i owe taxes on 0.60 at the capital gains rate

No.  Its a little more complex than that.  Of the $19.60 you received, some of that is interest, and interest is taxed at the ordinary income rate.  The rest of it is return of capital, and is not taxed.  It does however change your tax basis.  The amount of capital gain tax you owe depends on your tax basis at the time you sold for $1.

The LC 1099s are available now.  I suggest you just grab yours and you can see the numbers there.  After a bit you will understand.  Then just copy the numbers to your tax return.

does LC do that all correctly?  if interest is ordinary income no matter what, then the only way i have a capital gain to pay tax on is if i actually successfully sell my note at a premium right?  no 1099 for me, i just started investing!

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Foliofn - LC / Re: taxes...?
« on: February 01, 2019, 08:02:52 PM »
Yes, you got it pretty much right.  Interest is ordinary income.  Sale and default are capital gain/loss.

LC sends you a form 1099.
You copy the numbers to your tax forms.
You don't need to itemize every loan.

so just to confirm this again
- buy secondary note $20
- receive payments $19.60
- sell secondary note $1

i'm up 0.60
i owe taxes on 0.60 at the capital gains rate

so we're all kind of incented to sell the last 1 or 2 loan payments?

8
We used to have a user Core who had 100% returns on Folio doing trading.  But his strategy was at capacity with 20k or something.

If you want to hedge, just find another large consumer lender.

Lendingclub seems to be the only consumer lender with a robust secondary market.  I have some money on prosper and mintos but there are not the same trading opportunities as lending club.  Finding another large consumer lender would provide diversification but no the hedge I'm looking for.  By hedging I meant protecting myself from a big loss if the economy as a whole tanks and consumers are unable or unwilling to pay back their loans.


100% return on 20k is impressive but definitely doable from what I've seen.  Finding strategies that scale is the difficult part

how is mintos?  do they have a nice api and history to download?  worth getting into?

9
I keep the dataframe in memory.  It is just LoanID, purchase markup price, expected credit score and starting credit score in the dataframe so its under 20 megabytes.  You are right, reading it into memory from a disk would be too slow

so my program i run every 30 or 60 min spins up python, does it's thing, it's all quite heavy particularly compared to yours given that i do things with snowflake database on it now too.  is your process long running, ie. you create your frame on disk once a day, then you read it, and your program just runs the next 23 hours and you are running, sleeping 10 sec or something, then hitting the api again?  at some frequency isn't the lc api highly annoyed at you?

Quote
I do.  SecondaryMarketAllNotes.csv is big so wrote some low level code to only download the last 32kb of the file so I can detect changes more often.  If there is a change then I download the entire file.  If it was possible to know the exact time the file is updated i wouldn't have to do this but since there is no fixed interval it pays to scan frequently.

why are you doing both, sounded like above you didn't think the api missed anything? 

thanks for the comments, it makes me rethink my own design.  i could probably do my snowflake stuff differently and ahead of time and minimize the costs i spend running anything on the platform.  even at the smallest size, it's overkill for something like a lil folio tradey bot.

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yes I am doing a dataframe merge, which is quite fast with pandas.  I update the list once per month when new credit scores come out.  I also detect if there is a change in fico score since my model priced the note.

how big is your frame of prices you like that you are merging with the newly listed notes?  i haven't tried to do anything like that, but just reading a csv that large would seem to take a good chunk of time!
Quote
New notes are listed approximately every 2-3 minutes via the api.  SecondaryMarketAllNotes.csv is updated less frequently but at least every 5 minutes. 

do you read both?

Quote
I check for new notes very frequently.  I can notice that a note is snatched up quickly when I put in an order a fraction of a second after the notes are listed and they come back as not available.  For example a note with no late payments will be bought very quickly for a 20% discount regardless of what type of note it is.  I used to only get a small fraction of these notes but I'm capturing more now.

lol why is anyone even selling a note like that?

Quote
"have you separated out your notes to hold inventory with the ones you put up for sale, or are they always up for sale to someone who is willing to pay 5% more than you did?  is this just under the theory that a no risk 5% right now improvement is always worth it?  are these notes acquired at big discounts to start?"
I did this at first.  Then I figured what the heck, why not mark them up 10-15%.  To my suprise some of the most premium notes are regularly purchased at 15% markup (especially notes with ficoscore changes over +100 with rates over 24%).  This spawned a whole new strategy since at first I didn't think anyone would pay such a premium.  The notes I want to keep I usually mark up an extra 10% and figure I'll keep most of them and make a quick profit on the rest.

thanks that is interesting!

Quote
I'm buying fractional notes on the primary market with the api.  I don't have the capital to purchase whole notes.  I just started doing the primary market a few months ago so it will be a while before I can say what kind of returns I would get.  It was incredibly easy to implement primary market purchasing via api compared to the trading and valuation I'm doing with loans on the secondary market.

that's what i figured - so few loans come out on the primary platform that i find it frustrating and annoying though.  i have pretty strict rules on when i want to buy there and they never actually trigger.  so i'm essentially going to folio to have a larger market to evaluate to find the things i like.

