Author Topic: Email from Lending Club  (Read 19704 times)

SLCPaladin

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Re: Email from Lending Club
« Reply #45 on: June 06, 2016, 01:12:29 PM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

AnilG

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Re: Email from Lending Club
« Reply #46 on: June 06, 2016, 01:44:22 PM »
You are conflating price movement with change in yield when comparing utility stocks with LC. LC investment is not readily traded so there is no price movement. Most users are valuing their LC portfolio notes at remaining outstanding principal rather than the market value. As utility stocks are readily tradable, their price (market value) moves frequently and thus published yield. A fair comparison is when LC yield is compared with yield from utility stock at the time of utility stock purchase. Any price movement of utility stock and resulting change in yield after purchase is irrelevant when comparing with LC yield.

Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

Instead of comparing with utility stock, a better comparison (still not perfect) for the LC yield is with that of junk/high yield bond from consumer financial services firms such as Ally and Capital One or even Junk/High Yield ETFs. I have seen some large retail lenders applying the price movement of such bonds to LC account value to figure out imputed value of their LC investment.


Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.
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jz451

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Re: Email from Lending Club
« Reply #47 on: June 06, 2016, 02:20:50 PM »
This is my view also, that people need to think of LC in comparison to junk bonds/bond funds which are the most similar in terms of structure and level of risk.  Everything else is apples to oranges.


You are conflating price movement with change in yield when comparing utility stocks with LC. LC investment is not readily traded so there is no price movement. Most users are valuing their LC portfolio notes at remaining outstanding principal rather than the market value. As utility stocks are readily tradable, their price (market value) moves frequently and thus published yield. A fair comparison is when LC yield is compared with yield from utility stock at the time of utility stock purchase. Any price movement of utility stock and resulting change in yield after purchase is irrelevant when comparing with LC yield.

Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

Instead of comparing with utility stock, a better comparison (still not perfect) for the LC yield is with that of junk/high yield bond from consumer financial services firms such as Ally and Capital One or even Junk/High Yield ETFs. I have seen some large retail lenders applying the price movement of such bonds to LC account value to figure out imputed value of their LC investment.


Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

fliphusker

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Re: Email from Lending Club
« Reply #48 on: June 06, 2016, 02:48:02 PM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).
Please do not take this in a personal way.  When I started in LC, I like many others did not know FOLIO very well.  I got into LC knowing full well that every single dime I put into it could be lost, just not any investment that is not insured.  I like others, came for the big fat nice returns.  Wearing blinders and investing is sloppy at best.
I have loftier goals then 5% and I am willing to roll the dice on my investment here.  I am probably one of the few here who do not care about a BRV.  Sure it would be nice, but not going to demand a change in game because I got scared by what I see as a one time issue, not a systemic problem with LC. 
I have learned the FOLIO market to a certain extent.  I am by far no expert though, but I want to think I am doing alright.  Is it liquid?  Absolutely depending on the losses you want to incur.  That depends on your panic level.  If you believe that LC has enough cash to weather a storm for three years, then why would you sell any notes that mature in that time or rake out enough profits to pay for the upfront cost?  I am buying notes from panicked investors who are offering deep discounts.  Am I smart for doing this?  We will see in five year's time.
It is all up to you though, if you want to lose all the profits or even take small losses, that is easily done.  As it is a buyers market though, you are not going to make much of a profit selling on FOLIO right now.

Fred93

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Re: Email from Lending Club
« Reply #49 on: June 06, 2016, 02:58:23 PM »
IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Whoa.  You can sell that utility stock quickly, but there is no guarantee that you will get your money back.  You think losing 3-5% is "a bad investment" ?  When you try to sell that utility stock you may find the price down -10%, -20%, -30%.  That's the way the stock market works.


sommers

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Re: Email from Lending Club
« Reply #50 on: June 06, 2016, 07:27:40 PM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.

Rob L

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Re: Email from Lending Club
« Reply #51 on: June 06, 2016, 07:45:43 PM »
Without BRV, retail lenders are buying a junk bond from a "single" company (LC) or a borrower payment linked note whose counter party is LC and not borrowers. There are two components to risk of buying notes for retail lenders: The risk of borrowers not repaying and the risk of LC failing their commitment as counter party.

I think you've hit the nail on the head so to speak. The term "counter party risk" is well established and well defined. Depending on your view counter party risk has remained relatively unchanged or has increased. It's the ultimate bottom line to the "bulls bears" or what ever you want to call it discussion.

Fred93

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Re: Email from Lending Club
« Reply #52 on: June 06, 2016, 08:24:20 PM »
Utility stock don't experience "wild swings".

You set the bar by claiming disgust at losing 3-5%, and claimed utility stocks would not lose you this much.  That's not correct.  Utility stocks certainly vary more than this.  Now you change the vocabulary to "wild".

Take one of the big standard stable utilities, such as ED.  Closing prices (from google)... 1998 Dec 18 $54.00, then if you suddenly decided to sell on 2000 Feb 25, you find the price is $26.188 .  That's down 51.5%   You can find plenty of 30% drops.  This is common in the stock market.

Quote
The CEO commits some relatively minor fraud ... and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.

You did better than the ED investor trying to get out on 2/25/2000, and you did better than the General Public Utilities investor trying to get out right after Three Mile Island.  (GPU since merged, so the stock chart isn't on Yahoo or Google, or else I would have posted it.)  You did a hell of a lot better than the BP investor after the gulf spill.  The list goes on.

