Author Topic: Worst Month Yet  (Read 164751 times)

Rob L

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Worst Month Yet
« on: December 03, 2015, 05:40:26 PM »
Posting this to take the opportunity to whine and also see if others have seen anything similar.
Background; my portfolio's weighted average age was maybe 15 months this past January and is approaching 18 months now.
Perhaps 90%+ of the loans are D's and E's, and all are 36 month. I have 4000 - 5000 active notes (not fully paid or charged off).
Got my Nov statement today and the past two are my worst by far.
Simply taking the numbers from the 2015 monthly statements and computing charge offs as a percent of principal invested and as a percent of interest received I came up with the following (easy stuff; no NAR, IRR, XIRR, etc.):

Stmt Start           Charged Off            Charged Off             
    Date                   as a %                   as a %
                           of Interest               of Principal
-------------          -------------             -------------
01/01/2015              50.24%                   0.66%
02/01/2015              31.27%                   0.38%
03/01/2015              48.74%                   0.69%
04/01/2015              40.07%                   0.56%
05/01/2015              31.68%                   0.41%
06/01/2015              46.76%                   0.61%
07/01/2015              27.51%                   0.39%
08/01/2015              48.92%                   0.59%
09/01/2015              41.55%                   0.52%
10/01/2015              61.86%                   0.84%        ****
11/01/2015              75.24%                   0.92%        ********

Simple Average         45.80%                   0.60%

Yep that's right fans. This months score was 75% of my interest covered charge offs and I got to keep 25% for myself.
My average weighted portfolio age is way past the peak of the charge offs curve, so I don't understand what's going on.
Maybe I should just consider myself lucky that I at least made a profit.
There's been a lot of dissing of LC's ANAR, but it did warn me things were going south fast. It dropped almost a full % the past 2 months.
Now I'm going to have a beer (and cry in it).

jheizer

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Re: Worst Month Yet
« Reply #1 on: December 03, 2015, 06:15:01 PM »
Ouch.  That is a pretty large jump.  I'd be curious if you notice anything similar about them.  All from a similar month, etc.  The holidays has had me wondering what effect it has on both existing loans and loans issued this month in the future.  I just haven't had time to attempt to research it.  At 4.9 month average duration I'm still too new to cry over too many charge offs yet.  My only advice is have 5 beers.
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AnilG

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Re: Worst Month Yet
« Reply #2 on: December 03, 2015, 07:17:02 PM »
Yep, you are near the tipping point.

It will be rare for you to have negative monthly portfolio return with these loans unless you stopped lending cash in the account.

Background; my portfolio's weighted average age was maybe 15 months this past January and is approaching 18 months now.
Maybe I should just consider myself lucky that I at least made a profit.
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Rob L

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Re: Worst Month Yet
« Reply #3 on: December 03, 2015, 07:25:18 PM »
Yep, you are near the tipping point.
It will be rare for you to have negative monthly portfolio return with these loans unless you stopped lending cash in the account.
Most cash drag I've had the past year was maybe 2%. I just keep plowing it back.
Haven't looked at the charge offs for common themes. Needs to be on my to-do list (after the beers).

investor88

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Re: Worst Month Yet
« Reply #4 on: December 03, 2015, 07:41:00 PM »
Hi Rob,

I have over 5000 notes invested and my Lending Club results have recently been poor.  Mostly C,D and E notes.    Can I ask you what is your current adjusted net annualized return?  You may be about 8-10% now, but the only way to keep your return high is to keep plunging more cash in.  If you stopped investing for a while, the losses would start to snowball.
If you look at the ‘Understanding Your Returns’ chart, the interest rate falls very far over time.  Once your portfolio is over 18-24 months, the returns really start slipping to between 6-8% and with the tax consequences of so many write-offs you may even have a negative return.
« Last Edit: December 03, 2015, 07:46:17 PM by investor88 »

Fred93

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Re: Worst Month Yet
« Reply #5 on: December 03, 2015, 07:49:16 PM »
If you look at the ‘Understanding Your Returns’ chart, the interest rate falls very far over time.  Once your portfolio is over 18-24 months, the returns really start slipping to between 6-8%

That is misleading.  Most of the data in that chart is from 36 month loans, and with a portfolio of 36 month loans, you really cant get beyond about 15 months average age unless you stop investing.  I believe the data points for higher average age are people who have stopped investing.  It is possible that these people stopped investing because they were doing poorly.  That's a selection bias. 

lascott

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Re: Worst Month Yet
« Reply #6 on: December 03, 2015, 08:27:19 PM »
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

investor88

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Re: Worst Month Yet
« Reply #7 on: December 03, 2015, 08:38:49 PM »
I believe the data points for higher average age are people who have stopped investing.  It is possible that these people stopped investing because they were doing poorly.  That's a selection bias.

I think there is also a selection bias that the people who post on this forum are mostly active investors who have young portfolios and are seeing the illusion of a good return.

I stopped investing in LC about a year ago and therefore have an older aged portfolio, I have experienced the pain of charge offs that Rob is only now beginning to experience.  So I am offering a warning to Rob from the older end of the investment curve that it may be a mistake to keep plowing your cash into LC.   

