Resurrecting this blog, this time about crypto-currencies

I am resurrecting this blog for the 3^rd time. This time its to analyze crypto-currencies. I started this blog in 2014 to investigate alternative investments. I ultimately identified six alternatives, invested in all as test cases, and followed their progress through this blog. All were positive, but in the end, I selected two to make sizable investments in, Betterment and Lending Club. Then the blog was dormant for about two years.

By mid-2017 I was becoming concerned about my investment in Lending Club. It was performing poorly. I decided to do an in-depth analysis and document my findings on this blog.  The analysis led me to liquidate my holdings in Lending Club (not a pretty or easy thing to do as described in the blog posts). By May-2017 I was totally out of Lending Club and again this blog went dormant.

I did start a separate blog about sports analysis and betting, ole44bill.blogspot.com. I made a couple of dozen posts but now have reached a point where I want a break from this. There were a handful of posts early on in that blog about crypto-currencies. I will review these and possibly repeat some of these here.

So, why am I doing this? First, I need to review my holdings in crypto-currencies. I was quite active trading these in 2017, and naturally made good money (everyone did). But at the end of the year I got tangled up in trying to document all the trades for tax purposes. I decided then just to freeze my holdings until I had time to work out a system to keep track of this stuff before I became active again. I’ve reached that point. I have a handful of different coins and wonder if I should consolidate, expand, or do nothing.

The second reason for putting my efforts on the blog is for documentation purposes. I’m turning 74 in a few weeks and my memory isn’t that great. So, I’ll use this as the vehicle for keeping track of what I’ve done.

You can follow me on Twitter, @billlanke, to know when I post again. Or you can Email me at bill.lanke@gmail.com.

Final thoughts on Lending Club

I opened my Lending Club IRA account in 2015 and deposited $50,000. My original intent was to build up the number of notes in the account and generate a decent monthly income when the time came to start withdrawing money. I acquired notes using their automatic investment feature for selecting notes and was effectively re-investing my returns in new notes. By then end of that year the account had grown to $53,000 and all looked great. In 2016, there were new notes being added and old ones either fully paid or charged off (some others in varying other states). Following are a few data points from the end of 2015 and 2016.

Description	Dec-15	Dec-16	Difference
Account Value	$53,166	$54,944	3.34%
Number of Notes	2,410	3,495	45.02%
Issued & Current	2,117	2,559	20.88%
Charged Off	15	279	1760.00%
Monthly Income	$647	$555	-14.23%
Net Annualized Return	15.32%	6.58%	8.74%

The account balance had grown by a little over 3%. The number of notes that I had acquired had grown substantially, as had the number that were current and earning interest. However, the number of notes charged off had grown by a factor of 17 (and more than doubled again in 2017). Surprisingly the monthly interest income had declined. Charged off loans were probably the biggest factor. But a shift to lower interest/risk loans contributed, as did the declining balances remaining in the current loans. Overall a disappointing performance. I decided to quit investing in more notes, let the account run out,  and start withdrawing the funds as they accumulated.

Later in 2017, I elected to start selling notes on FOLIOfn to close the account as soon as I could. Some of these I sold at substantial discounts as discussed in my previous posts. In the end, I cashed out $52,430. I made $2,430 or about 1.6% annual return on my initial investment.

It’s not clear what would have happened had I stuck with my original approach. I certainly would have acquired many more notes, some good and some bad. From discussions on peer to peer lending forums I think I was using automated investing during a period when Lending Club’s underwriting model was performing badly. Maybe over time it has improved, and the results would have been better.

One lesson I’ve taken away is beware of blindly using automated investing. You are likely to be better off developing your own models. Unfortunately, if you have much invested that would be a sizable job in selecting a lot of notes. One alternative would be to use one of the several services available to select notes for you.

That wraps up my Lending Club experience. I started this blog a few years ago to discuss alternative investment strategies. I think I will continue with the blog focusing on cryptocurrencies like bitcoin. I have been investing in these and plan on doing more analytical studies to aid with these investments. Follow me on Twitter @billlanke to know when I post these studies.

Lending Club returns history

Now that I’ve gotten both accounts completely closed I decided to share my history with the Lending Club IRA graphically. I tracked my account holdings daily and rolled these into a weekly spreadsheet. This is the data from the spreadsheet. There are two lines on the graph. One represents the annual return rate by comparing the week ending balance to that of 52 weeks prior (and adjusting for withdrawals). The second is the number of notes in my account (in hundreds).

The initial return rate was running at 8% and all was good. I was using automatic investment, so as cash was accumulated in the account, Lending Club selected new notes to fit the profile I had set. Then in September 2016 the return rate started a steady decline. In early December 2016 I turned off automatic investment when the return rate had fallen to about 4%. The fall was because of an increasing rate of charge offs. This was probably due to increasing age of the portfolio and the fact that automatic investment was doing a poor job at the time.

By the end of 2016 I decided that I had had enough and was going to let the account run out. I started withdrawing the cash as it accumulated. I did experiment in 2017 buying some notes at FOLIO for test cases and accidentally turned on automated investment for a few days and it sucked a lot of cash from my account in 2 days an added over 100 new notes.

The graph demonstrates that the return fell steadily. I don’t know if I could have turned it around by re-investing in more notes and using a strategy other than automatic investing. My next and final post will be a summary of my opinions on Lending Club. Follow me on @billlanke to know when I post this.