Author Topic: Lending Club - Time to panic?  (Read 73329 times)

hgjjgkj

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Re: Lending Club - Time to panic?
« Reply #250 on: February 20, 2018, 09:20:05 AM »
From the customer perspective I tried to get a 10k loan to essentially refinance my student loans. I have 6 figure income, no debt aside from student loans, credit score in the mid to low 700s and very low housing cost. Somehow was quoted 9% interest rate. There is no way anyone credit worthy would use these guys

uwp

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Re: Lending Club - Time to panic?
« Reply #251 on: February 20, 2018, 01:10:55 PM »
It's been a while since MMM updated the "experiment" page.

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #252 on: February 20, 2018, 02:07:40 PM »
It's been a while since MMM updated the "experiment" page.
I think it would be great if MMM updated his initial LC article with the current status of the company. That being returns are way down and it pretty much doesn't make any sense to use this over the stock market.

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Re: Lending Club - Time to panic?
« Reply #253 on: February 20, 2018, 07:25:09 PM »
From the customer perspective I tried to get a 10k loan to essentially refinance my student loans. I have 6 figure income, no debt aside from student loans, credit score in the mid to low 700s and very low housing cost. Somehow was quoted 9% interest rate. There is no way anyone credit worthy would use these guys
This has been my experience too. High 700s, debt-to-income < 1%, and they wanted twice the rate of a competitive unsecured loan.

Pretty sure that their customer base is made entirely of people who either:
1) don't have the chops to shop around
2) don't give a shit because they intend on missing a payment

chasesfish

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Re: Lending Club - Time to panic?
« Reply #254 on: February 21, 2018, 05:17:33 AM »
It's been a while since MMM updated the "experiment" page.
I think it would be great if MMM updated his initial LC article with the current status of the company. That being returns are way down and it pretty much doesn't make any sense to use this over the stock market.

He updated the post to say he's letting it wind down.  The problem is its really manual to calculate your annual returns.

I'm hoping I get a bump in paydowns since its tax refund season.  That happened in past years, but not this year

chasesfish

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Re: Lending Club - Time to panic?
« Reply #255 on: March 11, 2018, 06:56:29 AM »
Update, LC still sucks.  On a $5000 or so portfolio, I had $230 in losses against $90 in interest income and recoveries.   Then they emailed me a survey wanting to know about my experience.

I still think its time to short them...or just buy a bunch of $3.50 put options

frozen

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Re: Lending Club - Time to panic?
« Reply #256 on: March 11, 2018, 07:16:51 AM »
From the customer perspective I tried to get a 10k loan to essentially refinance my student loans. I have 6 figure income, no debt aside from student loans, credit score in the mid to low 700s and very low housing cost. Somehow was quoted 9% interest rate. There is no way anyone credit worthy would use these guys
This has been my experience too. High 700s, debt-to-income < 1%, and they wanted twice the rate of a competitive unsecured loan.

Pretty sure that their customer base is made entirely of people who either:
1) don't have the chops to shop around
2) don't give a shit because they intend on missing a payment
Agreed. I noticed on of my borrowers declared bankruptcy immediately after receiving the loan. The person never even made a payment!

I added some more money to my Lending Club account late last year for the United Mileage Plus promotion and still have not received the miles! Plus their stock is down to single digits. I just donít trust them.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #257 on: March 11, 2018, 08:47:59 AM »
I'm about to buy some put options for this coming October in case the company goes bankrupt.  I just don't see how this model is sustainable and at the pace they're loosing money and the failure of their origination platform, I no longer think the IT is valuable to competitors.

We will see, there may not be someone dumb enough to write the put option on the other side

frozen

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Re: Lending Club - Time to panic?
« Reply #258 on: March 11, 2018, 12:27:09 PM »
I'm about to buy some put options for this coming October in case the company goes bankrupt.  I just don't see how this model is sustainable and at the pace they're loosing money and the failure of their origination platform, I no longer think the IT is valuable to competitors.

