zero sum game?????????????

[bitrend]

You guys, you always give case by case to support your non zero-sum concept. If it has infinite cases, you will get n right cases divide by infinite that's will result a zero point.

Let see the big picture, the money in and the money out. The money in are IPO, additional raises, our retirement savings, investors open new account or keep refunding their account, dividends (since dividends are paid to investors account and it depends on him to withdraw or reinvest). The money out are funds that have been move to other non-zero-sum investment and the total amount that investors withdraw.

If we can prove the money-out is greater than the money-in then it's a non zero-sum, it's likely not since only 5% success and we can say the 95% unsuccessful investors are rarely withdraw the money from the market. However, scientifically we cannot conclude anything because we can always argue that the money-out is greater than the money-in and vice versa.

One possible way to prove a zero-sum or non zero-sum is to look the Market Index, if it's always going up then we can conclude it's not a zero-sum since the total value become bigger. The calculation of the index must be non-bias. By market always going up mean that it's understandable that from time to time the market retrace back to a certain level but we can guarantee that it won't go back to the place where it was 100 years ago.

Well, it looks like it goes in your favor for supporting a non zero-sum theory since the DOW is always going up. Now the point is can you explain why the DOW is always going up? And once you know the exact reason why the DOW is always going up you will understand why it's a zero-sum and not a non-zero-sum.

 

[Lights]

yes, but there are short speculators in the market. to be able to buy a stock in a rising market, someone needs to sell that to you, which results in their opportunity costs. also know that the majority of the public is long the markets at tops, oftentimes during significant crashes where up to a trillion can be lost in 401k portfolios, pensions, etc. i think the argument is that over time, the market offers more wealth, but all the participants if add up all the gains and losses net out to near zero. some may say that the stock market is a place where great wealth can be transfered from one player to another.

in that way, maybe the market itself is not zero sum. but it could very well be zero sum to it's participants. it seems like the debate here is between these two different perceptions of zero sum.

Quote from Perseus:

Lights, the stock market can keep going up as long as GDP does.

 

[winter]

Quote from Lights:

i think the argument is that over time, the market offers more wealth, but all the participants if add up all the gains and losses net out to near zero. some may say that the stock market is a place where great wealth can be transfered from one player to another.

in that way, maybe the market is not zero sum. but it could very well be zero sum to it's participants.

Wow, I can't even begin to comprehend how you can believe that. You are talking about the stock market and wealth, not money, right?

After talking a dozen or so posts to convince someone that the futures market is zero-sum (when the CBOT web site clearly says that it is) I don't think I have the strength to go down that road. It is interesting how so many educated people can have different views, maybe its just a matter of perspective/semantics.

 

[Perseus]

winter


but an economy is just one big market. the trade transaction itself creates wealth, this has been the story of economics for the last millenia. You are simply counting dollars in a trade like poker chips, I am counting real wealth and what further advantage the trade creates to get more dollars and wealth.


put it this way, if the futures markets really were just a big zero sum casino game, do you believe they would even be allowed to exist like this?

what about single stock futures? apparently stock transactions are ok.

 

[Perseus]

lights, there is no wealth 'in the market'.

 

[winter]

Quote from Perseus:

but an economy is just one big market. the trade transaction itself creates wealth, this has been the story of economics for the last millenia. You are simply counting dollars in a trade like poker chips, I am counting real wealth and what further advantage the trade creates to get more dollars and wealth.


put it this way, if the futures markets really were just a big zero sum casino game, do you believe they would even be allowed to exist like this?

They are "allowed" to exist because of the reasons you stated, they are very useful for hedging. That doesnt change that for every dollar gained in futures trading that someone else has lost a dollar on their futures trading.

You seem to be hung-up that because futures is zero-sum its a bad thing. Its not, as you point out its very useful to the larger economy.

Quote from Perseus:
what about single stock futures? apparently stock transactions are ok.

All futures (and options) are the same, for every long someone else is short.

 

[whitster]

perseus, the issue isn't "are the markets as a whole zero sum?"

clearly, THEY ARE NOT

the issue is - are the futures market zero sum. they ARE

is the stock market zero sum? no

an individual investor is irrelevant.

an investor/trader cannot be measured in the terms "zero sum"

zero sum is a ... wait for it... SUM of all transactions within a system

in the case of a futures market , that sum equals ZERO

net zero

period

it has to

that is not the case in the stock market

your results are irrelevant

i trade mostly futures because i prefer them. the fact that they are zero sum is irrelevant to my results

but it is a fact


heck, if you buy the basket (properly weighted ) of dow stocks and i buy a DJ futures contract, and keep the leverage differential in t-bonds (that is why futures are priced above the cash index, because you can buy them on margin, and then invest the remainder in t-bills. fair value is asseses with those differentials in mind, and when they get out of line, arbitrage brings them bac), assuming fair value (which the futures market stay close to or they get arbitraged ), we will get the EXACT same return

the fact that i conducted my transaction in a closed zero sum market, and you conducted your transactions in a non zero sum market is again - irrelevant

the net sum of an equity market can be (and is) less than or greater than zero.

the net sum of a futures market is ALWAYS zero

the net return of any individual is absolutely 100% irrelevant to that reality

 

[Perseus]

we are probably arguing some sematics here

I agree with a lot of what you are saying, IF you only want to count the dollars in any particular trade at the time of the transaction. That's all a poker player cares about, however the participants are not all poker players and the transaction itself can be source of further wealth and therefore further dollars to some, therefore to call the futures markets a zero sum game to all is inaccurate.

If you agree that futures markets are beneficial to the economy then you must agree that they are not zero sum. A true zero-sum game generates no new wealth.

 

[winter]

Quote from Perseus:

If you agree that futures markets are beneficial to the economy then you must agree that they are not zero sum. A true zero-sum game generates no new wealth.

Your conclusion does not follow from your proposition.

First you say that the futures market is beneficial (agreed), then you say it generates wealth (false). The future market helps the economy generate wealth, it does not generate any wealth in and of itself.

 

[Perseus]

winter, the futures market is part of the economy, it is not seperate. However even if i take what you say, that it 'helps the economy', that still supports my case. Even if it only helps the economy that makes it not zero-sum for a true zero-sum game would not help the economy.