There’s an old adage. Mark Cuban uses it a lot when talking about why you shouldn’t invest the stock market. It goes like this: In any given situation where you have an investment at stake, take a look at all the players in the room. If you can’t find the sucker, you’re it! Basically, you have to have an edge in today’s volatile markets if you expect any kind of real return (or to avoid serious losses!). By edge, I mean some kind of inside information that tips you off as to which way the chips will fall.
I don’t have this edge. Vegas has had this figured out for years. It’s precisely why I don’t gamble and why Warren Buffett has long advocated that the small investor (that’s you and me) forgo “playing the stock market” on individual company stocks and simply put our money into cheap index funds. We just don’t have the time to find the edge.
Better to not play at all than to be the sucker in the room.
I play an internet game called the Hollywood Stock Exchange. It emulates the real stock market and contains many of the investment vehicles that you might find in real life (e.g. – Movie Stocks, Star Bonds, Opening Week Derivatives, etc.). And you can buy, sell, short, and call all day long with these things. It’s a great testing ground for finding out exactly how bad I’d actually be with real money. Of course, there’s the benefit that I can usually tell you with great accuracy which movies are coming out this weekend and, on Monday, how much they made. Basically, I lose my ass on a regular basis. For instance, I shorted The Devil Inside last weekend and lost about $1mm. It killed my HSX net worth. After seeing the trailer and reading a few early reviews, the movie looked (and likely is) awful and I thought that the word would get out after Friday night how bad it was. I figured that the numbers would fall off the rest of the weekend. Oh, how wrong I was. On Monday morning, Pajiba had a nice little piece on the Ten Highest Grossing Movies of Any Opening Weekend to Start the New Year. Hello! Meet the sucker!
There’s another arena in which I fear I have made a bad gamble with equally non-monetary losses. It’s the social media bet. Six months ago, Google+ entered the scene. In November 2011, I decided to go all in on G+ and exclusively engage there instead of FaceBook. I thought that a company as inventive and adept as Google would nail it. Was this a good move? I’ll tell you what I have found next week.
I don’t have this edge. Vegas has had this figured out for years. It’s precisely why I don’t gamble and why Warren Buffett has long advocated that the small investor (that’s you and me) forgo “playing the stock market” on individual company stocks and simply put our money into cheap index funds. We just don’t have the time to find the edge.
Better to not play at all than to be the sucker in the room.
I play an internet game called the Hollywood Stock Exchange. It emulates the real stock market and contains many of the investment vehicles that you might find in real life (e.g. – Movie Stocks, Star Bonds, Opening Week Derivatives, etc.). And you can buy, sell, short, and call all day long with these things. It’s a great testing ground for finding out exactly how bad I’d actually be with real money. Of course, there’s the benefit that I can usually tell you with great accuracy which movies are coming out this weekend and, on Monday, how much they made. Basically, I lose my ass on a regular basis. For instance, I shorted The Devil Inside last weekend and lost about $1mm. It killed my HSX net worth. After seeing the trailer and reading a few early reviews, the movie looked (and likely is) awful and I thought that the word would get out after Friday night how bad it was. I figured that the numbers would fall off the rest of the weekend. Oh, how wrong I was. On Monday morning, Pajiba had a nice little piece on the Ten Highest Grossing Movies of Any Opening Weekend to Start the New Year. Hello! Meet the sucker!
There’s another arena in which I fear I have made a bad gamble with equally non-monetary losses. It’s the social media bet. Six months ago, Google+ entered the scene. In November 2011, I decided to go all in on G+ and exclusively engage there instead of FaceBook. I thought that a company as inventive and adept as Google would nail it. Was this a good move? I’ll tell you what I have found next week.
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