We will see, there may not be someone dumb enough to write the put option on the other side

Great idea!
I will look into this as well.
I still have about $4K with Lending Club that I am slowly divesting. If they go bankrupt, what do you think happens to the lenders and borrowers?

ePalmtrees

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Re: Lending Club - Time to panic?
« Reply #259 on: March 11, 2018, 01:50:41 PM »
I'm about to buy some put options for this coming October in case the company goes bankrupt.  I just don't see how this model is sustainable and at the pace they're loosing money and the failure of their origination platform, I no longer think the IT is valuable to competitors.

We will see, there may not be someone dumb enough to write the put option on the other side

Not too familiar with put options, why for this coming October specifically?

chasesfish

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Re: Lending Club - Time to panic?
« Reply #260 on: March 11, 2018, 07:30:44 PM »
I'm about to buy some put options for this coming October in case the company goes bankrupt.  I just don't see how this model is sustainable and at the pace they're loosing money and the failure of their origination platform, I no longer think the IT is valuable to competitors.

We will see, there may not be someone dumb enough to write the put option on the other side

Not too familiar with put options, why for this coming October specifically?

A put option allows me the option to places 100 shares of Lending Club with the other party.  There are only so many contract dates you can pick, I'm guessing this crap blows up in another quarter or two.

How much you pay for the option depends on the price you want to put the stock on the counterparts.

If I buy out options for .30/share at 3.50, I make my investment back st $3.20 and start profiting higher.  A put option has a maximum loss vs a short sale so theoretically has unlimited loss potential.

It's rare to do, but it's an interesting gamble if you think a company will fail.  I'm kicking myself for not doing this earlier.  Someone still has to agree to sell me the put.

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #261 on: March 12, 2018, 09:26:33 AM »
I started attempting to liquidate all the notes in my LC Roth IRA via the trading platform. Wish me godspeed.

hgjjgkj

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Re: Lending Club - Time to panic?
« Reply #262 on: March 12, 2018, 10:03:23 AM »
Still a ton of FIRE bloggers repping these P2P companies. Which is honestly disgusting given the state of these firms.

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #263 on: March 12, 2018, 12:22:12 PM »
I'm about to buy some put options for this coming October in case the company goes bankrupt.  I just don't see how this model is sustainable and at the pace they're loosing money and the failure of their origination platform, I no longer think the IT is valuable to competitors.

We will see, there may not be someone dumb enough to write the put option on the other side

Good luck and keep your position size reasonable! Go for the longest duration you can get, even though it's more expensive to do so. Zombie companies like this can linger around for years, and then there's the threat of them being acquired. Bear in mind how LC jumped 18% on March 1 for no apparent reason!

You will find a seller for your puts. The question is, at what price? I would use an aggressively priced limit order.

robtown

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Re: Lending Club - Time to panic?
« Reply #264 on: March 12, 2018, 07:37:03 PM »
I started attempting to liquidate all the notes in my LC Roth IRA via the trading platform. Wish me godspeed.

Good luck.  I sold on the secondary market and took my loses a year ago.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #265 on: March 12, 2018, 07:57:37 PM »
@ChpBstrd No real takers yet, it's just hobby money with a capped upside.  I wish I had the guts to buy $30,000 in puts

frozen

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Re: Lending Club - Time to panic?
« Reply #266 on: March 13, 2018, 01:50:47 PM »
If you get a chance, read the feedback from Lending Club employees on Glassdoor. I read posts about them complaining about the stock, worrying the company would go bankrupt, and complaining about borrowers with little financial literacy. One person posted that some people will borrow money for an expensive vacation with no understanding of what it will take to pay it back.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #267 on: March 13, 2018, 07:15:36 PM »
Looks like I need an account, but I bet those reviews are awesome.

