Author Topic: FOLIOfn Selling Strategy... Flawed?  (Read 13831 times)

Keltset

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FOLIOfn Selling Strategy... Flawed?
« on: November 16, 2012, 12:29:12 PM »
I have not participated in the secondary market until now and just started playing around with it a bit. I initially thought I could just re-price all my notes to a 2-4% markup (depending on the note and my valuation of it to my portfolio) over par and make a quick buck or two on anything that sells because I would be selling at a premium over the service fee charged by foliofn for selling the note. My thought being that I would always be selling for a better and currently i'm not having a problem getting those funds re-invested into notes that meet my investing requirements. I thought this might give me a slight bump in my quarterly ROI numbers because the added points would be a bonus if the funds were re-invested quickly enough.

I'm now starting to question this thought process as wholly flawed as I'm starting to see which notes are selling and which aren't. I'm specifically looking at notes with increasing credit scores (that are now overpaying interest because of improved credit rating[IE this is a safer note to stay in]) or notes that have reached or are close to reaching the up to average default length (1yr)...

Does anyone have any thoughts or considerations on this methodology of note flipping? Do you think I'm doing more harm by increase the risk of getting stuck with defaulting notes because the more seasoned a note gets the more likely it seems to sell...

-Keltset

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #1 on: November 16, 2012, 01:48:37 PM »
I'm a Folio-only investor, so I buy all my notes there. I never buy any "used" notes (i.e., payments have been made) over a 2% markup so I would not touch any of yours. (Everyone has their own strategy, though, so that's just one person's opinion.) If you go in and sort by markup and "never late", there are almost 3000 notes priced at less than 1% markup. People are probably just not seeing your notes at 2-4% markup because they find something they like with a better price before they ever get that far. Try to think of how people are searching for and finding notes, and then ask how they would find yours. It needs to be somewhat close to the top in some sensible search like low markup or high yield.

I have given up on "used" notes for a while and have started buying them just-issued. (I sort by loan and note number to find the newest ones.) I think flipping very fresh notes at thin margins would be a great strategy - I see almost no notes available at <2% markup unless they are really bad notes, so they must be disappearing quickly at that price point. I will go up to 3% markup ($25.75) for a very good just-issued note. Say it takes a week to sell each note, with a 2% markup you're making .25 cents a week per note, after fees. $13 annually on a $25 investment...? Yeah... I really wish they would approve LC in my state so I could do this.
« Last Edit: November 16, 2012, 01:50:48 PM by SarahV »

yojoakak

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #2 on: November 16, 2012, 06:23:09 PM »
I'm often hesitant to buy "fresh" notes with no payments.

I mean, if someone just planned to sell their notes on to Foliofn immediately, how much time did they spend choosing good notes?

And a fresh note with a markup of 0% (or even less sometimes) makes no sense to me at all. (LendingClub "topping off" loans and then selling them on to Foliofn, maybe?)

In any case, I'm often surprised by which of my notes will get bought on Foliofn. Sometimes it doesn't seem to make a lot of sense.

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #3 on: November 16, 2012, 07:21:42 PM »
Fresh notes with no payments are just like buying notes on the retail platform, but with a slight markup (a tax for being in a Folio-only state, I guess). I have no problem with that.

As for picking notes carefully, I don't really care - I am as careful as I want to be and use my own filters to make sure any note I buy on Folio matches what I am looking for. I don't care who picked it or why. If they pick poorly, their notes won't sell and they'll be stuck with lousy notes they can't get rid of. I think you're more likely to get good notes from a flipper than you are from someone who buys good notes and then sells off the ones that start looking bad (dropping FICO, etc.).

As for pricing - keep in mind "fresh" notes can be up to 30 days old and they may have racked up a decent amount of interest already. If you put it up at 25.50 and there is .40 of interest on it, it is a 2% markup over what they originally paid but will show as a 0.3% markup in Folio.

faeriering

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #4 on: November 17, 2012, 08:20:34 AM »
Sarah,

I really like your idea of just selling fresh notes on Folio, the challenge that I have for you is when purchasing notes on LC directly, there is usually a decent lag from when the money is invested until the note is issued, and if a note fails to be issued, there you have to go back through the investment selection process again.  So it might take longer than 60 days to reinvest that money, which would cut your return in 1/2 on that 25$ investment.  Though that's still a decent return like 25% on an annual basis, so might be worth looking into.  Do you prefer higher interest loans or lower interest loans?

