Pretty much all "market reactions" boggle the mind. It's a bunch of people playing on rumors to gamble with other people's money in order to try to make a zero risk (for them) fortune.
Pretty much all "market reactions" boggle the mind. It's a bunch of people playing on rumors to gamble with other people's money in order to try to make a zero risk (for them) fortune.
Market conditions are often irrational, but investors are not a bunch of mad hatters in an ivory tower. And investment is not equivalent to letting it ride on black. Investment is fundamentally...
Market conditions are often irrational, but investors are not a bunch of mad hatters in an ivory tower. And investment is not equivalent to letting it ride on black.
gamble with other people's money
Investment is fundamentally different than gambling. Gambling is based on chance. Investment is based on a company's ability to generate profit. You could be obtuse and say "well I don't know whether companies will do well or not so it's basically gambling" but that doesn't hold a ton of water. I also don't really know how it's "other people's money" we invest.
zero risk (for them) fortune
I'm pretty sure every brokerage explicitly points out the multitude of risks in investments.
And the assessment of a company's ability to generate profit is done how often? Yearly? Quarterly? Monthly? Daily? In fractions of a second that occur during high frequency trading all day every...
Investment is fundamentally different than gambling. Gambling is based on chance. Investment is based on a company's ability to generate profit. You could be obtuse and say "well I don't know whether companies will do well or not so it's basically gambling" but that doesn't hold a ton of water.
And the assessment of a company's ability to generate profit is done how often? Yearly? Quarterly? Monthly? Daily? In fractions of a second that occur during high frequency trading all day every single day? And who exactly is providing them this inside information into the second by second goings on of the companies in order to make this assessment?
I also don't really know how it's "other people's money" we invest.
Is the broker putting up his own money or someone else's?
I'm pretty sure every brokerage explicitly points out the multitude of risks in investments.
Which has what to do with the fact that the broker takes none of those risks personally?
Investing isn't just literally about analyzing earnings reports to make analysis of a company. You can use data and analysis of market conditions, external factors, etc, to make educated...
And the assessment of a company's ability to generate profit is done how often? Yearly? Quarterly? Monthly? Daily? In fractions of a second that occur during high frequency trading all day every single day? And who exactly is providing them this inside information into the second by second goings on of the companies in order to make this assessment?
Investing isn't just literally about analyzing earnings reports to make analysis of a company. You can use data and analysis of market conditions, external factors, etc, to make educated judgements on the state of the market.
Is the broker putting up his own money or someone else's?
I'm not sure what you're trying to say.... A broker invests money how you ask them to. They provide you a service. Does a valet suddenly own hundred of cars? I think you might have a misunderstanding of what the purpose of a broker is. They exclusively provide financial services to customers, acting on their behalf.
No it's not. It attempts to account for minuscule fluctuations and changes in valuation. For example, let's say I have a data analytics system that sees the price in pork rising. Therefore, I can...
No it's not. It attempts to account for minuscule fluctuations and changes in valuation. For example, let's say I have a data analytics system that sees the price in pork rising. Therefore, I can conclude that sausage vendors will probably be affected. I could utilize that data to effectively HFT by making micro adjustments based on market conditions.
But again, it is by definition not gambling - although you won't always make a profit the outcome is not at all determined by chance.
Do you consider building a bridge gambling because you're not sure how many people will pay tolls to make it profitable? Or do you just find issue with the finance industry in particular?
Just because the probability distribution is unknown doesn’t mean the market isn’t stochastic. It depends on your definition of gambling, I think. In the colloquial sense, investing in stocks or...
Just because the probability distribution is unknown doesn’t mean the market isn’t stochastic. It depends on your definition of gambling, I think. In the colloquial sense, investing in stocks or stock options is basically the same as placing a bet on a dog in a dog race. The dogs are not all the same, but there is still a probability distribution for the outcome that you don’t know when you place your bet.
In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is split up. The market is,...
In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is split up. The market is, on average, constantly creating new value.
The broker always wins in the same way that a valet or dry cleaner always wins - you're paying them. It's disingenuous to compare them to a casino house. And yes, value can be lost, but...
The broker always wins in the same way that a valet or dry cleaner always wins - you're paying them. It's disingenuous to compare them to a casino house.
And yes, value can be lost, but conventional wisdom is, on average, value is always created. You're free to disagree with that point but it's a key principle of investing.
I don’t see how it’s disingenuous. If I sit down to play Texas Hold Em at a casino, I’m paying them (i.e., the house takes a rake) to run the game. I don’t disagree on that point as I don’t know...
It's disingenuous to compare them to a casino house.
I don’t see how it’s disingenuous. If I sit down to play Texas Hold Em at a casino, I’m paying them (i.e., the house takes a rake) to run the game.
And yes, value can be lost, but conventional wisdom is, on average, value is always created. You're free to disagree with that point but it's a key principle of investing.
