Author Topic: Nickel Steamroller: 5% LOSS on completed F notes?  (Read 6558 times)

jackeb13

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Nickel Steamroller: 5% LOSS on completed F notes?
« on: October 05, 2014, 07:56:19 AM »
When I do back testing on Nickel Steamroller, I see that, if I do not select "completed", the A,B...E notes come out about what I expect (though of course they depend on the myriad filters you can toy with).  But if I select "completed", which I assume shows only these notes that are completed,  F and G notes come out showing negative ROI. 

Does this really mean that, overall, people who invest in F and G notes have negative ROIs for those notes?  That just doesn't sound right-- and it contradicts Lending Club's statistics, which show F notes have one of the highest ROI's compared with other grades.

Could someone help me out...what am I missing?  Thanks!

rawraw

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #1 on: October 05, 2014, 08:36:40 AM »
I see a -3% ROI.  Also, one of the historic ways financial institutions hide risk is by large growth.  When the growth slows, then the true level of delinquencies and losses becomes evident.  A way to see this happening before its too late is to do vintage analysis instead of aggregates, which is what I assume the LC analysis does.

Randawl

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #2 on: October 05, 2014, 05:56:13 PM »
When I do back testing on Nickel Steamroller, I see that, if I do not select "completed", the A,B...E notes come out about what I expect (though of course they depend on the myriad filters you can toy with).  But if I select "completed", which I assume shows only these notes that are completed,  F and G notes come out showing negative ROI. 

Does this really mean that, overall, people who invest in F and G notes have negative ROIs for those notes?  That just doesn't sound right-- and it contradicts Lending Club's statistics, which show F notes have one of the highest ROI's compared with other grades.

Could someone help me out...what am I missing?  Thanks!

Yes, that is true for "completed" notes.  NSR defines completed notes as notes that have completed their 36 or 60 month maturities.  This definition does not include notes that have charged-off or fully paid if they have not reached their 36 or 60 month ages.  At least, that's my recollection.  Some further reading:

http://www.lendacademy.com/forum/index.php?topic=2660.msg23210#msg23210
http://www.lendacademy.com/forum/index.php?topic=2494.msg21329#msg21329
http://www.lendacademy.com/forum/index.php?topic=2637.msg23110#msg23110
http://www.lendacademy.com/forum/index.php?topic=2632.msg22819#msg22819
« Last Edit: October 05, 2014, 05:58:06 PM by Randawl »

DanB

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #3 on: October 05, 2014, 07:28:53 PM »
When I do back testing on Nickel Steamroller, I see that, if I do not select "completed", the A,B...E notes come out about what I expect (though of course they depend on the myriad filters you can toy with).  But if I select "completed", which I assume shows only these notes that are completed,  F and G notes come out showing negative ROI. 

Does this really mean that, overall, people who invest in F and G notes have negative ROIs for those notes?  That just doesn't sound right-- and it contradicts Lending Club's statistics, which show F notes have one of the highest ROI's compared with other grades.

Could someone help me out...what am I missing?  Thanks!

Yes, that is true for "completed" notes.  NSR defines completed notes as notes that have completed their 36 or 60 month maturities.  This definition does not include notes that have charged-off or fully paid if they have not reached their 36 or 60 month ages.  At least, that's my recollection.  Some further reading:

http://www.lendacademy.com/forum/index.php?topic=2660.msg23210#msg23210
http://www.lendacademy.com/forum/index.php?topic=2494.msg21329#msg21329
http://www.lendacademy.com/forum/index.php?topic=2637.msg23110#msg23110
http://www.lendacademy.com/forum/index.php?topic=2632.msg22819#msg22819

How could a negative ROI be the result if what you're saying is true?

Fred93

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #4 on: October 05, 2014, 08:27:59 PM »
The problem is that "completed" doesn't mean what you think it means. 

If you go to nickelsteamroller and instead of using "completed", use the "issue date" field to set an ending limit of 2/30/2011.   This will produce a set of loans that are now completed, in the sense that 36 months of payment due dates are done, and 4 months have elapsed to conclude the chargeoff.

You will see that the numbers for this set of loans make more sense.


jackeb13

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #6 on: October 06, 2014, 07:50:19 AM »
Strange.  I did that (even using your exact date, and selecting only 36 mo loans) and got a similar result. 

When I moved it back to 02/30/2009 (to include 60 mo. loans), I get this.  In a sense I'm relieved, because I KNOW this can't be right.

(I'm doing well after 2 years, and got a little nervous when I saw that previous result on Nickel Steamroller I first posted about.  Sure, I expect my NAR to creep down as time goes on, but these numbers can make one think they are doomed to lose money in the long run!)

A   4.77%   8.58%   2.97%   $3,171,350.00   $355,193.60   522   100.00%   50.77%   75.00   $123,383.47   ($34,081.01)
B   1.24%   10.44%   8.39%   $6,813,825.00   $932,734.70   799   100.00%   40.68%   75.71   $751,153.80   ($70,605.36)
C   0.71%   11.98%   10.48%   $7,507,675.00   $1,180,133.40   880   100.00%   35.68%   75.53   $1,032,920.80   ($77,185.36)
D   -1.10%   13.50%   13.88%   $5,463,800.00   $985,596.90   632   100.00%   30.85%   75.95   $1,010,397.70   ($55,066.22)
E   0.58%   14.90%   13.51%   $3,818,775.00   $741,046.75   436   100.00%   31.42%   77.31   $672,594.44   ($39,388.21)
F   -8.98%   16.21%   24.44%   $1,877,975.00   $368,806.56   176   100.00%   29.55%   78.57   $555,649.06   ($17,320.14)
G   -5.29%   17.96%   22.49%   $1,351,025.00   $308,241.30   127   100.00%   22.05%   79.02   $385,776.75   ($13,224.51)

brother7

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #7 on: October 06, 2014, 09:22:50 AM »

