As you know if you've read my previous posts, I've taken a test to learn my Myers-Briggs type, my mother happens to be a closet survivalist, and I'm willing to go to great lengths to learn the true price of a stamp. But it gets way geekier than that. My confession: In my spare time, I play the stock market game (known as "CAPS") online, which is kind of like fantasy baseball for math and finance geeks.
When I started playing last spring, I was terrible—or at least the game thought I was. Points accrue cumulatively, so when I was but a tadpole in the big pond of more than 65,000 players, my rating was something like 14 out of a possible 100. But I kept picking stocks—not with any special expertise, mind you, just following Warren Buffet's timeless dictum to "invest in what you know"—making my best guess as to whether each stock would do well ("outperform") or fail ("underperform") over a certain period of time. By New Year's, my rating had climbed above 80, putting me squarely in All Star territory, and this week it hit 97, putting me in the top three percent of all players. Woo-hoo!
Those small triumphs, however, been tempered by several things I've noticed, all of which are a little frightening when considered in the context of the overall market:
1. In the aggregate, players' picks can actually predict, with a high level of accuracy, the fate of individual stocks. So a five-star stock in the game can probably be trusted to do pretty well in real life. The worrisome part? All it takes to be an All-Star stock-picker is to achieve something like 50 percent accuracy—on a good day. That might explain a few things about our current financial situation...
2. Until recently, my most successful pick was my "underperform" call on LEE—Lee Enterprises, that is, owner of the St. Louis Post-Dispatch. Underperformance being an understatement, of course, when it comes to the company now having its way with our dear hometown newspaper. And last week, The Motley Fool published an article titled "The 10 Worst Recession Stocks." Sitting smack in the middle of the losing pack? Our other hometown favorite, Charter Communications.
3. Still more unfortunate than that news, though, is the pick that earned me the most points last week: My cynical "outperform" call on SWHC, a.k.a. Smith & Wesson. Yikes!
4. Finally, while my score in the stock market game has climbed steadily since last spring, my real-life portfolio looks just like everyone else's: down 42 percent since April. Sigh. —Margaret Bauer, Associate Editor
