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Messages - ThinleyWangchuk

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Investors - LC / Re: What's Your LC ROI?
« on: April 07, 2020, 10:26:03 AM »
Most of my performance came in the first few years.  Been loosing money ever since. 

Investors - LC / Reason Behind Declining Loan Performance
« on: June 17, 2017, 08:57:30 AM »

"In the past two fiscal quarters, banks reported a steep rise in credit-card charge-offs — debt that companies can't collect from their customers — according to a report from Moody's....The sharp increase, the largest since 2009, is especially unusual given how strong the US employment market has been, Moody's noted. It suggests that American consumers haven't fallen on hard times so much as banks have started to loosen their standards and issue credit more aggressively."

Investors - LC / Re: a view of LC's deteriorating investor returns
« on: April 27, 2017, 12:03:22 PM »
Well, here's another way to look at the situation.  We usually look at returns.  Many of us calculate returns different ways, but all of them involve interest rates, chargeoffs, fees, and sometimes other factors.  Tonite I'm going to look at just one factor.  Its the factor that has the little problem ... chargeoffs.

I've calculated a chargeoff rate for two portfolios.  These happen to be two portfolios that I have access to.  The first is my own Fred93 portfolio.  The second is Lending Club's Broad-Based Consumer Credit Fund (which I refer to as BBQ). 

For my own account, each month I take the net chargeoff $ (which means chargeoffs minus recoveries) and divide by the account balance at the beginning of the month.  This produces a monthly chargeoff rate.  I then multiply it by 12 to get an annual rate.  Nothing fancy.  No freaky math like IRR or ANAR.  Everybody can follow along.

Since the beginning of 2016, the BBQ fund has published their monthly net chargeoff rate.  I've multipled this by 12 and plotted it on the same chart as the Fred93 chargeoff rate.

I'm very happy that my chargeoff rate is lower than LC's, but that's not the main point of this note. 

You can see that both of these curves used to run along sorta flat, and then in mid 2016, they both started climbing.  That's the cause of the degradation of loan performance that I've often talked about. 

The first thing I notice is that the net chargeoff rate for both these portfolios are moving up together.  That gives me some confidence that it isn't my bad loan selection that made the bend in the red curve.  I don't have the data for all of your portfolios, but I suspect that if you plotted net chargeoff rate vs time, you'd get a similar looking curve, with a bend up.

You can see that neither of these curves looks like it is leveling off.  I hope they're leveling off!  I suspect that they're leveling off.  But... there just isn't data yet to demonstrate that.  So far its a wish and a supposition.

One nice thing about this annualized net chargeoff rate is that you can compare it directly to the average interest rate of your portfolio.  They have the same denominator.  Each month interest comes in, and chargeoffs go out.  You can subtract one from the other.  Lets try that...

Lets do it for the LC fund.   LC's BBQ fund has an average interest rate of 12.96%, and in March had a net chargeoff rate of -13.68%.  Oops.  They're losing money.  They also charged a fee of -0.09%/month, which annualizes to -1.08%.  (The fund charges different size customers different sized fees, and this is their published number for the fund average.)  The result was that they lost money on a cash basis.  Annualized cash basis performance in March was 12.96% - 13.68% -1.08% = -1.8% 

I say "cash basis", because when LC calculates returns on their fund, they throw in an additional term, which they call "adjustment".  In accounting lingo this adjustment is a "non cash item".  The adjustment marks the portfolio down when market interest rates go up and vice versa, when credit quality goes down, and vice versa, and they also adjust for loan age.  They have this scheme where loans are given a haircut at birth because some of them are expected to default later in life.  As life goes on, there is less life left in which to default, so the value goes up.  This may be a perfectly rational system of accounting for some, but it isn't the way most of us value our own portfolios, so I've removed the adjustment, leaving the terms which actually measure movement of cash.  Their adjustment for March was +0.59% which annualizes to +7.08%, so when you add that in, that makes the return they report come out positive.

The adjustments are big, and kinda random looking.  Now let me be clear:  I'm not accusing them of anything.  These adjustments are calculated by an outside firm so that we won't have to worry about insiders making up positive adjustments to hide bad stuff.  I do think that outside firm might employ too many guys with green eyeshades and not enough people with common sense, but that's just my opinion.  I should also mention that the adjustments are negative in some months and positive in others.  I just prefer to ignore the adjustment.  Its hilarious... I charted the BBQ fund returns and the curve jumps up and down like crazy.  Looks ridiculously noisy.  I took out all their adjustments, and got a nice smooth curve! 

The BBQ fund is losing money on a cash basis.  We have every reason to believe that it will continue to do so.  Unless some magical thing makes the net chargeoff rate go down, it will continue to exceed the interest rate, and the fund will lose money. matter what the adjustments say.

But enough about the BBQ fund.  Back to the shape of the curves. 

