A Picture of a Loser’s Game

In the below video Jim Cramer gets upset about the mess of obvious insider trading that has occurred with Fannie Mae and Freddie Mac.  Jim Cramer is famous for being  a CNBC “sportscaster” for the stock market giving his tips on “hot trades” and giving the “play by play” of the day’s trading.  I am not a big fan of Mr. Cramer but I think he’s called this one right on.

I think what this teaches us, the Wall Street outsider, is that investing is a “loser’s game,” a game where a defense strategy is best and where the winner makes the least amount of mistakes.  Mr. Cramer advises investors, ‘tongue in cheek’ to go completely into T-bills since the market is clearly compromised.  I feel that for a long time the market has not been a “winners game” where hot tips can lead to long term outperforming.  The idea of the “loser’s game” was coined by Charles D. Ellis in his article “The Loser’s Game.”

So, remember that the long term success of a stock is tied to the long term success (earnings) of the company.  Since no one can predict the future, the proven best way any investor can invest especially in the voilite markets of today is by investing for the long term in utra-diversified portfolios of stocks or bonds, keeping cost as low as possible, through index funds.

Read the article by Charles D. Ellis “The Loser’s Game” about how amateur tennis can relate to how you and I should play the “Loser’s Game” a game where the one who makes the least amount of mistakes wins.

By Published On: August 27, 2008

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