Title: FOLIOfn Selling Strategy... Flawed?
Post by: Keltset on November 15, 2012, 11:00:00 PM
Post by: Keltset on November 15, 2012, 11:00:00 PM
I have not participated in the secondary market until now and just started playing around with it a bit. I initially thought I could just re-price all my notes to a 2-4% markup (depending on the note and my valuation of it to my portfolio) over par and make a quick buck or two on anything that sells because I would be selling at a premium over the service fee charged by foliofn for selling the note. My thought being that I would always be selling for a better and currently i'm not having a problem getting those funds re-invested into notes that meet my investing requirements. I thought this might give me a slight bump in my quarterly ROI numbers because the added points would be a bonus if the funds were re-invested quickly enough.
I'm now starting to question this thought process as wholly flawed as I'm starting to see which notes are selling and which aren't. I'm specifically looking at notes with increasing credit scores (that are now overpaying interest because of improved credit rating[IE this is a safer note to stay in]) or notes that have reached or are close to reaching the up to average default length (1yr)...
Does anyone have any thoughts or considerations on this methodology of note flipping? Do you think I'm doing more harm by increase the risk of getting stuck with defaulting notes because the more seasoned a note gets the more likely it seems to sell...
-Keltset
I'm now starting to question this thought process as wholly flawed as I'm starting to see which notes are selling and which aren't. I'm specifically looking at notes with increasing credit scores (that are now overpaying interest because of improved credit rating[IE this is a safer note to stay in]) or notes that have reached or are close to reaching the up to average default length (1yr)...
Does anyone have any thoughts or considerations on this methodology of note flipping? Do you think I'm doing more harm by increase the risk of getting stuck with defaulting notes because the more seasoned a note gets the more likely it seems to sell...
-Keltset
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 15, 2012, 11:00:00 PM
Post by: TravelingPennies on November 15, 2012, 11:00:00 PM
I'm a Folio-only investor, so I buy all my notes there. I never buy any "used" notes (i.e., payments have been made) over a 2% markup so I would not touch any of yours. (Everyone has their own strategy, though, so that's just one person's opinion.) If you go in and sort by markup and "never late", there are almost 3000 notes priced at less than 1% markup. People are probably just not seeing your notes at 2-4% markup because they find something they like with a better price before they ever get that far. Try to think of how people are searching for and finding notes, and then ask how they would find yours. It needs to be somewhat close to the top in some sensible search like low markup or high yield.
I have given up on "used" notes for a while and have started buying them just-issued. (I sort by loan and note number to find the newest ones.) I think flipping very fresh notes at thin margins would be a great strategy - I see almost no notes available at <2% markup unless they are really bad notes, so they must be disappearing quickly at that price point. I will go up to 3% markup ($25.75) for a very good just-issued note. Say it takes a week to sell each note, with a 2% markup you're making .25 cents a week per note, after fees. $13 annually on a $25 investment...? Yeah... I really wish they would approve LC in my state so I could do this.
I have given up on "used" notes for a while and have started buying them just-issued. (I sort by loan and note number to find the newest ones.) I think flipping very fresh notes at thin margins would be a great strategy - I see almost no notes available at <2% markup unless they are really bad notes, so they must be disappearing quickly at that price point. I will go up to 3% markup ($25.75) for a very good just-issued note. Say it takes a week to sell each note, with a 2% markup you're making .25 cents a week per note, after fees. $13 annually on a $25 investment...? Yeah... I really wish they would approve LC in my state so I could do this.
Title: FOLIOfn Selling Strategy... Flawed?
Post by: yojoakak on November 15, 2012, 11:00:00 PM
Post by: yojoakak on November 15, 2012, 11:00:00 PM
I'm often hesitant to buy "fresh" notes with no payments.
I mean, if someone just planned to sell their notes on to Foliofn immediately, how much time did they spend choosing good notes?
And a fresh note with a markup of 0% (or even less sometimes) makes no sense to me at all. (LendingClub "topping off" loans and then selling them on to Foliofn, maybe?)