I remember our bank's CEO was asked about LendingClub/Prosper two years ago, he politely said non-bank lenders have been making loans for years, but they fail at collecting loans

yachi

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Re: Lending Club - Time to panic?
« Reply #268 on: March 14, 2018, 06:17:57 AM »
@ChpBstrd No real takers yet, it's just hobby money with a capped upside.  I wish I had the guts to buy $30,000 in puts

What do you think are the chances of bankruptcy in the next year and a half vs a takover?  Capital One just sold off their former sharebuilder ownership to Etrade, I'm not sure what else they have been buying.  I think maybe Prosper would buy them, or Renaud Laplanche's new company Upgrade Inc.  Then again, I'm not sure either of these companies would trust the loan portfolio they would be buying.
At the rate they're losing money, it looks like they have less than 5 quarters of cash left.

yachi

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Re: Lending Club - Time to panic?
« Reply #269 on: March 14, 2018, 09:04:51 AM »
@ChpBstrd No real takers yet, it's just hobby money with a capped upside.  I wish I had the guts to buy $30,000 in puts

I just did this with a January 2019 expiration.  At worst, it's better than buying my dream sportscar and wrecking it w/o insurance.  At best (stock drops to $1) I get a x5 return.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #270 on: March 14, 2018, 12:33:04 PM »
Capital One is the one company I'm worried about buying one of these....its a consumer bank that wants to believe its a tech company.  Spends all this money on small business and mortgage, then lays off the entire division.  No real clue what they're doing

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #271 on: March 14, 2018, 09:06:16 PM »
We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.
I'm checking in on the performance of my synthetic short idea from December 6th.

Last put price 1.55
Last call price 0.91
----------------------
Current profit: 0.64

Assuming you had to deposit 100% margin ($4.50/share) for the short call, that's an ROI of 14.2% since December 6th. Multiply by roughly three to annualize that! Interestingly, most of the profit came from deterioration of the call.

frozen

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Re: Lending Club - Time to panic?
« Reply #272 on: March 25, 2018, 08:55:03 PM »
I wonder if Lending Club is falling victim to Bust Out Fraud like the credit card companies are. I have been reading about how people are creating synthetic identities and it made me wonder how LC verifies they are loaning money to an actual person.

Iíve noticed a few of my loans lately that default before 1 payment has even been made!

Padonak

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Re: Lending Club - Time to panic?
« Reply #273 on: March 25, 2018, 09:08:31 PM »
I wonder if Lending Club is falling victim to Bust Out Fraud like the credit card companies are. I have been reading about how people are creating synthetic identities and it made me wonder how LC verifies they are loaning money to an actual person.

Iíve noticed a few of my loans lately that default before 1 payment has even been made!

Even if they use their real identities, they may get a loan with Lending Club, spend a bunch of money on their credit cards, get  personal loans with banks and default on all of their obligations.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #274 on: March 26, 2018, 04:56:54 AM »
1st payment defaults aren't anything new for Lending Club, I saw a few of these in my portfolio back in 2011 and 2012.

The entire banking industry has been forced to retain more capital from 2010 through 2016, they have to put it to work somewhere and are making the same higher rate/higher loss loans as lending club was exclusively making in 2011.

Making loans is easy, collecting loans is harder.

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #275 on: March 29, 2018, 11:47:30 AM »
I noticed today that on MMM's initial LC article, there is now a disclaimer near the top. I don't know when this went up, but it makes me feel a little better that he isn't actively steering people that way anymore:
https://www.mrmoneymustache.com/2012/09/24/the-lending-club-experiment/

chasesfish

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Re: Lending Club - Time to panic?
« Reply #276 on: March 30, 2018, 06:52:18 AM »
I noticed today that on MMM's initial LC article, there is now a disclaimer near the top. I don't know when this went up, but it makes me feel a little better that he isn't actively steering people that way anymore:
https://www.mrmoneymustache.com/2012/09/24/the-lending-club-experiment/

I started my account in 2011.  It had a good run from 2011 to 2014, then fell off a cliff

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #277 on: March 30, 2018, 09:10:14 AM »
I noticed today that on MMM's initial LC article, there is now a disclaimer near the top. I don't know when this went up, but it makes me feel a little better that he isn't actively steering people that way anymore:
https://www.mrmoneymustache.com/2012/09/24/the-lending-club-experiment/

I started my account in 2011.  It had a good run from 2011 to 2014, then fell off a cliff
I started later than you, but had a similar good run that ended. I'm too lazy to look up the dates exactly, but like most everyone now I am losing money month over month (and actively trying to get out). I followed the MMM strategy of high risk/high return; I wonder if the lower-risk notes have also had increased default rates. Of course the return rates were never high enough in the A-C notes to justify allocating money there away from stocks/bonds.

