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Thread: Harmoney

  1. #2821
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    Quote Originally Posted by nztyke View Post
    knowledge.
    agree with everything you have said.

    we are sitting on a big bubble and I have been in a cycle of not reinvesting in harmoney and paying down revolving credit for if (and when) things "crash' i can buy in.

    In saying that though I still have AP's each month into managed and index funds, as yes I know they will probably be effected when the markets suddenly turns after this bull run, but like you say, when?

    You try and time it and pull the money out, then you miss out on potential returns, and if you leave it in then invariably you will get beat up a bit.

    I'm going to keep paying down debt, but also just going to keep AP'ing into my funds. I trust my fund manager (milford) to minimize the effect of a downturn (for reference one of their higher risk funds, the trans tasman, did -9.9% in 2009, whilst the index did -24.9%), if it drops, I might even up the AP's or drop a lump sum in.
    Last edited by alistar_mid; 03-11-2017 at 01:00 PM.

  2. #2822
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    At least we didn't go the quantitative easing route in NZ, not that we are insulated from it of course. I do worry where we are heading with all this borrowing but have felt this way for at least two decades! What promoters of equities nearly always fail to acknowledge is that with shares the returns are inflated by gearing to the extent that the companies have debt. If you take out the impact of gearing and then take a long term average the returns will be much lower. If things get to the state of losing money on consumer credit portfolios I'd be picking losses on shares would be considerably greater.

  3. #2823
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    Quote Originally Posted by nztyke View Post
    Anyone who thinks that a 20% return on equites is sustainable is living in cloud cuckoo land. Myles is right, you have to look at shares as a long term investment. For example in from my own experience for the year to 10th May 2006 my share investments made a whopping return of 39.6% but in the year to 28th October 2008 I suffered a calamitous loss of 42.2% on my portfolio. Over the last 15 years (which is the sort of time frame you should look at) I have made an average of 9.8% per annum after tax which is about what one would expect. Since the GFC low interest rates have created a huge asset bubble in shares and property; it is all going to come crashing but unfortunately I don't know whether it is going to happen next week, next year or in five years time. In the meantime one can only diversify, including Harmoney, and keep cash reserves to take advantage of the buying opportunities that the next GFC will bring. Sorry to be so gloomy.
    I never suggested in any way that 20% was sustainable longer term, however if you're careful about where you invest I think 10 - 15% is achievable longer term in a mix of shares/ funds. I've been able to do so across ~12yrs and i have no great knowledge anyone else doesn't have or can't obtain albeit my risk profile is possibly higher than many. To be fair, the last 12 yrs have been fairly bullish, particularly NZ except GFC and agree a fall will come at some stage, though i don't see it being imminent.

  4. #2824
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    Quote Originally Posted by Fisherking View Post
    Wow, so your RAR must be ~26%? Well done. To be this high you must be invested in very low grade loans and either got lucky or have not been in for long enough to see the defaults come through - you need a couple of years.
    Been away... How can you compare 1 year of strong share growth but then say I can't compare that to 1 year of strong P2P growth - I think you missed my point, it was somewhat subtle but that is my way...

    I don't need anything like 26% RAR to achieve 18% growth... Compounding of interest (i.e. reinvestment) is a very powerful growth factor for P2P which shares do not have (many here simply don't seem to get this...). Let's say I earn 15% growth (interest-fees-tax) in a year, that means my principal for the second year (it's monthly I know, but showing it for a year is easier) is 15% larger than it was the previous year, so it will earn an additional 2.25% the second year 3.32% the third year etc. (performance is even better with monthly interest as it is with Harmoney). You do not get compounding with shares.

    Even at modest interest rates, I'd suggest Harmoney investments will outperform shares in as little as 5 years, and that's on the up-cycle with shares... Of course you need to make some effort to not pick loans that are more likely to default, same as shares - you don't pick crap shares - this is what makes the difference between those who make good returns and those that don't.

    RAR will not show this end-on-end growth, it simply looks at individual loan growth.