When I stopped investing I thought that I was past the peak of the charge off curve. However, I still have months where the charge offs are well over 100% of the interest earned!  I think that if you stopped investing now that by January or February your charge offs would be over 100% of the interest you earn because you would not have the falsely inflated benefit of new notes paying 20-25%+.

Fred93

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Re: Worst Month Yet
« Reply #8 on: December 03, 2015, 09:34:11 PM »
When I stopped investing I thought that I was past the peak of the charge off curve. However, I still have months where the charge offs are well over 100% of the interest earned!

Clearly, you made poor choices.  You are precisely one of those people I was talking about who has stopped because he had poor performance.

The main reason people who invest in very risky loans are deceived is that loans pay interest starting after 1 month, but cannot be charged off until they are 5 months old.  Thus there is a 4 month skew in the numbers that people often subtract.  (And NAR makes this same mistake.)   It is not the average age that matters, but the fraction of loans which are younger than 4 months.

Quote
I think that if you stopped investing now that by January or February your charge offs would be over 100% of the interest you earn because you would not have the falsely inflated benefit of new notes paying 20-25%+.

And you make this rather astonishing claim while knowing nothing about my portfolio!  I have no notes paying 20-25%. 

brycemason

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Re: Worst Month Yet
« Reply #9 on: December 03, 2015, 11:00:06 PM »
My account and that of my family has shown increased distress in the last quarter.

nonattender

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Re: Worst Month Yet
« Reply #10 on: December 03, 2015, 11:06:10 PM »
I think there is also a selection bias that the people who post on this forum are mostly active investors who have young portfolios and are seeing the illusion of a good return.

Fred93 has done the hard lifting of pointing out the real selection biases involved in the issue you're experiencing, but, as far as
"forum-demographic", many of us have been around this industry since ~2006 - and some of us since before ZOPA UK's debut...

It's not the first time we've seen someone discover adverse selection, the effect of new loans (or prepays) on return metric, etc.

I will note, as well, that you mentioned "tax consequences" as a factor in whatever return calculation you may have been using
to model your portfolio's performance.  Investing in this asset class outside of a tax-efficient vehicle (IRA/etc)  is "not optimal"...

That was my clue that it was you who is the rookie - rather than your initial claim that the real problem belonged to all of us. ;)
There is an EOY/holiday effect that usually affects performance during this time of year - but that is a higher order "problem".

Better luck to you (primarily in the sense that you reduce your dependence upon "luck")!
A little nonsense now and then is relished by the wisest men.

investor88

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Re: Worst Month Yet
« Reply #11 on: December 03, 2015, 11:30:33 PM »

Quote
I think that if you stopped investing now that by January or February your charge offs would be over 100% of the interest you earn because you would not have the falsely inflated benefit of new notes paying 20-25%+
Quote
And you make this rather astonishing claim while knowing nothing about my portfolio!  I have no notes paying 20-25%.

Fred, I am talking to the original poster Rob.  He is the one asking other people who have D and E investments about their portfolio's performance.  Since you do not invest in these kind of notes there is no need for you to offer your opinions.  Please let us D and E investors commiserate and discuss with each other.

I invested in these higher interest/ higher risk loans because LC projected the returns at 12%-15% at the time when I placed my orders.  However now my account is showing an ANAR of under 8% and looking at the 'Understanding Your Returns Chart', I am performing on average of others with similar notes.  Looking at the chart, zero people who invested in over 500 notes have earned over 10%, most are between 5 and 8%.

Rob, why did you choose to invest in the D and E notes?  Were you swayed by LC's projections that you would earn over 12%?   

nonattender

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Re: Worst Month Yet
« Reply #12 on: December 03, 2015, 11:41:16 PM »
I invested in these higher interest/ higher risk loans because LC projected the returns at 12%-15% at the time when I placed my orders.  However now my account is showing an ANAR of under 8% and looking at the 'Understanding Your Returns Chart', I am performing on average of others with similar notes.  Looking at the chart, zero people who invested in over 500 notes have earned over 10%, most are between 5 and 8%.

Rob, why did you choose to invest in the D and E notes?  Were you swayed by LC's projections that you would earn over 12%?

Ah... professional victimhood.  Ok, you don't want to learn - you want someone to blame, besides yourself.

Moving on...
A little nonsense now and then is relished by the wisest men.

investor88

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Re: Worst Month Yet
« Reply #13 on: December 03, 2015, 11:54:43 PM »


Ah... professional victimhood.  Ok, you don't want to learn - you want someone to blame, besides yourself.

Moving on...
[/quote]

Yes, please move on.  I am trying to honestly help the OP and give information about my experience with LC.  I’m really confused by what the motivation is to insult me, but please stay out of this discussion.  You haven’t added anything to the topic except for trying to silence me.  I am just offering Rob my honest experience and warning him about what is in store. 

RaymondG

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Re: Worst Month Yet
« Reply #14 on: December 04, 2015, 12:52:39 AM »
Got my Nov statement today and the past two are my worst by far.

I have noticed it in October that my adjusted XIRR (of the month, annualized) suddenly dropped in August. It's 4.4%, 5.83%, 7.11% from August to October, which means increasing number of notes became late. Charge-off / Interest is 50% in October.
« Last Edit: December 04, 2015, 01:09:31 AM by RaymondG »