Author Topic: Is It Time To Use The 'R' Word?  (Read 776 times)

Rob L

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Is It Time To Use The 'R' Word?
« on: March 15, 2020, 02:06:01 PM »
Recession. Okay, I said it.
Are we already in one, one shortly to come, a narrow miss or a miss by a mile?
Since the start of a recession is officially declared way after it starts we won't know for a while.

If we are or soon will be in recession we will finally get an answer to that often asked question:
"How will market place lending perform over a full cycle"?

AnilG

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Re: Is It Time To Use The 'R' Word?
« Reply #1 on: March 15, 2020, 08:01:57 PM »
Between prosper 1.0 and early LC loans, we already have enough idea how marketplace lending will perform. The lenders who invested in loans issued in last couple of years will be hosed. Once market settles down at a low, lenders who invest in new loans will have excess returns as economy recovers. The underlying assumption is that credit criteria tightens during recession and loosens during good times.
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Rob L

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Re: Is It Time To Use The 'R' Word?
« Reply #2 on: March 15, 2020, 10:11:12 PM »
Between prosper 1.0 and early LC loans, we already have enough idea how marketplace lending will perform. The lenders who invested in loans issued in last couple of years will be hosed. Once market settles down at a low, lenders who invest in new loans will have excess returns as economy recovers. The underlying assumption is that credit criteria tightens during recession and loosens during good times.

Sounds like a vote for recession now or near. Your thesis has a familiar ring. After the great recession banks would not lend. P2P (as it was known then) came into existence and after a fitful start (Prosper 1.0 and early LC) they did lend at very profitable rates. A few years later banks began to lend again and that squeezed P2P (which had morphed into MPL) returns. This time banks are in far better shape and the magnitude of the opportunity presented by the great recession 12 years ago may be somewhat less this time.

AnilG

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Re: Is It Time To Use The 'R' Word?
« Reply #3 on: March 16, 2020, 07:51:26 PM »
I hope you are right that banks are in better shape this time. But I have serious doubts. US banks like to capitalize profits and socialize losses. I am pretty sure with current politics-corporate nexus, banks will try to offload liabilities to taxpayers again.

So delinquent and late loans will be written off in bulk, and new loans will not be issued. The funding commitments will be cancelled. Banks and Institutions are like sheep herd, one starts to head to exit means stampede soon.

I am pretty sure LendingClub and others might be scrambling to line up new funding to buy loans. I expect to see retail lenders being courted soon.


Sounds like a vote for recession now or near. Your thesis has a familiar ring. After the great recession banks would not lend. P2P (as it was known then) came into existence and after a fitful start (Prosper 1.0 and early LC) they did lend at very profitable rates. A few years later banks began to lend again and that squeezed P2P (which had morphed into MPL) returns. This time banks are in far better shape and the magnitude of the opportunity presented by the great recession 12 years ago may be somewhat less this time.
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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Fred93

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Re: Is It Time To Use The 'R' Word?
« Reply #4 on: March 16, 2020, 10:07:01 PM »
I expect to see retail lenders being courted soon.

Ha!  Pigs gotta fly first.  Today 6pm LC posted a total of 3 new loans.  At 2PM a total of 8 new loans.  If they were having trouble with other funding sources these allocations would be higher.

I do agree some sort of recession is happening.  A funny different kind than in the past. 

AnilG

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Re: Is It Time To Use The 'R' Word?
« Reply #5 on: March 17, 2020, 05:13:28 AM »
LOL, wait and see. Shit hasnít hit the fan yet. When banks and institutions start bailing out on their fund commitments to LC, LC will have no choice but to fallback on retail.

I expect to see retail lenders being courted soon.

Ha!  Pigs gotta fly first.  Today 6pm LC posted a total of 3 new loans.  At 2PM a total of 8 new loans.  If they were having trouble with other funding sources these allocations would be higher.

I do agree some sort of recession is happening.  A funny different kind than in the past.
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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rawraw

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Re: Is It Time To Use The 'R' Word?
« Reply #6 on: March 19, 2020, 12:27:39 PM »
I'd say yes we are in a recession.  Will this last 2 quarters to be called a recession?  Unsure about that.

I think banks will be OK.  I'm starting to buy bank equity and debt exposures.

jheizer

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Re: Is It Time To Use The 'R' Word?
« Reply #7 on: March 19, 2020, 03:25:27 PM »
I decided to try to GTFO.  Listed everything for break even prices.  People have been nice enough to buy 1/3 of them so far.  They are all very aged and stead so as long as things don't get too bad too fast someone is getting a great deal.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com