Author Topic: Retail Reality Check  (Read 4905 times)

nonattender

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Retail Reality Check
« on: September 01, 2013, 05:14:33 PM »
Lots of discussions here about models, API, etc...  I don't think this is the future, though I can see why the general consensus of this
particular forum's participants (a bit on the obsessive side, or, to be polite, "super users") is that LC must bend to satisfy demands...

Frankly, you're all putting much more time into this than it ought, at scale, warrant.  No one who is rational and not a "super user" is
interested in logging onto any websites every day, much less several times a day, much less having to make time and capital invests
towards competing with other similarly irrationally/specially interested parties in order to make a decent return off of this asset class.

What "real" retail investors want is what I think many of you might call a "dumbed down" version of LC's current vehicle interface, or,
what I'd call a "rational retail vehicle", which is optimally positioned to be as passive as possible with as much yield as that will allow.

Now, I think some of you think you're going to be able to gear up to provide that, and that a market will appear - where "managers",
"advisers", or what have you will compete to be the vehicle of choice for X investors demographic - and. maybe that is possible, for a
limited amount of time, while LC's focus is elsewhere - but, eventually you're going to be dis-intermediated by the dis-intermediators.

The only way this plays out that makes any sense is for large capital pools to signal, prior to "listing", a capital commitment - and the
only way to guarantee, "fairly", that there's a "level playing field" is to throw everyone into a small variety of funds with y risk profile.

It may seem paradoxical, but "increased capacity, with reduced granularity, and balanced yield" is going to be LC's optimal solution...

Of course, I could just be building a supermodel and trying to scare off competition - but...  frankly, I'm too lazy - and it's not worth it.
I'll just wait a year to dump some money into a fund that makes me 2% less than you do, but requires absolutely zero precious time.

That's the retail reality...  (And that's the institutional reality, as well - oh, goodie, one line-item, and nobody to hire to "manage" it...)

Am I wrong?
A little nonsense now and then is relished by the wisest men.

Dennis

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Re: Retail Reality Check
« Reply #1 on: September 01, 2013, 06:15:54 PM »
I guess there are many different levels of expectations when it comes to investing.  With 30 years of investment experience behind me, I can say that investor returns generally are proportionate to the amount of time and energy an investor puts into them.  Although anyone can get lucky for awhile and attain what seems like success (without putting in much work), without a corresponding foundation to support that success, that success will at some point fail.  I could also use an example of a business, where the success of that business will generally be proportionate to the amount of work the owner is willing to put in to it.  So if you think some of us spend too much time at this, well in one sense you're right - as far as you're concerned.  So maybe your time is more valuable than spending a good part of it working towards a successful financial end, maybe you're satisfied with average returns and an average life, nothing wrong with that.  Some people are driven, however, towards a higher level of reward.  And I've rarely seen anyone attain meaningful success without working really hard at it and sacrificing at least a little to get there. 

To say no one who is rational would work hard at this (to paraphrase you), end of quote, (now me) to attain 15%+ returns consistently, well I think we need to define the word "rational" here.  I can see if someone has very little money in this (little at risk), then a couple or a few thousand dollar yearly profit doing this would not be worth putting in a lot of time.  Makes sense.  But for someone who might (not me) have say a half million in it, time spent working hard at this would probably be worth it to them.  So it just comes down to, I guess, point of view.

Now as a "real" investor, I want as much control over my investment dollars as possible.  I don't trust anyone else with my money as they don't even remotely care as much about my money as I do.  I also trade stocks, many people do, and I spend a lot of time with that also.  I manage very good returns there also, while it's a fact that 70% or more of people lose money trading stocks.  Most managed stock funds are really not that good either, expenses and fees act like a cancer in them over time.  And fund managers could give an ass hair about you or me.  But stock trading is stressful, P2P is not.  So I like this format better than trading, and I actually stopped trading for awhile while I was pursuing/learning this (I needed the break). 

So as anything in life is, the harder you work at something, the better you'll be at it.  Your time may be too valuable to work at this or other investments as hard as some of the rest of us do, but like I said, nothing wrong with that if you're achieving everything you want in life.  Maybe your life is better balanced than some of us too.  Good for you.  I wish I could be that way, many times when I get only 4 - 6 hours of sleep a night, I wonder why I'm living like this and working so hard, but then when I look at my bank account, I understand.  I'm not saying my way is "the way" either, it's just "a" way.  It's whatever works for you, none of us are always right, none of us are always wrong.  And that's just my humble opinion.......         
« Last Edit: September 01, 2013, 06:52:43 PM by Dennis »

core

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Re: Retail Reality Check
« Reply #2 on: September 01, 2013, 06:30:03 PM »
Translation:  "I don't want to work so hard to get the kind of returns you are, so just give me some of yours."

