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Lately, I've been talking a lot about peer-to-peer lending – or P2P lending, as it is known.
GSBD, which yields more than 8%, popped at the open of trading Monday. At its high price Monday morning, you were up almost 10% from where I recommended it only six trading days ago (an annualized gain of nearly 2,600%). And just two days after we told you about it, the widely read Investor's Business Daily highlighted the Goldman business-development entity as one of two recent initial-public-offering (IPO) stocks "notable for their eye-catching earnings and sales growth in recent quarters."
Triple-digit sales and profit gains is part of what caught my eye.
As for Apollo – it's roughly flat from where I recommended it. But the stock has a juicy yield approaching 11%, which means you're ahead of the game even before it delivers the gains I'm predicting.
The bottom line: Stick with these two investments. They'll rise nicely in due course. In the meantime, you're getting a better risk-adjusted yield than you'll find in most other places.
That brings me to the market intelligence I want to share with you today.
Most of our talks here focus on opportunities – places and ways to make money.
But successful investing also involves managing risk – minimizing the losses you incur… or avoiding them altogether.
Thanks to Disruptors like Goldman and Apollo, the new lending market is one of the sexiest profit opportunities in the finance arena.
But what you don't know can hurt you.
So today I'm going to show you how to avoid losing money in the shifting lending market…
Don't Follow the Herd
Investors are heading into the new lending arena for a lot of reasons.
They're heading there to pick up yield.
They're increasingly "investing" on (that's "on," not "in") P2P lending sites like the one operated by LendingClub Corp. (NYSE: LC), a publicly traded firm, and Prosper, a privately owned Disruptor site.
On both the LendingClub and Prosper sites, investors fund borrowers looking for loans. You can see on the sites what borrowers want money for. They are all personal loans, mostly for such things as consolidating high-interest rate credit card debt.
The interest rates that the "lenders" (investors) earn are based on each borrower's creditworthiness, as measured by new Disruptor credit calculation metrics and algorithms meant to be predictive of a borrower's likelihood to repay their debts, as well as on the term (length) of the loan. Terms vary, but most are three-year (36-month) and five-year (60-month) loans.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.