Experimenting with Prosper.com
Ok after reading about Prosper.com all over the place, in order to talk about it intelligently, I had to do some homework. I've recently deposited $1000 into Prosper and have already made some bids to get a hang of it. Of course, I was outbid within 24 hrs, which leads me to believe that you need a serious strategy in order to make any serious returns.
There are a TON of people bidding for what appears to be a precious few funding spots. Unless Prosper successfully attracts enough borrowers to meet the lending demand, I fear that rates are going to plummet to an unreasonable level. Sure, there will still be some premium in the rate over and above what borrowers can get on the street through conventional means, but as a lender, the margin has to be worth the risk being taken. As rates plummet, I can forsee the margin not making up for the risk.
Time will tell. For now, I will use my play money to see what kind of return I can generate. The other thing I will be watching closely is how much time I am spending trying to generate these returns...
BTW, why don't they have RSS feeds for these things???
There are a TON of people bidding for what appears to be a precious few funding spots. Unless Prosper successfully attracts enough borrowers to meet the lending demand, I fear that rates are going to plummet to an unreasonable level. Sure, there will still be some premium in the rate over and above what borrowers can get on the street through conventional means, but as a lender, the margin has to be worth the risk being taken. As rates plummet, I can forsee the margin not making up for the risk.
Time will tell. For now, I will use my play money to see what kind of return I can generate. The other thing I will be watching closely is how much time I am spending trying to generate these returns...
BTW, why don't they have RSS feeds for these things???
posted by fin_indie @ 10/21/2006
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8 Comments:
At 10/21/2006 8:17 PM,
Anonymous said…
It used to be a lot easier two months ago than it is now.
I don't think the rates will plummet to an unreasonable level or lenders will leave. If lenders leave rates will improve through lack of competition. It's a market where buyers and sellers will determine the rates.
I think that RSS feeds are a good idea, however, you can just bid the lowest rate that you'd accept. You'll end up getting the same rate that the whole group gets. So you could bid 1% and still get 13% if that's what the rest of the people fund it at.
At 10/22/2006 8:30 PM,
StealthBucks said…
I've looked at prosper and it seems to me that the quality of the applicants is lacking and the rates are too low. Here is a very different idea. Look to local start up banks and try and be a depositor when they look for added capital. These banks often are bought out, go public or merge in to something larger. There is a local Everett bank capitalizing now that I know nothing about. (Buyer Beware... enter at your own risk, etc..) It is an interesting sub investment class and has shown success.
On the wine front. I have a couple of suggestions in the Meritage camp or lush Cab. 1st look for Columbia Crest Walter Close Private Reserve (any year) You can sometimes find this at our communist controlled state liquor stores for under $18.00. The stores have to compete in WA on wine and beer sales only, thus they get screaming deals. The other wine to look for is Walla Walla Vinters (any Cab). These guys make really toasty barrel aged cabs. They are spendy but unique enough out here, you can enjoy it with friends and compare to a less toasted and oaked cab. It's a fun drink. This combo in fact would show two very different types of wine making but both excellent.
Good luck and try the Washington State liquor board wine site as well. If you find a bottle you want, they'll inter store ship it for free to your local state shop.
At 10/23/2006 3:51 PM,
fin_indie said…
@LazyMM: Right, I agree that the market will set the price, but my point was that the rates for me personally will be too low to warrant the risk involved. It'll be interesting to see.
I mean, look at this lising (login required): https://www.prosper.com/public/lend/listing.aspx?listingID=48961
5 pages worth of bids -- lots of money chasing returns. ...and you know the lender rate will not close at 17.95%, where it stands now. This is a "D" credit rating with debt to income of 17%. A 17.95% lender rate or below is just not enough to justify the risk of default. No bank would loan at this level, why should I?
At 10/23/2006 3:54 PM,
fin_indie said…
@Stealthbucks: Interesting idea. I am always on the lookout for alternative investments. Of course, the risk is hard to quantify for me, but I will do some research to see if I can identify the bank you are referring to (unless you want to just tell me the name :)
re: Wash state liquor store: I had heard about this years ago, but forgot about it. I should stroll into my neighborhood shop and see what they have! Thanks for reminding me.
At 10/23/2006 9:35 PM,
StealthBucks said…
I have to look for the bank but it's the concept that counts. These things come and go and there is a lot available on line about the concept. I'll see if I can steer you to some info once I have a chance. It's a pretty good vehicle just do your own research as I am a nameless faceless guy.
At 10/24/2006 5:33 PM,
fin_indie said…
Yeah, I get that. I just don't know what it means for an individual investor such as myself to help capitalize a bank. ie. how exactly does it work? Given an example, I could run with the concept.
At 10/25/2006 8:27 PM,
StealthBucks said…
If you have a deposit with one of these banks, they will offer you the ability to capitalize for private stock. Often some preffered issue of some kind. You then have a very real, illiquid investment. You can even place these in an IRA with many brokerages. Sometimes these issues pay dividends. Sometimes they do not. You can sell them to other private owners or wait for the stock and company to go public (sometimes years) CitiBank (not the big one but the little one in Everett was funded this way). I know it sounds creepy but you can look in to this on the net and it appears much easier than prosper. Again, I'm not selling anything and have never done one of these but the success rate is pretty high relative to normal angel investing. I also think that it may not be worth your time but at a minimum is a good trivia point. Banner was also started this way. As was Viking Bank in Ballard. There are lots of examples.
At 10/28/2006 6:32 AM,
fin_indie said…
Very interesting. Thanks for the examples. If I wind up going this route, I'll be sure to report back with a post.
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