The silver lining

I haven't had a cashflow update for awhile, and there's a good reason for that. I'm moving to a new place, and I had to tap into my savings to come up with last month's rent, broker's fee, and new furniture. Needless to say, I must have shaved off $3.50 off my monthly passive income cash flow. Propser is still on hold as they go through some filings to open up a secondary market for their loans. I have 7 loans active, with 1 late (some real estate flipping loan...go figure), but my return is still pretty high there. There's $56.00 in cash, but I can't loan that back out because of that filing thing. So the only thing I've been able to mess around with is my Sharebuilder account.

I've made some bad decisions here and there. I bought 150 shares of Freddie Mac (FRE) when they were still going down. Lost quite a bit there. Bought 100 shares of Sirius XM (SIRI) since I thought the merger would be good for them and they are the only satellite radio company out there. Besides, they have that partnership thing with GM. But we know what happened with GM, and Sirius just isn't pulling in enough subscriptions. They have some debt coming up, too. So even though I bought cheap, I still managed to lose 75% of my investment there.

I have since made some longer-term investments. Bought 13 shares of Western Digital (WDC) with my BUD proceeds. So far that investment is paying off, but with 13 shares it's not a lot. Accounting for my commission costs, I made $12. I know...riveting. I also bought 50 shares of Fairpoint Communications (FRP). I think the company is pretty promising and I'm pretty excited about their business in Q1 of 2009 when they finish taking over Verizon's landline business up north.

Anyhoot, while watching the market and reviewing my holdings, I suddenly remembered that I had some stocks paying dividends. I didn't pay much attention to it before since I had some pretty measly holdings, but now I have 320 shares of stocks. So I did a quick look into my holdings and I'm quite pleased. FRE and FRP both pay about quarterly dividends of $0.25 per share. I'm not sure if FRE put their dividends on hold (I think GM did), but if both are still paying, I'm due for $50.00 per quarter. So even if my my shares aren't making leaps in gains, I can at least get some cash flow out of them. There's that silver lining.

FRP announces fourth-quarter dividend!

So after a bit of a hit with Freddie Mac (FRE) and Sirius XM (SIRI), I've been a bit more selective about what I put my money into. With the sale of Anheuser-Busch, my shares of BUD were liquidated without anybody telling me. Seeing how I didn't want my cash sitting there while the market was down. I threw the cash into Western Digital (WDC). They are a pretty solid company with good product offerings. Tech has been a bit volatile lately, being affected by the weak retail sales, but I foresee WDC holding its own for a bit. Solid-state drives haven't caught on that well, so HDD should be fine for now.

A while back, I had some meager shares of Verizon Communications (VZ). Somehow, when they spun-off their northern New England business into Fairpoint Communications (FRP), I was given a fraction of a share. A few days ago I noticed some movement, and after some research, I found that they are about done with their transition of business away from VZ to FRP. The price was low, so I went in for 50 shares. Barring any hiccups with the final stages of the transition, FRP should be fine in the short-run. They also just announced a quarterly dividend of $0.2575 per share. So holding FRP will give me $12.88 dividend income per quarter. Not too shabby, while I wait for their business to settle in. Volume on the stock is pretty low at around 120K, but FRP is still relatively unknown. It did make the biggest movers list on Motley Fool a few days ago, though!

Some thoughts on P2P lending

So I've been doing a bit more research on peer-to-peer lending sites, mainly Prosper and Lending Club. Basically, they are both pretty similar, but how they go about with the lending process is different. Prosper relies on an eBay style process with borrowers posting a listing and starting interest rates. Lenders bid and lower the interest rate until time runs out. Decisions are based on info borrowers submit to Prosper. Lending Club reviews information as well, but their lending process is different. Borrower listings are assigned a credit grade based on information that includes their credit rating, DTI, etc. Then an interest rate is assigned. No bidding. Kinda more of a Buy it Now approach.

There was an article out there talking about the differences. The author had some investments with Prosper, and although Prosper uses a different approach in terms of the borrowers' credit rating, he attempted to figure out what interest rate he would've received if he invested in a similar loan on Lending Club. He concluded that lenders would probably receive a higher interest rate at Lending Club, while borrowers can take advantage of the larger lending base at Prosper and receive a lower interest rate.

