Andy,
Yes, you reoplied to me months ago, but I finally decided to wind down my LC investments and not reinvest. Instead I am slowly moving my money out of LC and into Fidelity funds.

Quote"> from: andy3109 on August 26, 2016, 10:21:11 PM

Here is more confirmation of the vaidity of my devcision to migrate out of LC.

http://seekingalpha.com/news/3232417-lendingclub-loss-rates-picking-compass-point?app=1&dr=1&uprof=45&utoken=b62127f07c7665796cfda9e0cbac8e9b707e3d77#email_link

I have been doing well with Fidelity using the advice I get on www.fmandi.com

I have lost as much money to defaults as I have made in Lending Club.
I am still ahead and have made money, but I would make more money if I shifted my money to Fidelity and polaced it in a DJ linked fund.
Slowly, I am moving my funds out, not reinvesting.

I have changed my expectations for my LC investments from 9% to 7% to anything between 6-7%

At least we are still making money.

bdonovan,

Now you have to find out where those guys go for lunch, and casually sit at a table near them and listen carefully! 

bdonovan's questions which started this thread are terribly interesting!

The implied question in his post is how to increase the probability that a borrower will pay back a loans.
Another way to put it is, how to reduce defaults.

The better you can predict default rate, the better returns.
I do not know how interest rates are determined for an individual. I suppose that FICO is a primary variable used in that formula. I assume that FICO is a good predcitor of financial reliability-risk.

I suppose if you did a deep interview, a full psychological assessment, and took one of the borrower's children as a hostage, you could increase probability of repayment. I suppose that more in depth data collection would cost more.  There has got to be some set of data which are the best predictors of probability of default. I guess those variables could be determined using factor analysis.

Since any statistical prediction only has a particular margin of error, the more loans the less the variance.
This all and bdonovan's question, makes me want to learn more about the science and math of making loans.
I had taken stats in grad school, but I just don't remember enough to solve this problem, now.
I do wonder if LC gathers enough data and provides the data to us for us to be able to improve the prediction of default rates.

For me, the good news is that loads of G, F and E rated notes are returning.

As far as Folio goes, immediately after a note gets issued, I list in on Folio at between a 5% to 8% markup.
I don't seriously expect it be bought, but I figure, that if I can get even one person to buy a 27% loan at 5-8% within the first couple of months, and then I take that money and buy another loan, I have profited right away.

Did you ever find an interesting topic for your thesis?

What was your major?  A thesis for behavioral economics would ask a different question than a thesis for finance.