sophie wrote:In case anyone is into Lending Club....
Get out now.
I put a tiny slice of VP money into it as an experiment, just enough to diversify sufficiently. Return's been good (~9%) but in the past several months I've seen a constant stream of loans going bad. The company's claimed charge-off rate is absurdly low. At the current pace, I expect that at least 1/3 - 1/2 of my loans will ultimately charge off. And, the recoveries have shrunk to less than 1% of charged-off amounts, as opposed to the 10% I was getting previously.
Either the economy is not nearly as healthy as advertised, or LC has decided to dump investors overboard and aren't going after deadbeat borrowers. Not good news either way. I guess P2P lending has run its course, but I wonder about all the big pension funds that bought into it.
I can't imagine why anyone would do this. It's not like running up debt on credit cards is hard for anyone who is likely to pay it back, so why would they need to borrow from other individuals, unless they are really bad risks?
The big pension funds are going to go broke from this and all the other tricks that they have been using to try to meet their return expectations. I blame the Fed for their interest-rate suppression... although actually it's the fault of the government for spending so far beyond their means.