  5. #2825
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    Back in the USA > Lending Club shares have plummeted by almost 20% > Cannot get high quality Borrowers!

    http://www.zerohedge.com/news/2017-1...shing-guidance

  6. #2826
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    Attracting borrowers doesn't appear to be the problem for Harmoney at the moment that it is for Lending Club?

  7. #2827
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    Have been playing with Harmoney data extracts in Tableau with pleasing visual results.

    Some notable features of performance:
    Harmoney's fees have almost topped out at their maximum possible, the big temporary spike early in the piece is an interesting view of the impact of re-writes when the fee was based on origination rather than interest income. So far they have been a bit light on adding significant or profitable features so with income growth now likely peaking, I wonder what they will conjure to extend their revenue base?
    Recent weeks echo a few forum comments about larger loan losses (I have mostly C, D and a lesser number of E loans)

    HarmoneyTableau.jpg

  8. #2828
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    I see on the marketplace statistics page the platform RAR has really been trending down all year. https://www.harmoney.co.nz/investors...ace-statistics

  9. #2829
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    Quote Originally Posted by myles View Post
    Been away... How can you compare 1 year of strong share growth but then say I can't compare that to 1 year of strong P2P growth - I think you missed my point, it was somewhat subtle but that is my way...

    I don't need anything like 26% RAR to achieve 18% growth... Compounding of interest (i.e. reinvestment) is a very powerful growth factor. You do not get compounding with shares.
    .
    Agree compounding is a very powerful growth factor. But disagree that you do not get compounding with shares. You do. Dividends are/can be reinvested and any earnings the company retains are often reinvested in the company which leads to higher EPS the following year.
    15% growth on lending is not sustainable long term. You have probably got lucky. At 15% you will experience total capital degradation or write off of a few of your loans over time.

  10. #2830
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    Quote Originally Posted by blackcap View Post
    Agree compounding is a very powerful growth factor. But disagree that you do not get compounding with shares. You do. Dividends are/can be reinvested and any earnings the company retains are often reinvested in the company which leads to higher EPS the following year.
    15% growth on lending is not sustainable long term. You have probably got lucky. At 15% you will experience total capital degradation or write off of a few of your loans over time.
    I don't fully disagree, but the compounding effect is very different. In 'lean' years you don't get dividends, typically dividends run at only 2 - 3%. When shares drop significantly, which they do, it can take a very long time to claw back those losses. Neither of these occur with P2P Lending. However you do get share value growth in good years, but to offset that you get share value loss in bad years (usually quite significant).

    My return is currently running at just under 18% (after tax and fees), but I view my predicted actual return based on deducting all loans in arrears over 30 days, which gives me a current return of just over 15%. The total number of loans in arrears over 30 days appears to be fairly stable for me now, but perhaps this will change? Interestingly if I use Harmoney figures of expected defaults I get a predicted return of 15.47% (seems to be a reasonable value). My actual over 30 days arrears rate is 1.23%, Harmoney predicted figure 1.58%, however the loans in arrears returned in the exported report from Harmoney do seem to have major issues i.e. loans in arrears are not reported as being in arrears...

    With over 1000 loans I don't think 'luck' has all that much to do with it?

  11. #2831
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    Quote Originally Posted by myles View Post
    I don't fully disagree, but the compounding effect is very different. In 'lean' years you don't get dividends, typically dividends run at only 2 - 3%. When shares drop significantly, which they do, it can take a very long time to claw back those losses. Neither of these occur with P2P Lending. However you do get share value growth in good years, but to offset that you get share value loss in bad years (usually quite significant).

    My return is currently running at just under 18% (after tax and fees), but I view my predicted actual return based on deducting all loans in arrears over 30 days, which gives me a current return of just over 15%. The total number of loans in arrears over 30 days appears to be fairly stable for me now, but perhaps this will change? Interestingly if I use Harmoney figures of expected defaults I get a predicted return of 15.47% (seems to be a reasonable value). My actual over 30 days arrears rate is 1.23%, Harmoney predicted figure 1.58%, however the loans in arrears returned in the exported report from Harmoney do seem to have major issues i.e. loans in arrears are not reported as being in arrears...

