When I do back testing on Nickel Steamroller, I see that, if I do not select "completed", the A,B...E notes come out about what I expect (though of course they depend on the myriad filters you can toy with). But if I select "completed", which I assume shows only these notes that are completed, F and G notes come out showing negative ROI.
Does this really mean that, overall, people who invest in F and G notes have negative ROIs for those notes? That just doesn't sound right-- and it contradicts Lending Club's statistics, which show F notes have one of the highest ROI's compared with other grades.
Could someone help me out...what am I missing? Thanks!
I see a -3% ROI. Also, one of the historic ways financial institutions hide risk is by large growth. When the growth slows, then the true level of delinquencies and losses becomes evident. A way to see this happening before its too late is to do vintage analysis instead of aggregates, which is what I assume the LC analysis does.
The problem is that "completed" doesn't mean what you think it means.
If you go to nickelsteamroller and instead of using "completed", use the "issue date" field to set an ending limit of 2/30/2011. This will produce a set of loans that are now completed, in the sense that 36 months of payment due dates are done, and 4 months have elapsed to conclude the chargeoff.
You will see that the numbers for this set of loans make more sense.
Strange. I did that (even using your exact date, and selecting only 36 mo loans) and got a similar result.
When I moved it back to 02/30/2009 (to include 60 mo. loans), I get this. In a sense I'm relieved, because I KNOW this can't be right.
(I'm doing well after 2 years, and got a little nervous when I saw that previous result on Nickel Steamroller I first posted about. Sure, I expect my NAR to creep down as time goes on, but these numbers can make one think they are doomed to lose money in the long run!)
A 4.77% 8.58% 2.97% $3,171,350.00 $355,193.60 522 100.00% 50.77% 75.00 $123,383.47 ($34,081.01)
B 1.24% 10.44% 8.39% $6,813,825.00 $932,734.70 799 100.00% 40.68% 75.71 $751,153.80 ($70,605.36)
C 0.71% 11.98% 10.48% $7,507,675.00 $1,180,133.40 880 100.00% 35.68% 75.53 $1,032,920.80 ($77,185.36)
D -1.10% 13.50% 13.88% $5,463,800.00 $985,596.90 632 100.00% 30.85% 75.95 $1,010,397.70 ($55,066.22)
E 0.58% 14.90% 13.51% $3,818,775.00 $741,046.75 436 100.00% 31.42% 77.31 $672,594.44 ($39,388.21)
F -8.98% 16.21% 24.44% $1,877,975.00 $368,806.56 176 100.00% 29.55% 78.57 $555,649.06 ($17,320.14)
G -5.29% 17.96% 22.49% $1,351,025.00 $308,241.30 127 100.00% 22.05% 79.02 $385,776.75 ($13,224.51)
For that one, I did not use any filters except to put in the dates.
36 month loans, issued between 2/30/09 and 2/30/11:
A 4.66% 7.55% 2.07% $37,894,680.00 $3,780,549.20 4,913 100.00% 52.27% 54.35 $1,035,840.70 ($407,288.28)
B 5.17% 10.94% 4.94% $55,685,692.00 $7,995,070.00 5,519 100.00% 47.62% 56.42 $3,609,818.20 ($602,643.80)
C 5.02% 13.15% 7.31% $40,701,608.00 $7,120,389.50 4,403 100.00% 44.47% 58.50 $3,958,409.50 ($441,765.12)
D 4.87% 14.82% 9.14% $28,422,722.00 $5,629,679.50 2,735 100.00% 39.12% 59.34 $3,470,037.80 ($308,144.30)
E 4.07% 16.15% 11.26% $11,552,075.00 $2,445,833.20 1,083 100.00% 39.24% 64.07 $1,705,038.40 ($124,183.33)
F -3.88% 17.68% 20.76% $4,888,200.00 $1,051,698.50 377 100.00% 35.54% 66.42 $1,233,980.90 ($48,203.07)
G -1.16% 19.15% 19.54% $2,616,825.00 $638,932.75 212 100.00% 26.89% 70.19 $650,814.70 ($26,914.27)
F and G loans have the worst returns of any notes on LC after taking prepayment and credit losses into accounts and that's WITH a decent economy. Imagine how they'll perform if we have a recession. I haven't invested in any since mid last year.