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

Quote from goldenarm:
When the cotton gin was invented, then cotton manufacturers became wealthy, not "the world".
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False. Try thinking for yourself for two seconds rather than digging in your heels.

Quality cotton products were available at an affordable cost to increasing segments of the population after the invetion of the cotton gin, i.e., they could afford things they couldn't prior, and were by definition wealthier.

Are you going to also say that the net standard of living did not improve upon the industrial revolution, that only the factories benefitted from mass production of quality goods? From labor saving machines used both in the home and in places of work? All of that was a wash? Come on.

Fletch
 
I'm surprised that this thread is still alive.

Inventions do two things: it raises standard of living by lowering costs of making goods, and it gives the inventors/original investors a chance to hit it big.

But, once the company goes public, from the point of its IPO to the point of its bankrupcy, if you count all the money that's put in and all the money that it paid back, you get a negative result.

Therefore, while inventions/innovation reap millions for the inventors, the stock market is a negative sum game.
 
Quote from james_bond_3rd:


But, once the company goes public, from the point of its IPO to the point of its bankrupcy, if you count all the money that's put in and all the money that it paid back, you get a negative result.
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That was the whole point. The company has to go bankrupt for it to be a zero-sum game. If it doesn't it is not zero-sum.
 
Quote from HolyGrail:

That was the whole point. The company has to go bankrupt for it to be a zero-sum game. If it doesn't it is not zero-sum.
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Every single one of them eventually go belly up. It's the question of how long that will take.
 
It doesn't matter because there are always new ones to take the place of the bankrupt ones or they get bought out by private equity firms, or bought out by other public companies. As long as a company's stock has underlying value it is not zero-sum game. That was the whole point of this thread that investing in stocks is not zero sum. The point originally taken by the creator of this thread was correct.
 
A good way to put it is:

Investing in stocks has been a positive-sum gain, at least for the last 100 years or so.

But trading is a slightly negative sum game because of commissions and slippage.

But the vast majority of stock investors do not day trade. Look at stocks like Microsoft or Berkshire Hathaway. All of the long term buy-and-hold investors are all way ahead by billions in market cap.

But yes, those who tried to constantly day trade MSFT or BRKA over the years would be facing a slightly negative sum game, where approximately 5% of the players win and around 95% lose. The biggest winners in the "day trading" game are probably firms like Renaissance, SAC Capital and the specialists and market makers.
 
Quote from george_s:

A good way to put it is:

Investing in stocks has been a positive-sum gain, at least for the last 100 years or so.

But trading is a slightly negative sum game because of commissions and slippage.

But the vast majority of stock investors do not day trade. Look at stocks like Microsoft or Berkshire Hathaway. All of the long term buy-and-hold investors are all way ahead by billions in market cap.

But yes, those who tried to constantly day trade MSFT or BRKA over the years would be facing a slightly negative sum game, where approximately 5% of the players win and around 95% lose. The biggest winners in the "day trading" game are probably firms like Renaissance, SAC Capital and the specialists and market makers.
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For every MSFT or BRKA, I can give you same number of stocks that went south in the past 10 or 20 years. How about ENE? Or UAL (what was its symbol before chapter 11)?

There are far more people who pick and "invest" in stocks that do didilly squat, than those who pick MSFT. (Otherwise wouldn't everyone be billionairs today?) The the fact that a small fraction in the total investor universe made it big doesn't change the fact that the stock market is a net negative game.
 
and again , people misunderstand the term - ZERO SUM

let me make this as clear as possible.

game theory was invented in 1944

in the formulation of game theory, a term was used to describe certain kind of systems- ZERO SUM

whether or not, a stock goes to zero, or even the whole market has exactly ZERO to do with zero sum

saying something is not zero does not mean it is necessarily going to result in positive outcome (whether for the aggregate or the individual)

that is 100% irrelevant.

if every stock goes to ZERO tomorrow morning, that says NOTHING about whether the stock market is zero sum

zero sum means (for the umpteenth time) that every dollar GAINED in the system (doesn't even have to be dollars - can be any benefit) is coming from somebody else's (the system on a wholes) loss, such that at any moment in time, the SUM is zero.

this is NOT the case in the stock market, or the economy. obviously.

this IS the case in futures. in the case of futures,

(for the umpteenth time)

EVERY SINGLE POSITION HAS AN OFFSETTING POSITION.

this is not, to use an analytical reasoning term, a NECESSARY component for a zero sum game.

a poker game is zero sum, but it is NOT the same as futures trading, in the way money is distributed (in terms of offsetting positions at discrete intervals)

however, both are zero sum because no wealth can be created. the system is closed to wealth creation.

sure, there can be additional inputs (a new player arrives at the table). his money is then ADDED to the sum. when he leaves, whatever he leaves with, if anything is subtracted to the sum. but no wealth is created WITHIN the system.

in the stock market, wealth is created, among other reasons, because every position does not have an equal and opposite offset, such that if ABCD tomorrow invents the cure for cancer, a HYOOOGE amount of wealth will be infused into the system and numerous positions will gain, but not NECESSARILY (and not in reality) exactly offsetting with corresponding losses in other positions.

some people here, even those who correctly conclude the stock market is not zero sum, are confusing the positive bias of the market with the fact that it is not zero sum.

a market does not have to have a positive or negative bias for it to be zero sum.

that is irrelevant. if the market for the next 10 yrs goes down 5% a year, that has zero bearing. the stock market will still be a NON-zero sum game. the futures market will still be a zero sum

iow, this is a binary issue. a system (or market) is either zero sum or it is not

a non-zero sum game is not necessarily "positive sum", that's a silly irrelevancy.

and based on misunderstanding of the term

all the people here who think the stock market is zero sum either completely misunderstand how capital markets work, or don't understand this model (invented in 1944 - there are plenty of books on it), or - sadly - both
 
So you think just because the FED prints money that wealth is created ? You are not even taking into account inflation of 3% annual over the past 100 years. If stock is not a liability, where does the dividend come from that WMT pays its shareholders ? Let me guess it comes from the wealth tree.
 
Whitster ur very convincing but u can’t prove that u are right. So far creation > destruction. But who knows maybe we nuke each other to death, maybe Armageddon, maybe aliens will attack us. In the Armageddon case stocks are zero sum from beginning to end? There is no way of knowing that the amount of wealth 100 years from now is bigger than today, probably it is, and probably participants in the stock market as a group earns money for shouldering risk.

When investors earn money where does that money come from? GDP growth is only part of the answer. Companies like people value money today more than money tomorrow, that’s why historical returns are bigger than GDP growth.

Having said that, but what if companies as a rule issues stocks when the market is at tops, and investors typically prefers to buy when stocks are hitting all time highs. Investors could also typically sell on lows and companies could buy back stocks when stocks are hitting lows.
 
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