Beating Broke

Lending Club 2Q2012 Update

July 6, 2012 By Shane Ede 16 Comments

Another three months have passed which means it’s time for another update on my Lending Club account. If you’ve been following my LC updates, you know what this is all about. If not, you can catch up by starting with the Calculating a Real Rate of Return on Lending Club post, followed by the first Lending Club Return Update and then Lending Club 1Q2012 Update. If you’re interested in opening your own Lending Club Account, you can do so here.

Now that we’re all on the same page, let’s take a look at what happened this last quarter.

First Lending Club Delinquency

The biggest thing, I think, to note for this update is that I finally had my first (and second) delinquencies on loans. The first, I sold. I was lucky enough to be able to sell it for break-even on the remaining principle. I lose out on the interest that it would have paid through to maturity, but if it went into collections, I likely would have lost more than that. I should have paid a bit more attention, but I believe the first was a C grade loan. The second, which just went into late status at the end of June, is a D grade loan. I’m holding on to this one. My reasoning behind holding on to it is three-fold. First, and more importantly, is that the loan is showing as late, but it is also showing that the borrower has entered into a payment plan. While that isn’t ideal, it does show a desire to pay it in full and avoid the collections process. I’m giving the borrower the benefit of the doubt that they’ll be able to pay the loan off. Second, the remaining balance on the loan, including interest, is $6.06. If I lose that, it won’t break my portfolio, or my rate of return to any significant degree. Third, and finally, I’m keeping it as a part of the experiment. I’m curious to see how the process works, and how it will end up. How it does end up will likely help me make decisions on what to do with any further late loans in the future.

Lending Club Returns Remain Above 13%

After it’s all said and done, the one late loan in the bunch could end up dropping the rate below 13%, but it hasn’t been written off yet. If, however, it remains in a late, but paid, status, my rate is doing pretty well. As of 7/4, my account is showing a NAR (Net Annualized Return) of 13.58%.

“My Net Annualized Return is at 13.58% on @lendingclub – @BeatingBroke” <– Click to Tweet This

I’m still amazed by that rate of return. Yes, I do realize that I’m likely having some luck so far. Another factor might include the size of my portfolio. It’s climbing, but it’s just barely over $500 total. As the portfolio size grows, the likelihood of a written off loan grows with it. The flip side of that, of course, is that the larger the portfolio gets, the more diversified I’ll be, and the less one written off loan will affect my rate. One nice part of the size of the portfolio is that it’s nearing a self-sustainability mark. Currently, the total monthly payments coming in is $23.67. With that coming in each month, I could easily stop contributing to the account, and merely use the payments as the renewing funds for investment. I don’t plan on doing that, but I certainly could.

Lending Club Account Dashboard

Adjusted Lending Club Risk Ratios

Previously, I spoke about having adjusted the loans I was buying to be almost all C and D grade loans. While I am not abandoning that idea, I’m adjusting it slightly to try and keep it slightly more balanced. What I don’t want to happen is to find myself with ALL D grade loans. The lower grade loans, while paying less in interest, are a lower risk. I’m now trying to keep the portfolio to a pretty nice bell curve that centers somewhere between C and D. One thing to keep in mind here is that it’s somewhat hard to find the A and B grade loans that have any return at all when you have to purchase the loans through the FolioFN trading platform, which tends to push the curve towards the D side anyways.

That’s it for this quarter’s update. With a little luck, and some shrewd investing, I hope that next quarter’s update will be just as good!

Want to open your Lending Club account? Click here.

Do these updates add any value for you? What would you like to see change in them? What do you like? And, what has your experience been like with Lending Club?

Growing Potatoes in Containers

June 27, 2012 By Shane Ede 11 Comments

As part of my foray into container gardening this year, I decided that it would be fun to try my hand at growing some potatoes. I’d done a fair amount of reading, and it seemed like growing potatoes in containers was pretty workable. I’d seen several examples of people growing them in old tires stacked 4 high, fencing towers stuffed with straw, and some much more elaborate wood sided towers that allowed for taking the bottom rung off and pulling potatoes out from under the plant.

The re-purposed container that we already had, potatoes already planted.