Many people would say there's nothing wrong with that.  An increasing number of people think that way, and I'll offer the 2008 and 2012 elections as proof.

If you can't spank somebody, what's the point of playing?

nonattender

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Re: Retail Reality Check
« Reply #3 on: September 01, 2013, 07:38:54 PM »
Translation:  "I don't want to work so hard to get the kind of returns you are, so just give me some of yours."

I'm not stealing your favorite new toy, but I am telling you that you're going to be forced to share it with the other kids.  (It's only "fair"...)
(Someone will no doubt have beaten you out, by the time this occurs, so you won't care / will be tired of playing a losing game, anyway...)

As it is, some of you feel like second class citizens to "big money".   You're not.  You're third-class.  "Big money" is the second-class citizen
- now - and the first-class citizen is the incredible drag reduction that LC can achieve by changing its model to serve just a few fund LLC's.

Pretend you're them - do you want to have to constantly fuss over (or with) thousands of customers on the investor side - when you are
already having to do the one-on-one thing on the borrower side?  No - you look for ways to optimize the model to reduce inherent drags.

And all of this fighting over loans is a "drag", in several senses, for majority of parties, whose interests, like it or not, outweigh "yours"...

I'm not telling any of you what you're doing is "wrong" - I'm just giving heads up that the inefficiency you exploit will not be around long.

"Make hay while the sun shines" is a nice way to put it without focusing on the implicit and impending sunset, upon which I've focused...
A little nonsense now and then is relished by the wisest men.

core

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Re: Retail Reality Check
« Reply #4 on: September 01, 2013, 07:54:25 PM »
Pretend you're them - do you want to have to constantly fuss over (or with) thousands of customers on the investor side - when you are already having to do the one-on-one thing on the borrower side?  No - you look for ways to optimize the model to reduce inherent drags.

No this I agree with, and I always have.  Even if it results in some action I don't like.  Whenever I hear someone around here calling up LC (or sending an email) to ask why $0.01 is missing from their payment, or asking to cancel a $25 purchase, or [insert life changing issue here] I wince a bit.  They've got better things to do and when you bother them to this level, I can definitely see where they would want to do away with that.  It does make financial sense for them to go with the big money.  On some level.

I do not see why cutting down these "drags" must mean setting up a series of funds.  There are enough larger investors around that they could eliminate all the drags by just saying you gotta have 1mil in order to participate.  No changes to the site are required.  Just kick all the "undesirables" out over time.  Not that I would be for this; just saying.

nonattender

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Re: Retail Reality Check
« Reply #5 on: September 01, 2013, 08:06:12 PM »
I do not see why cutting down these "drags" must mean setting up a series of funds.  There are enough larger investors around that they could eliminate all the drags by just saying you gotta have 1mil in order to participate.  No changes to the site are required.  Just kick all the "undesirables" out over time.  Not that I would be for this; just saying.

It's not a matter of undesirables - it really is more about "fairness", or, more apropos and more rigorously, "incentive alignment".
If the retail investor dollar is riding along with the institutional investor dollar, the 'chauffeur' driving the vehicle has equal incent.

Most, if not all, of the "class" issues disappear when everyone's money rides along, together, in the same chauffeured vehicles...

(vroom, vroom...)
A little nonsense now and then is relished by the wisest men.

Dennis

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Re: Retail Reality Check
« Reply #6 on: September 01, 2013, 08:45:30 PM »
If you can't spank somebody, what's the point of playing?

There seems to be a growing school of thought in this country that losers have the same right to spoils that winners do.  That we must give from those who have worked so hard and sacrificed so much, to those who have worked so little, tried so effortlessly, and sacrificed nothing in their tireless pursuit of achieving nothing.  I say spank them until it hurts, they'll finally get tired of it (fear it), just as a small child does and learns from it, and then maybe some will get off their lazy sore asses and begin contributing something to society. 

I'm not opposed to charity, far from it, but I am opposed to laziness, and laziness has become epidemic in this country.  There are way too many able bodied people standing around with open hands these days.  And I hear all too often that there are no jobs - that's just not true.  Open the help wanted section of the newspaper on Sunday and you'll find the newspaper full of them.  Now some may not pay well, some may require sacrifice, some hard work, and some require skills, but they're out there.  And what ever happened to entrepreneurship in this country?  Oh yeah, government killed that with endless taxes and restrictions on small business.   

