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Messages - hippo387

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Posted on the main site but will probably get more interesting responses here:

As I've mentioned in another context, most 3rd party sites--which make up the so-called "ecosystem"--are just derivatives on something LC created. As an average non-accredited retail investor, I view the ecosystem as mostly adding a layer of fees to provide services of questionable value (speed, extra filtering, etc) that in some cases attempts to advantage certain investors at the expense of the rest. My bet is that the vast majority will fail to outperform a simple filter or investment approach, which has been shown again and again in all types of markets.

I know this opinion will annoy many users, especially the active crowd on this site or those who profit from LC's product, but personally Iím not sure why LC owes derivative businesses anything. I'm for any move that helps LC ensure a level playing field for retail investors, and as Peter said this change mostly impacts very large investors (and those that service them). Is the negativity here really about transparency? Or is it just about money and the fear that a derivative player won't be able to grab a slice of the pie?

No offense intended and just one guy's opinion!

Prosper has a lot of loans for institutions, but acc to several interviews with management, they release as many loans to individuals that they can and still have them funded before expiring. In other words, as retail investor activity grows, so does the pool of loans available to retail.

Personally, I much prefer Prosper due to better returns and ease of use. Others may disagree, but you won't know until you try both.

I think this was important analysis. I'm not a fan of 3rd party services that exist to provide a speed advantage, and this calls into question their whole reason for being. In my opinion, LC and Prosper can provide automated investing through their platforms directly, which is better for the average investor who doesn't want (or need) a middle man.  Over at Prosper I've been quite happy with my simple Automated Quick Invest filters -- easy to use, performance is good, and cash is being put to work daily. These are just my opinions.

Investors - LC / Re: Loan Information Asymmetrical Timing
« on: June 18, 2014, 08:04:20 AM »
I'm a retail investor who has never used API or a 3rd party service, and admittedly I know nothing about the IT infrastructure of Lending Club or Prosper. But my dollar is just as valuable as anyone else's, so here's my opinion. From a big picture perspective, any move that puts individual investors (not concerned about institutions for this point) on a common playing field is a good move in my opinion. The API and 3rd party services, by using advanced speeds and data, have frequently put the common investor like me at a disadvantage. I shouldn't need to know how to code to invest. I shouldn't need to sign up for a 3rd party service to gain greater speeds to invest. I should be able to log onto LC or Prosper directly, or use their automated investing tools, and put money to work myself. And more and more, that's what I can do. Personally I prefer Prosper and I've been finding many loans that meet my criteria each day. I don't expect them to cater to me, and I'm not sure why anyone else expects to be catered to. No 3rd party service is a part of Lending Club, so I wouldn't think they have any obligation here. 

Investors - P / Re: Prosper Filters not Working?
« on: May 20, 2014, 08:05:05 AM »
My filters have been working just fine, and I have a few separate accounts. Maybe you should adjust them slightly (make them less strict) to see if it's really a glitch or really just your criteria.

General P2P Lending Discussion / Re: Peter launches a Hedge Fund
« on: March 04, 2014, 07:13:05 PM »
Well Peter your blog has a lot of followers because you've always answered questions without cynicism or offense, so I appreciate all you've said and the news you continually provide.

General P2P Lending Discussion / Re: Peter launches a Hedge Fund
« on: March 04, 2014, 01:29:23 PM »
I agree with the comments on conflict of interest, it does not appear there will be any and I stand corrected.

Perhaps my other criticisms aren't valid either. I'm just being honest, it does bother me that every financial investment turns into a fee machine. Money managers take their fee and in return provide returns that are no better than average. We've seen this over and over in the financial industry, and it generally benefits the few and not the many, and adds little value to the economy other than benefitting the fee-takers. Now look, I sound like my father!

Again, I can't really blame Peter, the system is what it is. Best of luck.

General P2P Lending Discussion / Re: Peter launches a Hedge Fund
« on: March 04, 2014, 09:16:48 AM »
I don't blame Peter for doing it, I'm sure it will be a very lucrative business, but I'm a little disappointed at how predictable it is. All financial instruments, from stocks to real estate to P2P, spawn cottage industries that charge fees, target (mostly) the wealthy and upper middle class, and cozy up to insiders. These funds don't add much value or create anything new, they just piggyback off of the core instruments to take a cut. Rather than educate people on how to invest for themselves without extra fees, they end up making the barriers to entry higher while telling the average person "it's too complicated, let me manage your money (for a fee)". Then over time, people realize those fees are costing them thousands of dollars over a lifetime, and they feel duped. The reality is P2P isn't that hard, a simple filter can generate returns equal to Peter's. And of course I would do exactly what Peter is doing if someone offered me a huge payday to use my "expertise" for others.

