Financial Analyst Calls Second Life a Pyramid Scheme

Petey_Alchemist writes "Silicon Valley gossip rag Valleywag is carrying a story about Second Life being a new spin on the old pyramid scheme. The article, which consists mostly of selections from the report of financial consultant Randolph Harrison, suggests that not only are most people deceived about the amount of money they can make in Second Life, but also about how easily they can withdraw it. It says 'Like the paid promotion infomercials that run on CNBC, sadly SecondLife is a giant magnet for the desperate, uninformed, easily victimized. Its promises of wealth readily ensnare those who can least afford to lose their money or lives to such scam in exactly the same way that real estate investor seminars convince divorcees with low FICO scores to buy houses sight unseen with no money down.'"

Comments

Re:Can't the same be said about the stockmarket?

[CreatureComfort]

Wrong. Well, partially.

Day traders and the ignorant lead to a much higher volatility, lower medium term predictability, and valuations that have no backing in reality in the market. The only people that make money off of day traders are other day traders, like large banks and trading firms that use heuristic schemes. To make money off the day traders you must either 1) rely on luck, or 2) be able to invest such large amounts that getting in on a small swing in the direction you are betting nets big profits, even if you miss the peak in the swing. But either way it is much more of a gamble than a good long term investing strategy based on real viability and growth of a company. Day trading is almost by definition gambling. You buy or sell a stock betting on which way you think a large amount of investment money is going to move based on short term announcements. You are basically trying to guess how other people are going to react. It can be very profitable, that is why the large firms are getting into it, and in a much more comprehensive way than you average small investor, but it is still risky.

Real investors look at the market cap, business conditions, income and expense trends, etc. of a company to help determine if it is going to have growth over a longer time span. As one of the other replies to my parent post pointed out, Apple stock is high volatility in daily trading due mainly to day traders and the ignorant. Investors, myself included, pay almost no attention to the daily, or even hourly, swings based on whether Steve Jobs said this, or some analyst said that. Now speculations on Jobs SEC investigation and possible ouster, and both the immediate and long term effects they might have on the company's profitability and growth are of extreme interest to real investors. I still haven't decided if I'm going to sell AAPL, or not, but I am in no way going to base my decision on today's market swings, even though many day traders, including large firms, may make or lose a bundle on them before market close. Of course, that not to say that when I do decide to buy a stock, I'll try to do so on downswing, or sell it on an upswing, but the basic decision on what to buy or sell is based on a lot longer time frame. Almost all of my stocks I keep for a minimum of six months, and most I've had for over 5 years.