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Are You Trading or Gambling?

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Re: Are You Trading or Gambling?

#361

Post by mrb »

orangeoxidation wrote: post #309
colordrops wrote: post #282

Earlier quoted context omitted.

Yes, 11 years after its debut and nearly a trillion in valuation, still ridiculously ignorant statements like "delivers no value". It delivers no value you care about. Many people care about money that can't be inflated, can't be stopped from being traded, and can't be controlled across international borders. Those are hugely valuable to some people, whether you find it valuable or not.

> money With built in and inevitable deflation. Bitcoin could never replace a national currency. With transaction times in the tens of minutes and with a maximal global transaction rate of 5-10 per second. The Blockchain couldn't replace the banking system of single mid-sized town. It's not money. It's at best "digital gold", but more realistically it's just a ponzi scheme.

«could never replace a national currency»

There are plenty of scenarios for Bitcoin to succeed and be useful without necessarily replacing national currencies.

«transaction times in the tens of minutes»

Wires take hours/days. Credit card transactions take 1-2 days before the seller's bank account is actually credited. Obviously speed isn't an issue for adoption given that people tolerate systems much slower than Bitcoin.

«maximal global transaction rate of 5-10 per second»

Bitcoin Lightning Network supports thousands/millions of transactions per seconds.

«Blockchain couldn't replace»

IMHO it shouldn't replace, but complement.

Re: Are You Trading or Gambling?

#362

Post by EdwardDiego »

tshanmu wrote: post #315
scsilver wrote: post #311

Earlier quoted context omitted.

Religion is just a ponzi scheme that still underpins most of the world's networks and hierarchies.

Care to elaborate? Or you mean christianity? There are quite a few other religions that are quite nice. Buddhism as practiced in Bhutan comes to mind...

Not sure about the lack of freedom of religion in Bhutan.

Re: Are You Trading or Gambling?

#363

Post by ak39 »

kqr wrote: post #132
YokoZar wrote: post #26

Earlier quoted context omitted.

> An investor would not really care about the stock, but only about the behavior of other investors. This sounds like the idea of a Keynesian Beauty Contest ( https://en.wikipedia.org/wiki/Keynesian_beauty_contest ) "It is not a case of choosing those [faces] that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third deg…

Exemplified in a competition in -- I think -- The New York Times: readers were instructed to guess a number between 1 and 100, and were told the winning guess would be the one closest to 2/3 of the average guess.

What was the result?

Re: Are You Trading or Gambling?

#364

Post by happymellon »

WrtCdEvrydy wrote: post #344
np- wrote: post #236

Earlier quoted context omitted.

You can buy your coworker a pizza with your credit card today. At most the fee would be 3%. From start to end the whole process would take no more than 5 mins. Plus, pretty much every decent pizzeria on the planet already accepts it as payment. The BTC transfer fee is something like $20 now, more than the cost of a pizza, and the transaction might take like an hour to clear? Maybe it's fine if you don't mind overpayi…

> BTC transfer fee is something like $20 now, more than the cost of a pizza, and the transaction might take like an hour to clear? Maybe it's fine if you don't mind overpaying, aren't too hungry, or you enjoy cold pizza. Segwit transfer is currently at $0.003, and a transaction with enough fee processes instantly. It takes 6 confirmations for a guarantee (but that will settle over the next hour). Pizza deliveries get…

> I can bet you buying a pizza in Spain with Spanish currency using a US card will charge you a foreign exchange fee.

That sounds like a personal choice. There are plenty of banks that don't charge fees for purchasing in foreign currencies. Monzo and Revolut both spring to mind here in the UK, and I believe both are now available in the US.

Re: Are You Trading or Gambling?

#365

Post by IgorPartola »

criticaljudge wrote: post #157
j4yav wrote: post #64

Earlier quoted context omitted.

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 gov…

I believe that is the case in the US also and it results in extremely poor company behavior. I would rather invest in companies that prioritized doing the right thing to maximize long term profits than companies just try to maximize the next quarter’s returns.

Re: Are You Trading or Gambling?

#366

Post by kqr »

porb121 wrote: post #292
ryandrake wrote: post #226

Earlier quoted context omitted.

Everyone has a different definition of gambling. I don't think it has to do with EV. Poker players can definitely achieve long-term, sustainable +EV, especially in rake-free games, because they are playing against other players and not a house. I still think it's gambling (along with the stock market), which to me simply means wagering something of value on a future event whose outcome is unknown.