Also, you didn't have to liquidate.  Nobody forced you.  You could have held the notes, and done fine.  You could have liquidated more slowly and taken a smaller hit.  The hit was a result of your panic.  You exercised your choice ... that's fine.  You decided to take a loss.

fliphusker

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Re: Email from Lending Club
« Reply #53 on: June 06, 2016, 09:02:35 PM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire. 

bobeubanks

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Re: Email from Lending Club
« Reply #54 on: June 07, 2016, 01:45:00 AM »
Utility stock don't experience "wild swings".

SO dropped about 5% in just one day (Aug 24, 2015)

sommers

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Re: Email from Lending Club
« Reply #55 on: June 07, 2016, 06:05:04 AM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire.

I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus L C hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus an L C note with who knows who on the other end of it (especially with the questionable underwriting standards many are suggesting are being employed). 
For this thing to go into crisis this fast---should scare everyone.  This is uncharted territory and hope is not a strategy

fliphusker

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Re: Email from Lending Club
« Reply #56 on: June 07, 2016, 08:24:54 AM »
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IF the reality is it takes a 3-5% discount to sell "perfectly good notes" then I call that a bad investment.  So, why would I want to continue investing in L C notes?
Not to mention the lack of liquidity (at a reasonable price)---you can buy a utility stock and make an easy 5% and buy and sell it multple times a day for $8 a trade for virtually unlimited numbers of shares (transaction costs approaching zero).

Apples vs. oranges.  You simply cannot compare these two asset classes. Stocks (yes, even utilities) are prone to wild swings in their price. Stocks have higher volatility and are riskier, this certainly applies to utility stocks, especially in an era of an evolving energy mix (e.g. coal to natural gas to solar). Furthermore, I don't know of any utility stocks that consistently have a yield of 5%. Vanguard's Utility Index fund has a yield of 3.25%. It's share price fluctuates all the time, so it's certainly not a foregone conclusion that you could predictably exit your stock position with a 5% return with yield and capital gains. If you bought VUIAX in Jan 2015 and sold in Sept, you'd be down 17%.

Utility stock don't experience "wild swings".  The CEO commits some relatively minor fraud---and look what happens.  The stock drops 80% and you have to take a 5% hit on open notes to liquify--and then jump through hoops on folio to even get that done.  If you want to compare these notes to a junk bond ETF--maybe JNK or HYG---fine--but I can buy and sell either at the click of a mouse pad--and have instant liquidity.
Face it--this LC note thing is extremely fragile.  Nobody here even knows what legal standing note holders have if the worse case happens.  I understand the defensive posture of people who are heavily invested in this.  I am getting out while the getting is good.
Come on now, told you 1,357 times not to exaggerate. :P   May 6th LC closed at $7.10, now sits at $4.74.  Only panicked buyers are getting out of LC at 5%.  Others have shown over and over what notes on FOLIO are going for.  I pointed out what I am buying at, but that is absolutely not the norm.  Think someone said that most notes on FOLIO are being sold below -2.  As long as these notes are not brand spanking new, you have pulled profit from these notes, right? 
Jump through hoops on FOLIO to sell notes?  Click notes to sell, select portfolio to sell, check all, hit sell, set markup for all notes and hit submit.  Come back in a week change discount and rinse and repeat.  How is this difficult?
Guess will see in about 11 days how fragile LC is when Chen's call and put options expire.

I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus L C hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus an L C note with who knows who on the other end of it (especially with the questionable underwriting standards many are suggesting are being employed). 
For this thing to go into crisis this fast---should scare everyone.  This is uncharted territory and hope is not a strategy
What I guess scares too many here is a bad portfolio strat.  They came here and dumped way too much into one sector.  Now they are scared, and want out.  The problem is they do not understand how to get out.  Sommers, you have been in this forum since Dec. 2014.  You do not understand how FOLIO works?  I am a fricking novice.  Man I have to look up half the shit that is said here, on Google, to find out what it means.  But one thing I think I understand, is how FOLIO works, and what panicked people will price notes at.  Sure, most notes do not sell at -3 discount, but I sure lap the ones that sell for -6 as quick as I can. 
You want out, you do not have to take a loss, all you have to do is squander all your profits you have made in the past year and a half.  Take that beatdown and price your notes to break even, not hard to figure out. 
I apologize for being incentive.....  Just annoying when people bitch about things they were ignorant to in the first place due to well their own..... lack of research.

SLCPaladin

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Re: Email from Lending Club
« Reply #57 on: June 07, 2016, 11:22:49 AM »
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I'm not worried about Southern Company etc going out of business. I AM worried about L C.  Plus LC hasn't been tested in an increasing interest rate environment or a recession---utilities have.  There is certainly a lot less risk investing in a utility versus.

I'm not worried about Southern going out of business per se, mainly because they seem to be embracing renewables. But since you brought up utilities as a low-risk play, I think you might want to revisit some of those assumptions. Some utilities are in for a wake-up call in the next few years. I see this out here in the midwest (NV Energy, Vivint).

Sun Edison's financial chicanery aside,  solar is a real threat to the profit models of quite a few utility companies. Low cost PV panels + federal and state tax credits for renewables + improving better battery technology (i.e. Tesla Powerwall et al) = decoupling from utilities. Utility companies are panicking in some places and are trying to squash the nascent industry by gouging net metering customers. THey are trying to lobby state politicians to erect barriers to prevent their monopoly (much like traditional car dealers are trying to prevent Tesla from selling direct-to-consumer). Technology may prove disruptive, even in boring, "safe" utilities.

That is not to say you are wrong about the very real risks you've cited with LC, but the alternatives you've suggested are anything but low risk. You want low risk? You need to be talking about treasury bonds and FDIC insured CDs, which are paying 1% - 2% interest, so slightly below inflation.