Wednesday, March 5, 2008 Virtual Stockpicking

The truth of the matter is that as of today I do not have one-million-dollars. It would be really sweet if I did, but what I do have is a virtual portfolio that starts me off with $1,000,000 big ones.

TheUpDown is a pretty cool concept. I first joined back in September and have spent a minimal amount of time on the site since then. My basic strategy for investing is through following trending (both up and down) stocks. Plus I look at myself as a long term investor rather than a short term day trader (that takes too much time/effort/stress).

This company allows its users to watch, chart, analyze and follow stocks, ETFs and fellow traders.

In the seven months since I first joined I have bought and sold only three stocks, while retaining shares in REITs (SLG, VNO) and precious metals (GOLD, IAU). My strategy has been simple: Find all-time highs and ride them.

Half the virtual money I have made so far has been through shorting REITs. Real Estate Investment Trusts just do not have what it takes to weather the recession in which we have found ourselves. Two years ago the housing market was seeing the first signs of depression. Two years ago REITs were beginning to reach their all-time highs. Even last year REITs were performing strong. However, as the recession is settling into the foreseeable horizon and more jobs are cut, it will be harder and harder for the REITs to squeeze out their profits.

Companies are shedding employees, companies are merging (Doubleclick/Google and Yahoo/Microsoft). These companies are seeking efficiency. That means slashing jobs and freeing up overpriced real estate. We will see these REITs and others take greater hits over the next 9-18 months as we weather inflation, sub-prime BS, globalization and $100/plus barrels of oil.

Alternatively, I have used the UpDown to model what would happen if I bought gold six months ago, before we were certain about this recession ( Can't believe that Bernanke and Bush deny any economic slowdown = idiots). I had a gut feeling that as inflation took hold, investors would be comfortable in the gold standard (why did we leave it by the way?).

The shares I bought have shot through the roof. GOLD has risen from $24.66 to $54.18 since I bought it in September (a gain of 120%). This is crazy and awesome. Too bad its not real money that I am playing with.

My virtual annualized returns are at a whopping 44.26% . I have turned the $1 Million into $1,254,640 .

The weirdest part about this service is that I can make some real money through my virtual trades. I am not sure where this money is coming from, but I have been paid through paypal $50.37 for having a good portfolio and continually checking in on my portfolio.