Out man at large in the Amazon.com

Kiplinger's Personal Finance Magazine, Nov, 1998 by William Giese

Sunday: I read in the newspaper an exciting article about investing with what's described as a Fun & Games Account (FGA): "a pot of money for playing the market, as opposed to investing for a long-term goal such as retirement." Accompanying this article is a suggested list of FGA-worthy stocks.

The very first on the list is Amazon.com (AMZN), the outfit that sells books, tapes and CDs over the Internet. This monster of a stock is up more than 300% since the beginning of the year, says the article. At this point it's $129, up $6 for the week.

I like fun. And frankly, it's time I got off my duff and put my dime on these Internet stocks. It's our future, you know. So I await my chance.

Thursday: The Dow falls more than 350 points. AMZN plops to $119, down $8.25 for the day. This can be seen as a buying opportunity.

I do my due diligence. On the Internet, I call up Silicon Investor (www.techstocks.com), a site with bulletin boards keyed to specific stocks. For most stocks there are hundreds of messages, but Amazon.com has inspired 15,000 notes.

There's much to absorb here, and I do my best. But it's not always easy going. Example: "Rebounds from a `selling climax' are short-lived in bear markets." But I think I'm ready.

Friday: I visit my Schwab office to deposit a check. On impulse I decide to buy one share of Amazon.com. "Just one share?" asks the broker guardedly. "Yes," I say, "Just one. I'm starting one of the Fun & Games accounts I read about."

She smiles, nods and goes to work, helping me set up my trade via computer to get the bargain $29.95 commission. We check and see that Amazon.com has slipped some more to $110.75. Even more of a bargain! I actually get it for $110.25. My fun stock continues to drop and an hour later is at $104. I am already down approximately $6.

Saturday: I use the Prodigy Internet service to get an Amazon.com investment report. I see that AMZN isn't profitable and isn't expected to make a profit in this century. A price-earnings ratio is, of course, out of the question, as are dividends. I seem to have missed these pesky little facts earlier.

Monday: The Dow drops 513 points, and Amazon.com can be excused for shedding another $22, to about $83. I'm now down $27.

Tuesday: The Dow roars back 288 points, but my Amazon.com is down another $4. I also suddenly remember that buy/sell commissions will cost me altogether $29.95 times two, so my AMZN will have to more than double, skipping up to about $170 before I break even. This is discouraging. A check of Silicon Investor's AMZN bulletin board shows me that I am not alone. Amazon.com, writes one investor, "took all my money.... I have this stock to thank for prompting me to move toward productive employment." Writes another: "No sense crying over spilt milk.... Employed again, no longer retired."

This sounds ominous, so I reread the original newspaper article to see what I'm doing wrong. Turns out I'm doing plenty wrong. For example, an FGA is supposed to be no more than 10% of my stock portfolio, when in fact this AMZN share is 100% of my holdings.

Worse, I now suspect the article is intended to be cautionary. FGAs are a lousy idea, might be the point, except to the extent that they help purge investors of the gambling urge. Why the article included a list of stocks to buy is beyond me.

Still, I'm holding on, even if it's not all Fun & Games out here in Amazon.com.