On the liquidation front, so far I haven't sold a single loan that is in either late period (16-30 days or 31-120 days). I have sold a couple Grace Period loans, and a bunch of current.

Anyone know what kind of discount is needed before someone will take a chance on these toxic assets? I've been ratcheting up the discount over time, currently at 10%.

Outside the Box

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Re: Lending Club - Time to panic?
« Reply #278 on: March 30, 2018, 10:32:51 AM »
On the liquidation front, so far I haven't sold a single loan that is in either late period (16-30 days or 31-120 days). I have sold a couple Grace Period loans, and a bunch of current.

Anyone know what kind of discount is needed before someone will take a chance on these toxic assets? I've been ratcheting up the discount over time, currently at 10%.

For lates, I couldn't sell any for more than 50%. The 31-120 I had to discount even more deeply. I'm so glad to have completed my liquidation months ago.

I was more conservative, so thankfully I had many current. If you look through my post history, I detailed the process.

blinx7

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Re: Lending Club - Time to panic?
« Reply #279 on: March 30, 2018, 10:38:02 AM »
On the liquidation front, so far I haven't sold a single loan that is in either late period (16-30 days or 31-120 days). I have sold a couple Grace Period loans, and a bunch of current.

Anyone know what kind of discount is needed before someone will take a chance on these toxic assets? I've been ratcheting up the discount over time, currently at 10%.

For lates, I couldn't sell any for more than 50%. The 31-120 I had to discount even more deeply. I'm so glad to have completed my liquidation months ago.

I was more conservative, so thankfully I had many current. If you look through my post history, I detailed the process.

I have no experience in lending club but I do work in commercial real estate so am very familiar with lending generally.  A 10% haircut for a loan that is late beyond grace period on a troubled platform seems wildly optimistic.  Would you advise someone to buy what you are trying to sell?  50% sounds more likely. 
« Last Edit: March 30, 2018, 10:41:11 AM by blinx7 »

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #280 on: March 30, 2018, 10:41:40 AM »
On the liquidation front, so far I haven't sold a single loan that is in either late period (16-30 days or 31-120 days). I have sold a couple Grace Period loans, and a bunch of current.

Anyone know what kind of discount is needed before someone will take a chance on these toxic assets? I've been ratcheting up the discount over time, currently at 10%.

For lates, I couldn't sell any for more than 50%. The 31-120 I had to discount even more deeply. I'm so glad to have completed my liquidation months ago.

I was more conservative, so thankfully I had many current. If you look through my post history, I detailed the process.

I have no experience in lending club but I do work in commercial real estate so am very familiar with lending generally.  A 10% haircut for a loan that is late beyond grace period on a troubled platform seems wildly optimistic.  50% sounds more likely.
Thanks to both of you for the context. I don't have any experience in this arena, so I didn't know how optimistic I was being! I will go in and re-price my notes to try to shed them.

Honestly, just looking at what Lending Club thinks those notes are worth in their "adjusted NAR" view should have been a clue.

Outside the Box

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Re: Lending Club - Time to panic?
« Reply #281 on: March 30, 2018, 10:46:14 AM »
Thanks to both of you for the context. I don't have any experience in this arena, so I didn't know how optimistic I was being! I will go in and re-price my notes to try to shed them.

Honestly, just looking at what Lending Club thinks those notes are worth in their "adjusted NAR" view should have been a clue.

What I did was price everything, and then 2 times a day I did the "minus button" to decrease them by 25bp until they sold. I would individually sometimes lower the late ones by 50bp or 100bp depending on how I was feeling.

That way you have a process which will eventually sell them at the highest price the market will pay.

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #282 on: March 30, 2018, 11:07:56 AM »
Thanks to both of you for the context. I don't have any experience in this arena, so I didn't know how optimistic I was being! I will go in and re-price my notes to try to shed them.

Honestly, just looking at what Lending Club thinks those notes are worth in their "adjusted NAR" view should have been a clue.

