Author Topic: Lending Club Loan Demand  (Read 12682 times)

nonattender

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Re: Lending Club Loan Demand
« Reply #30 on: June 12, 2016, 06:43:10 PM »
BRV would be like a valium the size of a golf ball for LC's retail investors (and everyone else in the industry exposed to LC's "uh-ohs")...

Certainly for the most of the investors on this board.  However, I suspect that most investors have no clue what a BRV is.  I certainly didn't until I got involved in this stuff.  Therefore I'm not so sure that it would have the impact you presume.  Not trying to argue whether they should do it. 

For all we know, they are working on it.  They don't tell us anything these days, so we would never know.  If I were inside making the decisions I would think the biggest concern would be the stupid press.  At this point, if they introduced a BRV, the press would write articles concluding that they were preparing for bankruptcy.

"LC Announces Retail Investor Enhancements"

How hard can it be to write that?  It would even have the convenient benefit of being true.  Package it with a bonus % announcement.

Worst case, some journo spins as "LC preps for imminent BK" - but, they've still gotten the message out - and w/the bonus incentives!

I notice nobody in the press - except investors on this forum - covered the retail investor bonus...  This is an easy way to go wide w/it.

"Fine, you're gonna write a hit piece?  You're gonna have to include our advertising.  Either way, we look forward to your new story..."

Really, though, their PR/mkting value prop was "Hate stockmarket volatility? Then..." - only way they get back to that is by decoupling.
A little nonsense now and then is relished by the wisest men.

Rob L

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Re: Lending Club Loan Demand
« Reply #31 on: June 12, 2016, 07:08:59 PM »
Hey, let's not kid ourselves; retail is NOT on LC's radar at the present time. Peter said as much in response to my comments on his blog post last week where I commented that the word "retail" wasn't mentioned. Think he's pretty in-touch with LC's latest.

I've heard in the past that LC valued its retail investors and saw them (us) as "sticky money" that's less fickle than the institutional flavor. That probably would have been true, but I give retail folks (in substantial numbers and those with significant money at stake) credit for knowing what counterparty risk means. In hindsight (yeah, always 20/20) their (our) loans should never have been on LC's balance sheet. Now that would have been "sticky money", and I believe there would have been a lot more of it. Would'a, could'a, should'a ...

I have an example I can share. During the crisis of '08-'09 I had quite a bit of money in E*Trade. Think their stock traded under $2.00 at one time and I knew (or thought) there was a chance they wouldn't make it. But my money wasn't on their balance sheet. My cash was swept into FDIC secured accounts and my securities were SIPC insured. The SIPC wasn't important so long as my holdings were in my name (well, not exactly but I'm on a roll here) and even if E*TRADE went bust it would not mean one iota to my holdings. So, I'm still an E*TRADE customer. I sincerely wish I was in the same situation with LC.

Fred93

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Re: Lending Club Loan Demand
« Reply #32 on: June 12, 2016, 07:14:25 PM »
I've heard in the past that LC valued its retail investors and saw them (us) as "sticky money" that's less fickle than the institutional flavor.

Yes.  Was said repeatedly.  However, it was Renaud who said that.  I think he meant it, but he is gone!  We have heard very little from Sanborn.  I want to know where his head's at.

And by  the way, Renaud was right.  What started this mess was a pullback by hedge funds and other such small to medium sized institutional investors beginning around the start of the year.


Rob L

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Re: Lending Club Loan Demand
« Reply #33 on: June 12, 2016, 07:42:21 PM »
Yes.  Was said repeatedly.  However, it was Renaud who said that.  I think he meant it, but he is gone!  We have heard very little from Sanborn.  I want to know where his head's at.

You missed my point and it has nothing to do with RL. He may have believed one thing and SS may believe another. Doesn't matter what they believe. What matters is what we (or some of we) retail investors did. If RL were still around and there was a different cause for LC's problems the retail reaction would have been the same. If we were not on the balance sheet it would have been very different IMHO. And that's the point. It wasn't that way so it's really ancient history, but years ago how hard would it have been to set things up with us off the balance sheet?

