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Messages - mchu168

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2
Investors - LC / Re: a view of LC's deteriorating investor returns
« on: March 20, 2017, 08:26:52 AM »
The value of most P2P loans once defaulted goes to zero with no chance of that value to ever recovering to pre-default value.  The "buy low sell high" assets (majority) sooner or later will rise to the implicit value of those assets after their "struggle" phase is over. Though few such assets do become worthless before they had chance to recover. This is the main difference between P2P loans versus the "struggling" assets that you want to buy low and sell high.


The rough patch is the degradation in underwriting. I'm assuming Lending Club overcompensates for weak returns by tightening up lending standards. 

3
Investors - LC / Re: a view of LC's deteriorating investor returns
« on: March 19, 2017, 01:28:40 PM »
If you start with unrealistic expectations, you will surely be disappointed in the end.

Long run equity returns are expected to be mid to high single digit (5-8%). Most people expect longer-duration fixed income assets to have negative returns over the next couple of years. Real estate prices are in bubble territory in many markets.  What do you expect from P2P loans?

I used to think investing was about pushing all assets into one or two bets to maximize returns. 100% tech stock, 100% junk bonds, etc. But I've learned that being wrong with such concentrated bets can/will lead to disaster. So a better approach is to spread the risks around to many asset classes. Most will have positive returns over time and hopefully generate decent long-run risk adjusted returns. Trying to time any market is perilous and will almost always lead to regret and disappointment.  Diversification says I don't have to make the right bets all the time but I will be right in the long run.

P2P lending is definitely in a soft patch right now but therefore isn't this the right time to raise allocation to a struggling asset?  I don't have the answers and I'm not going to try to time this market either. But with diversification I can afford to be a little wrong in the short run...  :)

 

4
Investors - LC / Re: Worst Month Yet
« on: December 26, 2016, 02:11:55 AM »
We are nowhere near a peak for the credit cycle. On nearly any metric, we are still near all time lows. I'd be careful to keep this in mind when framing your expectations.


Peak means nearing the point where defaults are nearing a cyclical low.  You think this can get a whole lot better?

https://www.federalreserve.gov/releases/chargeoff/delallsa.htm

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Investors - LC / Re: Worst Month Yet
« on: December 25, 2016, 09:30:07 AM »
What evidence is there that we lend on the fringe?

I'd be curious to know that, too;  I see pretty broad market.
(I'm also not buying into the recession talk; things look OK!)

I also want to clarify what I said earlier. I think the credit cycle might be peaking soon, but a recession is probably a few years out. And given the potential for lower taxes, less regulations and other stimulus being proposed by the new administration, I think the credit cycle has been extended. Rather than imminent recession, I think the greater risk today is overheating in the economy and potentially a more pronounced boom/bust cycle sometime down the road.

6
Investors - LC / Re: Worst Month Yet
« on: December 23, 2016, 09:49:23 AM »
Is anybody NOT taking money out? I know I am taking out all the cash as it comes in now and investing elsewhere. I mean c'mon, tax free bonds have better returns than LC p2p right now. Do they think investors will just accept these returns? 4-5% is not worth the trouble/risk.

Not sure what you're talking about. If you've been in muni's over the past few months, you've experienced (relatively) big draw downs and underperformance vs. most other asset classes. Depending on the economy and the duration of your muni portfolio, more pain could be in store.

I'm not taking money out but am not adding either due to my concerns about the credit cycle peaking out soon.

7
Investors - LC / Re: I'm peeved with lack of EFG loans
« on: August 10, 2016, 02:02:59 AM »
I agree it's frustrating. My cash balance is piling up every day. But I do believe that the new management is doing what's right for the longer-term viability of the company. Which will ultimately benefit us investors.

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Investors - LC / Western Asset Management story
« on: August 04, 2016, 07:42:54 PM »
I'd rather see LC deal with these guys vs. the cast of unsavory characters that Prosper is facing according to the wsj....


http://www.bloomberg.com/news/articles/2016-08-04/lendingclub-said-in-talks-with-western-asset-for-funding-deal

9
Investors - LC / Re: good news finally
« on: July 19, 2016, 08:20:15 AM »
We want a BRV. But it will never happen because they don't give a damn about us.


No, you can't always get what you want
You can't always get what you want
You can't always get what you want
But if you try sometime you find
You get what you need

10
Investors - LC / Re: LC article in today's WSJ
« on: July 15, 2016, 08:56:36 AM »
Yeah--SURE!  The WSJ is crap--biased---why read it?   Obviously many people on this forum are heavily invested in notes and are the ones who are EMOTIONALLY involved.  So, I'll respect the views of the financial media FAR MORE than the irrational I read on this forum

I happen to believe the wsj is more objective than 99.9% of other media sources and their reporting on this has been relatively fair.  I also have hundreds of thousands of dollars invested in LC notes and I continue to reinvest proceeds every day.  Yes, there will come a day when my returns will suffer due to macro events, recession etc. But I do believe that underwriting standards have improved at LC lately and overall economic trends and other attributes of P2P notes (diversification, etc) make it an attractive place to invest for now and over the long run.

