History

This is not my first foray into the world of peer-to-peer (P2P) lending. Loyal readers (hi, you two!) might recall that I invested in loans through Prosper back in 2006 and 2007. You may also recall that I didn’t fare too well. Here’s my current account status:

To review: out of 28 loans, 11 were paid as agreed, and 17 were ultimately sent to collections or discharged through bankruptcy, where I either got pennies on the dollar or nothing at all.

Those investments were discussed previously in this blog:
http://www.bbhart.com/81/prospercom/
http://www.bbhart.com/265/prosper-13-months-later/

Rationale

So why am I back to P2P lending for more punishment? Well, a few things are different this time.

1. My mood towards the stock market has soured. I’m not confident stocks as a group can deliver their historical rate of return in the decades ahead. I’ve been out of school, in the work force, and saving for retirement since 1997. In that time the S&P 500 has seen a compound annual growth rate of 5.64%. I believe I can do better, but I’m also realistic about what’s truly possible. I’d feel successful if I earned 8-10%.
2. I’m investing with Lending Club instead of Prosper. Lending Club was the first US peer-to-peer lender to register its offerings with the SEC. They’ve had a number of years now to tune their business model. Regardless of how you might feel about the SEC, investing with a company that’s subject to some degree of SEC oversight is probably safer than a company that isn’t. I don’t blame Prosper — they were learning the same expensive lessons that I was and I truly feel they had altruistic motives — but I’m trying a different company anyway.
3. I’m investing through a self-directed IRA (SD-IRA). One of the biggest headaches I had with Prosper was dealing with the taxes once March/April rolled around. They basically act like 28 individual securities, which means a lot of typing into Turbotax. With the IRA account, I invest free of the taxes or tax reporting burdens I would’ve had with a regular account.
4. I’m dealing with lots of loans this time around. Instead of having $2,500 tied up in 28 loans at Prosper, I’ve invested twice the money ($5,000) in 7x the number of loans (~200 when fully funded). This spreads the risk amongst lots of individual borrowers.
5. Historical defaults are known, and I’ve factored them in to my expected rate of return. I invested in Prosper when the company was brand-spanking new. They were learning, and I was learning. Turns out their default rate was much higher than they anticipated, which destroyed return on investment (ROI). They didn’t have years of data to draw conclusions against. Lending Club does. There will be defaults, but since there’s an acceptable amount of historical data (in my opinion) to be able to predict default rates, I’ve factored defaults in to my expected ROI.

Getting Started

I dragged my feet on getting everything set up. There are a few more hoops involved in setting your Lending Club account up using retirement funds. The process isn’t difficult, per se, but neither the documentation nor the automation is where it needs to be to make it dead simple for investors of all ages and computer skills. The flows appear to be:

Forms
You ---(mail or fax)---> Lending Club ---(forwards to)---> SD-IRA Services

Money
You ---(check or rollover form)---> SD-IRA Services ---(wires to)---> Lending Club

At the end of it, you end up with a Self-Directed IRA account at the aptly-named Self-Directed IRA Services and a Lending Club account. One interesting side-effect of having a self-directed IRA is that I can invest retirement funds in things like real estate, stock of privately-held companies, and tax liens.

One important note: if you want to do the Lending Club IRA thing, you need to use a special link on the Lending Club web site to kick off the process, and it’s not always easy to find. If you blow it and create a regular account, thinking there will be a place where they ask you what kind of account you want, then their support people have to delete it and you start all over again, which can take a day or two.

You can roll over part or all of an existing Roth or Traditional IRA over to SD-IRA/Lending Club, but I opted to make them my 2011 Roth contribution, which meant I just mailed them a check. I can’t comment on how smooth the rollover process is, but I’d expect they do a lot of them and it wouldn’t be any problem.

Investing

Once the forms were received and my check was cashed, I ended up with basically what amounts to 5,000 shares of my Lending Club account worth $1 each in my SD-IRA account (see below) and an available cash balance of $5,000 in my Lending Club account.

