Wednesday, April 28, 2010

Thank you HP for taking Palm out of the news

I was getting really tired of news bandwidth being wasted on speculation over the future of Palm, namely who would buy them. HTC, yes, no. Lenovo, maybe. Finally, thankfully, HP just announced that they would be buying Palm for $1.2 billion in cash. Given the iPhone and Android and the upcoming software refresh from Microsoft, et al, the future of the Palm mobile computing devices is still up in the air, but at least the financial future of Palm as a standalone company will be wiped off the media map, for good.

The deal will close sometime over the next three months, before the July 31, 2010 close of HP's third fiscal quarter, so we will still have Palm's financial future in the news for awhile longer, but at least the life of the Palm takeover story has its days numbered.

In a way, it is quite sad to see Palm "go", but this is life in the technology sector.

I personally do not have a cell phone, but I still carry an eight-year old Sony PDA that runs the Palm software.

My biggest question right now is whether HP really intends to actively and wholeheartedly pursue the Palm OS (webOS) beyond the near-term. More specifically, does HP intend to focus on the hardware or the software for mobile devices? Personally, I would rather see HP become more of a U.S. version of HTC and offer both Android and Microsoft mobile device software on their own quality hardware. Sure, keep the Palm OS software for a couple more years, but focus more attention on shifting the Palm app features to Android and Microsoft. But that is just my opinion.

-- Jack Krupansky

Will Greece default on its sovereign debt?

I won't go so far as to say that fears about the fiscal health of Greece and the rest of the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) are "overblown" since these countries really do have severe fiscal problems (as does the U.S. and UK, for that matter), but the concerns need to be put in the perspective of one essential factor: eventually, ultimately, somehow, someway, Greece (and the rest of the PIIGS) will, with absolute certainty, be bailed out in some way, shape, or form by the European financial authorities. The specific details and terms and timing of any bailout may be up in the air, but there is simply too much at stake and too much self-interest in preventing a sovereign default in Europe for the relevant financial authorities to do anything other than do as many bailouts as are needed.

To be sure, nobody wants to do a bailout and bailouts, as a preference, should be considered out of bounds, but this is about reality, not an academic exercise and test of what the proper answers are to an academic exam. Sure, economically a bailout is "unacceptable", but this is really a political problem, so academic ideals get tossed to the wind.

I'm certainly not advocating that anyone should buy or hold (or sell) the sovereign debt of Greece or any other country, but the suggestion by many, as echoed endlessly by the media, that "contagion" from Greece, et al will cause another global financial crisis is, to put it simply, absurd. Sovereign default simply will not happen in the current political regime.

To be sure, the European financial authorities have their hands full, but that in no way indicates that anyone here in the U.S. should lose even two seconds of sleep worrying about the impact of the sovereign debt of Greece or any other country on their own investments.

Besides a series of short-term bailouts, ultimately it will be incremental improvement in global economic growth that will help Greece climb (slowly) out of its financial hole.

In short, It is exceedingly unlikely that Greece will default on its sovereign debt regardless of the gloominess of the short-term economic forecasts for Greece.

In other words: No.

-- Jack Krupansky

Tuesday, April 27, 2010

My latest Lending Club investment loan has been issued

Overnight my latest Lending Club investment loan reached 100% funding and was issued. I now have no loan orders outstanding. This loan was funded with cash flow (interest and return of principle) from my existing portfolio of loans.  Within a week or so my account will accumulate enough additional cash from interest and return of principle to fund yet another loan.

This is still just an experiment for me (less than a year) since I have no prior experience with this type of investment, but so far in has been very encouraging.-- Jack Krupansky

Saturday, April 24, 2010

Why is trading being allowed to drive securities underwriting?

The traditional securities underwriting business of Wall Street at least had some rhyme and reason behind it that made sense for Main Street businesses. Main Street companies needed to raise capital and Wall Street helped them do it, and in the process Wall Street was quite profitable on the fees they earned from helping to underwrite new securities that provided Main Street with capital. This process help build both Wall Street and Main Street and was a prime contributor to the size and health of the American economy. So far, so good. But then Wall Street got lost in the wilderness and began constructing artificial, "synthetic" securities that had the distinctive pair of qualities that they provided enormous profits to Wall Street without providing even a single dime of capital to creditworthy Main Street companies and consumers. What happened? Enter trading, specifically proprietary trading (also known as prop trading), or more specifically, creation of securities whose primary motive was to provide a trading vehicle for Wall Street to generate a continuous profit stream from in-house proprietary trading, all funded by "witless" customers who were sold a bill of goods when they bought the "securities" that funded the trading vehicles.