Put it this way, I don't lose a minute of sleep thinking about the bad stuff that could happen to my LC notes, but I do occasionally lose sleep over my exposure to treasuries, stocks, etc... That's just me and if you want to be hysterical about your LC exposure, that's your prerogative.

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Investors - LC / Re: Liquidity of Funds?
« on: June 30, 2016, 07:38:16 PM »
Man, some of you give really horrible advice...  the guy's got 8k that he needs back in nine months and you want him to spend hours setting up filters and then more hours doing folio sales whilst taking on all kinds of risk and uncertainty...  really stupid to go with LC.

http://www.depositaccounts.com

Pick one and jump through the modest debit card/ach hoops for a relatively similar return, zero risk, and a giant time savings on $8k.

While everyone is giving bad advice, I will add mine.  Use Coinbase to covert the money to bitcoin and then park your money here for a few months:

https://haobtc.com/?lang=en

~7% interest plus all of the appreciation in bitcoin. Could be to the moon.

12
First I would reset investor expectations by telling them things will be bad for several quarters maybe.  Then I would do a meaningful layoff to lower opex.  Then I would try to roll out as quickly as possible new products that make it easier for retail, non-accredited investors to get exposure to retail notes.  Maybe create an note ETF, make it easier to buy and sell notes in a secondary market, work with advisors (maybe robo) to get this product in front of different kinds of investors - millennials, retirees, etc.  I'm sure all of these are hard to do from a regulatory, technology standpoint, but shouldn't we expect an innovative company to innovate. 

#1 and #2 are done.  Now let's see some #3.

13
Investors - LC / Re: Lending Club Loan Demand
« on: June 10, 2016, 04:51:42 PM »
I will chime in that it's a bad idea for LC to buy and hold notes.  If they're holding notes for 30 days or whatever as inventory so that they can sell a bundle of notes to an investor, then maybe that's ok. 

Like I said before, with LC's cost of capital probably in the teens or higher, they have no business whatsoever investing their cash in notes that earn 7-8%.  Period, end of story. 

14
If things get worse, then the warrants will become worth a lot less - maybe nothing.  If you are worried about things getting worse, better to buy puts to hedge you investment in notes.

Anyways, I understand why LC may FEEL the need to do a dilutive deal with a hedge fund, but I ask the question again, is it really in such a dire situation?  This is not a highly leveraged company that is nearing the brink of a Lehman-like death spiral moment.  If fact, they have no debt whatsoever and a fairly large cash pile relative to mkt cap.

Also, note investors are fleeing now but why should we fear a permanent buyers strike?  The returns have been good (not great) relative to other fixed income securities and the asset class has other nice attributes (low volatility, etc). Junk bonds, munis, etc have all faced buyers strikes in recent years but have bounced back (even stronger in the case of munis) when investors looked objectively at the risk-return and relative value attributes of these asset classes.

Instead of trying to temporarily spike originations by selling a piece of the "farm," I would rather see LC do something innovative on the retail investor side.  After all, they are a FinTech company, but there hasn't been any Tech or innovation at LC in years, as far as I can tell.  First I would reset investor expectations by telling them things will be bad for several quarters maybe.  Then I would do a meaningful layoff to lower opex.  Then I would try to roll out as quickly as possible new products that make it easier for retail, non-accredited investors to get exposure to retail notes.  Maybe create an note ETF, make it easier to buy and sell notes in a secondary market, work with advisors (maybe robo) to get this product in front of different kinds of investors - millennials, retirees, etc.  I'm sure all of these are hard to do from a regulatory, technology standpoint, but shouldn't we expect an innovative company to innovate. 

Also they should leverage their board.  Why have Larry Summers, Mary Meeker, John Mack and all these other luminaries and not use them to create partnerships, curry favor with regulators, etc.  There is so much to do, but under RL's leadership all we got was an IPO and some very tenuous small bank relationships.  Sorry for the rant.

15
Is it just me or does this strike anyone else as a really strange deal?  I guess idea is that buying loans (probably using very cheap borrowed money) will drive LC stock price higher.  With warrants (basically call options issued by the company) the hedge funds get the levered upside in the stock which they are essentially pushing higher by buying the notes.  Seems a little ponzi-ish to me but will probably work for a short term gain.

Dealing with the likes of third point, etc is akin to dealing with the devil, which seems like a last resort measure imo.  Are things really that dire? I'd be a lot happier if they could work something out with Morgan Stanley (unless Mack somehow makes a deal impossible) to sell notes through the adviser network or structure some products for pension, endowment type investors. I think LC will be glad they didn't have to deal with the hedge funds in the end.

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