In any case, I'm often surprised by which of my notes will get bought on Foliofn. Sometimes it doesn't seem to make a lot of sense.
I mean, if someone just planned to sell their notes on to Foliofn immediately, how much time did they spend choosing good notes?
And a fresh note with a markup of 0% (or even less sometimes) makes no sense to me at all. (LendingClub "topping off" loans and then selling them on to Foliofn, maybe?)
In any case, I'm often surprised by which of my notes will get bought on Foliofn. Sometimes it doesn't seem to make a lot of sense.
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 15, 2012, 11:00:00 PM
Post by: TravelingPennies on November 15, 2012, 11:00:00 PM
Fresh notes with no payments are just like buying notes on the retail platform, but with a slight markup (a tax for being in a Folio-only state, I guess). I have no problem with that.
As for picking notes carefully, I don't really care - I am as careful as I want to be and use my own filters to make sure any note I buy on Folio matches what I am looking for. I don't care who picked it or why. If they pick poorly, their notes won't sell and they'll be stuck with lousy notes they can't get rid of. I think you're more likely to get good notes from a flipper than you are from someone who buys good notes and then sells off the ones that start looking bad (dropping FICO, etc.).
As for pricing - keep in mind "fresh" notes can be up to 30 days old and they may have racked up a decent amount of interest already. If you put it up at 25.50 and there is .40 of interest on it, it is a 2% markup over what they originally paid but will show as a 0.3% markup in Folio.
As for picking notes carefully, I don't really care - I am as careful as I want to be and use my own filters to make sure any note I buy on Folio matches what I am looking for. I don't care who picked it or why. If they pick poorly, their notes won't sell and they'll be stuck with lousy notes they can't get rid of. I think you're more likely to get good notes from a flipper than you are from someone who buys good notes and then sells off the ones that start looking bad (dropping FICO, etc.).
As for pricing - keep in mind "fresh" notes can be up to 30 days old and they may have racked up a decent amount of interest already. If you put it up at 25.50 and there is .40 of interest on it, it is a 2% markup over what they originally paid but will show as a 0.3% markup in Folio.
Title: FOLIOfn Selling Strategy... Flawed?
Post by: faeriering on November 16, 2012, 11:00:00 PM
Post by: faeriering on November 16, 2012, 11:00:00 PM
Sarah,
I really like your idea of just selling fresh notes on Folio, the challenge that I have for you is when purchasing notes on LC directly, there is usually a decent lag from when the money is invested until the note is issued, and if a note fails to be issued, there you have to go back through the investment selection process again. So it might take longer than 60 days to reinvest that money, which would cut your return in 1/2 on that 25$ investment. Though that's still a decent return like 25% on an annual basis, so might be worth looking into. Do you prefer higher interest loans or lower interest loans?
-Megan
I really like your idea of just selling fresh notes on Folio, the challenge that I have for you is when purchasing notes on LC directly, there is usually a decent lag from when the money is invested until the note is issued, and if a note fails to be issued, there you have to go back through the investment selection process again. So it might take longer than 60 days to reinvest that money, which would cut your return in 1/2 on that 25$ investment. Though that's still a decent return like 25% on an annual basis, so might be worth looking into. Do you prefer higher interest loans or lower interest loans?
-Megan
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 16, 2012, 11:00:00 PM
Post by: TravelingPennies on November 16, 2012, 11:00:00 PM
Ah, I see. I don't have any experience with the direct-purchase side of things since I can't even get to that part of the site.
My preferences on interest rates - I don't buy anything under 12-13% just because after I pay 2-3% markup in Folio and 1% of all payments to Lending Club (which is another 1-2% of the initial price) any lower-interest loans are going to have pretty low returns after you subtract that. Most of the notes I end up with are somewhere in the B5-E5 range (because F & G loans rarely meet my criteria for a good loan).