Although many of the specific details of Wall Street actions have been recounted endlessly (and mindlessly) by the media, nobody has bothered to connect the dots and simply point out that the core problem behind the crisis was the concept of securities which are created primarily for the purpose of Wall Street to trade (endlessly) rather than to provide capital to creditworthy businesses and consumers on Main Street.

Granted, these new-fangled securities did provide a lot of capital, but so much of it was targeted to the least-creditworthy businesses and consumers. It simply wasn't capital that had any chance of helping to build a better and stronger economic base in America.

That's why the so-called sub-prime crisis occurred. Wall Street did not care even the slightest bit about the credit quality of the debt behind any of its new securities. In fact, the shakier and riskier the security, the greater the chance of higher volatility, which is the primary quality of interest to the new breed of trader on Wall Street. Okay, so Wall Street did care about credit quality - they preferred the worst credit quality. That was the primary reason for the sub-prime crisis.

Actually, that was half of the problem behind the crisis. The other half of the problem is that mere bankers, without any great insight into the new Wall Street bias towards bad credit misguidedly loaded up on a lot of these new securities (MBS, CDO, et al) as a major component of their asset base without realizing that it really wasn't AAA quality or even close. This asset-quality deterioration is what caused the bulk of the financial crisis in 2008, but it could not have happened without the deterioration of credit quality on the securities side of the fence.

In the old days, trading was a relatively minor side business for investment banks, needed primarily to "support" the main security underwriting business. Any profits from such trading was mere icing on the cake and not the cake itself. Today, the situation is reversed and trading is the cake and actual securities are the mere icing.

That is why in the latest Goldman Sachs case a mere "trader" is the boss of the guy doing securities deals. Trading is in charge - because trading is where the lion's share of the profits are.

This is also why the big issue for reform is not whether banks should be allowed to engage in investment banking and the underwriting of securities, but that banks should be forbidden from engaging in the kind of trading that led to the whole sub-prime-fueled financial crisis. This is why repeal of the real of Glass-Steagall is not enough and that the Volcker rule is needed to address the trading bias in the securities business.

Where is the media on this? Asleep at the wheel, AWOL, pick your favorite metaphor.

-- Jack Krupansky

Friday, April 23, 2010

Last loan of my recent batch of Lending Club investment loans has been issued

Overnight the last loan in my latest batch of Lending Club investment loans reached 100% funding and was issued. My new order to reinvest accumulated interest and return of principal in yet another investment loan note is now 47% funded with a little less than seven days to get fully funded.

Meanwhile, my Net Annualized Return has moved up to 15.34%, which puts me up at the 89% percentile with only 11% of Lending Club investors earning a higher return than me. I'd like to get that up into the low 90's. I have a total of 52 notes, plus the new one from yesterday that is still in funding.

Even with this doubling of my total portfolio size, my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky

Michael Lewis: Bond Market Will Never Be the Same After Goldman

Financial writer (and former bond salesman) Michael Lewis has an excellent commentary on Bloomberg entitled "Bond Market Will Never Be the Same After Goldman" which is written as if it were a letter to bond traders, telling them what questions Main Street should be asking them, the bond traders, on Wall Street. It starts out:

If you happen to be sitting on the Goldman Sachs bond-trading floor life must feel horribly unfair.

You did nothing worse than live by the ethical assumptions of your market -- any money-making event short of obviously illegal is admirable -- and now your own grandfather thinks you're some kind of monster. Your world feels upside down: What was right is now wrong; what was good is now bad; what once felt like winning now feels like losing.

You are probably wondering: What next? What will the angry rabble -- all those ordinary people who can never really understand your business -- now demand that you explain to them, so they can disapprove of you all over again?

He actually gives us some solid insight gleaned from his own experiences dealing with bond traders.

I think the reference to grandfather and monster is actually a speech by former Federal Reserve Chairman Paul Volcker in which he chastises his very smart grandson, who apparently worked on Wall Street, for using "the Nuremburg excuse" for absolving himself of blame for his role in the financial crisis.

Mr. Lewis also writes:

Your bosses claim to have lost almost $100 million on the Abacus trade for which your firm is being sued. This seems, to put it mildly, disingenuous. In March 2007, the time of this particular Abacus trade, your prop traders were already short the subprime market. Would they really have taken a naked long position in a deal you helped to construct precisely so that it would fail without offsetting in some other way on their books?

That is exactly what I was wondering when I read about Goldman's mysterious $100 million "long" investment. It seemly oddly out of place, given everything else they were doing. Was that simply one position among many, or was it really a net position? I doubt the latter. My own hunch is that it was part of some larger trade and not a true, "naked long" position or net position.

