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zero sum game?????????????
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you. 
For every buyer, there is a seller. Therefore, when the long makes money the short loses money.
This is easy to see in the future and options markets.
In the stock market, I suppose it may be a little different. If you buy in the primary market, perhaps it could be a positive sum game for investors (at the opportunity expense of the company). But, once you get to the secondary market, and there is a fixed number of shares outstanding, for every buyer there must be a seller...for every winner, there is a loser.
Perhaps you could explain why you think it is not a zero-sum game. Lay out a scenario where more money is made than lost. Do you think that money is just magically created in the markets?
Given that when one person buys a futures contract, someone must sell it to them. (One side makes delivery of the underlying at expiration, one takes delivery at expiration).
At expiration, one of them will have made $X amount and the other will have lost $X amount.
The total sum is zero [$X-$X = $0].
This is what is meant by a zero sum 'game'. Nothing more, nothing less.
People apply the term broadly as though everyone has the same time horizon and so therefore markets are effecient.
Re: zero sum game?????????????
Its a NEGATIVE SUM game my friend...from the first nano-second you enter, because of the spread, the games and the commissions...
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......
who has lost money here???...
until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....
so how can this be a zero sum game?
What difference does it make? There is an opportunity to take some money for those who can do it. Thats all that really matters.
If you sell a stock at $50 and it goes to $60, does one or more people make the $10?
If you buy a stock at $50 and if goes to $60, does someone miss out on that gain of $10 you received?
IMO, it's completely a zero sum game except for this little thing called commission; but that can be considered zero sum as well because someone is paying and someone is receiving therefore if you minus the receiving from the paying you get ZERO!
Well the point is that time is not on your side...no matter what the edge is.
Quote from easyrider:
What difference does it make? There is an opportunity to take some money for those who can do it. Thats all that really matters.
Quote from madmunny:
yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......
who has lost money here???...
until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....
so how can this be a zero sum game?
You do not see all that the market has to give...because its a negative-sum game.
The trends you see are reduced because of this...the charts represent to you the resulting movement, when they could be so much more reflective of buying and selling...
Quote from trend_guy:
If you sell a stock at $50 and it goes to $60, does one or more people make the $10?
If you buy a stock at $50 and if goes to $60, does someone miss out on that gain of $10 you received?
IMO, it's completely a zero sum game except for this little thing called commission; but that can be considered zero sum as well because someone is paying and someone is receiving therefore is you minus the receiving from the paying you get ZERO!
Quote from ElectricSavant:
You do not see all that the market has to give...because its a negative-sum game.
The trends you see are reduced because of this...
No...read above...you guys do not see the forest for the tree's...why should I waste my time...
I am a trader not a theorist...
Quote from trend_guy:
Explain how it can be negative sum?
The instance you enter the trade you are upside down. The longer you are in it the more you give away in waste...to where the time verses yield screws you...
A fellow the other day told me, his grandfather portfolio just got back to BE, as he held all through the bubble days up until now...
BE for all this time...sheeesh
Quote from ElectricSavant:
No...read above...you guys do not see the forest for the tree's...why should I waste my time...
I am a trader not a theorist...
Quote from madmunny:
yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......
who has lost money here???...
until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....
so how can this be a zero sum game?
You must consider time in your example...this is negative sum...go back to school time is your thief...especially overnight!
Quote from trend_guy:
Your point is valid... this is useless info... the bottomline is can you buy something for a dollar and sell for two. If the answer is yes, you know your stuff and nothing else matters. But the fact remains it is zero sum. If you make money, some either gave you that money or gave up the opportunity to make that money. If you pay a commission, someone else received that commission.
Quote from ElectricSavant:
The instance you enter the trade you are upside down. The longer you are in it the more you give away in waste...to where the time verses yield screws you...
A fellow the other day told me, his grandfather portfolio just got back to BE, as he held all through the bubble days up until now...
BE for all this time...sheeesh
They would make you 2% if there was no spread, commission or games! you lose 1% einstein.,..
Quote from trend_guy:
how so, most of my trades make me 1% plus the minute I enter, where can I get that elsewhere? how am I upside down?
if I lose the spread, is someone else making the spread?
I do not think it is fair to count the bid ask spread. You can sell at the offer and buy at the bid without the market necessarily going through you. i.e. if you sell at the offer, that doesn't necessarily mean that it is now bid at the price you sold it at.
thanks....you all continue to prove to me that any one who believes it is a zero sum game is an idiot ......and i can continue to be pissed when ever i read your ignorant comments
lets forget about fees and commisions at the moment cause it just gives you morons something else to confuse yourselves with.
zero-sum implies for every dollar profited one dollar has been lost to make for a break even point......
tell me with google at $350 who has lost enough money to cover the profit that has been made from its gains....
even a stock that ipo's at $10 and goes up to 100 and back down to 50........more profit has been made than lost........
You can throw the ball up in the air...but you can't keep floating it forever...
There are short sellers too...
its the stuff in the middle that reduces your illussion and is what you are not counting...
The stock market may be positive sum as long as new funds are coming into the market
You waited to get that price...genius..you did not get a bargain
Quote from DynamicReplic8r:
I do not think it is fair to count the bid ask spread. You can sell at the offer and buy at the bid without the market necessarily going through you. i.e. if you sell at the offer, that doesn't necessarily mean that it is now bid at the price you sold it at.
Quote from ElectricSavant:
You can throw the ball up in the air...but you can't keep floating it forever...
There are short sellers too...
its the stuff in the middle that reduces your illussion and is what you are not counting...
The stock market may be positive sum as long as new funds are coming into the market
MM, if you have an opinion, why ask the question?
you guys may want to look at opportunity cost. If you buy a house for $100K, sell it at $150K, net $50K; then in the next 5 years it goes to $300K, did you not lose $150K in opportunity cost?
Your Broker/specialist/marketmaker is like a real estate agent...pulling a percent to provide you with a market, thus reducing the net aggregate..
You lose...it a losers game...an edge may get you the time you need..
Think of the dealer in Vegas pulling the 10% in each pot...(he gets tips too)
the market is a zero sum game?
lol.
spare me.
our economy generates wealth. as does the stock market (which reflects, in the long run, our economy).
TIME
TIME
TIME
TIME
All you scholars forget the word TIME
Yield should never be cited without TIME
Quote from ElectricSavant:
Your Broker/specialist/marketmaker is like a real estate agent...pulling a percent to provide you with a market, thus reducing the net aggregate..
ahhh...just print more money then...
Quote from whitster:
the market is a zero sum game?
lol.
spare me.
our economy generates wealth. as does the stock market (which reflects, in the long run, our economy).
Zero Sum Game
The term zero sum game does not mean what some of you people think it means. The concept refers to the transfer of wealth. When a trader enters into a position (any position) wealth is transferred either to the trader from someone else or from the trader to someone else. Such wealth is not created out of thin air, it transfers from one party to another. Commissions and Fees work the same way. Wealth simply transfers from one (or several parties) to another ad infinitum.
http://wfhummel.cnchost.com/misconceptions.html
"Where does all the money go when stock prices plummet?
This question mistakes the monetary value of stocks for money itself. Stock prices simply reflect the current market value of the shares. At the end of the day, buyers own more shares and less money, while sellers own fewer shares and more money. Their aggregate financial wealth may be higher or lower, but the total amount of money they own remains unchanged."
Total amount of money remains unchanged...
Hence ZERO SUM GAME.
- Spydertrader
__________________
trend guy.....
oportunity cost has nothing to do with zero-sum.....yes if i bought a house fo 100k and sold it for 200k and it was sold by the new owner a year later for 300k......i have not have profited the whole 200k i could have but i did profit 100k...and the guy i sold it to profited 100k......but that does not mean the new owner has lost 300k.........he is at break even......soooooo profit 200k...loss 0k......again...just like the stock market.....not a zerosum game....
and why ask the question......to help these people who keep posting replys that include the statement the stock market is a zero sum game to realize it isnt...never has been....never will be....
cause we are all here to learn.......
Time? Does the risk free rate not factor into prices anymore?
shit....then came decimilazation...
could of...would of...
we do not see the market...
Quote from DynamicReplic8r:
No, the MM is part of the market too. He is buying and selling just like you (only on a shorter time frame). He takes losses sometimes to my friend. If you add up all the profits and subtract all the losses of all market participants it is not negative sum (other than commissions. I'll give you that).
Quote from ElectricSavant:
Your Broker/specialist/marketmaker is like a real estate agent...pulling a percent to provide you with a market, thus reducing the net aggregate..
You lose...it a losers game...an edge may get you the time you need..
Think of the dealer in Vegas pulling the 10% in each pot...(he gets tips too)
zero sum to me only means the money can be accounted for; to net out to zero. Fairness is a different issue... are you down the commission when you enter; definitely; can I track where it went to net out zero; definitely.
this is aeasy discuission. a family of 4's living expenses is about 60-80k a year. unless you can make 100k or more its a zero sum game. you'r emuch better off making 70k a year and investing your money. as a trader your jsut paying your living expenses and enver getting ahead. trading to most is just a dream. i'd say for 97%of trader traidng is a short term zero sum game as they can't stay ahead of there expenses
So you just reduced the quote with a percent of 5K...
My point exactly..
money is Money and its transfer effects the market velocity.
This is negative sum...as the person in the middle pulls...which not only DIRECTLY effects this, but INDIRECTLY>>>
Quote from trend_guy:
It's all how you frame it... I believe if I pay $5K real estate commission and someone gets paid the $5K, the nets out at zero.
Why am I in this thread? I don't even trade equities...
do you understand that economies GROW wealth
please compare the real wealth of the lowest income quintile NOW vs. 100 yrs ago.
(or any income quintile for that matter).
where does this wealth come from? does it come from other people (which it would have to if it was a zero sum game).
of course not.
this is so basic Econ 101, i can't believe anybody would argue the zero sum game.
our economy grows wealth by increased economy of scale, innovation, etc. for example, it takes far less man-hours/acreage/resources to grow a bushel of corn now, vs. 100 yrs ago. this frees up manpower for other tasks.
when i am trading YM on an intraday basis - THAT is a zero sum game. because for every winning trade, there is a losing trade. that is not true with the economy, or stock market, as a whole.
Quote from whitster:
do you understand that economies GROW wealth
please compare the real wealth of the lowest income quintile NOW vs. 100 yrs ago.
(or any income quintile for that matter).
where does this wealth come from? does it come from other people (which it would have to if it was a zero sum game).
of course not.
this is so basic Econ 101, i can't believe anybody would argue the zero sum game.
our economy grows wealth by increased economy of scale, innovation, etc. for example, it takes far less man-hours/acreage/resources to grow a bushel of corn now, vs. 100 yrs ago. this frees up manpower for other tasks.
when i am trading YM on an intraday basis - THAT is a zero sum game. because for every winning trade, there is a losing trade. that is not true with the economy, or stock market, as a whole.
I had to re-read that
when i am trading YM on an intraday basis - THAT is a zero sum game. because for every winning trade, there is a losing trade. that is not true with the economy, or stock market, as a whole.
OMFG
thank you whitster....finally an intelligent answer
i had given up hoping for one
wish i had been able to answer my own question with as well as you did
Quote from madmunny:
thanks....you all continue to prove to me that any one who believes it is a zero sum game is an idiot ......and i can continue to be pissed when ever i read your ignorant comments
lets forget about fees and commisions at the moment cause it just gives you morons something else to confuse yourselves with.
zero-sum implies for every dollar profited one dollar has been lost to make for a break even point......
tell me with google at $350 who has lost enough money to cover the profit that has been made from its gains....
even a stock that ipo's at $10 and goes up to 100 and back down to 50........more profit has been made than lost........
__________________
"All cities in Sweden are built around a graveyard" - William S. Burroughs
less the commisson (negative sum)
This means one dollar has been taken out of the market and one dollar has been given back. 1-1=0
And I'll reiterate that there is an important distinction between the economy creating wealth and the stock market creating wealth. The economy creates the wealth, the stock market does not.
That the value of the stock or the economy is going up has nothing to do with simple math of selling and buying.
__________________
"All cities in Sweden are built around a graveyard" - William S. Burroughs
Also, madmunny, Cramer destroys wealth. 
so explain the effect that an auction has on price....
and don't tell me about the Kevin Bacon Movie (what happened to that guy...he was a good actor) Just like that rock N' Roll Group "The Cars...here today gone tomorrow...
can someone figure out how much net wealth was accumulated in the equities markets from 1900 and how much wealth was destroyed. very difficult i would imagine, but that would solve this mystery. my theory is the amount of wealth available to traders have risen over time, but winners and losers net out close to zero.
"Fair enough, but the stock market does not create wealth, the economy does."
correct. but in the LONG TERM (we are all dead ha ha), prices in the stock market reflect the value of those companies, which is a reflection of the value OF the economy. the reason why MSFT is worth many many times its stock value 1 yr after IPO is that the value of the company has grown, not merely some ephemeral opinion of MSFT's stock value.
since the economy grows, the value of the stock market grows.
stocks are a forward looking price/discovery method. they are not a zero sum game, because there is (believe it or not) a growing intrinsic value beneath the price of the stock. the PRICE swings wildly due to difference of opinion, hype, fear, whatever. That's how we TRADERs make money . but in the long run (pull up some quarterly/yearly charts), the average stock price will plot relatively closely the value of the company.
in some sense, it is a feedback loop.; while the growing economy (and growing companies) grow, which in turn results in increased stock values, the loop works the other way, in that issuance of stock provides capital to the companies that allow them TO grow. that is why companies issue stock in the first place.
it is true that if you buy at 1, then sell to me at 2, then i sell at 3, etc. it sounds like a zero sum game. but what u don't understand is that there is underlying capital improvements/value improvements that this growing stock price is reflecting. while short term swings (a la 2000) can move prices grossly out of line with value, in the long run, price regress to a mean. the fact that prices DO regress to a mean is why contrarian investing is such a great way to make money, as is spread trading, but i digress.
a stock is priced at whatever people think it is worth. thus,. stock prices are purely opinion. however, a stock has an underlying tie to value - it is a specific percentage of a company. THAT is not debatable. if everybody agreed on the price of MSFT (efficient market theory), then the market would instantly adjust to whatever that value is/was. which is the absurdity of efficient market theory of course.
one share of AAPL is worth X% of the actual COMPANY aapl. thus, if AAPL grows wealth, as it did phenomenally since steve jobs took over (which is also why i bot PIXR on weakness and banked heavily but i digress), the stock WILL reflect that.
in the long term
it is not a zero sum game as long as stocks are tied to underlying entities (companies). companies grow wealth. the economy grows. stockprices grow. see the relationship?
contrarily, if a massive problem hits the US economy, and US companies on average lose 50% of their value (thru some catastrophic event), then it still won't be a losing game. overnight, billions of $$$ in stock value will dissapear. that's not a zero sum game either, of course.
throughout history, naysayers have tried to talk the greatness of our nation and economy down. the smart money, otoh, has benefited from the growth in our economy by taking the opportunity to own some of the greatest companies and capital developing engines ever known to man.
i suggest you do the same.
all interesting opinions, the bottomline is you should be playing the market to buy something for a dollar and sell it for more than a dollar. If you can do this there is no better job on earth IMO... unless maybe you are Jay Z! LOL
Stalker
yes but your fogeting about the money the person who sold you your dirty socks made....so its still not a zero-sum game is it...and then there is still that original $1 i paid you for your dirty socks...so at one point when one of us gets sick of selling these socks back to the other one and quits.....the other will be positive $1..........
So...please stop tellin me its a phucking zero sum game its it aint
Stock hitting new high every day from first day of trading (ipo).
Stock beeing bought out by privet investors and taken from market[stock market]. ENYONE that traded this stock is made money , still sum zero ?
not to mention that a dirty pair of socks does not (usually) grow wealth.
US companies do.
.00001% of MSFT (or whatever %age of the company = 1 share) is WORTH far more now than it was the year of MSFT's IPO.
that is why the same share (which of course has split many times) is worth so much more.
it is NOT a zero sum game because there is an underlying entity beneath the stock that has growing value. see my other post where i wank about this ad nauseum
MM, only way it isn't zero sum is if you can't account for the gains and losses, you still haven't been able to prove yourself.
zero sum is only an accounting method, your missing the point badly.
Auction theory
An instrument and its underlying price movements
A purely Technical application of the quote system...
Put it together and there is slop...
Where would you open Google on Monday...? (do you think that is zero sum application?)
True, stocks grow in value as the underlying company grows in value. The company creates wealth. The only reason the stock grows in value is because new money comes into the market. Where did that new money come from? It came from wealth created by the economy (in part by that company). It's not the fact that the stock changes hands that causes the increase in value.
no Trend Guy
...it is not i who misses the point......i understand that zero-sum works in accounting.....if i pay you 1 for a stock you are +1 and i am -1......so for accounting books the net is zero....but the fact is i still own 1 stock work $1 so i have lost nothing so i am not actually -1...........so to say that for every winner there is a loser is wrong because the person who owns the stock at this moment is not really in the negative becuase they own the stock and they can turn around and sell it for a profit and the person they sold it to could then sell it for a profit and in fact that could go on indefinitely so that in actuality no-one ever lost money owning the stock if it continued to grow in value forever.
My point has been trying to point out that in the stock market for me to make 1000 dollars somebody else does not need to lose 1000 as zero sum implys. the only case where this would happen is if the stock went to 0 because of bankrupcy.
There are guys that make a living off the opens...they know what I mean
I believe in opportunity cost.
eg. I buy at $1, sell at $2... then the stock goes to $3. I made $1 profit, but I lost $1 in opportunity.
If you don't believe in opportunity cost then it's not zero sum.
like I said, it's all how you frame it... once you trade for a decade or two, you realise that your opportunity losses are the most significant losses.
If I buy something at $10 and it goes to $15 and sell, I made 50% profit... if the stock continues to rise to $50. IMO, that is my biggest loss of the year. The fact is I made $5 and lost $35.
I agree trend_guy. I would rather take an actual loss than close out a long position the day before the stock doubles. Sounds rediculous I know.
trend guy
soooo....i buy 1 million shares of google at 100 bucks a piece and sell them at 101 dollars and make 1 million profit........i am actually -249 million cause i didnt sell them at 350 dollars?????????????
please stop posting cause your an idiot
oportunity cost has 0 do to with zero sum
Anyone who understands this concept IMO has experience and makes money. The the only way to understand this is to sell at $15, make 50% profit and see the stock go to $50. If you think you didn't lose anything for selling at $15 you probably shouldn't be trading because you just don't get it.
Quote from madmunny:
trend guy
soooo....i buy 1 million shares of google at 100 bucks a piece and sell them at 101 dollars and make 1 million profit........i am actually -249 million cause i didnt sell them at 350 dollars.....
please stop posting cause your an idiot
oportunity cost has 0 do to with zero sum
Quote from madmunny:
trend guy
soooo....i buy 1 million shares of google at 100 bucks a piece and sell them at 101 dollars and make 1 million profit........i am actually -249 million cause i didnt sell them at 350 dollars.....
please stop posting cause your an idiot
oportunity cost has 0 do to with zero sum
I also wish you good luck in your trading MM. Thanks for the discussion, I enjoyed it.
In the options and futures market it is a zero sum game (include comm. and expense and time value of money it's a neg sum game)
But going long on STOCK equity doesn't mean there is always someone on the short for that stock at a 1 to 1 ratio...So in this Market it is not a zero sum game. Longs all win and lose together on the percieved value of the paper you hold..
I look at the Market as a "Ponze Sceme", Ponze said he could double your money in a year. one man believed him..Ponze then spent that year looking for 2 new people to believe him..he found them, took their money and at the end of the first year.. the first man got twice the amount he gave Ponze...Word broke out around town that Ponze could double your money and everyone before you new it was giving Ponze money and for years he kept doubling the early investors money...A PYRAMID SHEME...Ponze had so much money that he left town and lived a luxurious life..
Moral of the story lets hope your not the man with the paper when the buyers disappear...
GO TO
Forums--trading for a living--Journal--want to share
For a look at a Portfolio up 20% in 2006...with over 175 positions.
Opportunity loss? I suppose there is a 'term' for everything. I've got to laugh. The word, 'Euthanism', it works well where the markets are concerned.
all i want is for the zero-sum beleives to tell me who has lost money on google.......and by this i mean...who has lost the equivalent to the profit that has been made?
so telling me your brother lost money when he bought 200 shares at 450 and sold at 375 is not required
tell me who had lost the equivalent of the outstanding number of shares in the company multiplied by the current price of the stock.
just tell me this....if you can then i will concede your zero-sum perception of the market is right.....
in fact you pick any stock that is not bankrupt.....and show me how the same amount of money has been lost as made since the ipo......
anybody......please......
and again....opotunity cost\loss has nuthing to do with this topic.....
The stock market is not a zero sum game because wealth is created. Ex. comp a issues an ipo at 50. I buy at 50 and sell at 75, you buy from me at 75 and sell at 100, we both benefit without the other losing.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
If you don´t count the dividend (hope it´s the right english word) and commissions, I still don´t see how stocks could be anything but a zero-sum game.
Money exchange hands through the buying and selling of a paper, even if this paper is slowly rising for a hundred years. All the profit taken out is payed back to the market by some one else.
You can create a zero-sum game where everyone wins every day, but it´s gonna cost more and to participate.
__________________
"All cities in Sweden are built around a graveyard" - William S. Burroughs
I will give you one last example of my point. Again, if you don't believe the concept of opportunity loss then you probably won't like my answer; but my advice is think about the scenario below and tell me how you would feel and if you felt you lost anything.
You bought 1 million shares of GOOG at $100, the next day you sold your 1 million shares of GOOG at $101. You made $1 million profit. Then you jumped on a flight to cuba and enjoyed your new found wealth for the next year or so. When you came back home you checked your quote screen and see GOOG at $450. What would you feel? Would you feel you lost out of some profits. Would you feel you lost out on nothing?
In my dozen years of trading, I have never met a successful trader who doesn't understand opportunity cost. If you are simply looking at the Investopedia.com definition then you are right, trading is NOT a zero sum game because I can buy at 50, sell at 75, and the next person can buy at 75 and sell at 100.
Stock market is not zero sum. Futures and options markets are.
Money does not equal wealth, do not confuse the two terms.
Its spelled "Ponzi".
Trend guy, I think of this as a theoretical discussion that doesn´t mean shit when it comes to trading
This is nothing but a little amusement on a boring saturday...
__________________
"All cities in Sweden are built around a graveyard" - William S. Burroughs
Quote from Stalker:
Trend guy, I think of this as a theoretical discussion that doesn´t mean shit when it comes to trading
This is nothing but a little amusement on a boring saturday...
Stalker, all too true. I'm going to the bar.
But before I do, I'd like to pull up a quote from the initial post.
Quote from madmunny:
I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
Quote from madmunny:
My point has been trying to point out that in the stock market for me to make 1000 dollars somebody else does not need to lose 1000 as zero sum implys. the only case where this would happen is if the stock went to 0 because of bankrupcy. [/B]
when you sell a stock, you basically are selling the future opportunity and risk to the buyer. The question is... who is smarter?!?!
Hey....Cheers dude!
Quote from DynamicReplic8r:
Stalker, all too true. I'm going to the bar.
But before I do, I'd like to pull up a quote from the initial post.
I think we all agree that the futures market is a zero sum game. If you don't believe that, then you should probably go to the bar too. So, madmunny, do you think that since futures are a zero sum game no one should trade them?
I thought I spelled it wrong "Ponzi" THANKS..
I did like my little story and It can apply to the market...and the illiquidity of a market during a correction. (Not saying we are going there).. Corrections are kind of like "Ponzi" skipping out of town...
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AKA "BLACK MONDAY"
When: October 21, 24, and 29, 1929
Where: USA
---A string of terrible days led to a more than 40% drop in the market from the beginning of September 1929 to the end of October 1929. In fact, the market continued to decline until July 1932 when it bottomed out, down nearly 90% from its 1929 highs. --------------"Ponzi skips town"---------------
---Americans were as bullish as ever. The stock market was guaranteed to make everyone rich as the first world war had been won, and industrialization was resulting in previously-unimaginable luxuries. It was a good time to be American.
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THE CRASH OF 1987
When: October 19th, 1987
Where: USA
---The amount the market declined from peak to bottom: 508.32 points, 22.6%, or $500 billion lost in one day. The largest one-day percentage drop in history.
---This was the crash that everyone expected but could not justify because of the work of the U.S. Securities and Exchange Commission. The SEC--which was established for the prevention of further crashes and fraudulent practices that had infected the stock market--was doing a fine job after the war and finally coaxed tentative investors back into the market in the sixties.
"What the little guy is back--heard that recently"
The SEC, however, could take investors to the proper information but couldn't make them think. In the early sixties and seventies, investors looked not at the value of the company but at the appeal of its public image and the vernacular used to describe it. The following kinds of over-embellished company sketches would attract the public eye. Investors were infatuated with these companies, which somehow represented some higher idea and purpose. EX. TODAY "GOOG","AAPL","HANS", "NTRI"
Fortunately, the newbie chairman of the Fed, Alan Greenspan, was around to help fight off a depression by preventing the insolvency of commercial and investment banks.
"What was that we corrected after a new Fed Chairman"
((Not saying these companies aren't good just some people LOAD THE BOAT UP not knowing anything, but they are talking about it on CNBC))
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The Asian Crash (or Crises)
When: 1989-2004
Where: Southeast Asia but primarily Japan
Percentage Lost From Peak to Bottom: 63.5% as of 2003.
---The Japanese have an uncanny ability to enhance what they adopt from the Americans (market economy). Sadly, the Japanese have picked up on crashes as well and made theirs a lot bigger than any one historical American crash. The crash of the Nikkei has morphed into a massive, surly bear that attacks any signs of recovery. It all started with the a boom/bull market of the 1980s.
"Just don't get stuck with depreciating Paper"
--------------------------------------------------------------------------------
The Dot-Com Crash
When: March 11th, 2000 to October 9th, 2002
Where: Silicon Valley (for the most part)
Percentage Lost From Peak to Bottom: The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11.
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The Florida Real Estate Craze
When: 1926
Where: Florida
The amount the market declined from peak to bottom: Land that could be bought for $800,000 could, within a year, be resold for $4 million before crashing back down to pre-boom levels. The prices were so inflated that to buy a condo-style property in 1926, you would've had to pay the same as you would now have to pay for a luxury home in the guard-gated communities in Miami ($4,500,000)--without adjusting for inflation!
"SOUNDS FAMILIAR"
As hindsight is always 20/20, we should take the time to highlight what we can learn from these past tragedies.
First off, we should point out that most market volatility is all our fault. In reality, people create most of the risk in the market place by inflating stock prices beyond the value of the underlying company. When stocks are flying through the stratosphere like rockets, it is usually a sign of a bubble. That's not to say that stocks cannot legitimately enjoy a huge leap in value, but this leap should be justified by the prospects of the underlying companies, not just by a mass of investors following each other. The unreasonable belief in the possibility of getting rich quick is the primary reason people get burned by market crashes. Remember that if you put your money into investments that have a high potential for returns, you must also be willing to bear a high chance of losing it all.
Another observation we should make is that regardless of our measures to correct the problems, the time between crashes has decreased. We had centuries between fiascos, then decades, then years. We cannot say whether this foretells anything dire for the future, but the best thing you can do is keep yourself educated, informed, and well-practiced in doing research.
Quote from madmunny:
My point has been trying to point out that in the stock market for me to make 1000 dollars somebody else does not need to lose 1000 as zero sum implys. the only case where this would happen is if the stock went to 0 because of bankrupcy.
Here we go again... I will quote my reply in a different topic.
I think the ET community had many times in the past this discussion. My view is this:
If you take the whole market as one entity and you add some time lag, the stock market game is very close to a zero sum game.
First of all the stock market as a whole grows no more than 4 - 5% a year on average (that is if you are lucky enough to invest in a growing economy like the US stock market in the past century).
If you compensate for inflation , transaction costs , companies that closed etc. the real growth is even less.
So for the average participant in a stock market, the only way to achieve a return more than this is to take a bigger part of this limited pie in the expense and by outsmarting another investor.
There will be times that temporarily many will have above average profits and the market will give the impression that it is not a zero sum game but this is only temporarily. The market has a memory (time lag) and it will rebalance these profits making in the long run the game very close to a zero sum one.
Some that follows the strict academic definition of the zero sum game will disagree with the above.
Quote from easyrider:
What difference does it make? There is an opportunity to take some money for those who can do it. Thats all that really matters.
__________________
Take The Money & Run!
We all remember the Qualcomm 1000 quote six years ago, before the Nasdaq crash.
A few people shorted and made a lot of money. The people who lost may not be here to tell the tale. And those who shorted may be feeling guilty about making it.
The US economy has a deficit and China has a surplus. At the top it may be zero sum, but underneath it...
Bulls make money, bears make money and pigs get slaughtered...
Just last month we hear Google 2000.
"at the top it might be zero sum"
it is NOT zero sum. wealth is created.
why is that hard to understand?
look at the world today.
look at the world 100 yrs ago.
is there more wealth NOW?
yes. where did it come from? it was created. i already explained how - increased economy of scale, innovation, etc.
the stock market is no different
the value of the market is gonna swing around in the short term, but in the long term, the market regresses to mean. that mean is roughly equivalent to the intrinsic value of the companies represented by these stocks. that is a basic proxy for the wealth created by these companies.
it is not rocket science. it aint even debatable if you understand the underlying concepts.
Both sides have valid arguments to approve or disapprove. The fact, that one believe it's a zero-sum game make him to think, to be aware, that this is a very risky business. Then he must have an edge in order to survive. In contrast, one who believe it's not a zero-sum game make him to think it's about economy, about business, etc. Then he will go on cruise control and he's likely to be wiped out.
Quote from whitster:
"
look at the world today.
look at the world 100 yrs ago.
is there more wealth NOW?
yes. where did it come from?
"Both sides have valid arguments to approve or disapprove."
there is a lot of arguable stuff in investing and trading that reasonable people can disagree on.
there are some things that are simply a cold hard fact.
this is one of the latter.
it is empirically and definitionally provable that the market is NOT a zero sum game.
strictly speaking, these may be valid arguments (against zero sum game) but they are unsound arguments. but i;m not gonna get all analytical reasoning to explain the difference.
they cannot be sound arguments, but they can be valid.
in layman's term, they are wrong.
there are a virtually endless # of topics that are arguable in investing. and only a few that aren't.
this is one of those "that aren't"
wealth is a measurable quantity.
you can quibble over details, but it is inarguable that there is more wealth NOW than there was 100 yrs ago (true on a USA basis. true on an international basis)
since there is more TOTAL, it has not merely been transferred (which would be a necessary condition of a zero sum market), but has in fact in many cases been created.
i am going to give you one example of how wealth is created.
let's say every person in the world owns 10 lbs of wackawacka seed.
the value of 10 lbs of wackawacka seed is that it can grow 1000 lbs of soylent green (it's people) per acre.
johnny smith makes an invention. this invention (a super gizmo ray) when shined on the 10 lbs of wackawacka seed now increases the yield to 2000 lbs.
the wealth (of this single product - i am simplifying the ecnomy obviously to a one item economy) of the nation just roughly DOUBLED.
since everybody EATS 1000 lbs of soylent per year everybody in the economy had to use their wackawacka seed on themself.
now, there is such a big surplus, that the surplus can be sold and/or far less people have to cultivate wackawacka seed.
the person who invented the gizmo ray has seen his stock multiply by 10,000% based on his invention.
where did this wealth come from?
it WAS CREATED.
it is not a zero sum game.
in the above scenario, it should be "every person in the USA" not "every person in the world"
It is amazing how much missunderstanding is among stocktraders about the very instrument they are trading. Only 2 people mentioned so far 2 very important characteristics of stocks that options and futures don't have, but it changes the logic of it, when we are examining if it is a zero sum game or not:
1. Dividends.
2. Ownership.
Dividens means that even if no stocks change hands, but there is dividend paid to the stockholders, there is wealth created by the underlying company. So clearly, here we are not talking about a closed system (just buyers and sellers), because money is coming in from the outside. So you can throw out the zero sum game right now.
Ownership itself doesn't really have an effect on the zero sum problem, although it must be noted that when the company has a positive value, the stockprice can not go much below a certain value, otherwise the shares would be bought up and the company sold with a profit. In zero sum games, the value of the traded part of the game usually can go to zero.
Options although we think of them as trading vehicles, originally were created for insurance purposes, thus the problem of a wasting asset although exists, but doesn't bother the insurance buyer. They are zero or negative games, depending on how many transaction occurs.
Futures are zero sum games without counting comissions and slippage, otherwise they are sligthly negative games...
Nicolas Darvas at the beginning he thought it's about ecomony, serious business, wealth creation; and he lost. Until he started to find out the truth; it's just The Other Las Vegas then he started to make money.
Quote from Pekelo:
It is amazing how much missunderstanding is among stocktraders about the very instrument they are trading. Only 2 people mentioned so far 2 very important characteristics of stocks that options and futures don't have, but it changes the logic of it, when we are examining if it is a zero sum game or not:
1. Dividends.
2. Ownership.
Dividens means that even if no stocks change hands, but there is dividend paid to the stockholders, there is wealth created by the underlying company. So clearly, here we are not talking about a closed system (just buyers and sellers), because money is coming in from the outside. So you can throw out the zero sum game right now.
