LC RIP - Aug 2013

[New Jersey Guy]

Even on the secondary market, E-G notes rarely pass even a loose filter.  I'll get the chance to grab an occassional E note, but F and G are nearly impossible to get unless you're looking at 60-month term.  Even then, the number of 60-month E and G notes issued are much smaller than the other grades.

I totally agree with Rawraw's last statement.  I'm happy with the 16% I'm making on that particular portfolio. 

Like him, my Buy/holds are mainly C and D with a few lower grade B4 and B5 in the mix.  Very, very few E,F or G.

[PennySaved]

I am very happy with getting B and C loans on Lending Club with occassional D.  If I can get a B loan with double digit interest rate, that is still better than  the ordinary savings rate.  I am not despairing over not getting 20% return versus 10%.  I do have some E, F and G, but they are older loans. But I too feel the party might be over some day....So i keep reinvesting and adding new money in occassionally.  So far, I am up to $16,237 invested after starting with my "experiment" in 2009 with a couple hundred dollars.

I even started putting money back into Prosper as I am more hopeful for its success now.  Again, I have no problem getting only AA, A and occassional B loans.  Better returns than conventional savings without the wild swings of the stock market.

[New Jersey Guy]

"So far, I am up to $16,237 invested after starting with my "experiment" in 2009 with a couple hundred dollars."

Impressive!  I started last October with $400 and went into the New year with $600 out of pocket.  I, too, wanted to continue my "Experiment" with just that amount.  But like alot of others, I got caught up in it and have been adding money on a monthly basis.  I'm sure you'll see my IRR drop the next time I update it due to added funds.

[Fred]

LC published a study on how LC notes performed better than stocks and bonds for the 2007-2012 period.

http://blog.lendingclub.com/2012/11/07/five-year-review-lending-club-notes-outpace-stocks-and-bonds/

This year, stocks probably will do well -- SP500 is about +20% so far -- but anyone in equity should have the stomach to go through a -5% drop within a few days, which happened in June this year.

[Fred]

But like alot of others, I got caught up in it and have been adding money on a monthly basis.

Those double-digit returns are addictive.   

[berniemadeoff]

LC published a study on how LC notes performed better than stocks and bonds for the 2007-2012 period.

http://blog.lendingclub.com/2012/11/07/five-year-review-lending-club-notes-outpace-stocks-and-bonds/

This year, stocks probably will do well -- SP500 is about +20% so far -- but anyone in equity should have the stomach to go through a -5% drop within a few days, which happened in June this year.

No pain, no gain, as they say.  This is a hated bull market and it suits me just fine.

Picking 2007 and 2012 is a convenient timeframe.  They won't be able to boast this claim going forward on a rolling basis, as least not vs. equities.  Including tax drag from interest, the outperformance in stocks pull ahead even further.

[GS]

I was thinking the same thing.  From 2009-2013 I'm sure the stock market did better than LC, but 2007-2009 was a death spiral ... I've read the average long term return on the S&P is 10%, using the 1950s as a starting point.

[Fred]

1. Don't get me wrong, I do not discourage anyone going into equities.  I myself have bigger positions in equities than in P2P notes.  I know people are always looking for alpha.  But for me, having been exposed to -100% to +300% swings, my goal now is to maximize Sharpe ratio, not alpha.

2. If you notice, LC's report was published in Nov 2012, so I don't think they picked the period out of convenience per se.  It was the "latest" as of the time of writing.

[berniemadeoff]

Fair enough.  But it likely will be the last time they can make this claim.

Sharpe ratio is ok, but I'm all about beta and low costs. Alpha is a total crap shoot.

[Amelia]

I'm just about to pull the trigger on a Roth IRA roll over even though it took two tries to invest a measly $125 this morning right at the bell. 

But, since I believe for the average Joe investing in the stock market is 80% emotional/confidence vs. market knowledge I feel more confident and in control of my money here even though it will take some solid clock watching to get the funds I'm looking for during the load times.

