Author Topic: picking up pennies  (Read 2188 times)

mikedev10

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picking up pennies
« on: January 07, 2019, 07:26:17 PM »
it seems like there are loans out there with a 5% ytm, just cost $2.something, you make a nickel, 3 months of payments left in the loan...  i am a little curious why these are out here, vs. already being picked up.  why do i see this in my search without a bot having already picked it up - is there a greater risk to these pennies than i'm noticing, or is the capital just deployed better elsewhere?  example for a current note would be: https://www.lendingclub.com/foliofn/browseNotesLoanPerf.action?showfoliofn=true&loan_id=70915052&order_id=148294353&note_id=119450233

2.44 to make 2.49 over the next 3 remaining payments.  a fast, but lowly nickel.  seems safe.  why hasn't it been gobbled up?


Fred93

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Re: picking up pennies
« Reply #1 on: January 07, 2019, 07:41:04 PM »
That's not a high enough YTM for a "C1" note in general.

mikedev10

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Re: picking up pennies
« Reply #2 on: January 07, 2019, 08:32:31 PM »
i suppose that is too low a ytm for my own algo to keep with a c1 (i had already filtered it out for other reasons)

nonetheless, would the same borrower warrant a c today?  seems their risk of not paying it off is substantially lower today, and with only 3 payments left, how substantially does that it was a c nearly 3 years ago matter today?

i did consider that this is akin to picking up pennies in front of a steamroller possibly as well

Rob L

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Re: picking up pennies
« Reply #3 on: January 07, 2019, 08:41:24 PM »
I think somebody bought it.  ???

Fred93

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Re: picking up pennies
« Reply #4 on: January 07, 2019, 10:22:22 PM »
nonetheless, would the same borrower warrant a c today?

I don't know.  He might warrant a D, E, or F today for all I know. 

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how substantially does that it was a c nearly 3 years ago matter today?

If you do a statistical study on this, let us know what you find.

If you look at the chargeoff curves for loans by grade, it would appear that borrowers who were assigned a risky grade at the beginning do indeed have a higher probability of chargeoff in the late months than borrowers assigned a low risk grade.  However, there may be other factors one can use to mitigate the risk, but I haven't studied that extensively, certainly not enough to quantify it, so I don't know.