Author Topic: Feasibility on profitting from secondary market?  (Read 9147 times)

Watermen

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Feasibility on profitting from secondary market?
« on: March 12, 2013, 01:00:27 AM »
Alright, I will start the first post.  :)

What do you guys think of profiting from the secondary market?

SarahV

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Re: Feasibility on profitting from secondary market?
« Reply #1 on: March 12, 2013, 01:17:27 AM »
Since a lot of us can't use the retail platform, profiting from the secondary market is the only option :)  I'm doing quite well. Almost 3% YTD in a buy-and-hold-and-occasionally-sell strategy.

Show Me The $

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Re: Feasibility on profitting from secondary market?
« Reply #2 on: March 12, 2013, 04:20:10 AM »
I was looking into making spreads buying big volume and reselling on foliofn quickly at small profit spread....I don't know. I find foliofn to be ridiculously hard to use, searching is impossible, sorting is slow etc. It is a damn shame that foliofn is such an infantile database setup.....

New Jersey Guy

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Re: Feasibility on profitting from secondary market?
« Reply #3 on: March 12, 2013, 10:18:25 AM »
Unpredictable.

I kicked butt November and December.  I carried an average of 50 notes.  One day alone in December, I sold 14 notes, all for a profit.

So toward the middle part of December, I increased my notes to 100, then come January, the bottom fell out.  Both Jan. and Feb. sucked!  I'd go days at a time without selling a single note.  Come end of Feb. all the older notes started catching up with me.

Defaults were coming in daily.  I cleaned house this month just dumping any note over 100 days since last payment.  I took my lumps and changed my strategy.

Right now I have 59 notes for sale on Folio, but I'm much more careful in what I choose.

Part of my problem was my inexpierence in choosing notes in my starting days of Lending Club.  Since I could only buy off the platform, I was buying Grace Period and 16-30 day late notes thinking they would rebound.  These were notes I intended to keep, not resell  So, those notes were costing me $10 to $20 each.  Once payments kept failing, I moved those severely late notes to my speculation folder.  Many I ended up selling for as little as 98-cents.  Some went into default.  So I ended up taking a major butt-smack on each of those notes.

My parameters in choosing notes for resale are much more tighter.  Plus, I'm signed up with Interest Radar and use it extensively for both resale notes and quality notes I intend to keep for the duration.  Not only that, but I'm sure investors like us have tips to pass.

SO, HERE IS A TIP I'LL PASS!
Never buy notes that are posted as 16-30 days late unless the discount is 78% or more!

Reason:  The window between a 16-30 note going 31-90 days late is very, very short, sometimes just a matter of days.  If you buy a 16-30 day note today for 50% off, it could be 31-90 next week.  The value of that note decreases dramatically.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

lender_john

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Re: Feasibility on profitting from secondary market?
« Reply #4 on: March 12, 2013, 11:05:54 AM »

I think its quite feasible to profit from the secondary market, I'm certainly managing.

My strategy is generally, buy and hold while offering for sale.

I look for notes that are either good long term investments or undervalued by the seller.

I also use selling as a way to rebalance my portfolio.


writing2reality

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Re: Feasibility on profitting from secondary market?
« Reply #5 on: March 12, 2013, 11:11:45 AM »
Great tip New Jersey!

I think it is possible, but inconsistent at best. As New Jersey stated, things can be going gangbusters and then fall apart with no notice. Dare I say buy high, sell low? I certainly noticed this last fall myself where week to week was drastically different in the profit I could make on selling notes, even those with improved credit, consistent payments, and good fundamentals.

Folio, while a useful tool, has a very inconsistent market place. I believe part of this is the normal fluctuations of any market, and another part is the vast inefficiencies presented by Folio itself. Interest Radar is a great tool to help cut through the garbage for Folio investors, but I'm sure his market share of secondary market purchasers is relatively small still.
WriteYourOwnReality Blog: http://www.writeyourownreality.com

lender_john

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Re: Feasibility on profitting from secondary market?
« Reply #6 on: March 12, 2013, 11:29:51 AM »
SO, HERE IS A TIP I'LL PASS!
Never buy notes that are posted as 16-30 days late unless the discount is 78% or more!

Reason:  The window between a 16-30 note going 31-90 days late is very, very short, sometimes just a matter of days.  If you buy a 16-30 day note today for 50% off, it could be 31-90 next week.  The value of that note decreases dramatically.

In general you are right.. but there are a couple criteria that make a major difference (at least in my mind).

Changes in credit score and payment plans. 

New Jersey Guy

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Re: Feasibility on profitting from secondary market?
« Reply #7 on: March 12, 2013, 11:51:45 AM »
"I look for notes that are either good long term investments or undervalued by the seller."

Oh, I do too!  I actually keep a separate portfolio of quality notes that I have no intentions of selling.  Folio is great for like you said, finding undervalued notes.  Those are the best especially if you're getting them under par.  Then, you get the best of two worlds- Interest and gains. 

I've used the profits made from selling distressed notes to help fund purchasing quality notes.  Sometimes, it feels like I'm getting them for free.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

dontvote

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Re: Feasibility on profitting from secondary market?
« Reply #8 on: March 12, 2013, 06:12:57 PM »
Too much of a hassle to even consider. You have to have a lot of time on your hands to arb this market. I don't know if some investors have built tools to quickly search, autobuy and whatnot but as a matter of course, too much trouble.

I've put some loser notes up for sale and occasionally they go but I'm not having a lot of luck selling my grace period notes or older ones, even at large discounts.

Maybe Jersey Guy wants to come look at my bargain bin for some fixer-uppers.

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SkaXc0re77

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Re: Feasibility on profitting from secondary market?
« Reply #9 on: March 12, 2013, 08:23:56 PM »
someone bought my https://www.lendingclub.com/account/loanPerf.action?loan_id=3217551&order_id=5240796&note_id=18463210 grace period note!  Listed as current yesterday and purchased within 2 hours for 25.30 (even made 5 cents :-P).  Says grace period today!!! 

Mighta just skated by with a stinker, hu?