I'm sorry, but that's crap. Big spreads and liquidity add up quite a lot. If numerous consumers want to exit, there is not much liquidity, they are probably going to get hit much harder in their sale. And with no liqudity, spreads can be 30 cents. In a $30 stock that is 1% right off the investment. That doesn't matter? C'mon buddy, be serious! And then when you add up all the small savings for retirement funds and mutual funds, it is substantial.
I did (liquidity, tighter spreads, lower commissions), and only below did you address it (and poorly I might add).
If you're not trolling, then: A) You got seriously burned in the market and have a HUGE grudge against traders or anyone involved professionally with the market B) You are mentally handicapped I'm going to attempt to answer your idiotic "argument", well if you ever fix your selective reading problem. Trading is speculating and speculation is one of the oldest professions throughot human's history. Speculators are vital to any functioning market since they provide liquidity and make markets more efficient. Without traders (otherwise known as gamblers by you), where would today's stock markets be? Most of the volume in today's markets are performed by short term traders. Take out all speculators from the picture and there would barely a market left for the average investor. Just occasional big blocks going off. Also, the day trading industry provides a good chunk of jobs through the support functions of clearing firms. I truthfully doubt that the tech support guys in my office are upset that "gamblers" which do nothing productive provide jobs in an industy that has had rough times for almost 5 years.
Compared to what? People have been getting hit with 6% or more commissions in real estate forever, and yet the real estate market seems to continue functioning. 1% transaction cost is a bargain, depending on your comparison point.
If this is a display of the critical thinking skills of the average trader, I like my odds in this game. I've never been burned in any market nor am I mentally handicapped. I have an advanced degree from an Ivy in a quantitative subject. Also, I get called an idiot, a moron, and worse about 50 times a day, literally. The forcefulness with which I get berated for being a moron correlates quite nicely with how quickly I am emptying the person's pockets. So, I don't bruise easily, and you might as well save the insults and try to use reason instead. You'd do well to express what argument you're addressing first. My main argument is that people may react negatively to trading as a profession because they see it as non-productive and/or predatory, and that this is not particularly irrational because that is indeed the inescapable nature of zero-sum games. That people are getting upset and defensive about this is really perplexing. It seems relatively obvious and I wouldn't think it would be particularly controversial. Did I say it was new? Why did you think it was relevant to point out the age of the profession? Do you think people are going to respect a profession based on its longevity? I think the answer to that is clear, considering how most view the "oldest profession." That's of course a true statement. However, it is also a true statement that gamblers are necessary to the functioning of a poker game, since they provide the action and employ the dealers. However, neither statement says anything about the productivity associated with running the game in the first place. I can give you all kinds of descriptions of how the players can change the nature of the game, which is what almost all of the attempted refutations of what I'm saying have attempted to do: liquidity, spreads, etc. However, none of this is relevant to the idea that at the end of the day, what has happened is that some wealth was transferred and nothing was gained on the net. I think there's one reasonable way to refute this, which I point out below. Let's clear up one thing. I am talking about irrefutably zero-sum markets such as commodities or financial futures. Stock markets have additional dimensions which create a whole slew of new considerations. I'm not directing my comments towards non zero-sum markets. Take all the professional gamblers out of the poker games and there would be no games left for the recreational players. Do you see the irrelevancy of what you're saying? The "average investor" in a zero-sum market is going to lose. You're not doing him any favors by giving him a market to participate in, in the first place. I truthfully doubt that the poker dealers are upset that there is a poker boom in the past couple years, either. It's of course also irrelevant. None of this makes playing poker a productive activity, nor does employing people who make money off day traders make day trading a productive activity. There's really one reasonable answer for some markets and I'm surprised no one has offered it. In the case of commodities, the speculators do offer the hedgers a service by absorbing their risk for a price. The hedgers can benefit from a "loss" from the resulting stability they've gained that has other benefits for their business. Was that so difficult?
i disagree that trading in a futures market or any other zero sum game market is equivalent to taking money from other people. what if the counterparty's goal was not to speculate? they just want to hedge their position. yes, the bottom line is that wealth is transferred, but there is value added to all of this. if you read hull or some other intro to the derivatives markets, speculators do provide a service for trying to gain money. it is legitamate in the sense that it enables sophisticated investors to customize a portfolio of securities that creates their ideal payoff with their ideal risk/reward characteristics. granted that not all investors are sohpisticated, but this is the idea of complete markets, ala your intro to invcestments textbook (bodie will be a good start). so i think your perception is a bit naive.
I think we crossed in recent posts (you'll see I said basically the same in my last post): I agree with the risk transferrance interpretation of value creation and accept that as a valid refutation of the "zero sum can't be productive" viewpoint. However, your next sentence is a non-sequitur. I still think it's gambling. I also think getting into your car and driving to the store is a gamble, and don't think having a further semantics argument about what constitutes gambling would be productive.
i think what you are missing is that the act of wealth transfer in itself is a vehicle to improve the efficiency of the financial system. take for example IPOs. arguably, the institutions who buy the newly issued stock from the i-banks are entering into a zero sum game with the firm. however, by the act of their participation in the IPO, wealth is distributed and the firm can proceed to invest with their newly raised money from their public offering. take for example a farmer. he shorts corn futures so he can hedge. the speculator on the other side takes the risk in the hope for gain. in his very act of selfish interest, he has provided a value of risk transfer. the value is in the risk transfer that you cannot value plainly