Both of these portfolios have seen an increase in chargeoff of around +6% over the period we observe here.  That's huuuge! 

You hear LC from time to time say they've increased interest rates so everything is fine, but the increases in interest rates have been very small compared to the increases in chargeoffs.  I haven't done the math, but you know LC took interest rates down and then up again, and the net change isn't much.  Yea, I know they made some larger increases in the high risk grades, but both these portfolios are similarly middle-grade, centered on "C" grade. 

I've charted vintage chargeoff rates various ways in the past.  These show that recent vintages are performing worse than older vintages, which is nice to know, but doesn't relate directly to cash going in and out of our accounts.   Many of us have published  charts of the ratio of monthly chargeoffs to interest received.  That does something similar to what I've done here, but it's a ratio, which doesn't so easily combine with interest rates.  If you compute the chargeoff rate, you can directly subtract it from your portfolio average interest rate, which seems a little more intuitive. 

Portfolio chargeoff rate is my new favorite thing to track.

Great post! Please continue to keep us updated :)

Excellent!  Thanks

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Anyone have the link to the percentile calculator?

Adjusted Net Annualized Return :   9.81%
Weighted Average Interest Rate:   20.95%
Weighted Average Age of Portfolio:   28.4 mos
Number of Notes:   1,353

vs All Accounts:
vs Similar Age Accounts:
vs Similar Age and WAIR Accounts:


Adjusted Net Annualized Return3 ?:   15.87%
Weighted Average Interest Rate:   20.76%
Weighted Average Age of Portfolio:   51.2 mos
Number of Notes:   79

vs All Accounts:
vs Similar Age Accounts:
vs Similar Age and WAIR Accounts:

I don't talk your language but if anyone can tell me how my notes are doing.. most appreciated.

I am a grandmother and don't quite understand any of this.
thank you

I think you're doing okay.  Just be careful as I would expect the yield of your portfolio to decline to ~5% in a few months/year.

Investors - LC / Re: Worst Month Yet
« on: November 20, 2016, 01:29:07 PM »
I'm giving up on P2P unless the interest rate on C loans and below increase 10%+. Same underwriting standards but going to earn ~0% net of losses. Disappointed.

What is are Policy Code 2 loans?

Investors - P / Re: first-velocity-association?
« on: October 03, 2016, 08:12:05 PM »
Interesting.  "first-velocity-association" has been renamed "Prosper-Funding-LLC"

FolioFN - Prosper / FolioFn discontinued
« on: September 29, 2016, 01:02:44 PM »
We are writing to let you know that as of October 27, 2016, Prosper will no longer offer the Folio Investing Note Trader platform, the secondary market for Prosper Notes. Prosper has found over time that very few investors are using the secondary market and, as such, has made the decision to no longer offer this service. We apologize for any inconvenience that this causes. Prosper remains committed to its retail investor clients and to providing them a great experience.

Here's what this means for you: The secondary market trading service will be available as normal until end of day (5:30 pm PST) October 19, 2016. After that time, any new orders to list Notes for sale will not have sufficient time to be completed and processed before the site becomes unavailable to users at the end of day (5:30 pm PST) on October 27, 2016.

Once the secondary market trading service is terminated, you will not be able to sell Notes that you own, and you will need to hold them to maturity.

If you have questions about your Notes or the wind-down of the Folio Investing Note Trader platform, please contact Prosper customer service at 877-611-8797.

You're pretty good at credit analysis :). If you don't mind me asking, what criterias are most important for a filter?  If you're more comfortable maybe send a DM?

For a filter? That would have to be income. There's a lot of little things that I kinda weigh when doing my manual review though. Sometimes what might come off as a negative might be a positive for me. If there's a enough interest, then maybe I'll create a separate thread to discuss how I went about things.

Definitely!  Your thoughts on counterintuitive things sounds interesting.

*Sorry for going off topic @lascott

WOW... I thought I had good returns...
What's you secret? ;)

Secret? Oh jeez... Don't take advice from message boards? Haha, just kidding. I'll have to poke around this forum and other posts to see what if anything I was doing differently than others. I will say that I don't use any 3rd party tools to find loans. Just a simple filter within the LC UI and then manual inspection.

Don't let the charts fool you, my actual profits are nowhere near what LC says it is.

You're pretty good at credit analysis :). If you don't mind me asking, what criterias are most important for a filter?  If you're more comfortable maybe send a DM?

Just discovered this message board and thread. Was curious at what other returns people were getting as I felt what LC was telling me was not exactly accurate and after doing a quick google search, this site came up. (August was my first profitable month in awhile after numerous break even months and September seems to be trending up)

vs All Accounts:
vs Similar Age Accounts:
vs Similar Age and WAIR Accounts:

WOW... I thought I had good returns...
What's you secret? ;)

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