-Megan

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #5 on: November 17, 2012, 10:25:33 AM »
Ah, I see. I don't have any experience with the direct-purchase side of things since I can't even get to that part of the site.

My preferences on interest rates - I don't buy anything under 12-13% just because after I pay 2-3% markup in Folio and 1% of all payments to Lending Club (which is another 1-2% of the initial price) any lower-interest loans are going to have pretty low returns after you subtract that. Most of the notes I end up with are somewhere in the B5-E5 range (because F & G loans rarely meet my criteria for a good loan).

rawraw

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #6 on: November 17, 2012, 10:45:10 AM »
Ah, I see. I don't have any experience with the direct-purchase side of things since I can't even get to that part of the site.

My preferences on interest rates - I don't buy anything under 12-13% just because after I pay 2-3% markup in Folio and 1% of all payments to Lending Club (which is another 1-2% of the initial price) any lower-interest loans are going to have pretty low returns after you subtract that. Most of the notes I end up with are somewhere in the B5-E5 range (because F & G loans rarely meet my criteria for a good loan).
How long does it take to find 1 good note?

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #7 on: November 17, 2012, 11:22:05 AM »
Oh, I don't know... it varies a lot. Some days I log in and find a great one on the first page of searches, some days I don't find any in 15-20 minutes of looking. I'm a smallish investor (~200 notes) so I don't mind spending a few minutes to pick each note.

faeriering

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #8 on: November 18, 2012, 08:00:05 PM »
Okay Sarah,  I'm trying it out.  I've posted all of my notes that are "issued" forsale on FolioFN at either 25.50 or 25.75.  It's about 75 notes.  We'll see how long they take to sell.  Hopefully some of them will fit your criteria :)

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #9 on: November 18, 2012, 10:01:08 PM »
Let us know how they do!

I should have money in my account tomorrow to do some buying...

nonattender

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #10 on: November 19, 2012, 12:46:33 AM »
Seems what you're all dancing around is thus:

The ability for Folio-only investors to signal to investors in approved states their willingness to purchase X note for y% markup, and then
have the approved-state investors "do your bidding", after which they'll put that particular note up on Folio for the non-approved to buy.

Personally, I think LC is on shaky legal ground allowing the sale of notes on its secondary market to users in states where the notes are
not approved (and I think anyone who systematically did such as a venture would likely be treading further onto shaky ground), but with
that said, I think that's really where what you're all talking about ultimately winds up.  So, if someone's gonna do it - let's get on with it...

Am I reading this wrong or is that the model that you're all hoping appears?  This thread feels a bit like being back in high school:

"Yeah, I'd, uh, like to buy an ounce of... baseball tickets.  Something pretty high - I mean... up near.. the owner's box, you know?"
A little nonsense now and then is relished by the wisest men.

SarahV

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #11 on: November 19, 2012, 01:40:45 AM »
You're reading too much into it!

All I am saying is that I see a way to make money on Folio, because I always buy a certain type of note and there is often a shortage of good notes of that type in that price range. If I were in a state where I could use that strategy I would try it out for sure. And as a bonus, if more people used this strategy they would help out the FolioFN users while they make a tidy profit.

I don't really know if it will work (it depends on volume of note trading on FolioFN, whether there is really a shortage of those notes or just a lack of interest on both sides of the transaction), but there's not really any way to lose by putting them up for a quick sale, so it seems like a no-brainer to give it a try.

I'm certainly not offering to buy them all, I haven't got that kind of cash invested  ;)

yojoakak

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #12 on: November 19, 2012, 04:57:06 AM »
Seems what you're all dancing around is thus:

The ability for Folio-only investors to signal to investors in approved states their willingness to purchase X note for y% markup, and then
have the approved-state investors "do your bidding", after which they'll put that particular note up on Folio for the non-approved to buy.
You put a note up for sale and either it gets bought or it doesn't get bought. That IS the signal to go find some similar notes and put them up for sale. It doesn't have to be explicit.

It would be nice if Foliofn published some of the details of transactions, like a ticker. As it is one only has one's own sale history to try and eke out that information.

