PartyGloating

This story:

PartyGaming's 33% drop from 157p to 105p took its share price below its flotation level of 116p.

reminds me of an earlier post:

To a simple economist, PartyGaming, the online poker company which floated today, looks like a bad investment.

Compare this to the "analysts'" recommendations. According to Yahoo, last month five were postive on the stock (Company REFS lists them as Shore Capital, Citigroup, Investec, UBS and Williams de Broe), and only one (Arbuthnot) was negative. That was when the share price was over 170p.
I don't mention this to blow my own trumpet. No, really, I don't, honestly. I do so to remind you all that economists can, sometimes, be useful to investors.
The trouble is that too many people in the meeja and, worse still, the City, think we should stick to macroeconomic forecasting. But that's just a ghetto.

Comments

[Charlie Fowler]

Mr S&M - speaking of gloating, in the light of how well the FTSE has done since early May, do you still stand by your post of May 9th when you wrote:

"I say "horror" because this corroborates my own views. Seasonal investing is the only active investment policy I pursue; I switch my pension fund into cash sometime in May and back into equities in early November.
This is because history shows that the "sell in May" rule is amazingly useful. These guys have estimated that it has worked in the UK for over 300 years."

[chris]

Of course, I didn't mean - and no-one would have inferred - that the market does badly every summer. I was just playing the odds.
There are two puzzles for me here.
1. I do seasonal investing. But I didn't short PartyGaming. Seems I talk a better game than I play.
2. What exactly have I lost from being out of the market? Sure, there's an opportunity cost, a gain foregone. The interesting question is: have expected returns fallen (so that I'll be worse off once I re-invest in November)? Because risk-free rates - linkers' yields - have fallen, the ex ante equity risk premium has (I suspect) risen since May. In this sense, prospective gains have increased.

[Mark T]

One thing economists could have added to the party gaming debate was a discussion about the threat of new technology to the future profits. Indeed the owner, having graduated via school funded by daddy'd brothels then via his telephone sex lines, xxx video empire and into internet porn, has a history of technology making the existing assets redundant - by which I mean DVDs making videos redundnat and internet making dvd's redundant. The girls, I'm sure, are still there. The threat to Party gaming surely is Poker bots. Anyone can now download a computer programme that will play high level poker. This means that the amateurs coming back from the pub will find themselves getting taken out EVERY TIME, They will quickly give up and go back to playing with their buddies. The market will be left to poker bot playing poker bot.There may be a barrier to entry in setting uo a site, but there is no barrier to entry for computerised players. So no margin, so no interest.