What I did was price everything, and then 2 times a day I did the "minus button" to decrease them by 25bp until they sold. I would individually sometimes lower the late ones by 50bp or 100bp depending on how I was feeling.

That way you have a process which will eventually sell them at the highest price the market will pay.
That's pretty much how I started. I just made a huge jump in the discount of my late notes. I'll keep going from here.

I may not get the highest possible price, but there's an opportunity cost as well. Since you can't sell notes in Default, if you wait trying to sell a late note and it goes to default, you have lost the chance to sell (unless it comes back, which is possible but unlikely). Plus the opportunity cost of the cash I have sitting around in the account until the whole debacle is finished. Since it's an IRA I am going to end up paying Strata (the IRA custodian) for the pleasure of rolling my account over, and if I am reading the terms correctly, this fee is per withdrawal/rollover, and not small (I think $100 or something ridiculous). So I'm trying to fast track this process, at the cost of maybe not totally maximizing the prices I sell at.

tyort1

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Re: Lending Club - Time to panic?
« Reply #283 on: March 30, 2018, 12:00:11 PM »
Good lord, what a clusterf*ck this whole thing turned out to be.  I'm glad I stuck with plain old boring indexing. 

I mean, I maybe have a little bit of stress when the market goes down, but nothing like the aggravation and stress I see around Lending Club investments.  Sheesh.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #284 on: March 30, 2018, 12:44:34 PM »
I'm just resigned to having $2500 or so that can't be liquidated.   That plus another 575 notes that charged off while I owned them should have a nice string of residual recoveries $10-$50 at a time. 

The problem with the recovery idea is who knows what happens to recoveries once Lending Club goes bankrupt.

Oh well, I kept this to a percent or two of my net worth at the peak, lessons learned

Timodeus

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Re: Lending Club - Time to panic?
« Reply #285 on: March 30, 2018, 01:44:47 PM »
Good lord, what a clusterf*ck this whole thing turned out to be.  I'm glad I stuck with plain old boring indexing. 

I mean, I maybe have a little bit of stress when the market goes down, but nothing like the aggravation and stress I see around Lending Club investments.  Sheesh.

Back in 2012 I dipped my toes into Lending Club, buying secondary market notes at discounts (the state I was living in at the time forbade buying directly from LC) and recall being really excited about the concept even though it should have been obvious to me how dodgy this was-50% of notes on the secondary market were selling for more than the total cash you could possibly get out of them, i.e. a scam. After about 6 months I liquidated everything. There wasn't just one thing that was a trigger, but I think the biggest was actually reading the prospectus. The structure of the platform is incredibly complex and the risk is inordinately put on the investor. If LC goes bankrupt, you're screwed, if the borrower defaults, you're screwed, if WebBank (I believe this was the bank holding cash for the transaction) went out of business, you're screwed. The lesson here is read the prospectuses folks.

I also recall an early review of Lending Club calling into question the model of securitization and how it compared to the dodgy securities during the financial crisis. I registered the article in my mind then, and it's becoming apparent to me now how accurate they were. I'm glad I got out while I did.

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #286 on: March 30, 2018, 03:20:42 PM »
Hmmm. Feeling frustrated at work and tempted to go all in with the Jan 2020 put options at the $1.50 strike. At the asking price of $0.20/share the ROI would be 650% in the event of a bankruptcy in the next 21 months.

LOL, not gonna do it. Too risk averse. Not a millionaire either...hmmm.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #287 on: March 30, 2018, 06:16:47 PM »
Hmmm. Feeling frustrated at work and tempted to go all in with the Jan 2020 put options at the $1.50 strike. At the asking price of $0.20/share the ROI would be 650% in the event of a bankruptcy in the next 21 months.

LOL, not gonna do it. Too risk averse. Not a millionaire either...hmmm.

