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

Yes, I agree let¢s close it :).

About the real returns in the stock market.

Quote by Warren Buffett. Interview in Fortune magazine November 22 1999.

So where do some reasonable assumptions lead us? Let's say that GDP
grows at an average 5% a year—3% real growth, which is pretty darn
good, plus 2% inflation. If GDP grows at 5%, and you don't have some
help from interest rates, the aggregate value of equities is not going to
grow a whole lot more.
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If I had to pick the most probable return,
from appreciation and dividends combined, that investors in aggregate—
repeat, aggregate—would earn in a world of constant interest rates, 2%
inflation, and those ever hurtful frictional costs, it would be 6%. If you
strip out the inflation component from this nominal return (which you
would need to do however inflation fluctuates), that's 4% IN REAL
TERMS. And if 4% is wrong, I believe that the percentage is just as
likely to be less as more.
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So according to Buffett the GDP growth is a ceiling factor to stock market gains.

Now let¢s see what the evidence show us

gdp6uu.jpg


Since 1820, the real growth of GDP annually were 3.66% and 1.97%, for the U.S. and U.K. This is very close to the real terms stock market growth in those two markets. If we had hindsight 100 years back and picked a balanced portfolio in those two markets then we would achieve real (inflation adjusted returns) of 2-3% annually. If we weren¢t good at picking the stock markets that outperformed then our real returns would be close to zero.

Now, I know that for most of us a 2% return doesn¢t look great. If we wanted to achieve a better return the only way would be to take it from another investor¢s pocket. For me this is close to a zero sum game. However one may argue that this is not the exact definition of a zero sum game because one investor¢s gain is not immediately translated to another investor¢s loss. In the long-term it is.
 
Quote from Buy1Sell2:

These concepts are so simple and basic that one or two pages would have been sufficient in this thread
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So perhaps the major conclusion of this thread might be that we now have an idea about the intelligence (or stupidity) of the average ET poster.

After all we used almost 40 pages to explain (or understand) something that normally can be done on 2 pages ?

:D
 
gbos you forgot dividend yield.


what is really childish is to call others who don't agree with you as stupid. my reasons are sound. I was told to get a 'figgen dictionary', well here is what wiki says:

http://en.wikipedia.org/wiki/Zero-sum


Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses is subtracted then they will sum to zero. Chess is an example of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum.



if you can't understand that even in the futures markets that non-zero sum is possible (both the farmers and the Archer daniels benefit regarless of who made or lost money) and if want to ignorantly insist that value is only the dollar amount gain and loss in the market, then you are the one in need of an education. not everyone is a poker player, but for us poker players it pretty is zero sum.
 
Quote from Perseus:

gbos you forgot dividend yield.
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No, I didn't. Buffett mentions 4% real growth including dividend yields. This is equal approximately with the real US GDP growth.
 
Perseus about insults in posts just ignore them…

I will quote you what a philosopher once said (the translation is probably bad).

¡Master they are swear at you in the marketplace¢

¡Let them do. In my absence I give them permission to beat me also.”

:)
 
Quote from Perseus:

if you can't understand that even in the futures markets that non-zero sum is possible (both the farmers and the Archer daniels benefit regarless of who made or lost money)
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A new day and this thread continues.

The farmer and Archer Daniels are not the futures market. They are participants in the futures market. If you cannot distinguish between these two facts you will never grasp the concept that the future market is zero sum.

Participants in the futures market (the farmer) can lose money on their futures contracts and still come out ahead overall.

You are trying to broadly define the futures market to include all transactions of anybody who participates in the futures market. Using your definition the entire economy is "the futures market" because everyone in some way or the other is related to futures transactions.

The net sum of all long and short corn future contracts is always zero and always has to be.

Quote from Perseus:
not everyone is a poker player, but for us poker players it pretty is zero sum.
More...
"Pretty zero sum" ?!? Either it is or it isnt zero sum. Didn't you say earlier it isnt zero sum because entertainment is generated? Critical thinking isn't your strong suit, is it?
 
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