My preferences on interest rates - I don't buy anything under 12-13% just because after I pay 2-3% markup in Folio and 1% of all payments to Lending Club (which is another 1-2% of the initial price) any lower-interest loans are going to have pretty low returns after you subtract that. Most of the notes I end up with are somewhere in the B5-E5 range (because F & G loans rarely meet my criteria for a good loan).
Title: FOLIOfn Selling Strategy... Flawed?
Post by: rawraw on November 16, 2012, 11:00:00 PM
Post by: rawraw on November 16, 2012, 11:00:00 PM
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 16, 2012, 11:00:00 PM
Post by: TravelingPennies on November 16, 2012, 11:00:00 PM
Oh, I don't know... it varies a lot. Some days I log in and find a great one on the first page of searches, some days I don't find any in 15-20 minutes of looking. I'm a smallish investor (~200 notes) so I don't mind spending a few minutes to pick each note.
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 17, 2012, 11:00:00 PM
Post by: TravelingPennies on November 17, 2012, 11:00:00 PM
Okay Sarah, I'm trying it out. I've posted all of my notes that are "issued" forsale on FolioFN at either 25.50 or 25.75. It's about 75 notes. We'll see how long they take to sell. Hopefully some of them will fit your criteria 
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 17, 2012, 11:00:00 PM
Post by: TravelingPennies on November 17, 2012, 11:00:00 PM
Let us know how they do!
I should have money in my account tomorrow to do some buying...
I should have money in my account tomorrow to do some buying...
Title: FOLIOfn Selling Strategy... Flawed?
Post by: Peter on November 18, 2012, 11:00:00 PM
Post by: Peter on November 18, 2012, 11:00:00 PM
Seems what you're all dancing around is thus:
The ability for Folio-only investors to signal to investors in approved states their willingness to purchase X note for y% markup, and then
have the approved-state investors "do your bidding", after which they'll put that particular note up on Folio for the non-approved to buy.
Personally, I think LC is on shaky legal ground allowing the sale of notes on its secondary market to users in states where the notes are
not approved (and I think anyone who systematically did such as a venture would likely be treading further onto shaky ground), but with
that said, I think that's really where what you're all talking about ultimately winds up. So, if someone's gonna do it - let's get on with it...
Am I reading this wrong or is that the model that you're all hoping appears? This thread feels a bit like being back in high school:
"Yeah, I'd, uh, like to buy an ounce of... baseball tickets. Something pretty high - I mean... up near.. the owner's box, you know?"
The ability for Folio-only investors to signal to investors in approved states their willingness to purchase X note for y% markup, and then
have the approved-state investors "do your bidding", after which they'll put that particular note up on Folio for the non-approved to buy.
Personally, I think LC is on shaky legal ground allowing the sale of notes on its secondary market to users in states where the notes are
not approved (and I think anyone who systematically did such as a venture would likely be treading further onto shaky ground), but with
that said, I think that's really where what you're all talking about ultimately winds up. So, if someone's gonna do it - let's get on with it...
Am I reading this wrong or is that the model that you're all hoping appears? This thread feels a bit like being back in high school:
"Yeah, I'd, uh, like to buy an ounce of... baseball tickets. Something pretty high - I mean... up near.. the owner's box, you know?"
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
You're reading too much into it!
All I am saying is that I see a way to make money on Folio, because I always buy a certain type of note and there is often a shortage of good notes of that type in that price range. If I were in a state where I could use that strategy I would try it out for sure. And as a bonus, if more people used this strategy they would help out the FolioFN users while they make a tidy profit.
I don't really know if it will work (it depends on volume of note trading on FolioFN, whether there is really a shortage of those notes or just a lack of interest on both sides of the transaction), but there's not really any way to lose by putting them up for a quick sale, so it seems like a no-brainer to give it a try.
I'm certainly not offering to buy them all, I haven't got that kind of cash invested
All I am saying is that I see a way to make money on Folio, because I always buy a certain type of note and there is often a shortage of good notes of that type in that price range. If I were in a state where I could use that strategy I would try it out for sure. And as a bonus, if more people used this strategy they would help out the FolioFN users while they make a tidy profit.