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Foliofn - LC / Re: taxes...?
« on: January 22, 2019, 04:51:38 PM »
If you use TurboTax to work out your tax returns, you can have LendingClub tax forms automatically imported into TurboTax and it's done. No manual number entry required.

https://help.lendingclub.com/hc/en-us/articles/220044828-Importing-LendingClub-tax-forms-to-TurboTax-a-step-by-step-guide

that is quite nice, if it actually accounts for all of this stuff correctly!

12
it is interesting that you have started with a price you are willing to pay beforehand.  how are you connecting that with the loans you are evaluating?  is this just something like a dataframe merge?

you noted loans snapped up in "milliseconds" - how frequently are you running your process?  how did you even notice something being snatched up that quickly?  the most i run is once every 30 minutes!

have you separated out your notes to hold inventory with the ones you put up for sale, or are they always up for sale to someone who is willing to pay 5% more than you did?  is this just under the theory that a no risk 5% right now improvement is always worth it?  are these notes acquired at big discounts to start?

are you buying fractional notes on the primary market via the api or via the auto-invest?  or do you plan on signing up for the whole loan purchase program?

13
my account is clearly missing money in the summary because of 1. cash in folio tied up in pending purchases 2. cash in folio tied up for canceled, refund processing orders.

without making trades for no days and waiting for all these to settle, is there a way to actually accurately account for how much my account is worth?  i'd like to take a month end snapshot to calculate IRR but how can i do this if i can never get an accurate number?

it seems that the best i can hope for is that
1. at any given point i record a number, the same amount of money is held up
2. at some point if i invest enough money, the amount tied up won't significantly throw off my results

that or make some lame rule like i stop trading the last 5 days of the month or something.

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Investors - LC / Re: Speed of Funding
« on: January 18, 2019, 02:25:11 PM »
Mikedev10 -

I guess I didn't realize how drastic the falloff has been.  You're right though, the retail market does continue to shrink - I put together some quick charts from the SEC data https://sites.google.com/site/swimwolfe/home/news-noteworthy/crowdfunding-active-research/falloffinretailnoteavailability. I would think this puts more emphasis on the secondary market investment opportunities right?

What we've been thinking about lately is how quickly the whole loan market loans get snapped up.  Occasionally those loans go unfunded and we were thinking a little about how that speed of funding in the institutional market might be an indicator of adverse selection issues for 1) slow institutions 2) retail investors on those rollover loans.  I know most of those rollover loans went away after the management change in 2016 but they still happen from time to time.

i'm curious why your chart to current day does not appear even lower - what does it look like for the last 3 weeks?  this chart (and maybe just because of the size and render etc) makes it look to me like there's still hundreds a day vs. the tens a day.

it would be nice to have access to the above mentioned "allocation 1" although i'm not sure my algorithm could compete with lending club's own internal simple based rules process.  my end to end process takes about 60 seconds, i could make it faster, although never as fast as an internal process with simple rules.  having hundreds of retail loans plop out a day would be nice though.

i asked about access to loans earlier or through a different way - it took some pestering as no one was getting back to me, but it sounded like you had to do whole loans then and the starting point for access to that was 50k.  i think i have quite a good loan picking methodology but i'm not on board with buying whole loans with my 50k, i'd be up for OPM and a few million to play with though :p :)

I would think this puts more emphasis on the secondary market investment opportunities right?

No, because the secondary market is so tiny that the "opportunities" there are incredibly small relative to the primary market. 

My experience is that I am able to invest 1000x more $ per day on the primary market than on the secondary market.

Individuals results will vary, depending on their investing criteria, pricing policy, etc.

So while the primary market volume has decreased, secondary market volume never existed.

i have been tweaking my model and fear the impact of the earlier hungry day where i had money in my account and it bought something like 200 notes in 24 hours... cuz they probably weren't top shelf picks...  in any case my current buy rate is 2-10 a day.

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Investors - LC / Re: Speed of Funding
« on: January 16, 2019, 06:44:26 PM »
isn't the greater problem now that there are barely any loans out there?  it doesn't feel to me that i'm not fast enough to get into those "juicy" loans that come out at 4 times a day - because checking 1 second after the release, there are barely any loans to choose from.

per this https://www.lendingclub.com/investing/investor-education/how-loans-are-allocated-to-investors the primary market api seems to be kind of a "leftovers" api.  i only started playing around with this stuff the last week of december, but it seemed like each release period just 4-10 loans leaked out.

looking at https://www.peercube.com/histperf/available_loans/lc this seems to be the case as well - the last 4 release periods here had 1, 4, 12, and 18 new loans released respectively.  so there's no great race/effort to pick the best of the 1000 loans issued in the past 24 hours; there's just a lazy stroll to review the 35 that became available.

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