Fred93

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Re: Lending Club Loan Demand
« Reply #34 on: June 12, 2016, 09:43:34 PM »
You missed my point and it has nothing to do with RL. He may have believed one thing and SS may believe another. Doesn't matter what they believe. What matters is what we (or some of we) retail investors did. If RL were still around and there was a different cause for LC's problems the retail reaction would have been the same. If we were not on the balance sheet it would have been very different IMHO. And that's the point. It wasn't that way so it's really ancient history, but years ago how hard would it have been to set things up with us off the balance sheet?

So you want the BRV to have been done years ago.  Ok, but I don't have a time machine, so that ain't gonna happen. 

You believe that had a BRV been in place, retail investors would have acted differently.  I understand that, but I'm skeptical.  I don't think most retail investors understand what a BRV is or understand the legal structure of things, or have read the prospectus, or think that far ahead.  A BRV is a pretty obscure legal construct.  I'm sure 99.9% of the population doesn't have a clue about them.

Frankly, I think that a lot of retail investors who don't understand the balance sheet see a BRV as some sort of magic potion.  In fact, the balance sheet is incredibly safe, and a BRV is not a magic potion, it is instead a legal construct which may help or may not help, depending on the judgement of the bankruptcy court.

Rob L

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Re: Lending Club Loan Demand
« Reply #35 on: June 12, 2016, 11:21:07 PM »
A BRV is a pretty obscure legal construct.  I'm sure 99.9% of the population doesn't have a clue about them.

I'm one of them. In my personal example above E*Trade didn't have a BRV. My money, securities, etc. were not on their balance sheet; period. SEC rules and all that. If LC had a BRV from day one I'd probably now know a lot more about them than I ever wanted to. I've thought about it and I can't say whether or not I'd be a happy camper today. What I can say is that I stayed with E*Trade when the possibility of their bankruptcy was very real; likely more so than LC at the present. So a BRV probably isn't good enough or it's too arcane for us average retail folks. There's no time machine but if LC makes it through this and decides it is in their interests to change things, then something like a conventional brokerage account would be a better idea than a BRV that, as you say, no one understands anyway. Why would that be such a far out legally impossible arrangement?

.Ryan.

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Re: Lending Club Loan Demand
« Reply #36 on: June 13, 2016, 12:08:31 AM »
You missed my point and it has nothing to do with RL. He may have believed one thing and SS may believe another. Doesn't matter what they believe. What matters is what we (or some of we) retail investors did. If RL were still around and there was a different cause for LC's problems the retail reaction would have been the same. If we were not on the balance sheet it would have been very different IMHO. And that's the point. It wasn't that way so it's really ancient history, but years ago how hard would it have been to set things up with us off the balance sheet?

So you want the BRV to have been done years ago.  Ok, but I don't have a time machine, so that ain't gonna happen. 

You believe that had a BRV been in place, retail investors would have acted differently.  I understand that, but I'm skeptical.  I don't think most retail investors understand what a BRV is or understand the legal structure of things, or have read the prospectus, or think that far ahead.  A BRV is a pretty obscure legal construct.  I'm sure 99.9% of the population doesn't have a clue about them.

Frankly, I think that a lot of retail investors who don't understand the balance sheet see a BRV as some sort of magic potion.  In fact, the balance sheet is incredibly safe, and a BRV is not a magic potion, it is instead a legal construct which may help or may not help, depending on the judgement of the bankruptcy court.