Ownership itself doesn't really have an effect on the zero sum problem, although it must be noted that when the company has a positive value, the stockprice can not go much below a certain value, otherwise the shares would be bought up and the company sold with a profit. In zero sum games, the value of the traded part of the game usually can go to zero.
Options although we think of them as trading vehicles, originally were created for insurance purposes, thus the problem of a wasting asset although exists, but doesn't bother the insurance buyer. They are zero or negative games, depending on how many transaction occurs.
Futures are zero sum games without counting comissions and slippage, otherwise they are sligthly negative games...
pekelo.
you are absolutely right
to go further. futures and options are merely agreements. you don't own anything underlying.
futures is a binding contract, and options are a discretionary contract (assuming you bought them as opposed to writing them), but they are just that - contracts, not "stuff".
a stock is "stuff". one share of AAPL = a certain % of the company Apple Computers.
A single stock futures contract on AAPL, or a call option of AAPL does not mean you own anything. it means you have a contract in reference to AAPL. and necessarily, somebody has a countering contract - hence, the zero sum nature.
otoh, if u own a share of apple, it does not follow that there is an opposing position for that share, and as long as people think the company Apple is worth more than Zero, so will your stock.
bitrend, in the case of TRADING you are right. in the case of investing, i would say no.
traders don't trade stocks or futures or options. they really trade(play) OTHER traders. that's it.
investors put money into companies, as represented by stocks.
the former is a bit different than the latter.
i do both, in different accounts, and with different rules.
they may use the same basic vehicles, and the same general goal (sell for more than you buy), but they are different
Would you sell or buy the starving people of Sudan?
And what would happen to the US deficit if the population of China went up by 1 billion?
im not sure what your point is. and fwiw, any student of politics knows that most famines are caused by political actions, not by lack of food.
no matter how much wealth is created, when u have dictators intentionally starving their people (for political means), wealth don't mean squat.
there is way more than enuf food to feed every person on earth comfortably. the problem is not lack of food.
and again, compare the levels of starvation worldwide TODAY vs. 100 yrs ago. wealth has been created.
for pete's sake. in the US, we actually pay farmers NOT to grow (see: many farm programs), and the #1 health problem among the poor is OBESITY
for the first time in history, the poor are FATTER than the rich
The funny thing is I think the poster that started this thread had a completely wrong definition of "Zero Sum Game".
A zero sum game means that unlike casino gambling trading has no house edge!!!
Although we pay commissions it is completely different because we are all playing with the same chance of success long or short.
ssptrading
im an the original poster.....
please i would like if you could inform me of what i think the definition of zero sum means....
i would appreciate that
and if you really think that everyone in the market has the same chance of making money you really have no clue how it works......cause that would be like saying you have the same chance of winning a poker tournament that phil helmouth or daniel negranue or doyle brunson have........
that for every buyer there's a seller and the sum of the 2 transactions equals to zero:
eg:
buyer makes $1000 -
seller lose $1000
---------------------
0
Quote from bitrend:
Both sides have valid arguments to approve or disapprove.
bitstream
i asked him for what he thought i THOUGHT was the definition of zero sum not what the actual definition is
cause he just said that he figured i had the wrong definition of zero-sum then threw in some dumbass remark about no one having and edge and that everyone has the same chance of winning in the market as everyone else
and just like the morons that figured oportunity cost had something to do with zero sum....percentages have nothing to do with zero sum...
one person could be quaranteed to be right 100% of the time in a zero sum game and all that would mean is for every dollar everyone else lost he would profit........
so zero sum does not mean everyone has the same chance of profiting...
Quote from Bitstream:
that for every buyer there's a seller and the sum of the 2
yawn
i know about the freakin' dividend but it doesn't make much of a diff for daytraders and a lot of swing traders alike, especially on tech where theres NO dividend on almost all stocks.
the only ones that are going to benefit from div yield are long term investors....don't come here and tell me that the couple of c u get for holding' on for 3 months changes the maths upside down: if u are underwater by 100meters u drawn no matter what.
by the way we are talkin' about trading here not buyin'n'hold for yrs
I am sorry, but the original question was :
Is the stockmarket a zero sum game?
and not
Is daytrading a zero sum game?
The answers are pretty obvious to both questions, so I am done with this thread....
Can't believe this is still dragging on. The stock market is a zero sum game just like any pyramid game is. If you made money on Google stock, it’s not because Google put some of it’s profits into your bank account. Rather, it’s some new buyers transferred some of their bank account to yours!
ja, and the op said stockmkt not 25yrs buyin and hold + the thread is under the 'trading' forum+ he made the goog eg where there's no dividend payout.
it is not a zero sum game, and i have already explained why
the nation grows wealth and the market correspondingly has grown as well
zero sum game means for every winner there is corresponding equal loss
that is simply not the case in the stock market
Quote from whitster:
it is not a zero sum game, and i have already explained why
the nation grows wealth and the market correspondingly has grown as well
zero sum game means for every winner there is corresponding equal loss
that is simply not the case in the stock market
whitster and pekelo
i thank you for your posts.....its nice to see there are at least two intelligent traders on this board
but as you can tell these people continue to believe its a zero sum game and no matter how often you prove to them that it isnt they will continue to think it is cause they read it in a book once or new a guy who new a guy that told them it was.
So yes this thread is dead
listen u proved absolutely nothing, if something we come to disagree in our arguments: for every one stock that grows there are countless other that go belly up and never paid a single cent of dividend during their half-life.
Quote from madmunny:
whitster and pekelo
i thank you for your posts.....its nice to see there are at least two intelligent traders on this board
but as you can tell these people continue to believe its a zero sum game and no matter how often you prove to them that it isnt they will continue to think it is cause they read it in a book once or new a guy who new a guy that told them it was.
So yes this thread is dead
Taking about dividends, the unique valid argument that can support a non zero-sum. Unfortunately, there're very few companies that can pay dividends, most of them are in S&P500, compare to thousand other companies, probably 10000, that can't return money to their investors. Where are those moneys? They just been moved from one trader to anther trader.
Quote from Pekelo:
Really? Care to quote just one argument for zero sum?
But I will make it interesting! There is actually a time, when the stockmarket can be zero sum:
If the underlying company doesn't pay dividend (also no profits) and its value pretty much zero (and no expectations of sudden inventions, discoveries,etc. ) or very negative, meaning they have huge outstanding debts, THEN that particular company's stock is a zero sum game.
It usually applies to very young tech companies, that were founded on one single idea, like pets.com. They were always in the red, never paid dividends and the company's value went down the drain as they burnt through the IPO money...THAT was a zero sum game....
this is not about n=1
this is about the stock market AS A WHOLE.
companies merge, some fail, some succeed, etc.
that is tangential to the reality. i agree with the others. there is no use discussing things with people who ignore facts while engaging their cognitive dissonance engine on overdrive.
i strongly suggest either a course in basic economics, or a discussion with any finance professor worth his salt. maybe an "argument from authority' will convince you because certainly an argument from rationality has not
to give another analogy, although i doubt it will help. zero sum game necessarily implies a "closed system". the market is not a closed system. companies grow. what are stocks. stocks are a PERCENTAGE ownership in a company.
i am not going to get into the issues of survivorship bias, but of course that is taken into account regarding the ENE's of this world.
i'm pretty darn good at game theory if i don't say so myself (i just did). i strongly suggest a study of game theory. game theory makes clear cut distinctions between zero sum games (the very term "zero sum GAME" comes from game theory) and non-zero sum games.
markets diverge from their means. that's what makes successful trading possible. if the market was purely rational, it would be boring as hell to trade, and all prices would instantly readjust to the intrinsic value of the entity underlying the security(ignoring for a second that the only way to determine the intrinsic value is really via a classic two sided auction).
if you can get it through your head that a COMPANY can create wealth, then it should not be hard to understand that a market of company shares can also gain growth.
when apple makes a computer, they create value by taking sand (silicon), plastic, etc. and making an item out of it that is greater than the cost of assembling these parts and their cost as raw product.
the market does a similar thing, but im getting tired of explaining it to you.
if you WANT a zero sum game, then look at the futures markets. fwiw, i do MOST of my trades in futures, and most of myinvestments in stocks.
there HAS to be a corresponding loss for every corresponding gain in the futures market. necessarily. it is the structure of the market. however, a futures contract is nothing more than an agreement. a stock is more than an agreement. it is a PART of a company. at a bare minimum it is the value of the buildings , free cash, and land value of the plants.
if you are a sucessful trader, more power to you. generally speaking, those who myopically stick to their opinions, when they have clearly been proven wrong, tend to make poor traders. but maybe you are an exception
in this marketplace, the marketplace of ideas, your idea that the market is a zero sum game is more than a falling knife. it is a rocket propelled bayonet, and trust me all you are doing by holding on to it, is shredding your hands and providing entertainment for those watching you on video.
I am amazed by your arrogance: u are saying that what u believe are infact proven facts and that anybody that disagrees with u is ignorant and plain wrong; u also gave a hint to stupidity therefore being offensive: there are many arguments supporting both our and your assertions and yet u insist on stating your version of the facts as an absolute true. this discussion has no point being just lost in semantics and won't help anyone to make money here given we are not newbs and understand the mechanics of the mkt pretty well. since u are extremely good at it, do us a favor and take your game theory elsewhere: nobody is going to benefit from it when opening their pos on monday morning.
it's not what i believe.
it is a fact
it is definitional, and anybody who understands basic economics/finance will agree
there are lots of things that are opinions.
heck, the classic joke about two economists applies "on the one hand, on the other hand" etc.
but this is not arguable.
it's definitional, and any economist - whether keynesian, galbraithian, or lord forbid marxian would agree.
stocks are PIECES of companies
companies grow wealth
there is no aspect of zero sum. read a book, dood.
here's another - tomato is a fruit.
you can argue it's not all you want, but it's a fact.
it's similarly definitional
furthermore, this has nothing to do with making money. this is about the structure of the market. not a how to lesson
knowing that an apple is a fruit won't help you bake a pie either
but arguing it's a vegetable just makes you look either, just like arguing the stock market is a zero sum game.
Using generally-recognized definitions, it is difficult to conclude that equity markets are zero-sum games.
http://en.wikipedia.org/wiki/Zero-sum
Quote from trend_guy:
If I buy something at $10 and it goes to $15 and sell, I made 50% profit... if the stock continues to rise to $50. IMO, that is my biggest loss of the year. The fact is I made $5 and lost $35. [/B]
May be I missed the point, but even the starvation caused by greedy dictators would not necessarily mean that they have hid all the cash underneath their fat dunlop.
All the cash has to be accounted for by some central banking system, and that may be deployed in various asset forms.
So someones books have to be balanced or cooked?
The poor in the US may be fatter for the first time in history, but that does not change the fact that there are more people living under the poverty line in the US than the total US population some 100 years ago.
And then how to account for the "convexity" where the population growth of the US in 1 year was greater than the total population of Canada?
There's food for thought for MM.
Wow, I can't believe it took 16 pages of this BS before someone was smart enough to figure out that stocks pay dividends. It amazes me how so many so called traders have no clue how the stock market works at all. I guess that makes it easier for me to make money
It is not a zero sums game. Success companies make profits from selling goods and services. These profits are then payed out to share holders in the form of dividends. This means money is coming in outside of people buying and selling shares and it is not a zero sums game.
In 2004 Microsoft paid a $32.6 billion one-time dividend, the S&P 500 paid a total of $213.6 billion in dividends during 2004. This is all money coming in from the outside.
Futures are a zero sum game if you include all market participates but not all market participates are not traders. Companies use futures contracts to hedges and lock in prices for commodities that they use. I don't know anyone has ever tried to figure out if hedgers are net losers or winners in the long run. Unless they break even, futures trading is not a zero sums game for traders.
I'll agree when wealth is created it is not a zero-sum game, and wealth is created over the long run, so over the long run the stock market is not a zero sum game.
But over the short run, if the markets are flat or down in a time period then isnt wealth stagnant or diminishing..creating a negative sum game after fees?
stocks are priced lower as function of the dividend amount from ex-dividend as long as trader is stockholder on record before ex-dividend date.. assuming all things equal from yesterday to today's ex-div date, a $1 quarterly dividend subtracts $1 off the stock price.
there is NO SUCH THING as free profits off dividends in the stock market.
also, whoever was arguing about recouping losses via dividends over time, if a stock is priced $25, and company distributes $1 dividend per year, you do not recoup all losses in 25 years via dividend for reason explained above. also, $25 per share acccumulated in dividends in 25 years is not worth the same as today because of inflation. on top of that factor in tax.
Quote from Matt8200:
Wow, I can't believe it took 16 pages of this BS before someone was smart enough to figure out that stocks pay dividends. It amazes me how so many so called traders have no clue how the stock market works at all. I guess that makes it easier for me to make money
It is not a zero sums game. Success companies make profits from selling goods and services. These profits are then payed out to share holders in the form of dividends. This means money is coming in outside of people buying and selling shares and it is not a zero sums game.
In 2004 Microsoft paid a $32.6 billion one-time dividend, the S&P 500 paid a total of $213.6 billion in dividends during 2004. This is all money coming in from the outside.
Futures are a zero sum game if you include all market participates but not all market participates are not traders. Companies use futures contracts to hedges and lock in prices for commodities that they use. I don't know anyone has ever tried to figure out if hedgers are net losers or winners in the long run. Unless they break even, futures trading is not a zero sums game for traders.
"The poor in the US may be fatter for the first time in history, but that does not change the fact that there are more people living under the poverty line in the US than the total US population some 100 years ago."
that is irrelevant because the "poverty line" is a relative measure. it also is silly because the poor are not measured on a per capita in the above statement.
certainly, the poorest 20% of our population now are richer than the poorest 20% were 100 yrs ago.
because wealth overall has grown, it has also grown within all quintiles. that is again statistical fact.
a "poor" person in the US would be considered rich in most 3rd world countries.
by any measure you could think, the US has grown significant wealth
http://en.wikipedia.org/wiki/Opportunity_cost
Trading Lesson #1
http://www.investopedia.com/terms/o/opportunitycost.asp
Winning traders can only profit to the extent that other traders are willing to lose. Traders are willing to lose when they obtain external benefits from trading.
If I want to buy GOOG and nobody is willing to sell any stock; I can't profit. For me to have a chance at a profit somebody has to sell me some shares because they feel a benefit. Opportunity cost is easily quantifiable after the fact.
If I sell a stock at $2 and now it's at $6, my opportunity cost was 6-2. Zero sum can only be calculated after the fact.
My advice is pick up the phone and call some extremely successful traders. Ask them this question...
What situation causes you the most anger in trading?
I guarantee you the answer you will get is...
When I sell out of a position and then it rips higher or vice versa for shorting.
Zero sum has many interpretations. My definition includes opportunity costs because after you trade for many years you realise these were your most expensive costs. An analysis of trading without inclusing opportunity costs is like a Football team only analysing how many points they scored and ignoring how many points they gave up.
Most of you will disagree with me but that actually brings me happiness. If 95% of traders didn't disagree with my trading decisions on a daily basis I wouldn't be able to make a great living from this game.
In 1950 the S&P was at 16 points. The index grew from 16 to almost 1300 today.
Doesn't this mean that the market capitalisation of the companies in the index grew form 16 to 1300? Or in other words that over all these years the surplus in market capitalisation proves that it is not a zero sum game?
I think this is true for stocks but also for S&P futures. Because S&P futures are the result of the value of the stocks in the index. The underlying value from 1 point in the ES grew form 16$ to 1300$.
If you could have bought 1 contract in 1950 it would be worth now 81 times it's original value.
The only thing that still has to be taken in account is slippage and commission.
For every winner there doesn't has to be a loser. If A buys Google at 85 and sells at 110, A made money. If B sells at 250 he makes money too. So in that case there is no loser.
To make a correct calculation one shpould accumulate all the profits and all the losses and deduct one from the other. If the resul would be negative than you can speak of a zero (or negative) sum game. But as long as the actual price is higher then the initial price, the sum of all profits and losses will be positive, because the netto move was up.
Spike,
I agree that the stock market is not a zero sum game. But I think it is different in the futures. There trader A can only buy a contract when there is another trader B who takes the other side. So when A is winning then trader B is loosing cause B is still in the game/market.
In the stock market trader B can sell his stocks and is out of the market. So B will not be affected by rising stock prices(except you took a short).
[QUOTE]Quote from spike500:
I think this is true for stocks but also for S&P futures. Because S&P futures are the result of the value of the stocks in the index. The underlying value from 1 point in the ES grew form 16$ to 1300$.
If you could have bought 1 contract in 1950 it would be worth now 81 times it's original value.
The only thing that still has to be taken in account is slippage and commission.
spike, you are correct about the stock market but wrong about the futures market.
i will explain this again. there is a very significant difference between futures (and options for that matter) and stocks. i have already explained this, but you need ot keep rereading this, and/or read up on futures because if u think futures are not a zero sum game, you don't understand futures.
a stock represents ownership of a company (a portion thereof)
a futures contract does not. a futures contract is an agreement, a binding one.
for EVERY long futures contract, there is a short futures contract to offset it. ditto for options. somebody WROTE the call or put you bought. futures aren't written, but they necessarily have an offsetting futures contract. they have to. by their nature. that is not the case with stocks.
futures have somehwat of a different purpose than stocks. futures are used for - speculation, for hedging, but essentially they are the ultimate price discovery mechanism FOR the underlying entities they represent. they are pure supply/demand vehicles.
futures are symmetrical. that is what makes them zero sum (less than zero sum whne including commissions, but let's spare that complexity for now).
stocks are not symmetrical
THAT is the difference
again, if u think futures are not zero sum, you need to read up. it is not arguable. it is definitional at the most basic level.
futures contracts can be created out of thin air, because they don't represent a portion OF the S&P, Dow, etc. they represent two opposing parties making an agreement regarding that underlying basket of stocks.
futures also, unlike stocks, have to be rolled over, since futures contracts have an expiration, etc. but that might make the issue even more complicated for you.
of COURSE you would participate in the growth of the economy by being long the futures from the past (assuming we are not talking about the Nasdaq from 2000 to 2005 ) , but you ARE participating in a zero sum game in the futures.
you are not in stocks.
spike, you are correct about the stock market but wrong about the futures market.
i will explain this again. there is a very significant difference between futures (and options for that matter) and stocks. i have already explained this, but you need ot keep rereading this, and/or read up on futures because if u think futures are not a zero sum game, you don't understand futures.
a stock represents ownership of a company (a portion thereof)
a futures contract does not. a futures contract is an agreement, a binding one.
for EVERY long futures contract, there is a short futures contract to offset it. ditto for options. somebody WROTE the call or put you bought. futures aren't written, but they necessarily have an offsetting futures contract. they have to. by their nature. that is not the case with stocks.
futures have somehwat of a different purpose than stocks. futures are used for - speculation, for hedging, but essentially they are the ultimate price discovery mechanism FOR the underlying entities they represent. they are pure supply/demand vehicles.
futures are symmetrical. that is what makes them zero sum (less than zero sum whne including commissions, but let's spare that complexity for now).
stocks are not symmetrical
THAT is the difference
again, if u think futures are not zero sum, you need to read up. it is not arguable. it is definitional at the most basic level.
futures contracts can be created out of thin air, because they don't represent a portion OF the S&P, Dow, etc. they represent two opposing parties making an agreement regarding that underlying basket of stocks.
futures also, unlike stocks, have to be rolled over, since futures contracts have an expiration, etc. but that might make the issue even more complicated for you.
of COURSE you would participate in the growth of the economy by being long the futures from the past (assuming we are not talking about the Nasdaq from 2000 to 2005 ) , but you ARE participating in a zero sum game in the futures.
you are not in stocks.
Quote from ElectricSavant:
ahhh...just print more money then...
Quote from spike500:
In 1950 the S&P was at 16 points. The index grew from 16 to almost 1300 today.
Doesn't this mean that the market capitalisation of the companies in the index grew form 16 to 1300? Or in other words that over all these years the surplus in market capitalisation proves that it is not a zero sum game?
I think this is true for stocks but also for S&P futures. Because S&P futures are the result of the value of the stocks in the index. The underlying value from 1 point in the ES grew form 16$ to 1300$.
If you could have bought 1 contract in 1950 it would be worth now 81 times it's original value.
The only thing that still has to be taken in account is slippage and commission.
For every winner there doesn't has to be a loser. If A buys Google at 85 and sells at 110, A made money. If B sells at 250 he makes money too. So in that case there is no loser.
To make a correct calculation one shpould accumulate all the profits and all the losses and deduct one from the other. If the resul would be negative than you can speak of a zero (or negative) sum game. But as long as the actual price is higher then the initial price, the sum of all profits and losses will be positive, because the netto move was up.
Quote from gbos:
Ok
DJIA 1/1/1900 at 68
DJIA 2006 at 11200
That is a growth of less than 5% annually and this with the hindsight of been invested in the fastest growing economy of the western world. Try doing the math including the markets that a conservative investor would own back in the 1900.
That said, for a stock investor to achieve returns more than 5% annually he must take them from someone else¢s pocket. If not the math don¢t work out. This is why I claim the stock market is very close to a ¡zero sum game¢.
first of all spike, if it's above 0%, it's not a zero sum game
things aren't "kind of " a zero sum game. they either ARE or they aren't
furthermore, your DJIA example of compounded return does not take into account of dividends. DJIA stocks tend to pay dividends that EXCEED the average dividend
The yield for the DJIA, DJTA (dow jones transport average - recently hit an all time high btw) and the S&P 500 has historically moved between a range of 3% and 6% . The normal yield range for the DJUA (dow jones utility average) is between 3% and 12%.
the current div yield on the SP500 is 1.7%, on the DJIA is 2.3%, the DJTA is 1.0 % and the DJUA is 3.5%
you cannot discount dividends when computing compounded returns.
Quote from spike500:
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my
Every return above 0% proves that stock markets are not zero sum.
According to Yahoo S&P was at 16 in 1950. This gives a compounded rate of return of about 18%.
Quote from whitster:
first of all spike, if it's above 0%, it's not a zero sum game
things aren't "kind of " a zero sum game. they either ARE or they aren't
furthermore, your DJIA example of compounded return does not take into account of dividends. DJIA stocks tend to pay dividends that EXCEED the average dividend
The yield for the DJIA, DJTA (dow jones transport average - recently hit an all time high btw) and the S&P 500 has historically moved between a range of 3% and 6% . The normal yield range for the DJUA (dow jones utility average) is between 3% and 12%.
the current div yield on the SP500 is 1.7%, on the DJIA is 2.3%, the DJTA is 1.0 % and the DJUA is 3.5%
you cannot discount dividends when computing compounded returns.
Quote from Lights:
stocks are priced lower as function of the dividend amount from ex-dividend as long as trader is stockholder on record before ex-dividend date.. assuming all things equal from yesterday to today's ex-div date, a $1 quarterly dividend subtracts $1 off the stock price.
the fact that mkts punctually are a 0-sum game is actually irrelevant... what matters is the relative perception of value, as the 'masses' are made to perceive by clever-enough marketing... and thats all it is, perception... but as it goes up you want to be long whatever instrument / index, and as it goes down... the trick is in identifying which element of the everyday marketing b/s will be clever enough to move all the other retards... or be one of them... cheers...
the fact that SOME markets are not a zero sum game (stocks are not, futures are), is a matter of underlying market reality
what does this have to do with TRADING?
well, next to nothing. it has a heck of a lot to do with the market though.
also, it is problematic to conflate investors with traders.
investors have the opportunity to invest in the greatest wealth creation mechanism ever invented that is available to EVERYBODY with no entry fee but a commission - the stock market.
it is 100% democratic- price is purely set by the aggregate opinion of market participants, and it is a mechanism that grows wealth, and will continue to do so in the long term as long as we (as a nation) do the same.
this is really a phenomenal thing. you can own parts of great companies, and see your wealth rise along with the company.
i invest (vs. trade) in companies i believe in and pay heavy attention to fundamentals and technicals
i trade, otoh, with little regard to fundies.
it's an amazing opportunity.
What about convexity?
How do you account for 24 million new people in the US in one year?
If the total global economy is about 32 trillion annualized, and there are about 6.5 billion people in this world, then the average person is valued at about $5000 per year, or the equivalent to 1 futures contract annualized.
In order to keep the money flow cycle in check, the equivalent of about 200 contracts per second have to be traded to account for the 6.5 billion people in a 32 trillion dollar economy.
If whitster is right, and all indexes are coupled, and 200 buy and sell orders per second are matched up, then in my view...
extreme capitalism = communism.
So no one should ever have any bills to pay, and we should all be living on free air.
it's not a zero sum game, period. quit worrying about it.
the guy who grows corn sells it via futures. the guy who buys his contract sells it higher. the guy who bought it the third time takes delivery and eats it.
all made money or derived value.
financial futures reflect income from interest rates.
the value of productive wealth monetized and traded.
Quote from aPismoClam:
it's not a zero sum game, period. quit worrying about it.
the guy who grows corn sells it via futures. the guy who buys his contract sells it higher. the guy who bought it the third time takes delivery and eats it.
all made money or derived value.
financial futures reflect income from interest rates.
the value of productive wealth monetized and traded.
Quote from DynamicReplic8r:
The futures market is a zero-sum game by definition. It has nothing to do with whether prices are going up or down, or whether value is being created in the economy. I cannot buy a futures contract unless someone else goes short. Therefore, if I make X dollars, the short loses X dollars. If I lose X dollars, the short makes X dollars.
Why do I bother?
It has nothing to do with one's goals.
http://www.pathtoinvesting.org/cate...futures_071.htm
http://www.investopedia.com/terms/z/zero-sumgame.asp
By the way, I concede that the stock market is non-zero-sum.
Quote from trend_guy:
Your missing the point, by selling at $200 you gave up $200 plus in potential gains and those gains are in someone elses pocket or probably many other peoples pockets. IMO, giving away $200 is the same as losing $200.
Quote from DynamicReplic8r:
Why do I bother?
It has nothing to do with one's goals.
http://www.pathtoinvesting.org/cate...futures_071.htm
http://www.investopedia.com/terms/z/zero-sumgame.asp
By the way, I concede that the stock market is non-zero-sum.
Because he sold corn at a price below the prevailing market price. He lost money on the futures contract. It doesn't matter if he made money by growing corn. HE LOST MONEY ON THE FUTURES CONTRACT, and it was the same amount that the other traders made cumulatively.
Quote from DynamicReplic8r:
Because he sold corn at a price below the prevailing market price. He lost money on the futures contract.
You didn't like my first two links? Fine. Here is another:
http://dictionary.reference.com/sea...zero-sum%20game
"zero-sum game
A situation in which one person's gain must be matched by another person's loss. Without considering taxes and transaction costs, many types of investing, such as options and futures, are examples of zero-sum games."
Since we're talking about corn, here's something from the CBOT.
http://www.cbot.com/cbot/docs/56449.pdf
Look at the 3rd page:
"In mathematical terms, futures trading is a zero sum game."
This horse is dead. Can we please stop beating it?
Quote from QQQShort:
The profit pontential he surrendered, however, is not a loss.
Quote from DynamicReplic8r:
You didn't like my first two links? Fine. Here is another:
http://dictionary.reference.com/sea...zero-sum%20game
"zero-sum game
A situation in which one person's gain must be matched by another person's loss. Without considering taxes and transaction costs, many types of investing, such as options and futures, are examples of zero-sum games."
Since we're talking about corn, here's something from the CBOT.
http://www.cbot.com/cbot/docs/56449.pdf
Look at the 3rd page:
"In mathematical terms, futures trading is a zero sum game."
This horse is dead. Can we please stop beating it?
Umm. I think I already did a couple times. Let's try again. He sold a futures contract. The price of corn went up. His account was debited (by the same amount that someone elses account was credited).
I really don't know what to tell you. dictionary.com, the cme and the cbot, all say the futures market is a zero-sum game
Futures is zero-sum period. You may be using future contracts to hedge other positions but that is irrelevent to whether futures is zero-sum because what happens outside the futures market is irrelevent when discussing the futures.
It doesnt matter what the participants goals are. For every $1 made in the futures market a $1 is lost. I don't care if someone paid you $50,000 to intentionally lose $10,000 in the futures market. The fact that you net'd out $40k positive doesnt mean that you did not lose $10k in the futures market. The $50k is not part of the futures market. Your motives, goals or what you had for breakfast does not change the fact that its zero-sum.
Quote from QQQShort:
By definition, the futures market is a non-zero sum game. To conclude otherwise is to believe all participants have similar goals for that market. They do not, as shown by aPismoClam in his example.
Excuse me if somebody already said this.......
Fresh Meat is the reason it is NOT a zero sum game. That is what pays the commissions to CME, CBOT, Merrill Lynch, etc and the traders that are winners of the game.
Without a daily influx of new capital we would all be out looking for work, because the leaches would eventually bleed the market dry.
Quote from patoo:
Excuse me if somebody already said this.......
Fresh Meat is the reason it is NOT a zero sum game. That is what pays the commissions to CME, CBOT, Merrill Lynch, etc and the traders that are winners of the game.
Without a daily influx of new capital we would all be out looking for work.
We agree the value of the corn contract was $50k at the time it was created. We also agree the value was $60k at the time of physical delivery.
The person taking physical delivery paid the corn farmer $50k. Within the futures market, there must be an offset of $50k for it to be a zero-sum game in mathematical terms. I don't believe there is such an offset.
The $60k market value is moot -- within the futures market -- for the parties involved in physical delivery. The $10k profit is made when the corn is sold to another party, but that profit does not occur within the futures market.
The outflow of money has nothing to do with price. The capital is syphoned off regardless the the price movement. They get a commission which ever way the price goes including sideways.
.........corn, perhaps. But how many people are taking delivery of anything in the SP/ES/NQ/ND contracts. The number of open contracts left at the end of a contract's time is practically nothing.
What if the corn got washed away by hurricane Katrina, but it was insured, however, the amount in storage was not known, and an amount greater than 50K got claimed?
It is not zero sum. The only way it can be so, is if God thinks he is Bill Gates, and 200 buy and sell contracts can be matched per second every single trading day, assuming all indexes are coupled.
this thread is amazing.
it is incontrovertible that futures are a zero sum game
it is incontrovertible that stocks are not
fwiw, technically speaking, a zero sum game can still be theoretically a net neutral outcome game, however any system that is NOT a net neutral outcome game (once slippage and commissions are factored out) CANNOT be zero sum. by definition.
so, in brief (analytical reasoning time yo)
net non-neutral outcome is sufficient but not necessary in proving a system to be non zero sum
net neutral outcome is necessary, but not sufficient for proving a system is zero sum
rinse, lather, repeat
the fact that there are still people arguing otherwise is either the most amazing example of cognitive dissonance in recent history (somebody call the APA), or the most amazing example of intentional ignorance - not that there is much of a difference.
for people who have a hard time understanding this - use the closed vs. open system analogy. or my gizmo widget analogy.
or if that does not work, i suggest a full frontal lobotomy.
yes clearly the stock market is not zero sum for the simple reason that the seller may be simply trying to raise money for their business on the IPO, and if the stock keeps going up the all are winners. sellers are not always traders, and why can't that be for futures? let's say that hedging risk produces efficiency, so selling in a rising corn market can be good if you are a producer. sure you may have sold at a higher price but hedging allows you to plan.
perseus. are you reading what people are writing?
what you are saying is completely irrelevant to the fact that futures are zero sum, and stocks are not
completely.
zero sum for which players? all? how is it irrelevent?
The only thing that matters when discussing zero-sum in the future markets is the money that is exchanged for futures contracts. What you do with your farm or your corn is irrelevant as it is not part of the futures market.
Quote from Perseus:
zero sum for which players? all? how is it irrelevant?
you are making everyone into a trader, and they are not. for some people the futures market is only one part of a larger equation in their enterprise.
In other words the 'game' for some is not just the market, so to say that they are even playing the 'game' isn't correct.
correct
why do we keep repeating ourselves
for every long futures position, there is an offsetting short - in futures
that is what makes it zero sum.
in futures, you are trading a CONTRACT, an agreement. that's all it is.
his comment was (and IS) irrelevant to the fact that futures are zero sum
of course hedgers use the futures market to offset real holdings.
duh
what does that have to do with the futures market being zero sum? absolutely NOTHING
It doesnt matter what their motives are or how the futures contracts offset other positions they may have. Those are external and are not part of the futures market. Yes a farmer can "lose" on a futures contract and still come out ahead because he was using it for hedging. He still lost money on the futures contract.
Quote from Perseus:
you are making everyone into a trader, and they are not. for some people the futures market is only one part of a larger equation in their enterprise.
i think the debate here involves two very different perceptions of zero sum. one argument is any stock transaction at the moment is not zero sum. but the other argument some are making is that over time, the net amount of wealth created by the stock market is offset by how much is lost by all participants. they believe that if it was possible for everyone to win in the stock market, that money is being created from nothing and this is impossible.
anyway, traders and econ professors have been debating this for well over a century.
it is virtually impossible to prove. hence, the ongoing debate over time.
what you are trying to assert is contrary to economics. That trading produces value is well known, for people other than us who deal with real production.
are you trying to tell me that if i am a farmer and I sell one contract to Archer Daniels, then later deliver against that to Archer, then I and Archer have gained nothing? If the price goes down and Archer is debited, it is simply part of the cost of the corn. That's not zero sum, they just wanted to be assured of supply.
