Author Topic: Worst Month Yet  (Read 261457 times)

investor88

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Re: Worst Month Yet
« Reply #240 on: November 03, 2016, 12:09:51 PM »
When did the "Understanding your returns" chart update to show so many investors below 0%?

The “Understanding your Returns” chart  that I posted is  for a weighted average portfolio of 20-21% which is heavy in D and E notes that the OP was originally discussing.  This chart has been looking worsening over the past year.  For a comparative chart, here is what a similar weighted average portfolio looked like August 20, 2015.  In the 6 to 15 month range all investors are above 5%.  Now half of them are below 5% by that time.  Since the chart goes down over time, I think most of those investors will be below zero by 30 months when their portfolios age out.

BruiserB

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Re: Worst Month Yet
« Reply #241 on: November 03, 2016, 12:19:07 PM »
Shutting down my reinvesting on my taxable account for a while.  Will let the Roth IRA continue for a while as my performance has actually been starting to turn around there.

The understanding your returns graph is very misrepresentative of how our accounts are currently performing, since, like the "interest earned" on the login page, it goes back to day 1 of opening our accounts.  I have 5 years of decent earnings that will take a lot of losses to drag down.  It would be a lot more enlightening to be able to see YTD or a rolling 12 months' performance or something along those lines.

Rob L

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Re: Worst Month Yet
« Reply #242 on: November 03, 2016, 01:19:48 PM »
Here's my latest. In absolute terms I had my highest dollar amount charged off this month.
The past 3 months charge offs in absolute terms have been unusually high.
Decided to add the stacked bars to be able to observe what I hope to be the convergence of % charge offs back to steady state on par with my new portfolio size.

Still in the throes of having reduced my holdings by about 50% over the months of July and August. All of my Folio sales were current notes. I bought no new notes May through August then resumed purchases, reinvesting payments and resuming maintenance of a zero cash balance on what is now my downsized portfolio. Hopefully the backlog of charge offs that was already baked into my portfolio before May will have worked its way through within the next couple of months and my charge offs will settle down to a level commensurate with the my new portfolio size (blue bars and red bars about the same size). What that level might be is anyone's guess. The portfolio is about 65% D's and 35% E's, WAIR 17.38% and combined ANAR 8.08%.




apc3161

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Re: Worst Month Yet
« Reply #243 on: November 03, 2016, 01:46:00 PM »




What is scary about this chart, is that supposedly the economy is doing alright. So, to what extent did lending club lower their lending standards in order to achieve their loan volume targets?



To achieve that exponential growth, they had to attract a lot of new borrowers, and their only way to do that was to basically complete relax their underwriting standards, at the expense of the investors. I should have known this would happen after going public.

jz451

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Re: Worst Month Yet
« Reply #244 on: November 03, 2016, 03:57:01 PM »
Piggy backing off of what CircleT009 has said I want to say that grade and loan selection is a big determining factor of portfolio performance. I suspect that people who are saying they want to stop investing are weighted more in lower grade notes E-G, maybe even being too weighted in D, which is causing lower returns due to losses. If this is the problem then being able to optimize grade distributions, which I'm trying to do by using an efficient frontier model (If anyone has seen my post about that earlier in the week and can lend a hand that would be great.) to reduce portfolio variance.

You all must think I'm crazy to say the following but my returns have been relatively stable the past seven months when I started investing and any drop in performance is easily explained. As a warning I've only invested in Folio so my returns will be higher than others due to selecting older notes vs investing in new notes. The attached pictures show my weights for each grade as well as performance since I've started. My weights are broken down as (5.5% D), (28.1%, E), (37%, F), (29.5%, G) and steadily heading toward the higher grade notes as I get away from F-G. Over these seven months I've averaged between 18-20% returns with the only drops being from an influx of $500 for a 50% increase of funds I invested in July, and selling 1 out of my 89 notes at a 90% loss in October.

