First of all, I implied WHEN it appreciates. Obviously if it doesn't appreciate, no wealth is created (for those that are long). Second, its not MY "magic," its aphexcoil's. I was NOT implying that everyone makes money in the stock market no matter what. I wish you people would read someone's post before you critisize them.
I said that it wasnt a zero-sum game (look to previous posts)...I was refering to this "magic".... p.s. I apologize MU if you thought i was critisizing......that was not my intention...but i can definitely see where u might have assumed I was critisizing.........
Anytime a stock drops below its initial offering price, that stock is a negative sum game for the participants.
Here it is at the very basic level: The earth contains "stuff" that does not really increase or decrease. This stuff, often called "resources" can be used for various functions. A person or group of people will assign a value to ANYTHING. This includes everything from gold, corn, computers, lumber, oil, etc. Well, if something "increases" in value, it simply means that either demand has increased for it or the supply of that commodity or resource has decreased -- or both. If a stamp or rare coin increases in value, it is not because it is a magic little thing that is creating money out of thin air. The amount of money in circulation at any given time will remain the same until the supply on that money is changed. That rare stamp was, at some point in time, purchased for let's say a quarter. Why, 80 years later, is that stamp worth 100 dollars? Well, what is the supply of that stamp relative to whe it was first issued? If I sell it to someone 80 years later (let's forget about inflation) and someone gives me $100 for it -- we can say that the money had to come from somewhere -- so who loses the $99.75? The Post office? The guy buying? What will he sell it for? A lot of people don't seem to have a solid grasp of fundamental economics.
except the people that initially sold the stock.. (and that would only permanently be true if the company ceased to exist..)
Money is not created or destroyed in the markets. It simply tades hands. It is a zero some game in all markets. Or as some like to call it a minus some game.
Whether any given person makes money or loses money doesn't make the fundamental game negative sum or not negative sum. As I view it, I'm not including the company that booked the proceeds of the stock sale to its balance sheet as being a participant in this game. In my view the participants are the investors & speculators who buy and sell the stock once it has been made available for sale on the market.
if that was the definition of ZSG, then poker with more than 2 players would not qualify as ZSG, because the distribution of losses among losers is rarely identical to the distribution of gains among winners. for example, imagine a poker game of 4 participants where three people win and one loses... just nitpicking of course... - jaan
Money IS created and destroyed, all the time. When credit flows expand (banks increase their lending), the total money supply expands. When credit flows contract (banks call in their loans), the total money supply contracts. The stock market is a zero (or minus) sum game, with the caveat that new flows are constantly coming in to replace the old flows going out, which gives the appearance of an "everybody wins" situation in bull markets. When money flows are constricted and/ or net negative, as happens in bear markets, the truth comes out. The concept of markets going up forever is predicated on the necessity of capital flows- i.e. credit expansion as a result of productivity- going up forever also. And when a stock goes to zero, it does not have to have shorts riding it all the way down. That money can simply go back into thin air. For every dollar of loans that banks call in and do not replace, something like fifteen to twenty dollars is removed from the system. If the CEO of dumb.com borrows $100 million, then wastes it all, everyone can be fragged and that money can be gone without a single short lending a hand- because fractional reserve capital- electronic money essentially- can self destruct of its own accord.
company is created with 10 shares at $10 bucks. 1 share is sold at $20. value of company = $200. if this is ZSG, then who lost the 100 bucks?