If nothing else the price signals are of enormous value.
Lights, the stock market can keep going up as long as GDP does.
"anyway, traders and econ professors have been debating this for well over a century. "
um, no.
no trader who understands markets "debates" this. it is non-debatable. it is a structure of the market certainty. i am a trader. i am also an investor. that's irrelevant. futures are zero sum. they have to be. it's a structural design aspect.
similarly, stocks are not zero sum. they can't be. it's the design of the market.
"zero sum for which players?"
the fact that you can even ask this question shows you don't understand what zero sum MEANS.
5 people sit down at a poker table with 500 chips each. after 4 hours, one guy walks away with 2500 chips. the other 4 are broke.
that is necessarily true. it's a closed system. for every chip that guy who won got it necessarily meant another trader lost a chip.
a closed system such as that is a zero sum game
futures market is similar in that each additional chip that comes into the game is offset by a short chip
this is NOT true in equities
games/markets are not zero sum for "which players"?
lol, the mere idea shows a complete ignorance of the concept of zero sum
zero sum means that for the aggregate of transactions in the market, the net sum (absent commissions) is ZERO
hence, the name
there is no other possibility in the futures market
that makes it zero sum
the aggregate of transactions in the stock market (absent commissions) are not ZERO
the which players comment is nonsensical
i pull money consistently out of the futures market. that is my job. it is what i do. however, that MARKET is zero sum. saying "it's not zero sum for me" would be nonsensical. because zero sum is a measure of the totality of exchanges within the closet set, not an individuals result within
jeeez
What if I find some arbitrage trade of futures against something really odd like tractors? and suppose that in the net I lose in the futures but gain in the tractors? according to the narrow definition here I am a loser in the futures market.
Perseus, do you agree that cash settled futures (ES for example) are zero-sum. I want to see if we can at least agree on that.
Quote from Perseus:
what you are trying to assert is contrary to economics.
whitster, if the markets existed in a vacuum and the only game was trading then i agree with you. You make sense but I take the broader view.
You can take whatever view you want but once you include elements that are not part of the futures market then you are no longer just talking about the futures market and hence your conclusions become false.
Quote from Perseus:
whitster, if the markets existed in a vacuum and the only game was trading then i agree with you. You make sense but I take the broader view.
whitster, that is the perfect analogy. I'm sure someone is going to say something like, "What if one of the poker players finds an extra $20 in his pocket he had forgotten about?" or "what if someone wins the lottery while they are sitting at the poker table?" .... shesssh
Quote from whitster:
5 people sit down at a poker table with 500 chips each. after 4 hours, one guy walks away with 2500 chips. the other 4 are broke.
that is necessarily true. it's a closed system. for every chip that guy who won got it necessarily meant another trader lost a chip.
a closed system such as that is a zero sum game
The poker game is self contained so i agree that poker is truly zero sum, markets are tied to some economic fundamental, so i don't agree that they are 'closed'.
in the strict sense of the mechanics of trading, if it were closed like poker, then i agree. In the broader sense though since there are correlations to the bigger world then it is possible to lose money in the futures market but have it offset elsewhere.
No one is saying that someone couldnt have their gains or losses in futures offset somewhere else but those gains and losses are not part of the futures market.
Quote from Perseus:
The poker game is self contained so i agree that poker is truly zero sum, markets are tied to some economic fundamental, so i don't agree that they are 'closed'.
in the strict sense of the mechanics of trading, if it were closed like poker, then i agree. In the broader sense though since there are correlations to the bigger world then it is possible to lose money in the futures market but have it offset elsewhere.
to consider the futures market disconnected from the underlying economy makes no sense to me at all.
there is nothing gained in a poker treansaction, there is wealth created in a true trade of goods.
No one has said they consider the futures market is disconnected from the economy, they are saying for the purposes of discussing whether the futures market is zero-sum, you cannot consider things outside of the futures market.
Quote from Perseus:
to consider the futures market disconnected from the underlying economy makes no sense to me at all.
You guys, you always give case by case to support your non zero-sum concept. If it has infinite cases, you will get n right cases divide by infinite that's will result a zero point.
Let see the big picture, the money in and the money out. The money in are IPO, additional raises, our retirement savings, investors open new account or keep refunding their account, dividends (since dividends are paid to investors account and it depends on him to withdraw or reinvest). The money out are funds that have been move to other non-zero-sum investment and the total amount that investors withdraw.
If we can prove the money-out is greater than the money-in then it's a non zero-sum, it's likely not since only 5% success and we can say the 95% unsuccessful investors are rarely withdraw the money from the market. However, scientifically we cannot conclude anything because we can always argue that the money-out is greater than the money-in and vice versa.
One possible way to prove a zero-sum or non zero-sum is to look the Market Index, if it's always going up then we can conclude it's not a zero-sum since the total value become bigger. The calculation of the index must be non-bias. By market always going up mean that it's understandable that from time to time the market retrace back to a certain level but we can guarantee that it won't go back to the place where it was 100 years ago.
Well, it looks like it goes in your favor for supporting a non zero-sum theory since the DOW is always going up. Now the point is can you explain why the DOW is always going up? And once you know the exact reason why the DOW is always going up you will understand why it's a zero-sum and not a non-zero-sum.
yes, but there are short speculators in the market. to be able to buy a stock in a rising market, someone needs to sell that to you, which results in their opportunity costs. also know that the majority of the public is long the markets at tops, oftentimes during significant crashes where up to a trillion can be lost in 401k portfolios, pensions, etc. i think the argument is that over time, the market offers more wealth, but all the participants if add up all the gains and losses net out to near zero. some may say that the stock market is a place where great wealth can be transfered from one player to another.
in that way, maybe the market itself is not zero sum. but it could very well be zero sum to it's participants. it seems like the debate here is between these two different perceptions of zero sum.
Quote from Perseus:
Lights, the stock market can keep going up as long as GDP does.
Wow, I can't even begin to comprehend how you can believe that. You are talking about the stock market and wealth, not money, right?
Quote from Lights:
i think the argument is that over time, the market offers more wealth, but all the participants if add up all the gains and losses net out to near zero. some may say that the stock market is a place where great wealth can be transfered from one player to another.
in that way, maybe the market is not zero sum. but it could very well be zero sum to it's participants.
winter
but an economy is just one big market. the trade transaction itself creates wealth, this has been the story of economics for the last millenia. You are simply counting dollars in a trade like poker chips, I am counting real wealth and what further advantage the trade creates to get more dollars and wealth.
put it this way, if the futures markets really were just a big zero sum casino game, do you believe they would even be allowed to exist like this?
what about single stock futures? apparently stock transactions are ok.
lights, there is no wealth 'in the market'.
They are "allowed" to exist because of the reasons you stated, they are very useful for hedging. That doesnt change that for every dollar gained in futures trading that someone else has lost a dollar on their futures trading.
Quote from Perseus:
but an economy is just one big market. the trade transaction itself creates wealth, this has been the story of economics for the last millenia. You are simply counting dollars in a trade like poker chips, I am counting real wealth and what further advantage the trade creates to get more dollars and wealth.
put it this way, if the futures markets really were just a big zero sum casino game, do you believe they would even be allowed to exist like this?
All futures (and options) are the same, for every long someone else is short.
Quote from Perseus:
what about single stock futures? apparently stock transactions are ok.
perseus, the issue isn't "are the markets as a whole zero sum?"
clearly, THEY ARE NOT
the issue is - are the futures market zero sum. they ARE
is the stock market zero sum? no
an individual investor is irrelevant.
an investor/trader cannot be measured in the terms "zero sum"
zero sum is a ... wait for it... SUM of all transactions within a system
in the case of a futures market , that sum equals ZERO
net zero
period
it has to
that is not the case in the stock market
your results are irrelevant
i trade mostly futures because i prefer them. the fact that they are zero sum is irrelevant to my results
but it is a fact
heck, if you buy the basket (properly weighted ) of dow stocks and i buy a DJ futures contract, and keep the leverage differential in t-bonds (that is why futures are priced above the cash index, because you can buy them on margin, and then invest the remainder in t-bills. fair value is asseses with those differentials in mind, and when they get out of line, arbitrage brings them bac), assuming fair value (which the futures market stay close to or they get arbitraged ), we will get the EXACT same return
the fact that i conducted my transaction in a closed zero sum market, and you conducted your transactions in a non zero sum market is again - irrelevant
the net sum of an equity market can be (and is) less than or greater than zero.
the net sum of a futures market is ALWAYS zero
the net return of any individual is absolutely 100% irrelevant to that reality
we are probably arguing some sematics here
I agree with a lot of what you are saying, IF you only want to count the dollars in any particular trade at the time of the transaction. That's all a poker player cares about, however the participants are not all poker players and the transaction itself can be source of further wealth and therefore further dollars to some, therefore to call the futures markets a zero sum game to all is inaccurate.
If you agree that futures markets are beneficial to the economy then you must agree that they are not zero sum. A true zero-sum game generates no new wealth.
Your conclusion does not follow from your proposition.
Quote from Perseus:
If you agree that futures markets are beneficial to the economy then you must agree that they are not zero sum. A true zero-sum game generates no new wealth.
winter, the futures market is part of the economy, it is not seperate. However even if i take what you say, that it 'helps the economy', that still supports my case. Even if it only helps the economy that makes it not zero-sum for a true zero-sum game would not help the economy.
You agreed that poker games are zero-sum. Poker games help the economy (create a demand for poker chips to be produced).
Quote from Perseus:
winter, the futures market is part of the economy, it is not seperate. However even if i take what you say, that it 'helps the economy', that still supports my case. Even if it only helps the economy that makes it not zero-sum for a true zero-sum game would not help the economy.
PERSEUS, you cannot make up definitions to further your point
zero sum MEANS something
it was defined, and created, many years ago as a concept in game theory. if you don't like the term, that's groovy, but it does not change what zero sum means
the issue is not "are futures markets beneficial?"
of course they are
the issue was/is "ARE THEY ZERO sum"?
they ARE
that is not a bad thing. it is simply A THING
heck, i make a living trading futures. i love futures
but that is 100% irrelevant to the fact that they are a zero sum game
i also love stocks. stocks are kewl
they are not zero sum
you could make 20 million dollars in the futures market. that is irrelevant to the fact that they are zero sum
if all speculators were magically eliminated from the futures markets and futures were SOLELY a hedging vehicle, they would still be zero sum
one thing is absolutely 100% incontrovertible. you cannot have a NET gain among participants in the futures market
period.
you can have a net gain among participants in the stock market
the latter, due to its structute can GROW wealth, as a system
the former cannot - because the net sum is z*E*R*O
and you guys cannot make the definition of game and zero-sum to suit your own purposes. Is the game only the trading in the markets or is the game to make make money overall while using the markets to do so? why do you get to define the game and the rules? why do you get to define wealth only as the money accounting used in a transaction?
just refute the farmer and archer daniels example, make it a one contract and one trade exchange, and tell me it is zero sum for the participants.
i was already going to point out that poker was not zero sum due to the fact that entertainment is generated, but that hurts your case, not mine. but lets take that further, what if trading and losing REALLY entertains me? eh? what if it entertains me so much it is actually cost effective? what about all the jobs created in the futures industry, to use your own poker example, to refute your claim.
oh and yes i can come up with a zero sum game- lets trade something, anything, that we don't care about without regard to economic gain. the winner is the one with the most headache.
To ignore the broader benefit and only focus on the accounting of a transaction is narrow.
dood. get a frigging dictionary.
zero sum game has a precise, defined meaning
futures are a zero sum game.
it is not a VALUE judgment
it is a structural definition
apples are a fruit
that is a definition.
it doesn't say they are good, bad, or whatever
get an education. obviously you can't read
also, it is simply astounding to me that you cannot grok the concept of what zero sum means
it is not a value judgment.
it does not say the futures market are icky and bad
it says something instructive about their structure.
personally, i love futures. love em. that is 100% irrelevant to their structure as zero sum
you don't have to understand that a car is propelled by an internal combustion engine in order to drive it. or that it is far less efficient in terms of energy expended per mile driven as compared to a bicycle etc. to have fun driving one
but it IS propelled by an internal combustion engine. argue for the "engine fairies" all you want, but that doesn't change the reality
So, on Saturday, when I responded to the original post, I wasn't really sure whether the stock market was zero-sum. I was sure that the futures market was. I never would have imagined that this thread would have taken up more than 30 pages, and I certainly would never expected people to be arguing that the futures market is not zero sum after so many posts.
How can anyone still argue that the futures market is not zero-sum? I just don't understand the ignorance. For those of you that are too lazy to click a freakin link, I'll post them again. You people suck. Please do not let this thread reach 40 pages.
http://www.pathtoinvesting.org/cate...futures_071.htm
http://dictionary.reference.com/sea...zero-sum%20game
http://www.cbot.com/cbot/docs/56449.pdf
http://www.cme.com/edu/course/intro/futrvsstck9697.html
The worst traders I know are the ones that cannot admit they are wrong. You guys are worse than them, because not only can you not admit you're wrong, but you keep arguing to the contrary.
But what if you count this...
But what about the time that so and so made money selling whores....
Drop it. Please. Move on.
frankly, i can't believe these people that are arguing the futures market isn't zero sum or the ones arguing that the stock market IS, are anything but papertrading 16 yr old playing on their mommy's imac
Within the confines of one particular futures market, it is a zero sum game
Markets are NOT a zero sum game because:
1) Markets are not efficient, which is why secular booms and busts occur every 20 years or so. History is facts.
2) The existence of derivatives (futures, options, other leverage systems, etc) make it impossible to be zero sum.
Quote from rimshaker:
Markets are NOT a zero sum game because:
1) Markets are not efficient, which is why secular booms and busts occur every 20 years or so. History is facts.
2) The existence of derivatives (futures, options, other leverage systems, etc) make it impossible to be zero sum.
i am now scoring the
"futures are not a zero sum because they are like really cool n' stuff"
and
"stock market is a zero sum because everytime somebody buys a stock somebody else sells it yo"
**trolls**
on my patented Dow Jones (tm) Troll-o-Meter
0--------------------------------------------------------------------------10
weak as hell super sweet
^
II
Now that I've spent the last hour or so reading through this, I feel the need to respond.
Perseus, you need to separate the futures market from the underlying. View the corn futures, for example, in a vacuum. For every person who makes $1 on a corn futures contract, someone loses $1 on that corn futures contract (it doesn't have to be that same person who sold that contract- he or she may have made money, but the net result of all transactions in that corn futures market is zero). The fact that they may have made money on the underlying corn is irrelevant. The fact is, the corn futures market, and all other futures markets, are zero-sum. We're not talking about the whole universe of corn markets, we're just talking the corn futures market.
Quote from Moneyball:
Now that I've spent the last hour or so reading through this, I feel the need to respond.
Perseus, you need to separate the futures market from the underlying. View the corn futures, for example, in a vacuum. For every person who makes $1 on a corn futures contract, someone loses $1 on that corn futures contract (it doesn't have to be that same person who sold that contract- he or she may have made money, but the net result of all transactions in that corn futures market is zero). The fact that they may have made money on the underlying corn is irrelevant. The fact is, the corn futures market, and all other futures markets, are zero-sum. We're not talking about the whole universe of corn markets, we're just talking the corn futures market.
Quote from Buy1Sell2:
exactly--within the confines of one particuar futures market, it is a zero sum game
lol...so two days later can we all now agree now that the stock market is not...has never been....and never will be a zero-sum game???
cause i think we have beaten this thread to death
but i do apreciate all the people who resonded to my first post!
Quote from Buy1Sell2:
now, outside of the confines of one particular futures market, it can be argued that it is not zero sum and the reason is as follows:
The corn farmer who sells a contract to me and loses money as the market rises, is recouping that money in the cash market, so new money is coming in from outside sources and that keeps the farmer alive. So it could be argued that new money is being infused into the market.
the issue is not whether or not new money is infused into the market. the issue is that for every penny that is infused long into the futures market, a corresponding penny is necessarily infused short
balance = 0
zero sum game
qed
Quote from whitster:
the issue is not whether or not new money is infused into the market. the issue is that for every penny that is infused long into the futures market, a corresponding penny is necessarily infused short
balance = 0
zero sum game
qed
thread is now closed
Yes, I agree let¢s close it .
About the real returns in the stock market.
Quote by Warren Buffett. Interview in Fortune magazine November 22 1999.
So where do some reasonable assumptions lead us? Let's say that GDP
grows at an average 5% a year—3% real growth, which is pretty darn
good, plus 2% inflation. If GDP grows at 5%, and you don't have some
help from interest rates, the aggregate value of equities is not going to
grow a whole lot more.
If I had to pick the most probable return,
from appreciation and dividends combined, that investors in aggregate—
repeat, aggregate—would earn in a world of constant interest rates, 2%
inflation, and those ever hurtful frictional costs, it would be 6%. If you
strip out the inflation component from this nominal return (which you
would need to do however inflation fluctuates), that's 4% IN REAL
TERMS. And if 4% is wrong, I believe that the percentage is just as
likely to be less as more.
Quote from Buy1Sell2:
These concepts are so simple and basic that one or two pages would have been sufficient in this thread
gbos you forgot dividend yield.
what is really childish is to call others who don't agree with you as stupid. my reasons are sound. I was told to get a 'figgen dictionary', well here is what wiki says:
http://en.wikipedia.org/wiki/Zero-sum
Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses is subtracted then they will sum to zero. Chess is an example of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum.
if you can't understand that even in the futures markets that non-zero sum is possible (both the farmers and the Archer daniels benefit regarless of who made or lost money) and if want to ignorantly insist that value is only the dollar amount gain and loss in the market, then you are the one in need of an education. not everyone is a poker player, but for us poker players it pretty is zero sum.
Quote from Perseus:
gbos you forgot dividend yield.
Quote from Perseus:
gbos you forgot dividend yield.
what is really childish is to call others who don't agree with you as stupid. my reasons are sound. I was told to get a 'figgen dictionary', well here is what wiki says:
Perseus about insults in posts just ignore them…
I will quote you what a philosopher once said (the translation is probably bad).
¡Master they are swear at you in the marketplace¢
¡Let them do. In my absence I give them permission to beat me also.”
this thread gets the first prize for MOST YAAAAAWNING EVER!
A new day and this thread continues.
Quote from Perseus:
if you can't understand that even in the futures markets that non-zero sum is possible (both the farmers and the Archer daniels benefit regarless of who made or lost money)
"Pretty zero sum" ?!? Either it is or it isnt zero sum. Didn't you say earlier it isnt zero sum because entertainment is generated? Critical thinking isn't your strong suit, is it?
Quote from Perseus:
not everyone is a poker player, but for us poker players it pretty is zero sum.
thread has been closed for two pages
It ain't over until the fat lady sings.
Quote from Buy1Sell2:
thread has been closed for two pages
Does God still think that he is Bill Gates.
Some people on this thread are confusing two entirely different terms: Market Efficiency and Zero Sum Game.
The futures markets are by definition a Zero Sum Game and this has NOTHING to do with the efficiency of the markets. If this were not true, we would have our own perpetual money making machine – money would grow on trees!!!
This does not mean that the markets are efficient! People can and do consistently make money in the futures markets, but this money does not appear out of nowhere. It is transferred from one person to another after each trade.
The rest is just semantics.
It is not entirely a zero sum game due to dividends!
If you bought say GE for $30 and received $2 in total dividends. Later, I buy GE from you for $28, you only lose the $2 of dividend earnings, not your initial equity.
_________________________________________
Also, your gain may not necessarily be someone's loss.
For example, if I buy 1,000 shares of GE for $30 and hedge my position by buying 10 put contracts with strike 30 for $2 each. I plan to sell GE on the day the put options expire, and I know that I will get $.50 per share in dividend before the puts expire. On expiration day, let's say GE goes up to $33. Whoever sold the options to me pocket $2 per contract, and I pocket $1 + $.5 in profit per share of GE. In this situation, we can't say it's a zero sum game.
But let's say the price of GE on expiration day is $30. Whoever sold me the puts pockets $2 per contract. But does it mean I actually lose $2 per contract to that person? Of course not! I make $.5 from the dividend, so my net loss is only -$1.5. So you see, it's not entirely a zero sum game.
Quote from bvam1:
It is not entirely a zero sum game due to dividends!
If you bought say GE for $30 and received $2 in total dividends. Later, I buy GE from you for $28, you only lose the $2 of dividend earnings, not your initial equity.
Quote from bvam1:
It is not entirely a zero sum game due to dividends!
If you bought say GE for $30 and received $2 in total dividends. Later, I buy GE from you for $28, you only lose the $2 of dividend earnings, not your initial equity.
Re: zero sum game?????????????
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
Re: Re: zero sum game?????????????
Quote from Stealth Trader:
You are correct. The stock market is not a zero sum game, and as you point out, those that believe it is are simply clueless.
http://www.investopedia.com/terms/z/zero-sumgame.asp
http://www.fool.com/news/foth/2000/foth000912.htm
st
From the second webside quoted above:
"the hard and fast truth is that only two factors determine stock prices over time -- the level of corporate earnings and the multiple that investors are willing to pay for those earnings."
This is obviously not true. In bubbletime, stockprices easily multiplied without the company ever showing a profit or positive earnings. That is called losings not earnings...
Didn't AMZN go up from $3 over $100 in its first 2 years? And it was only a year or so ago when they finally started to turn a profit...
Quote from Pekelo:
From the second webside quoted above:
"the hard and fast truth is that only two factors determine stock prices over time -- the level of corporate earnings and the multiple that investors are willing to pay for those earnings."
This is obviously not true. In bubbletime, stockprices easily multiplied without the company ever showing a profit or positive earnings. That is called losings not earnings...
Didn't AMZN go up from $3 over $100 in its first 2 years? And it was only a year or so ago when they finally started to turn a profit...
oh my god.
the blithering idiots continue...
"It is not entirely a zero sum game due to dividends!
"If you bought say GE for $30 and received $2 in total dividends. Later, I buy GE from you for $28, you only lose the $2 of dividend earnings, not your initial equity. ""
STOCKS pay dividends. STOCKS are not a zero sum game. EVEN if stocks did NOT pay dividends, they would still not be zero sum. only a moron would claim that stocks are zero sum. similarly, only a moron would claim that futures are not zero sum.
FUTURES do not pay dividends. dividends are paid by a company. when you own a stock, you LITERALLY own a fraction OF that company. that company, in the case of stocks that pay a dividend, gives income payments to co-owners of a company. that is what stockholders are. Literally. If you don't believe this, then you don't understand stocks.
Futures are NOT stocks. Companies issue stock. Companies do not "issue" futures. Futures are a contract. That is all. For EVERY single long futures contract, there is a short futures contract. futures contracts can be generated out of thin air. because all they are is an agreement . options are similar. i can write a "call option" for MSFT right now. and sell it. it's called "writing a call". somebody else can buy that option. options are also a zero sum game. MSFT has no control over MSFT options. Similarly, the companies that comprise the Dow Jones Index don't issue YM futures contracts. the very idea is meaningless.
the sum total of all futures contracts (there is necessarily the same # of short and long contracts) is thus ZERO. hence, the term 'zero sum'
"Also, your gain may not necessarily be someone's loss.
For example, if I buy 1,000 shares of GE for $30 and hedge my position by buying 10 put contracts with strike 30 for $2 each. I plan to sell GE on the day the put options expire, and I know that I will get $.50 per share in dividend before the puts expire. On expiration day, let's say GE goes up to $33. Whoever sold the options to me pocket $2 per contract, and I pocket $1 + $.5 in profit per share of GE. In this situation, we can't say it's a zero sum game.
But let's say the price of GE on expiration day is $30. Whoever sold me the puts pockets $2 per contract. But does it mean I actually lose $2 per contract to that person? Of course not! I make $.5 from the dividend, so my net loss is only -$1.5. So you see, it's not entirely a zero sum game."
that's great, but GE stock is not part of a zero sum market.
stock market GROWS wealth over time. That is not that hard to understand.
you guys are truly amazing.
PLEASE trade YM. i need some more traders to provide liquidity to me. thanks
[/B][/QUOTE]i]Quote from whitster:[/i]
PLEASE trade YM. i need some more traders to provide liquidity to me. thanks [/B][/QUOTE]
LOL!!!! I'm simply amazed that this thread is 40 pages long and so many are actually arguing that the stock market is a zero sum game. The dumbing down of America is in full swing!
st
all these maroons posting here might be signs of a bubble.
it was said that JP Morgan (iirc) pulled his money out of the market because he was taking an elevator ride, and operator started bragging about what a killing he was making in the stock market.
when an elevator operator in 1929 is making a "killing in the stock market" (most probably using a bucket shop with 10 : 1 margin), that is a pure sign that all the buyers are already in, and it can only go down.
another great bearish sign was when a famed economist stated "the market appears to have reached a PERMANANTLY high plateau" lol.
that was almost as "prescient" as Bill Gates comment about RAM, or the patent office dood who claimed near the beginning of the 20th century that the patent office was rapidly becoming obsolete because everything that could be invented has pretty much already been invented.
those who don't learn from history...
--------------------------------------------------------------------------------
Quote from Perseus:
if you can't understand that even in the futures markets that non-zero sum is possible (both the farmers and the Archer daniels benefit regarless of who made or lost money)
--------------------------------------------------------------------------------
A new day and this thread continues.
The farmer and Archer Daniels are not the futures market. They are participants in the futures market. If you cannot distinguish between these two facts you will never grasp the concept that the future market is zero sum.
Participants in the futures market (the farmer) can lose money on their futures contracts and still come out ahead overall.
You are trying to broadly define the futures market to include all transactions of anybody who participates in the futures market. Using your definition the entire economy is "the futures market" because everyone in some way or the other is related to futures transactions.
The net sum of all long and short corn future contracts is always zero and always has to be.
--------------------------------------------------------------------------------
Quote from Perseus:
not everyone is a poker player, but for us poker players it pretty is zero sum.
--------------------------------------------------------------------------------
"Pretty zero sum" ?!? Either it is or it isnt zero sum. Didn't you say earlier it isnt zero sum because entertainment is generated? Critical thinking isn't your strong suit, is it?
I am sorry you are able to not expand your thinking beyond your narrow and closed minded version of things. I posted the definition of zero sum game and I clearly posted an example of a futures market transaction where both parties benefit, therefore the futures market is not zero sum.
your statement here is revealing of YOUR inability to think critically: The farmer and Archer Daniels are not the futures market. They are participants in the futures market. If you cannot distinguish between these two facts you will never grasp the concept that the future market is zero sum.
participants are not the marketplace???? god man get a friggen clue. Lets see, if we take away all the players at a poker game why we still have the poker game!! brilliant baby!
In any event the definition of non zero sum clearly states that if both PARTICIPANTS benefit then the game is not zero sum, you have all but admitted this by the fact that the farmer can lose money yet benefit.
Example 2: The farmer sells a corn contract and delivers one month later. The price of corn goes up in the interim but by delivering he negates the debit from his account. Either by offsetting and settling in the cash market or by delivery the fact that his futures account was debited doesn't matter, he still sold his corn and didn't lose money in the process.
I am so glad that this thread has came around to the truth about markets. In no way shape or form are the futures, options, currency and stock markets a zero sum game. The concept of what money really is holds the key to this. Every transaction made is a form of fiat money. This money created is then distributed amongst the participants as form of seniorage. Markets create a great deal of the money in our economy and spread out risk so that business can operate.
now that's somethin': 'seniorage'
nice 1
Quote from whitster:
all these maroons posting here might be signs of a bubble.
it was said that JP Morgan (iirc) pulled his money out of the market because he was taking an elevator ride, and operator started bragging about what a killing he was making in the stock market.
when an elevator operator in 1929 is making a "killing in the stock market" (most probably using a bucket shop with 10 : 1 margin), that is a pure sign that all the buyers are already in, and it can only go down.
another great bearish sign was when a famed economist stated "the market appears to have reached a PERMANANTLY high plateau" lol.
that was almost as "prescient" as Bill Gates comment about RAM, or the patent office dood who claimed near the beginning of the 20th century that the patent office was rapidly becoming obsolete because everything that could be invented has pretty much already been invented.
those who don't learn from history...
I happen to grow corn, have pigs and hens and even own GE stock. All these things create wealth but the futures and options contracts that I use to hedge myself are all zero sum instruments.
I'm not a farmer btw. Just trying to post a point
I don't understand the need of offending people.
rather pathetic I might say.
Quote from Bitstream:
I don't understand the need of offending people.
rather pathetic I might say.
the attitude of some posters in this thread is just chilling...no education, no sensibility, no nothin'
I wasn't addressing' u in particular but I noticed that once a poster here started flyin' insults left and right some others jumped in like in a fight they couldn't resist to participate, just for the joy of humiliating.
if school has taught them something it certainly wasn't manners.
"zero-sum game" definition
Don't fight kids, better google and look up the definition first, i.e. per investopedia:
this thread shows more about human psychology that the stock market
the proof has been offered over and over again
the naysayers refuse to even comprehend it. they CANNOT be that stupid
futures - zero sum
stocks - not zero sum
interestingly, half the opposition to these obvious facts comes from people who keep talking about benefits etc.
which are completely irrelevant
it is a definition of structure, not beneficence
amazing
Every academic will tell you that Futures and options trading is zero sum. However that does not make it true. To say that it is zero sum fits nicely into how academics think. We as traders do not have this luxury, we have to be right to make money, academics only have to fit the consensus to make money.
An example of how futures create money is a Canadian farmer hedging dollar risk. A fully hedged farmer would have made tremendous gains on the Canadian dollar appreciation. This would create excess margin in the futures account. This margin could then be withdrawal and used to pay down a line of credit or prepay seed.
North Americans have a very poor sense of what money is. They treat paper money as if it is a "real" thing with permanent value. "Learn the value of a dollar", "Cash Money" and other such expression reflect this. Money is just a concept. It only has value because you think it does. A lot of these post suggest that the stock market creates "real money" but the futures market creates phoney electronic money. Both are equally valid as the concept of money.
Ask Brazilians about what money is. They can give you a really good answer.
I begged. I pleaded. But, this thread made it past 40 pages anyway. What a disappointment. 
Quote from zf trader:
A fully hedged farmer would have made tremondous gains on the Canadian dollar apperiation.
you still don't get it dood
of course he made money
but no WEALTH WAS CREATED INSIDE THE FUTURES MARKET
why is this hard to understand?
two people can have opposing contracts
i am short winter wheat Oct
he is long winter wheat Oct.
winter wheat goes down in price
i make $$$
he has twice as much winter wheat in a silo, as the amount that he hedged with his long holding in the futures market
he ALSO makes money
it's still a zero sum game. because the "game" of the futures market has not gained any wealth. it cannot. the short contract has lost EXACTLY as much money as the long contract.
futures can be used for all sorts of things - transferring risk, hedging, speculating, making money off spreads (contangos i love) etc.
it's still a zero sum game, because they are agreements, and they counteract each other
duh
Quote from DynamicReplic8r:
I begged. I pleaded. But, this thread made it past 40 pages anyway. What a disappointment.
Quote from whitster:
this thread shows more about human psychology that the stock market
the proof has been offered over and over again
the naysayers refuse to even comprehend it. they CANNOT be that stupid
futures - zero sum
stocks - not zero sum
interestingly, half the opposition to these obvious facts comes from people who keep talking about benefits etc.
which are completely irrelevant
it is a definition of structure, not beneficence
amazing
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
that is part of your problem
it's irrelevant
the issue is not whether a single (or specific subset) of transaction is or isn't zero sum
it is a matter of the MARKET.
a market is the aggregate of transactions. it is a lattice, a matrix
a futures market necessarily HAS to be zero sum. because by the structure, they cannot be anything but. there is no way i can be long a YM contract, unless there is a corresponding short contract. because a futures contract is a CONTRACT. it has to have complementary parties, or it is meaningless. where does the money COME from when a long contract is EXERCISED (from somebody who is short). duh
if a stock market was made up of one stock.
and i bought the stock at IPO. for $40. and then for the next 30 years, the stock never moved from $40. then, the company bought the stock back. for $40. that market would have a net zero sum of transactions. you are correct. it neither gained nor lost wealth. it was merely transferred. HOWEVER, that is an isolated example of ONE transaction. and course my ownership of that one share did not necessarily mean that somebody else was short that item. the fact that in this one isolated transaction, no wealth was created is nifty keen, but it is irrelevant to the structure of the market. that the market can gain wealth and is thus not zero sum.
this is a totally different structure than a futures market
Quote from whitster:
you still don't get it dood
of course he made money
but no WEALTH WAS CREATED INSIDE THE FUTURES MARKET
why is this hard to understand?
two people can have opposing contracts
i am short winter wheat Oct
he is long winter wheat Oct.
winter wheat goes down in price
i make $$$
he has twice as much winter wheat in a silo, as the amount that he hedged with his long holding in the futures market
he ALSO makes money
it's still a zero sum game. because the "game" of the futures market has not gained any wealth. it cannot. the short contract has lost EXACTLY as much money as the long contract.
futures can be used for all sorts of things - transferring risk, hedging, speculating, making money off spreads (contangos i love) etc.
it's still a zero sum game, because they are agreements, and they counteract each other
duh
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from volente_00:
This thread is confusing as hell and now I am going to add more fuel on the fire. The original shares issued by a publicly traded company are sold to investors in the beginning for a set price at the ipo. If the share price appreciates 10 dollars from the ipo price , and the company decides to do a buyback, then they have to pay 10 dollars more than what they issued the shares for in the beginning. Is this not a zero sum example ?