Now my question to you all is are you going to do something about to improve your returns as I assume most will as rational investors, or for the select few will you just say that everything is falling apart and there is nothing you can do to improve your situation and withdraw from Lending Club?
Guys, I will admit that I have not read every post in this thread, but I am shocked to be reading that people are losing money on monthly basis.

What kind of loans are you buying that you are experiencing default/charge off rates that are greater than 10% (hard to believe anyone has average interest rate lower than 10%). 

Seems to me that you are being greedy and focusing most of your investment into riskier loans.  I am also thinking that those that are losing money are not investing an appropriate amount of $ to achieve the correct diversification.

The most important thing about investing in LC is diversification.  But not just diversification in the number of loans you hold, but also diversification over time. 

If you have $5,000, to invest you can not invest that in a 1-2 week period (even at $25 per loan) and expect solid returns.  You have to spread your investment over a longer period of time and be really picky about the loans you purchase.  Especially if you can not hold/buy a significant amount of loans.  LC and several other sites will talk about a magic number of loans to hold to achieve diversification, to me that number is a min. of 1,000 $25 loans. 

Last month was my best month ever regarding $ return.  Yes, my net return has decreased from 10.xx% to 8.28% over the last 2-3 years, but it has been a very slow decline and cannot imagine losing money.  I have an average interest rate of  11.49% and per LC have a Combined Return NAR of 8.28%.  I know of 21 LC accounts with positive returns, lowest Combined Return NAR is 7.95%.

Maybe I am missing the bigger picture of this thread, as I have not read every post, but seems like those who are losing money are making big mistakes in how they are deploying their funds.  I am not saying LC has not done things to hurt their investors, but I do not think anything they have done would cause investors to be losing money.

I do not say any of this to say I am better than anyone else or anything like that, I am just shocked people are losing money.  Attached is the breakdown by grade of my portfolio.

anabio

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Re: Worst Month Yet
« Reply #245 on: November 03, 2016, 04:55:36 PM »
Now my question to you all is are you going to do something about to improve your returns as I assume most will as rational investors, or for the select few will you just say that everything is falling apart and there is nothing you can do to improve your situation and withdraw from Lending Club?
I guess I'm one of those irrational/select few. I stopped investing in Jan 2015 because of an interpretation error...but I'm glad I did. As I have said before, I don't believe all the problems are caused by LC relaxing their standards. I am having notes fail that were purchased in 2014 and have 25+ payments.

Then again, maybe those you label as irrational might just be the most rational of all...only time will tell. I know there are those who belittle those of us who believe a recession is coming. I can't see how the chewing gum/bailing wire/duct tape that has been going on since 2008 can hold the finger in the dike much longer. There will either be a recession or rampant inflation as the government tries to print it's way out of the mess it has created.

Remember, LC has not really been through  a recession. They (and we) have no idea about how bad defaults will get during a recession. I know LC was around in 2008 but with a very limited role...they even suspended operations for a part of that year. So for all practical purposes LC has NOT weathered a storm. I think (and you could disagree with me) that there will be he-doubleL to pay when the recession does hit sometime in the next year. I think we are starting to see the precursors of that recession right now.

Remember, LC's clientele are not anywhere near the cream of the crop. There will be "bookoo" defaults and it will hit the riskier (D/E/F/G...) loans real heavy.

I don't know if I'll still be watching this board in a year; most of my loans will be gone by next May...but if I am I will be the first to admit I was wrong if a recession did not come...but I will be among the first to say "I told you  so" if it does.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

jz451

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Re: Worst Month Yet
« Reply #246 on: November 03, 2016, 05:32:44 PM »
You bring up a point that is always on the back of my mind that we won't know until the economy reverses itself, which is why in addition to the limited supply of quality low grade notes on Folio I'm moving toward the higher grades. Now do you think that as a whole if I invested in a market portfolio of notes that my returns will be better or worse during a recession than if I invested stocks, mutual funds, and ETFs?


I guess I'm one of those irrational/select few. I stopped investing in Jan 2015 because of an interpretation error...but I'm glad I did. As I have said before, I don't believe all the problems are caused by LC relaxing their standards. I am having notes fail that were purchased in 2014 and have 25+ payments.

