Given a mock $100,000 to invest in the stock market, four boys at New Prague High School quickly decided that conservative tactics weren't for them.
They wanted to win big, and do it fast. So the boys -- members of a team they called Black Thursday -- turned to short selling, a strategy that boils down to profiting when a stock falls, rather than when it rises.
In a series of risky, quick transactions made in the past few weeks, the team pulled it off: When the winners were declared on Monday, the boys' portfolio was valued at $140,000, making them the top Minnesota team in this fall's rendition of the volatile Stock Market Game.
"You can still make money when the market's down," said team member Garrett Smith, a sophomore.
That may have been true for Black Thursday, but it was a wild and mostly disappointing ride this year for most of the several thousand Minnesota students who played the game -- a longstanding competition that teaches kids about investment and financial markets.
Since this year's game began on Sept. 22, the news has been unusually bad on Wall Street: the Dow Jones Industrial Average fell about 22 percent between that date and the end of play last Friday.
Last year, when the economy was stronger, about 40 percent of the Minnesota teams made gains, said Ryan Tews of BestPrep, a Brooklyn Park-based nonprofit that oversees the game locally. This fall, 11 percent of the teams made money.
Terry Odenthal, the New Prague team's business teacher, said he's proud of his students: They didn't wander blindly into trades, doing their homework before short selling a variety of stocks, including shares in companies in the oil industry. The students did a lot of work during class, said team member Tony Meger, but they were also willing to work overtime. They'd usually eat lunch quickly so they could spend a few minutes checking their investments on a computer in the school library.
All 867 of this year's teams started with $100,000. Then the students, who ranged from 4th graders to high school seniors, invested it as they saw fit, paying brokerage fees and buying stocks and mutual funds at actual prices.
Some teams watched as the value of their investments dropped to less than $30,000. Even the staff members at BestPrep, who competed against one another in an office version of the game, all lost money, Tews said.
'We got lucky'
Among the teams that outperformed Tews: A group of sixth graders at Hastings Middle School, whose portfolio featured shares of Nintendo.
"I think we got lucky," said Lois Gutierrez, an 11th grader at Burnsville High School whose team ended up in second place.
Although only a small percentage of the students raked in profits, all of them got a dry run in the market during a historically rough period -- an experience that teachers hope will pay dividends when their students leave school and, perhaps, start investing real money.
"They learned the necessity to not put all your eggs in one basket," said Donna Ryan, a business teacher at Prior Lake High School.
And making money is hardly the point of the game, said Felix Meschke, a finance professor at the University of Minnesota's Carlson School of Management, who said he used a similar game in class this semester. The games can be a useful way to teach students about how financial markets work, but he considers them "devastating" if students draw a connection between their success -- or lack of it -- and skill.
"If you want to win the game, you have to take a lot of risk," he said. "If you take a lot of risk, you either get lucky and win the game, or your trading strategy blows up."
Getting students to wrap their heads around the fact that there's no safe way to get rich quick can be very difficult, he said, but it's easier when the market is as volatile as it was this fall.
Among teams that lost big, "It was hard to keep the morale up, to be honest," Odenthal said.
The New Prague team that won the competition by short selling -- in addition to buying shares they hoped would gain value -- actually did so against the advice their teacher usually gives students.
"It's an approach that I generally don't encourage for long-term investing," Odenthal said. "I really want to instill strategies that would carry them through the tough times: to buy solid companies and let them ride."
Short selling is legal, but it's risky because if the market reverses course investors who bet on a decline can lose everything fast.
Yet making money on long-term investments is tough when you only have three months and you're trapped in a bear market, Odenthal said.
Meger said he wouldn't short sell if he were investing real money, but "it's really the only way to make money in the market we're in right now."
The economic downturn was instructive to all of Odenthal's students, even the ones who bet the farm and lost. "When they have their own money invested down the road, they're going to be much more conservative with it and smart with it," he said.
And market woes made for "wonderful discussion" in class, he said. "We talked about the bailout daily for a couple of weeks."
Sarah Lemagie • 952-882-9016