starbucks4ever (99.53)

The one-star revolution is coming

June 04, 2009 – Comments (4)

In case you think those 5-star ratings are very meaningful, think again. To be rated 5 stars, a ticker must be recommended by many top players, and to be rated 1-star, it has to be mostly popular among low-rated players. However, the difference between these categories of players is not that great. For instance, if you have a 65% accuracy and a score of -150, you get a rating of 35. But if you improve that score by only 300 points, you get a score of +150, and your rating goes up to 85. The author of these lines had his score jump from 34 to 89 in just a couple of days, which, by the way, were not marked by any extensive stock picking on my part. I did not become any smarter or stupider during these two days, and my opinions on my (currently) 178 picks are still the same. But those same bets that looked suspicios for many months because they came from a low-rated player are now looking respectable because with my new rating, I now appear to be smart. So my red and green thumbs are now assigned more weight by the Caps program, and the 1-star tickers that I "bought" in Caps are now likely to see a promotion to 5-stardom? But the fundamentals of these stocks haven't changed since last week. I have seen many players' ratings undergo a dramatic change this month, and I now expect that many tickers will gain or lose stars in the coming weeks. So if you put your trust in the "collective intelligence" of Caps players, remember that this "collective intelligence" may be less meaningful than you think.