I don’t disagree on that point as I don’t know enough about macroeconomics to argue against it. I’m just saying, from a layman’s perspective and definition of gambling and picking stocks, they are so similar as to basically be indistinguishable. I’ll admit that there may be some esoteric macro-economic side-effects of stock markets that are not present with traditional casino gambling. But I think that’s beside the point. What about state-run lotteries? Are you saying those aren’t gambling because of their side-effects? I just don’t understand your argument, and it seems like you don’t want to label market investing as gambling due to the negative connotations of gambling. If I’m mistaken on that, then sorry, but I think it’s a silly position to take.
Brokers don't run the markets..... They provide services. They don't "rake" because they don't provide the game. They literally just assist you in making trades. And I think you're mistaken on my...
Brokers don't run the markets..... They provide services. They don't "rake" because they don't provide the game. They literally just assist you in making trades.
And I think you're mistaken on my assertions re gambling. In investing, the pot constantly increases, as more value is created by the market. In gambling, money is only redistributed. In investing, money is actually created.
Edit: I should say that I have no problem with gambling, but with gambling in the long run you end up with zero. With investing in the long run you end up with more money than you started.
I'm not sure if this holds up, but I have a sketch of an argument that market prices must have some randomness in them to account for uncertainty. Market prices are predictions about the future...
I'm not sure if this holds up, but I have a sketch of an argument that market prices must have some randomness in them to account for uncertainty.
Market prices are predictions about the future and many future events are unpredictable; we don't even know their probabilities with much rigor. If we were being scientific we would give a broad range of possible valuations, but the market requires consensus on a single number. How is that number chosen? Why would it be stable? It seems like uncertainty would result in volatility?
When we say some event depends on chance, it means we don't know the forces causing it to take a certain value, and this seems as true of market prices as it is of gambling. Many gambles are more predictable than the market because at least the probabilities are understood.
Reposting another comment: In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is...
Reposting another comment:
In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is split up. The market is, on average, constantly creating new value.
Yes, of course, and this is why investing is well worth doing. With long-term, conservative investments, much of the randomness can be avoided. Nonetheless, if you want random risks to gamble on...
Yes, of course, and this is why investing is well worth doing. With long-term, conservative investments, much of the randomness can be avoided.
Nonetheless, if you want random risks to gamble on for possible short-term gain, the stock market is a good source of them. People who don't want risk will sell it to you.
To be fair it depends more on whether the investors know this more than anything. Unfortunately the idea of putting money in something abstract like a stock and somehow making money out of it is...
To be fair it depends more on whether the investors know this more than anything. Unfortunately the idea of putting money in something abstract like a stock and somehow making money out of it is basically the definition of a get-rich-quick scheme and perfect clickbait material so unless you put some barriers to joining the market it will be flooded by these types of investors and all you can do is out-spend them since the stock market is based on buyers and sellers.
Your point is tangential to the article, and I think fundamentally flawed. The market is a fairly efficient 'wisdom of the crowds' pricing mechanism. Individuals have been moving away from...
Your point is tangential to the article, and I think fundamentally flawed.
The market is a fairly efficient 'wisdom of the crowds' pricing mechanism.
Individuals have been moving away from individual stock picks and into broad market based ETFs for a while now, which means it is all the more important for others to do the hard work of price discovery. HFT & hedge fund fees don't affect individual investors.
The systematic weakness that affects people like you and me is more related to insidious attempts to lower US rates prior to US election year, which is what the article is actually about.
Low rates create asset bubbles, hide risk and further income inequality, and near zero rates will create real issues during the next recession.
The title is not referring to what you think: If you have noticed the markets dropping precipitously, this is why. Interest rates have been decreasing since 1980. This has driven up the stock...
The title is not referring to what you think:
Cutting now when Fed funds is already sitting 100 basis points below neutral further cements the dangerous precedent already set that the only independent variable in the policy reaction function that matters is what the S&P 500 is doing of late
If you have noticed the markets dropping precipitously, this is why.
Pretty much all "market reactions" boggle the mind. It's a bunch of people playing on rumors to gamble with other people's money in order to try to make a zero risk (for them) fortune.
Market conditions are often irrational, but investors are not a bunch of mad hatters in an ivory tower. And investment is not equivalent to letting it ride on black.
Investment is fundamentally different than gambling. Gambling is based on chance. Investment is based on a company's ability to generate profit. You could be obtuse and say "well I don't know whether companies will do well or not so it's basically gambling" but that doesn't hold a ton of water. I also don't really know how it's "other people's money" we invest.
I'm pretty sure every brokerage explicitly points out the multitude of risks in investments.
And the assessment of a company's ability to generate profit is done how often? Yearly? Quarterly? Monthly? Daily? In fractions of a second that occur during high frequency trading all day every single day? And who exactly is providing them this inside information into the second by second goings on of the companies in order to make this assessment?
Is the broker putting up his own money or someone else's?
Which has what to do with the fact that the broker takes none of those risks personally?
Investing isn't just literally about analyzing earnings reports to make analysis of a company. You can use data and analysis of market conditions, external factors, etc, to make educated judgements on the state of the market.
