Game helps teens' stock rise

By Glenn Scott
Advertiser Staff Writer

Getting pounded lately in the stock market?

Kaiser students Raimie Chun, Shelah Aczon, Eric Chow and Yi Cui have taken what they've learned from teacher Karen Kubota's accounting class and have amassed $36,582 in a stock market simulation game. Deborah Booker • The Honolulu Advertiser

Beware, though. They have done it less by selecting stocks likely to rise in price and more by accurately picking those primed to plummet. Their pessimistic approach has powered the quartet to first place among 57 student teams competing in a stock market simulation game sponsored by the Hawai'i Council on Economic Education and Merrill Lynch.

The goal of the contest is to expose students to the world of stocks and investments. Call these leading students quick learners. Chow, the leading Kaiser team's chief investor, said their strategy of short selling — a bet that prices will decline — made most sense for squeezing fast profits from a volatile, downward-moving market.

When the contest began in early February, Chow explained, the team began with a safe approach seeking stocks that might rise in price.

"But after a month," he said, "things in the market turned bad and then ugly. We short sold every day."

With a week left, they hold a $16,200 lead over the second-place team, also from Kaiser. More twists can still occur, as adult investors know only too well. But with their large lead, Aczon, Chow, Chun and Cui — whose names ring like the future title of a trading house — say they've taken measures to reduce risk, shifting holdings to safer stocks like Coca-Cola.

Their latest mantra: stability.

Players in these simulation games don't get to keep their earnings, of course, nor do they pay for losses. They began on Feb. 8 with $100,000 in imaginary money and an understanding that the team with the highest portfolio value on April 12 would win a new computer for their classroom and stock certificates worth $100 for each team member from sponsor Merrill Lynch.

Lyle Hendricks, coordinator of the Stock Trak simulation game, said the rules encourage students to experiment in the market with more acceptance of risk than most actual investors can afford.

When selling short, investors in effect sell a stock they don't own, then buy it back at a lower price, profiting from the difference. The risk is that the stock price might rise. Then the buyer becomes liable for unlimited losses.

Aggressive short selling may not be the preferred way to invest. Rob Saracco, a vice president and senior financial adviser with Merrill Lynch in Honolulu, said a weakness of the game, as currently packaged, is the emphasis on making a quick fortune. "When it's real money, it's a whole different ballgame," he said.

But even to succeed with high-risk tactics, students still need to set goals and make informed choices based on extensive research into market trends. Chow said his team members have huddled regularly to study various stocks on Internet programs such as Microsoft Money Central. After that, Chow has made the trades through the game's Web site.

"It's a great learning experience," Kubota said. "And they can make mistakes because it's not their money."

The contest leaders haven't made many mistakes. After discovering dire earnings forecasts for Nortel Networks, they managed a short sell over a four-day period in which the stock lost a third of its value, dropping from $30 to $20. They also profited from the downward slide of Dimon Inc.

On the positive side, they bought Nvidia Corp. at $47 a share and sold at $56. "We bought that one going up," Chow observed. "Now it's really dead."

Overall, teammates agreed, they traded their way through a volatile market, winning more than they lost and switching stocks as often as the rules allowed.

Their teacher Kubota said harsh market conditions this semester turned the contest into a more sobering exercise than with games in preceding years, when the tactic was simply to pick the top performers in a bull market.

Out of the 57 teams that participated in the game, only 13 were showing a gain as of last week.

Kubota credited Saracco for staging Saturday workshops to coach participating teachers in stock-trading methods. "That kind of support helps us to feel much more confident in what we share with our students," she said.

The Stock Trak game, run for the first time this year by the economic education council, is just one of the simulation contests in use in local classrooms. Other sponsors, such as the state Department of Commerce and Consumer Affairs, run similar outreach programs to remind residents of the strong relationship between investment returns and risks.

As for Aczon, Chow, Chun and Cui, they say their effort to decipher the stock market has given them an appreciation of finance and an interest in investment careers.

"There are so many factors to consider," Aczon said, "especially if it's your own money."

Chow said the contest has taught him not to be defeated by risk but to know how to calculate it.

He has been talking about that with his father, Ricky Chun.

"He thinks my trading is really risky," said Eric in a moment of scholastic self-confidence. "But I said, 'You're losing money, Dad, and I'm making it.'"

Glenn Scott can be reached by phone at 525-8064, or by e-mail at gscott@honoluluadvertiser.com.