Saturday, July 02, 2005

Blogshares: My strategy

What I am going to write about is based purely on how I've approached the game. I've also added some additional advice on how I might have done things differently.

The Crawling Stage

Learning about the game. I can't emphasize enough that you should read the help files to familiarize yourself with the terms and lingos used in blogshares. Terms like karma, chips, shares, ideas, bonds, artefacts, P/E, and especially artefact terminologies like raid, public pressure, hype, public relations disaster (PRD), restructure and hostile takeover (HTO) will be used liberally in this entry.

The blogshares forums also contains a treasure trove of questions and answers. Just register for an account and post away. I ignored the forums when I first started blogshares thinking it was just another boring forum; I would have used it more liberally had I known how active it was and still is. Another quick way of getting help is to log in to the #blogshares IRC channel. For those with your own IRC client, the address is intrepid.wyldryde.org:6667. You'll find the who's who of blogshares in there, and don't let your newbie or n00b status intimidate you. The blogshares community is very generous with advice and with B$ / blogshare dollars!

One final thing for the crawling stage, there are RULES in blogshares. Read them and clarify on the forums if you're unsure. Don't get caught breaking them as the penalties can be pretty harsh e.g. suspension of account or considerable penalties on your blogshares assets. My rule of thumb is if you think it's wrong, it usually is; if you're not sure, clarify.

The Walking Stage

Trading in shares. Everyone starts off with B$500 and 1,000 shares in your own blog, if your blog is listed. If it's not listed, just add your blog then stake your claim. Your blog is valued based on the number and value of incoming links (the more and the higher the values of incoming links, the higher your valuation), versus the number and value of outgoing links (the more and the higher the value of outgoing links, the lower your valuation).

How did I find other blogs to invest in? Well, since I was familiar with some popular local blogs like Mr Brown, what I did was to look it up on blogshares and follow the incoming and outgoing links. I sold some shares from my own blog and I bought up shares in the blogs that still had publicly available shares. Another way of finding blogs is to search the industries.

A good place to search for cheap and potentially good stocks to invest in is the tips page.

When buying or selling shares, bear in mind the time restrictions for buys and sells as well as the number of transactions allowed for non-premium accounts. The basic strategy given in this help section while good, I found an alternative strategy that may be more effective:

1. Follow the buy advice as stated under "Basic Strategy".

2. After buying up the 4,000 shares and waiting for 6 hours, sell off the shares in blocks of 20 instead of 250. Selling will raise the P/E of the stock and hence the value of your remaining stock.

3. Instead of selling everything off when P/E hits 250, I suggest that you observe the share price history graph of the blog in question as you sell it off. When you see it tapering off, it is a good time to sell off all the shares. This will send the stock price and P/E crashing and you can buy it up again after a 6 hour refractory period. Why? Because different blog share prices perform differently. Some share prices taper and drop even before it reaches P/E 250 whereas others can go up to P/E of 300 before tapering and dropping.

Voting for karmas and chips. Another important strategy at this stage is to start voting new blogs into the appropriate categories, or industries as they are called in blogshares. This will earn you karmas and chips which will come in handy as you transit into the next stage. Chips are commodities that can be swapped in the blogshares market for B$. The current market rate for a single chip ranges from B$25M to B$35M. Hunt around the forums and you'll see the horse trading for chips. Note however, that just because voting gets you chips, doesn't mean you vote blogs blindly. Bad voting is frowned upon and a consistent trend of bad voting amounts to flouting the rules. Where do you find blogs to vote for? Try the stock tips page or the newly added blogs page.

The Running Stage

Artefacts. Ah, the magic of artefacts. Why are they so special? Well, they give you easy money if you're in it for the long term through raiding and also through enhancing your ability to trade in stocks. The importance of karma comes in here because with a karma of 750, you get to use your artefact twice in the span of 24 hours as opposed to once.

Raiding with artefacts. As Laila, the numero uno player of blogshares, aptly describes in her blogshares profile, "Raiding blogs using artefacts will give you mostly 500 ideas FREE (per day)". I'd like to add that with a karma of 750, you get to raid blogs twice a day which gives you mostly 1,000 ideas FREE! So with a good raidable industry and 750 karma, you get to earn your B$ back in 10 days and it's pure profits from the eleventh day onwards. Think about it approximately 200% profits in 30 days.

You find ideas from the ideas market. You can filter for ideas with artefacts here. Notice that there are certain industries with no ideas in the market. You may find ideas in the bond market but they would usually cost a little or a lot more than the market value.

