I am a day early with my weekly news roundup this week because I am heading off on vacation with my family for a few days. But here is the major news of the past week that I shared on Twitter.
We had many blogger updates this week and we also saw not one but two new p2p lending companies launch in the UK. It really is a vibrant marketplace across the pond and just shows what kind of innovation would be happening if the regulations here were not so burdensome. Speaking of innovation I want to point out the article on Gigaom about Lenddo, a new kind of lender that takes social connections into account when making loans. While not a p2p lender they are using many principles that could (and probably will be) easily be adapted by p2p lenders in the future. Enjoy your weekend.
My Money Blog – Prosper vs. LendingClub: Credit Card Debt Consolidation Loan Comparison
Random Thoughts – Lending Club Loan Issued Date and Default Rate
Bible Money Matters – Lending Club Returns Closing In On 12%
Wiseclerk (UK) – Squirrl Launch – Secured Loans to Suppliers
Gigaom – Credit scores, with a little help from your friends
MarketWatch – SoMoLend Closes $1.17M Seed-Round
FT Advisor (UK) – Massow launches peer-to-peer lending venture
Lending Club Experience – Ten Months on Lending Club, Brutal Reality Hits
Lucrative Lending – P2PXML Rate Groups: An Attempt to Standardize Loan Grades Across P2P Lending Platforms
Fast Company – Shaking Up Crowdfunding
Narrow Bridge Finance – Lending Club Update – May 2012
Lucrative Lending – Invest in P2P Lending While in Debt? Generally Not a Good Idea.
WOW! Marc @Lending Club Experience is a long way from his Sept/Oct postings about being in the top 100% of investors by returns and an NAR above 20%. He appears to be currently sitting on a negative return, Ouch!
Lou
Peter…………How can you go on vacation when you’re already on vacation? 🙂
My six months is Sydney is not exactly a vacation – the last couple of months I have been working as hard as do when I am in Denver….
I’m not so surprised about the LC Experience post. He’s been buying only on the secondary market.
It’s true that some people sell on the secondary market just for the small markups, but, most people (such as myself) use it to sell problem notes, which I think he had been buying a considerable amount of. Even with the face-value discounts he was getting, problem notes are problem notes, and a high percentage of them eventually go into default/charged off status.
@Lou/@Danny, From what I have read of Marc’s posts he focuses only on good notes that are for sale, trying to avoid any problem notes. But I don’t think he fully realized how to do that until recently.
Peter, do you remember that guy with the blog headline proclaiming 24% returns y/y? This was after something like 3 months on LC. We all know his XIRR is going to come crashing down, it’s just going to take a couple months. That was Marc seven or eight months ago announcing he was in the top 99.5% of investors by returns. has he really figured out how to avoid the bad loans? We won’t know for months. maybe he’s picking up DanB’s sloppy seconds (since Dan has a super secret way of getting rid of bad loans before they look bad). If someone had followed Marc’s blog and mimicked his strategy, that person could also be sitting on a negative return.
Lou
@Lou, I do remember this guy and it was different from what you are saying. (Here is the post Lou is referring to: http://thomasdelong.com/2012/04/21/prosper-april-update-seasoned-returns-are-24-yy/). This guy is a Prosper investor with an account that is about 8 months old. He even said himself on that post that he expects his returns to drop to around 15% and I would agree with that. But I would also say it is a LOT easier to earn 15% at Prosper as a retail investor than it is to earn 15% at Lending Club using only the trading platform.
I would bet serious money that regardless of whether you’re a retail investor or not, that it’s virtually impossible to earn a 15% long term return at LC investing in 3 year notes exclusively. I’m no fan of the 5 yr notes, but you would need to allocate at least 30% of your portfolio to them if you wanted to have even the theoretical possibility of achieving15% long term on Lending Club. Of course all of the above is based on the platform interest rates not deviating substantially from the range that we’ve experienced these last 3-4 years.
@Dan, I think for anyone to have a hope of 15% long term at Lending Club they need a good portion in 5-year loans. I would even say more than 50%. But, of course, the jury is still out on 5-year loans as to whether they do provide a better long term return. What we do know is that they have the potential to give better returns than 3-year loans.
After reading these comments, I’m looking forward to sharing how my portfolio containing 43% 5-year term notes, all purchased in LC’s secondary market performs as more time passes.
@Brady, I am looking forward to hearing your results as well. We don’t have enough “trading platform only” investors sharing their returns here. I saw your initial update last month on your blog and you are off to a good start.
I’d be very interested too see how the 5 yr. portion of your portfolio performs too…………….assuming that we’re talking about at least 400+ loans & that they are on average 2+ years old when you tell us how they’re doing. Personally, I find that portfolios that don’t meet the above thresholds much less interesting & much less illuminating.