Quote
Personally, I think LC is on shaky legal ground allowing the sale of notes on its secondary market to users in states where the notes are
not approved (and I think anyone who systematically did such as a venture would likely be treading further onto shaky ground), but with
that said, I think that's really where what you're all talking about ultimately winds up.  So, if someone's gonna do it - let's get on with it...

That is beyond the scope of the current discussion.

Quote
Am I reading this wrong or is that the model that you're all hoping appears?  This thread feels a bit like being back in high school:

"Yeah, I'd, uh, like to buy an ounce of... baseball tickets.  Something pretty high - I mean... up near.. the owner's box, you know?"

That is also beyond the scope of the current discussion.
« Last Edit: November 19, 2012, 05:59:03 AM by yojoakak »

nonattender

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #13 on: November 19, 2012, 08:38:51 AM »
Seems what you're all dancing around is thus:

The ability for Folio-only investors to signal to investors in approved states their willingness to purchase X note for y% markup, and then
have the approved-state investors "do your bidding", after which they'll put that particular note up on Folio for the non-approved to buy.
You put a note up for sale and either it gets bought or it doesn't get bought. That IS the signal to go find some similar notes and put them up for sale. It doesn't have to be explicit.


No, it doesn't have to be explicit, but the dance of "what kind of notes should I buy in order to sell to people in unapproved states via Folio" is - you'll have to forgive me if we disagree - rather tiresome, and if a mechanism existed to make this information as explicit as possible, then there wouldn't be all this implicit guesswork...  Ergo - voila - a mechanism (albeit explicit and nearly reductio ad absurdum).

It would be nice if Foliofn published some of the details of transactions, like a ticker. As it is one only has one's own sale history to try and eke out that information.

Yes - but my way's optimal - cuts through all the bullshit - and accomplishes the same objective, but better.  ;)  Granted, it probably wakes up the SEC and/or state securities regulators, but, in the long term, will reduce uncertainty (I think that's a long term good).

Personally, I think LC is on shaky legal ground allowing the sale of notes on its secondary market to users in states where the notes are not approved (and I think anyone who systematically did such as a venture would likely be treading further onto shaky ground), but with that said, I think that's really where what you're all talking about ultimately winds up.  So, if someone's gonna do it - let's get on with it...

That is beyond the scope of the current discussion.

"Yes, sir, officer."  On a less snarky note, I think you dislike the fact that I'm right - that this is rather a gray area.  What you likely don't realize is that I, too, dislike that it's a gray area.  If I had my druthers, all loans (not "notes") would be available to both borrowers and lenders, regardless of state.  As is, that's not the case, and there's some uncertainty around the legality of these notes trading outside of the states where they're approved.  Which is why you don't like the "explicitness" of the model I suggest - since you know it is "iffy".


Am I reading this wrong or is that the model that you're all hoping appears?  This thread feels a bit like being back in high school:

"Yeah, I'd, uh, like to buy an ounce of... baseball tickets.  Something pretty high - I mean... up near.. the owner's box, you know?"

That is also beyond the scope of the current discussion.

I have a medical condition for which I am allowed to discuss peer to peer lending out of compassion.  What's your excuse?
A little nonsense now and then is relished by the wisest men.

yojoakak

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Re: FOLIOfn Selling Strategy... Flawed?
« Reply #14 on: November 19, 2012, 01:28:59 PM »
"Yes, sir, officer."  On a less snarky note, I think you dislike the fact that I'm right - that this is rather a gray area.  What you likely don't realize is that I, too, dislike that it's a gray area.  If I had my druthers, all loans (not "notes") would be available to both borrowers and lenders, regardless of state.  As is, that's not the case, and there's some uncertainty around the legality of these notes trading outside of the states where they're approved.  Which is why you don't like the "explicitness" of the model I suggest - since you know it is "iffy".


Every State has its own laws. LendingClub says it is doing everything within those laws.

Do you have reason to believe LendingClub is conducting business contrary to any law?

http://www.seclaw.com/bluesky.htm

http://blog.lendingclub.com/2011/06/10/is-lending-club-available-in-my-state/

https://www.lendingclub.com/foliofn/faq.action#ga3

https://www.lendingclub.com/info/prospectus.action
« Last Edit: November 19, 2012, 01:31:50 PM by yojoakak »