It is a serious question, though, if the blog is now a conflict of interest. If Peter knows about future developments before others because of his relationships, isn't that an ethical consideration for his fund? If P2P becomes a fully legitimized asset class, these sorts of issues will need to be regulated.

Sorry Peter, I'm a big fan but I don't think these are unfair criticisms. Maybe I'm wrong, I'm certainly open to your perspective which I'm sure you'll provide on the blog.

Investors - P / Re: Prosper--OK, you win!
« on: February 15, 2014, 01:40:23 PM »
Randawl -- it has only been one week and so far the Prosper fix is working by and large. Too soon to tell if it's only a band aid. Why don't you wait and see how it goes before calling it insufficient? Besides, the broader point is that they did take action and have stopped taking on new institutional investors until they find the right balance. Your criticism appears unfounded, or at least premature.

Investors - P / Re: Prosper--OK, you win!
« on: February 02, 2014, 06:19:31 PM »
1-  I do a combo of auto invest and logging on once a day to pick up notes. Depending on the size of your portfolio, you can increase your average $$ per note. For example, if you have $50K to invest, you probably shouldn't be doing $25 per note -- that level of diversification is no more benefit than $50-100 per note. Currently my supposed annualized return is around 12% after 3 years. I know that will go down over time and I don't mind.

2- The risk assumption is unproven because the industry is still in its early stages and has not seen many full economic cycles. Prosper 1.0 and Lending Club returns both went down in 2008 during the credit crisis. There will be future crises / recessions and I would bet (my own assumption, of course) that during those periods, A and B loans will outperform D and E loans. There's no such thing as an investment where higher risk continually outperforms. I could be wrong, but of course we won't know until P2P has 20+ years of history. The assumption I perceive is based on 3-5 years of historical data -- any way you cut it, that's not long enough to prove anything.

Hey, I do wish everyone the best possible returns and I understand the frustration. I just think people should cheer up over any return over 5% in this environment. I also think those focusing exclusively on D-E loans will feel the pain of that risk at some point.

Investors - P / Re: Prosper--OK, you win!
« on: February 02, 2014, 12:40:12 PM »
I think this line of thinking is full of unproven assumptions. It is assumed that (1) higher risk loans are always better and (2) earning 6-10% interest is a waste of time.

In my opinion, Prosper still provides an excellent return. Over the long term, a portfolio compounding at 8% should make an investor very happy. 

Investors - P / Re: Prosper Returns
« on: February 02, 2014, 12:26:11 PM »
I wouldn't worry. People on this forum tend to worry a lot about estimating returns and so on. The reality is that the only return that matters is your realized after-tax profit. Everything else is just speculation.

Investors - P / Re: Automated quick invest
« on: October 15, 2013, 02:30:46 PM »
Just FYI, I've found many B, C, and D loans lately on AQI.  It's in the fine print but when there are multiple loans available, AQI will choose 1 lower risk note first and move up the risk scale. Therefore, if your filter includes all loan grades, You'll get AA first, then A, then B, and so on. 

Anyway, I get multiple hits on B - D loans each day and it keeps me fully invested.  It's not a perfect tool, but it saves a lot of time and I've found it to be effective.

General P2P Lending Discussion / Re: Impact of Government Shutdown
« on: October 04, 2013, 08:19:49 AM »
mo:  Probably incorrect on the Oct 4 paycheck. The paycheck would not be for hours worked this week, but for a previous 2-week period in September. The next paycheck (Oct 17) would be the one that is cut, and who knows if that paycheck will be on time.

That said, I think you're correct that this is a huge negative for any notes tied to government work under 2 scenarios: (1) It drags on and people don't get paid for weeks. (2) Non-essential employees don't get back pay. DC is a very expensive place to live, I doubt that many people who have P2P loans also have a large emergency fund to pay monthly expenses. (If they did, why would they borrow at relatively high rates via P2P?). Unlike credit cards, LC and Prosper do not offer 0% balance transfers.

- Friday Oct. 4th is a payday for government employees (they are paid bi-weekly) and in this case they will only be paid for hours worked before Oct. 1st.  So a lot of people are going to be receiving a paycheck this Friday that is ~50% of what it usually is.  If this stretches for another two weeks past Friday everyone except active-duty military members would be getting no paycheck at all.

Exactly my point about bankruptcy being less likely -- higher growth means the business is more attractive to investors / suitors. Sorry I didn't spell it out in crayon for Xenon, the point has been made countless times.

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