Mr. Lewis reminds us that it seemed odd that the SEC is going after only one lower-tier individual:

His name isn't even on the top of the list of Goldman traders listed on the $2 billion Abacus deal for which you are being sued. The name on top of that document is Jonathan Egol. Egol appears to have been the bond trader at the center of your Abacus program. The same Jonathan Egol who told fellow traders in 2006 -- a year before this transaction -- that the subprime market was doomed.

The public eventually will ask: Who is Jonathan Egol and what exactly was his game?

Exactly.

And then on the curious matter of the "independent" manager of the CDO deal:

But what's interesting here is what you appear to take for granted: that ACA has no talent for evaluating the bonds picked by Paulson. After all, if ACA was doing its job it wouldn't have cared one way or the other what Paulson (then a little-known hedge fund manager) was up to. ACA would have known which bonds were good and which were bad, and picked the good ones.

In their anxiety about Paulson's motives we can all glimpse their incompetence. They want to know that Paulson has an interest in picking the good ones because they themselves have no clue which ones they are.

But if a CDO manager had no independent ability to select the bonds inside a CDO what, please explain to us, was his financial function? Why did you select ACA to manage your deal?

And finally, on the matter of moral values on Wall Street:

The masses will be curious to know, for instance, how you became blinded to the very simple difference between right and wrong. The more moralistic among them will ask the question mainly to fuel their own outrage; the more tactical will ask the question because they sense that the financial system doesn't function unless you have the incentive to think in these terms - - and you clearly do not.

Definitely read Lewis' piece. It is shorter tan the general media coverage, but offers much greater insight. And it is actually easy to read and understand. No wonder he was unable to hold a position on Wall Street for any significant length of time. All the better for him, and us.

-- Jack Krupansky

Thursday, April 22, 2010

Did the market cap of Apple really surpass Microsoft today?

After the market close I entered the MSFT ticker symbol in Google to see if Microsoft had reported earnings for the quarter yet and in the search results I see an interesting but odd tidbit, a Twitter tweet that says:

AAPL is now worth more than MSFT

Really? I didn't think it was true, at least yet.

That same info has been re-tweeted from here to eternity and typically links to a VentureBeat blog post by Paul Boutin that says:

The day the fanboys have waited for is here: Apple finally passed Microsoft this afternoon to gain the second highest market capitalization on the S&P 500 index. The total value of all Apple shares climbed to $242 billion, passing Microsoft's $239 billion.

(I would note that that blog post has changed each time I viewed it. The first time it referred to the S&P 500 as an "exchange". It is now a much longer post, more of a story, but still quoting the dubious numbers, without linking to sources. They at least claim that they are using some alternative calculation, again without any link to a source.)

Now, technically, I knew that the day was coming, but I thought Apple had to reach $300 or so to beat the Microsoft market cap. So, I checked both Google and Yahoo Finance which both report the Apple market cap as about $241 billion and Microsoft as about $275 billion. In other words, Apple still needs to gain about another 14%.

I did a little more searching through Google News and found that Rex Crum of MarketWatch seems to have blogged the curious claim:

MARKET PULSE
April 22, 2010, 4:02 p.m. EDT
Apple passes Microsoft for second place in S&P 500
By Rex Crum
SAN FRANCISCO (MarketWatch) -- Apple Inc. (AAPL 265.40, -1.07, -0.40%)  became the second-largest company, in terms of market capitalization, on the S&P 500 (SPX 1,209, +2.74, +0.23%)  Thursday, trailing only Exxon Mobil (XOM 68.50, -0.06, -0.09%) . Apple's market cap reached $242 million, surpassing Microsoft Corp.'s (MSFT 29.97, -1.42, -4.52%)  $239 billion. Exxon still remains in the top spot with a market cap of $324 billion.

Now, in truth, I do not know what the ultimate source is for number of shares outstanding, which is the other key number besides current price needed to calculate market capitalization, but even MarketWatch's own stock quote show MSFT with a cap of 275 billion. So, Rex, what gives?

Since I read his original post he has updated it to add:

The S&P 500 is float-adjusted, so it doesn't use the full market basis for Microsoft. Apple's float-adjusted market cap reached $241.5 billion, surpassing Microsoft Corp.'s (MSFT 30.22, -1.17, -3.73%)  index market value of $239.5 billion...

Yes, it is true that S&P has a proprietary calculation for its indexes, but that calculation is not the calculation of a market capitalization. So, apparently, it is true that Apple has a higher ranking in the S&P 500 index, for reasons not completely explained, but that does not automatically give Apple a higher market capitalization.