With a wide interpretation of "wager", your definition includes lots of human behavior that no one would traditionally call gambling, because all future events have unknown outcomes, and most future events have appreciably unknown ones.

I'm not who you responded to, but I'm fine with that broad definition. It is practical to find those mathematical equivalences that are easy to find when you apply the analysis of gambling on most endeavours.

Re: Are You Trading or Gambling?

#367

Post by criticaljudge »

jandrewrogers wrote: post #347
criticaljudge wrote: post #314

Earlier quoted context omitted.

But I think the opposite case still kind of holds, that with P/E you can at least see if a company is most likely not overvalued. And that was the issue in question ("everything is just gambling").

P/E doesn't even tell you that. Companies with negative revenue growth rates often have low P/E ratios but these are often overvalued and poor investments even then. Sophisticated investors, and therefore market pricing, take all of this into account when valuing companies. All trivial nominal measures of stock value were completely arbitraged out of the market many years ago. There are still measures that correlate…

I certainly didn't want to suggest that P/E is a reliable or sufficient indicator for good investments. It was just about this claim that everything is just gambling at this point.

Re: Are You Trading or Gambling?

#368

Post by kqr »

spydum wrote: post #111
ab111111111 wrote: post #104

"Gambling occurs when you have a poor understanding of risk, resulting in either (1) negative expected value bets, or (2) poor bet sizing that leads to ruin." Not so. Top poker players are still gambling, but have an excellent understanding of the risks. Their skill doesn't turn them into investors. Gambling is taking a high risk bet. Whether the expected pay off is high enough to justify the risk and whether you can…

I thought the exact same thing. I suspect a better definition would be a wager based on random chance. Markets aren't "random", they are just suitibly complex enough to seem like it. Some people apply algorithms and emotional analysis to predict behavior. This might sound like poker, but I would argue all of the influences in a market are clearly visible. In a game of chance like poker, card ordering is still random…

Very few (if any) things in life on a non-quantum scale are actually random. Roulette results, dice throws, shuffled cards, etc, are all the results of complex and hard-to-predict processes, but they are no more random than the markets.

What people mean when they say that something is random on a non-quantum scale is this: the process is so complicated and hard to predict that our best models of the process incorporate a significant amount of randomness.

This is the case for markets too, where a multifractal random walk is about the best model we have.

Re: Are You Trading or Gambling?

#369

Post by criticaljudge »

rjbwork wrote: post #356
criticaljudge wrote: post #151

Earlier quoted context omitted.

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…

I don't really want to get into it here, but your first example is pretty disingenuous. AFAIK the assertion is not that "all labor creates value" but that "all value derives from labor". There is a difference in those assertions and you should at least be willing to steelman the position of someone you disagree with.

Which one do you mean? It is true that owning stock does not entitle you to labor of a company of employees. Paying wages does.

And the "value theory of labor" states that the value of labor is determined by how hard the work is. So why should I not be paid for digging a hole in front of your door?

If you say you didn't want that hole to begin with, we are veering into "people should only pay for what they want", and I think the "value theory of labor" already gets in trouble. You have to admit that how much people want something, or how useful it is to them, should factor into how much they should have to pay somebody else. So the theory that only labor should determine the price is debunked.

"All value derives from labor" is not even true (what about trading rare items, for example - or lets take a house. Is a house by the lake the same value as a house on a garbage dump, because they both take the same amount of labor to build?), and it seems a very vague statement. How do you derive the value of something from that statement?

Re: Are You Trading or Gambling?

#370

Post by kqr »

hntrader wrote: post #168
lordnacho wrote: post #31

This is only scratching the surface of the question. For interest, there's a very common negative expected value bet that almost everyone is required to make: insurance. We don't consider that gambling, in fact we often tell our parents to buy some when they fly on holiday. Why? The answer touches on the lottery. We care about not just the average case, we care about what might happen. Regarding Kelly criterion, ther…

Insurance is negative EV only in dollars, not necessary in utility. Since most have a risk averse utility function, it's often positive EV in utility.

The argument gets even better than that.

Logarithmic utility corresponds to maximum growth of wealth (Kelly criterion), so insurance is actually often compatible with maximum growth of wealth.

How can something be negative EV yet maximise growth? Compound returns.

Insurance is only negative EV when considering a single period. The ongoing act of having insurance is positive EV in terms of growth. The way to get to that is to count EV as the geometric mean instead of arithmetic mean.

This is a very common mistake still, even though it was discovered by Bernoulli in 1734. I strongly recommend reading that paper. It is very easy to read.

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