    With over 1000 loans I don't think 'luck' has all that much to do with it?
    so your'e reinvesting?

    Can you do a graph of your outstanding principle over time? - just out of interest to see what it would look like, it should kinda be a compounding growth right?

    I have just done my first month of re investing, but also got hammered by writeoffs at the same time so made like $200 on a $70k outstanding principle.
    Last edited by alistar_mid; 15-11-2017 at 01:19 PM.

  12. #2832
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    Quote Originally Posted by alistar_mid View Post
    Can you do a graph of your outstanding principle over time? - just out of interest to see what it would look like, it should kinda be a compounding growth right?
    Outstanding principal (blue) bounces around a bit as big lumps come back that take a bit of time to reinvest, but I plot the actual gain (red => Outstanding Principle + Funds Available - 100K) which still looks pretty linear. I deposited 100K and have not withdrawn or deposited since.

    If I draw a straight line along the red line, there is a slight upward curve.

    chart.png

  13. #2833
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    Quote Originally Posted by myles View Post
    Outstanding principal (blue) bounces around a bit as big lumps come back that take a bit of time to reinvest, but I plot the actual gain (red => Outstanding Principle + Funds Available - 100K) which still looks pretty linear. I deposited 100K and have not withdrawn or deposited since.

    If I draw a straight line along the red line, there is a slight upward curve.

    chart.png
    Hi Myles
    I think the big difference between what your current actual gain and the RAR is the effect of the Payment protect on your outstanding principal. We have started another Harmoney account recently - just over a month. Already, the payment protect effect pushes up the total gain from a mere 3.7% (without) to over 20% (including the payment protect) based on a simple increase in total/total invested (including cash balance). The low 3.7% is because we have over $10,000 sitting in cash over the 5 to 6 weeks all the time (with money in every week) and that most of the loans invested have not started paying interest yet. Total interest is just about $160 but payment protect already added about $760 to our outstanding principal. Over time the effect will lessen as the increase from payment protect is just a once off for each loan. Also, if a loan with payment protect gets paid off early, you may actually lose some money instead of gain. However, in the long run, Harmoney expects that payment protect adds more than 1% (I think it may be a touch more) to your RAR, even with both the early repayments and the principal waived.

  14. #2834
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    Hey CoolBear, not sure exactly what you're referring to re actual gain vs RAR, but I agree with what you've said about the Payment Protect - certainly seem to be a positive for lenders.

    My current RAR - 17.75% - has pretty much caught up with my actual gain which fluctuates in the range 17.5 to 18%, however the actual gain is after tax, where RAR is before tax. (I've yet to see the typical drop in RAR, but I'm sure it's coming). I currently have 5 charge-offs included, this will increase, but I'm hoping the reinvestment gains will go some way to cover those losses - at this point in time the straight line gain shown in the graph above indicates it is covering all of them. I'm predicting a 2.5 - 3% drop in the current actual gain from defaults over time - this represents around 65 defaults per year.

    I'm being significantly more selective of loans in the lead up to Christmas, but suspect I'll see an increase of defaults in the future from this period of loans.
    Last edited by myles; 17-11-2017 at 11:13 PM. Reason: Edit: Corrected defaults per year value.

  15. #2835
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    Quote Originally Posted by myles View Post
    Hey CoolBear, not sure exactly what you're referring to re actual gain vs RAR, but I agree with what you've said about the Payment Protect - certainly seem to be a positive for lenders.

    My current RAR - 17.75% - has pretty much caught up with my actual gain which fluctuates in the range 17.5 to 18%, however the actual gain is after tax, where RAR is before tax. .
    That is what I meant. Your actual gain if you include tax would be at least 21+% (to 25% depending on your tax rate) but your RAR is "just" 17.75%.
    Last edited by Cool Bear; 18-11-2017 at 09:08 PM. Reason: add " "

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