I believe our socialist government is taking away a lot of people's will to do what is necessary, no matter how hard, to achieve success.  How many corporations were hiring when the Pilgrims came to this country?  None that I know of.  Life was hard but enough survived to form the foundation of a great country, but more importantly those early pioneers proved that tireless hard work and sacrifice works.  But now we have become a country that promotes and endorses failure.  Entertainment has become a priority over hard work, over honor and sacrifice, and that's truly sad.  One high ranking politician in this country (I'll refrain from using names) openly said unemployment is good because those who receive unemployment money will almost always spend all of it, and the spending of that money is good for the economy.  Well gee, then wouldn't 100% unemployment be really really good for the country, when you look at it like that???  Now I won't go into all the wrongs with type of thinking (they should be obvious) but with some politicians thinking that way (and really believing it!) what chance do we have as a nation???

I'll leave it there, end of dissertation (LOL).     

rawraw

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Re: Retail Reality Check
« Reply #7 on: September 01, 2013, 09:44:16 PM »
If you can't spank somebody, what's the point of playing?
And what ever happened to entrepreneurship in this country?  Oh yeah, government killed that with endless taxes and restrictions on small business.   


Even the areas the U.S. ranks poorly in taxes, regulation, and coordinated support aren't all that negative. In the quantitative analysis, the U.S. has above average or strong rankings in areas like ease of starting a business, tax rate, and overall time spent doing taxes. However, it's pulled down by the survey results, since U.S.-based entrepreneurs tend to feel very negative about taxes and regulation.



Read more: http://www.businessinsider.com/best-country-to-be-an-entrepreneur-2013-8#ixzz2dhBKutpa

core

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Re: Retail Reality Check
« Reply #8 on: September 01, 2013, 10:03:04 PM »
All that means is we haven't caught up with socialist Europe yet.  Is that how you set the bar?

GS

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Re: Retail Reality Check
« Reply #9 on: September 01, 2013, 10:39:03 PM »
It's been said in the past that an ETF or ETN that invests in P2P notes would be a good alternative for people who  don't want to put in the time to manage their own investments.  I don't mind logging in everyday to check my account, in fact, I think it's fun, but I'd be interested in seeing how an actively managed ETF would compare to my expected returns.  I'm sure the fees would be pretty high, as they normally are for actively managed ETFs. 

JDowding

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Re: Retail Reality Check
« Reply #10 on: September 02, 2013, 08:33:47 AM »
It's been said in the past that an ETF or ETN that invests in P2P notes would be a good alternative for people who  don't want to put in the time to manage their own investments.  I don't mind logging in everyday to check my account, in fact, I think it's fun, but I'd be interested in seeing how an actively managed ETF would compare to my expected returns.  I'm sure the fees would be pretty high, as they normally are for actively managed ETFs.

I am one of the ones would be interested in that, in part because I don't want to put that much time into Lending Club (I must be another lazy socialist), and in part because I'd like the flexibility to easily move funds between my other investments.   

As an aside, when I moved a chunk from my IRA at Schwab to LendingClub earlier this year, a note on the Schwab web site that I could only do that once per year.    I can't find anything suggesting that is a federal regulation, anyone know if that is just a Schwab thing?


Randawl

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Re: Retail Reality Check
« Reply #11 on: September 02, 2013, 12:37:32 PM »
As an aside, when I moved a chunk from my IRA at Schwab to LendingClub earlier this year, a note on the Schwab web site that I could only do that once per year.    I can't find anything suggesting that is a federal regulation, anyone know if that is just a Schwab thing?

Unless it was a rollover, it's definitely a Schwab thing as the IRS does not limit the frequency at which people can make IRA custodial transfers.

yojoakak

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Re: Retail Reality Check
« Reply #12 on: September 02, 2013, 03:50:14 PM »
Unless it was a rollover, it's definitely a Schwab thing as the IRS does not limit the frequency at which people can make IRA custodial transfers.
Maybe he meant one FREE transfer out per year.

http://www.schwab-global.com/public/file/P-1036363/Pricing_Guide_-_REG23060-22_Final.pdf

"
...
Transfer (out) of assets:
Full $50 per account
Partial $25 per account
...
"

JDowding

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Re: Retail Reality Check
« Reply #13 on: September 02, 2013, 06:08:04 PM »
Unless it was a rollover, it's definitely a Schwab thing as the IRS does not limit the frequency at which people can make IRA custodial transfers.
Maybe he meant one FREE transfer out per year.

http://www.schwab-global.com/public/file/P-1036363/Pricing_Guide_-_REG23060-22_Final.pdf

"
...
Transfer (out) of assets:
Full $50 per account
Partial $25 per account
...
"


Thanks, that may very well  have been it.   I recall seeing a $25 fee, but it was waived.