Whether you are a 19 day veteran or a 2 day user of this new machine we have collectively created called OneSeason, I think we can all agree that this monster is addictive as hell. From keeping yourself logged into your account 24 hours a day (on multiple computers mind you), to hitting the refresh bottom on your browser like a madman in hopes to get a jumpstart on the newest IPO, this is the most intense thing you have done since freshman year pledgeship. The first time you see the ROMO SOI you just bought at 5.75 split 4 times and then gap up to 40 bucks intraday faster than Mike Vick getting chased by the ATL Po Po (all the while you are rest easy because your man Tone the Rome is due to split again tomorrow morning once his share price breaks 20) it is pretty exhilarating...I know. You begin to ask yourself: Self - can I actually make real money at this, or will this euphoric high leave me just as quickly as it came. We will chat more as I continue this dialogue, but for now lets just lay out a few points on how I view the world: 1. Is the OneSeason model sustainable over time? (Answer: Unclear, however I do think adoption and penetration rates alone will be the tide that raises all ships) 2. Are there ways to make money in the short run (Answer: Absolutely) 3. Are there ways to make money in the long term? (Answer: I think so, but the incremental $ opportunity will diminish (forget normalized / analyzable returns on invested capital (ROIC) because they are irrelevant at this point), and the ability to capture massive upside will subside 4. Is this a rational marketplace (Answer: Hell no - but it could be a LESS IRRATIONAL someday) 5. Will player performance eventually drive price? (Answer: It will be one of many factors, but I think so). 6. As the S&P gaps lower by the nano second (literally headed straight to 825), will this be your only refuge to make money? (Answer: YES).
Why do I pose all these seemingly idiotic questions? Well, because OneSeason is the Wild Wild West and you think you are Wild Bill Hickock - a modern day Maverick. You are logged on, guns 'a blaz'in searching for arbitrage opportunities left and right - puking AIRJ at the open and buying him back on the lows...I know how you think. Well, its all gravy baby. Keep doing what you are doin, but just recognize that this market is NOT liquid. In fact, lack of liquidity (volume of shares exchanging hands from buyers to sellers) has led to massive moves intraday and those swings can have meaningful impacts or your own P&L (Sportfolio). To that end, I suggest always maintain a cash balance (un-invested capital) of 15% - 30% (depending on your risk appetite). This is helpful for many reasons: 1. It gives you some dry powder to put in bids for IPO's as they come into the market 2. Decreases portfolio volatility 3. Gives you the ability to capitalize on glaring dislocations that may present themselves throughout the day. In addition, monitoring your cash reserves % (cash / total invested capital) it will also help you know when to take profits on some of your high returning positions. Good luck out there, and make some money.
Written by Uncle Rico
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