__________________
I prefer being smart enough to be born lucky, than lucky enough to be born smart.
"and i bought the stock at IPO. for $40. and then for the next 30 years, the stock never moved from $40. then, the company bought the stock back. for $40. that market would have a net zero sum of transactions. you are correct. it neither gained nor lost wealth. it was merely transferred. HOWEVER, that is an isolated example of ONE transaction. and course my ownership of that one share did not necessarily mean that somebody else was short that item. the fact that in this one isolated transaction, no wealth was created is nifty keen, but it is irrelevant to the structure of the market. that the market can gain wealth and is thus not zero sum. "
Is every single share of a publicly traded stock not issued from the company in the beginning or at some point in time ?
It is not an isolated transaction because every initial transaction is started this way in a publicly traded stock. For ever dollar that the stock goes up, the company who issued it loses a dollar because their liability increases to the shareholder by the same amount.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
With the farmer point is that volatility in the futures market created money that the farmer could use to pay off debt or invest for interest all while being hedged. The $5000 in the brokerage account used as margin to buy $C last september would have grown to say $12,000. The farmer can now withdraw $7000 and still be fully hedged.
If the market stayed flat there would be less money created.
Quote from volente_00:
"
It is not an isolated transaction because every initial transaction is started this way in a publicly traded stock. For ever dollar that the stock goes up, the company who issued it loses a dollar because their liability increases to the shareholder by the same amount.
__________________
I prefer being smart enough to be born lucky, than lucky enough to be born smart.
Already beat the old record
http://www.elitetrader.com/vb/showt...me&pagenumber=1
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Poker as a positive-sum game
You may want to check 1.2.2 Poker as a positive-sum game.
Quote from zf trader:
Every academic will tell you that Futures and options trading is zero sum. However that does not make it true. To say that it is zero sum fits nicely into how academics think. We as traders do not have this luxury, we have to be right to make money, academics only have to fit the consensus to make money.
...
Quote from volente_00:
Already beat the old record
http://www.elitetrader.com/vb/showt...me&pagenumber=1
Quote from volente_00:
"
Is every single share of a publicly traded stock not issued from the company in the beginning or at some point in time ?
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from Buy1Sell2:
Within the confines of one particular futures market, it is a zero sum game
Quote from Buy1Sell2:
Everything that needed to be said in this thread can be found in this previous post. Case and thread are now closed.
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me?
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
it means that the stock market as a whole is not zero sum and that within the confines of one particular futures market, that market by itself is zero sum. There can be nothing more added to this,-it is the answer in it's entirety.
Quote from whitster:
futures can be used for all sorts of things - transferring risk, hedging, speculating, making money off spreads (contangos i love) etc.
it's still a zero sum game, because they are agreements, and they counteract each other
duh
Quote from Buy1Sell2:
it means that the stock market as a whole is not zero sum and that within the confines of one particular futures market, that market by itself is zero sum. There can be nothing more added to this,-it is the answer in it's entirety.
rigid?
lol
it is so simple.
FOR EACH AND EVERY LONG CONTRACT, THERE IS A CORRESPONDING SHORT POSITION
THE ***NET*** IS NEUTRAL. HENCE, IT IS ZERO SUM
it has nothing to do with rigidity. futures are nothing more than agreements. that is all.
stocks are not.
stocks are partial ownership of someTHING
thus, the wealth in that system can grow. it doesn't HAVE to grow. in fact it can retrace for some time. a la 1929.
futures are necessarily a two sided agreement referencing a tangible item (or basket of items). since one side of the agreement necessarily gets smaller, as the other side gets bigger, on a net basis, there is no change
unless you want to bend the laws of physics and mathematics to suit yer own agenda, it is that simple.
as option players ( i am one to an extent, but not a full blown volatility hound) know, you can construct some very complex strategies involving combinations of options, or options/stock or even (lord forbid) options, stocks, and futures.
but the net is necessarily zero. there is no way, structurally it could be any different
Quote from whitster:
oh my god.
you guys are truly amazing.
PLEASE trade YM. i need some more traders to provide liquidity to me. thanks
Whitster, you're such a narrow-minded moron! Think carefully before you actually verbally trash another!
Do you have a basic understanding of hedging? If you did, you would know that options, futures, and stocks are related. Gambling in options and futures = zero sum game (I agree). But options and futures do not have to be entirely zero sum game. When a person buy stocks and hedge with options and futures, it is not a zero sum game. Wealth can still be created in this process because of the ownership of stocks in that hedged portfolio (and we have already established that trading in stocks is not a zero sum game).
You misinterpreted the what academics said about options and futures. Trading (GAMBLING) in options and futures is a zero sum game. Betweem the gamblers, it is a zero sum game. But options and futures themselves are not a zero sum game. Learn to differentiate! Learn to think before you talk! Learn to be humble! And learn not to be a jerk!!!
The problem between those who are in disagreement about rather futures and options are a zero sum game is a definition problem. Depending upon what you define as the 'game' and who the players are, it changes rather it is zero sum or not. If you define the game as strictly the buying and selling of only the futures and options by all market participates, then yes it is a zero sum game. However if you define the game to also include arbitrage transactions with the underlining contracts or you do not consider hedgers to be part of them game, then no, it is not a zero sums game. Some people might not consider hedgers to be a part of the 'game' since they are using futures to insure a price for their business and not looking to profit from the futures directly. In their definition only traders looking to profit directly from futures are part of the game.
For anyone who things the stock market is or might be a zero sums game, there is a better website for you....www.stupidtrader.com
As I see it:
Loser - Negative sum game
Neutral - Zero sum Game
Winner - Positive sum game
Everything else is theory leading to "zero sum opinion".
P.S. Your P/L determines the answer to that question. Whether the "stock market" is a zero sum game is a different matter.
Quote from bvam1:
Do you have a basic understanding of hedging? If you did, you would know that options, futures, and stocks are related.
Since this thread is getting boring and repetative, I figured I would introduce a new concept, the negative sum game, when most (not all, but the majority) of the participants lose. (Playing poker in a casino is a negative sum game, because of the rake, which is the house's comission.)
Example:
I am a doctor in cancer research. I come up with a new way that MIGHT treat cancer. I found a company based on my promising research and we go public. At the IPO we take in 100 million from the original investors. The stock start to trade, we start the research, use the money to hire doctors, laboratories, etc.
After 2 years, we realize that we used up pretty much all of the money and my original idea wouldn't work for one reason or other. I hold a pressconference announcing the news. Stock start to fall, in the next few weeks we burn through all the 100 mill and eventually go bankrupt. The company gets unlisted, stock trades at 2 cents a piece, if at all. The company never earned a dime, never paid any dividens.
In this case from the stocktraders' view it was a negative sum game, because basicly 100 million got siphoned out of the investors pockets. Overall it was zero sum, because that money was used up by my company, it went to reserach and salaries, nevertheless stocktraders traded the stock down until it got to zero, except shorters, anybody who bought it after the announcement had to sell it at a lower price. (Just for the argument sake, if the stockprice was less than $5 originally, you couldn't even short it.)
This just shows, that :
1. The stockmarket itself is not a closed system, because beside buyers and sellers there is a 3rd entity, called the company. That fact greatly influences the whole game set up.
2. It is possible that there are more money lost than made, thus a stock can be a negative sum game.
Conclusion: (in my opinion)
The stockmarket is not a zero sum game (because it is not a closed system, which is a requrement for zero sum games), but that doesn't mean that it is always a positive sum game. Stocks can be negative sum games too.
On the investopedia website, when they write about this, they say:"... it is not a zero sum game because wealth CAN BE created outside of the stocktraders."
Please note that they use CAN and not IS. Thus it is a conditional, it doesn't mean that wealth is ALWAYS created by the underlying companies, just as my example showed. Or just recall pets.com,webvan.com and other very promising tech start ups from the bubbletimes. They were all negative sum games eventually as far as stocktraders were concerned, although some traders made money by trading them.
Now for extra fun, I mention again, that stocks CAN BE zero sum games. When there is no dividends paid AND the company's value doesn't change in either way (if that actually happens is a different question, let's say my company in its first 2 years in the example ), then it is a zero sum game....
Quote from Pekelo:
Now for extra fun, I mention again, that stocks CAN BE zero sum games. When there is no dividends paid AND the company's value doesn't change in either way (if that actually happens is a different question, let's say my company in its first 2 years in the example ), then it is a zero sum game....
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Pekelo, certainly the stock market is not a closed system but there is an upper bound. This bound is the GDP growth. If the stock market functions efficiently then this is the most that the average investor can extract as return. The available data support this. You just have to check the historical returns of various stock markets around the world. At most the real stock market growth (inflation adjusted) + dividends equal the country¢s GDP growth. As I already said earlier in this thread if an investor is making more than this mediocre return (3 – 4% annually) it will take it from the loss of another investor.
Quote from gbos:
Pekelo, certainly the stock market is not a closed system but there is an upper bound. This bound is the GDP growth.
Quote from Pekelo:
What happens when the country doesn't have a positive GDP?
Quote from Pekelo:
As logical positivist, I tend to think that a sentence , like: The stockmarket is a zero sum (or non-zero sum) game." is meaningless, because simply we just can not tell.
Hence, that's why I said it's NOT ENTIRELY a zero sum game.
This is just unreal. Regardless of hedging, trading ability, or anything else, as whitster says, futures and options are zero sum. Stating otherwise is like saying 2+2=5; quite literally. I have little interest in belittling anyone, but this is just getting ridiculous. There is nothing to dispute here. Within the confined arena that is a derivatives market, no wealth is ever created and thus it is axiomatic that said markets are zero sum. PERIOD. But, but, but, nothing.....
__________________
...one is not one unless won...
Quote from saturnine:
... futures and options are zero sum ...
Quote from bvam1:
Hence, that's why I said it's NOT ENTIRELY a zero sum game.
Quote from bvam1:
Whitster, you're such a narrow-minded moron! Think carefully before you actually verbally trash another!
Do you have a basic understanding of hedging? If you did, you would know that options, futures, and stocks are related. Gambling in options and futures = zero sum game (I agree). But options and futures do not have to be entirely zero sum game. When a person buy stocks and hedge with options and futures, it is not a zero sum game. Wealth can still be created in this process because of the ownership of stocks in that hedged portfolio (and we have already established that trading in stocks is not a zero sum game).
You misinterpreted the what academics said about options and futures. Trading (GAMBLING) in options and futures is a zero sum game. Betweem the gamblers, it is a zero sum game. But options and futures themselves are not a zero sum game. Learn to differentiate! Learn to think before you talk! Learn to be humble! And learn not to be a jerk!!!
Quote from whitster:
oh my god.
you guys are truly amazing.
PLEASE trade YM. i need some more traders to provide liquidity to me. thanks
--------------------------------------------------------------------------------
What do you understand by liquidity? Why do you need more liquidity? Why you need the traders to provide the liquidity for you?
Buy a Nymex contract and take it to delivery.
That is all I ask you to do. Just do it. What do you fear. That you may not be here to tell the tale, that you may be wrong, that you may not survive, that you may have to save up on the gasoline fumes next time you fill up.
You have stated your view of what you think.
Let's see if you can share your experience after having gone through to delivery. Let's see if your view changes in anyway.
This is just unreal. Regardless of hedging, trading ability, or anything else, as whitster says, futures and options are zero sum. Stating otherwise is like saying 2+2=5; quite literally. I have little interest in belittling anyone, but this is just getting ridiculous. There is nothing to dispute here. Within the confined arena that is a derivatives market, no wealth is ever created and thus it is axiomatic that said markets are zero sum. PERIOD. But, but, but, nothing.....
As i have explained over and over again, benefit and wealth are not measured solely by the dollar amounts of the futures offsets and for the person who delivers, that offset can be irrelvent. The fact that one can benefit AND be on the losing side of a futures transaction makes it a non zero sum game. Insisting on counting only the dollars of cash settlements is small minded, but understandable for a trader.
The futures markets transactions do produce visible benefit, therefore they produce wealth, and therefore you and the likes of whitster are dead wrong. Trading futures markets for profit gain only without being connected to the underlying economic fundamental is what is zero-sum, or as close to it as practical.
"The fact that one can benefit AND be on the losing side of a futures transaction makes it a non zero sum game".
false.
you don't even understand what zero sum MEANS
sad
Sure yes. Zero-sum mean the sum of zeros that imply zero transaction or zero execution, meaning that both traders didn't make any trades. Then where the wealth has been created? Right.
Quote from whitster:
you don't even understand what zero sum MEANS
sad
somebody fire up the Bitrend Translator (tm)
Surely you must be kidding. You can't change the definition of an apple just because it doesn't suit your needs. You HAVE TO (axiomatically) think of derivatives markets as a closed function; not as a something bigger than what it is. Your waxing philosophical and failing brilliantly. There is a time and a place to think outside the box, but here you simply CANNOT. Don't you understand that it's simply not a choice here? This is incontrovertible. You can rationalize all you want within your mental masturbation session, but 2+2 can never = 5, man. The external benefit of derivatives markets to a hedger or anyone else for any reason, has absolutely NOTHING to do with the concept of zero sum.
The point you are attempting to make about a losing participant in the futures market benefiting from something external is moot to be kind. It has zero relevance to the fact that in the closed system futures market, said player was a loser. What about this is difficult to understand? What the participant did outside of the futures market makes no difference.
Beneficence, monetary or otherwise CANNOT be included in the definition of zero sum. Period. By your misshapen logic, the following ridiculous scenario would make derivatives positive sum: I bet a buddy that if I lose on my next futures trade I get to sleep with his wife. Losing here sounds like it has a fringe benefit to me, however it has no bearing on the fact that I lost my trade within the closed system futures market. Hell, it may be worth losing the money in this instance if she looks good enough, but does it change anything about what the derivatives market sees? Do the derivatives markets care if you scrood your buddy's hot wife? NO. By the way, derivatives don't care if you hedged or offest your losing bet with stock, options, or corn either. Your external benefit is irrelevant; no less than my ludicrous wife example....
Quote from Perseus:
As i have explained over and over again, benefit and wealth are not measured solely by the dollar amounts of the futures offsets and for the person who delivers, that offset can be irrelvent. The fact that one can benefit AND be on the losing side of a futures transaction makes it a non zero sum game. Insisting on counting only the dollars of cash settlements is small minded, but understandable for a trader.
The futures markets transactions do produce visible benefit, therefore they produce wealth, and therefore you and the likes of whitster are dead wrong. Trading futures markets for profit gain only without being connected to the underlying economic fundamental is what is zero-sum, or as close to it as practical.
__________________
...one is not one unless won...
Quote from Buy1Sell2:
Everything that needed to be said in this thread can be found in this previous post. Case and thread are now closed.
Re: zero sum game?????????????
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
so saturnine thinks it stupid to define benefit beyond pure accounting, here is what a finance professor says:
http://www.turtletrader.com/zerosum.pdf
My adobe will not allow cut and paste so i will paraphrase:
p. 5: "Several important implications flow from whether trading is or is not a zero sum game. The classification depends on how broadly we define profits and losses of players. "
read page 6-7 as to why poker can a positive sum game game.
read page 10-11 as to why you can make a case for trading as a positive sum game. In summary if people didn't trade for external benefits then the game simply would not exist. To ignore these external benefits when analyzing the markets as a game is really sort of stupid then.
Also note that all cash transactions could be classified as zero sum if you only did money accounting. If i buy an ipod from you for $50, but its 'market value' one hour later is $49 you would call me a loser. But that would ignore many factors such as maybe i didn't want to wait (how could I have known anyway?), maybe obtaining it sooner meant that I could do something more productive in the meantime. It would be pretty stupid to label all sellers who didn't sell at the top and all buyers who didn't buy the low as losers, but that's pretty much what is happening here. If a farmer sells his crop in the silo one month early in the futures, and then the price rises, you call him a loser since his account was debited. That totally ignores that the reality is that he may not care, and to him he won the game by off loading his crop when he chose too. He didn't LOSE money, he simply didn't sell at the top and his futures position is itself an offset to a physical. When he sells his crop the profit will more than offset the futures losses.
whitster, you are simply a limited mind, I really don't give a damn then if you disagree with me.
Re: Re: zero sum game?????????????
Quote from 1000:
Original question was about the whole stock market. Not one or any individual part of it.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from Perseus:
read page 6-7 as to why poker can a positive sum game game.
Quote from saturnine:
... Within the confined arena that is a derivatives market, no wealth is ever created and thus it is axiomatic that said markets are zero sum ...
pekelo, what you and others are having problems with is defining benefit beyond money, not authority.
In the narrow definition offered here, anytime you lose money, you lose whatever game you are playing. haven't you ever paid money for something and said- 'that was worth it'?
people here all the time claim that beginners will lose money but it is worth the education if you learn from it. To say that everyone who loses money are losers, even those who expect to lose, is a narrow way of looking at it.
Another example, take the farmer with corn and instead of hedging with straight futures he buys a put. To some here to idea of the gained utility of offloading risk is irrelevent, if the option expires worthless the guy is a loser (even if corn shoots through the roof!) no matter what the player himself says about it.
Take that even further, when I buy car insurance I lose money. By some definitions here I am a loser even though I offloaded risk and gained a whole lot of peace of mind.
Ignoring external benefits (external to money) of any game is pretty dumb especially when a large number of players are playing for externals.
Once more, external benefit has nothing to do with the fact that derivatives markets are zero sum. NOTHING. No one ever disputed that you cannot gain externally. That was never the question. That still does not change one bit, the fact that derivatives markets are zero sum excluding costs. Including costs the story gets much worse.
You are arguing the color of the sky when everyone else is talking about the texture of grass. Let it go for goodness' sake.
I mean come on, in your article you offer to support your argument, the second line in the .pdf states and I quote: "No trader can profit without another trader losing."
Selective reading/perception perhaps?
__________________
...one is not one unless won...
What could possibly be the reason that people are still posting arguments about zero sum here.
well saturnine if you read it all you would have gathered the understanding intended, but since you have reached a foregone gone conclusion then it doesn't matter really and you focussed in on one sentence. Yes I saw that sentence, but I also read and understood the rest.
external benefits (other than money) are extremely relevent in the definition of zero sum game , you are stuck with your brain shut, so drop it and move on
buy1sell1,
I happen to enjoy academic discussion once in a while. Of course this will not help anyone make money, but that goes for about 99% of the threads in ET.
Alternatively, Why would someone who doesn't care even bother to open the thread and post?
Let's trod down a familiar path, using a slightly different twist:
-- Corn farmer "shorts" his corn for $50,000; speculator "long" for $50,000.
-- Pig farmer buys contract from speculator for $55,000; speculator has $5000 gain.
-- Corn Farmer delivers corn and receives $50,000 from pig farmer, who feeds corn to his pigs.
Was this a zero-sum or non-zero sum game? If we conclude "zero-sum", then we must be able to show that someone suffered a loss.
We have tried to argue the corn farmer lost $10k in the example scenario. I am having trouble understanding that, however, because his financial position did not change as a result of rising corn prices.
The corn farmer certainly surrendered $10k in potential profit. Is that how we are concluding this example illustrates a zero-sum game?
You have failed to define the scope of your game. If the scope includes 3 individuals then there is insufficient information to answer the zero-sum question but I my guess would be no, it was not zero-sum. If you are asking only about the futures contracts described above then it was clearly zero sum.
Quote from QQQShort:
Let's trod down a familiar path, using a slightly different twist:
-- Corn farmer "shorts" his corn for $50,000; speculator "long" for $50,000.
-- Pig farmer buys contract from speculator for $55,000; speculator has $5000 gain.
-- Corn Farmer delivers corn and receives $50,000 from pig farmer, who feeds corn to his pigs.
Was this a zero-sum or non-zero sum game? If we conclude "zero-sum", then we must be able to show that someone suffered a loss.
We have tried to argue the corn farmer lost $10k in the example scenario. I am having trouble understanding that, however, because his financial position did not change as a result of rising corn prices.
The corn farmer certainly surrendered $10k in potential profit. Is that how we are concluding this example illustrates a zero-sum game?
Zero-sum? Heavens no!!
The MM's & Specialists are ripping you off every chance they get!
Quote from Perseus:
are having problems with is defining benefit beyond money, not authority.
In the narrow definition offered here, anytime you lose money, you lose whatever game you are playing. haven't you ever paid money for something and said- 'that was worth it'?
QQQshort,
Please do not fall prey to the incorrect thinking which is that of Perseus...
The only consideration one needs to make is that the futures market = the futures market. Nothing more, nothing less. It doesn't matter if the farmer walks away no worse off, because that is 100% ancillary to the point.
This is incontrovertibly zero-sum because there are always offsetting futures contracts. It doesn't matter if I win a night with my buddy's wife, or if have hedged my losing bet with a securing a lifetime supply of cracker jacks. It makes NO difference. The point is, always was but more importantly, cannot be disputed: For every long contract there is an opposing short. For every dollar gained, one is lost inside the closed circuit that is the futures market. Period.
Anything beyond this is totally secondary to the futures market and CANNOT be included in its definition. This is axiomatically so.
And yes, opportunity cost, is a loss within the confines of zero-sum calculation. Zero-sum calculation assumes all losses, gains, real, paper, or otherwise so long as it is only referencing transaction inside said futures market. If you sell a winning contract too soon, you have lost the opportunity to make more. Example: A trader with a winning position sells to a trader that also wins on this position. The opportunity that you sold is now someone else's gain and therefore is your subsequent loss. Anyone that argues otherwise is of the same mind that one is not losing money until they sell a losing position (in spite of being down $5,000 on 'paper'.) There is no such thing as a paper loss.
Quote from QQQShort:
Let's trod down a familiar path, using a slightly different twist:
-- Corn farmer "shorts" his corn for $50,000; speculator "long" for $50,000.
-- Pig farmer buys contract from speculator for $55,000; speculator has $5000 gain.
-- Corn Farmer delivers corn and receives $50,000 from pig farmer, who feeds corn to his pigs.
Was this a zero-sum or non-zero sum game? If we conclude "zero-sum", then we must be able to show that someone suffered a loss.
We have tried to argue the corn farmer lost $10k in the example scenario. I am having trouble understanding that, however, because his financial position did not change as a result of rising corn prices.
The corn farmer certainly surrendered $10k in potential profit. Is that how we are concluding this example illustrates a zero-sum game?
__________________
...one is not one unless won...
Having a philosophical discussion about zero-sum (e.g. poker is zero-sum from a cash basis but if you factor in "entertainment" then its positive sum) is pointless because you can't quantify enjoyment. That that even has to be said (we are talking about money/wealth) in this thread is sad and speaks volumes about the depths that the "nothing is zero-sum" side has sunk to.
Once you add in "external benefits" (financial or otherwise) then the scope of the discussion becomes infinite and suggests to me that someone is more interested in being argumentative then having a serious discussion.
Sanity; thank you
Quote from winter:
Having a philosophical discussion about zero-sum (e.g. poker is zero-sum from a cash basis but if you factor in "entertainment" then its positive sum) is pointless because you can't quantify enjoyment. That that even has to be said (we are talking about money/wealth) in this thread is sad and speaks volumes about the depths that the "nothing is zero-sum" side has sunk to.
Once you add in "external benefits" (financial or otherwise) then the scope of the discussion becomes infinite and suggests to me that someone is more interested in being argumentative then having a serious discussion.
__________________
...one is not one unless won...
Re: zero sum game?????????????
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
__________________
Don Bright (not an alias)
http://www.stocktrading.com
Wow!! I am surprised this thread has gotten so long. The idea of the stock market as a zero-sum game is approached in basic level books so I dont understand the problem here.
It is a zero-sum game. That is not my opinion, that is fact. Zero-sum means, obviously, the sum of all transactions with the market equal zero. The market does not produce money.
Here is where most people do not understand it. They are thinking about the relationship between themselves and the market. That relationship is not zero-sum. You must look at the relationship of the market. From the very first day, until the very last day of its existance, it is zero sum. All of us make up the parts of the whole.
Think of it as a piggy bank where we all put different amounts of pennies into it. After time, some of us are able to take out nickels and dimes, while others cannot take out anything at all. But the piggy bank is zero-sum because it doesnt not produce nor take away from the contents within.
~RT
...and another genius enters the fracas...
Quote from RunTrade:
The idea of the stock market as a zero-sum game is approached in basic level books so I dont understand the problem here.
Quote from Pekelo:
...and another genius enters the fracas...
So after just lurking for a month, this was the thread you decided to jump in? Without even reading what was said before?
I actually love this thread! Baron should make it obligatory for every member to post his/her opinion on the matter.
I have an even better idea! Let's vote on it! Can somebody make a vote on the topic? I bet at least 40% will vote for zero-sum game!!!
... and Mr. Market takes your money away!!!
So, who can take the lead to open a poll, madmunny?
Quote from RunTrade:
The market does not produce money
Quote from Buy1Sell2:
What could possibly be the reason that people are still posting arguments about zero sum here.
Quote from 1000:
In my humble opinion, I feel that they are posting daily trades with hidden codes in every message. It is easier than posting on the classified ads section on The New York Times. Plus there is the added bonus of time.
Anyway, if you factor in "timed out" nothing is zero sum.
So you have convexity, elasticity, and, timed out (the reason for my example about buying Nymex contracts to delivery).
Does that mean that my rating has sunk by 93%, now that was ESay.
Would you please explain what you mean when you keep saying that there is convexity and elasticity? Or, did you just learn some new terms that you thought sounded sexy?
If you're talking about the bond market, then yes, the bond pricing function exhibits convexity. When yields fall by a given amount, the price will rise by more than it would fall if yields rose by a that same given amount. However, that is completely priced into the market. When rates are expected to be volatile, bonds that exhibit greater convexity will be relatively more expensive. So, if you buy a bond that exhibits high convexity and rates turn out to be less volatile, you will actually do worse than you would have if you had bought a low convexity bond.
If you're talking about options, it's called gamma, and again, completely priced in.
But, I don't see what this has to do with whether any market is defined as zero sum. Please do elaborate.
I get this sinking feeling like sliding down the yield curve.
May be I should change my name to 7938, no that's silly You Moron.
perhaps there is confusion about the market and trading? They are very different in this discussion.
market does equal zero sum
trading does not equal zero sum
Quote from whitster:
this thread shows more about human psychology that the stock market
the proof has been offered over and over again
the naysayers refuse to even comprehend it. they CANNOT be that stupid
futures - zero sum
stocks - not zero sum
interestingly, half the opposition to these obvious facts comes from people who keep talking about benefits etc.
which are completely irrelevant
it is a definition of structure, not beneficence
amazing
all i can say is these people who think stocks ARE zero sum and.or futures are NOT zero sum should really pick up a book on game theory
it is not that complex, but it is somehwat counterintuitive
Stocks (No) Futures (Yes)
Stocks (No to Zero Sum)
Futures (Yes to Zero Sum)
Simple Equation
FGL=futures gains on longs
FGS=futures gains on shorts
TFG=total futures gains
SGL=stock gains on longs
SGS=stock gains on shorts
TSG=total stock gains
FGL+FGS=TFG=0
Since the above equation is always (Yes at all times) equal to zero futures are ZERO SUM
SGL+SGS=TSG=X
Since this equation is not always (Probably has never even been once) equal to zero stocks are NOT ZERO SUM
X does not equal 0 at all times
To be a ZERO SUM GAME the equation must equal 0 AT ALL TIMES. Whereas in reality, even if the stock market stops trading or even drops to zero the stock equation will not equal 0.
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
Re: Re: zero sum game?????????????
Quote from Don Bright:
Our analysis:
Futures and Forex tend to be zero sum game...every winner has a loser.
The stock market provides an average growth of 8-10%, pays dividends, and companies make money (or go out of business).
Don
This is a zero sum thread. Every post in it has zero value.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from volente_00:
This is a zero sum thread. Every post in it has zero value.
Quote from DynamicReplic8r:
If you're talking about the bond market, then yes, the bond pricing function exhibits convexity. When yields fall by a given amount, the price will rise by more than it would fall if yields rose by a that same given amount. However, that is completely priced into the market. When rates are expected to be volatile, bonds that exhibit greater convexity will be relatively more expensive. So, if you buy a bond that exhibits high convexity and rates turn out to be less volatile, you will actually do worse than you would have if you had bought a low convexity bond.
If you're talking about options, it's called gamma, and again, completely priced in.
But, I don't see what this has to do with whether any market is defined as zero sum. Please do elaborate.
Quote from 1000:
The date is 31st Dec 2005, the futures trade is ER2 (Russell 2000). For all those who traded this will know that the futures is not zero sum. Ask the Nybot.
The date is 31st Dec 2005, the futures trade is YM (Dow Jones). For all those who traded this will know that the futures in not zero sum.
Unless you placed actual futures trades with a view to arbitrage, you will not know.
Try trading spreads between indexes like the Dow and Ftse.
You may have complete pricing in or gamma, but this only proves non zero sum and that the equation needs constant adjusting with spreads and different trading instruments.
Quote from volente_00:
Every post in it has zero value.
Re: Re: Re: zero sum game?????????????
Quote from QQQShort:
Does your conclusion extend to physical delivery?
Also, the qualifier "tend to" leaves open a small crack. Was that intentional?
__________________
Don Bright (not an alias)
http://www.stocktrading.com
Quote from DynamicReplic8r:
Nice try. When you trade a spread you make money in one contract. The person/people that are on the other side of that trade lose money. You lose money on the other leg, and the person/people on the other side of that trade make money.
The same goes for arbitrage.
Here is an example of how it could not be zero sum. You own one contract someone else is short that contract. When the price goes up one tick, you make $30 and the other person only loses $25 (on that trade...forget about what other positions they have..it's irrelevant). That's just not the way contracts are designed.
you still don't get it
it does not matter if it is auction or electronic
these contracts are transferred
all they are is agreements. with a price agreed upon by both sides. there are necessarily two holders of every future contract. one person MUST be short for every person who is long
one side necessarily offsets the other
they have no "thing" attached to them (like a stock does), since they are purely agreements
only MSFT can issue a share of MSFT, since a share of MSFT is literally a percentage of the company - MSFT
otoh, a single stock future in MSFT is merely an agreement. it is a contract setting a price, between a long holder and a short holder of the same contract
there is no net difference between the two, hence it is zero sum
stocks are different. they are not zero sum, since there can be (and obviously is) a net sum, whether or positive or negative
assume there are 10 millions shares of stock in the entire stock market
the value of that market can (to paraphrase JP Morgan) "fluctuate"
assume there are 10 million contracts of MSFT single stock futures outstanding
the value of that market cannopt fluctuate. it is zero. everybody who is long 1 contract has a counterpart who is short one contract
i use SSF's because they are easier examples. this holds true for any futures contract tho.
Quote from 1000:
Your assuming that an exact equal position is taken at the exact equal time on the exact equal instrument that is being traded.
SSSShhhh. You bunch of idiots. I'm trying to sleep.
Quote from THERUDEBOY:
SSSShhhh. You bunch of idiots. I'm trying to sleep.
Yeh, i'm mad, mad for the talk of twats. There's always some cunt on here talking about this that or the other. What a load of bollocks!
Why don't you give me an answer to this post without the smug smiley?
I'll tell you what, Why don't you ask me what i am doing on this site if that's all i'm up to?
And before any of you question my sanity.....
FUCK OFF!
You one line, inbread, shortsighted fucks.
HAVE A NICE DAY!
.....Seriously though?
ISSSSUUUUUUUUUEEEEEEEEESSSSSSSSSSSSSS
No. I need tissues.
The sum of all your arguments between the two groups is zero. The same as stock market. Right!
Why does the sum of all your arguments is zero? Because it's still undecided, it means that the result is zero. If one argument win over another then it has been decided, the result is not zero. And therefore this thread should be closed. But it's still continuing... same way as the market continue... if one group win (money) over another then the market is stopped. You see the proof of zero-sum!
When should we start the poll?
Quote from bitrend:
When should we start the poll?
Lets get accurate. Take YM; not the stock market. For every purchase there is sale. Open and shut: a zero sum game. Take off commission or dealing spread; it becomes a slightly negative balance game.
Quote from Pekelo:
Yeah, I want the vote! I tried to make a vote, but it didn't look like I was making it. Anyway, the choices should be:
The stockmarket is a .... game.
1. zero sum
2. non-zero sum
3. negative sum
4. positive sum
5. none of the above
6. I don't know
The correct answer is...
ja, below zero-sum: winner makes less than the loser loses.
what we have here is a typical situation of 2 groups of people totally misunderstanding each other:
1) stock market in respect of contracts/shares exchanged is a zero sum equation.
2) If your are commenting in respect of participants in the stock market it can be one of 3 - positive, neutral or negative.
The question has not been worded correctly.