I'm not sure what you're trying to say.... A broker invests money how you ask them to. They provide you a service. Does a valet suddenly own hundred of cars? I think you might have a misunderstanding of what the purpose of a broker is. They exclusively provide financial services to customers, acting on their behalf.
Say that to High Frequency Traders.
It's basically just gambling with extra steps.
No it's not. It attempts to account for minuscule fluctuations and changes in valuation. For example, let's say I have a data analytics system that sees the price in pork rising. Therefore, I can conclude that sausage vendors will probably be affected. I could utilize that data to effectively HFT by making micro adjustments based on market conditions.
But again, it is by definition not gambling - although you won't always make a profit the outcome is not at all determined by chance.
Do you consider building a bridge gambling because you're not sure how many people will pay tolls to make it profitable? Or do you just find issue with the finance industry in particular?
Just because the probability distribution is unknown doesn’t mean the market isn’t stochastic. It depends on your definition of gambling, I think. In the colloquial sense, investing in stocks or stock options is basically the same as placing a bet on a dog in a dog race. The dogs are not all the same, but there is still a probability distribution for the outcome that you don’t know when you place your bet.
In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is split up. The market is, on average, constantly creating new value.
The broker/trading platform always wins.
Value can also be lost. I’m not sure what your point is here.
The broker always wins in the same way that a valet or dry cleaner always wins - you're paying them. It's disingenuous to compare them to a casino house.
And yes, value can be lost, but conventional wisdom is, on average, value is always created. You're free to disagree with that point but it's a key principle of investing.
I don’t see how it’s disingenuous. If I sit down to play Texas Hold Em at a casino, I’m paying them (i.e., the house takes a rake) to run the game.
I don’t disagree on that point as I don’t know enough about macroeconomics to argue against it. I’m just saying, from a layman’s perspective and definition of gambling and picking stocks, they are so similar as to basically be indistinguishable. I’ll admit that there may be some esoteric macro-economic side-effects of stock markets that are not present with traditional casino gambling. But I think that’s beside the point. What about state-run lotteries? Are you saying those aren’t gambling because of their side-effects? I just don’t understand your argument, and it seems like you don’t want to label market investing as gambling due to the negative connotations of gambling. If I’m mistaken on that, then sorry, but I think it’s a silly position to take.
Brokers don't run the markets..... They provide services. They don't "rake" because they don't provide the game. They literally just assist you in making trades.
And I think you're mistaken on my assertions re gambling. In investing, the pot constantly increases, as more value is created by the market. In gambling, money is only redistributed. In investing, money is actually created.
Edit: I should say that I have no problem with gambling, but with gambling in the long run you end up with zero. With investing in the long run you end up with more money than you started.
I'm not sure if this holds up, but I have a sketch of an argument that market prices must have some randomness in them to account for uncertainty.
Market prices are predictions about the future and many future events are unpredictable; we don't even know their probabilities with much rigor. If we were being scientific we would give a broad range of possible valuations, but the market requires consensus on a single number. How is that number chosen? Why would it be stable? It seems like uncertainty would result in volatility?
When we say some event depends on chance, it means we don't know the forces causing it to take a certain value, and this seems as true of market prices as it is of gambling. Many gambles are more predictable than the market because at least the probabilities are understood.
Reposting another comment:
In gambling, the house always wins. This is not true in investing as value is actually created. The big difference is that in investing there is not a single pot that is split up. The market is, on average, constantly creating new value.
Yes, of course, and this is why investing is well worth doing. With long-term, conservative investments, much of the randomness can be avoided.
Nonetheless, if you want random risks to gamble on for possible short-term gain, the stock market is a good source of them. People who don't want risk will sell it to you.
To be fair it depends more on whether the investors know this more than anything. Unfortunately the idea of putting money in something abstract like a stock and somehow making money out of it is basically the definition of a get-rich-quick scheme and perfect clickbait material so unless you put some barriers to joining the market it will be flooded by these types of investors and all you can do is out-spend them since the stock market is based on buyers and sellers.
Your point is tangential to the article, and I think fundamentally flawed.
The market is a fairly efficient 'wisdom of the crowds' pricing mechanism.
Individuals have been moving away from individual stock picks and into broad market based ETFs for a while now, which means it is all the more important for others to do the hard work of price discovery. HFT & hedge fund fees don't affect individual investors.
The systematic weakness that affects people like you and me is more related to insidious attempts to lower US rates prior to US election year, which is what the article is actually about.
Low rates create asset bubbles, hide risk and further income inequality, and near zero rates will create real issues during the next recession.
The title is not referring to what you think:
If you have noticed the markets dropping precipitously, this is why.
Interest rates have been decreasing since 1980. This has driven up the stock market. Because people are paying increasingly more for stocks and getting less earnings.
Or as Warren Buffett puts it “I think stocks are ridiculously cheap if you believe ... that 3% on the 30-year bonds makes sense”