zero sum game?????????????
- Thread starter madmunny
- Start date
I understand what you are driving at, but it is like saying: If I get hit by a car and get killed, there are external benefits that I don't have to worry about my cavities or taxes anymore....
Or the external benefits of drinking beer beside having a good time and taste, is exercising, because that damn beerglass is rather heavy...
QQQshort,
Please do not fall prey to the incorrect thinking which is that of Perseus...
The only consideration one needs to make is that the futures market = the futures market. Nothing more, nothing less. It doesn't matter if the farmer walks away no worse off, because that is 100% ancillary to the point.
This is incontrovertibly zero-sum because there are always offsetting futures contracts. It doesn't matter if I win a night with my buddy's wife, or if have hedged my losing bet with a securing a lifetime supply of cracker jacks. It makes NO difference. The point is, always was but more importantly, cannot be disputed: For every long contract there is an opposing short. For every dollar gained, one is lost inside the closed circuit that is the futures market. Period.
Anything beyond this is totally secondary to the futures market and CANNOT be included in its definition. This is axiomatically so.
And yes, opportunity cost, is a loss within the confines of zero-sum calculation. Zero-sum calculation assumes all losses, gains, real, paper, or otherwise so long as it is only referencing transaction inside said futures market. If you sell a winning contract too soon, you have lost the opportunity to make more. Example: A trader with a winning position sells to a trader that also wins on this position. The opportunity that you sold is now someone else's gain and therefore is your subsequent loss. Anyone that argues otherwise is of the same mind that one is not losing money until they sell a losing position (in spite of being down $5,000 on 'paper'.) There is no such thing as a paper loss.
Please do not fall prey to the incorrect thinking which is that of Perseus...
The only consideration one needs to make is that the futures market = the futures market. Nothing more, nothing less. It doesn't matter if the farmer walks away no worse off, because that is 100% ancillary to the point.
This is incontrovertibly zero-sum because there are always offsetting futures contracts. It doesn't matter if I win a night with my buddy's wife, or if have hedged my losing bet with a securing a lifetime supply of cracker jacks. It makes NO difference. The point is, always was but more importantly, cannot be disputed: For every long contract there is an opposing short. For every dollar gained, one is lost inside the closed circuit that is the futures market. Period.
Anything beyond this is totally secondary to the futures market and CANNOT be included in its definition. This is axiomatically so.
And yes, opportunity cost, is a loss within the confines of zero-sum calculation. Zero-sum calculation assumes all losses, gains, real, paper, or otherwise so long as it is only referencing transaction inside said futures market. If you sell a winning contract too soon, you have lost the opportunity to make more. Example: A trader with a winning position sells to a trader that also wins on this position. The opportunity that you sold is now someone else's gain and therefore is your subsequent loss. Anyone that argues otherwise is of the same mind that one is not losing money until they sell a losing position (in spite of being down $5,000 on 'paper'.) There is no such thing as a paper loss.
Having a philosophical discussion about zero-sum (e.g. poker is zero-sum from a cash basis but if you factor in "entertainment" then its positive sum) is pointless because you can't quantify enjoyment. That that even has to be said (we are talking about money/wealth) in this thread is sad and speaks volumes about the depths that the "nothing is zero-sum" side has sunk to.
Once you add in "external benefits" (financial or otherwise) then the scope of the discussion becomes infinite and suggests to me that someone is more interested in being argumentative then having a serious discussion.
Once you add in "external benefits" (financial or otherwise) then the scope of the discussion becomes infinite and suggests to me that someone is more interested in being argumentative then having a serious discussion.
Quote from madmunny:
could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.
the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.
maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you.
Our analysis:
Futures and Forex tend to be zero sum game...every winner has a loser.
The stock market provides an average growth of 8-10%, pays dividends, and companies make money (or go out of business).
Don
Wow!! I am surprised this thread has gotten so long. The idea of the stock market as a zero-sum game is approached in basic level books so I dont understand the problem here.
It is a zero-sum game. That is not my opinion, that is fact. Zero-sum means, obviously, the sum of all transactions with the market equal zero. The market does not produce money.
Here is where most people do not understand it. They are thinking about the relationship between themselves and the market. That relationship is not zero-sum. You must look at the relationship of the market. From the very first day, until the very last day of its existance, it is zero sum. All of us make up the parts of the whole.
Think of it as a piggy bank where we all put different amounts of pennies into it. After time, some of us are able to take out nickels and dimes, while others cannot take out anything at all. But the piggy bank is zero-sum because it doesnt not produce nor take away from the contents within.
~RT
It is a zero-sum game. That is not my opinion, that is fact. Zero-sum means, obviously, the sum of all transactions with the market equal zero. The market does not produce money.
Here is where most people do not understand it. They are thinking about the relationship between themselves and the market. That relationship is not zero-sum. You must look at the relationship of the market. From the very first day, until the very last day of its existance, it is zero sum. All of us make up the parts of the whole.
Think of it as a piggy bank where we all put different amounts of pennies into it. After time, some of us are able to take out nickels and dimes, while others cannot take out anything at all. But the piggy bank is zero-sum because it doesnt not produce nor take away from the contents within.
~RT
...and another genius enters the fracas...
So after just lurking for a month, this was the thread you decided to jump in? Without even reading what was said before?
I actually love this thread! Baron should make it obligatory for every member to post his/her opinion on the matter.
I have an even better idea! Let's vote on it! Can somebody make a vote on the topic? I bet at least 40% will vote for zero-sum game!!!
Quote from RunTrade:
The idea of the stock market as a zero-sum game is approached in basic level books so I dont understand the problem here.
So after just lurking for a month, this was the thread you decided to jump in? Without even reading what was said before?
I actually love this thread! Baron should make it obligatory for every member to post his/her opinion on the matter.
I have an even better idea! Let's vote on it! Can somebody make a vote on the topic? I bet at least 40% will vote for zero-sum game!!!
Lurking? More like on vacation. I do not consider myself a genius by any means, but I feel that I have a fair amount of knowledge. This topic has been explained in all of the entry level daytrading books that I have read; therefore, I believe I am "qualified" to restate its simple explaination.
Perhaps I did not explain myself right. I do not think it is a matter of opinion, but rather that people tend to misinterepret the theory. That is what it is, a simple theory that people make complicated. If it is viewed on individual relationships from company -> company or individual -> portfolio etc... then the theory does not apply.
What is zero sum?
The sum of all transactions equals zero. The same as saying units (in this case money) are not produced by the zero-sum agent (the market).
Now the next step...
When you use the agent as the market, you must consider the market as a whole. This whole includes the WHOLE time frame of its existance. If the zero-sum agent was yourself trading, wouldn't you consider the entire timeframe that you traded? So you can see that from begining to end, the stock market does not produce any money. Period.
That is the definition of zero-sum.