Worst Month Yet

[lascott]

January was a crazy month for not only the number of notes but evenness of the grades.  I bought a bunch ... but as they cycle goes a lot of those are coming back out (borrower decided not to get loan, didn't supply all doc, etc reasons).

Image: http://i.imgur.com/u6Z0JJr.png

[Rob L]

Mentions of "Worst Month Ever" in November were just a prelude of things to come.
Got my January statement today. At least it's not a loss (yet).

[Fred93]

I attempted to make a chart of Chargoffs / InterestReceived, but the numbers came out small, due to the fact that my I have been making deposits during 2015.  You start getting interest when a loan is 1 month old, but you don't start getting chargeoffs until a loan is 5 months old, so there's a skew, and the denominators included interest on loans which could not possibly charge off.  So I modified the spreadsheet, adding a 4 month skew.  The numerator is chargeoffs in the current month.  The denominator is interest received FOUR MONTHS AGO.



I don't see a trend here.  I see random variations around 25%, which is same as it ever was. 

This of course applies to my account, given my loan selection criteria, and may not apply to others.

[dompazz]

I wasn't making deposits in the fall, so the skew won't apply to my account.  Jan was my worst by far at 45%. 

I've had a backlog from the fall of loans sitting in the Late 31-120+ bucket.  That started working off last month and will continue, probably into March.  I haven't seen any new loans fall into that category since late Dec. and the 16-30 day bucket has it's normal handful.

I thought I was going to have my first ever no payments made default.  Had one sitting in 31-120, but they suddenly caught the loan up and made it current. 

I've got a smallish portfolio, so this is purely anecdotal.

[RaymondG]

Note that the distribution on loan grades in the account has no material change since 1/2013. The low bars in mid 2014 are partly due to 20% new money injected in to my LC account. The trend line is MVA of 6 periods. The loss is adjusted with lates, defaults, and loss from selling on folio.

[newstreet]

Mentions of "Worst Month Ever" in November were just a prelude of things to come.
Got my January statement today. At least it's not a loss (yet).

Are you looking at these on a static basis?   Does lending club enable you to analyze static pools? 

[Rob L]

Are you looking at these on a static basis?   Does lending club enable you to analyze static pools?

All the data comes from my monthly statements.
LC tells me how much interest I collected and the total charge offs for the month.
The graph goes back from my first statement with charge offs to my most recent.

FWIW, if doesn't seem like I'm buying loans that are terrible and I'm extremely diversified (almost all D's and E's though):



Maybe it's just a run of bad luck.

[Rob L]

It's interesting to keep things in perspective.
When I bought my first note on 5/17/2013 the S&P 500 (SPY ETF) was 157.95 (adjusted back for dividends).
This past Friday's SPY close was 187.95. A gain of 18.99%. My LC account as of today has gained 26.86%.
SPY would have to be at 200.37 for its gains to equal my LC gains.
I know it's apples to oranges but by comparison LC isn't looking too bad right now despite my recent setbacks.

[Rob L]

Note that the distribution on loan grades in the account has no material change since 1/2013. The low bars in mid 2014 are partly due to 20% new money injected in to my LC account. The trend line is MVA of 6 periods. The loss is adjusted with lates, defaults, and loss from selling on folio.

Nice graph. MVA at a lifetime high. Maybe you're unlucky too. Guess time will tell if that's meaningful or not.
I don't trade Folio and did not adjust for lates and defaults. So, I have those to look forward to.

[janef]

I thought I have some pretty bad months in 2014 and 2015.  Most of my notes are D since late of 2014 –  doesn't making any differences even when I had lots of A, B and C notes in the early years (2010 to 2014). The 278.13 default in April 2014 were mostly from B notes, and some were over 15 months.

[Rob L]

And so it goes:



It's not just my new loans that are flaking out, it's pretty much across the board. I started with LC in 5/13.
I'm not adding cash exponentially to my portfolio, but I am reinvesting principal and interest. No deposits since 2014.

Charge offs haven't flattened out at 12-14 months.
That seems to be my big problem. It's not simply that new loans are being quickly charged off.



Not giving up though; still trying to stay fully invested. The new interest rates are definitely helping in that regard.
Still could be simply a run of bad luck. It happens.

PS: Trend lines there to make Fred93 happy.   

[hzhou9]

A simple read of Rob's data - for the latest 4 bad month:
Jan 15: most bad loans from Jul~Aug 14 (As average charge-off age 16~17 months)
Dec 14: most bad loans from May~Jun 14 (As average charge-off age 18~19 months)
Nov 14: most bad loans from Jul~Aug 14 (As average charge-off age 15~16 months)
Oct 14: most bad loans from May~Jun 14 (As average charge-off age 16~17 months)

Looks likely there's loan quality control issue with LC during May to Aug 2014? Not sure whether this analysis is correct. 

[hfguy]

Not giving up though; still trying to stay fully invested. The new interest rates are definitely helping in that regard.
Still could be simply a run of bad luck. It happens.

Ugh...dude, you're killing me. I sincerely feel bad. This will get worse before it gets better. Ask yourself what your opportunity cost is. The company has already admitted their algo's for this completely new asset class were wrong. Bad luck???

[Fred93]

And so it goes:

Your graphs are FUZZY and hard to read.  I see they are .png, but I suspect that the png were made from jpg or some other fuzzy form.  Please if possible switch to some less fuzzy scheme for future posts.

Looks like the vertical axis is NUMBER OF chargoff loans during period.  But we don't know how many loans you had.  Was number of loans in portfolio changing vs time?

[pourts]

Not giving up though; still trying to stay fully invested. The new interest rates are definitely helping in that regard.
Still could be simply a run of bad luck. It happens.

Ugh...dude, you're killing me. I sincerely feel bad. This will get worse before it gets better. Ask yourself what your opportunity cost is. The company has already admitted their algo's for this completely new asset class were wrong. Bad luck???

Funny you mention opportunity cost.  For those of us who aren't fancy hedge fund guys like you, the opportunity cost is very low.  What do you recommend instead, 20 year corporate bonds yielding like 5%?