I logged into my stock account the other day and realized that contrary to my previous claim/strategy of investing solely in Warren Buffet's Berkshire Hathaway, I had no Berkshire shares left. Time for an update, I reckon.
So what happened? Nothing against Berkshire, for sure. I sold almost all of my shares at a profit, and I still have full faith in the company. But sometimes opportunities come along that are too good to pass up, two of which I'm currently invested in.
Some of my money is in BP, the A-holes who spilled a bunch of oil in the gulf. After that disaster their stock plummeted to around half of its value, and I started thinking.
Is the whole company REALLY worth HALF as much as it was yesterday because of the spill? I'm nothing more than a pure amateur when it comes to valuating companies, but that seemed extremely harsh to me. Also, I had been thinking a lot about how people are really overreactionary (not a word, I know), and I couldn't help but think that this selling orgy might have something to do with that.
So I sold some Berkshire stock and bought a bunch of BP. I've since sold some of it (to buy this domain), but it's gone from my $31.9 purchase price to $49.25 as of this writing, in just six months. That's almost a 55% profit.
I haven't sold yet because I'm waiting for a year to pass. No point in paying short term capital gains if you don't have to.
I won't say I have my fingers crossed for another ecological disaster, but I will say that when it does happen, I'm going to be ready to cash in on it.
And now for an investing strategy you can take advantage of, too. You know those hippies who are always talking about how unfair it is that credit card companies "rape" their customers (hint: it's not unfair if you agree to it)? While they're off complaining, I'm gazing out the window with a smile on my face, fantasizing about how awesome it would be to get to loan money at such exorbitant rates.
A few months ago this fantasy came to reality by way of Lending Club. Lending Club is a site where people can apply for loans from their peers. If you have money to spare, you can invest it with them, choosing individually which loans you'd like to partially fund.
For example, a mother of three might be asking for a loan to get her foundation fixed. She provides all the usual credit/income information to Lending Club for your viewing pleasure, and she'll actually answer questions about the loan. This is awesome because you can take the time to actually make a good decision on each loan, unlike banks which must go by formulas.
Best of all, Lending Club publishes statistics on its various loans. Historically the best returns are found with the high D low E loans (A is best, F is worst). So those are what I invest in. The problem with worse loans is that some will default, so it's important to diversify your risk. I have $10k invested through Lending Club right now, and each loan is $50 to $200.
It's only been a few months, but my returns are averaging 17.8% right now. That's better than Berkshire and I imagine it to be less risky as well. With average defaults (meaning I am no better than average at choosing loans), I can expect that to fall to 15%.
On top of that 17.8%, I've also received 2% in bonuses. Every month there's some promotion going on. Right now you can get 3% on 15k. I don't have that much to invest, so I'm not doing it. Two months ago was 2% on 5k, which I did. As my loans get paid off (people tend to pay more than the minimum, so this is faster than expected), I withdraw all of the money. Once I withdraw enough to qualify for another bonus, I'll put it back in. Counting the bonuses, I'm pushing 20% returns here
Thanks to an awesome blog reader, I'm speaking at SXSW this year! WOO! More details coming when I have them.
Progress on my big project mentioned a few posts back is great. I'll be applying to YC Summer '11. If you're thinking of applying then, don't. it will be brutal trying to work in my shadow.
I'll keep giving out TaskSmash codes until they aren't getting snapped up. If you can't get one, keep trying! BTW, I don't really need feedback right now. I have a lot of it, and I probably won't get to it for a while. I'm giving out the codes because I think even though it's a bit rough, TS is the best way to stay accountable.
Just a heads up, I followed this advice to the T.
About a year later things look much differently.It only looks good at first because no one has defaulted. It shows my returns as 12.38%, but when you factor in past-due notes the real returns is -10.10%.
Obviously I don't blame anyone for this loss, I am my own man and made up my own mind. Just be careful with Lending Club thinking you are getting awesome returns, because you need to wait a while first and see that past due notes actually show up.
Tynan hopefully you sort through the crap and read my post. I was going to email you, but thought this may be more appropriate since it could help other readers.
For Lending Club where Texas residents are excluded, did you get a PO Box through a friend in another state or do you have a San Francisco address. I'm trying to find the easiest way to get a PO Box in another state so I can utilize the service.
Do not confuse technology ( computers etc. ) with science (the scientific method which is keeping an open minded skeptical attitude while constructing tests to isolate variables and find truth) science is not jumping to beliefs but testing the boundaries, carefully conducting experiments and reporting that truth. Science IS learning how to Think for yourself.
I found your site from a recent post from Tyler at Advanced Riskology but I first heard about you while doing a cross fit workout with Leo Babauta in SF. I love your story. Leos been saying we should get together if you're still in SF.
As a side note, my other business aside from my blog, is a value investment partnership modeled after Buffetts partnerships of the 50s and 60's. We get out to Omaha each year. Needless to say, your headline caught me. Good points. Going to check lending club. Looks fun.
Awesome work my man.
Keep it up!
I don't think I could invest in a company that I believe to be evil because that would make me just as bad. But I guess more power to you if it doesn't bother you, only God can judge you after all.
This is why I love reading blogs by you and other people I look up to. I always learn something new. I never even knew Loan Clubs existed. I'm going to do some research into and see if it's a good option for my own personal investments. Thanks Tynan.
@Phil. Thanks for the suggestion. I see that it is 20 per month and 25 one time set up fee. I will have to wait until my interest in is greater than costs out it looks like.
I've been on lendingclub for over a year, and a few charge-offs have kept my returns to about 6%. Still way better than you're average bank account. Your rate looks way better at first because nobody has had time to default yet.
@Marcus "science has been here 2 300 years."
Well wrong, the ancient greeks started it about 3000 years ago... and don't you rely on science for just about everything? Your car, your computer, the internet, your food, electricity, heating etc? Seems a bit strange to belittle something that helps you so much.
During my second year at college, I thought that investing was easy. I read about options, paper traded for a few months, and then solicited my friends for investments. Many of them invested in my hedge fund - "The H Fund", which I started with a friend. In total we had $26k, which was quite a lot considering how young we were.
The fund survived for a few months, even being profitable for a short amount of time. In the end, though, we lost all of the money. Luckily I have awesome friends who understood the risk, and no one was mad. Still - I learned my lessons and stayed out of the stock market for years.
For some reason or another I started reading about Warren Buffet. For those that don't know, he is the second richest man in the US, with a worth of over 40 billion. What makes him exceptional is that he is the only person on the top 100 richest people list who made his money through investing.
I first found out about Lending Club last summer (in 2012) after Tynan posted an article on his blog about it. There seems to be a healthy skepticism about using it, so I thought I'd offer my two cents after 9 months of activity.
If you haven't checked it out, I encourage you to visit the website a bit. The company is a middleman for lenders and borrowers. A typical customer may want to consolidate their debt, or pay some unexpected bills, and ask for a loan from Lending Club. The company itself will do some due diligence to make sure what the borrower is claiming as income, employment history, etc. is true. The loan itself is then listed on the website, and lenders (us) combine their money to fulfill the loan. This is a very simplistic explanation, but it's enough to get you started.