One of my problems with Prosper is that I ended up engaging in emotional investing. I read people’s sob stories and ended up investing a disproportionate share of my funds in their loan. Turns out those people default just as frequently as everyone else. Thus, Rules 1 and 2 were born.

Brian Rule 1: Nobody gets more than $25 from me.
Brian Rule 2: Ignore the stories.

Which is better: 25 loans of $200 each? Or 200 loans of $25 each? I don’t know; I’d say it depends on who the 25 loans are for. But I feel better having my loans spread amongst many people. As for ignoring the stories, time will tell on whether that’s a good idea, but if everything else is in place (additional Rules below), then I’m less concerned about how you acquired the debt as I am in your ability to pay off your loan.

For the first $3,500 or so of my total $5,000, I used Lending Club’s Invest function.

Clicking Invest automates Rules 1 and 2 for you. It builds a portfolio of $25 notes (Rule 1) and it doesn’t read the borrower stories (Rule 2). What it does do is build portfolios based on your risk tolerance. It doesn’t discriminate between types of loans, though, so if you’d rather not loan to someone starting a business or needing to cover medical expenses, this feature probably isn’t for you.

As strange as it sounds, for the first $5000 I felt it was more important to get my money placed than to spend hours and hours vetting $25 loans one-by-one. I used the Invest function for the initial $5000, but after all was said and done with rejected or expired offers, about $3500 was allocated and the remaining $1500 was left over to reallocate. At that point, I decided it was time to get more particular about the loans and make some more rules.

Brian Rule 3: Invest in higher-rate loans.
Brian Rule 4: Focus on debt consolidations.
Brian Rule 5: Borrowers should have jobs. Even better if it’s for the government/military, and better still if they’ve been there for at least 1 year.

Lending Club’s historical data demonstrates that investing in higher-rate loans will net a higher return than “safer” loans when you subtract out the default rate. In other words (and speaking generally), which one would you prefer?

• 8.9% with 1% defaults = 7.9%

  OR

• 16% with 5% defaults = 11%

In my opinion, the answer is: it depends. If you play it by the numbers, and expect default rates to remain close to their historical values across all class of borrowers, then you’d chose the 16% portfolio. On the other hand, you might sleep better at night knowing only 1% of your loans will default, as opposed to 5%. You’re loaning real money to real people; it might effect you emotionally to have some of those people stiff you. You will want to minimize the number of defaults, even if it means a lower rate of return, just so you can sleep more soundly at night.

I tried to remain unemotional with Prosper, but it’s hard to do that when you read the borrower’s hard luck story before deciding to invest. Once the loans were funded, I found myself rooting for these people, even though I knew some of them would skip out on me. And sure enough, when a loan would go from 30 past, to 60 past, to 90 past, to Sent To Collections, I would scream inside “But you were one of the good ones!!! This wasn’t supposed to happen!!!”. Like I mentioned earlier, I made fewer loans with a higher amount-per-loan than I have with Lending Club, which didn’t help me divest myself emotionally. One loan defaulting hurt.

For my last $1,500 I decided to set up some basic filters in Lending Club’s Browse Notes screen. I wanted to exercise a bit more discretion in the loans I made, while trying not to become emotionally involved. This meant paying closer attention to the borrower’s statistics, while trying not to become too involved in their business. I screened for Debt Consolidation loans, for people with a steady job under their belt, who were mainly in the C/D range, with some B’s and D’s (and even a few E’s) tossed in there, those who had had their income verified by Lending Club, and where Lending Club had already approved the loan. Very few loans met all those criteria, and certainly not $1,500 worth at $25 each. I loosened the criteria some, relaxing the Approved status and looking at some loans that weren’t Debt Consolidation, and have been able to come close to funding out my full $5,000.

All told it will end up taking close to 3 weeks to fully invest my initial $5,000. Some loans I agreed to fund either expired before being fully funded or were rejected by Lending Club for some reason. When that happens, the money is returned back to me to reinvest, but days or weeks may have passed where that money was idle. It ends up being a fair amount of work to place all your money, but once it’s done, all you have to worry about is either re-investing the money people pay you every month or pulling it off the table and finding something else to invest in.

