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.
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.
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
Your assumption is based a fixed money supply. How much more money is available versus 75 years ago ? What is the national debt today compared to 75 years ago ? A share of stock represents a claim to a company's assets should they go belly up. Although the shareholders are last on the ladder you can not say that issued stock is not a liability to the company.
My position is that wealth can't be created in the stock market. 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.
Where did all this come from whitster ? Did it just grow on the wealth tree ? http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
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.