i've always heard that: - the markets, esp. in futures, is a zero-sum game - the PPT Plunge Protection Team is ready to step in anytime so just wondering, do they make or lose $ on a net basis? ie. after all their efforts, are they still making $ from other participants, or actually losing / subsidizing everyone else? bc if the latter, if they're really acting as the bagholder and subsidizing everyone else, isn't there going to be a limit? like when the Chinese stock market popped in 2015, and their local version of PPT stepped in, eventually they had to give up via public announcement that the state-owned banks won't be buying more & everything reverted back to normal on the charts
PPT are the Keyser Söze of the financial markets. With the legendary timing they have, it is unlikely they have ever lost.
Next thing we’ll be talking about if the moon landing happened, is the earth flat, and where is Bigfoot right now.
There have been rumours of the PPT since Livermore's days from ROASO: I heard a day or two later that Mr. Morgan simply sent word to the frightened bankers of New York that they must provide the money the Stock Exchange needed. "But we haven't got any. We're loaned up to the hilt," the banks protested. "You've got your reserves," snapped J. P. "But we're already below the legal limit," they howled "Use them! That's what reserves are for!" And the banks obeyed and invaded the reserves to the extent of about twenty million dollars. It saved the stock market.
it just seems like the term has crossed over to the mainstream press, with Reuters reporting these past few days: https://www.reuters.com/article/us-...-convene-plunge-protection-team-idUSKCN1OM0LJ if the PPT is indeed operating, as they seem to be with the historic ramp in S&P 500 futures, then on a net basis they're either making $ off the other participants, or losing/subsidizing the others. either way, it looks like a redistribution of wealth exercise - 1) if they made $ off the others on a net basis, wouldn't that mean they made profits out of those who were forced to liquidate at the lows -- seems quite predatory 2) if they lost $/subsidized others on a net basis, isn't there a limit to how much they can potentially lose, if only bc it would take a lot of money and balance sheet skillz to do all that my inclination is to believe 1), that maybe they don't try to make as much $ as possible, but are still making $ on a net basis with all the buying from forced liquidations, etc in that case it'd seem like the losers would be - a) Ppl who were forced to liquidate at the lows b) Ppl who respected their stop loss points/technical analysis entries/exits and sold to the PPT near the lows c) Ppl who bought into the market while the PPT was exiting their positions, ie. ppl who used technical analysis entries/exits to buy into a seemingly good mkt when PPT was really using the chance to secretly liquidate and offload their book d) The CTAs, who were positioned using traditional price movt signals - i mean, these guys have lagged the market for years, maybe they were outplayed & the winners would be - a) the PPT b) Ppl who acted in tandem with PPT by only buying into market at times of forced liquidations c) Ppl who used mean reversion strategies, in contrast to the CTAs
Which is exactly why if you're interested in economics you should make the effort to get a solid economics education rather than just listed to what you've "always heard". Let's break down your statement. First, "markets are a zero sum game". Really? The market cap today of the Russet 3000, which is a good chunk of the stock market, is something north of $25 Trillion with a T dollars. What do you think it was a hundred years ago in 1918? If "what you always heard" was correct, it would be the same, when adjusted for inflation, which would be about $1.5 Trillion. Of course it wasn't nearly that size. The country was a fraction of the size it is today, productivity was a fraction of what it is today. Trade was a fraction of what it is today. The economy as a whole was a fraction of the size it is today. Naturally that means the market cap of the stock market was a fraction of what it is today. Companies are entities that make real things and produce real services that have value. Companies stocks increase in value over the long term because they create value. That is decidedly not zero sum. In fact, to go further I'd submit that many of the world's major problems, including the anti-immigrant, anti-trade, nationalist sentiment we see today, is due to small minds who believe that the entire world is zero sum and perhaps can't even grasp the concept that this isn't the case. As for "esp. in futures", given that futures, at least stock futures, are simply a version of the market, if the market grows then a portfolio invested in S&P 500 futures would grow at exactly the same rate as a portfolio invested in SPY or the individual stocks of the S&P 500. Why would it be any different?
Of course it's possible to roll S&P 500 futures and almost exactly replicate the return of SPY. Not to mention that if you agree that something isn't a zero sum game then cutting it into smaller time periods doesn't turn it into a zero sum game, just from a basic logic perspective.
ok, i checked and investopedia specifically lists futures and options as an example of a zero-sum game https://www.investopedia.com/terms/z/zero-sumgame.asp "In the financial markets, options and futures are examples of zero-sum games, excluding transaction costs. For every person who gains on a contract, there is a counter-party who loses."
But according to Sig, if everyone keep rolling their contracts, then it is no longer zero sum, everyone will win!