P2P Lending / NFT Lending Forum

Lending Club Discussion => Investors - LC => Topic started by: PeerSocialLending on May 11, 2014, 11:00:00 PM

Title: No best loans on LC platform - are you serious?
Post by: PeerSocialLending on May 11, 2014, 11:00:00 PM
I found this Forbes article pretty fascinating and would love to hear some thoughts from others.  It basically talks about how all loans are created equal and that there is no evidence that any investor can consistently generate better than average returns. Obviously, this doesn't include the folio folk.  :)

http://www.forbes.com/sites/stevenbertoni/2014/05/12/no-hedge-funds-arent-hijacking-peer-to-peer-loans-says-lending-club-ceo/
Title: No best loans on LC platform - are you serious?
Post by: SBryantMS on May 11, 2014, 11:00:00 PM
I disagree on one major point -- not 45 risk buckets -- but seven risk buckets for me (A - G).

I do believe that there are better loans (lower default potential) in each risk bucket.  I use P2P-Picks to identify those loans.

I also believe that statistically that there are better loans (do not payoff early) in each risk bucket.  I don't have a tool for that loan type. 

With P2P-Picks, I am riding about 1.5% higher on the wave when I look at LC's graph that compares me to similar lenders.
     
Title: No best loans on LC platform - are you serious?
Post by: daniel2023 on May 11, 2014, 11:00:00 PM
from: PeerSocialLending on May 12, 2014, 01:26:10 PM
Title: No best loans on LC platform - are you serious?
Post by: Zach on May 11, 2014, 11:00:00 PM
That's a great article. Thanks for sharing!
Title: No best loans on LC platform - are you serious?
Post by: Lovinglifestyle on May 11, 2014, 11:00:00 PM
"There is no evidence that any investor has generated better than average returns on the platform consistently."  (from the article)

Are Folio users excluded from all that "evidence"?  Are their Folio gains and losses excluded and considered to average out, since their return statistics can't be calculated?
Title: No best loans on LC platform - are you serious?
Post by: rawraw on May 11, 2014, 11:00:00 PM
I think his point is that that rank order risk predictably.  Not quite the same thing as inferring that this means there are no better or worse loans -- perhaps he got confused lol
Title: No best loans on LC platform - are you serious?
Post by: Fred on May 11, 2014, 11:00:00 PM
from: Lovinglifestyle on May 12, 2014, 06:15:17 PM
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 11, 2014, 11:00:00 PM
I have often rejected loans that are approved and verified.  It makes me grit my teeth, but my view of risk doesn't match theirs.  Ditto for the Build A Portfolio choices.  If their statistics were more transparent there might be some evidence to the contrary. It's pretty convenient to just say there isn't any.
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 11, 2014, 11:00:00 PM
from: Lovinglifestyle on May 12, 2014, 06:15:17 PM
Title: No best loans on LC platform - are you serious?
Post by: Rob L on May 11, 2014, 11:00:00 PM
from: Fred on May 12, 2014, 08:50:02 PM
Title: No best loans on LC platform - are you serious?
Post by: Booleans on May 13, 2014, 11:00:00 PM
from: Fred on May 12, 2014, 08:50:02 PM
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 13, 2014, 11:00:00 PM
My comment was specifically to counter-argue the "There is no evidence ..." statement in the article.
Title: No best loans on LC platform - are you serious?
Post by: BruiserB on May 13, 2014, 11:00:00 PM
There might not be a best grade of loan.  I can see where LC attempts to have their underwriting criteria and interest rates balanced to provide an even return to investors for any given grade.  However if someone else could do better predictive analysis and even weed out 25% of the loans that will probably default or find a way to predict the ones that won't, then the lower grades offer more potential for higher overall return.