Wrap Up

As of December 19, this is what my account looks like:

I’m still waiting on $150 to find its way into funded loans, but otherwise, as I mentioned, it’s taken me about 3 weeks to invest $4,850 in loans that pass my sniff test. You can expect that I’ll update this blog periodically with how it goes.

Update 12/20/2011: Peter Renton from SocialLending.net reminded me about lendstats.com. LendStats is not affiliated with Prosper or Lending Club; you could use it to do a sanity check against what those sites are reporting for performance. Here are my stats for my old Prosper loans.

My brother and his family came by for dinner, which included teriyaki flank steak and 1905 Salad, so it was all good.

As expected, the Boy was a little standoffish around all the new people, but got into it towards the end and was running around and carrying on with the rest. The baby did what babies do.

Symptoms for the past few days:

• Sinus pressure. I’ve had CT imaging and a visual inspection by an ENT, but I can only describe this as sinus pressure. Pressure behind my nose. We had some altitude changes yesterday and it did seem to get better or worse based on those changes.

• Constantly clearing ears. I had to do that thing where you blow air through your ears inside your head to clear them many, many times yesterday. Relief would last for a few seconds and then there’d be pressure again.
• Throbbing. It’s kind of a throbbing sinus/ear pressure.
• Lots of neck pain. Crunching and cracking in my neck.

WTF, man…

p.s. I hate that I’m going to have to make a Medical category on my stupid blog.

I visited with a maxillofacial guy on Wednesday and learned a few things. Most importantly, I’m not going crazy. They did a a lot more nodding-and-agreeing than frowning and brow-furrowing, which was a relief. The doctor did his poking and prodding and listening and questioning, with a diagnosis of a temporomandibular disorder.

Taking a tangent for a moment, what’s up with the Pain Scale? You know, that thing where they ask you where your pain level is on a scale of 1 (with a next to it) and 10 (with a next to it)? The issue is that 10 is never defined. To me, 10 is pain so intense that you’ve passed out and can’t answer; 9 would be spotty consciousness and uncontrollable sobbing; 8 is where you become single-threaded and can only concentrate on mitigating the pain; and then on down the line. When the man pokes my jaw and asks for a pain level, I answer the best I can but each time I’m asking myself “Relative to what?” I feel like I’m living as a 5 right now, but maybe someone who’s been in a car accident would laugh, pat my head, and call me naive.

Fortunately my issue is with muscle and not bone, so there was no talk of surgery or other drastic action. They’re checking with my insurance company to price out two oral splints, which are kind of like retainers. Street price on those suckers is about $1200 a piece, so while I’m very interested in getting them ASAP, I’m even more interested in paying 20% of the negotiated rate instead. That will take a few weeks. In the meantime they’ve prescribed something called carisoprodol for the pain, which, as opposed to the other meds I’ve tried so far, does actually take the edge off. And it makes my jaw feel better (hi-yo! *rim shot*).

One of the most curious aspects of this whole 13 week ordeal is that I might not have found my way to a TMJ guy if not for my father mentioning, somewhat offhandedly, that it may be a dental problem and I should try going down that road. My primary care guy never mentioned checking with a dentist. Nor did the ENT, who instead recommended treating the symptom (using trigger point therapy) instead of the cause, since the cause was unknown to him.

With a little luck, I’ll only have to write one or two more blog entries about this and be done with it for a long time.

I had a realization this evening. I’m now putting more effort into social media than I’m getting out of it. Turns out it hasn’t brought me closer to anyone, really, and it’s stealing my attention. It hasn’t generated any money for expenses or savings for me or my family. I haven’t found enlightenment or inner calm. Mostly I feel stressed and overwhelmed at the end of the day, with just a hint of FOMO when I’m offline.

