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

[illiquid]

Quote from whitster:

stocks are not contracts. they are things. they are pieces of companies.

for every long futures contract, there necessarily is a short one. period

however, that is not true for every stock share

But someone sold those shares of stock in the first place. Stocks don't come out of nowhere -- when issued, they represent a transfer of ownership. There might not necessarily be a short for every share, but there is (was) a seller for every buyer.

An company goes public at the peak of internet mania; the first opening print is its all time high and proceeds to just go lower from there. Six months later the company is bankrupt, its stock worthless. Would you say that everyone lost money in this case? Who is actually laughing all the way to the bank, or more accurately, has been laughing for the past six months?

 

[canyonman00]

Quote from madmunny:

yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any stock....google for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......

who has lost money here???...

until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....

so how can this be a zero sum game?

That sounds smooth in theory, but in reality that's not how it tends to go. When you separate it into nice bite-sized, local vision then you will never be able to see the picture of reality. Loss means different things to different people.

In the minds of some, the initial stock seller lost because he didn't wait for say $260 for his sell. He lost out because while he might have hit his sale target the stock clearly was in a long term uptrend and he lost out on the running profit.

In it's long definition, crude sure enough, it's all a legalized ponzi scheme. We just continue to hope for unending long term appreciation. You ride along hoping that you aren't the last sucker in the line before the crash. Profits/Losses are explained with good/bad earnings reports, good/bad management, embezzlement, profit taking and mergers. At the time that each transaction occurs, there is a sort of break even. Whether or not it was good or bad is party and timing dependent.

 

[ORM]

Quote from trend_guy:

MM, if you have an opinion, why ask the question?

you guys may want to look at opportunity cost. If you buy a house for $100K, sell it at $150K, net $50K; then in the next 5 years it goes to $300K, did you not lose $150K in opportunity cost?

Sorry but this is a ridiculous comparison. You cannot say that opportunity cost in this case have anything to do with the stock market.

You sell for 50k profit and put it risk free in bank. You earn interest risk free.

Stock market involve risk.

If you applied that you would always be a looser. Because lets say you were so stupid and bought GE 10 years ago and today made only 100k profit, after selling apple.. Then the buyer of your apple stock made 200k.. Then with your logic you lost 100k even though you took lot less risk.

Doesnt work like this im afraid

The stock market isnt a zero sum game. The options and futures however is.

And sorry if someone commented on this already. Just had to without reading all the posts

ORM

 

[volente_00]

Quote from illiquid:

But someone sold those shares of stock in the first place. Stocks don't come out of nowhere -- when issued, they represent a transfer of ownership. There might not necessarily be a short for every share, but there is (was) a seller for every buyer.

An company goes public at the peak of internet mania; the first opening print is its all time high and proceeds to just go lower from there. Six months later the company is bankrupt, its stock worthless. Would you say that everyone lost money in this case? Who is actually laughing all the way to the bank, or more accurately, has been laughing for the past six months?

That was my argument about 20 pages ago. All stock issued becomes a liability on the company's book because they shorted it in the begining when they initially offered it.

 

[FaderTrader]

There are many reasons why the market is not zero sum but the main one is that everyone has a different basis. I might be buying or selling to someone who is averaging up or down and, therefore, I could be improving thier position while taking profit on my end.

You simply don't know the other person's basis, so to say that each trade is an absolute buy or sell for all participants is a gross oversimplification.

 

[QQQShort]

Quote from volente_00:

That was my argument about 20 pages ago. All stock issued becomes a liability on the company's book because they shorted it in the begining when they initially offered it.

Stock is not a liability for the issuing company; there is no obligation to repay.

 

[winter]

Quote from volente_00:

That was my argument about 20 pages ago. All stock issued becomes a liability on the company's book because they shorted it in the begining when they initially offered it.

To say that a company doing an IPO is the equivalent of creating a short position is hard for me to swallow.

If you create something in your garage, say a sculpture and then sell it to someone would you consider that you are now short the sculpture?

Not every sale is a short sale, to me going short means that you did not have a position to begin with. When you own something (a company) and you sell ownership (part or full) you are not short the company, at least not by any definition that I am familiar with.

Damn, I unsubscribed to this thread long ago, I can't believe its been resurrected and I'm being sucked back in.

 

[Buy1Sell2]

and I closed the thread long ago

 

[FaderTrader]

Quote from Buy1Sell2:

and I closed the thread long ago

Sorry.

All: From now on, be sure to ask Buy1Sell2 for permission prior to posting in his thread. LOL...

 

[RedManPlus]

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.

This is the dumbest post I've seen so far at ET... and that is saying a LOT.

With your inability to understand what "zero sum game" means...
And your utterly reckless way of thinking and perceiving the markets...
You have zero chance of ever becoming a successful trader.

Stop wasting bandwidth.

rm+