Then again, maybe those you label as irrational might just be the most rational of all...only time will tell. I know there are those who belittle those of us who believe a recession is coming. I can't see how the chewing gum/bailing wire/duct tape that has been going on since 2008 can hold the finger in the dike much longer. There will either be a recession or rampant inflation as the government tries to print it's way out of the mess it has created.

Remember, LC has not really been through  a recession. They (and we) have no idea about how bad defaults will get during a recession. I know LC was around in 2008 but with a very limited role...they even suspended operations for a part of that year. So for all practical purposes LC has NOT weathered a storm. I think (and you could disagree with me) that there will be he-doubleL to pay when the recession does hit sometime in the next year. I think we are starting to see the precursors of that recession right now.

Remember, LC's clientele are not anywhere near the cream of the crop. There will be "bookoo" defaults and it will hit the riskier (D/E/F/G...) loans real heavy.

I don't know if I'll still be watching this board in a year; most of my loans will be gone by next May...but if I am I will be the first to admit I was wrong if a recession did not come...but I will be among the first to say "I told you  so" if it does.

lascott

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Re: Worst Month Yet
« Reply #247 on: November 03, 2016, 05:58:50 PM »
<snip>
I do not say any of this to say I am better than anyone else or anything like that, I am just shocked people are losing money.  Attached is the breakdown by grade of my portfolio.
It does look like you've shift about 14% from A to 8.5% B and 5.5% C in the past year, however.  That is great tho as you took a little more risk but still have very reasonable returns.
« Last Edit: November 03, 2016, 06:23:50 PM by lascott »
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storm

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Re: Worst Month Yet
« Reply #248 on: November 03, 2016, 06:03:16 PM »
I guess I'm one of those irrational/select few. I stopped investing in Jan 2015 because of an interpretation error...but I'm glad I did. As I have said before, I don't believe all the problems are caused by LC relaxing their standards. I am having notes fail that were purchased in 2014 and have 25+ payments.

Then again, maybe those you label as irrational might just be the most rational of all...only time will tell. I know there are those who belittle those of us who believe a recession is coming. I can't see how the chewing gum/bailing wire/duct tape that has been going on since 2008 can hold the finger in the dike much longer. There will either be a recession or rampant inflation as the government tries to print it's way out of the mess it has created.

Remember, LC has not really been through  a recession. They (and we) have no idea about how bad defaults will get during a recession. I know LC was around in 2008 but with a very limited role...they even suspended operations for a part of that year. So for all practical purposes LC has NOT weathered a storm. I think (and you could disagree with me) that there will be he-doubleL to pay when the recession does hit sometime in the next year. I think we are starting to see the precursors of that recession right now.

Remember, LC's clientele are not anywhere near the cream of the crop. There will be "bookoo" defaults and it will hit the riskier (D/E/F/G...) loans real heavy.

I don't know if I'll still be watching this board in a year; most of my loans will be gone by next May...but if I am I will be the first to admit I was wrong if a recession did not come...but I will be among the first to say "I told you  so" if it does.

Maybe we are headed towards another recession, and maybe we aren't.  The economy has been limping along the last 8 years, so it wouldn't surprise me if the GDP goes slightly negative.  I don't think it will be a very deep recession.  I've read opinions from Federal Reserve board members and scholarly economists that have said the Fed has done about all it can do to stimulate the economy, and it is up to Congress to encourage economic growth.  Our tax laws haven't been reformed since Reagan was in office.  Given the nastiness of this election season, I don't really see anything changing after Tuesday no matter who wins.

I'm interested in what Lending Club has to say when they release their Q3 results.  I sold off a bunch of late loans last month for pennies on the dollar, and posted less than a $20 gain after interest on my "good" loans.  So much for my dream of retiring and living off of the interest.  I'm holding mostly C notes and then some of the lower grades.  Something is really wrong, and I don't think it is all about the economy.

