You don’t have to be old enough to drive to play master of the universe. I’m just 15 years old, but in a national stock-market game sponsored by the Securities Industry and Financial Markets Association, I quickly grasped the way hedge fund managers must feel when they make decisions.
My friend Zachary Weiss and I had two months to beat 1,235 other groups of New Jersey high schoolers. There wasn’t any real money at stake, so we were playing for glory and, in the case of Northern Valley Demarest Regional High School, where we’re freshmen, a tour of the New York Stock Exchange.
Unfortunately, we won’t be visiting the Big Board. We didn’t even finish in the top half. But we learned some valuable lessons. First, that you shouldn’t have a two-month time frame in mind when investing. And second, that people do funny things when their own money isn’t at stake.
As the game was getting underway, my dad, who writes The Wall Street Journal’s Ahead of the Tape column, showed me some of the most volatile securities out there, which my partner and I thought of as essential for victory in a short-term game where anything can happen.
Deciding the market probably would rise, we sold short securities that produced double the daily return of VIX futures. My dad explained that, on average, they should lose over 90% of their value each year. We also bought securities that did the opposite. We used the proceeds from our shorts and bought on margin, increasing our risk and potential return. Then Vladimir Putin came into our lives and we found ourselves in 1,016th place.