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Are You Trading or Gambling?

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Re: Are You Trading or Gambling?

#151

Post by criticaljudge »

rjbwork wrote: post #137
criticaljudge wrote: post #52

Earlier quoted context omitted.

I think you can still buy some stock with the intention of collecting the dividends or hoping for the stock's value to grow over time. There are simple calculations like Price/Earnings ratio that are usually published with every stock, that can help to see if it is a "gambling stock". You will of course hear all sorts of opinions about the stock market, including hardcore socialists who believe it is the root of all…

From a socialist (especially labor theory of value) perspective, you're buying and selling people's future labor. Socialists tend to think that the workers should get all of their labor. Obviously "root of all evil" is somewhat hyperbolic, but based on even passing knowledge of socialism, it is easy to see why a socialist might consider it to be an evil game. Per your previous sentences though, a common refrain on /r…

It doesn't make much sense, as owning a stock does not give you any entitlement to the future labor of employees. Also employees can buy stock themselves, which arguably is superior to forcing them to be stakeholders in the company they work for, as it is voluntary. But the labor theory of value also doesn't make sense to begin with (if you disagree, I'd like you to pay me 10000$ to dig a hole in front of your front door, which would be hard work and therefore definitely worth 10000$), it's probably moot to discuss.

I don't think /r/WSB is representative of the stock market as a whole.

The stock market is just people trading. Some do stupid trades, some do smart trades. To cherry pick some stupid trades and claim it is all a casino is crazy, imo.

Personally, I am a freedom guy - I think people's freedoms should be maximized.

The alternative to "letting the people trade" is to regulate what people invest in. In my country, it gets harder and harder to invest in anything but the government pension, as every other asset class is being destroyed with taxes and risk of socialist pawning. There are also rules. It is just another tentacle of the "nanny state", preventing people from making potentially harmful decisions. But it limits freedom. Especially people on Hacker News (formerly Startup News) should understand. Should people be allowed to do Startups? It's a very risky undertaking which might lose you money.

Re: Are You Trading or Gambling?

#152

Post by TacticalCoder »

tobyhinloopen wrote: post #71

> This is because on average, you will gain $1 with every coinflip. For those interested in the maths, you have a 50% chance of winning $2, and a 50% chance of losing $1, 50% * (+2) + 50% * (-1) = +$0.50. Interesting

As as already been pointed out it's not correct. Your EV, although positive, is +$0.50 cents, not +$1.

Another nitpick: in Poker you'd more see the $1 as the price to participate, and $3 as the gain (because in Poker what you put in the pot is considered "not yours" anymore).

So the math is ($3 * 0.5 -$1), which also gives 50 cents and which, arguably, is more logical (but really it's a minor nitpick).

As the problem is presented in the article you wouldn't see it that way but then Poker is mentioned so...

Re: Are You Trading or Gambling?

#153

Post by shawnz »

elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

I think a better distinction would simply be whether you are aiming to profit from speculative movements (gambling) or risk premiums (investing).

Any kind of technical analysis, fundamental analysis, day trading, etc falls into the first category. Passive investing, factor investing, investing in ETFs, etc falls into the second.

Re: Are You Trading or Gambling?

#154

Post by minitoar »

px43 wrote: post #148
nikanj wrote: post #127

Earlier quoted context omitted.

And thus, bitcoin. A stock that's guaranteed to provide no dividends, do no buy-backs, or deliver any value - aside from the ability to sell it to the next fool for an even greater value.

I know this whole "bitcoin is pointles" meme gets upchuckles on hacker news all day long, but at this point it's pretty embarrassing that this level of ignorance continues to persist. As it turns out "sending money over the internet" is kind of an important utility for the modern world, and nothing does it as well as Bitcoin. This is why it's now a trillion dollar global economy. That's great for you that you're in a…

I think I agree with your sentiment, but saying that nothing is as good as Bitcoin for sending money over the internet, and that’s why it has value, is just really not a compelling argument.

Re: Are You Trading or Gambling?

#155

Post by Closi »

shawnz wrote: post #153
elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

I think a better distinction would simply be whether you are aiming to profit from speculative movements (gambling) or risk premiums (investing). Any kind of technical analysis, fundamental analysis, day trading, etc falls into the first category. Passive investing, factor investing, investing in ETFs, etc falls into the second.