Quote from DynamicReplic8r:
Nice try. When you trade a spread you make money in one contract. The person/people that are on the other side of that trade lose money. You lose money on the other leg, and the person/people on the other side of that trade make money.
The same goes for arbitrage.
Here is an example of how it could not be zero sum. You own one contract someone else is short that contract. When the price goes up one tick, you make $30 and the other person only loses $25 (on that trade...forget about what other positions they have..it's irrelevant). That's just not the way contracts are designed.
Quote from 1000:
That is what is happening between China and the US. So inter index spreads also have to look at currency manipulation. Thus non-sum zero.
I am sorry if this has been mentioned already...but isn't the most obvious and clear case of zero sum in the stock market, when you short sell a stock? Then you have two sides to the transaction and what the shorter makes the buyer (from him as a new buyer) loses. Conversely, what the buyer makes, the shorter loses?
Other than that, seems pretty clear the stock market is not zero sum.
But, that opportunity cost stuff....while it does not actually have to do with the zero sum argument, is still frustratingly true just as a trading comment. Particularly for a position trader or anyone with a high win ratio. Last year, just one fucked up trade, that i sold waaaay too early would have been more than double ALL of my actual net losses for the entire year! Now i was still profitable, but that still drives me mad, total ineptitude on my part. Also, this is going to depend quite a bit on what sort of trading you do, super high frequency with a lower win ratio may not have this problem as bad. I guess though, this is really a discussion of EXITS IMO, one of the most challenging aspects of trading.
Zero Sum - Yeah Baaaabbbyyy!
I make my living on those that lose a lot of money.
I practically finance every losing trader out there.
I'ts because of them that I'm able to be profitable in lending money. Because I'm a Hard Money Lender I can lend without taking into account how messed up a traders credit report is, or even verifying if they trade full time or not.
So I like the zero sum game of the markets because when people need money to invest or if they have lost money and need to borrow some more - THEY COME TO ME!
__________________
A Sinner saved by grace through faith in Christ Alone.
Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from Aapex:
So I like the zero sum game of the markets because when people need money to invest or if they have lost money and need to borrow some more - THEY COME TO ME!
Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from 1000:
Are you fully invested or do you also gain from interest, and currency diff. Did you see the ECB move coming!
I think it was Buffet who said that investors put more money into railroad stocks than they took out of them. In other words, if you add all the money that was made from railroad stocks and substract all the money that people paid for them, you get net negative. You don't even get zero
This is true for every industry. It has already happened with the airline stocks. It is happening with the auto stocks. 99% of the companies eventually go out of business. When they do, it is not hard to compute the aggregate profit over time. It is definitely negative, because every company bankcrupts at the price of zero. But no company IPO's at zero. If there had been secondary offerings then the aggregate net loss is even larger.
Stock market's function is NOT for people to make money. It is similar to lottery (but with a better chance): It gives people hope for winning a lot of money, in return it takes money from people and put it into economic activities - losing most of it in the process.
Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from DynamicReplic8r:
Who didn't? That was a non-event.
Quote from james_bond_3rd:
I think it was Buffet who said that investors put more money into railroad stocks than they took out of them. In other words, if you add all the money that was made from railroad stocks and substract all the money that people paid for them, you get net negative. You don't even get zero
This is true for every industry. It has already happened with the airline stocks. It is happening with the auto stocks. 99% of the companies eventually go out of business. When they do, it is not hard to compute the aggregate profit over time. It is definitely negative, because every company bankcrupts at the price of zero. But no company IPO's at zero. If there had been secondary offerings then the aggregate net loss is even larger.
Stock market's function is NOT for people to make money. It is similar to lottery (but with a better chance): It gives people hope for winning a lot of money, in return it takes money from people and put it into economic activities - losing most of it in the process.
Merriam Webster Online Dictionary
Main Entry: zero-sum
Function: adjective
: of, relating to, or being a situation (as a game or relationship) in which a gain for one side entails a corresponding loss for the other side
------------------------------------------
This is easy to see if you try to find an instance where there are no losers and all participants are winners: an impossibility.
Step 1:
Google IPO at $85 (gain $85)
Trader "A" buy at $85 (lose $85)
Step 2:
Google rise to $100
"A" sells at $100 (gain $100)
"B" buys at $100 (lose $100)
Step 3:
Google rise to $200
"B" sells at $200 (gain $200)
"C" buys at $200 (lose $200)
There will never be a step where a gain is not offset by a loss.
Count in commissions and its easy to see that this is a negative sum game.
Quote from Matt8200:
2004 total US IPO offers raised $11 billion
Re: Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from 1000:
Why the sell of in treasuries soon after? If it was a non-event then there should have been a more linear sell off occuring over the past month.
Was this a knee-jerk reaction to the European selling, or going back to convexity, was someone trying to play hangman?
However, IMHO, could it have something to do with the Euro having to be kept around or above the 1.20 level?
Re: Re: Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from DynamicReplic8r:
I suppose they say ignorance is bliss, but 1000, I wouldn't call you bliss.
I don't like to see bad math, so I have to correct it:
Quote from Remiraz:
Step 1:
Google IPO at $85 (gain $85)
Trader "A" buy at $85 (lose $85)
Step 2:
Google rise to $100
"A" sells at $100 (gain $100)
"B" buys at $100 (lose $100)
Step 3:
Google rise to $200
"B" sells at $200 (gain $200)
"C" buys at $200 (lose $200)
Quote from Matt8200:
lol the post in here are getting worse and worse. The stock market is a negative sums game now haha, everyone get your money out of the stock market, its not for people to make money. Seriously where did you get your numbers? Could you provide us with some references.
This is what I found:
2004 total US IPO offers raised $11 billion
http://www.altassets.com/news/arc/2006/nz7975.php
2004 total global IPO offers raised $124 billion
http://www.ey.com/global/content.ns...IPO_Survey_2005
$213.6 billion in dividends paid during 2004 by S&P 500 stocks
http://www.iht.com/articles/2005/01...ss/dividend.php
The S&P 500 alone almost paid out twice the total amount of all global dividends paid during 2004.
If stupidity hurt, he'd go through life on a morphine drip.
Ever wonder how different life would be if stupidity hurt?
If stupidity hurt, he'd go through life on a morphine drip.
No, please do post again. I would love for you to explain the stock market is like a lottery and how it loses most of the IPO earnings put into it. That clearly contradicts the numbers I have found.
PS, sorry, I might have missed a few commas. You need to check spelling before you post next time.
Quote from Pekelo:
In step 2. when A sells for $100 his gain is not $100 because he got it for $85, so unless you were educated in the American public school system (understandable disadvantage), the correct gain is for A: $15.
When B buys is for $100 he doesn't have a loss or gain (yet). He simply owns a stock. He is going to have a gain or loss WHEN he sells it.
Quote from Pekelo:
in this example so far it was a POSITIVE SUM game, because everybody made money. Trader A has $15 gain, B has $100 gain and C has the stock.
This thread has been closed for at least 10 pages. Further postings will be ignored.
Quote from Buy1Sell2:
What could possibly be the reason that people are still posting arguments about zero sum here.
Quote from Pekelo:
Yeah, I want the vote! I tried to make a vote, but it didn't look like I was making it. Anyway, the choices should be:
The stockmarket is a .... game.
1. zero sum
2. non-zero sum
3. negative sum
4. positive sum
5. none of the above
6. I don't know
The correct answer is...
Because I am an evil person, I decided to add to the confusion, so I am going to provide examples:
1. Zero sum: a penny stock that vegetates for years. (not counting commission and spread)
2. Non-zero sum: the stockmarket itself, in general (psst, correct answer)
3. Negative sum: AMZN between 1999 Dec and 2001 Sept, losing 90%+ of its value thus destroying wealth.
4. Positive sum: MSFT between IPO and 1999 Dec, multiplying countless times thus creating wealth.
5. None of the above: you are really clueless.
6. I don't know: at least you are honest.
Quote from Remiraz:
Stocks are just pieces of paper, you only get money when you sell them.
Quote from Matt8200:
No, please do post again. I would love for you to explain the stock market is like a lottery and how it loses most of the IPO earnings put into it. That clearly contradicts the numbers I have found.
PS, sorry, I might have missed a few commas. You need to check spelling before you post next time.
Re: Re: Re: Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Trader A gets long 1000 shares XYZ overnight. XYZ misses earnings. Trader closes position on open for $3 loss.
Total Loss: $3,000
Trader wonders why it gapped down so much.
Trader A then discovers that 50 of his trader buddies each went long 1000 shares XYZ after hearing a tip by Cramer on Mad MOney. All 50 traders dumped their position on open contributing to the $3 dollar slide.
Total Loss: $150,000.
XYZ consolidates, and makes new 52 week highs a week later.
Trader B who had been holding 1000 shares since it's IPO is now in the money 60 points.
Total GAin: $60,000
Trader C who had been short 1000 shares out of the money for 20 points now decides to cover. He's had enough.
Total Loss: $20,000
Three weeks later, Trader D who is long 500 shares receives a $1 dividend/share on XYZ which had traded @$75 previously. The stock is adjusted to $74 ex dividend on the open. Trader D receives $1 cash/share.
Total Gain on Dividend: ZERO
Re: Re: Re: Re: Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
The day before Armageddon, when planet earth is set to collide with a massive meteor every stock in the entire market is attempted to be sold out without a single buyer or uptick in sight. Every single stock is then priced at $0. Shorts initially celebrate but then realize that all their unrealized profits cannot be covered for profit.
Re: Re: Re: Re: Re: Re: Re: Re: Zero Sum - Yeah Baaaabbbyyy!
Quote from Lights:
The day before Armageddon, when planet earth is set to collide with a massive meteor every stock in the entire market is attempted to be sold out without a single buyer or uptick in sight. Every single stock is then priced at $0. Shorts initially celebrate but then realize that all their unrealized profits cannot be covered for profit.
Quote from Pekelo:
Hate to tell you, but stocks are certificates of ownership. You can get a company for them, if you are able to collect enough of them, but at least a seat on the board of directors.
I am sure you would say your marriage licence is just a piece of paper, at least that was your deffense when your wife asked:
" What the hell is that naked woman doing in our bed?"
In other thread I pointed out that Microsoft's original stock issued exactly 20 years ago for $21 would worth almost $8000 today, but you are right, you would get that money only if you haven't sold it in 20 years.
Still, I would say a "slight" wealth creation was going on somewhere between those dates...
"Its really up to personal preference. The laws of mathematics and english are writtened by man. Therefore, anything goes. "
false. although maybe the smiley was instructive.
futures are a zero sum game.
stocks aren't
futures are contracts. they are not ownership of anyTHING.
stocks are not contracts. they are things. they are pieces of companies.
for every long futures contract, there necessarily is a short one. period
however, that is not true for every stock share
furthermore, futures contracts can literally be invented out of thin air. they are merely agreements.
this is not true of stocks.
Quote from Remiraz:
The laws of mathematics and english are writtened by man.
Quote from whitster:
stocks are not contracts. they are things. they are pieces of companies.
for every long futures contract, there necessarily is a short one. period
however, that is not true for every stock share
__________________
do the hansa
trading blog
Quote from madmunny:
yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......
who has lost money here???...
until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....
so how can this be a zero sum game?
__________________
Being told that it can't be done is the reason that someone like you goes out a does it. So I'm now telling you, "It can't be done!"
Quote from trend_guy:
MM, if you have an opinion, why ask the question?
you guys may want to look at opportunity cost. If you buy a house for $100K, sell it at $150K, net $50K; then in the next 5 years it goes to $300K, did you not lose $150K in opportunity cost?
Quote from illiquid:
But someone sold those shares of stock in the first place. Stocks don't come out of nowhere -- when issued, they represent a transfer of ownership. There might not necessarily be a short for every share, but there is (was) a seller for every buyer.
An company goes public at the peak of internet mania; the first opening print is its all time high and proceeds to just go lower from there. Six months later the company is bankrupt, its stock worthless. Would you say that everyone lost money in this case? Who is actually laughing all the way to the bank, or more accurately, has been laughing for the past six months?
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
There are many reasons why the market is not zero sum but the main one is that everyone has a different basis. I might be buying or selling to someone who is averaging up or down and, therefore, I could be improving thier position while taking profit on my end.
You simply don't know the other person's basis, so to say that each trade is an absolute buy or sell for all participants is a gross oversimplification.
Quote from volente_00:
That was my argument about 20 pages ago. All stock issued becomes a liability on the company's book because they shorted it in the begining when they initially offered it.
To say that a company doing an IPO is the equivalent of creating a short position is hard for me to swallow.
Quote from volente_00:
That was my argument about 20 pages ago. All stock issued becomes a liability on the company's book because they shorted it in the begining when they initially offered it.
and I closed the thread long ago
Quote from Buy1Sell2:
and I closed the thread long ago
Re: zero sum game?????????????
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
Quote from winter:
To say that a company doing an IPO is the equivalent of creating a short position is hard for me to swallow.
If you create something in your garage, say a sculpture and then sell it to someone would you consider that you are now short the sculpture?
Not every sale is a short sale, to me going short means that you did not have a position to begin with. When you own something (a company) and you sell ownership (part or full) you are not short the company, at least not by any definition that I am familiar with.
Damn, I unsubscribed to this thread long ago, I can't believe its been resurrected and I'm being sucked back in.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Re: Re: zero sum game?????????????
There were plenty of explanations from experienced traders (the guys from the field) that the stock market is a ZERO-SUM. Unfortunately, they still believe with the point of view from the academic side that have no clue of what really happen in the field.
The only way to convince them that the market is a zero-sum game is to let them go in the market (in the field) with this belief and come back later to tell us the story. I bet they will change their mind once they're on the field for long time enough.
By the ways, if a soldier from the battle field tell you the story of the war and a professor of the military academy tell you the story. Who do you believe?
The professors from the academic side who argue that the stock market is not a zero-sum game are not always have this belief in reality but maybe they have to. Imagine if they tell the public the truth that the stock market is a zero-sum game, what the public will think? The public will think that is no more than Las Vegas. And what will happen to the economy?
Quote from RedManPlus:
This is the dumbest post I've seen so far at ET... and that is saying a LOT.
With your inability to understand what "zero sum game" means...
And your utterly reckless way of thinking and perceiving the markets...
You have zero chance of ever becoming a successful trader.
Stop wasting bandwidth.
rm+
Any one who believs that this is zero sum might actually have to go to a doctor to figure out wether or not they are legally retarded
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my
LOL. You're kidding. You believe this. You have no clue why the market is always going up? By the mean of always going up is it's understandable that the market retraces back from time to time but never go back to the point where it was 100 years ago.
Let me give you a story then you will understand why the market is always going up. Let say if they give you an option that you can choose 30 world best horses and you travel with them. Your objective is to go far as much as you can using your horses. You don't need to come back home if you still have energy to go far. The more distance you made the more you win, there's an excellent prize for your motivation, money and fame. Don't worry they build bridges to connect continents for you.
Scenario 1:
When one or few of your horses die or sick you can replace with new fresh best horses and disregard the death/sick horses, you leave them and continue your travel with always 30 best horses. Of course you can always spend sometime in the place where you enjoy the most or retrace back and stay for a while over there and then move forward.
Scenario 2:
You can always replace a sick or death horse with the new best horse but with a condition that you bring the death/sick horses with you. Don't worry your dead horses won't got rotten since they provide you a special chemistry to keep them fresh.
In scenario 1, you will go very very far. It's unlimited, you're always "going up" or so far. But in scenario 2, at one moment you will end up by having a lot of death/sick horses and you will no longer could carry them, they become too heavy. And as a result, you can't go far. You're not always "going up."
Well, it's exactly happen with the DOW (30 best stocks, refer to 30 best horses of the example above) and the S&P500. They don't keep the death or sick companies in the divisor. They are using method described in scenario 1. Now you see why the market is always going up. Do you still believe in not zero-sum?
Quote from dwl603:
Any one who believs that this is zero sum might actually have to go to a doctor to figure out wether or not they are legally retarded
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my
buy the futures then if your stance is because they kick the shit companies off of the S&P500, rookies like you who believe everyone loses money will never make money, but thank you for giving me yours!
And the fact that you put this much time in to trying to prove that I was wrong about the market tells me you are definitely a big time loser! Please keep giving me money in this zero sum i like taking money from zeros like you.
here is another one for you but it wont show it since inception, take a 70 year off of this one and once again I win this is not zero sum it is morons like you who cant find worthwhile stocks that will atleast give you 10% per annum
http://finance.yahoo.com/q/bc?s=RY&t=my
Quote from bitrend:
LOL. You're kidding. You believe this. You have no clue why the market is always going up? By the mean of always going up is it's understandable that the market retraces back from time to time but never go back to the point where it was 100 years ago.
Let me give you a story then you will understand why the market is always going up. Let say if they give you an option that you can choose 30 world best horses and you travel with them. Your objective is to go far as much as you can using your horses. You don't need to come back home if you still have energy to go far. The more distance you made the more you win, there's an excellent prize for your motivation, money and fame. Don't worry they build bridges to connect continents for you.
Scenario 1:
When one or few of your horses die or sick you can replace with new fresh best horses and disregard the death/sick horses, you leave them and continue your travel with always 30 best horses. Of course you can always spend sometime in the place where you enjoy the most or retrace back and stay for a while over there and then move forward.
Scenario 2:
You can always replace a sick or death horse with the new best horse but with a condition that you bring the death/sick horses with you. Don't worry your dead horses won't got rotten since they provide you a special chemistry to keep them fresh.
In scenario 1, you will go very very far. It's unlimited, you're always "going up" or so far. But in scenario 2, at one moment you will end up by having a lot of death/sick horses and you will no longer could carry them, they become too heavy. And as a result, you can't go far. You're not always "going up."
Well, it's exactly happen with the DOW (30 best stocks, refer to 30 best horses of the example above) and the S&P500. They don't keep the death or sick companies in the divisor. They are using method described in scenario 1. Now you see why the market is always going up. Do you still believe in not zero-sum?
I see your point of view is very narrow you're keeping to give with example case by case. If it has an infinite cases you will get Zero. You're not seeing the big picture. Don't ever dream you can take money from me, I won't lose it to someone like you're. It's impossible to lose money to a loser like you.
I can write long text when the market is closed since it requires longer time to explain for person like you.
Quote from dwl603:
buy the futures then if your stance is because they kick the shit companies off of the S&P500, rookies like you who believe everyone loses money will never make money, but thank you for giving me yours!
And the fact that you put this much time in to trying to prove that I was wrong about the market tells me you are definitely a big time loser! Please keep giving me money in this zero sum i like taking money from zeros like you.
here is another one for you but it wont show it since inception, take a 70 year off of this one and once again I win this is not zero sum it is morons like you who cant find worthwhile stocks that will atleast give you 10% per annum
http://finance.yahoo.com/q/bc?s=RY&t=my
Quote from bitrend:
I see your point of view is very narrow you're keeping to give with example case by case. If it has an infinite cases you will get Zero. You're not seeing the big picture. Don't ever dream you can take money from me, I won't lose it to someone like you're. It's impossible to lose money to a loser like you.
I can write long text when the market is closed since it requires longer time to explain for person like you.
futures cannot be anything but zero sum
all long contracts + all short contracts = 0
the equity markets, on the other hand, are NOT zero sum
go back to elementary school. try arithmetic
Quote from whitster:
futures cannot be anything but zero sum
all long contracts + all short contracts = 0
the equity markets, on the other hand, are NOT zero sum
Zero sum game - it is impossible, as all market and countries are developing and prices are going up, then something is changing.
And of course, there exists in short term one's profit is anothers lose. But in long term it isn't like this.
Wow, amazing post! I can't help but be swayed by your convincing logic.
Quote from 1000:
So if it is zero sum, why is it not "not zero sum"
If it is zero sum then it is not "not zero sum" which may not be true.
i.e. all long contracts - all short contracts <>0
may not be exclusive because of price distortion.
What happened to your winter wheat (you need to insure it), and was that spelling error around page 50 deliberately implying buying puts on MSFT, or just buying volatility calls?
"That means that...
our whole solar system...
could be, like...
one tiny atom in the fingernail
of some other giant being.
This is too much!
That means...
-one tiny atom in my fingernail could be--
-Could be one little...
tiny universe.
Could l buy some pot from you?"
A company does not ever have to do a buyback, it has no obligation to do so. A short position by definition means that you do have an obligation.
Quote from volente_00:
If the company does a buyback, they pay the current market price when it occurs. For every dollar that the stock is above the ipo, the company then loses that dollar to the investor.
Quote from winter:
A company does not ever have to do a buyback, it has no obligation to do so. A short position by definition means that you do have an obligation.
If I have a bar of gold and decided to sell it and one year later after the price has gone up decide to buy it back it doesn't mean I was "short" during that one year span, I was flat.
When you short something it means you are selling something that you do not own. When a company does an IPO it is selling ownership of the company, which it does own, hence it is not shorting itself when it goes public.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from bitrend:
I see your point of view is very narrow you're keeping to give with example case by case. If it has an infinite cases you will get Zero. You're not seeing the big picture. Don't ever dream you can take money from me, I won't lose it to someone like you're. It's impossible to lose money to a loser like you.
I can write long text when the market is closed since it requires longer time to explain for person like you.
Quote from volente_00:
When a company has an ipo, it is selling rights to future profits. If the profits have not been made then they do not own/possess them at the moment.
If someone has the right way down the line to a claim on a company's assets, is that not still a liability ?
And you keep dreaming that GOOG or another strongest one will go to infinite!!! In what world are you right now?
You don't have a valid argument, you just insult people of being retarded for not agree with you. But your point of view is wrong. How can someone agree with you if you're wrong? You cannot force them to believe in you, you need valid arguments to convince people. I have nothing against you personally. It's just I find your attitude for discussion is unhelpful.
Quote from dwl603:
ok ill make this simple for you think of the float of google as 1 share if person A buys google at 100 then B buys it off of A for 200
A has now profited 100 dollars,
C buys from B for 300
B now has profited 100 dollars
D buys from C for 400 C now has 100$ profit
E buys from D for 500 D now has 100$ of profit
In total that is 400$ in profits
so now E sells to F for 400$ a loss of 100$
and G buys off of F for 300$ a loss of 100$
thats 400$ in profits vs 200$ in losses the stock market creates wealth meathead, now you're gonna tell me you could do the same for stocks that go to zero except that a stock can only go down 100% where as it can go up infinite, you lose sorry.
Btw trade Ford today I look forward to taking your money
I took a company public a few years ago. Sold $10 million worth of stock at $1.00. "We" made $10 Million. Investor's bought stock at $1.00, and sold it at $3.00, they made money. So far $30 million "made". Those who bought stock at $3.00 have lost nothing at this point. Companies generally trade for several times "book value" and even higher P/E multiples...so even if Company breaks even, stock "may" stay at $3.00 forever. When company makes money, "true value" goes up, closer to the $3.00 mark...so price may increase. The market then determines pricing, with buyers and sellers taking market risk. Dividends and appreciation and overall profitability add to value.
Perhaps this will help the discussion a bit (maybe not, LOL)...
Don
__________________
Don Bright (not an alias)
http://www.stocktrading.com
this is another good comment thx Don, the company or person sold the shares also profited off of the initial sale of shares so therefore the ONLY possibility of zero is if the stock goes to zero, anything over zero and someone has still made money off of it.
And no I have no dreams of google just used an example everyone would know of but thx bit trend.
Thank you for once again proving your intelligence by taking my comment literally
I think that the next thread bittrend will be most likely to inhabit is the "is trading gambling thread" where he will swear up and down we are nothing but a bunch of slot jockeys.
This of course will be followed by the thread "I just blew my account what now"
Try telling me something like berkshire hasnt created wealth, I wonder what the overall percent return is on that stock had you bought it at the IPO.
Quote from Don Bright:
I took a company public a few years ago. Sold $10 million worth of stock at $1.00. "We" made $10 Million. Investor's bought stock at $1.00, and sold it at $3.00, they made money. So far $30 million "made". Those who bought stock at $3.00 have lost nothing at this point. Companies generally trade for several times "book value" and even higher P/E multiples...so even if Company breaks even, stock "may" stay at $3.00 forever. When company makes money, "true value" goes up, closer to the $3.00 mark...so price may increase. The market then determines pricing, with buyers and sellers taking market risk. Dividends and appreciation and overall profitability add to value.
Perhaps this will help the discussion a bit (maybe not, LOL)...
Don
it's a negative sum game, and someone is always left holding the bag
those are the facts
now it's up to you
Quote from DynamicReplic8r:
Could l buy some pot from you?"
__________________
Act always so as to increase the number of choices. - Heinz von Foerster -
Trading is a Zero Sum Game, investing is not! You guys are constantly mixing the two together.
Not to change the subject, but did you know that there was some random person talking about you a few weeks ago?
Quote from MAESTRO:
Trading is a Zero Sum Game, investing is not! You guys are constantly mixing the two together.
trading is NOT a zero sum game. because the trading INSTRUMENTS (assuming you don;'t limit yerself to futures/options) are not zero sum
futures and options are zero sum
equities are not
( i say this as somebody who does 90% of his volume in futures)
Quote from MAESTRO:
Trading is a Zero Sum Game, investing is not! You guys are constantly mixing the two together.
__________________
Act always so as to increase the number of choices. - Heinz von Foerster -
Quote from winter:
Not to change the subject, but did you know that there was some random person talking about you a few weeks ago?
http://www.elitetrader.com/vb/showt...5182&perpage=40
This is the first time I've seen you post since then...just thought you should know.
Quote from hirsch.im.wald:
I respect you a lot, nevertheless that is simplified, sorry.
It is one dynamic system and it is subject to the laws of thermodynamics.
If participants rationally can expect gains (monetary or external) they behave accordingly.
In practical terms: their perceived hurry will lead them to trade at prices away from short-term equilibrium. Thus each lower time frame might profit from exits and entries of a larger one.
The effect could be felt in a diluted form throughout the system, even in futures and options.
Of course that's pure theory, because it ignores the asymmetrical information effect.
The uninformed trader faces a zero-sum game with negative expectancy. If you want to know more about the different types of informed traders read Lawrence Harris.
Quote from MAESTRO:
Thanks. It was some idiot. Not worth even mentioning. This world is full of wacky people!
__________________
Don Bright (not an alias)
http://www.stocktrading.com
Here is three zeros for ya bittrend, were you on the other side of this all day?
You keep dreaming. LOL.
I wonder about your credibility!!!
Stop lying to yourself, this is the only way to become successful.
Quote from dwl603:
Here is three zeros for ya bittrend, were you on the other side of this all day?
companies with "book value" can be rendered worthless during market conditions such as this...
Quote from Don Bright:
I took a company public a few years ago. Sold $10 million worth of stock at $1.00. "We" made $10 Million. Investor's bought stock at $1.00, and sold it at $3.00, they made money. So far $30 million "made". Those who bought stock at $3.00 have lost nothing at this point. Companies generally trade for several times "book value" and even higher P/E multiples...so even if Company breaks even, stock "may" stay at $3.00 forever. When company makes money, "true value" goes up, closer to the $3.00 mark...so price may increase. The market then determines pricing, with buyers and sellers taking market risk. Dividends and appreciation and overall profitability add to value.
Perhaps this will help the discussion a bit (maybe not, LOL)...
Don
Quote from QQQShort:
Within the context of "zero sum", it is almost certain the future payouts to shareholders -- regardless of form -- will not equal the original amounts paid for the underlying stock. If they do, it would be coincidental.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
look, zero sum has nothing to do with whether or not you will make money
zero sum has a precise meaning
i suggest people look it up. it is tightly defined
99% of the people arguing that equities market ARE zero sum or that futures markets ARE NOT zero sum don't understand game theory. and game theory DEFINES what zero sum means.
it's definitional.
Quote from bitrend:
You keep dreaming. LOL.
I wonder about your credibility!!!
Stop lying to yourself, this is the only way to become successful.
Quote from DynamicReplic8r:
Could l buy some pot from you?"
equity markets are probably not absolute zero sum, but many traders seem to believe that one man's misery is often another man's gain. it is war for many. so the concept of zero sum does get thrown into the mix. it's semantics, really...
Quote from whitster:
look, zero sum has nothing to do with whether or not you will make money
zero sum has a precise meaning
i suggest people look it up. it is tightly defined
99% of the people arguing that equities market ARE zero sum or that futures markets ARE NOT zero sum don't understand game theory. and game theory DEFINES what zero sum means.
it's definitional.
"equity markets are probably not absolute zero sum, "
amazing
there is no probably about it
they are not zero sum
futures and options markets are
read the thread again. get a book on game theory.
Quote from madmunny:
yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......
who has lost money here???...
until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....
so how can this be a zero sum game?
Quote from whitster:
"equity markets are probably not absolute zero sum, "
amazing
there is no probably about it
they are not zero sum
futures and options markets are
read the thread again. get a book on game theory.
yes, that's what it is.. a theory.
Quote from whitster:
"equity markets are probably not absolute zero sum, "
amazing
there is no probably about it
they are not zero sum
futures and options markets are
read the thread again. get a book on game theory.
Ha! You people are all wrong.
The stock market is rarely ever a zero sum game. In bull markets the liquidity and capitalization of the entire market is increasing. During capitalization expansions there does not have to be a loser for every winner. Likewise, during bear markets, liquidity and capitalization are contracting, and there are more losers than winners.
People who say it's a zero sum game forget that the market inhales and exhales with inflows and outflows. Zero sum game only holds true if the market had zero inflow and outflow and the total capitalization was held constant.
Quote from Lights:
yes, that's what it is.. a theory.
As for the topic:
http://www.investopedia.com/terms/z/zero-sumgame.asp
Options, futures, FX etc: shift wealth from one side to another.
Stocks: wealth can be generated.
>>Options and future contracts are examples of zero-sum games (excluding costs). For every person who gains on a contract, there is a counter-party who loses. Gambling is also an example of a zero-sum game. >>
'counter-party who loses': that's why the counter-party ID (one of the X_Trader column) is so important for some FCMs to establish a strategy?....
profits and losses are realized when positions are CLOSED. so an open winning position in a bull market may eventually be closed out at a loss during a bear market. it is near impossible to calculate the real winners or losers from any one transaction because a long or short position can theoretically be held forever unless delisted or stopped out on margin call.
Quote from jamis359:
Ha! You people are all wrong.
The stock market is rarely ever a zero sum game. In bull markets the liquidity and capitalization of the entire market is increasing. During capitalization expansions there does not have to be a loser for every winner. Likewise, during bear markets, liquidity and capitalization are contracting, and there are more losers than winners.
People who say it's a zero sum game forget that the market inhales and exhales with inflows and outflows. Zero sum game only holds true if the market had zero inflow and outflow and the total capitalization was held constant.
Well I know that the efficient market theory is bullsh*t.
Quote from mahras2:
Actually a theory is something based on facts.
Laymen seem to think that theory is assumption. Well thats hypothesizing not theory.
So game theory is a concept based on facts that have been repeatedly tested and found to be true.
Quote from Lights:
Well I know that the efficient market theory is bullsh*t.
Actually, the Efficient Market Hypothesis is the central part of a larger field of economics called the Efficient Market Theory (EMT).
Quote from mahras2:
Most people don't use the correct terms for that either. Its known as the Efficient Market Hypothesis (EMH). Yes, I do agree with your assessment somewhat.
http://www.e-m-h.org/
There are very few true theories when it comes to economics.
Quote from Lights:
Actually, the Efficient Market Hypothesis is the central part of a larger field of economics called the Efficient Market Theory (EMT).
You are very correct though.
efficient market theory/hypothesis/wildassedguess has very very very little to do with the fact that futures/options are zero sum, and equities are not
the former is a (at best) conjecture about the possibility of "beating the market", which is absurd, but at least theoretically arguable
the latter is simply an irrefutable statement about the structure of the market
nobody (NOBODY) argues that a poker game is not zero sum.
futures/option are no different. for every option bought, there is a writer who wrote it, and somebody who bought it. no wealth is created. the net is zero. this is totally different from the stock market where wealth is created every day. there is not a net zero sum necessarily in the stock market. there is in the options/futures market. they are different in structure
usually, at this point, somebody starts protesting
"i can make $$ in the futures market, so it's not zero sum", which is totally irrelevant
i trade futures for a living. has zero to do with the fact that they are zero sum.
Quote from whitster:
the former is a (at best) conjecture about the possibility of "beating the market", which is absurd, but at least theoretically arguable
the latter is simply an irrefutable statement about the structure of the market
nobody (NOBODY) argues that a poker game is not zero sum.
futures/option are no different. for every option bought, there is a writer who wrote it, and somebody who bought it. no wealth is created. the net is zero. this is totally different from the stock market where wealth is created every day. there is not a net zero sum necessarily in the stock market. there is in the options/futures market. they are different in structure
usually, at this point, somebody starts protesting
a typical nonresponse...
This discussion must end.
Quote from mahras2:
Most people don't use the correct terms for that either. Its known as the Efficient Market Hypothesis (EMH). Yes, I do agree with your assessment somewhat.
http://www.e-m-h.org/
There are very few true theories when it comes to economics.
Quote from whitster:
a typical nonresponse...
Quote from bitrend:
Nicolas Darvas at the beginning he thought it's about ecomony, serious business, wealth creation; and he lost. Until he started to find out the truth; it's just The Other Las Vegas then he started to make money.