Maybe the real source of the mis-claim is that some analyst put a $300 target on AAPL, which would result in AAPL getting a higher cap than MSFT. That's the problem with most Apple fan boys - the future is today. As they say, dream on.

The bottom line is that Bloomberg is a far superior source of information to MarketWatch.

As I finish editing this post, I refreshed the VentureBeat post and now it begins with this update:

[Update: As a few readers have pointed out, the S&P 500 index is "float-adjusted." That means it measures the value of only the shares that are available to the public for trading, rather than all shares. That takes some of the fun out of AAPL passing MSFT on the S&P. Microsoft's total market capitalization is still bigger.]

So, in summary, Microsoft has a larger market cap (for now), but Apple has a larger S&P float-adjusted cap. It would not surprise me to see Apple with a higher market cap within a few weeks. Also, note that Microsoft is continuing a share repurchase program, so their market cap would shrink even if their share price were stable.

So, why is MSFT down after earnings? Probably mostly the tradition of "Buy the rumor, sell the news." PC and Windows 7 sales are up. That's yesterday's news, so traders move on to a fresher story.

-- Jack Krupansky

Wednesday, April 21, 2010

Still have one more Lending Club investment loan to get issued

All but one of my latest batch of Lending Club investment loans were issued as of Monday. Somehow I had made a mistake and inadvertently selected a loan that was not already "Approved", which means that although it had reached full funding, it failed to be issued due to a lack of final documentation from the borrower. I was out for a few days, but I just placed a new order for a new "Approved" investment loan.

I also had accumulated enough interest and return of principal to make yet another new loan investment.

Together, the two new loans average 18.67% return, with a historical default rate of 5.95% and a service charge of 0.73%, resulting in a projected return of 12%.

Meanwhile, my Net Annualized Return has inched up to 15.19%. I have a total of 51 notes, pus the two new ones from today that are still in funding.

Even with this doubling of my total porfolio size, my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky

Friday, April 16, 2010

Abacus

After hearing about the shenanigans that Goldman Sachs engaged in with their investment "deals" called Abacus, it occurs to me that as punishment for all of their transgressions henceforth all investment banking and trading operations should be restricted to those where all of the relevant financial calculations can be personally performed by bank staff using an... abacus. Yes, a real abacus. Maybe that will teach them a sense of humility and decency.

Oh, and make them write out all of their deals in longhand.

Computers are great tools for improving society. They should not be allowed to be used to harm society.

Oh, and the government should take away their Blackberrys while we're at it.

-- Jack Krupansky

Thursday, April 15, 2010

All but a few of my latest Lending Club investment loans have been issued

Just a week ago I placed orders to invest in a new batch of Lending Club investment loans and already 75% of them have been fully funded and issued. And of the remaining five, two have reached full funding and are awaiting final review. The remaining three are about 75% to 80% funded and likely to be funded and issued by Monday.

Somehow I made a mistake and inadvertently selected a loan that was not already "Approved", which means that although it has reached full funding, it could still be declined if the borrower does not finalize proof of income. I should be okay on this one (as I have been for most such loans in the past), but it does add some uncertainty.

It has been ten days since I started this investment batch by initiated a transfer of funds to my Lending Club account from within the Lending Club web site. Assuming the remaining loans are issued on Monday, that will have been a two-week investment cycle, which is about what I would expect with a moderate size batch of loans, a bunch of which were less than 50% funded when I selected them, and includes the time for the transfer of funds from my bank account to settle in my Lending Club account.

Meanwhile, my Net Annualized Return has inched back up to 15.08%. I have a total of 52 notes (assuming the latest batch all get funded.)

Even with this doubling of my total porfolio size, my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky

Sunday, April 11, 2010

I am continuing to pay down the public debt of the U.S. government

I just made my fourth monthly payment to pay down the public debt of the U.S. government. Not much, just another $25, but it is a matter of principle. It may take me another 502 billion years to pay it all down all by myself at this rate, but, as I said, it is matter of principle.

According to the U.S. Treasury web site, the total public debt outstanding was $12,826,031,306,447.93, as of April 8, 2010. It was $12,544,703,929,352.50 a month ago, for an increase of about $262 billion.

What I wrote back in January when I made my first donation/gift/payment:

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or debit transfer from a bank account.

So do the right thing and show all those whiners and complainers (including so-called "tax protesters") how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

For the record, the only real way out of the deficit is not to merely cut expenditures or raise taxes or some combination of the two, but through economic growth. Sure, we need to manage the federal budget more carefully as well, but the big focus has to be on achieving economic growth.