I own a few $2.50 for this June...I may throw a grand or two at that strategy above

HAPPYINAZ

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Re: Lending Club - Time to panic?
« Reply #288 on: April 01, 2018, 03:41:00 PM »
I haven't had any problems with Lending Club.  I originally invested 10K in 21 different loans (most are A, B, C) and have earned $1163 interest.   8 loans are fully paid off, 12 are in repayment, and 1 was charged off (a $263 loss).   I wasn't going after the riskier loans.  I tried to pick loans that I thought would have high probability of payback and so for that has worked for me.  I have been pulling my money out though since I like Peer Street better with it's shorter loan periods. 

appleshampooid

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Re: Lending Club - Time to panic?
« Reply #289 on: April 19, 2018, 08:42:24 AM »
Thanks to both of you for the context. I don't have any experience in this arena, so I didn't know how optimistic I was being! I will go in and re-price my notes to try to shed them.

Honestly, just looking at what Lending Club thinks those notes are worth in their "adjusted NAR" view should have been a clue.

What I did was price everything, and then 2 times a day I did the "minus button" to decrease them by 25bp until they sold. I would individually sometimes lower the late ones by 50bp or 100bp depending on how I was feeling.

That way you have a process which will eventually sell them at the highest price the market will pay.
That's pretty much how I started. I just made a huge jump in the discount of my late notes. I'll keep going from here.

I may not get the highest possible price, but there's an opportunity cost as well. Since you can't sell notes in Default, if you wait trying to sell a late note and it goes to default, you have lost the chance to sell (unless it comes back, which is possible but unlikely). Plus the opportunity cost of the cash I have sitting around in the account until the whole debacle is finished. Since it's an IRA I am going to end up paying Strata (the IRA custodian) for the pleasure of rolling my account over, and if I am reading the terms correctly, this fee is per withdrawal/rollover, and not small (I think $100 or something ridiculous). So I'm trying to fast track this process, at the cost of maybe not totally maximizing the prices I sell at.
I'm now up to selling current notes at a 10% discount and 31-120 days late notes at 92% discount.   90 notes left...
« Last Edit: April 19, 2018, 08:45:57 AM by appleshampooid »

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #290 on: April 19, 2018, 11:33:51 AM »
We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.

The above synthetic short on Lending Club is now up $0.38 plus the original $0.08 credit = $0.46.

Update: the synthetic short described above is now up $0.90 plus the original $0.08 credit = $0.98 per share (Using today's "last" prices).

This might be the smolder before the dumpster fire. I'm kicking myself for only being a spectator on this one.

jrbrokerr

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Re: Lending Club - Time to panic?
« Reply #291 on: April 19, 2018, 01:19:35 PM »
We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.

The above synthetic short on Lending Club is now up $0.38 plus the original $0.08 credit = $0.46.

Update: the synthetic short described above is now up $0.90 plus the original $0.08 credit = $0.98 per share (Using today's "last" prices).

This might be the smolder before the dumpster fire. I'm kicking myself for only being a spectator on this one.

What if LC gets bought by a bigger company at a higher price ?? this could lose big...

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #292 on: April 19, 2018, 02:26:25 PM »
We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.

The above synthetic short on Lending Club is now up $0.38 plus the original $0.08 credit = $0.46.

Update: the synthetic short described above is now up $0.90 plus the original $0.08 credit = $0.98 per share (Using today's "last" prices).

This might be the smolder before the dumpster fire. I'm kicking myself for only being a spectator on this one.

What if LC gets bought by a bigger company at a higher price ?? this could lose big...
There's that risk of being acquired and then there's the risk they do some kind of operational improvement to make their business model work. I've seen dumber acquisitions and I've seen stranger turnarounds succeed. Guess I shouldn't kick myself too hard. After all, a synthetic short can lose a theoretically infinite amount.

Risk #1 became less likely as interest rates rose and volatility returned. That probably explains the past few months.

Risk #2 is an issue of "if they haven't been able to fix the problems in all these years..." However a leadership shakeup could really pop the stock in the short term.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #293 on: April 19, 2018, 03:10:16 PM »
I bought some $2.50 put options for June, it hasn't dumpster fired enough yet for me to make any money

ChpBstrd

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Re: Lending Club - Time to panic?
« Reply #294 on: April 20, 2018, 12:24:09 PM »
I bought some $2.50 put options for June, it hasn't dumpster fired enough yet for me to make any money
Well, if the overall market tanks, LC is likely to double-tank, so at least this short exposure offsets some systemic risk from the rest of your portfolio. It's definitely a multi-year play. I might wait for a bout of good news and then get in. It's rare for an individual investor to obtain essentially a customer satisfaction survey like this thread.