I don't really know if it will work (it depends on volume of note trading on FolioFN, whether there is really a shortage of those notes or just a lack of interest on both sides of the transaction), but there's not really any way to lose by putting them up for a quick sale, so it seems like a no-brainer to give it a try.
I'm certainly not offering to buy them all, I haven't got that kind of cash invested
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Title: FOLIOfn Selling Strategy... Flawed?
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Post by: TravelingPennies on November 18, 2012, 11:00:00 PM
Title: FOLIOfn Selling Strategy... Flawed?
Post by: Peter on November 18, 2012, 11:00:00 PM
Post by: Peter on November 18, 2012, 11:00:00 PM
I merely think that they're in a super-position of states and that no control has yet been established over the sale of notes into secondary markets, much the same way that tax treatment of "member dependent notes" is also still a matter of interpretation.
And much the same way that the status of "loans" (now "notes") were in a super-position of states before the SEC "observed".
So, to answer directly, is LendingClub doing anything "illegal"? Magic 8-ball says "unclear", since the only way to find out if they happen to be is if some regulatory entity steps in and says that they are, after the fact. Don't get me wrong, I think that sucks - but it is a risk...
And much the same way that the status of "loans" (now "notes") were in a super-position of states before the SEC "observed".
So, to answer directly, is LendingClub doing anything "illegal"? Magic 8-ball says "unclear", since the only way to find out if they happen to be is if some regulatory entity steps in and says that they are, after the fact. Don't get me wrong, I think that sucks - but it is a risk...
Title: FOLIOfn Selling Strategy... Flawed?
Post by: Keltset on November 18, 2012, 11:00:00 PM
Post by: Keltset on November 18, 2012, 11:00:00 PM
I posted all my notes for sale with a markup irrelevant of my intent to keep them or not. All notes I buy I wouldn't purchase unless I intended to keep them so if they are not bought I do not run into a problem. I started posting clean just issued notes for sale @ a rate of 25.50 to 26.00 and depending on the interest rate of the note. I just went to look at how my "issued" notes are performing on the secondary market and see that I have 8 listed right and of the 8 listed two sold for 25.65 and another at 25.50. Another thing I would want is an extra month or so of interest out of my note sale after the service fee. I have no problem getting my funds re-investing into an interest earning state within 10-14 days and the FAR end. But I'm also a small player.
My biggest concern with continually posting my notes for sale, including my seasoned notes, is that I'm reducing my diversification by insisting that my average note balance remains higher than it would if I were to let more of my notes run their course. This is because I find the more seasoned notes sell faster on the secondary market. This is what I was trying to get at in my post and do not think I worded it clearly enough. Instead of having notes that ride the range of $25.00 to a buck or less I'm constantly pushing my average outstanding principle balance back towards that 25.00 mark. This means I hold less notes for the amount of funds that I have invested, and increases the damage that defaults can do to my portfolio. I suppose this risk is mitigated through larger investments (meaning more notes) but at this time I only have roughly 2 grand. This is what I mean by the question, am I doing more harm than good by doing this?
-Keltset
My biggest concern with continually posting my notes for sale, including my seasoned notes, is that I'm reducing my diversification by insisting that my average note balance remains higher than it would if I were to let more of my notes run their course. This is because I find the more seasoned notes sell faster on the secondary market. This is what I was trying to get at in my post and do not think I worded it clearly enough. Instead of having notes that ride the range of $25.00 to a buck or less I'm constantly pushing my average outstanding principle balance back towards that 25.00 mark. This means I hold less notes for the amount of funds that I have invested, and increases the damage that defaults can do to my portfolio. I suppose this risk is mitigated through larger investments (meaning more notes) but at this time I only have roughly 2 grand. This is what I mean by the question, am I doing more harm than good by doing this?
-Keltset