Recession. Okay, I said it.
Are we already in one, one shortly to come, a narrow miss or a miss by a mile?
Since the start of a recession is officially declared way after it starts we won't know for a while.
If we are or soon will be in recession we will finally get an answer to that often asked question:
"How will market place lending perform over a full cycle"?
Between prosper 1.0 and early LC loans, we already have enough idea how marketplace lending will perform. The lenders who invested in loans issued in last couple of years will be hosed. Once market settles down at a low, lenders who invest in new loans will have excess returns as economy recovers. The underlying assumption is that credit criteria tightens during recession and loosens during good times.
I hope you are right that banks are in better shape this time. But I have serious doubts. US banks like to capitalize profits and socialize losses. I am pretty sure with current politics-corporate nexus, banks will try to offload liabilities to taxpayers again.
So delinquent and late loans will be written off in bulk, and new loans will not be issued. The funding commitments will be cancelled. Banks and Institutions are like sheep herd, one starts to head to exit means stampede soon.
I am pretty sure LendingClub and others might be scrambling to line up new funding to buy loans. I expect to see retail lenders being courted soon.
LOL, wait and see. Shit hasn't hit the fan yet. When banks and institutions start bailing out on their fund commitments to LC, LC will have no choice but to fallback on retail.
I'd say yes we are in a recession. Will this last 2 quarters to be called a recession? Unsure about that.
I think banks will be OK. I'm starting to buy bank equity and debt exposures.
I decided to try to GTFO. Listed everything for break even prices. People have been nice enough to buy 1/3 of them so far. They are all very aged and stead so as long as things don't get too bad too fast someone is getting a great deal.