You do not have to prove the obvious.
Quote from 1000:
Prove it. Prove what you say is true, because you know it isn't. You cannot prove it, yet reality suggests non zero sum.
You keep repeating the same thing continuously, and no one every told you that futures and opitons trading isn't a game. It isn't a game.
Quote from Cheese:
Futures (ie YM) is a zero sum game. Sellers equal buyers and vice versa. It is a game. There are players. I am a player.
Must be a positive sum game for the winners and a negative sum game for the loosers, thus zero sum overall.
__________________
GS19
Quote from GS19:
Must be a positive sum game for the winners and a negative sum game for the loosers, thus zero sum overall.
Jan when she sells it back to the MM after the stock tanks to 7
Quote from Triple X:
Jan when she sells it back to the MM after the stock tanks to 7
__________________
Being told that it can't be done is the reason that someone like you goes out a does it. So I'm now telling you, "It can't be done!"
Oh, I get it. If you make money then the game is positive sum. Duh, why didn't I think of that. Oh, I know because that has nothing to do with this. C'mon people this thread has been around for more than a month. It's 74 pages long. Everything that can be said has been said SEVERAL times over and over and over. If you don't understand the meaning of zero-sum game, then go look it up. You don't have to go very far. It has been posted over and over and over again in this thread. I understand as well as anyone that posting is a way to alleviate boredom. But, c'mon doesn't it eventually get boring to keep rehashing this.
Quote from DynamicReplic8r:
But, c'mon doesn't it eventually get boring to keep rehashing this.
Quote from QQQShort:
Sellers also equal buyers in the stock market.
Quote from RedManPlus:
The crucial point some people as missing:
" creation... is a zero sum game.
$1,000,000 goes in... $1,000,000 comes out.
It does not matter who wins/loses.
rm+
Has anyone watched Syriana yet?
George Clooney proves non zero sum in such an expensive and painful way.
All those wrecked 4x4s and BMWs. Need to prop up the automotive industry some how.
Makes Angelina Jolie look like a small timer.
"Sellers also equal buyers in the stock market. "
but that is not relevant.
NET longs = net shorts in the options/futures markets. the sum total = 0
net longs <> net shorts in the stock market. hence, the sum is not (necessarily) zero. therefore, it is not zero sum.
there are several other reasons to explain why futures/options are zero sum and stocks are not.
this is the most basic.
you CANNOT have a long futures contract, without somebody being on the opposite side. these contracts are AGREEMENTS. that is all.
you CAN have a long stock holding without somebody being short the same stock holding.
they are differently structured markets.
Quote from whitster:
"Sellers also equal buyers in the stock market. "
but that is not relevant.
NET longs = net shorts in the options/futures markets. the sum total = 0
net longs <> net shorts in the stock market. hence, the sum is not (necessarily) zero. therefore, it is not zero sum.
there are several other reasons to explain why futures/options are zero sum and stocks are not.
this is the most basic.
you CANNOT have a long futures contract, without somebody being on the opposite side. these contracts are AGREEMENTS. that is all.
you CAN have a long stock holding without somebody being short the same stock holding.
they are differently structured markets.
__________________
Chagi
all this talk of welath being made, would someone care to answer where the wealth being made comes from ?
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
dividends are nice, but they are not *the* reason why equities are not zero sum
even if dividends did not exist - equity market would still not be zero sum. but dividends are a good point, since they are a constant influx of new wealth flowing into the market
Quote from volente_00:
all this talk of welath being made, would someone care to answer where the wealth being made comes from ?
it COMES from the process of capitalism
jeez. this is frigging econ 101. actually, it's even simpler
look.
how much wealth is there in the world today?
how much wealth was there in the world 100 yrs ago?
is there MORE now?
of course.
how much wealth is in the US now?
100 yrs ago?
etc.
economic systems can (and do ) in many cases create wealth
wealth can be created. some economic systems, can destroy wealth.
the point is that wealth is not finite. it is increased through invention, innovation, economy of scale, etc.
this is just exceptionally basic economics.
Quote from whitster:
the point is that wealth is not finite. it is increased through invention, innovation, economy of scale, etc.
this is just exceptionally basic economics.
of course it is relevant. wheter it be short or seller, a seller is matched with a buyer. a seller who sells too early incurs opportunity cost, or loss. and don't argue that opportunity cost does not exist. if a man retires at 30 and doesn't work another day, he is losing by not participating and eventually runs out of WEALTH. a pga golfer who is not PARTICIPATING because of injury suffers loss. a football team suffers loss when their starting quarterback is not PARTICIPATING because of injury.
also, when dividends are distributed, it SUBTRACTS off the stock price.
Therfore, a stock @$50 with a $1 dividend distribution will trade adjusted @$49.
Quote from whitster:
"Sellers also equal buyers in the stock market. "
but that is not relevant.
NET longs = net shorts in the options/futures markets. the sum total = 0
net longs <> net shorts in the stock market. hence, the sum is not (necessarily) zero. therefore, it is not zero sum.
there are several other reasons to explain why futures/options are zero sum and stocks are not.
this is the most basic.
you CANNOT have a long futures contract, without somebody being on the opposite side. these contracts are AGREEMENTS. that is all.
you CAN have a long stock holding without somebody being short the same stock holding.
they are differently structured markets.
it is not relevant to the fact that equity markets are not zero sum and futures markets are.
it is relevant only in proving you don't understand what the term zero sum means. because IF you think it's relevant, you don't understand what zero sum means.
omfg...wonder when u'll run out of semen after all this mental masturbation..
roflmaopimp
Quote from whitster:
it COMES from the process of capitalism
jeez. this is frigging econ 101. actually, it's even simpler
look.
how much wealth is there in the world today?
how much wealth was there in the world 100 yrs ago?
is there MORE now?
of course.
how much wealth is in the US now?
100 yrs ago?
etc.
economic systems can (and do ) in many cases create wealth
wealth can be created. some economic systems, can destroy wealth.
the point is that wealth is not finite. it is increased through invention, innovation, economy of scale, etc.
this is just exceptionally basic economics.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from volente_00:
Wealth is not made, it is merely transferred.
It does not matter if we are talking today, tomorrow or 100 years ago.
Do you agree that you can only acquire wealth at the expense of others ?
__________________
I prefer being smart enough to be born lucky, than lucky enough to be born smart.
"Wealth is not made, it is merely transferred. "
ok. i had thought you were ignorant.
now, i know it.
if wealth is not made, then where did all the wealth COME FROM? the "wealth fairies"?
there was the same amount of wealth 3 thousand years ago as there is today? worldwide? amazing. care to compute the average wealth per capita today vs. 3 thousand years ago. heck, 200 yrs ago? all the inventions (harnessed electricity, motor transport, literature, science, medicine, vaccines, hydroponics, botany, etc. etc. etc. ) have done NOTHING to CREATE wealth. riiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiight. you can't "transfer" what doesn't exist. if you TRULY don't understand that mass wealth has been (and is being created) you truly are a man completely 100% ignorant of the most basic concepts of human society. i feel badly for you. really/
some people are truly amazing. a billion points of data cannot wrest their petty prejudices out of their small minds.
if you REALLY believe this, then you are truly ignorant.
and this is a very very very rare thing.
Quote from whitster:
"Wealth is not made, it is merely transferred. "
ok. i had thought you were ignorant.
now, i know it.
if wealth is not made, then where did all the wealth COME FROM? the "wealth fairies"?
there was the same amount of wealth 3 thousand years ago as there is today? worldwide? amazing. care to compute the average wealth per capita today vs. 3 thousand years ago. heck, 200 yrs ago? all the inventions (harnessed electricity, motor transport, literature, science, medicine, vaccines, hydroponics, botany, etc. etc. etc. ) have done NOTHING to CREATE wealth. riiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiight. you can't "transfer" what doesn't exist. if you TRULY don't understand that mass wealth has been (and is being created) you truly are a man completely 100% ignorant of the most basic concepts of human society. i feel badly for you. really/
some people are truly amazing. a billion points of data cannot wrest their petty prejudices out of their small minds.
if you REALLY believe this, then you are truly ignorant.
and this is a very very very rare thing.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
We have mixed "capital allocation" with "wealth creation".
The extraction and sale of raw materials, e.g., coal and oil, is a wealth creation process, while equity transactions are capital allocation.
When related to physical delivery of a commodity, it seems the futures market can involve both wealth creation and capital allocation.
Quote from QQQShort:
We have mixed "capital allocation" with "wealth creation".
The extraction and sale of raw materials, e.g., coal and oil, is a wealth creation process, while equity transactions are capital allocation.
When related to physical delivery of a commodity, it seems the futures market can involve both wealth creation and capital allocation.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
volente doesn't understand what wealth creation means
much as he doesn't understand what zero sum means.
thus, having a discussion with him is pointless
it would be like discussing whether what is in Vial X is a solution or a suspension, with a person who doesn't even understand what the terms mean. it's meaningless
of course bill gates created wealth. he created immense wealth.
again, volente can't answer the question.
compute wealth in toto NOW. wealth owned in total in the world right now
compute it 3,000 years ago. it's ok. it doesn't need to be exact.
do you HONESTLY believe there is not more wealth TOTAL in the world right now, than there was 3,000 years ago?
for pete's sake, arguing with the ignorant (volente) is like dressing up a pig.
wealth creation.
it exists. economists disagree on a lot of things. a lot. i have never heard any economist (or sentient being) argue that wealth creation does not exist.
MATTER cannot be destroyed .
wealth can. it can also be created.
i used this example about 50 posts ago.
i'll do it again
in the Year X, it takes a farmer 100 man hours and 1 acre to grow 1 bushel of Y
Johnny invents the supergrowinator. using this device, it now requires 50 man hours and 1/4 acre to grow 1 bushel of y
Johnny sells the growinator to farmers.
blah blah blah
anyways, if u don't believe wealth can be created, then explain WHERE DID IT COME FROM
there are only two options
1) wealth has not been created. there is no more wealth in the world NOW than there was 3000 years ago (if you choose this option, you are an idiot)
2) wealth was transferred from the magical wealth fairies (...)
you really don't understand markets, volente. i hope to GOD you trade. we need more lemming idiots like you. they provide liquidity
Quote from whitster:
volente doesn't understand what wealth creation means
much as he doesn't understand what zero sum means.
thus, having a discussion with him is pointless
it would be like discussing whether what is in Vial X is a solution or a suspension, with a person who doesn't even understand what the terms mean. it's meaningless
of course bill gates created wealth. he created immense wealth.
again, volente can't answer the question.
compute wealth in toto NOW. wealth owned in total in the world right now
compute it 3,000 years ago. it's ok. it doesn't need to be exact.
do you HONESTLY believe there is not more wealth TOTAL in the world right now, than there was 3,000 years ago?
for pete's sake, arguing with the ignorant (volente) is like dressing up a pig.
wealth creation.
it exists. economists disagree on a lot of things. a lot. i have never heard any economist (or sentient being) argue that wealth creation does not exist.
MATTER cannot be destroyed .
wealth can. it can also be created.
i used this example about 50 posts ago.
i'll do it again
in the Year X, it takes a farmer 100 man hours and 1 acre to grow 1 bushel of Y
Johnny invents the supergrowinator. using this device, it now requires 50 man hours and 1/4 acre to grow 1 bushel of y
Johnny sells the growinator to farmers.
blah blah blah
anyways, if u don't believe wealth can be created, then explain WHERE DID IT COME FROM
there are only two options
1) wealth has not been created. there is no more wealth in the world NOW than there was 3000 years ago (if you choose this option, you are an idiot)
2) wealth was transferred from the magical wealth fairies (...)
you really don't understand markets, volente. i hope to GOD you trade. we need more lemming idiots like you. they provide liquidity
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
I'm not going to contradict anyone, I thought I'd just throw in my two cents worth. I remember the first physics course about the definition of the energy in the Universe as a whole. The question is do we have only one Universe or more than one? The conclusion is we have only one Universe since we don't lose nor gain energy, the energy is just transformed, from one form to another. The law of conservation of energy says that energy is neither created nor destroyed. If we have two Universes then we must have lose or gain energy.
Regarding the Market, it's only one Market as a whole; stock market, commodity market or currency market is a one entity Market. Then the money, goods or wealth are only exchanged from one hand to another or from one country to another country. The FED cannot print the money as it wishes unless it has enough wealth to support the value of the dollar.
Base on the above, if one lose money in the market, please don't worry your money is not really lost, someone will find it.
Quote from whitster:
volente doesn't understand what wealth creation means
much as he doesn't understand what zero sum means.
thus, having a discussion with him is pointless
it would be like discussing whether what is in Vial X is a solution or a suspension, with a person who doesn't even understand what the terms mean. it's meaningless
you really don't understand markets, volente. i hope to GOD you trade. we need more lemming idiots like you. they provide liquidity
Quote from whitster:
for pete's sake, arguing with the ignorant (volente) is like dressing up a pig.
MATTER cannot be destroyed .
Johnny invents the supergrowinator. using this device, it now requires 50 man hours and 1/4 acre to grow 1 bushel of y
Johnny sells the growinator to farmers.
you really don't understand markets, volente. i hope to GOD you trade. we need more lemming idiots like you. they provide liquidity
Quote from bitrend:
I'm not going to contradict anyone, I thought I'd just throw in my two cents worth. I remember the first physics course about the definition of the energy in the Universe as a whole. The question is do we have only one Universe or more than one? The conclusion is we have only one Universe since we don't lose nor gain energy, the energy is just transformed, from one form to another. The law of conservation of energy says that energy is neither created nor destroyed. If we have two Universes then we must have lose or gain energy.
Quote from 1000:
You obviously don't know what is going on in NM. We do gain energy. Energy has just been created, and more than once.
Whether it was transformed or not, no one knows where it came from. You cannot prejudge that, just because you cannot imagine that it could have been created. OR because it may be contrary to the current law that may have to be disregarded.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from 1000:
5. Tell me where the money in my account came from. You cannot answer that question just like you cannot prove zero sum.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from volente_00:
So that is what happens in area 51.
I do not believe that energy is created. It is just transferred from another resource such as coal, water, sun or atoms.
Quote from DynamicReplic8r:
"That means that...
our whole solar system...
could be, like...
one tiny atom in the fingernail
of some other giant being.
This is too much!
That means...
-one tiny atom in my fingernail could be--
-Could be one little...
tiny universe.
Could l buy some pot from you?"
You can call anything related to money as zero sum equation, a cycle. Money does not belong to anyone, it is simply passed on from one entity to another. Over what period of time that happens determines the answer to another view how this question can be answered. If you are successful at what you do, during that cycle it is not a zero sum. If one believes that everything in life is a cycle however (like in nature) the result will provide, EVENTUALLY, a zero sum equation.
EDIT: The only way to stay profitable in trading is by keeping both feet on the ground, being realistic about worst possible outcomes from our decision making and that largely depends on how well we are able to control risk.
romik, you don't understand what zero sum means,
it doesn't have to do with YOU or your result
it is a structure of the game definition
Quote from whitster:
it doesn't have to do with YOU or your result
it is a structure of the game definition
PLEASE READ
Zero-sum
From Wikipedia, the free encyclopedia
Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Chess is an example of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum.
The concept was first developed in game theory and consequently zero-sum situations are often called zero-sum games though this does not imply that the concept, or game theory itself, applies only to what are commonly referred to as games. Optimal strategies for two-player zero-sum games can often be found using minimax strategies.
In 1944 John von Neumann and Oskar Morgenstern proved that any zero-sum game involving n players is in fact a generalised form of a zero-sum game for two persons; and that any non-zero-sum game for n players can be reduced to a zero-sum game for n + 1 players, the (n + 1) th player representing the global profit or loss. This suggests that the zero-sum game for two players forms the essential core of mathematical game theory.[1]
To treat a non-zero-sum situation as a zero-sum situation, or to believe that all situations are zero-sum situations, is called the zero-sum fallacy.
NOW PLEASE READ PAYING ATTENTION TO BOTTOM PARAGRAPH
The lump of labour fallacy is a fallacy which occurs when an argument relies on the belief that something is fixed in quantity, when really that quantity changes. Another way to say this is that it treats a variable as if it were constant, when it's not. It may also be called the fallacy of labour scarcity, or the zero-sum fallacy, from its ties to the zero-sum game.
As a fallacy, it often takes the form of a false premise. In rhetoric it is usually a hidden premise, which makes the conclusion a non sequitur. That means that this fallacy is usually either a subtype of a false premise fallacy, a non-sequitur fallacy, or both.
In division of resources, this may occur when a resource is assumed to be fixed even though the division of it reduces its content. A simple example might be dividing a cake – a small cake could not be distributed to 10,000 people, because the cuts necessary would destroy the cake.
In modern times, economists often use the term in other contexts – often to highlight errors of reasoning when ceteris paribus assumptions are counterfactual.
An often cited example of a lump of labour fallacy is in economics, where one might assume that redistributing income to one person must mean taking it away from someone else. While this is modestly persuasive, economic activities can increase or reduce the amount of wealth in the world, making the economic 'game' non-zero-sum. The consequence is that we might be able to take $100 of your money, use it to economically create $1,000 of value in the world, and return $200 of value back to you--in that case, nobody loses anything.
Quote from whitster:
you really don't understand markets, volente. i hope to GOD you trade. we need more lemming idiots like you. they provide liquidity
zero sum game?
Simply put (futures):
The money flowing into the pockets of the few nimble winners balances with the money flowing out of the pockets of the mass of losers.
__________________
Trend Finding is Edge Finding and Edge Finding is Trend Finding
nononsense's axiom
Quote from romik:
PLEASE READ
Zero-sum
From Wikipedia, the free encyclopedia
Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Chess is an example of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum.
The concept was first developed in game theory and consequently zero-sum situations are often called zero-sum games though this does not imply that the concept, or game theory itself, applies only to what are commonly referred to as games. Optimal strategies for two-player zero-sum games can often be found using minimax strategies.
In 1944 John von Neumann and Oskar Morgenstern proved that any zero-sum game involving n players is in fact a generalised form of a zero-sum game for two persons; and that any non-zero-sum game for n players can be reduced to a zero-sum game for n + 1 players, the (n + 1) th player representing the global profit or loss. This suggests that the zero-sum game for two players forms the essential core of mathematical game theory.[1]
To treat a non-zero-sum situation as a zero-sum situation, or to believe that all situations are zero-sum situations, is called the zero-sum fallacy.
NOW PLEASE READ PAYING ATTENTION TO BOTTOM PARAGRAPH
The lump of labour fallacy is a fallacy which occurs when an argument relies on the belief that something is fixed in quantity, when really that quantity changes. Another way to say this is that it treats a variable as if it were constant, when it's not. It may also be called the fallacy of labour scarcity, or the zero-sum fallacy, from its ties to the zero-sum game.
As a fallacy, it often takes the form of a false premise. In rhetoric it is usually a hidden premise, which makes the conclusion a non sequitur. That means that this fallacy is usually either a subtype of a false premise fallacy, a non-sequitur fallacy, or both.
In division of resources, this may occur when a resource is assumed to be fixed even though the division of it reduces its content. A simple example might be dividing a cake – a small cake could not be distributed to 10,000 people, because the cuts necessary would destroy the cake.
In modern times, economists often use the term in other contexts – often to highlight errors of reasoning when ceteris paribus assumptions are counterfactual.
An often cited example of a lump of labour fallacy is in economics, where one might assume that redistributing income to one person must mean taking it away from someone else. While this is modestly persuasive, economic activities can increase or reduce the amount of wealth in the world, making the economic 'game' non-zero-sum. The consequence is that we might be able to take $100 of your money, use it to economically create $1,000 of value in the world, and return $200 of value back to you--in that case, nobody loses anything.
This is a newbie question but I have to ask.
I read everywhere that for every future contract I buy, someone has to take the opposite side.
In today's fast and fully electronic market, who is that 'someone'?
When I click a button on my PC to buy a contract, who goes out and finds someone to go short?
Whose responsibility is it to find this 'someone'?
Is it my broker? Is it the market-maker (is there such a thing called a market-maker in futures?)?
Futures contracts can be created out of thin air. What happens if nobody wants to go short? How do I get notified if there is no seller?
Has anyone ever experienced this?
Quote from Gamer:
This is a newbie question but I have to ask.
I read everywhere that for every future contract I buy, someone has to take the opposite side.
In today's fast and fully electronic market, who is that 'someone'?
When I click a button on my PC to buy a contract, who goes out and finds someone to go short?
Whose responsibility is it to find this 'someone'?
Is it my broker? Is it the market-maker (is there such a thing called a market-maker in futures?)?
Futures contracts can be created out of thin air. What happens if nobody wants to go short? How do I get notified if there is no seller?
Has anyone ever experienced this?
Quote from Gamer:
This is a newbie question but I have to ask.
I read everywhere that for every future contract I buy, someone has to take the opposite side.
In today's fast and fully electronic market, who is that 'someone'?
When I click a button on my PC to buy a contract, who goes out and finds someone to go short?
Whose responsibility is it to find this 'someone'?
Is it my broker? Is it the market-maker (is there such a thing called a market-maker in futures?)?
Futures contracts can be created out of thin air. What happens if nobody wants to go short? How do I get notified if there is no seller?
Has anyone ever experienced this?
exactly
look, EVERY dollar that is marked to market in your futures account, came from some other position's loss
a lot of traders find this concept hard to understand
for every person LONG MSFT, there is not a corresponding short position
but for every LONG CONTRACT of YM at whatever price, there is a corresponding short contract.
that's because contracts are thin air- they are AGREEMENTS
stock is ownership
a futures contract is an agreement. and there HAS to be an "other side" to that agreement
open interest can vary
but there can never be an imbalance in the "sides"
there CAN be an imbalance in ORDERS, but not positions
Buying a share is the same as buying an asset: you've paid full value for it.
Buying or selling a derivative is a contract whereby you are agreeing to pay the person on the otherside of the trade if you are wrong or vice versa.
For derivatives you only pay a margin, or fraction of the actual cost of the asset, like a deposit for a house.
If the derivative is of the same asset, then there is no difference in the value of either which is where everyone is getting confused.
The only difference is the cashflows. When you buy your share, you've paid in full but with a derivative you've paid on deposit and have to pay mark to market on a daily basis.
They are both zero sum games because their cashflows in equals their cashflows out. This is where it is zero sum.
If you imagine you buy a share for 100 bucks, someone will receive 100 bucks and you will get your share, but you are now out of pocket by 100 bucks. If you can not sell your share for more then you will lose money. For example lets say you have to sell for 90. You will get 90 bucks and someone will get your share, but they will be out of pocket by 90 bucks.
You may have lost money, but this money didn't disappear into a blackhole, it is just in someone else's pocket and more than likely it will be the person who sold the share to you for 100 bucks.
__________________
The people working at National Express are f****** idiots.
Quote from reactor:
They are both zero sum games because their cashflows in equals their cashflows out. This is where it is zero sum.
just to clarify...
the stock market is NOT zero sum
futures, options (and forex apparently) ARE
the stock market, as a system can build wealth. in the same way a company can. tomorrow, if company ABCD develops a cure for cancer, its stock goes up 1000%
any new buyers are now willing to pay 10 X as much as they were yesterday. value was created. WEALTH was created.
the same is NOT true in the futures market. the people who were short a futures contract will lose (per share) as much as a person who is long gains when the price goes up. and vice versa.
the critical difference is that in the stock market, you rarely (if ever) have the exact same amount of short positions vs. longs
that is a practical impossibility.
in the futures market, you do
one IS zero sum. the other is not
as a matter of "effect", on a daytrader basis, the stock market can essentially SEEM zero sum assuming a group of traders who go flat at the end of the day and are basically trying ot outgame each other for the best share price to sell and buy.
but, in reality, it is not.
the futures market has to be. period
the futures markets also have a (somewhat ) different purpose for many players, especially in commodities, etc. there are hedgeers, for example, who are not looking to make money in their trade, but merely to protect what they are ALREADY long in (for example 100,000 bushels of corn.). this person may go short an equivalent # of corn contracts to lock in the current corn price. so, if the price goes down, their short futures contracts will gain to offset their loss in value of corn that they will now sell at a lower price, etc.
again, these futures contracts are not ownership of a THING, they are an agreement.
based on some of the nimrods who posted earlier in this post, that is a very difficult concept for some people to understand
for PRACTICAL purposes as a scalper, it doesn't really matter. but it is reality whether or not it matters to you.
LOL if I buy a share for 100 bucks, someone gets my 100 bucks and I get a share.
If the share goes up to 200 bucks and I sell it at that price, I get 200 bucks and someone is now out of pocket for 200 bucks.
That extra 100 bucks profit has come from outside into the market, but that money has come from somewhere and this is the whole point of a zero sum game. If the 100 bucks came out of nowhere, it wouldn't be zero sum.
If the markets are a positive sum game, you will always get back more than you put in, because money would be appearing from nowhere, which everyone knows is not true as the money is coming from someone else.
If the markets are a negative sum game, you will always get back less than what you put in, because the money would be disappearing into nowhere, which again everyone knows is not true, as the money is going to someone else.
Zero sum is like accounting; for every debit, there is a credit and vice versa.
Just because it is a zero sum game does not mean you can't make money. It just means you need to be skillful at extracting it from others.
__________________
The people working at National Express are f****** idiots.
NOT a zero sum game when you count the number of players and the distribution of gains or losses.
One trader/investor buys sells 10k shares/contracts. Twenty others do 500 apiece.
Time is opportunity cost and opportunity lost. The classic example is when a so called trade is indeed a losing trade and the trade turns into an investment. (SIC)
The time spent in the losing trade is money tied up doing ZILCH, to make matters worse the dead money might have been of great value in another instrument.
ZERO sum game...........NO WAY , no way in hell.
How can anyone call a game where the VAST majority lose be called as ZERO SUM GAME?...........
World Series, St Louis WON, Tigers lost their stripes...........games are about winning and losing, not the sum of money etc. Playing the game of trading also involves some opportunity costs in time. Many traders wasting time looking for the Holy grail would be wiser to spend their time at a regular job. TIME HAS VALUE, use it well or end up being a greeter at a wally store.
whistler.............paper money is not wealth creation.
More paper is just needed to buy same amount of goods as the prior paper loses value. (ppp of a currency)
Example: In 1965 a fully loaded Chevy convertible was priced in round numbers $35 hundred dollars, today an approximate grocery getter will cost $35 thousand.
Wealth creation, REALLY ? Where?
Quote from reactor:
LOL if I buy a share for 100 bucks, someone gets my 100 bucks and I get a share.
If the share goes up to 200 bucks and I sell it at that price, I get 200 bucks and someone is now out of pocket for 200 bucks.
That extra 100 bucks profit has come from outside into the market, but that money has come from somewhere and this is the whole point of a zero sum game. If the 100 bucks came out of nowhere, it wouldn't be zero sum.
If the markets are a positive sum game, you will always get back more than you put in, because money would be appearing from nowhere, which everyone knows is not true as the money is coming from someone else.
If the markets are a negative sum game, you will always get back less than what you put in, because the money would be disappearing into nowhere, which again everyone knows is not true, as the money is going to someone else.
Zero sum is like accounting; for every debit, there is a credit and vice versa.
Just because it is a zero sum game does not mean you can't make money. It just means you need to be skillful at extracting it from others.
Quote from reactor:
LOL if I buy a share for 100 bucks, someone gets my 100 bucks and I get a share.
If the share goes up to 200 bucks and I sell it at that price, I get 200 bucks and someone is now out of pocket for 200 bucks.
That extra 100 bucks profit has come from outside into the market, but that money has come from somewhere and this is the whole point of a zero sum game. If the 100 bucks came out of nowhere, it wouldn't be zero sum.
If the markets are a positive sum game, you will always get back more than you put in, because money would be appearing from nowhere, which everyone knows is not true as the money is coming from someone else.
If the markets are a negative sum game, you will always get back less than what you put in, because the money would be disappearing into nowhere, which again everyone knows is not true, as the money is going to someone else.
Zero sum is like accounting; for every debit, there is a credit and vice versa.
Just because it is a zero sum game does not mean you can't make money. It just means you need to be skillful at extracting it from others.
For the love of God, can't you people see that stock trading is a zero sum game? For every stock trade made, one person makes money and another loses money. Just because MOST daytraders lose money doesn't discount the zero sum theory. It just means that most traders stink. The good consistent ones are taking most of the poor traders 'money.
Even assuming their are no short traders, if I bought GOOG at $300 and sold it for a profit at $320, I will have taken money from the poor slob who bought at $340 and got stopped out at $320. This is called VOLATILITY. Stocks don't move up (or down) a perfectly straight line. There are peaks, valleys, gap ups/downs in every stock chart and this is where people make and lose money even on a stock that goes up from $1 to $400. Not everyone wins when the stock climbs because of VOLATILITY. This clearly shows that stock trading is a zero sum game.
Even in a fantasy world where a stock goes up in a straight line, there will be people mistakenly calling the top and losing money. As long as there are bulls and bears and competing sentiments, trading will always be a zero sum game.
Don't you people understand this simple concept about trading? C'mon...
Unless the companies listed on the NYSE and Nasdaq go to Zero, there can be no way the stockmarket is a zero sum game. If that day comes then the zero-summers will be correct. Until then, YOU'RE WRONG!!!!
When a company goes to zero on an exchange, the companies competitors will benefit. Again, another example of zero sum game.
If the entire US market goes to ZERO then the economies of other countries (China, India, England, etc.) will reap the benefits. Again, this is a zero sum game!
Even accounting for growth and wealth creation, stocks are a zero sum game because of the influx of new players entering the investing arena. Even without the new players, the big players would still take up the slack.
Macro Econ 101 people! C'mon!
Anything that has value cannot be zero sum until it no longer has value. By that time it is zero sum, but until then, someone has made a profit on it.
Quote from goldenarm:
If the entire US market goes to ZERO then the economies of other countries (China, India, England, etc.) will reap the benefits. Again, this is a zero sum game!
Macro Econ 101 people! C'mon!
Where is this magical growth of wealth coming from?
More and more people in the world, is there such a thing as more wealth being handed out? With a printing press in the hands of central banks, there is no such thing as new wealth.
Is America increasing so called "wealth" faster than the debt of America?
Is a Bush tax cut really a tax cut or is it in fact just taxes deferred? Deferred to your children?
ZERO sum game, WHO cares, just trade it and good luck. Remember, there ain't no such thing as a tax cut, just putting the propaganda out to make greedy nerds feel good. ....
Quote from bighog:
Where is this magical growth of wealth coming from?
More and more people in the world, is there such a thing as more wealth being handed out? With a printing press in the hands of central banks, there is no such thing as new wealth.
Let me put it a different way.
What were computer sales in the year 1800? Since there were none sold did that market take away demand from some other product? I don't think so. Wealth is created by new inventions and business ideas. Wealth is not zero-sum nor is the stock market since it represents companies that have those ideas and inventions.
Quote from bighog:
Where is this magical growth of wealth coming from?
Zero Sum Game
Trading, like Casino Poker, is not a Zero Sum Game.
In a Zero Sum Game (such as two people betting an equellamount on a coin flip) for every dollar lost another player has won a dollar.
In a Casino Poker Game the house charges an hourly fee to play (or takes a very small percetage of each pot) so if the players were close in ability they would all lose in the long run.
If a group of friends all played poker together with no "house fee' or dealer tipping, etc.. This would be a Zero Sum Game.
In trading, money is continually siphoned out of the game via slippage, commissions, etc.
HOWEVER, games do not have to be Zero Sum for the "Expert Players" to make a living if they have a large enough edge and do enough volume.
When the cotton gin was invented, then cotton manufacturers became wealthy, not "the world". Demand was created for cotton products and a Darwinian cycle was created among the cotton companies. There were winners and losers as manufacturing processes became more advanced. Automated processes drove costs down and left many laborers unemployed. Demand for cotton caused manufacturers of linen and synthetic fabrics to go out of business. Wealth was not "created" from thin air. There was a reallocation of wealth from other industries. Hence, the zero sum game.
Trading is not Zerro Sum
Trading, like Casino Poker, is not a Zero Sum Game.
In a Zero Sum Game (such as two people betting an equal amount on a coin flip) for every dollar lost another player has won a dollar. Money is not siphoned off the game by a non-player.
If two expert Tic Tac Toe players played each other, they would break even in a Zero Sum Game. If fees for playing were charged, both players would obviously lose in this game.
In a Casino Poker Game the house charges an hourly fee to play (or takes a very small percentage of each pot) so if the players were close in ability they would all lose in the long run.
If a group of friends all played poker together with no House Fee or other fees, etc.. This would be a Zero Sum Game.
In trading, money is continually siphoned out of the game via slippage, commissions, etc.
HOWEVER, games do not have to be Zero Sum for "Expert Players" to make a living If The Experts have a "large enough edge" (positive expectation) and do enough volume, they can prosper.
Quote from goldenarm:
When the cotton gin was invented, then cotton manufacturers became wealthy, not "the world". Demand was created for cotton products and a Darwinian cycle was created among the cotton companies. There were winners and losers as manufacturing processes became more advanced. Automated processes drove costs down and left many laborers unemployed. Demand for cotton caused manufacturers of linen and synthetic fabrics to go out of business. Wealth was not "created" from thin air. There was a reallocation of wealth from other industries. Hence, the zero sum game.
