[OT] Brokerage for the D Language Foundation

[Laeeth Isharc via Digitalmars-d]

On Sunday, 18 September 2016 at 16:13:55 UTC, Andrei Alexandrescu 
wrote:
> On 9/18/16 11:44 AM, jmh530 wrote:
>> On Sunday, 18 September 2016 at 12:39:25 UTC, Andrei 
>> Alexandrescu wrote:
>>>
>>> Thanks all for answering! Well there is a relatively low-risk 
>>> option
>>> to make some 5%-7% annually by investing in marketplace 
>>> lending, see
>>> https://lendingclub.com/. (Individuals may do the same, too, 
>>> btw -
>>> look into it!) I've been using them since 2013 with moderate 
>>> amounts.
>>> Right now the portfolio's return rate is 5.06% - not to 
>>> sneeze at. The
>>> issue is liquidity, i.e. your principal and interest are 
>>> returned on a
>>> monthly basis over 3-5 years. The monthly schedule is 
>>> actually nice
>>> for the Foundation because it matches the way operations are 
>>> paid for.
>>
>> I would advise against investing the whole sum with the 
>> Lending Club
>> (some smaller amount, say 5-25%, I have less of an issue 
>> with). 5-7% is
>> what people earn investing in dollar-denominated sovereign 
>> bonds from
>> Emerging Markets. That's the kind of risk your taking on.
>
> Wouldn't that be risk from the unsecured personal lending 
> business, which although numerically similar has a different 
> dynamics?
>
>> You think it's
>> low risk because you don't see the risk: unemployment is low 
>> and has
>> been falling since 2013, so there are few defaults. What 
>> happens when
>> there is a recession? There will be higher defaults, slower 
>> repayments.
>> And you can't exit the position because you've locked up the 
>> investment
>> for 3-5 years.
>
> I've been looking at their historical numbers. Their accounts 
> didn't lose money even during the trough of the recession. At 
> that time they were one of the best places to invest out there. 
> There are challenges in the world of marketplace lending, but 
> as far as I understand it sure is a solid choice.
>
>>> Regarding the stock market, IB is quite attractive, and has an
>>> incredibly low margin rate.
>>
>> Frankly, this comment makes me cringe.
>
> s/cringe/curious to know more/
>
> The basic idea here is to have a buffer for short-term 
> borrowing. For example, for DConf we'd need to plop down some 
> money for renting a conference hall until proceeds from 
> registration roll in. The notion of being able to take a 1.60% 
> APY for that is quite attractive. Sadly, I've looked at IB 
> since and they don't offer any checking or general banking. I'm 
> not 100% sure, but I assume they'd lend money only for 
> investing; they wouldn't allow you to transfer cash on margin 
> into your bank. Does anyone know exactly what the case is?
>
>
> Thanks,
>
> Andrei

IB offer a trading account only.   You can wire money to your 
organisation's bank account,  and that's it.

I think the suggestion from others to be cautious about asset 
allocation is a sensible one.  Keynes did quite well in the end 
for King's College,  and more recently Dave Mittelman and Maurice 
Samuels did rather well for Harvard.  But those were established 
bodies that had plenty of cushion financially and prestige to 
carry them through the downs that come with the ups.   Nobody was 
going to refuse to donate to Harvard because they disagreed with 
its investment policy.

If tech and the corporate sector keep doing well,  that should be 
pretty good for being able to raise funds in coming months and 
years.   If things are more difficult,  then it's going to be 
harder to raise money,  and at the same time there will be more 
opportunities to spend money to further the aims of the 
foundation (since you can actually hire good people to help you 
in a downturn). So at least the needs of the foundation are more 
pro than counter cyclical.

I don't think there is a good case for having a margin account at 
all.   First there may be increased credit risk because of 
different custody treatment (I forget,and the rules have changed 
in any case).  Secondly to be a hundred percent fully invested is 
already taking an awful lot of risk, and cash needs ahead of a 
conference are something you can plan for when setting maturity 
of your investments.   Yes,  you can borrow against stocks and 
wire money to the organisation account,  but should you?

Re lending club,  if you invest a little,  then it's not enough 
to matter,  and if you invest a lot,  then you do have credit 
risk on the whole notional.   The nature of credit risk is that 
you're short convexity - you can only gain the coupon,  but 
defaults can often surprise.  And short term historical data 
doesn't tell you what you need to know,  because the really major 
events aren't ergodic.   (you obviously don't have long term data 
for lending club,  but you can look at data for past two 
centuries for a much better idea).   It's not the probability,  
but the magnitude and  consequences of loss.

Theres a whole set of expectations and lore regarding what one 
should do as a fiduciary.   Not my area,  and others will know 
better.

It's a very strange time - when rates are low people tend to pile 
into anything to get a return.   Understandable,  to be sure,  
but not always prudent.  That's how the credit bubble began post 
2001, and episodes like the present don't necessarily end well.

Cash isn't without risk either,  particularly if inflation should 
start to pick up in coming years.   (something that's not 
necessarily good for all asset prices). But on shorter horizons 
capital gains and losses dominate inflation surprises,  and my 
guess is that for the time being you will spend capital raised in 
the course of a few years.

So there's no easy option,  and I am also not able to give 
investment advice.   But definitely worry about the return of 
your capital first,  and the return on it next rather than the 
other way around.