I'm not sure why so many folks view a BRV as the panacea. Believing that a BRV solves all platform risk is being a bit naive, IMO, especially if you read all the legalese that goes along with it. If LC is buying loans, how about they cap their interest in a loan at 25%, and let the rest go to retail. Now we've got LC with a vested interest in making sure these loans that we have also invested in,  get paid in full. Win win.

rawraw

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Lending Club Loan Demand
« Reply #37 on: June 13, 2016, 08:22:28 AM »
I reached out to the FT journalist. He said that LC told him directly they are obligated to fund those direct mail loans

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Lovinglifestyle

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Re: Lending Club Loan Demand
« Reply #38 on: June 13, 2016, 10:13:27 AM »
I reached out to the FT journalist. He said that LC told him directly they are obligated to fund those direct mail loans

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That's the best argument I've heard/read for giving up.

fliphusker

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Re: Lending Club Loan Demand
« Reply #39 on: June 13, 2016, 02:33:43 PM »
I reached out to the FT journalist. He said that LC told him directly they are obligated to fund those direct mail loans

Sent from my SAMSUNG-SM-G935A using Tapatalk

That's the best argument I've heard/read for giving up.
And what percent of those direct mailers, that they have cut 75%, do they actually fund themselves?  Less than .25%?  If that number was lets say 50%, then would think you would have reason for concern.  My assumption is it is exceedingly low.

Fred93

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Re: Lending Club Loan Demand
« Reply #40 on: June 13, 2016, 04:14:25 PM »
I reached out to the FT journalist. He said that LC told him directly they are obligated to fund those direct mail loans

That's the best argument I've heard/read for giving up.

Think quantitatively.  I believe the only time this happens in any significant amount, is when demand suddenly drops, as it did May 9th.  In ordinary times, they adjust the amount of direct mail (and other sourcing) to the demand they have from lenders.  However there is a time lag.  In this extraordinary situation, when demand suddenly drops, there will be too much sourcing in the queue (ie direct mailings in flight etc), and there will be a few loans unfunded.

This is not a big deal.  Get hold of yourself.

rawraw

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Re: Lending Club Loan Demand
« Reply #41 on: June 13, 2016, 05:27:50 PM »
I reached out to the FT journalist. He said that LC told him directly they are obligated to fund those direct mail loans

That's the best argument I've heard/read for giving up.

Think quantitatively.  I believe the only time this happens in any significant amount, is when demand suddenly drops, as it did May 9th.  In ordinary times, they adjust the amount of direct mail (and other sourcing) to the demand they have from lenders.  However there is a time lag.  In this extraordinary situation, when demand suddenly drops, there will be too much sourcing in the queue (ie direct mailings in flight etc), and there will be a few loans unfunded.

This is not a big deal.  Get hold of yourself.
Quantitatively, it depends on the demand they were expecting and then how much that demand disappeared.  Could be a big deal (exceeding their ability to fund) or could be a non-issue.  So unless you cite those numbers, not so sure you can be so dismissive to the gentleman.  I understand you seem to be an optimist, but give the guy a break.

Fred93

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Re: Lending Club Loan Demand
« Reply #42 on: June 13, 2016, 06:58:28 PM »
Quantitatively, it depends on the demand they were expecting and then how much that demand disappeared.  Could be a big deal (exceeding their ability to fund) or could be a non-issue.  So unless you cite those numbers, not so sure you can be so dismissive to the gentleman.  I understand you seem to be an optimist, but give the guy a break.

Ok.  Here are numbers.  Because LC doesn't share what fraction of their supply comes from various channels, I have to guess.  I imagine I'm now gonna get attacked for choosing the numbers I have chosen.  For anybody who doesn't like my choices: Use your own numbers.

My model is that direct mail advertising was sized for the origination rate, and the origination rate suddenly dropped.  I'm estimating that the origination rate dropped by a factor of 2.

LC did $2.5B last quarter.
That's $194.4M/week.
Lets presume 20% of that was from direct mail. 
That's $38.9M/week from direct mail
Now presume that 50% of demand suddenly disappeared, and that a week's worth of direct mail advertisements are already on their way and cannot be stopped.
That's $19.4M of loans for which there is inadequate demand.

I've made several presumptions, which one may not agree with.  One thing we can agree with I think is that the May 9th event was a one time big event.  This isn't going to happen every week.

So they might need to buy $19.4M of loans, from their pot of $860M of cash.  That seems entirely workable.

And... they may be able to turn around and resell these loans within a short time.  It is certainly not clear that they would need to remain on the balance sheet.