Started in May and just now got my initial $8000 fully in the system.  Everything else is reinvesting now.  Starting with the Roth money, I'll be much more focused on getting as many loans started at the beginning of the month and hopefully they'll post by the first of the following month.  I can also now up my loan amount which will help (I hope).

The journey continues for me at LC.

[PennySaved]

I started a Roth IRA this year in Lending Club putting in $6500 in January.  It took me about two months to get it all invested. This is separate from my regular Lending Club account.  I plan to put another $6500 (I'm over 50) in the LC Roth in January 2014.  It is good to have LC funds in a Roth because then you don't worry about taxes on the interest. 

My regular LC account I could count on as emergency cash if I decided to withdraw the loan repayments (~$400 per month) instead of re-investing them.  The Roth I don't plan to touch for a long long time.  I already have a diffierent Roth that is invested in stock funds.

[Dennis]

I started a Roth IRA this year in Lending Club putting in $6500 in January.  It took me about two months to get it all invested. This is separate from my regular Lending Club account.  I plan to put another $6500 (I'm over 50) in the LC Roth in January 2014.  It is good to have LC funds in a Roth because then you don't worry about taxes on the interest. 

My regular LC account I could count on as emergency cash if I decided to withdraw the loan repayments (~$400 per month) instead of re-investing them.  The Roth I don't plan to touch for a long long time.  I already have a diffierent Roth that is invested in stock funds.

Hello:

I've been putting $6,000 in a Lending Club IRA for 3 years now (another $3,000 on the way for this year).  In addition, I have another Lending Club account and a Prosper account for additional funds not allowed in the IRA because I thought I was maxing out that account at $6,000/per year.  I'm over 50, did I miscalculate on what is allowed?  $6,500 is the max???  Another $500 isn't much, but I'd rather that $500/year be invested tax free (actually, tax deferred). 

[thezfunk]

I am no tax professional but I believe this year the limits went up to $5500 and $6500 for Roth IRAs.

[PennySaved]

For 2013, if you are over 50, you can contribute max of $6500.  For us Fifty-Somethings, the max amount increased by 500 over the 2012 contribution limit of $6,000. 

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

[cfb]

I'm having the same set of issues.  Struggled to get 50k invested earlier last year and had to take a lot of low interest loans and relax my filter significantly and it still took three+ months to get it all in play.  Had no problems finding 10-15 loans a day after that for further investment and reinvesting.  My defaults are decent with my filters, and I'm getting a 12.6 NAR after about 18 months.

However, last couple of months I'm fighting to get one or two notes a day and half of them don't issue.  Between the institutional and autoinvests the 'good' notes I'm looking for disappear in minutes.  While a few months ago it was routine to see 200-400 notes in inventory, I'm seeing 25-40 at some points during the day.

I won't do the autoinvest because they don't allow the filtering I want (no low income, no high payment to income ratio, I don't mind 25-30k in debt but I'm not interested in 40k+, for example) and the surcharge would eat into my returns.

Definitely not seeing anything else out there to put money into.  The stock market seems to have hit its apex on the cycle, the bond market is headed for a wall, cash investments give negative returns, and real estate around my area has picked up to the point where some properties are selling for well above what they're worth...again.

LC is really starting to take more time than its worth at this point, and its not very productive for me anymore, unless I want to take lower interest loans or take on more default risk.  Its only a small part of my net worth, but it WAS a nice cash slush fund where I could pull a few grand a month out of it or roll it over.  I'm not particularly interested in sub 10% returns at this risk/effort level.

I'm also deeply concerned about the sudden dramatic increase in quoted default rates.  3%+ is quite a move!  Are they expecting defaults to rise significantly going forward or were they just seriously understating the risk?  I used to get an ROI of 13-14% with a small bundle of notes, now I'm having a hard time getting north of 10.5%.

Bummer, it looked like a good ride for a while, but success has done a number on the product.