zero sum game?????????????
- Thread starter madmunny
- Start date
Quote from Pekelo:
Yeah, I want the vote! I tried to make a vote, but it didn't look like I was making it. Anyway, the choices should be:
The stockmarket is a .... game.
1. zero sum
2. non-zero sum
3. negative sum
4. positive sum
5. none of the above
6. I don't know
The correct answer is...
Because I am an evil person, I decided to add to the confusion, so I am going to provide examples:
1. Zero sum: a penny stock that vegetates for years. (not counting commission and spread)
2. Non-zero sum: the stockmarket itself, in general (psst, correct answer)
3. Negative sum: AMZN between 1999 Dec and 2001 Sept, losing 90%+ of its value thus destroying wealth.
4. Positive sum: MSFT between IPO and 1999 Dec, multiplying countless times thus creating wealth.
5. None of the above: you are really clueless.
6. I don't know: at least you are honest.
7. It's a conspiracy
8. It's a conundrum
9. Dr. Greenspan lives on
10.zEro Sum is actually a code for ES or S&P500
Hate to tell you, but stocks are certificates of ownership. You can get a company for them, if you are able to collect enough of them, but at least a seat on the board of directors.
I am sure you would say your marriage licence is just a piece of paper, at least that was your deffense when your wife asked:
" What the hell is that naked woman doing in our bed?"
In other thread I pointed out that Microsoft's original stock issued exactly 20 years ago for $21 would worth almost $8000 today, but you are right, you would get that money only if you haven't sold it in 20 years.
Still, I would say a "slight" wealth creation was going on somewhere between those dates...
Let us look at the numbers you found:
2004 total US IPO offers raised $11 billion
2004 total global IPO offers raised $124 billion
$213.6 billion in dividends paid during 2004 by S&P 500 stocks
I am not sure what the point was here. Let me make a guess and assume that your point was $213.6 billion > $124 billion so that dividend payments more than offset the IPO prices and if every year total dividend payment > total IPO cost then there must be a net gain by investors. You're missing the much bigger secondary offerings. Every year there are 3 or 4 times more secondary offerings than IPO's. A typical secondary offering is also larger (in terms of dollar amount) than a typical IPO, except for mega IPO's such as GOOG. (OTOH, GOOG has yet to pay a cent of dividend). The total dividends paid on stocks cannot even make up a fraction of all the money raised in secondary offerings.
PS you missed more than a few commas. "... the post in here are ..." - "post" should be plural. "negative sums game" - "sums" should be singular.
Trader A gets long 1000 shares XYZ overnight. XYZ misses earnings. Trader closes position on open for $3 loss.
Total Loss: $3,000
Trader wonders why it gapped down so much.
Trader A then discovers that 50 of his trader buddies each went long 1000 shares XYZ after hearing a tip by Cramer on Mad MOney. All 50 traders dumped their position on open contributing to the $3 dollar slide.
Total Loss: $150,000.
XYZ consolidates, and makes new 52 week highs a week later.
Trader B who had been holding 1000 shares since it's IPO is now in the money 60 points.
Total GAin: $60,000
Trader C who had been short 1000 shares out of the money for 20 points now decides to cover. He's had enough.
Total Loss: $20,000
Three weeks later, Trader D who is long 500 shares receives a $1 dividend/share on XYZ which had traded @$75 previously. The stock is adjusted to $74 ex dividend on the open. Trader D receives $1 cash/share.
Total Gain on Dividend: ZERO
Total Loss: $3,000
Trader wonders why it gapped down so much.
Trader A then discovers that 50 of his trader buddies each went long 1000 shares XYZ after hearing a tip by Cramer on Mad MOney. All 50 traders dumped their position on open contributing to the $3 dollar slide.
Total Loss: $150,000.
XYZ consolidates, and makes new 52 week highs a week later.
Trader B who had been holding 1000 shares since it's IPO is now in the money 60 points.
Total GAin: $60,000
Trader C who had been short 1000 shares out of the money for 20 points now decides to cover. He's had enough.
Total Loss: $20,000
Three weeks later, Trader D who is long 500 shares receives a $1 dividend/share on XYZ which had traded @$75 previously. The stock is adjusted to $74 ex dividend on the open. Trader D receives $1 cash/share.
Total Gain on Dividend: ZERO
The day before Armageddon, when planet earth is set to collide with a massive meteor every stock in the entire market is attempted to be sold out without a single buyer or uptick in sight. Every single stock is then priced at $0. Shorts initially celebrate but then realize that all their unrealized profits cannot be covered for profit.
Quote from Pekelo:
Hate to tell you, but stocks are certificates of ownership. You can get a company for them, if you are able to collect enough of them, but at least a seat on the board of directors.
I am sure you would say your marriage licence is just a piece of paper, at least that was your deffense when your wife asked:
" What the hell is that naked woman doing in our bed?"
In other thread I pointed out that Microsoft's original stock issued exactly 20 years ago for $21 would worth almost $8000 today, but you are right, you would get that money only if you haven't sold it in 20 years.
Still, I would say a "slight" wealth creation was going on somewhere between those dates...
It depends on how individual view Stock Certificates.
Apparantly you feel that Stock Certificates = money. Thus in a Stock Market game, "excess money" would generated in the form of Stock Certificates.
1) A has $100. B has $0. Total money in game = $100.
2) B writes and sells A 100 stocks at $1 each.
3) A has 100 stocks. B has $100. Total money in game = $100 + 100 stocks.
If the 100 stocks is considered money then total money in the game would be $200. $100 excess dollars have been "created". Thus non-zero sum.
However, some might consider only "real" money and discount "chips" like Stock Certificates. Thus no real money have been created and thus the market is a zero sum game.
Its really up to personal preference. The laws of mathematics and english are writtened by man. Therefore, anything goes.
"Its really up to personal preference. The laws of mathematics and english are writtened by man. Therefore, anything goes. "
false. although maybe the smiley was instructive.
futures are a zero sum game.
stocks aren't
futures are contracts. they are not ownership of anyTHING.
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
furthermore, futures contracts can literally be invented out of thin air. they are merely agreements.
this is not true of stocks.
false. although maybe the smiley was instructive.
futures are a zero sum game.
stocks aren't
futures are contracts. they are not ownership of anyTHING.
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
furthermore, futures contracts can literally be invented out of thin air. they are merely agreements.
this is not true of stocks.