Archive - 2007

December 16th

Technical Trading in Second Life Stocks

The recent discussions about exchanges and trading strategies in Second Life has prompted me to explore a little bit more some of these ideas. At the first public class of the Investment Education Team, there was a discussion about price earnings ratios. It was noted that stocks in Second Life seem to trade with little correspondence to these ratios. With banks and exchanges paying as much as 44% interest per annum, it means that any stock with a Price Earnings ratio higher than three needs to be less riskier than the banks or exchanges, to justify such a ratio, and that just isn’t all that likely.

So, it may be useful to move from fundamental analysis to technical analysis of the stocks in Second Life. Three exchanges, SLCapex, ACE and VSTEX provide in a format that makes it easy to do some of this analysis. A fourth exchange, ISE provides some similar data, but in a different enough format so that I haven’t gone out and added it to my mix of data.

Specifically, using the data feeds they provide, you can build your own data store and ticker plant. I wrote a little bit about that here. Now that I have a good store of data, I can start analyzing some underlying trends.

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December 15th

A New Christmas Tradition

Tradition has always been important to me and with our move this year, some of our traditions are changing. Traditions around Christmas can be especially challenging. I hate shopping. I hate the consumerism that detracts from the season. I hate the consumerism that adds to the problems our world faces. Instead of buying some other plastic object shipped in from China, are there things that we can do, locally, that is more meaningful.

Recently, our new neighbor gave us a clipping for Alpaca Hill Farm. They are about six miles up the road from us and are open from 10 to 5 every Saturdays in December before Christmas. (They are also open by appointment). We figured we would drive up, see the alpacas and head on to our next adventures. With my two oldest daughters being accomplished ‘fiber artists’, (that is a great phrase to describe all the wonderful things they do talking fleeces from various animals and turning it into special clothing), I hoped we might have something that the whole family could enjoy.

Alpacas, originally uploaded by Aldon.

Indeed, we all had a great time. Alpacas are gentle animals and we all enjoyed petting them, as well as looking at various rovings, yarn, garments and other gifts. The biggest problem was everyone wanted things from the store ‘Right Now!’ and weren’t interested in the delayed gratification of Christmas. I finally got everyone out of the store so I could get the appropriate gifts.

Soft warm rovings, yarn and garments, grown locally are good not only in that there is much less carbon pumped into the atmosphere for their creation and transportation, but also, hopefully everyone will enjoy wearing such products and it will be easier for me to leave the heat down in the house.

It looks like visiting Alpaca Hill Farm is the sort of Christmas tradition I hope to make a regular part of the holiday season.

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December 14th

Analysis of Second Life Exchanges

People have asked me my thoughts on the World Stock Exchange notecard, and particularly, section 3 where they claim

The WSE has over 95% market share and we ask that users express caution when dealing with the recent start-up exchanges as they are operating basic websites and trading platforms with extremely limited functionality compared to that offered by the WSE.

People have questioned how this 95% market share is calculated, and I must admit, I have no idea. So, I thought I would do a little digging into data available from the different exchanges. The International Stock Exchange (ISE) appears to provide the most detailed data, which can be aggregated. The Virtual Stock Exchange (VSTEX) provides detailed aggregated data. None of the other exchanges provide this sort of data in any readily accessible manner.

As a side comment, this calls into question the claims of extremely limited functionality that the WSE provides. Another key part of functionality that I rely on is the datafeeds that VSTEX, Ancapistan Capital Exchange (ACE), and Second Life Capital Exchange (SLCapEx) provide.

By taking this data, making projections out of data from ACE and adding in data from a recent report by SLCapEx, a fairly detailed picture emerges.

Over the past month, over 30 million Linden Dollars worth of stock exchanged hands. Approximately 41% was on the SLCapex, 38% on WSE, 10% on ACE, 6% on ISE and 5% on VSTEX.

At least from my experience and the data I’ve seen, WSE’s claim do not appear to bear up under scrutiny. That said, we would all be better off if all of the exchanges provided much better details about their historic volumes as well as historic data about deposits and withdrawals from the exchanges.

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Second Life Deadpool

Yesterday, I wrote about the Second Life Exchange Commission and the Investment Education Team in Second Life. Both groups have an interest in how trading in Second Life is viewed. Today, I received a note in Second Life from the World Stock Exchange (WSE) about what it going on there, and yesterday the Second Life Capital Exchange (SLCapEx) issued a report announcing that they had surpassed WSE in volume.

The WSE notecard talked about Ginko Financial, Midas Bank and Merlin Investment Bank, all companies that have joined the Second Life Deadpool. Perhaps we need to track the Second Life Deadpool similar to how TechCrunch tracks the technology firm deadpool.

Currently, there are forty-seven companies listed on WSE. When I started trading there, it was around seventy. Between the two dozen that have disappeared from WSE, and another half dozen at SLCapEx, the Second Life Deadpool has plenty of members. This shouldn’t be too surprising. As the TechCrunch deadpool shows, technology companies constantly come and go. In a place like Second Life where the barriers to entry are even less and the potentials for fraud are even greater, the deadpool can get crowded pretty quickly.

This should be a reminder to potential investors. Investing in Second Life companies is highly risky. The WSE notecard tries to remind people this, as has the IET training. Yet WSE goes too far, I believe in stressing the ‘fictional’ aspects of their services and the Linden Dollar. Perhaps there are some exceptions to the companies list, but by and far, these are real companies selling real goods and services. The Linden Dollars that they earn and the Linden Dollars deposited at the Second Life banks can easily be converted into U.S. Dollars. One person I spoke with who lost a fair amount of Linden Dollars when Ginko Financial collapsed had been saving that money to pay for their trip to the Second Life Community Convention. There was nothing fictional about this person or their dashed desires to travel to Chicago.

So, as trading continues to grow in Second Life, so will the Second Life Deadpool. Hopefully investors will become more savvy and invest in companies and exchanges where they are least likely to see their investments end up in said deadpool.

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The politics of language

So, everyone has been facebooking me w00t! about the Merriam Webster’s word of the year. If I weren’t so apathetic, I would try to write a blog post using all ten words. (I got three already).

However, as I read through the words I was saddened. Other than ‘facebook’ and ‘w00t!’, these words are all ladened with negativity. I found myself in conundrum about what seems to me a quixotic quest to write a blog post using all these without starting a blamestorming session. (Three more of the words).

Perhaps it gets to the politics of words, or at least how our language is reflecting our views of politicians. Are they Pecksniffian hypocrites? Are they charlatan masters of sardoodledom?

No wonder we are so apathetic. Only the first two words give us anything to facebook w00t! about.

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