Author Topic: LC is the Next Internet Bubble  (Read 14793 times)


RazzleDazzle

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Re: LC is the Next Internet Bubble
« Reply #1 on: February 12, 2015, 01:09:22 PM »
Unfolder, you really have a knack for finding such articles

AnilG

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Re: LC is the Next Internet Bubble
« Reply #2 on: February 12, 2015, 01:53:25 PM »
Really good article and concerns about Lending Club along with other hype cycle darlings. I believe a few others on the board has expressed similar sentiments. It is given that default rates will shoot up and the lenders will take all of the brunt. How many lenders will still be continuing to lend in that environment?

Quote
Lending Club is another one -- an online loan broker now valued at about $7.95 billion. Lending Club is supposedly exploiting a new community model of lending, providing borrowers and lenders a new direct, community-based market place. But Lending Club is brokering unsecured, consumer loans. Has anyone thought what might happen to unsecured loans in the next recession? Well you can be pretty sure default rates will shoot up and lenders will be stung -- then said lenders will just stop making these consumer loans. So the likelihood is that sooner or later, Lending Club's volumes will actually decrease, not rise. And yet it is only massive future rises in Lending Club's volumes that can justify the current stock price.

http://www.thestreet.com/story/13040401/1/amazon-twitter-uber-lending-club-and-the-next-internet-bubble.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH

Bubblicious!
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MathGuy

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Re: LC is the Next Internet Bubble
« Reply #3 on: February 12, 2015, 02:06:01 PM »
This article is nonsense!  LC performed well during the real estate meltdown.  Their underwriting is better now.   They reject the vast majority of applicants (unlike the banks that gave you a loan at the height of the bubble if you had a pulse ...)
Their model has very low risk since they are not holding loans on their books and make most of their fees on origination fees.
LC is changing the way people borrow the same way as companies like apple changed the way people purchase music
that's the future!

Nothing is guaranteed but the upside potential vs the risk is very favorable.  JMHO

 Added another 100  shares on the down trend that is probably due to this article...

standby

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Re: LC is the Next Internet Bubble
« Reply #4 on: February 12, 2015, 02:52:39 PM »
Agree with you MG.  It's the future.  I personally think the banks are too top heavy now anyway.  It seems they are already going after LC while ignoring the elephant in the room.

rawraw

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Re: LC is the Next Internet Bubble
« Reply #5 on: February 12, 2015, 05:13:53 PM »
This article is nonsense!  LC performed well during the real estate meltdown.  Their underwriting is better now.   They reject the vast majority of applicants (unlike the banks that gave you a loan at the height of the bubble if you had a pulse ...)
Their model has very low risk since they are not holding loans on their books and make most of their fees on origination fees.
LC is changing the way people borrow the same way as companies like apple changed the way people purchase music
that's the future!

Nothing is guaranteed but the upside potential vs the risk is very favorable.  JMHO

 Added another 100  shares on the down trend that is probably due to this article...
How is their underwriting better?  They've loosened standards on the prime platform and have subprime, business loans, etc which you have next to no data about.  I wouldn't go short LC as I think they'll grow, but I posted this in another thread:

I was just surprised I saw something so negative so shocking.  Interestingly enough, I was speaking with a guy who recently met with some buy side firms on Wall Street.  He asked them who their #1 short was and they replied LendingClub.  Seems this sector is gaining a skeptical glance

Unfolder

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Re: LC is the Next Internet Bubble
« Reply #6 on: February 12, 2015, 05:48:34 PM »
I was just surprised I saw something so negative so shocking.  Interestingly enough, I was speaking with a guy who recently met with some buy side firms on Wall Street.  He asked them who their #1 short was and they replied LendingClub.  Seems this sector is gaining a skeptical glance

Ah, I love it, LC, a potentially revolutionary financial company, the AMZN of loans, gets burnt at the stake, while SHAK, which sells overpriced greasy burgers, is valued at $25 million per store. Capitalism.


bobeubanks

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Re: LC is the Next Internet Bubble
« Reply #7 on: February 12, 2015, 06:09:03 PM »
SHAK, which sells overpriced greasy burgers, is valued at $25 million per store. Capitalism.

Actually, just over $7M per location. What a bargain. ;)

rawraw

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Re: LC is the Next Internet Bubble
« Reply #8 on: February 12, 2015, 06:18:29 PM »
What are the sales per location?  That's more important

bobeubanks

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Re: LC is the Next Internet Bubble
« Reply #9 on: February 12, 2015, 06:21:54 PM »
Forward P/E for SHAK is 580.

Unfolder

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Re: LC is the Next Internet Bubble
« Reply #10 on: February 12, 2015, 06:31:52 PM »
580. Good, good, clearly SHAK is the future, ground beef, between two (that's two) sesame buns. The R&D barriers to entry are staggering. Bid it to the moon, and to the trash with bloated pig LC *snorts cocaine*

LendingAlpha.com

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Re: LC is the Next Internet Bubble
« Reply #11 on: February 12, 2015, 07:41:50 PM »
Credit card default rates were 3.2x higher from peak through trough, and it was only for a temporary period. If the weighted default rate is 4.29% and the average rate being 11.38%, then the worst performance given another 2008-like financial crisis would yield -2.3% during peak charge-off periods. Relatively speaking, that's not bad given that -2.3% would have probably been the best performing fixed income asset class during that time period. Also, portfolios that actively avoid certain risks (example: purposes such as small business and home improvement, or higher income) would probably not see a negative year.