Outside the Box

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Re: Lending Club - Time to panic?
« Reply #295 on: April 20, 2018, 01:33:53 PM »
Well, if the overall market tanks, LC is likely to double-tank, so at least this short exposure offsets some systemic risk from the rest of your portfolio. It's definitely a multi-year play. I might wait for a bout of good news and then get in. It's rare for an individual investor to obtain essentially a customer satisfaction survey like this thread.
I feel bad dancing on their grave. I liked the business model. Lend to people at rates lower than banks and get paid higher than bank interest. I viewed it as high-interest bond investing.

I filtered by purpose, long employment history, low utilization ratio, low DTI, etc. I only invested in A-C. I was very non-risk tolerant when it came to this platform.

It was fine for a long time. I remember what a punch in the gut my first default felt like. I felt like "how could they do this (the borrower)?" But, I persisted for years. I dumped more and more money into it through the Roth IRA because it still seemed like a good investment overall in my portfolio. It was never over 10% of my portfolio.

Then, I started noticing lots more defaults and the rates were much higher. Why would a good borrower borrow from LendingClub if they could get the same or better rate from a real bank? They wouldn't, right? Ergo, sub-prime, in my opinion.

The whole thing looks like a house of cards to me now. I'm glad I took the hit and liquidated last year and got my money out to Vanguard, even though Trump has tanked the market since then with his trade war. I have long-term hope in the US/Intl stock markets that I no longer have in LC.

Again, I hate to dance on their grave, but the company as it is now seems beyond saving to me. I'm worried the people currently invested don't know what they really own. I hope I'm wrong.

bdbrooks

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Re: Lending Club - Time to panic?
« Reply #296 on: April 24, 2018, 03:06:21 PM »
About a year ago I took the plunge and invested in LC. I put in $115k. I almost exclusively bought loans on the secondary market. I wrote a program that would search the available loans whenever they put a new batch out (if you go to sell they don't put it up instantly). LC says my returns are double digits, but my calculations come in around 9%. I mostly bought 60 month loans that had 2-3 years worth of payments AND at a discount (you still have to keep an eye out for FICO score dropping). It has worked well, but my wife is wanting me to simplify our finances, and LC (specifically how I am using LC) is not simple.

Even with my program I only catch about 10% of the loans I want. My program checks to make sure there are no notes in the collections log (sometimes customers will call in BEFORE a missed payment). Even when I disabled this check, I didn't get more than 12-15% of the loans I requested. So that tells me that there are some quick people probably with co-located servers. They probably have as much capital to buy loans that return >12% after defaults. So that probably caps my gains at 10%.

Those two reasons have led me to wind down the portfolio. I have started withdrawing $5000 every 2 weeks. My portfolio is mostly notes with less than 2 years left, so payments are mostly principle at this point. I have been listing by loans to sell for a 5-10% premium and I have sold about 3-4% of my portfolio that way, but I'm mostly letting it unwind.

I thought I would share since I took a different approach than most people here. I had better results over the last year than most people on lending club, but it still didn't seem worth it since it is a matter of time before those bots buying up the secondary loans eat up more and more of the loans I would have bought.

uwp

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Re: Lending Club - Time to panic?
« Reply #297 on: April 25, 2018, 11:01:31 AM »
More bad news...
"FTC charges LendingClub with collecting hidden fees on loans"
https://www.marketwatch.com/story/ftc-charges-lendingclub-with-collecting-hidden-fees-on-loans-2018-04-25

FIPurpose

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Re: Lending Club - Time to panic?
« Reply #298 on: April 25, 2018, 11:39:54 AM »
Ohh yep LC stock is hitting a new low. Looks like it will be dropping to the 2.80 range.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #299 on: April 25, 2018, 12:31:44 PM »
My $125 investment in put options doubled today.  Still waiting out the earnings report.