Friday, September 16, 2011

Second Month Of Lending Club

(See other Monthly Status Updates)

So it's been two months and things are still looking pretty good. I've had a 4.5% growth in the funds I deposited. 58 Days ago I bought my first notes. I've been adding a little money to my account over the last two months, but if I had put it all in at the beginning, that would be an annualized rate of 32%. Since my minimum target is 16% per year, I think double is a good rate.

I've moved from a Google spreadsheet to a custom tool I developed that grabs the data directly from Lending Club's website. This way I am not limited by the amount of data I am willing to copy into a spreadsheet, it cuts down on the time I spend entering data (none) and I have more flexibility with what I do with the data. I now can spend less than 10 minutes a day to sell dozens of notes and buy at least a half dozen notes.

In a previous post I stated that I was going to change my strategy to cut down on the number of trades I do. This was mainly to cut down on the time. Every note that I bought I would enter a limited set of data into a spreadsheet. For each not I sold, I would add some more data about the sale. All this manual entry was time consuming. Now with my new tool, I can trade more frequently with less time being taken to enter data. Buying notes still takes a bit of time to find the right notes to buy. I wish Foliofn had better filters (like "only show notes with Yield to Maturity greater than X").

So I am still Top of the Class. My Net Annualized Rate dropped to 21.79% (or 22.01%, depending on where I look). The lowest it has been was 21.68%. Lending Club reports that for "Investors Like [Me]" 100% have a NAR less then me. Less than 4% of all Lending Club investors get over 18%.  "Investors Like [Me]" dropped to 5.56% NAR and overall average remains at 9.64%.

I'm still not convinced this is more than beginners luck. I am, however, transferring a larger chunk of funds into my account.

Currently I am holding about 1/3 of the notes I've ever held. Or, in other words, I've sold twice as many notes as I currently hold. The notes I sell I hold for an average of about two weeks. The average return is really high because I've sold some notes for a premium (I really wanted to hold them) the day after I got them. When you annualize that, it gets pretty crazy. However, my median annualized return from selling notes is 43.7%. The notes I am currently holding I've held for an average of about two weeks. The purchase price of the notes I am holding now average $18.27.

I still haven't had a default. I focus on buying high interest rate notes in their first year with either the highest Yield to Maturity or the lowest Markup (roughly equivalent). I want the notes to be $25 fractions of the overall loan. Then I sell the note for somewhere between 16% and 32% annualized (assuming it sells in 7 days). Since I don't hold notes for more than two weeks on average, that means no note really even has a chance of defaulting. That and I choose notes in the first year, which is the least likely time to default on a note (in my opinion).

I've found that there is a limited number of low Markup (or high Yield to Maturity) $25 fraction notes for sale. There are several in the range of $250 fraction, but the minimal ones tend to have a higher markup. The opportunity is there to take the lowest Markup $25 fraction notes and mark them up higher. If I can continually buy all the lowest Markup $25 fraction notes, and make sure the lowest ones are the ones I am reselling, then it increases the demand for my notes. At least that's the theory.


  1. I am working on a secondary market alternative portal that allows more elaborate filtering.

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  3. Wow. Michael that is impressive. I can't imagine how you put that all together. It's amazing. I'll definitely be looking though there for tweaks to my rules.