This seems to be what Bryce is doing with P2P picks and what Emmanuel is doing with the "Expected Return" feature of LendingRobot.  Even Peter's relatively simple filters seem to weed out some of the higher risk loans.  It remains to be seen how they perform over the full term of the loans, but I do believe their algorithms can lead to improved performance vs simply investing in random loans.
Title: No best loans on LC platform - are you serious?
Post by: lascott on May 13, 2014, 11:00:00 PM
from: BruiserB on May 14, 2014, 09:41:10 PM
Title: No best loans on LC platform - are you serious?
Post by: Fred93 on May 13, 2014, 11:00:00 PM
from: lascott on May 14, 2014, 10:26:43 PM
Title: No best loans on LC platform - are you serious?
Post by: Rob L on May 13, 2014, 11:00:00 PM
Not to mention a period of time when LC had far less experience underwriting these loans that have been called a new asset class. They've probably gotten better at it.
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 14, 2014, 11:00:00 PM
Still, this is one unbelievably impressive outlier.
More than 500 notes, none > 0.5% of portfolio, 22 months average age and about 17% adjusted NAR!
The weighted average interest rate is 18% or less. That doesn't leave much room for charge offs.
I wonder who it is. Will the winner please step forward and claim their prize!

Title: No best loans on LC platform - are you serious?
Post by: Fred93 on May 14, 2014, 11:00:00 PM
from: Rob L on May 15, 2014, 01:37:42 AM
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 14, 2014, 11:00:00 PM
Read that; also his "The Black Swan" and  Malkiel's "A Random Walk Down Wall Street" among others.
I thought the definition of outlier was a sample far out on the tail of the distribution (and expected, but rarely).
This qualifies, but appears to be so far out there as to possibly imply a measurement error (or a non-random event).
Title: No best loans on LC platform - are you serious?
Post by: brycemason on May 14, 2014, 11:00:00 PM
Simple definition of outlier is exceeding 3 sigma from mean. That account is. But I don't necessarily trust the data. That is quite unlikely, but rare events do happen.
Title: No best loans on LC platform - are you serious?
Post by: mikedave on May 15, 2014, 11:00:00 PM
That person is probably just selling his late notes
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 15, 2014, 11:00:00 PM
Yes, that would have explained it but ...
This is a quote from LC's "Learn More About This Graph":

Quote
Title: No best loans on LC platform - are you serious?
Post by: howler99 on May 15, 2014, 11:00:00 PM
Yes. I see those outliers at the 500 note level with well aged portfolios, and I'm thinking how can I figure out what that guy is doing?

When I was in B school in the 80's, we were taught that no-one can beat the stock market indexes consistently, and basically I still believe that, but I wish like hell I would have had $10k and the wisdom to give it all to Warren Buffett back then. I guess those outliers are the Warren Buffetts of the P2P world.

Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 15, 2014, 11:00:00 PM
Also just noticed that same dot is on my personal return graph. My weighted average rate is just over 19%. This dot isn't in red - meaning either it's being invested at 17% and not getting any charge-offs (or selling on Folio), or it's above 21%. 

Sigh ... this is going to keep me up nights.
Title: No best loans on LC platform - are you serious?
Post by: rawraw on May 16, 2014, 11:00:00 PM
from: brycemason on May 15, 2014, 09:19:15 AM
Title: No best loans on LC platform - are you serious?
Post by: Joleran on May 18, 2014, 11:00:00 PM
What I would expect if there were an actual strategy that beat the market consistently would be that multiple people would figure this out and there would be a small concentration instead of a diffuse, near-normalized distribution.
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 19, 2014, 11:00:00 PM
from: howler99 on May 16, 2014, 09:12:21 PM
Title: No best loans on LC platform - are you serious?
Post by: ThinleyWangchuk on May 24, 2014, 11:00:00 PM
I have accounts that have done well on the LC and Prosper platform.  Data from http://lendstats.com/ will prove investors can outperform in the P2P market.  Luck is great... But, to outperform, skill is necessary.
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 26, 2014, 11:00:00 PM
from: DonDaVinci on May 25, 2014, 09:06:47 PM
Title: No best loans on LC platform - are you serious?
Post by: TravelingPennies on May 27, 2014, 11:00:00 PM
from: rawraw on May 27, 2014, 10:23:23 AM
Title: No best loans on LC platform - are you serious?
Post by: rawraw on May 27, 2014, 11:00:00 PM
Quote"> from: DonDaVinci on May 28, 2014, 06:05:44 PM