It’s whittled down my attention span to where it’s razor thin. The attention span issue plus my facial pain (which I honestly think is NOT related, despite the fact everyone is saying it’s stress-related, thank you very much) have taken a lot of the joy out of my life. I crave quiet and calm, yet it is almost unattainable. I don’t know how to do it…. how to quiet my brain.

We’re not even talking about the amount of time spent on sites like Facebook, because it’s truly not that much. The issue is the frequency. Every time the computer pauses to think about something, whether it’s doing a configure/make/make install, starting a VM, waiting for Outlook to finish doing whatever the fuck it does where it goes to lalaland for a few minutes, etc., I pop over to Facebook or Twitter or Reddit to see what’s new. Could be only 30 seconds, but it happens A LOT.

All my thrashing around, back and forth, consuming data streams like a coked up coke monkey, has to have a cost. So I’m doing a few things. 1) I said bye-bye on Facebook, and adjusted my notification settings so it wouldn’t email me to let me know all the excitement I’m missing. 2) I’m making more use of Instapaper and my iPad for longer-form media like interesting blog entries, NY Times articles and the like. I’ll check Instapaper only a few times a day, and try to do it outside of my office for a mental breath mint. Content suggestions welcome, please. 3) Unfollow some Twitter people who are just trying to drive traffic towards social media. Instead, use Twitter to find compelling long-form media. 4) I’d like to write here some more. This entry is disjointed, yes, but writing is a muscle that needs to be flexed, like some sort of.. flexing… thing. The nature of this beast requires attention and organizing of one’s thoughts, the very skills I’m trying to redevelop! What a happy coincidence. 5) Delete social media icons from browser toolbars. Simple one. Easily bypassed, but I’ll feel guilty the whole time I’m typing out my URL by hand.

Those are the first steps. I don’t have checkpoints or metrics or anything else to help me measure success or failure in this endeavor, so I’ll have to figure it out as I go. Any other suggestions are appreciated.

There’s no reason to believe it’s a sinus issue anymore. A CT scan was done at the beginning of July and reviewed by a radiologist and ENT, along with a visual inspection by the ENT using a scope, and everything looks great there.

I’m now of the opinion that it has to do with my jaw, and have an appointment with a maxillofacial guy downtown on Wednesday morning — an appointment that took me 3 1/2 weeks to get. It’s my sincere hope that he can poke and prod and me and either 1) make a determination and recommend a treatment, or 2) exclude the parts of my face that are within his area of expertise and refer me onwards. Clearly I’m hoping for #1, but would accept #2 if it helps get me closer to a final determination. The not-knowing is the worst part. If he said that I needed to wear bulky head gear for a month while only eating soft foods, I would sign the authorization immediately if it would make this problem go away.

The medical bills aren’t funny any more either, even with health insurance. The total bills have gone from Nice Dinner Out to Moderate Car Repair and are approaching Decent Computer. I’m praying they don’t approach Beach Vacation or Child College Fund.

The summary I’d give the doc at this point would be:

• Persistent facial pressure since late August
• Ringing in my ears, though usually masked by ambient noise
• Pain is moderated somewhat by using a drug store bite guard
• At one point I had fairly significant pressure in my upper neck
• There’s nothing wrong with my sinuses or ears
• Pressure intensifies if I rest top and bottom jaw together
• Nose or jaw sometimes feels twitchy
• Phrenilin Forte or naproxen offer no relief
• I still have all of my wisdom teeth but the dentist didn’t believe it was a root cause here

We’ll see what the doctor says on Wednesday.

I want a primary care physician (PCP) who is the project manager. No single doctor can know everything about everything, so I understand the usefulness of specialists, but I still want someone learned in medicine who can boil concepts down for me and separate fact from, well, not fiction, but cases where my needs and a specialists needs are not completely, 100% aligned (aka profit motive). The process would be: I visit my PCP, he refers me to a ENT, the ENT renders an opinion to me and my PCP, and then I get in touch with my PCP to discuss. In that way, someone trained in medicine has a holistic view of my issue.