Slippage and commissions in trading are considered part of Costs of Goods Sold and are fixed costs. All traders factor this into the stock trading game as an expense to be overcome, along with systems costs, desk fees, etc. This doesn't mean that trading is not a zero sum game.
Trading commissions belong to another zero sum game: the back office game that broker/dealer firms, clearinghouses, exchanges and systems platforms engage in. There are winners and losers in this game as well as is evidenced by the corpses of many daytrading firms and systems platforms.
I'm not saying that WEALTH is a zero sum game, because wealth can be created from brain power which is theoretically infinite. Heck, look at YouTube and the wealth that was generated by its founders!
But stock trading, a game with a finite group of participants and finite prices, IS a zero sum game for all of the players taken as a whole (though some are more consistently profitable than others). For each winner, there's a loser (or group of losers) somewhere out there, even among different time frames.
Futures is a zero sume game.
Nowhere and I mean nowhere does it ever state or even imply that equities are zero-sum.
End Discussion.
Quote from whitster:
for every person LONG MSFT, there is not a corresponding short position
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
New wealth. Really? You start a company, you get investors, the banks loan you money, people buy or use your product.
You make IPO in the mkt, people buy the stock etc.
These are choices others made to HELP you acquire some money from OTHER people. Where is the new wealth?
This can get wrapped up in semantics so lets not go that far. But, i stand by my contention that new wealth is not created unless a TOTALLY new SOURCE is found. I myself have not found a huge gold nugget undiscovered before. I have made money from trading, but that is not creating anything.
PS, BEARS SUCK!!!!!!
this is a structural issue.
it is NOT a matter of opinion.
if the stock market WAS a zero sum game, then for every dollar of wealth built in the stock market since 1900 (for example), a dollar was lost.
this is clearly not true.
similarly, the NATION is far far far far far richer than it was in 1900 (both on a per capita basis, and on an absolute basis)
the entire edifice of capitalism is based on a very simple fact - wealth is CREATED. it is not zero sum. neither is the stock market.
" disagree, every share issued by the company is technically a short position since all outstanding shares are a liability to the company."
false. this is false as a matter of economics, and accounting.
it is not a liability. a stock is a PORTION of the company. a BOND is a liability. if i buy a bond, i am loaning money to the company. what they owe me is a liability. if i buy a share of stcok, i am literally buying a piece of microsoft. if microsoft grows wealth, the stock goes up (with of course some wiggles in between due to the market finding value).
the idiocy here is amazing.
what was microsoft worth in 1985? what is it worth now?
the entire edifice of capitalism is based on this - WEALTH IS NOT ZERO SUM
it can be grown (or diminished)
clearly, we GROW wealth. you can measure comparative income quintile wealth ownership now vs. 200 yrs ago.
this is so amazing that people think the stock market is zero sum
it is not. nor is our (or any ) economy.
look at yield per acreage. we have FAR FAR FAR more yield per acreage than we did 150 yrs ago.
so, when (various) inventions and technological improvements came along that increased yield per acreage, wealth was grown, for every farmer that owned farmland. that is not zero sum.
nor is the stock market
i trade futures for a living. futures are zero sum. this says nothing about whether you can make money or not. clearly, i make money. but the structure of the market is necessarily different than the stock market.
this thread is either a bunch of ignorant trolls, or just ignorant people.
its a structural issue. it is no more a matter of opinion than any other fact.
"This can get wrapped up in semantics so lets not go that far. But, i stand by my contention that new wealth is not created unless a TOTALLY new SOURCE is found."
it's not semantics.
it's your complete lack of understanding of how economics works.
wealth can, and is created.
simple example: there have been numerous inventions that significantly increase yield/acreage for various crops.
(example for illustration. #'s for demonstration purposes)
it is 1950. there are 10,000 soy farmers in the USA. the farmers own 100 million acres of soy fields.
soy is selling for $1 pound
each acre yields 1,000 pounds of soy.
so... the total wealth for soy farmers in the US is
100,000,000 (pounds)* 1 (dollar a pound) * 1,000 (pounds/acre) = $100 billion dollars.
lets say it costs $500 / acre to harvest, process, store, and get the soy ready for market.
so, the actual wealth in their fields is 50 billion dollars (cause half their "soy wealth") dollars are caught up in processing.
today, ABC Widgety Soy company has invented a more efficient method of harvesting soy.
it now costs 1/5 as much to harvest, process, store, and get the soy ready for market.
what has happened?
first of all, the wealth of the farmers has all gone up. they had to pay a cheap one time charge for the technmology, but their overall wealth is FAR improved, cause they are now getting FAR FAR FAR $$$ per acre, so they are now RICHER.
how about ABC Widgety Soy Company?
They previously were worth $5 / share based on the current market price, but now their revenue will increase 1,000 fold based on their sales of their new soy product.
BOOM, their stock now goes to $20 a share.
again, more wealth is created. they are worth more per share. the company does not OWE the shareholders any more $$$ (that liability thing was a crcok). but the shares are WORTH more, because the company is worth more.
Widgety Soy stock has 5% short interest. those people are stopped out at a decent loss. but those 5% of people lose money. the 95% of people who were long ALL are now much richer.
again, wealth is created.
and this has cascading (multiplier effects) in the economy.
of course, soy prices now go down, to some extent, but now because soy is so much cheaper for us to produce, we are exporting more soy, and this creates additional wealth in the shipping etc. industries
and on and on and on it goes.
this is how wealth is created.
look at japan after WWII.
not a lot of wealth compared to Japan by 1990. why? innovation, wealth creation, etc.
go back to econ 101.
and as a corollary - this is why capitalism is so wonderful. because it produces incredible incentive for innovation. this is why we are so incredibly inventive, so innovative, and so much incredibly richer now than we were 100 yrs ago - both per capita and in total.
the stock markets are wonderful because they are a price discovery mechanism, a means of democratically allocating capital, and a way to get in on the ground floor of all kinds of wonderful businesses, that in turn can grow wealth for themselves, and for the stockholders, who are partial OWNERS of the company.
price discovery, two-way auction, wealth creation, etc. all wonderful (and not too complex) aspects of our economy.
the difference in futures is that they are not OWNERSHIP of part of a company, they are AGREEMENTS between two parties on OPPOSITE sides.
open interest can go up or down, but net long or short cannot. net long is always ZERO. net short is always ZERO in the futures market. cause for every contract CREATED out of thin air (which is what happens when open interest rise), there are two sides to that contract - one short, and one long.
this is not true in stocks.
Quote from whitster:
if the stock market WAS a zero sum game, then for every dollar of wealth built in the stock market since 1900 (for example), a dollar was lost.
this is clearly not true.
Re: zero sum game?????????????
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
Quote from whitster:
this is a structural issue.
it is NOT a matter of opinion.
Quote from bsmeter2:
I deleted most of the hot air.
The gains you refer to in the stock market since 1900 is due to inflation + dividend payouts.
That's why value investors and dollar cost averaging ALWAYS come out ahead in the long run, not because of their investing acumen, but because they can collect the dividends. Just ask Warren Buffett.
__________________
http://tequity.blogspot.com
"The gains you refer to in the stock market since 1900 is due to inflation + dividend payouts."
lol!!!
"Of course this is not true. But according to some your argument is a red herring fallacy. The counter-argument is that the issue is whether stock trading is a zero sum game and not whether the price of a stock reflects wealth created by the company that issued it."
this is not "my argument"
this is fact. most things here argued are opinion. this is not opinion. it is a matter of structure.
capitalism BUILDS wealth. not even the most ardent communist/socialist denies this, because there are decades of evidence to prove this point (they may argue it builds wealth at the expense of others, but that is another issue)
of COURSE, in the long run, the stock price reflects the wealth of the company. do you think MSFT is worth several HUNDREDS of times its initial offering price for NO reason?
or GE?
could the fact that GE owns practically everything (ok , that's an overstatement) have SOMETHING to do with it?
this is NOT opinion.
"According to those that support your argument, when someone sells a stock that eventually goes up there is no real loss but only opportunity loss. "
that's a strawman. i didn't make that argument.
cause that argument is irrelevant to the issue of stock market not zerosum game, futures market zerosum game.
"However, according to those that think the argument is red herring fallacy, the loser did cover his loss by selling his shares. The time that this happened by no means affects the nature of the zero sum game since time is not a variable in this game. This is a very simple argument and it is very hard to come up with a counter-argument at this point against the zero sum game of stock trading."
look, i will try to make this as simple as possible for people who do not understand the nature of economics, capitalism, or capital markets (e.g. you).
if you are a daytrader, the stock market generally SEEMS zerosum since you are engaged in the game of gaming others by trying to buy stuff low over the course of the day and sell it high.
for every low buy, there is a low sell, and for every high sell, there is a high buy. this creates the ILLUSION that it is a zerosum game, because for people flipping shares on an intraday basis there is going to be (roughly) a similar amount of $$$ won vs. $$$ lost (roughly).
that is complteely irrelevant to the structure of the market.
the fact that it is not (stocks) zero sum is a matter of structure. that it so happens that the overall bias is up, does not mean that over any given timeframe, we could not have more net losers, or more net dollars lost, than winners.
for example...
if over the next 20 yrs, the value of the entire market is cut by 90% - we will have more wealth lost than gained.
however...
this is totally irrelevant to the fact that its not zero sum
in a zero sum (absent commissions) there MUST be an equilibrium
it's like a poker game
it's a closed system. (zero sum)
the stock market is like a factory. it can grow wealth due to invention, innovation, marketing, cheating, whatever.
if the economy could NOT grow wealth, then we would have the exact same amount of wealth as a nation than we did 200 yrs ago.
do we?
the stock market is merely a proxy for part of an economy (those companies that are public). it is not zero sum
again, this is a structural issue, not one of opinion. it's not an argument.
i seriously suggest you get this concept into your head.
it is 100% irrelevant to your success as a trader, in the same way that you could have the mistaken impression that your vehicle actually runs by a bunch of faeries spinning your motor under the hood, and still be a successful race car driver. you just have to know how to DRIVE.
but you would still be laughably wrong, as is anybody who believes the stock market is zero sum.
if the stock market is zero sum, then so is the economy. and if u believe that, your idiocy is colossal
i'll give one last example...
you could open a stock market and have only ONE stock on the exchange.
lets call that ABCD company.
ABCD has an IPO at $50 a share.
1,000 shares.
ok. capitalization of the market is USD 50k
tomorrow, ABCD invents the cure for cancer.
ABCD stock is now worth $5,000 a share.
sure, some shorts lost money. some sold too soon and sold at $100 (when their limit offer was lifted upon the ramping up in response to the news). some traders tried to fade the up move at 4,000 and got stopped out at 4400.
groovy.
but what is the market capitalization NOW?
5million dollars
what was it yesterday
50 thousand dollars.
where did that extra 4,950,000 dollars come from?
it came from the BUILDING of wealth (in this case, through innovation).
ABCD is WORTH MORE.
price , the last traded price of any instrument, is merely OPINION. it does not necessarily reflect VALUE.
the whole purpose of the market is price discovery, and capital alloction - the price discovery/rotation etc. trying to FIND value.
in the gaming that goes on, some will win, some will lose. but it is necessarily true in any capital market that if you take out transaction costs (commissions, etc.) and $$$$ can be greater now than they were yesterday, it is not zero sum.
that is the fundamental difference between futures (where you don't OWN anything, except an AGREEMENT (that is why futures are called CONTRACTs, not SHARES) and stocks (where you own something)
in the case of a contract somebody HAS to have the other side of that contract.
in the case of options, you can't BUY an option unless somebody WROTE the option
if they WROTE the option, they are necessarily on the opposite side of the trade from you. they GET the premium. you paid it.
this is not true in the stock market. there does not have to be (and usually isn't, with the exdception of people who are short - who make up a small %age of outstanding shares) an OPPOSITE side to your POSITION.
there is an opposite ACTION to your action (if you bot, they sold), but not POSITION
that is the difference.
if all POSITIONS balance (as they have to in futures), then no wealth in the system is gained or lost based on a move in the price of the contract.
necessarily
but since all POSITIONS do not have to balance in stocks (people can be long X many shares from all sorts of different price points in MSFT without correspondign short positions at the exact same price points), there is not a zero sum balancing
Quote from goldenarm:
When the cotton gin was invented, then cotton manufacturers became wealthy, not "the world".
I'm surprised that this thread is still alive.
Inventions do two things: it raises standard of living by lowering costs of making goods, and it gives the inventors/original investors a chance to hit it big.
But, once the company goes public, from the point of its IPO to the point of its bankrupcy, if you count all the money that's put in and all the money that it paid back, you get a negative result.
Therefore, while inventions/innovation reap millions for the inventors, the stock market is a negative sum game.
Quote from james_bond_3rd:
But, once the company goes public, from the point of its IPO to the point of its bankrupcy, if you count all the money that's put in and all the money that it paid back, you get a negative result.
Quote from HolyGrail:
That was the whole point. The company has to go bankrupt for it to be a zero-sum game. If it doesn't it is not zero-sum.
It doesn't matter because there are always new ones to take the place of the bankrupt ones or they get bought out by private equity firms, or bought out by other public companies. As long as a company's stock has underlying value it is not zero-sum game. That was the whole point of this thread that investing in stocks is not zero sum. The point originally taken by the creator of this thread was correct.
A good way to put it is:
Investing in stocks has been a positive-sum gain, at least for the last 100 years or so.
But trading is a slightly negative sum game because of commissions and slippage.
But the vast majority of stock investors do not day trade. Look at stocks like Microsoft or Berkshire Hathaway. All of the long term buy-and-hold investors are all way ahead by billions in market cap.
But yes, those who tried to constantly day trade MSFT or BRKA over the years would be facing a slightly negative sum game, where approximately 5% of the players win and around 95% lose. The biggest winners in the "day trading" game are probably firms like Renaissance, SAC Capital and the specialists and market makers.
Quote from george_s:
A good way to put it is:
Investing in stocks has been a positive-sum gain, at least for the last 100 years or so.
But trading is a slightly negative sum game because of commissions and slippage.
But the vast majority of stock investors do not day trade. Look at stocks like Microsoft or Berkshire Hathaway. All of the long term buy-and-hold investors are all way ahead by billions in market cap.
But yes, those who tried to constantly day trade MSFT or BRKA over the years would be facing a slightly negative sum game, where approximately 5% of the players win and around 95% lose. The biggest winners in the "day trading" game are probably firms like Renaissance, SAC Capital and the specialists and market makers.
and again , people misunderstand the term - ZERO SUM
let me make this as clear as possible.
game theory was invented in 1944
in the formulation of game theory, a term was used to describe certain kind of systems- ZERO SUM
whether or not, a stock goes to zero, or even the whole market has exactly ZERO to do with zero sum
saying something is not zero does not mean it is necessarily going to result in positive outcome (whether for the aggregate or the individual)
that is 100% irrelevant.
if every stock goes to ZERO tomorrow morning, that says NOTHING about whether the stock market is zero sum
zero sum means (for the umpteenth time) that every dollar GAINED in the system (doesn't even have to be dollars - can be any benefit) is coming from somebody else's (the system on a wholes) loss, such that at any moment in time, the SUM is zero.
this is NOT the case in the stock market, or the economy. obviously.
this IS the case in futures. in the case of futures,
(for the umpteenth time)
EVERY SINGLE POSITION HAS AN OFFSETTING POSITION.
this is not, to use an analytical reasoning term, a NECESSARY component for a zero sum game.
a poker game is zero sum, but it is NOT the same as futures trading, in the way money is distributed (in terms of offsetting positions at discrete intervals)
however, both are zero sum because no wealth can be created. the system is closed to wealth creation.
sure, there can be additional inputs (a new player arrives at the table). his money is then ADDED to the sum. when he leaves, whatever he leaves with, if anything is subtracted to the sum. but no wealth is created WITHIN the system.
in the stock market, wealth is created, among other reasons, because every position does not have an equal and opposite offset, such that if ABCD tomorrow invents the cure for cancer, a HYOOOGE amount of wealth will be infused into the system and numerous positions will gain, but not NECESSARILY (and not in reality) exactly offsetting with corresponding losses in other positions.
some people here, even those who correctly conclude the stock market is not zero sum, are confusing the positive bias of the market with the fact that it is not zero sum.
a market does not have to have a positive or negative bias for it to be zero sum.
that is irrelevant. if the market for the next 10 yrs goes down 5% a year, that has zero bearing. the stock market will still be a NON-zero sum game. the futures market will still be a zero sum
iow, this is a binary issue. a system (or market) is either zero sum or it is not
a non-zero sum game is not necessarily "positive sum", that's a silly irrelevancy.
and based on misunderstanding of the term
all the people here who think the stock market is zero sum either completely misunderstand how capital markets work, or don't understand this model (invented in 1944 - there are plenty of books on it), or - sadly - both
So you think just because the FED prints money that wealth is created ? You are not even taking into account inflation of 3% annual over the past 100 years. If stock is not a liability, where does the dividend come from that WMT pays its shareholders ? Let me guess it comes from the wealth tree.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Whitster ur very convincing but u can’t prove that u are right. So far creation > destruction. But who knows maybe we nuke each other to death, maybe Armageddon, maybe aliens will attack us. In the Armageddon case stocks are zero sum from beginning to end? There is no way of knowing that the amount of wealth 100 years from now is bigger than today, probably it is, and probably participants in the stock market as a group earns money for shouldering risk.
When investors earn money where does that money come from? GDP growth is only part of the answer. Companies like people value money today more than money tomorrow, that’s why historical returns are bigger than GDP growth.
Having said that, but what if companies as a rule issues stocks when the market is at tops, and investors typically prefers to buy when stocks are hitting all time highs. Investors could also typically sell on lows and companies could buy back stocks when stocks are hitting lows.
__________________
I’m not a believer in doubt, but I doubt I’m a believer.
Quote from whitster:
...this IS the case in futures. in the case of futures, EVERY SINGLE POSITION HAS AN OFFSETTING POSITION.
Quote from whitster:
i'll give one last example...
....
where did that extra 4,950,000 dollars come from?
it came from the BUILDING of wealth (in this case, through innovation).
ABCD is WORTH MORE.
"Whitster ur very convincing but u can’t prove that u are right. So far creation > destruction. But who knows maybe we nuke each other to death, maybe Armageddon, maybe aliens will attack us. In the Armageddon case stocks are zero sum from beginning to end? There is no way of knowing that the amount of wealth 100 years from now is bigger than today, probably it is, and probably participants in the stock market as a group earns money for shouldering risk. "
you still don't get it
even if every single stock goes to zero overnight, that says nothing about whether the market is zero sum or not
cause (for the umpteenth time) that is completely irrelevant
when u finnally understand that zero sum does not (necessarily) mean that stocks ever go up again, you MIGHT have a clue
you are confusing the positive bias of the stock market with the fact that it is not zero sum.
the fact is that zero sum means wealth can be created. it ALSO means that wealth can be destroyed.
in a zero sum game, NEITHER can happen
get a clue
in a game of poker, money cannot be destroyed (rake aside, of course, which is the corollary of commissions, which are already not being discussed here).
so, again. you completely fail at reading comprehension
in a zero sum game, there HAVE to be offsetting positions/results.
so, if the stock market goes to zero, it says NOTHING about this issue
stop confusing POSITIVE BIAS with zero sum
completely tangential.
for pete's sake, try reading
"Having said that, I think the issue is much more complicated than that. Is the stock market a zero sum game? probably not and maybe not provided any increase in stock prices is matched by a non-inflationary increase in money supply"
again. 100% irrelevant
the lack of reading comprehension is amazing
pick up a book on game theory
familiarize yourself with what "zero sum game" MEANS.
there is no dispute.
except for those that cannot understand a simple definition
people are (the nimrods) confusing positive bias with non-zero sum
completely irrelevant
if wealth can be DESTROYED it is also not zero sum
futures markets cannot create or destroy wealth.
they can only transfer it
stock market can create OR destroy wealth
so, your point is irrelevant and based on fundamental misunderstanding
if the dow goes to 10 tomorrow, that says exactly zero about this issue
which is what u fail to understand
Quote from whitster:
"Having said that, I think the issue is much more complicated than that. Is the stock market a zero sum game? probably not and maybe not provided any increase in stock prices is matched by a non-inflationary increase in money supply"
again. 100% irrelevant
the lack of reading comprehension is amazing
pick up a book on game theory
familiarize yourself with what "zero sum game" MEANS.
there is no dispute.
except for those that cannot understand a simple definition
people are (the nimrods) confusing positive bias with non-zero sum
completely irrelevant
if wealth can be DESTROYED it is also not zero sum
futures markets cannot create or destroy wealth.
they can only transfer it
stock market can create OR destroy wealth
so, your point is irrelevant and based on fundamental misunderstanding
if the dow goes to 10 tomorrow, that says exactly zero about this issue
which is what u fail to understand
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
pick up a book on economics, if u don't understand how wealth is created.
there are a million examples.
everytime somebody makes an invention, for instance, that makes a production system more efficient- wealth is created.
that is one example in many
find me one (ONE) economist who disagrees that wealth can be created
nobody disputes this.
because not only is it supported in theory, but in the entire history of the world literally millions of times over.
take your position as a counterexample.
if wealth cannot be created, then it can ONLY be transferred
if that is true, then we cannot have more wealth now in the USA, than we did in 1931. and if we do have more wealth than 1931, then every cent we grew in wealth had to be transferred from somewhwere else (iow, somebody else lost wealth)
do u think we have more wealth?
hth
fwiw, every economist agrees that not only are WE more wealthy, but the WORLD (including the 3rd world) has GROWN wealth over the centuries.
simply put - we are richer.
do u honestly believe wealthcannot be created in an economy?
if u understand this, then u can understand how it can be created in capital markets
the only markets that cannot create (or destroy) wealth are zero sum markets - which are DESIGNED to have exactly equal offsetting positions.
obviously, you can only transfer wealth in such a system
Quote from whitster:
pick up a book on economics, if u don't understand how wealth is created.
there are a million examples.
everytime somebody makes an invention, for instance, that makes a production system more efficient- wealth is created.
that is one example in many
find me one (ONE) economist who disagrees that wealth can be created
nobody disputes this.
because not only is it supported in theory, but in the entire history of the world literally millions of times over.
take your position as a counterexample.
if wealth cannot be created, then it can ONLY be transferred
if that is true, then we cannot have more wealth now in the USA, than we did in 1931. and if we do have more wealth than 1931, then every cent we grew in wealth had to be transferred from somewhwere else (iow, somebody else lost wealth)
do u think we have more wealth?
hth
fwiw, every economist agrees that not only are WE more wealthy, but the WORLD (including the 3rd world) has GROWN wealth over the centuries.
simply put - we are richer.
do u honestly believe wealthcannot be created in an economy?
if u understand this, then u can understand how it can be created in capital markets
the only markets that cannot create (or destroy) wealth are zero sum markets - which are DESIGNED to have exactly equal offsetting positions.
obviously, you can only transfer wealth in such a system
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
i am not cofusing the two
money is irrelevant
the issue is wealth creation
inflation aside, we as a nation and the stock market as a system have far more wealth than they did 70 yrs ago.
inflation aside, the futures market has the exact same amount of wealth as it has ever had
the EXACT same. a net of zero
Explain how you think wealth is created in the stock market.
Where do you think every dollar that comes into the market comes from ? The wealth tree ?
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from whitster:
inflation aside, we as a nation and the stock market as a system have far more wealth than they did 70 yrs ago.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
i am going to say this one last time
if u do not understand HOW wealth is created IN GENERAL, you cannot understand the distinctions between zero sum and non zero sum games
it's that simple
i can't explain this economics concept to somebody who is completely ignorant of economics, any more than i can teach somebody without vocal cords to sing.
pick up a book. or run a business.
EVEN the most ardent communists don't make the claim that wealth cannot be created.
they simply believe their system CREATES it and distributes it more equitably
capital markets are proxies for the economy, specifically those companies that are public
if ABCD invents the cure for cancer overnight people will recognize that ABCD - THE COMPANY is worth more.
the stock will also become worth more because the market recognizes this
wealth has been created. this new product
what u don't understand is that people who own stock own a THING, not just an agreement
each share is now WORTH more
Money (which is not the same thing as wealth, but i digress) doesn't have to even come into the stock market for wealth to increase this way.
the stock could be halted. but the bid/asks will still represent the increase in wealth
where the stock used to be $10 a share
it is now bid $990/Ask $995
not a single new dollar has come into the stock market (money), but WEALTH is created cause the market recognizes the new valuation of the company, and hence the stock.
again, if wealth could ONLY be transferred than we would have the exact same amount of wealth we had in 1931, when 1/2 the country could barely afford to eat.
if you understand that wealth can be created, than you merely have to understand that capital markets can too, since they are proxies for the underlying companies
Quote from whitster:
[B ... futures markets cannot create or destroy wealth.
they can only transfer it
stock market can create OR destroy wealth
so, your point is irrelevant and based on fundamental misunderstanding
[/B]
Quote from ronblack:
Maybe you haven't heard of price discovery and studies about how futures markets trading can impact the underline asset price.
You whole reference to wealth creation is a red herring. Trading, any type of trading, is theoretically a zero-sum game and practically a negative sum if you factor in commissions and other fees. This is what the experts say and I think they are probably correct.
Until you can demonstrate how both sides in a single transaction involving stock trading can benefit anything else you say is irrelevant.
In every transaction in the stock market, one of those involved wins and the other loses the same amount in the form of opportunity loss.
If a company "creates wealth" suddenly as in your example, the longs become richer and those that sold their shares to them lose that same amount. This is zero-sum game I think. I was not sure before but your arguments against it are so poor that I am forced forced to subsribe to the other view.
Ron
Quote from ronblack:
In every transaction in the stock market, one of those involved wins and the other loses the same amount in the form of opportunity loss.
"If a company "creates wealth" suddenly as in your example, the longs become richer and those that sold their shares to them lose that same amount. This is zero-sum game I think."
except that says nothing about zero sum games
this is a classic example of somebody wanting to redefine a word to suit their prejudice/lack of understanding
poker is zero sum. and in a home game, with no rake, it is pure zero sum
if i get up from the table, and i WOULD HAVE been dealth pocket a's the next hand would have beaten pocket K's for $5,000 that's groovy
it's a lost opportunity.
it says nothing about zero sum
again, your argument isn't even RELEVANT to zero sum
the stock market is not zero sum for one reason and one reason only.
it is not structured such that for each dollar lost, there is a dollar gained.
the futures market IS structured that way
you can make up any definition you want about what u WANT zero sum to mean. but redefining terms doesn't "win" an argument.
zero sum was designed to describe a specific type of system. the stock market is not that system.
also, the poster's point about the stock market for daytraders EFFECTIVELY being LIKE a zero sum game is basically correct
and i made that point about 20 posts ago
daytraders are basically handing off the same set of shares to each other and trying to game each other for buying lower and selling higher, and usually going flat
WITHIN that group of people, it is effectively (to a large extent) similar to zero sum
but it is not zero sum
it merely appears to be within a narrow section of people who are flipping the same shares and then going flat.
get some understanding. you are wrong, and your argument about economists is false.
go to any university and find me an economist who claims the stock market is zero sum
try it
to clarify in one sentence for the hard of hearing "opportunity costs (lost opportunity cause you didn't stay long and catch the whole move) are 100% irrelevant to zero sum)
if the SUM of positions does not add to zero, it is not zero sum
that is definitional.
unless the stock market has the EXACT same # of shorts positions as long positions in ALL shares of ALL stocks - and the market is structured such that it HAS to be that way, it is not zero sum
that is the criterium.
Quote from whitster:
unless the stock market has the EXACT same # of shorts positions as long positions in ALL shares of ALL stocks - and the market is structured such that it HAS to be that way, it is not zero sum
that is the criterium.
Wow!!!! You guys are in an endless cycle of arguing semantics.
Whitster is correct about game theory. He is talking about whether or not a system is actually "zero sum" according to game theory. According to this theory the stock market is NOT zero sum. The futures/derivatives markets are. It doesn't matter whether or not a stock certificate is technically a liability to a company. The owners of the company do not LOSE money when that share of stock increases in value.
You guys are arguing a case for the market being "net positive/negative" when this is NOT the same thing as a zero sum system in game theory. Because you're arguing apples and organges, this debate will never stop.
oh, and btw - the futures market is structured that way
open interest can vary.
but there can never be more longs than shorts in the futures market
try looking at COT reports if you find that concept hard to understand
whitster
Quote from FullyArticulate:
For this to be a fair statement about futures, you have to ignore hedging.
constrain the argument solely to the futures market and ignore the cash market.
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
cache landing, you are absolutely correct
as i try to explain to the dimwitted...
if the stock market goes down 20% a year for the next 10 years
it's still not zero sum
people who are arguing against the stock market being zero sum
don't understand what zero sum means
people who are arguing that wealth cannot be created in an economic system, don't understand economies.
and of course this can be disproved thusly
is there more (or less) wealth than there was 200 yrs ago
in the USA?
worldwide?
if so, wealth can be created and destroyed.
futures markets cannot do so. they can only transfer it
because all net gains are offsetted by net losses
nimrods above think if u buy ABCD at 5, sell ABCD at 10, and it goes to 20, that is a "net loss".
lol
no, you don't
if i am hedging a position in the cash market, with a futures position that says nothing about the futures market being zero sum
it means that if you COMBINE a zero sum market and a non-zero sum market you get a non zero sum market
i'll make this math easy for you
zero sum market + non-zero sum market = a combined non zero sum market
zero sum market + zero sum market = zero sum market
non-zero sum market + non-zero sum market = non-zero sum market
the issue here is not about intermarkte positioning. it is about the structure OF individual types of markets
futures markets are ALL zero sum
the combined market of all zero sum markets is a larger zero sum market
anytime you introduce a non-zero sum market and aggregate it with a zero sum market, the aggregate market (the set of submarkets) becomes nonzero sum
Quote from whitster:
cache landing, you are absolutely correct
as i try to explain to the dimwitted...
if the stock market goes down 20% a year for the next 10 years
it's still not zero sum
people who are arguing against the stock market being zero sum
don't understand what zero sum means
people who are arguing that wealth cannot be created in an economic system, don't understand economies.
and of course this can be disproved thusly
is there more (or less) wealth than there was 200 yrs ago
in the USA?
worldwide?
if so, wealth can be created and destroyed.
futures markets cannot do so. they can only transfer it
because all net gains are offsetted by net losses
nimrods above think if u buy ABCD at 5, sell ABCD at 10, and it goes to 20, that is a "net loss".
lol
Re: Stocks (No) Futures (Yes)
Quote from NUTSNEAL:
Stocks (No to Zero Sum)
Futures (Yes to Zero Sum)
Simple Equation
FGL=futures gains on longs
FGS=futures gains on shorts
TFG=total futures gains
SGL=stock gains on longs
SGS=stock gains on shorts
TSG=total stock gains
FGL+FGS=TFG=0
Since the above equation is always (Yes at all times) equal to zero futures are ZERO SUM
SGL+SGS=TSG=X
Since this equation is not always (Probably has never even been once) equal to zero stocks are NOT ZERO SUM
X does not equal 0 at all times
To be a ZERO SUM GAME the equation must equal 0 AT ALL TIMES. Whereas in reality, even if the stock market stops trading or even drops to zero the stock equation will not equal 0.
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
But
But
I actually think the one on page 92 is actually better and maybe even more accurate.
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
can i repeat my senior year of high school
if i could go back with what i know now, i could rule them like a colossus of yore
Re: whitster
Quote from NUTSNEAL:
Also, don,t forget that you must also ignore the crap game in the alley behind the drug store.
This is all sssssoooooo funny!
Quote from whitster:
can i repeat my senior year of high school
if i could go back with what i know now, i could rule them like a colossus of yore
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
"futures market is not zero sum when you include the cash market,"
well... duh
the FUTURES market is zero sum
the cash market isn't
when you combine one with the other, you get a non-zero sum market
my weekly poker game is zero sum
when i combine it with the economy of ecuador, it's non-zero sum
Quote from whitster:
"futures market is not zero sum when you include the cash market,"
well... duh
no, i'm not arguing
i'm saying its intuitively obvious, and agreeing with you.
Zero Sum Game/ goldenarm,
goldenarm, you are correct in your observations. The observations you make are VERY HELPFUL for trading.
HOWEVER, "Zero Sum Game" has a precise mathematical definition.
When it comes to definitions, I try not to "roll my own".
Trading IS ABSOLUTELY NOT a "Zero Sum Game" as defined in Game Theory, a mathematical field.
My first post may prove helpful in understanding different forms of speculation or gambling.
Zeo-sum/definition re goldenarm
Zero-sum
From Wikipedia, the free encyclopedia
Jump to: navigation, search
Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Chess and Go are examples of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others.
Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum. Other non-zero-sum games are games in which the sum of gains and losses by the players are always more or less than what they began with. For example, a game of poker played in a casino is a zero-sum game unless the pleasure of gambling or the cost of operating a casino is taken into account, making it a non-zero-sum game.
The concept was first developed in game theory and consequently zero-sum situations are often called zero-sum games though this does not imply that the concept, or game theory itself, applies only to what are commonly referred to as games. Optimal strategies for two-player zero-sum games can often be found using minimax strategies.