Historical Credit Card composite default rates


Lending Alpha's Balanced Strategy expected to remain positive at 3.2x default environments


Currently modeled date from LendingClub: 11.38% interest rate, 4.29% default rate




Really good article and concerns about Lending Club along with other hype cycle darlings. I believe a few others on the board has expressed similar sentiments. It is given that default rates will shoot up and the lenders will take all of the brunt. How many lenders will still be continuing to lend in that environment?

Quote
Lending Club is another one -- an online loan broker now valued at about $7.95 billion. Lending Club is supposedly exploiting a new community model of lending, providing borrowers and lenders a new direct, community-based market place. But Lending Club is brokering unsecured, consumer loans. Has anyone thought what might happen to unsecured loans in the next recession? Well you can be pretty sure default rates will shoot up and lenders will be stung -- then said lenders will just stop making these consumer loans. So the likelihood is that sooner or later, Lending Club's volumes will actually decrease, not rise. And yet it is only massive future rises in Lending Club's volumes that can justify the current stock price.

http://www.thestreet.com/story/13040401/1/amazon-twitter-uber-lending-club-and-the-next-internet-bubble.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH

Bubblicious!
« Last Edit: February 12, 2015, 07:44:26 PM by LendingAlpha.com »
Lending Alpha (http://www.lendingalpha.com)

Fully Automate Your LendingClub Portfolio - Simple and Effective for Everyone.
-Loan Selection
-Trade Execution
-Performance Optimization

BBingo

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LC is the Next Internet Bubble
« Reply #12 on: February 12, 2015, 07:49:30 PM »

Credit card default rates were 3.2x higher from peak through trough, and it was only for a temporary period. If the weighted default rate is 4.29% and the average rate being 11.38%, then the worst performance given another 2008-like financial crisis would yield -2.3% during peak charge-off periods. Relatively speaking, that's not bad given that -2.3% would have probably been the best performing fixed income asset class during that time period. Also, portfolios that actively avoid certain risks (example: purposes such as small business and home improvement, or higher income) would probably not see a negative year.

Historical Credit Card composite default rates


Lending Alpha's Balanced Strategy expected to remain positive at 3.2x default environments


Currently modeled date from LendingClub: 11.38% interest rate, 4.29% default rate




Really good article and concerns about Lending Club along with other hype cycle darlings. I believe a few others on the board has expressed similar sentiments. It is given that default rates will shoot up and the lenders will take all of the brunt. How many lenders will still be continuing to lend in that environment?

Quote
Lending Club is another one -- an online loan broker now valued at about $7.95 billion. Lending Club is supposedly exploiting a new community model of lending, providing borrowers and lenders a new direct, community-based market place. But Lending Club is brokering unsecured, consumer loans. Has anyone thought what might happen to unsecured loans in the next recession? Well you can be pretty sure default rates will shoot up and lenders will be stung -- then said lenders will just stop making these consumer loans. So the likelihood is that sooner or later, Lending Club's volumes will actually decrease, not rise. And yet it is only massive future rises in Lending Club's volumes that can justify the current stock price.

http://www.thestreet.com/story/13040401/1/amazon-twitter-uber-lending-club-and-the-next-internet-bubble.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH

Bubblicious!

Excellent insight, thank you!


Sent from my iPhone using Tapatalkz.  U

MathGuy

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Re: LC is the Next Internet Bubble
« Reply #13 on: February 12, 2015, 08:00:19 PM »
rawraw what I meant is that now LC is better at evaluating the risk profile of the borrower than before.  My understanding is that LC looks      
at the economic data and trends and based on that loosen or strengthen their underwriting.  For example if unemployment trend up it requires to have a stricter underwriting requirement.        
      
LC is a good stock with strong business model, I don't care too much to what wall street people say.        
When I tell my friends and coworker that I invest in unsecured consumer loans they think that       
I am crazy and naive.  That's because they don't understand how lending club works.
so I tell them: don't criticize what you can't understand   (Bob Dylan)

hessinger

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Re: LC is the Next Internet Bubble
« Reply #14 on: February 13, 2015, 02:22:19 AM »
Credit card default rates were 3.2x higher from peak through trough, and it was only for a temporary period. If the weighted default rate is 4.29% and the average rate being 11.38%, then the worst performance given another 2008-like financial crisis would yield -2.3% during peak charge-off periods. Relatively speaking, that's not bad given that -2.3% would have probably been the best performing fixed income asset class during that time period. Also, portfolios that actively avoid certain risks (example: purposes such as small business and home improvement, or higher income) would probably not see a negative year.

Historical Credit Card composite default rates


Lending Alpha's Balanced Strategy expected to remain positive at 3.2x default environments


Currently modeled date from LendingClub: 11.38% interest rate, 4.29% default rate




Really good article and concerns about Lending Club along with other hype cycle darlings. I believe a few others on the board has expressed similar sentiments. It is given that default rates will shoot up and the lenders will take all of the brunt. How many lenders will still be continuing to lend in that environment?

Quote
Lending Club is another one -- an online loan broker now valued at about $7.95 billion. Lending Club is supposedly exploiting a new community model of lending, providing borrowers and lenders a new direct, community-based market place. But Lending Club is brokering unsecured, consumer loans. Has anyone thought what might happen to unsecured loans in the next recession? Well you can be pretty sure default rates will shoot up and lenders will be stung -- then said lenders will just stop making these consumer loans. So the likelihood is that sooner or later, Lending Club's volumes will actually decrease, not rise. And yet it is only massive future rises in Lending Club's volumes that can justify the current stock price.

http://www.thestreet.com/story/13040401/1/amazon-twitter-uber-lending-club-and-the-next-internet-bubble.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH

Bubblicious!

Wow. I thought these numbers would be a LOT worse actually.