Game Playing Beyond Speculation

Know that the next level beyond speculation is game playing

A stock market game:

With high-tech, bio-techs and any other transiently high-flying group our editorial staff offers the following logic.

A high-flying group of stocks including at various times Bio-techs and Internet.com stocks, is by definition is governed by the perception and game-playing moods of the gang of market players. An individual buys into the gang's game, not the value of any one company. The disconnect between a company's value and its stock valuation is greatest in these situations. That explains why bio-techs have lost 65% over a five week period and Internet dot-com stocks have lost 70% to 90% over a four week period. The buyer of a stock in one of these groups is buying a game ticket to play the momentum game with the all the players in the gang. This buyer must be aware that those other players can suddenly decide to stop playing, sell and vanish, not to ever return. That is the meaning of being left holding the bag!

Unless a person has some inside information regarding fundamental operations, finances, buy-out, or other valid reason that could move the stock, these stocks are only game chips on the game board.

To play and minimize the potential game playing damage:

Since a stock is a surrogate for the company fundamentals, it will change in value based upon game players' perceptions. We can minimize the game playing factor by buying companies that are high quality, in a functioning industry that most people can understand (and therefore whose stock many people may want to buy some day), and whose industry is temporarily out of favor.

The over-riding fact in stock selection applies here: You are buying stock -- not the company. There is often a disconnect between the market's perception of a stock and the fundamental and operationing facts affecting a company.

To select a specific stock, look at the group of predominant stocks in play in that industry. Is there a momentum play already in progress in the stock or industry? Is there some macro news (The Clinton-Blair team took all the game playing fun out of the bio-techs with one public comment and they have not recovered even half of their loss! Check any bio-tech stock's chart covering November, 1999-April, 2000). The bio-tech game comes and goes and its down, out of favor phases often last many years.

See also: Houses of cards

The investment axiom that is always valid: Caveat Emptor

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