At 12:31 PM 1/22/00 -0800, hal@finney.org wrote:
>
>Here was a comment about StockGeneration from another mailing list, in
>reference to a similar operation being started in a few weeks:
>
> > The game is to be modeled after StockGeneration. StockGeneration was set up
> > in a form which would be a legitimate gambling operation IF they played by
> > their own rules, set up a reserve cash pool to cover the share prices of
> > their stock, and readjusted the price of the stocks each day as people buy
> > and sell them, to keep their total pool reserves at the same percentage of
> > total stock capitalization. HOWEVER, in 2 years, they've never dropped the
> > price of their largest, and, by far, most popular stocks, and so their
> > liabilities have grown FAR in excess of their assets and now they are
> > delaying withdrawals by 4 months, and putting several restrictions on
> > withdrawals. StockGeneration is now crashing as a ponzi scheme.
>
>As people here noted, Ponzi schemes always end up crashing - usually just
>after YOU are invited to join (so you're the one who ends up holding the
>bag).
>
>Hal
While it's certainly possible that SG will come crashing down
any minute, there are some inaccuracies above.
SG has "rule 13" which enables them to effectively drop the
price of some shares in respect of individual players. At the
stroke of a pen, they can revalue your portfolio so that your
shares #10 & 11 become share #9, wiping out most of your
paper profits. The rules also include the ability to drop the
price of share #11 to zero at "price-change time." The rules
enable SG to keep outflow less than inflow, possibly for
years to come. Rule 13 has been invoked many times to
nullify withdrawal requests and to downvalue portfolios.
(Though, as far as I know, nobody has lost money with SG.)
On Thursday I received my latest withdrawal. It took less
than 8 weeks. The average withdrawal time has been steady
at around 8 weeks for several months.
To now proclaim SG's demise may be premature. In my
opinion, the game is brilliantly designed and could continue
for several years. I think there's a good probability that this
year I'll take $250,000 out of the game.
Also not mentioned above is that SG uses some of their
capital to generate income that helps pay the returns.
A key to SG's potential longevity is the number of means
available to them to curtail outflow and keep it below inflow.
A key to evaluating a proposition such as SG is rational
analysis.
Frederick Mann
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