In 1944 John von Neumann and Oskar Morgenstern proved that any zero-sum game involving n players is in fact a generalised form of a zero-sum game for two persons, and that any non-zero-sum game for n players can be reduced to a zero-sum game for n + 1 players; the (n + 1) player representing the global profit or loss. This suggests that the zero-sum game for two players forms the essential core of mathematical game
I don't understand this 'zero sum game' idea.
Lets say you want to buy a new painting for your living room from an auction. There's several lithographs for auction, all of which are differently numbered but identical.
On the first, there are 4 bidders. The price is driven up til everyone but 1 gives up.
On the 2nd, only 2 people bid on it... and one gives up earlier and much cheaper than the first.
On the 3rd, only 1 person bids, the other interested party having left the auction in disgust. He gets it for the opening bid.
So, 3rd goes for X, 2nd goes for 3x, 1st goes for 5x.
What was the zero sum game about it? They were the same work of art, but due to the actions of the participants, the prices were absolutely not the same.
If by zero sum game, you mean someone gets the art and someone gets paid, you're missing the entire point of any sale.
The more people who want it, the more it costs. A given stock can technically go up infinitely, so long as someone... only ONE someone... is willing to pay that price for that stock, and there's no buyer willing to sell.
Trading/ Economics and non-zero-sum
Economics and non-zero-sum
Many economic situations are not zero-sum, since valuable goods and services can be created, destroyed, or badly allocated, and any of these will create a net gain or loss. Assuming the counterparties are acting rationally, any commercial exchange is a non-zero-sum activity, because each party must consider the good s/he is receiving as being at least fractionally more valuable to him/her than the good s/he is delivering (see also the law of comparative advantage) - to exchange in any other circumstances would not be rational.
In public policy, however, including the allocation of resources, tax policy and burden sharing, there are often broad economic winners and losers. There are defendable theories that posit many economic policies are zero sum, more often than classic economics typically acknowledges.
From Wikipedia, the free encyclopedia
Quote from whitster:
again, if wealth could ONLY be transferred than we would have the exact same amount of wealth we had in 1931, when 1/2 the country could barely afford to eat.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from whitster:
EVEN the most ardent communists don't make the claim that wealth cannot be created.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Where did all this come from whitster ? Did it just grow on the wealth tree ?
http://www.federalreserve.gov/relea...ist/h6hist1.txt
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
volente, you have been a troll for as long as i have been posting here, so responding to you is futile.
it would be like teaching a blind man how to paint.
but, to make one quick point
if
1) wealth can be grown in the economy
then
2) wealth can be grown in the stock market
that is necessarily true, since the stock market does not have necessarily offsettin positions
but agian, for it to be non-zero sum all that has to happen is for wealth to grow or deplete even $.01.
if that is the case, then it aint zero sum
the wealth present in the stock market fluxes throughout the day, week, year, etc.
welcome to price discovery.
each share is a PIECE of a company.
if a company can grow wealth, then the stock market can too
but again, volente is a troll. i can sit here and say "2+2 = 4", but if an ignoramus chooses to ignore that, there is naught i can do
to paraphrase
"i used to be disgusted, now i try to be amused"
LOL, I knew you would not answer the simple questions and instead just try to change the subject. What are you afraid of ? My argument is not about zero sum , it is about wealth being created in the stock market. If you get really bored, plot the national debt vs money supply vs the dow over the past 100 years and get back to me.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
"You have yet to show me how wealth is created in the stock market. Just because a stock gaps up 10% overnight does not mean that all 100 million shares outstanding can be sold at that time for that price for a 10% gain."
nor is that a requirement for a non-zero sum system
in a non-zero sum system, there would have to be an equal # of shorts to match the longs
even PAPER gains come out to zero in a zero sum system
if the futures gap (well, they don't gap much cause they are close to 24 hrs, but bear with me) 50 points, there is an EXACT paper (non-realized) loss to match thenon-realized gain
they don't in a non-zero sum system
also, just because all the shares could not be sold for that price is irrelevant
again, i am explaining economics to a non-sentient being
also, ALL asset classes will change worth based on realizations.
if everybody who owns bullion ALL decided to sell tomorrow, gold prices would drop
it doesn't therefore follow that if the price of bullion has gone up over the last 3 years, that none of the wealth gained is "real"
if everybody in the USA decided to simultaneously sell their house (to move into a tent in botswana) it does not follow that they didn't gain wealth over the last 5 years when their houses appreciated
whether wealth is realized or nonrealized is irrelevant
also, wealth can be realized in many different instruments
the value of a dollar bill changes from day to day, and so does a stock
again, these are elementary economic concepts but far beyond volente
Quote from whitster:
"You have yet to show me how wealth is created in the stock market. Just because a stock gaps up 10% overnight does not mean that all 100 million shares outstanding can be sold at that time for that price for a 10% gain."
nor is that a requirement for a non-zero sum system
in a non-zero sum system, there would have to be an equal # of shorts to match the longs
even PAPER gains come out to zero in a zero sum system
if the futures gap (well, they don't gap much cause they are close to 24 hrs, but bear with me) 50 points, there is an EXACT paper (non-realized) loss to match thenon-realized gain
they don't in a non-zero sum system
also, just because all the shares could not be sold for that price is irrelevant
again, i am explaining economics to a non-sentient being
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Ok I have two apples u have two oranges, I prefer one apple and one oranges u do the same so we trade. We both benefit from the trade. No real wealth is created, but our utility is higher since we both subjectively value what we have now more than what we had. This situation is supposed to be non-zero-sum according to wikipedia.
Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum(Wikipedia).
The futures market is zero sum because the money one gain another lose. But why is the subjective value someone could get from hedging discarded in the futures market case making it zero sum, when it is the same subjective value gain that makes the apple/orange trade not zero sum??
What about the market for lending and borrowing. Is that zero sum? Obviously what the lenders earn in inntrests the borrowers have to pay. Zero sum! But the lenders would not lend and the borrowers would not borrow if they did not gain something from the transaction. Non-zero-sum!
__________________
I’m not a believer in doubt, but I doubt I’m a believer.
whitster,
Does the fact that contracts in futures expire have something to do with futures being a zero sum? The same would be with poker. Each game expires and is settled and in order to change the sum of money involved, the new game has to be open. Does this fact of expiration make futures zero sum or it is the result of zero sum?
How is it different from the stock market? It looks that the stock market is a pool of all the stocks with never ending transactions and that makes it non zero sum somehow.
"Does the fact that contracts in futures expire have something to do with futures being a zero sum? "
no. that's irrelevant to the fact that it is zero sum. but good question.
"The same would be with poker. Each game expires and is settled and in order to change the sum of money involved, the new game has to be open. Does this fact of expiration make futures zero sum or it is the result of zero sum?"
no. it's irrelevant. a 24 hr poker game in a casino (eliminating the issue of rake of course) is zero sum even if it is open 24/7 365.
this is actually a very good question though.
"How is it different from the stock market? It looks that the stock market is a pool of all the stocks with never ending transactions and that makes it non zero sum somehow."
no, the difference is in the structure of the system.
you have to remember that stocks represent a THING. a portion of a company.
let's simplify.
let's make a market of ONE stock. cause that would still be non-zero sum.
and a market of ONE futures contract.
that would be zero-sum.
Company ABCD has an IPO.
their shares sell at various levels, and they issue 1,000 shares.
closing price today is $100 per share.
what is the market capitalization?
100,000 dollars.
now, this is not a zero sum system. the stock can go up or down. some people win, some lose. it may result in more wealth over time or less, but it will not be zero sum.
wealth can be represented in all sorts of markets. real estate. stock. gold. apples. corn, etc.
clearly, the whale oil market lost TONS of wealth - when we stopped using whale oil.
if ABCD company cures cancer, the stock could go to $1,000 a share.
now, what is the market cap?
100,000 dollars. UNLIKE a futures system, there can be more dollars "won" in the market than lost. (this market of one stock). lets' say the stock went from 100 to 1,000 pretty fast, but some people got out at 200, 300, 400, etc.
they realized various profits. some might have tried to sell short at 600 and lost some money, etc.
but the amount of wealth in the market is not FIXED
whether or not the wealth is REALIZED by everybody selling the stock at once, is irrelevant.
my wealth in my house is REAL. just because i haven't sold it doesn't make it imaginary. otoh, it could go down or up, but it still EXISTS at the fair market value for my house on any given day.
the stock market is different because it is a strict price discovery mechanism for exact things.
i can know EXACTLY what the best price I can get for 100 shares of ABCD is RIGHT NOW. it is the bid. period.
the current price can change. wealth, as measured by VALUE is more contentious, but when measured by PRICE is whatever the current last (bid/ask) is.
clearly a company that just cured cancer is worth more than it was worth the day before when it just had a drug in phase I.
each share is a PIECE of the company. it is literally a PERCENTAGE of everything that company is - income, liabilities, real estate, etc. etc. etc.
many genius stock pickers (e.g. buffett) realize nice gains by recognizing when a stocks PRICE is far below its real VALUE,like when he bot disney at s discount to its value because he recongized the poorly accounted vast wealth it had in its movie archives.
wealth is more than just dollar bills. it is stock, gold, real estate, bullion, groceries, etc.
now, the futures market is different
a company does nto issue "futures" contracts of its stock (even though there are futures of certain stocks)
futures contracts are created out of thin air.
all a futures contract is , is an agreement.
if i buy dec YM at 12030, I am long one CONTRACT. it is an agreement. somebody else must have an opposite POSITION to my "long agreement" and be short.
this is NOT true in the stock market.
if ABCD gaps overnight from 50 to 10,000 a share, every single long has gained wealth. the shorts (and assuming the stock has shorts, the shorts will still not exactly equal the longs, nor could they, since a brokerage has to have a share available in its pool to short (naked shorting aside, which gets even more complex))
if my futures contract goes up to 12080, EVERY SINGLE PERSON WHO GAINS $250 ($5 per YM point) is opposed by a person who was short YM and LOSES $250. period. it has to be that way.
all a futures contract is one side of an agreement. it is not a THING in itself.
consider real estate.
if i buy a house, and the housing market becomes movre valuable in my area because its now really desirable, there is NOT a corresponding position that LOSES value equally to offset my gain.
but if i buy an OPTION to purchase House X at $500,000 somebody had sell me that OPTION. he has the opposing position. the person that sold me the house otoh, is not SHORT 1 house.
our economy builds wealth. innovation, efficiencies, etc.
stocks are merely pieces of companies within our economy. it can see similar wealth built
a zero sum market cannot because nobody can enter a trade without a countervailing opposite position
Money makes it so confusing to understand why the stock market is non zero sum. In the economy at a given time there is this amount of physical property. XX shares represents all the physical property. Let’s imagine there is a big poker game where shares are the poker money. In this game what the players really win or lose is physical property. While the poker players play labor is being used to create more property from the property that already exists. So even though it’s still only XX shares on the table the poker players play for more and more physical property since more physical property is attached to each share, making this game non zero sum.
__________________
I’m not a believer in doubt, but I doubt I’m a believer.
Quote from whitster:
futures contracts are created out of thin air.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from whitster:
you have to remember that stocks represent a THING. a portion of a company.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
whitster,
So, only when we trade real things like stocks or houses wealth can be created or lost and we have a non zero sum, but when we trade agreements without the actual transfer of the real thing wealth cannot be created and we have a zero sum? Agreements then have their own price independent of the real thing, so it means that in futures we trade agreements about the underlying issue, not the underlying issue.
So, if I have somebody's agreement, then this somebody does not have this agreement and that makes him short and on the opposite side of my position?
"So, only when we trade real things like stocks or houses wealth can be created or lost and we have a non zero sum, but when we trade agreements without the actual transfer of the real thing wealth cannot be created and we have a zero sum? Agreements then have their own price independent of the real thing, so it means that in futures we trade agreements about the underlying issue, not the underlying issue.
So, if I have somebody's agreement, then this somebody does not have this agreement and that makes him short and on the opposite side of my position?"
um... basically yes.
look at the cot reports, for instance.
trading of agreements HAS to be zero sum because you can't have an agreement without two opposite POSITIONS
otoh, you can exchange a good without there being two opposite POSITIONS.
also, there are a finite number of goods (shares) but an INFINITE # of contracts.
if tomorrow, open interest on the dow increases by 10,000 contracts, that means 10,000 additional two sided agreements with a net/gain loss of ZERO.
but tomorrow, the only way there can be more SHARES of GE, is if there is a public offering of shares.
the shares represent an EXACT portion of that thing - GE - the company.
how people value it at any given moment is the democratic two way auction process of price discovery.
if i sell you my house, that i bot for 300k , for 450 k., i am not now short 1 house.
there is still one person long my house.
and i';m out with a profit.
if i buy an option to purchase a house, somebody else holds the paper to the other side of that agreement and they are necessasrily short.
if, tomorrow we discover how to make a perfect clean fuel out of corn, and corn goes from it's current price to $50 a bushel, every person who owns CORN just gained a hyoooge amount of wealth.
but the corn futures market cannot (net) gain a dime. cause for EVERY long positioon there is short positioon in that market (of course many people short corn FUTURES are long the underlying product in order to hedge their price, but WITHIN the futures market it is zero sum. but it is a fact that many use futures and options to hedge an underlying real world position and are not speculating. they are hedging a real product. if corn futures go up, their short goes down in value, but the corn in their silo goes up, so they are net even with where they were - a hedge. if corn prices fall, their short gains value concomitant to their silo'd corn losing value. net even (minus commissions, etc.). many people use futures and options this way. )
look at options. options are also agreements.
if the market could not grow wealth, then the stock market would not be the proxy for the companies it represents.
fortunately it is.
Quote from whitster:
to clarify in one sentence for the hard of hearing "opportunity costs (lost opportunity cause you didn't stay long and catch the whole move) are 100% irrelevant to zero sum)
if the SUM of positions does not add to zero, it is not zero sum
that is definitional.
unless the stock market has the EXACT same # of shorts positions as long positions in ALL shares of ALL stocks - and the market is structured such that it HAS to be that way, it is not zero sum
that is the criterium.
97 pages and still going strong! I'm going long 100 contracts on this thread, I see it hitting 1,000 pages over the next year or so, without reaching any conclusion! Anyone wants to take the other side so we can have a zero-sum game!
it's already reached a conclusion
there are just some that don't understand math, or game theory and refuse to admit the truth
refusal to admit 1+1=2 does not mean there is valid disagreement that 1+1=2
game theory was invented to describe a specific sort of system. the stock market does not meet the criteria. the futures market, absent commissions does.
the below is 100% irrelevant to the issue of zero sum
also, the term "positive sum" is also irrelevant
this is a binary thing. either a system is zero sum, or it isn't.
whether or not a buyer and seller can both benefit is 100% irrelevant to the issue.
zero sum is a description of a system. stock market does not meet that description.
read a book. educate yourself. 1+1=2. hth
----I asked you to provide an example where both the buyer and the seller of a stock benefit from their transaction. The specific transaction I mean and only that. Nothing external like the seller using his funds to purchase afterwards another stock or investing it in a profitable business or buying a home, etc. If you introduce external benefits that changes the nature of the game.
You forget that transactions take place because the buyer and the seller have an opposite view of the fundamental value of a stock at the time of the transaction. The fundamental value is not known in advance otherwise there would be no transaction. If the seller is wrong about the fundamental value the buyer profits at his expense.
"Wealth creation" changes fundamental values. It does not change the fact that these values exist but are uncertain at the time of the transaction. This uncertainty does not change the nature of the game, it is zero sum.
Unless you can provide a specific example of both a buyer and a seller benefiting from a specific transaction you have no sound argument in favor of a positive sum game of stock trading.
Quote from whitster:
it's already reached a conclusion
there are just some that don't understand math, or game theory and refuse to admit the truth
refusal to admit 1+1=2 does not mean there is valid disagreement that 1+1=2
game theory was invented to describe a specific sort of system. the stock market does not meet the criteria. the futures market, absent commissions does.
And there are some who still do not understand the simple concept that WEALTH is not created out of thin air in the stock market. It has to come from outside sources such as the govt, FED or consumers. The fact remains that EVERY dollar made in the stock market has 2 come out of somebody elses pocket. There is no wealth tree that buys the stock from you, it is another enitity using their money and transferring it to you in exchange for the stock.If you really fail to understand this then I find it hard to believe you actually participate daily in trading any market.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from whitster:
read a book. educate yourself. 1+1=2. hth
Quote from volente_00:
And there are some who still do not understand the simple concept that WEALTH is not created out of thin air in the stock market. It has to come from outside sources such as the govt, FED or consumers. The fact remains that EVERY dollar made in the stock market has 2 come out of somebody elses pocket. There is no wealth tree that buys the stock from you, it is another enitity using their money and transferring it to you in exchange for the stock.If you really fail to understand this then I find it hard to believe you actually participate daily in trading any market.
"Defining profits and losses relative to some common benchmark of fundamental value is the most sensible thing to do in the case of stock trading and this immediately implies the game is zero sum."
fine. then quote me where this professor says the stock market is zero sum
i'll stand by for this keen insight.
(it's not)
"After the abolishment of the Gold Standard it is very hard to define wealth any longer."
to an extent.
completely irrelevant to the issue, but true.
wealth is everything you own. your house, your car, your gold bullion, your stamp collection, your clothes, etc. etc.
MOST items are much less easy to immediately value (price define), and much less easy to liquidate.
again, irrelevant, but it actually goes against the alleged reason that volente thinks its not zero sum (but is not even an argument against zero sum, so what's the point)
the purpose, and nifty benefit of a two way auction market (stocks, futures, options, bonds, etc. are two way auction market) is that price is ALWAYS known (except when the market is closed). it's called "price discovery". if your a seller, the value of what u own in that market, your wealth in that market is IMMEDIATELY defined by the latest bid/ask.
of course, it VARIES, just like real estate, the value of the dollar, gold, food, gasoline, etc.
however, unlike most markets, there is one agreed upon price at any given moment in time.
it doesn't MATTER that if EVERYBODY who owned asset class X (be it a stock, or a maserati) decided to sell at once, that this would drive the price down (one of volente's red herrings). the same is true of ANY asset class. it's called supply/demand.
most assets are much less easily defined in terms of current price, than stocks. gasoline varies from station to station (not to mention that it's kind of difficult to sell it back), your house is different from every other house, and you don't know what u can get until you try to sell it. there is no AGREED upon price.
in stocks (or futures, etc.) the EXACT price is agreed upon at all times the market is open.
and of course, this fluxes with time, as does any asset class.
there are ONLY two kinds of systems when it comes to this distinction we are discussing - zero sum or non-zero sum
it HAS to be one or the other. no matter how many examples one gives of why it is NOT zero sum (all u need is one), some people can't understand the concept.
among many, the most obvious volente fallacy, is that if you don't REALIZE your wealth in dollars, it is not real.
this goes against every economic principle.
if you own a house, a hemicuda, 5000 ounces of gold, and 1000 shares of MO, you can measure your wealth
obviously, it is easier to value the gold and MO than the hemicuda or house, but the point is they all have a part in your wealth.
if gold doubles overnight, your wealth has significantly increased. the "thin air" concept of volente is a fallacy. the value of any asset (including a stock) is what somebody is willing to pay for it.
stocks, and two way capital auction amrkets in general, offer the CLEAREST and best defined price of almost any others (vs. say real estate etc.).
every time an asset is bought or sold, money is transferred.
that doesn't make it zero sum.
if gold doubles overnight, every single person who owns gold has realized an increase of wealth. if you want to think of that as "created out of thin air", it's nice - but still irrelevant.
wealth just increased.
same with stocks
whether or not a transaction takes place. a transaction merely transfers wealth from one form to another. but when the price of the asset increases, regardless of the transactions, the wealth changes (of the system) since there are people who own it (and some are short it). that is a change in wealth. that is all that is necessary for a nonzero sum system - that wealth can change in the system.
can't happen in futures, cause if gold FUTURES increase in price, every single gain in a person who is long, has a corresponding loss in a person who is short. regardless of when, if ever, gains/losses are realized.
"And there are some who still do not understand the simple concept that WEALTH is not created out of thin air in the stock market. It has to come from outside sources such as the govt, FED or consumers. The fact remains that EVERY dollar made in the stock market has 2 come out of somebody elses pocket. There is no wealth tree that buys the stock from you, it is another enitity using their money and transferring it to you in exchange for the stock.If you really fail to understand this then I find it hard to believe you actually participate daily in trading any market. "
Here we go again, I never said wealth can't increase or decrease. I said it is not created as you claim, it has to be transferred from one person to another. For every dollar coming into the market, there is one dollar coming out of somewhere to offset it. What part of this don't you understand ?
You trade YM. Say I decide to trade ym so I sell my boat for $5000 and open an account. You sell 1 YM to me at 11005. YM then falls to 11000. I have lost $25. You have gained $25. But the $25 was not created, it came from the proceeds of my boat.
You can plug in stocks, corn, oil or what ever else you want instead of YM and the fact still remains that zero wealth was created between the trade. It was only transferred from one person to another.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Quote from whitster:
every time an asset is bought or sold, money is transferred.
__________________
"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Transfer of ownership
Transfer of ownership
Quote from volente_00:
Here we go again, I never said wealth can't increase or decrease. I said it is not created as you claim, it has to be transferred from one person to another. For every dollar coming into the market, there is one dollar coming out of somewhere to offset it. What part of this don't you understand ?
__________________
"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
Quote from whitster:
"After the abolishment of the Gold Standard it is very hard to define wealth any longer."
to an extent.
completely irrelevant to the issue, but true.
Quote from whitster:
... in stocks (or futures, etc.) the EXACT price is agreed upon at all times the market is open.
and of course, this fluxes with time, as does any asset class.
Quote from whitster:
"
there are ONLY two kinds of systems when it comes to this distinction we are discussing - zero sum or non-zero sum
it HAS to be one or the other. no matter how many examples one gives of why it is NOT zero sum (all u need is one), some people can't understand the concept.
Quote from whitster:
"Defining profits and losses relative to some common benchmark of fundamental value is the most sensible thing to do in the case of stock trading and this immediately implies the game is zero sum."
fine. then quote me where this professor says the stock market is zero sum
i'll stand by for this keen insight.
(it's not)
Quote from volente_00:
And there are some who still do not understand the simple concept that WEALTH is not created out of thin air in the stock market. It has to come from outside sources such as the govt, FED or consumers. The fact remains that EVERY dollar made in the stock market has 2 come out of somebody elses pocket. There is no wealth tree that buys the stock from you, it is another enitity using their money and transferring it to you in exchange for the stock.If you really fail to understand this then I find it hard to believe you actually participate daily in trading any market.
__________________
I’m not a believer in doubt, but I doubt I’m a believer.
stock trading is an activity not a system.
it is somewhat "weird" (to use technical jargon) to say that stock trading is or isn't zero sum.
i know what u mean. i said it several posts ago, that EFFECTIVELY speaking, for short term traders (vs. investors) trading ANY asset may seem to be zero sum.
but zero sum is a definition of a system, not an activity, so to speak.
but it is a good point (and it confuses many people) that the activity of day trading is essentially a SEEMINGLY zero sum thing, because even though one is operating (if trading stocks) within a nonzero sum system, one is not really trading a stock anyways. one is trading other traders.
i think this is where a lot of the confusion is
"Yes every dollar made in the stock market has to come from somebody else’s pockets"
volente et al seem to have difficulty with the fact that when ANY asset increases in value (and you own it) your wealth increases. it's not "magic" as he says.
if you don't SELL the asset, the money does not come from anybody else's pocket.
realized gains in ANY system (zero sum or nonzero sum) of course COME FROM SOMEBODY ELSE.
what distinguishes zero from nonzero sum systems is that if i sell an asset in a nonzero sum sytem (like my house), it does not follow that somebody else LOST what i gained.
they GAINED a house. that is now worth 500k. despite the fact that when i bought it, it was worth 300k
assume a market of ONE house
nice and simple
i buy the house for 300k
my wealth (it's all i own) is now 300k
the systems wealth is 300k
my area suddenly becomes desirable to live, and my house is now worth much more
i have GAINED wealth. but its NOT zero sum. nobody needed to LOSE money (like in poker) for me to gain this wealth - my now 500k house.
wealth is gained whenever an asset increases in value - for WHATEVER reason.
what is the wealth in the system now?
500k
has ANYBODY lost any money?
no (this is your first sign it is not zero sum)
yet, i (the sole participant inthis nonzero sum game) now have 500k wealth
Note: the fact that i haven't sold it is 100% irrelevant. it's still wealth.
i decide to sell the house. dood pays me 500k
i used to have 300k wealth (before my house went up in value), then i had 500k wealth in my house. now i have 500k wealth in my pocket.
so, i have 500k wealth now (i used to have 300k). 200k is PROFIT.
has anybody lost 200k so i could make 200k? no. this is why it's not zero sum
if walk out of a poker game with 200k profit, it came from somebody else's loss. THAT's zero sum
now, what is the wealth in the system (one house). it's 500k
that system has gained WEALTH. it was 300k, now its 500k
i've got a 500k wealth (Im now outide the system) with 200k of that as profit
the guy in the system now has 500k wealth (with no profit).
if house values go down, the system LOSES wealth. if house values go up, it GAINS wealth
neither could happen ina zero sum game.
see the distinctions?
Hrm. What was wrong with my painting analogy?
3 lithographs sell for different prices. They cost the same price to print from the printer, and the same 2 seconds to sign and number by the painter.
None of them 'cost' any differently, but they sell at 3 different prices. Who's the other side of the 'zero sum'?
The paintings have a range of X to X + Y value now and they didn't cost anyone anything, not even the painter because he only had to paint once and now has a lot of prints to sell... but they keep going up in value.
Wealth was 'created' no?
Page 101...I'm up 4 pages
Not Zero Sum Game..
Stock trading like Casino Poker can be beatable games for expert player.
HOWEVER, Trading and Casino Poker are not Zero Sum Games.
In a Zero Sum Game, ALL money wagered is returned to the players. In both Trading and Casino Poker the players are charged fees to play.
"Zero Sum Game " is a term with a precise definition that can be looked up: (http://en.wikipedia.org/wiki/Wikipedia .
Even though Trading and Casino are normally beatable there are instances where unknowledgeable players are charged fees that are too high so that they will lose in the long run no matter how well they play. Fortunately, this is not the case at most firms or casinos.
Most of the arguments surrounding Zero Sum Game/Trading result because the posters both have different definitions of the term. When it comes to definitions, "I try not to roll my own".
depends on which markets you are talking about. futures and traded stock options are zero sum. Equities are not, as they can be awarded to directors/insiders etc who have "paid nothing" for them, but sell them on to the next guy.
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http://lauristonletter.blogspot.com/
How about a scenario where buyer A buys when a company goes public at $10.00.
He sells to buyer B @$20, who sells to buyer C @$40 who sells for $ 100 to a Group of investors who take the company private.
Where is the loser?
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Boib
Its easy to make a small fortune if you start with a big one
me too
Quote from bitrend:
Nicolas Darvas at the beginning he thought it's about ecomony, serious business, wealth creation; and he lost. Until he started to find out the truth; it's just The Other Las Vegas then he started to make money.
Quote from DynamicReplic8r:
For every buyer, there is a seller. Therefore, when the long makes money the short loses money.
hey witt, I can't believe you responded to a two year old post.
Re: Stocks (No) Futures (Yes)
Quote from NUTSNEAL:
Stocks = (No to Zero Sum)
Futures = (Yes to Zero Sum)
Simple Equation
FGL=futures gains on longs
FGS=futures gains on shorts
TFG=total futures gains
SGL=stock gains on longs
SGS=stock gains on shorts
TSG=total stock gains
FGL+FGS=TFG=0
Since the above equation is ALWAYS (Yes at all times) equal to zero, futures are A ZERO SUM game.
SGL+SGS=TSG=X
Since this equation is not always (Probably has never even been once) equal to zero stocks are NOT ZERO SUM
X does not equal 0 at all times
To be a ZERO SUM GAME the equation must equal 0 AT ALL TIMES. Whereas in reality, even if the stock market stops trading or even drops to zero the stock equation will not equal 0.
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"STRIVE FOR CONTINUED IMPROVEMENT NOT POSTPONED PERFECTION"
It's a waste of time to debate this topic any more. Nutty is right of course, ignoring transaction costs. But Darvas had the right idea, the Markets are Las Vegas II, or whatever. And THAT'S what matters.
wealth is created from nothing in a stock.
you make some things called shared and someone pays money to them for you. Theoretically, you don't care if the price of the share goes up or down from there because it cost you nothing to make the shares (again, theoretically, b/c of course u give up "ownership" of the company but that's irrelevant to this discussion).
I.e when you have an IPO, and the stock opens at $100, the people that sold the IPO (original investors) made $100 a share. The people that bought the shares have made 0$.
futures contracts are NEVER "created". they are either sold or bought.
i dunno why this zero sum thing is hard for people to understand.....
I hate to throw a monkey wrench in this 3 year old thread, HOWEVER, one could debate that even futures isn't zero sum for all the participants (it is for traders). The purpose of the markets is for commercial hedging, so in so far as hedging adds to a commercial interests' efficiency, it creates wealth.
Why does it seem so many people in this thread have never ever heard of something called DIVIDENDS?
Hey I still have my MCD stock and get y $19 every now and then. It's great.
Cajun Sniper - Co-Admin PureTick.com
Quote from Capablanca:
Why does it seem so many people in this thread have never ever heard of something called DIVIDENDS?
I don't like to think of wealth as a numerical value but as a comparative value, although we use that numerical number to compare. But has wealth actually increased through technology and innovation or has it only lowered the value of assets? Are people wealthier now then 50 years ago? If 100% of the population has the same wealth, would anyone be wealthy at all, or just average?
In order for the zero sum concept to be false you would have to assume that the value of equity could only go up, which isn't true, if it were the price would be infinity.
Quote from Capablanca:
Why does it seem so many people in this thread have never ever heard of something called DIVIDENDS?
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"With God all things are possible"
"You came to see a race today. To see someone win. It happened to be me. But I want you to do more than just watch a race. I want you to take part in it. I want to compare faith to running in a race. It's hard. It requires concentration of will, energy of soul. You experience elation when the winner breaks the tape - especially if you've got a bet on it. But how long does that last? You go home. Maybe you're dinner's burnt. Maybe you haven't got a job. So who am I to say, "Believe, have faith," in the face of life's realities? I would like to give you something more permanent, but I can only point the way. I have no formula for winning the race. Everyone runs in her own way, or his own way. And where does the power come from, to see the race to its end? From within. Jesus said, "Behold, the Kingdom of God is within you. If with all your hearts, you truly seek me, you shall ever surely find me." If you commit yourself to the love of Christ, then that is how you run a straight race."
"Hopefully one day you'll realize there are more important things in life than money, it's a means to an end is all, it's not the be-all and end-all of life"
"You can chase rainbows and dreams if you like, I've already achieved mine and I'm perfectly content with my lot in life"
"The destination is what your determination makes it"
"Is the juice worth the squeeze?"
"You miss 100% of the shots you never take"
"Buy the low, sell the high, walk away at the top"
"Fear is not an option for successful traders."
"Contrarians never die. They just fade away."
"You can't win if you don't bet"
"The one defining characteristic of successful traders is their refusal to quit in the face of adversity"
"Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough"
"Trading is an obsession, passion, the best entertainment, a challenge, the most fascinating game humans ever invented, a science, an art, the way of living and thinking, the strongest desire you ever had, an intellectual and physical fitness exercise and much more. Look inside your soul. If you don't feel this way about trading then you should not be trading at all. However if some of that resonates with you then don't give up. Work hard, sweat, get frustrated, create, test, enjoy the triumphs and suffer losses, become a great trader and make as much money as you want!"
Zero sum == your win is somebody's loss.
in the real world...your profit is somebody profit==transaction actually takes place. only 5% of wall street volume is real transaction. there is actually real investor or commodity buyer or seller of oil in the volume. only 5%of buyer will take delivery of gold and oil.
it's not theory it's wall street casino,.
[
QUOTE]Quote from adrock1795:
I don't like to think of wealth as a numerical value but as a comparative value, although we use that numerical number to compare. But has wealth actually increased through technology and innovation or has it only lowered the value of assets? Are people wealthier now then 50 years ago? If 100% of the population has the same wealth, would anyone be wealthy at all, or just average?
In order for the zero sum concept to be false you would have to assume that the value of equity could only go up, which isn't true, if it were the price would be infinity. [/QUOTE]
investors in wall street casino is a minority of 5% of volume.
wall street brokers/market makers traders cannot support itself if it relied on commissions from real investors.
you can't make a living on commissions from real investors who buy and hold and collect dividends.
Quote from volente_00:
And where do you think they come from ?
A transfer of wealth to you from the company.
ZERO SUM?!?!?!??!?!?!?
fuck that, how does one zero-out innovation?
the whole, every buyer has a seller argument is rubbish.
It's quite possible, and is often the case ... the seller/buyer, buyer/seller both made/lost
Let's say, a train carrying nuclear waste blows up and decimates a region of the country ... Who Wins!?
Let's say, Cancer is cured, Who Losses!?
Zero-Sum is antiquated, and wrong
(Except of course in the options market ... where my sum is always less than zero)
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