So now you know where the karma comes in. How about the chips? Well, once you hit the magic 750 mark for karma, sell off your chips for lots of B$ and buy 10,000 ideas from an expensive (costs B$1M or more) and good raidable industry. How do you gauge if an industry has good raids? Well, check out the top blogs in the industry. They usually have a high valuation and large number of incoming links. I use 1,500 incoming links for the top blog as a rule of thumb to gauge if I will consistently get a 500 idea raid (or 1,000 for 750 karma) 9 times out of 10.

Raiding, however, may not last forever.

Stocks and artefacts. Aside from raiding with artefacts which is really sweet in my opinion, artefacts are also good for enhancing your stock trading. If you own stocks categorized under an industry, say Singapore, and that industry has an artefact (the Merlion in the case of Singapore), you can use your artefact to enhance the stock trade in many ways. Public pressure allows you to buy up publicly available shares lock, stock and barrel in one go without having to succumb to the "buy 1,250" syndrome that you may experience if you try to buy them off the market. This also prevents others from intercepting those stocks in the buying process. Hype allows you to increase the P/E ratio of your stock and hence the share price. A word of caution for hype, don't get it beyond the 300 mark unless you're prepared to sell very soon (in like minutes), and definitely don't get it beyond the 700 mark or you won't be able to sell it. So if you own multiple industry artefacts in a certain blog stock, imagine what a mean combination hyping and public pressure will do which I will call the hype-PP combination.

The other artefact usages that exist include industry buzz, restructure, HTO and PRD. Industry buzz is like hype as it raises the P/E of stocks; it does it for all stocks within the industry but with a less devastating effect than hype. Restructure allows you to buy up a certain percentage of shares that are currently owned by others (other than the owner of the blog) that are not in the public market at 3 times the current market price. If you own more than 20% of stocks in a certain blog, you can buy up the rest of the stocks by performing a HTO which will also cost you 3 times the market price. As a rule of thumb, I don't usually restructure or HTO stocks with a P/E of more than 130. Lastly, the PRD is a counter to they hype. It brings down the P/E of a blog. Some players use it in an attempt to bring down the price to a low level for restructuring and HTO but it is generally considered poor etiquette.

The Flying Stage

Seeding. There is a catch when building artefacts and raiding from the market. Sometimes, rich players buy up all available ideas from the market leaving you with nothing to raid. So how do you work around this without losing that hard earned money? After you raid, remember to keep either 500 or 1,000 ideas in your holdings at all times and sell off the remainder for B$. Should someone soak up all the ideas, all you need to do to earn money and keep your ideas is to sell off the 500 or 1,000 ideas and raid it, and you get your money's worth by selling the ideas, and your ideas back for free. Remember to buy back your ideas if your raid didn't yield back your original 500 or 1,000 ideas. Also, a word a caution. When you sell your ideas back to the market, it's fair game for all so your sell/raid action requires speed and coordination.

Jumping into the ideas and bonds market. So why do people buy up all the ideas? Basically, when there are existing ideas in the market, the value of the ideas depreciate. If there are no ideas in the market, the value of the ideas appreciate. So the strategy for most of the very rich players is to soak up ideas in certain industries and sit it out for the long term. This is especially useful for players who do not wish to day trade on blogshares. Another lucrative source of income is in the bonds market. Players (ok very rich ones anyway) tend to pay very high prices for very rare ideas (those with no artefacts), and also for industries with good raiding potential. The pre-condition is definitely one where there are no ideas in the open market. How bonds are priced, varies with the market conditions and especially with competing idea bonders. My deduction is that some of these ideas grow to be really rare and therefore even more expensive than the bond prices e.g. I may bond a very rare industry for B$100M an idea even though its current worth is say B$50K an idea. However, if you sit on it for a long enough time, it may mature to over B$100M an idea. Of course, there are those who aim to collect ideas in every single industry so they would also pay a premium if you have ideas in an industry that they don't currently have.

Other Useful Blogshares Strategies Links (more will be added along the way):
1. Laila's profile.
2. Post details: Quick-draw: Tips for Playing the BlogShares Idea's Market (found this link through FWS after I was nearly done with this entry)

PS to the Bloggers in Singapore:
If you see me at Bloggers.SG, feel free to approach me for help on Blogshares. James knows who I am. Alternatively, leave a comment with your contact or send me a message on blogshares if you need help.

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