The Guru Effect
Sunday, February 26th, 2006
What is the Guru Effect anyway? Basically the guru effect is when a high profile stock anaylist like Jim says that a stock is a good buy or sell the market realizes an immediate effect you can see it in the afterhours trading. An associate of mine is trying a sort of academic experiment with a way to trade stocks.
Have you ever watched Jim Cramer’s Mad Money? It’s a great show and it has taught me new ways to look at the stock market but that’s not what this is about. What they are trying to do over at Guru Effect is see how much of an influecne Mad Money has on the stocks that Jim pushes. I can only speak from anecdotal experiences with trying to buy a stock that Mad Money profiles.
For example; last summer he pushed Sears Holding Company by writing the ticker symbols SHLD on his knuckels so I went and bought a bunch of options that were due to expire in a week a very risky thing to do. I could have lost my shirt. I spent about $1000 per contract if memory serves correctly and made about $800 profit on each one. Not a bad return for a 48 hour investment however it was very unsettling to say the least. I actually jumped out a little too early and could have made even more. But like I said a very risky thing to do.
I think he has something with this experiement and I am going to keep and eye on it maybe even give it a go myself. If I do I will post my results here. Go check out his site if you are interested.