When it came time to plant my potatoes, I decided that for the first time around, I’d just use one of the larger containers that I already had laying around the yard. I’d previously used it to try and grow some flowers in, and while those turned out fine, some produce would be even better. I also found and picked up another container that I wanted to give a try with potatoes. It’s a bag made specifically for growing potatoes in, called, wait for it, Potato Planter. It’s kind of cool though. It’s made out of the same material that those blue tarps are made out of, and is designed with a velcro flap near the bottom of the bag to allow for you to open the bag and pull some potatoes out of the bottom while letting the rest of the potatoes grow near the top.

So, armed with my containers and a couple of bags of topsoil, I set about planting some potatoes!

Steps for growing potatoes in containers:

Potato Planter Packaging © by thatedeguy
Fill each container with about 6 inches of soil.
Cut your seed potatoes so that each piece has about 2-3 eyes on it.
Place your seed potatoes onto the soil. (I’m sure there’s a scientific spacing you should observe, but I didn’t. I placed them about 6 inches apart.)
Cover the seed potatoes with a couple of inches of soil and water thoroughly.
Water as needed. (Remember that containers dry out faster than your garden will, so they need more frequent watering.)
When the plants are about 6 inches tall, add more soil until the soil is about 2 inches from the top of the plant.
Repeat until the container is full of soil.
Continue to water, and wait.
Potato Bag Started © by thatedeguy
After the plants have flowered, and the plant itself starts to yellow and die off, give the potatoes about a week to two weeks to mature, then harvest them. (This step and the ones following are purely from my research, and not from experience yet. I could be way off!)
When you harvest the potatoes, set them out in a warm, dry place to dry. This is supposed to allow the skins to harden up a bit for better storage. (One downside here is that the second the potato gets to a harvested state, the natural sugars in the potato begin converting to starch. I’ll be trying a few fresh from the ground and some that have been “hardened” and see how much of a difference there is.)
Repeat next year!

So far, I’ve gotten as far as planting, and adding soil to the potato containers. I’ve got one more batch of soil to add to the containers to fill them up with soil, then it’s just a waiting game as the plants grow potatoes and I wait for harvest time. This year is a bit of an experiment, as it’s our first year of dedicated container gardening, as well as the first time I’ve ever grown potatoes. Rather than add too many variables to the mix, I just planted some seed potatoes that I got from our local grocery store. If I recall, they were the Red Pontiac variety.

Next year, should this year be a success (and it’s looking like it will be), I would like to order some seed potatoes of different varieties. In particular, some purple potatoes. Mostly, just because I think they look cool! I’d like to try a few of the heritage/organic varieties too, and see if there’s much of a difference.

Have any of you ever successfully grown potatoes in your gardens or in containers? Got any hints or tips for me? Suggestions for varieties to grow next year?

Bank Makes an Error in Your Favor – What Do You Do?

June 20, 2012 By Shane Ede 19 Comments

This article on CNN caught my eye the other day. It’s about an “Accidental Millionaire” who discovered that a keying error by his bank resulted in him having a $10,000,000 line of credit instead of a $100,000 line of credit. Instead of notifying the bank of the error, he withdrew 6.8 Million of it, disbursed the money into overseas accounts and then promptly fled the country. About 2 and a half years later, he was caught and brought back to New Zealand to stand trial for his theft.

The whole thing brings up an interesting question though. Obviously, the right thing to do would be to notify the bank of the error, so that it could be fixed and all could continue on their way. And, I think it’s fair to say, most of us would do just that. But, what if it was for such a high amount of money? Sure, if the bank makes a $10,000 error, you’ll let them know. But, what if they make a $10,000,000 error? Just how tempting would it be to do just like this guy did, take the money out and put it into overseas accounts where it couldn’t be recovered by the bank, and make a run for it? Even if you knew you could make it 2.5 years before getting caught, would it be worth it to live like a multi-millionaire for that amount of time?

I think that the penalty would likely be high, and will likely involve some jail time, but would all that be worth living the rich life for a few years?

I can’t see where it would be for me, personally. But, obviously, for this guy, the answer was that it would be worth it. Or, maybe he truly thought he could get away and not get caught. I’m not sure how one really thinks that they’ll be able to get away with something like that. But, he obviously did, or at least thought the trade off was worth the possible penalty.

Me, I’ll settle for making my money the old fashioned way, and making it work for me. The trade-off of not making it as fast as he did, but staying out of jail is well worth it.

What are your thoughts on that. Would you trade a few years of living as a millionaire on the run be worth the possible penalties?