BruiserB

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Re: Worst Month Yet
« Reply #249 on: November 03, 2016, 06:09:10 PM »
Piggy backing off of what CircleT009 has said I want to say that grade and loan selection is a big determining factor of portfolio performance. I suspect that people who are saying they want to stop investing are weighted more in lower grade notes E-G, maybe even being too weighted in D, which is causing lower returns due to losses. If this is the problem then being able to optimize grade distributions, which I'm trying to do by using an efficient frontier model (If anyone has seen my post about that earlier in the week and can lend a hand that would be great.) to reduce portfolio variance.

You all must think I'm crazy to say the following but my returns have been relatively stable the past seven months when I started investing and any drop in performance is easily explained. As a warning I've only invested in Folio so my returns will be higher than others due to selecting older notes vs investing in new notes. The attached pictures show my weights for each grade as well as performance since I've started. My weights are broken down as (5.5% D), (28.1%, E), (37%, F), (29.5%, G) and steadily heading toward the higher grade notes as I get away from F-G. Over these seven months I've averaged between 18-20% returns with the only drops being from an influx of $500 for a 50% increase of funds I invested in July, and selling 1 out of my 89 notes at a 90% loss in October.

Now my question to you all is are you going to do something about to improve your returns as I assume most will as rational investors, or for the select few will you just say that everything is falling apart and there is nothing you can do to improve your situation and withdraw from Lending Club?
Guys, I will admit that I have not read every post in this thread, but I am shocked to be reading that people are losing money on monthly basis.

What kind of loans are you buying that you are experiencing default/charge off rates that are greater than 10% (hard to believe anyone has average interest rate lower than 10%). 

Seems to me that you are being greedy and focusing most of your investment into riskier loans.  I am also thinking that those that are losing money are not investing an appropriate amount of $ to achieve the correct diversification.

The most important thing about investing in LC is diversification.  But not just diversification in the number of loans you hold, but also diversification over time. 

If you have $5,000, to invest you can not invest that in a 1-2 week period (even at $25 per loan) and expect solid returns.  You have to spread your investment over a longer period of time and be really picky about the loans you purchase.  Especially if you can not hold/buy a significant amount of loans.  LC and several other sites will talk about a magic number of loans to hold to achieve diversification, to me that number is a min. of 1,000 $25 loans. 

Last month was my best month ever regarding $ return.  Yes, my net return has decreased from 10.xx% to 8.28% over the last 2-3 years, but it has been a very slow decline and cannot imagine losing money.  I have an average interest rate of  11.49% and per LC have a Combined Return NAR of 8.28%.  I know of 21 LC accounts with positive returns, lowest Combined Return NAR is 7.95%.

Maybe I am missing the bigger picture of this thread, as I have not read every post, but seems like those who are losing money are making big mistakes in how they are deploying their funds.  I am not saying LC has not done things to hurt their investors, but I do not think anything they have done would cause investors to be losing money.

I do not say any of this to say I am better than anyone else or anything like that, I am just shocked people are losing money.  Attached is the breakdown by grade of my portfolio.

I don't have the time to individually manage notes in my account as both my time has gone down and my number of notes has gone up over time.  I need this investment to work with one of the automated 3rd party options.  I was able to do that for several years and had 10-12% returns.  Last year fell to 9%.  This year YTD I'm in the 5% range.  This past month I had chargeoffs equal to 110% of the interest I earned.  I can see a trend and I don't like it.

I don't think the sky is falling and I'm not going to fire sale my notes.  But I will probably withdraw payments as they're made for a while now and dollar cost average them into a portfolio of ETFs I've put together.  It does seem a bit silly to panic with one month over 6 years of losses compared to the volatility of the stock market, but the way I see it is that LC is much less volatile than the stock market.  Because of that, performance trends aren't likely to instantly reverse either.  As previously mentioned it will take time for these bad loans to cycle out.  I already changed to a much more conservative approach in my account back in May.  Already about 1/3 of my account is these more conservative notes.  I want to make sure there aren't default problems there before continuing to invest. 