A   4.77%   8.58%   2.97%   $3,171,350.00   $355,193.60   522   100.00%   50.77%   75.00   $123,383.47   ($34,081.01)
B   1.24%   10.44%   8.39%   $6,813,825.00   $932,734.70   799   100.00%   40.68%   75.71   $751,153.80   ($70,605.36)
C   0.71%   11.98%   10.48%   $7,507,675.00   $1,180,133.40   880   100.00%   35.68%   75.53   $1,032,920.80   ($77,185.36)
D   -1.10%   13.50%   13.88%   $5,463,800.00   $985,596.90   632   100.00%   30.85%   75.95   $1,010,397.70   ($55,066.22)
E   0.58%   14.90%   13.51%   $3,818,775.00   $741,046.75   436   100.00%   31.42%   77.31   $672,594.44   ($39,388.21)
F   -8.98%   16.21%   24.44%   $1,877,975.00   $368,806.56   176   100.00%   29.55%   78.57   $555,649.06   ($17,320.14)
G   -5.29%   17.96%   22.49%   $1,351,025.00   $308,241.30   127   100.00%   22.05%   79.02   $385,776.75   ($13,224.51)
@jackeb13 What exact filter criteria are you using to get 3572 loans across all grades?

jackeb13

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #8 on: October 06, 2014, 10:45:29 AM »
For that one, I did not use any filters except to put in the dates.

Fred93

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #9 on: October 06, 2014, 12:14:43 PM »
When I moved it back to 02/30/2009 (to include 60 mo. loans), I get this.  In a sense I'm relieved, because I KNOW this can't be right.

No.

There ARE NOT ANY 60 MONTH LOANS, because they only made 36 month loans back then.  (By the way, you can filter on term to separate out the 36 vs 60 month loans if you want.)

What happened with your selection is that you heavily weighted a specific time period, known as "the financial crisis", during which risky loans did very poorly. 
« Last Edit: October 06, 2014, 12:21:46 PM by Fred93 »

jackeb13

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #10 on: October 06, 2014, 12:59:15 PM »
36 month loans, issued between 2/30/09 and 2/30/11:

A   4.66%   7.55%   2.07%   $37,894,680.00   $3,780,549.20   4,913   100.00%   52.27%   54.35   $1,035,840.70   ($407,288.28)
B   5.17%   10.94%   4.94%   $55,685,692.00   $7,995,070.00   5,519   100.00%   47.62%   56.42   $3,609,818.20   ($602,643.80)
C   5.02%   13.15%   7.31%   $40,701,608.00   $7,120,389.50   4,403   100.00%   44.47%   58.50   $3,958,409.50   ($441,765.12)
D   4.87%   14.82%   9.14%   $28,422,722.00   $5,629,679.50   2,735   100.00%   39.12%   59.34   $3,470,037.80   ($308,144.30)
E   4.07%   16.15%   11.26%   $11,552,075.00   $2,445,833.20   1,083   100.00%   39.24%   64.07   $1,705,038.40   ($124,183.33)
F   -3.88%   17.68%   20.76%   $4,888,200.00   $1,051,698.50   377   100.00%   35.54%   66.42   $1,233,980.90   ($48,203.07)
G   -1.16%   19.15%   19.54%   $2,616,825.00   $638,932.75   212   100.00%   26.89%   70.19   $650,814.70   ($26,914.27)

LonghornSF

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #11 on: October 06, 2014, 08:31:12 PM »
F and G loans have the worst returns of any notes on LC after taking prepayment and credit losses into accounts and that's WITH a decent economy. Imagine how they'll perform if we have a recession. I haven't invested in any since mid last year.

Randawl

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Re: Nickel Steamroller: 5% LOSS on completed F notes?
« Reply #12 on: October 06, 2014, 09:57:14 PM »
When I do back testing on Nickel Steamroller, I see that, if I do not select "completed", the A,B...E notes come out about what I expect (though of course they depend on the myriad filters you can toy with).  But if I select "completed", which I assume shows only these notes that are completed,  F and G notes come out showing negative ROI. 

Does this really mean that, overall, people who invest in F and G notes have negative ROIs for those notes?  That just doesn't sound right-- and it contradicts Lending Club's statistics, which show F notes have one of the highest ROI's compared with other grades.

Could someone help me out...what am I missing?  Thanks!

Yes, that is true for "completed" notes.  NSR defines completed notes as notes that have completed their 36 or 60 month maturities.  This definition does not include notes that have charged-off or fully paid if they have not reached their 36 or 60 month ages.  At least, that's my recollection.  Some further reading:

http://www.lendacademy.com/forum/index.php?topic=2660.msg23210#msg23210
http://www.lendacademy.com/forum/index.php?topic=2494.msg21329#msg21329
http://www.lendacademy.com/forum/index.php?topic=2637.msg23110#msg23110
http://www.lendacademy.com/forum/index.php?topic=2632.msg22819#msg22819

How could a negative ROI be the result if what you're saying is true?

Because the amount of money on loans that were charged off and have reached 36 months age is higher than the amount of money on loans that were fully paid and have reached 36 months age for the search criteria he/she used.