Communication-wise, I want to be able to call and speak with my PCP. Further, I’d like to be able to email them and receive a response within a working day or so. I don’t necessarily expect this to be free, though I don’t know if there are mechanisms in place to charge for this. It’s silly for me to take a few hours off of work to visit a doctor in person to tell them the allergy medication isn’t working and we need to move on to the next step. If we chat for a few minutes and it’s decided that it would be better if I came in so I can be examined and poked, fine, I’m ok with that.

My frustration comes from me having to be the executive-in-charge of getting my head pressure problem resolved. A medical person would be ideal. Instead I’m relying on the peanut gallery of Google searches, Facebook friends, family, etc. Someone besides me and my ENT should help decide whether trigger point treatment is the answer, considering the question of what’s wrong hasn’t been answered yet. I feel like the ENT will recommend ENT options, the dentist will recommend dental options, and the allergist will recommend allergy relief options.

I’m approaching seven weeks of living in hell. I’ll see a dentist on Monday for their opinion. If a dentist doesn’t know and an ENT doesn’t know, then what? MRI? DeWalt?

A list of symptoms would include:

• A lot of pressure behind my nose

• Pressure is always present, but varies in intensity
• Pressure is sometimes up behind my eyes, sometimes lower and into my upper jaw and teeth
• For a few days my jaw was always tired. My jaw felt like I’d been gnawing stringy beef jerky before even starting to eat.
• Constant ringing in ears, though usually masked by ambient noise.
• A twitching feeling some of the time in muscles lining the nose. A few nights it’s been severe enough to make sleeping difficult. Sometimes it feels like the problem is with facial muscles, sometimes with sinuses.
• There may be a post-nasal drip but since this condition has gone on so long I can’t tell if it’s a normal volume
• The pressure is worse when I bend over.
• As far as I can tell, I have no other symptoms. I don’t have a cough, I’m not more tired than usual, or overly headachy, or achy, or anything else.
• My lymph nodes may be swollen; not sure what constitutes normal for those
• There are no signs of bacterial infection, according to primary physician.
• My nose doesn’t run.
• I have no known allergies.
• I’ve never been treated for this problem before.
• I don’t believe I’m feverish.
• From July 3 or so, the bridge of my nose has felt “crooked”. Hard to explain. The sensation is that my nose is misaligned to the left a little.
• Update from July 5: the pressure has cranked up a few notches and is now making it very difficult for me to function at work or in life.
• Update from July 8: the ENT examined CT images: no structural sinus problems, everything looks great. He did a visual inspection of sinuses using scope: no problems. He offered trigger point injection but I declined. Xylocaine or novacaine mist was blown up my nose as a test but it only took the edge off, it didn’t make a big dent. He sent me away with phrenalin forte and a saline/topical anesthetic (xylocaine) compound. The phrenalin forte is barely taking the edge off and the compound doesn’t really do anything. The pressure had migrated downward some. The upper boundary is now near the top of my top teeth with a bottom maybe 1/3 of the way down my neck. Sideways pressure throughout is the best way I can describe it. Some throbbing but mostly just pressure. The pressure equally favors both sides of my head… not left or right in particular. Phrenalin Forte dims the pressure very slightly but also seems to concentrate it behind the bottom of my nose.

And some of the things that have been tried so far:

• Reading glasses; initially thought it might be caused by eye strain.
• Generic Zyrtec and generic Flonase at the same time. Took for 9 days, no noticeable change
• CT scan without contrast on June 27 showed nothing abnormal
• A lot of saline nasal spray over the span of two days didn’t make a dent
• Humidifier and hot tea
• Neti pot – once, on July 4
• Phrenalin Forte and a saline/lidocaine nasal spray, starting on July 7. Phrenalin took some of the edge off, but not much, and the nasal spray didn’t do anything except make my nose wet.

Updates will be here:
Update from July 9: could it be toncils? They seem inflamed and my neck feels stiff, though I don’t have a lot of other pertinent symptoms.
Update from July 10: today there’s a lot of “neck pressure”, and my upper jaw is sore.