Overall I probably have too much in this asset class, so I'm taking this as an opportunity to hit the pause button and see what happens for a while.

anabio

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Re: Worst Month Yet
« Reply #250 on: November 03, 2016, 06:12:28 PM »
You bring up a point that is always on the back of my mind that we won't know until the economy reverses itself, which is why in addition to the limited supply of quality low grade notes on Folio I'm moving toward the higher grades. Now do you think that as a whole if I invested in a market portfolio of notes that my returns will be better or worse during a recession than if I invested stocks, mutual funds, and ETFs?

I would never answer that question as a financial advisor but since you asked my opinion I will give you my opinion.

Even during the worst (2007-2009)...well...I'm not even considering the 1930's... the SP500 was down (I believe) 40%. Do I think you stand a good chance of losing more than 40% of your Lending Club investment?

YES, especially if you have loans below A/B. Even A/B clients are none to stellar (in my opinion). What type of stellar consumer should need to borrow LC funds to pay off Credit card balances that any "reasonable" consumer would not have in the first place???

Of course, that's just my unprofessional opinion.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

DLIFVOIP

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Re: Worst Month Yet
« Reply #251 on: November 03, 2016, 06:23:43 PM »
<snip>
I do not say any of this to say I am better than anyone else or anything like that, I am just shocked people are losing money.  Attached is the breakdown by grade of my portfolio.
It does look like you've shift about 14% from A to 8% B and 6% C in the past year, however.  That is great tho as you took a little more risk but still have very reasonable returns.

Once interest rates on A's fell below 8%, I stopped buying A grade loans. 

BruiserB

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Re: Worst Month Yet
« Reply #252 on: November 03, 2016, 06:26:06 PM »
A few additional frustrations:

It, more so than ever, feels like LC is figuring out what it wants to be and what value it adds.  Is it for retail or institutional investors?  We're definitely the smaller fish, so we're getting no attention.  I don't see anything changing that. 

The debacle in May has caused them to lose any momentum and focus that they did have.  Now they're concentrating on recovery rather than growth.  Before that they were distracted with getting ready for IPO and the first quarters of being publicly traded.

Over all of that time, nothing of note has changed in our experience.  The data and statistics on the logon pages don't really reflect reality as they don't allow you to look at your performance on a Month to Date or Year to Date level.  Everything is based on the complete history of your account.  I had hoped that would improve over time.  It hasn't.  And now they're distracted again.


anabio

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Re: Worst Month Yet
« Reply #253 on: November 03, 2016, 06:33:03 PM »
Maybe we are headed towards another recession, and maybe we aren't.  The economy has been limping along the last 8 years, so it wouldn't surprise me if the GDP goes slightly negative.  I don't think it will be a very deep recession.

You  have a lot more faith in the powers that be than I have. What would have happened in 2008 if the government had not rescued AIG? How many people have insurance, annuities, etc through that behemoth? And AIG was just one of the many that was rescued. Can you imagine the snowball effect?

The government had the tools to fight that recession and...to be honest I think they are still fighting that recession...and they have frittered away all those tools. I don't think we ever exited that recession. The government defines the parameters that decide a recession. Do they fudge the numbers??? well...who out there REALLY BELIEVES  that we only have a 5% unemployment rate? Those that believe probably also believe that LC borrowers report their actual salary...and # of years worked...and reason for the loan...and job title...

As far as I am concerned we are are going to have a recession in a recession.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

lascott

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Re: Worst Month Yet
« Reply #254 on: November 03, 2016, 06:42:14 PM »
Stopped investing for several months. Starting again with tighter criteria in my taxable account.  Will get Roth to about 2/5th the level it was and will then reinvest there too.

Remember that my accounts were to be the some of the 'bond' part of my asset allocation so for that I am still happy.

Taxable XIRR: 5.21%



Taxable account




ROTH account


« Last Edit: November 04, 2016, 11:30:07 AM by lascott »
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