-- Jack Krupansky

Friday, April 09, 2010

Finished investing my new Lending Club money in more investment loans

This morning and this afternoon I invested in the last two investment loans (notes) to complete the investment of my latest infusion of money into my Lending Club account. One was at 18.30% and the other at 17.56%, so I think my average for the new batch should be roughly at 15%, give or take. I had hoped to be up at 15.5% or even 16%, but 15% is fine.

Two of the batch of 20 loans have already been fully funded and issued. Three more have reached full funding and should be issued on Monday. The rest are all "Approved" but in various stages of funding. A couple of them might not reach full funding by the two-week deadline, but overall they are in great shape to get issued within the next week to ten days. My work is done (unless some of them fail to get fully funded). I'll check up on their funding status every couple of days (just for fun, actually), but otherwise my account is on auto-pilot.

It was only Monday that I initiated the transfer from my bank account in Lending Club. I didn't even expect to be starting the loan selection process until Monday. being ahead of the game is quite satisfying.

The only other comment I would make is that I would have been done yesterday if I had doubled or somewhat increased my loan slice size to minimize the number of loans I needed to select. Twenty is a lot to do all at one. Sure, the Lending Match feature can be used to do a batch of automatically selected notes all at once, but I prefer to carefully vet each note and to select only those that are already "Approved."

Meanwhile, my Net Annualized Return has moved back up to 15.07%. I have a total of 52 notes (assuming the latest batch all get funded.)

Even with this doubling of my total porfolio size, my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky

Thursday, April 08, 2010

Invested most of my new Lending Club money in more investment loans, averaging 14.88%

My latest infusion of money into my Lending Club account became available today, a day earlier than I expected. It was only Monday that I initiated the transfer from my bank account in Lending Club. I was pleasantly surprised to see the email message from Lending Club in my inbox when I got back from my noon walk.

I decided to keep the size of each slice of investment in any individual loan relatively small, at $50. I started out with the goal of shooting for a return of about 16% on these loans, but there simply weren't enough of them that were already "Approved" which is a personal criteria that I use to assure quality and increase the odds that the loans will be issued and in a timely manner. About half of my new loans are above 15% and half below 15%, averaging 14.88%. That is below my ultimate goal of 15%, but I actually held back 10% of the new money so that I could try on another day to get a couple of loans up in the 18% range to see if I could move the average above 15%. After all, new loans are appearing on Lending Club every day.

Some of these loans were mostly funded so I should see them issued within the next couple of days. Others were fairly new and may take a week or more to become fully funded.

Here's a hoot: One is for debt consolidation for an investment banker at Citigroup here in NYC who has a six-digit salary. Excellent! Competing with Wall Street on Wall Street -- that's the way to stick it to the banks for all of the pain they caused so many of us. Yeah!

Even with this doubling of my total porfolio size, my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%. I was briefly above 15% a couple of weeks ago, but then I fell back to 14.88%. Yesterday I finally crept back up to 14.99%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky

Wednesday, April 07, 2010

Doubling my Lending Club portfolio size (again)

As I had been hinting in recent posts about Lending Club, I am going ahead and doubling the size of my investment loan portfolio since my work started up again at the beginning of April. I also switched banks, so I had to wait to verify the new bank before initiating the funds transfer on Monday. According to Lending Club the money should be available for investment sometime on Friday or Monday. I am actually using money from my federal tax refund.

I still need to decide whether to invest in $50 or $100 loan slices. The larger amount means fewer loans which is easier to vet and manage but greater exposure to risk of any loan, while the smaller amount means more effort but less risk. Or, I could pick a number in the middle. What I really need to do is think about what investment activity I expect in the future so that these investments are consistent with that goal. I'll probably double my portfolio again within three or four months, so I am leaning towards the larger loan size.

Even with this doubling my Lending Club investment is still a modest size experiment. Even doubled again it would still be modest size. If all goes according to plan (not that I actually have a plan), by the end of the year I should finally have a real investment in Lending Club loans.

My goal continues to be a 15% return, but I figure I need a little buffer so that repayments (and maybe even defaults) don't push me below my goal too frequently. I may in fact keep pushing upwards with loans in the 16% to 18% range until I get my return up to 16% and then gradually work the average back to 15.5%. I was briefly above 15% a couple of weeks ago, but then I fell back to 14.88%. Yesterday I finally crept back up to 14.99%.

So far, my Lending Club portfolio has been perfect, with no delinquencies or even late payments. I started investing with Lending Club back in June 2009.

This is still just an experiment for me since I have no prior experience with this type of investment, but so far in has been very encouraging. I intend to double the size of the experiment in June or July (assuming my work income continues.)

-- Jack Krupansky