The $100 has not yet been lost in your example and in the end it may not be $100.00 that is lost....What will get lost is if/when the stock gets back down to $10......now the company is again $100...yet the person who bought at $20.00 can only sell at $10.00 this is from your example..and only from your example I agree that the market is not zsg....because of the vig..(but as inandlong stated earlier this is not true).....I really dont care...as long as my game doesnt add up to zeros.... Darkone....nice to have you back
if i buy a stick of gum from you for $100, have i lost $100? what if i turn around and sell it to my idiot cousin for $101? what if my cousin then sells it to his neighbor for $105? if the neighbor eats the stick of gum by accident, then he has lost $105- Where did it go? Follow the money. $100 went into your pocket, $1 into mine, and $4 into my cousin's. But it wasn't the neighbor's $105 in the first place: he borrowed that money from the bank. Now he's broke, so he defaults on the loan and screws the bank. The bank is pissed because this has been happening a lot lately, making their books look sketchy. So they stop lending money for bubblegum and start calling what loans they do have. Bubblegum makers are put in a pinch and start laying off workers. More loans default. More capital is destroyed. The economy goes into a death spiral and Robert Prechter decisively proves how Elliott Wave predicted the whole thing. p.s. thx Cubano, though I didn't really leave that time- just kind of lost interest in posting for a bit. it comes and goes
bringing up prechter and elliot wave opens up a whole can of worms....this alone could fill up thousands of pages of dribble. imo...scenario is possible, but not likely.
jaan, kind of close, but no cigar! Five guys come to play poker, 5 grand buy-in, winner take all. Total of 25 in the game then right? No more, no less. One guy wins it all. There is still a total of 25K. No more , no less. Zero sum means there is no net gain or loss! Period. ZERO SUM means when you add the components together the sum is ZERO! Hence the name... ZERO SUM. Get it? Zero sum..... zzzzeeeeerrrrrrooooo ......sum!
ZSG implies that there is a ZERO SUM..... the stock market is not ZSG. my example was fairly simple - who lost $100 - the answer is also very simple - NOBODY! Gum, cousins and all manner of confusion will not change that. if you believe you are correct, fine... this is really not gonna help my trading anyway! good luck
a) there is no free lunch. b) if there is no free lunch, then somebody must be paying for it. Do you understand the fractional reserve system? Do you understand that fiat money can be created and destroyed via strokes on a keyboard, that massive dislocations of capital in either direction can rip apart the structure of an economy, that retirees are dependent on younger generations holding up the value of their stocks as they cash out, that the only way the masses can win long term is if a minority creates a sustainable rise in value through some form of innovation or action and then shares it with the rest of humanity, that wealth transfer is a real and constant phenomenon, that capital consistently flows from irrational hands to rational ones just as water seeks its own level, and that it happens in a million different ways both intentional and unintentional? There are clear losers when the money supply contracts, just as there are clear losers in a game of musical chairs. When credit flows expand at a rate faster than true value is being created, they will necessarily contract sooner or later, causing messiness and pain in the process as fools reap their folly. This happens over and over because people are prone to overreaching. In your "who loses" question you assume no one loses simply because the loss hasn't been realized yet, but the length of holding time is irrelevant, the ultimate cashout point is what matters. As long as credit flows are expanding, everyone can be winning- TEMPORARILY- just as no one is losing in musical chairs when the music is still playing. But the only way credit flows can expand PERMANENTLY is IF some real value, some sustainable gain, is created that then establishes a new floor (value players prefer buying as close to this 'floor' as possible). And if new value is created, then it was smart thinking or hard work wot done it- again not free, had to come from someone's hands or head. The government and many people think and act as if gains are free but they are really not. Fiat paper is free. Sustained value add requires innovation and hard work. And there will always be rubes who get too excited and shills to egg them on, thus there will always be booms that go too far in response to progress and inevitable busts in response. It's a zero sum game that expands and contracts and never stops, though the size of the game gets bigger w/ time. Winners today can be losers tomorrow and vice versa, and with equities the decision can be put on hold for 5 or 10 or even 100 years, unlike a futures contract with an expiration date. But in the short run output must always be matched by input. If your stock goes down on Monday and back up on Tuesday, it was different dollars that pushed it back up. Output must match input in the long run too- ZSG minus the vig- but the picture is muddled by the fact that we are heavily betting that long term inputs will continue on an upward trend. The whole world is dependent on a minority of individuals to maintain a continual inflow of knowledge and productivity resulting in long term value add.
the stock market is not a zero sum game in the long term.assets are created from ideas and services.think of it like a house.you start with 50k worth of materials and the carpenter spends 50k worth of labor and when he is finished it is worth 200k.same thing in stocks.bill gates had an idea.lots of people want to buy his idea(software).so microsoft was built from an idea to a valuable asset.no one had to lose money for that to happen. another example:a farmer puts a seed in the ground.it grows into a valuable asset from nothing.same principle.
Ignoring transactions costs, it IS a zero sum game (assume the expected returns on stocks are zero, which is a good approximation in the short run). If you made some $, that does imply someone lost it. Of course, you probably transacted with different parties, but what difference does it make? Whoever sold it to you, could have sold it for more, had he/she waited a bit. And whoever bought it from you could have bought it for less. Your gain is their loss and vice versa. If you extend the holding periods to a point where the expected postive returns on stocks kick in, then everybody can potentially win. But again, whatever you make by trading with others, they could have made. They'll just make less now.
once again - its not complicated. who lost the $100? somebody had to lose to have a ZSG. are we sure its zero sum game? could it be zero sum gain? im not posting anymore on this thread... its not about being righ - its about making money - this isnt gonna change my bottom line. best to all!