So I've been playing in the market.  Literally playing, as no "real" money is at stake.  I use a website that gives you points for making paper trades, and it keeps track of your gains and losses.  Unfortunately it doesn't allow trading in foreign exchanges... but it is enough to teach me some basic lessons, which is what I'm really after.

So I'm playing with fake-fake money (merely "fake" money are the two bills in my wallet as I type this), and I decided that I wanted to sell short.  Whoops.  Big mistake.  My biggest positions (SLW, SLV, GLD, and GDX) have been keeping me from taking fake-fake losses, but my short positions were just sucking the life out of my accounts.  My "Open Positions" screen looked like a "frog in a bog"... green on the top with my winners, and red -- oh, soooo-soooo red -- on the bottom, where my short positions were.

So I closed all my shorts at a loss.

I'm really glad that I am learning these lessons with fake-fake money, because fake-fake can't be exchanged for real money, like merely fake money (Fed notes) can.  I'd be so mad at myself if I missed out on the opportunity to buy something valuable, like REAL shares of SLW or GDX, because I engaged in such a risky behavior with unlimited risk of loss accompanied by limited chance of gain like shorting a stock.

If you are shorting any stocks or bonds in this market, I would encourage you to rethink it.  Even the big guys who have decades of experience are saying that something doesn't smell right about this market, and as in home maintenance, you know that when you finally locate the source of the smell then chances are that the source will *not* be pretty.  I guess when I read that people were shorting U.S. bonds last year and had so much success, a little bit of greed and hubris took over, and I took unreasonable risks.  I am so glad I took those risks with fake-fake money, though, instead of the paper I can trade for real-world stuff.

You know what's funny about Monopoly(tm)?  The game only ends when pretty much everyone is bankrupt.  Come to think of it, maybe that's not so funny after all.

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written by Jeff Nielson, January 21, 2010

I've started using the phrase "Monopoly money" in my own commentaries - precisely because it's no longer a metaphor, but a LITERAL description.

The Federal Reserve (which has been granted a "monopoly" on the printing of so-called money) has printed so much of its banker-paper that it has PRECISELY the same worth as the bills being cranked-out by Parker Brothers - zero.

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