Now does that mean I should stop my investments at Prosper and move my money to Lending Club when it gets back from the loans? I don't know. Maybe I'll do better at Lending Club. Or maybe I won't. But right now I'm averaging at least 20% return with my 7 loans. So far Prosper doesn't seem to be going down yet, and there is an abundance of loans to bid on there (although things are locked while Prosper tries to get registered to offer a secondary market for their loans). Also, cash that gets repaid and haven't been reinvested is held for me at a Wells Fargo account with FDIC insurance. So, I hear some bad things out there, but I haven't been burned yet. I think I'm gonna stick around on Prosper and keep feeling things out.

Good news/bad news about Prosper

I got an email from Prosper yesterday telling me they are registering their promissory notes with the appropriate parties so that they can create a secondary market for their lenders. What this means if this passes is that lenders can sell their portions of a loan to get cash back prior to loan maturity. Say you have $200 stuck in loans and you really need it, but the loans don't mature for another two years. Sell that in the secondary market and get some of it back right away. That's pretty good news in that it creates some liquidity in the Prosper community. It turns out this was what Lending Club was doing when it was not accepting new lenders. So Lending Club, it seems, is ahead of Prosper.

Now the bad news is that Prosper has been making some pretty disturbing moves, including contradicting their own legal agreements with their own borrowers and lenders. According to some sources, their default rate is pretty high as well (35% for loans originated from June 2007 on). Personally, I'm not seeing this default rate. Either I picked my loans well or I'm just plain lucky. But I have $300 invested and I have $30+ in returns. I've been lending since October 2007, so you can quickly say I got 10% return. However, my loans did not all start in October, so it's probably closer to mid to high teens. I don't really feel like calculating it all out, but I'm definitely sure I'm getting a much better return than in the stock market (I'm getting negative return right now).

Now since Prosper is in a mandatory "quiet period", I cannot make new loans. This period will last until their whole registering their promissory notes thing is finished. I guess what I need to do now is decide whether I should stick with Prosper or just let the loans mature (or sell them in the supposedly upcoming secondary market) and switch to another peer-to-peer lending site like Lending Club. As I've said before, I have had not problems with Prosper, but a quick search definitely shows concerns regarding Prosper. I need to do some research and check up on Lending Club as well. Peer-to-peer lending has kinda been frowned on, but it's been such a great investment for me this past year. We'll see how it goes. Who knows? Maybe I'll find another area to invest my small Prosper funds in.

Dow is down...AGAIN.

O...M...G...

My portfolio and 401k are bleeding money. I thought the bailout was supposed to help. Good thing I don't need that money anytime soon.

"The goggles...they do nothing."

Senate votes on a revised bailout plan tonight

So, I got into work this morning and found out that the Senate will vote on a revised bailout plan tonight. This new plan will increase the amount that is currently insured by the FDIC, so that would be good. However, this new plan will include a package of business and energy tax breaks that the House of Representatives originally rejected. So now, even if the Senate passes this plan, the House might still reject it. We're just gonna see what happens today.

House of Representatives rejects $700B bailout

If you haven't heard already, the House of Representatives rejected the $700B bailout plan that was tentatively hashed out over the weekend. So hang on hard for this economic crisis to drag on a bit. Most the representatives voted against the plan (228 - 205) due to lack of confidence in it and that the presidential election is so close. Neither party wants to be faulted if the bailout fails (For the record, the majority of Democrats wanted the bailout while the majority of Republicans didn't).

What does this all mean for us? Well, for the taxpayers out there who were worried they'd have to shoulder the $700B bailout, they don't have to worry about that anymore. But with Washington Mutual failing last week and Wachovia pretty much pimping themselves to Citi, I'm gonna take a guess and say that a couple more banks will fail. The frozen credit market will get more frozen. People will find it harder and harder to get funding for houses, cars, etc. Companies will have a hard time getting funding to do business (including paying employees). Sure this is all a wild guess. But at the moment, anything is a wild guess.

Critics of the bailout plan stated the plan did not address job losses and other stuff. And I know the plan does not touch previous contracts that grant "golden parachutes" to executives of companies that seek bailout. But I still feel we should do something instead of waiting for things to turn around. I agree that the billionaire executives have to be held accountable for the companies that they drove to the ground, but to say no to a bailout plan because we don't want to be the ones to fix it is pretty silly. It's almost NIMBY-like, if you ask me.

Oh by they way, stocks plunged when it appeared the bailout would be rejected. The House held the vote open for an additional 40 minutes, even pointing out markets were going down to convince the nay-sayers to switch votes. But of course that didn't happen. Anyhoot. At the current moment, no bailout plan = shrinking 401ks, IRA's, investment portfolios, etc. If I were you, I wouldn't look at your retirement plan. Let's see what happens when the House votes again.