Technical analysis is definitely part of long-term investing (e.g. at the most basic, work out how much profit the company is making compared to the market cap and what dividends will be paid over the investment period)

Re: Are You Trading or Gambling?

#156

Post by criticaljudge »

drunkpotato wrote: post #114
criticaljudge wrote: post #53

Earlier quoted context omitted.

But it is obviously bullshit, as the real companies behind some stocks have a real value. Like for example they might own a building that is worth one billion dollars (simple example). If you take away all the stock market shenanigans, you still own part of that building via your stocks. As for the usefulness question: providing liquidity is useful. If an investor considers investing in some project, it helps his dec…

I care a lot what other people do with their money. I care if they use it to harm people. I care if they use it to buy legislation to replace pensions with 401ks. I care if they “earned” it through fraudulent means. Some ways to use money are beneficial or neutral, but some are harmful.

But do you care if they gamble away their money? Surely, with the "fraudulent means" example, you care about the fraudulent means, not the money. Can't comment on the 401k thing, but I suspect a conspiracy theory. If you have proof of people buying legislation, maybe tell CNN?

Re: Are You Trading or Gambling?

#157

Post by criticaljudge »

j4yav wrote: post #64
criticaljudge wrote: post #53

Earlier quoted context omitted.

But it is obviously bullshit, as the real companies behind some stocks have a real value. Like for example they might own a building that is worth one billion dollars (simple example). If you take away all the stock market shenanigans, you still own part of that building via your stocks. As for the usefulness question: providing liquidity is useful. If an investor considers investing in some project, it helps his dec…

As a shareholder how do you access that value without stock market shenanigans coming into play? The only two that come to mind are companies about to go bankrupt, or a careful focus on dividend value (but dividends may not pay out the value of their static assets without having to sell them.)

By forming an interest group with other shareholders, so that you have enough votes to determine what happens with the companies assets (in an extreme case).

You also have some legal rights as a shareholder. I don't know about the US, but for example in my country there is a LEGAL requirement for companies to maximize shareholder value. Few people seem to know when they blame capitalist greed, when really it is a government law. So you can sue the company if you think they mismanage their assets.

Of course there are ways for companies to rip off shareholders. I think there is an old Philip Greenspun article about it, iirc he mentions buying expensive furniture and artwork for the offices.

I suppose it is part of the due dilligence before investing in a company, to check how they spend their money.

Re: Are You Trading or Gambling?

#158

Post by ves »

px43 wrote: post #148
nikanj wrote: post #127

Earlier quoted context omitted.

And thus, bitcoin. A stock that's guaranteed to provide no dividends, do no buy-backs, or deliver any value - aside from the ability to sell it to the next fool for an even greater value.

I know this whole "bitcoin is pointles" meme gets upchuckles on hacker news all day long, but at this point it's pretty embarrassing that this level of ignorance continues to persist. As it turns out "sending money over the internet" is kind of an important utility for the modern world, and nothing does it as well as Bitcoin. This is why it's now a trillion dollar global economy. That's great for you that you're in a…

Ah yes, the optimal way to send money over the internet must surely involve burning up an amount of electricity which could’ve powered my house last week

Re: Are You Trading or Gambling?

#159

Post by koboll »

elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

It's odd to read this, since so much of my money is parked in index funds, probably for decades, simply because stocks are more likely to perform well over the long term than other asset classes.

I guess this can be read as an outgrowth of the "company perspective" in the sense that I think the American economy is fundamentally sound, but it's odd to call it that, since I couldn't care less about individual companies for the most part.

Re: Are You Trading or Gambling?

#160

Post by [deleted] »

tt433 wrote: post #86
ramblerman wrote: post #66

Earlier quoted context omitted.

Interesting, given he is such a prominent Economist I'm a little surprised by the simplicity of the analogy though. It seems strange that he has reduced it to one where there is no objective value at all. As an equity at the first level is still about how the company will perform in the future, no? And thus has an objective value.

Everything is worth what it's purchaser will pay for it; every transaction is subjective

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