I’m really curious if he is unable to trade when he gets older.
What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
91–100 of 182 posts
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#92Earlier quoted context omitted.
>The entire trading industry is a zero-sum game bro. For someone to win someone else has to lose. Traders add liquidity. That liquidity allows me to easily buy and sell stocks without waiting long periods or worrying about getting ripped off by the spread. And since the economy isn't zero-sum, it's possible for everyone to end up better than before.
Does trading stocks somehow cause an increase production of actual stuff? If not, I don't see how everyone ends up better off.
> Does trading stocks somehow cause an increase production of actual stuff?
Sure it does. If the price of a stock changes, it becomes easier/harder for that company to raise money relative to other companies. If it's a good company then making their shares go up can increase production of actual stuff because they can afford to build more factories etc. If it's an inefficient company and its shares go down then the people who sold it can go invest that money in something else. There is a net increase in production if the company who gets the money is the one more efficient at using it to make stuff than the alternative, i.e. share price becomes "more accurate" as a measure of the company's market efficiency.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#93Earlier quoted context omitted.
> The entire trading industry is a zero-sum game bro. It isn’t in utility terms, which are the only terms that matter for whether something is actually zero sum. Under certain assumptions, it is in (e.g.) dollar (or other specific commodity) terms, but the whole reason markets work at all is that the no specific commodity ( including any fiat currency at any point in time) has a consistent relationship to utility acr…
How well does that utility argument play out when companies see fit to grant 0 dividend?
If you buy shares for $100 and they increase to $200 without paying you a dividend, you've still made $100. If you prefer to have $100 in shares and $100 in cash rather than $200 in shares, you can sell half of your shares.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#94Earlier quoted context omitted.
This was a long time ago in a galaxy far far away. Also the article mentions these were thinly-traded stocks. I assume the argument would be that today this sort of thing is happening because it's Tuesday. i.e. it's normalized and if you get burned, it's almost someone's civic responsibility to part you from your money.
Scammers who think it's their "civic responsibility" to dupe their fellow man with intentional fraud should think two or three times before committing to that logic. If they want to value someone's worth to the human team based on their gullibility to professional liars, it's not reaching very far for other like-minded logicians to value the scammers' worth based on their ability to navigate any other man-made stress…
Good luck getting law enforcement to care about you getting your stuff stolen.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#95Earlier quoted context omitted.
Outside money flows into the market, this allows it to be positive sum. For the DnD analogy, it is as if you had a cleric. Eg: IPO sells at $2, next seller buys at $4, next at $6, etc. Everyond makes money in that scenario. Eventually there can be losses, do all the losses counter balance these profits? No, because on net everything went up. If there were always trades that had losses to balance the gains, only then…
Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health). If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms…
I'm responding to only: "> How does the market grow if all trades are zero-sum?"
I'm not trying to say that markets are necessarily a net positive. But we should also not be myopic about it either. There is more to it.
Firstly, money being made solely by trading is rent seeking. It's maybe even the definition of rent seeking (?) Personally I'd be in favor of tax rates in the 40% to 50% region for rent seeking (long term and short term capital gains tax IMO should both be doubled). Perhaps we agree a bit there.
> Money gets created when people take out loans which creates debt which is then traded in the markets
This is still net new money into the market, ergo, the market is not at all zero sum. There is new money flowing into it. That _negates_ the statement that there must be one person losing for every person winning in the stock market, it is not zero sum. Everyone can actually be making money because there is new money being injected (and the opposite can be true when money is net leaving because interest rates are high and everyone is putting their money to cash or bonds instead).
Same thing happens in a Ponzi scheme, everyone can actually be making money while there is new money flowing into the system.
In the example you stated, if a person borrows money against their house, they are moving money away from real estate to the market. Their wealth is net-zero in that scenario, but relative to the market - the market saw a net increase. Thus, the market is not a closed system, it is therefore not by necessity zero-sum - it's possible to have more winners than losers when trading (and/or more losers than winners too)
> If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms of something besides money. E.g. when half of the factory quits to go be day traders, the factory ends up producing more while consuming the same or less.
Yeah, this is what happens with IPO. Oatly is an example, they had a supply crunch, they could not produce enough milk for store shelves. With their IPO money they funded the construction of additional factories to increase their production capacity. I think people forget this, the IPO of a stock is a huge injection of money to a company, as-is whenever the company issues more stock. Amazon is another example, instead of using cash to pay employees, they used stock; which freed up cash to go to other places. Though, post-IPO, shares being traded around is arguably all just rent seeking. A company can still issue more shares too though. This very thing saved both AMC and GME; both of those companies would have gone under if they were not able to raise money by issuing stock.
On the other side, this situation is not always fully pure. Plenty of companies are run by MBAs that give themselves too many shares & their sole goal is to go public so they can offload their holdings rather than grow their company. Still though, the primary reason for stocks to exist is that companies can acquire additional funding without taking out loans, they get that funding by trading ownership. That's still a thing even if there is a lot of other corruption & rent seeking relating to it. Thus, we should not be myopic it, there is more to it.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#96Earlier quoted context omitted.
>The entire trading industry is a zero-sum game bro. For someone to win someone else has to lose. Traders add liquidity. That liquidity allows me to easily buy and sell stocks without waiting long periods or worrying about getting ripped off by the spread. And since the economy isn't zero-sum, it's possible for everyone to end up better than before.
Does trading stocks somehow cause an increase production of actual stuff? If not, I don't see how everyone ends up better off.
You have to buy stocks or you'll money will go to the government thanks to inflation.
Without the government the stock market would be less crowded.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#97Earlier quoted context omitted.
Outside money flows into the market, this allows it to be positive sum. For the DnD analogy, it is as if you had a cleric. Eg: IPO sells at $2, next seller buys at $4, next at $6, etc. Everyond makes money in that scenario. Eventually there can be losses, do all the losses counter balance these profits? No, because on net everything went up. If there were always trades that had losses to balance the gains, only then…
Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health). If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms…
In general there are two ways for companies to make money. 1) They make something that otherwise wouldn't have been made, or make it more efficiently than the competition and then capture volume with lower prices. 2) Rent seeking; they extract higher profits from the same activity, e.g. by buying their competitors and raising prices.
Traders do the work of finding the companies that can do one of these things and allocating resources to them so they can do them. When it's the first one, the societal gains are quite significant. When it's the second one, well, there are supposed to be laws against that and if it's happening then we need better laws or better enforcement.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#98Earlier quoted context omitted.
> The entire trading industry is a zero-sum game bro. It isn’t in utility terms, which are the only terms that matter for whether something is actually zero sum. Under certain assumptions, it is in (e.g.) dollar (or other specific commodity) terms, but the whole reason markets work at all is that the no specific commodity ( including any fiat currency at any point in time) has a consistent relationship to utility acr…
How well does that utility argument play out when companies see fit to grant 0 dividend?
Dividends or not are irrelevant, what matters is that the marginal utility of market value measured in monetary terms (or in market equivalent in any other commodity, but money is the most common one for people to mistake for a direct measure of utility) differs between market participants, and for the same participant (relative to others, not just by, e.g., inflation that applies in the same way to all market participants) at different points in time.
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#99He can afford college? In seriousness though: are analysts allowed to have an interest in stocks they're publishing analysis for? It seems like a fine line between creating an obvious conflict of interest (see: TFA perhaps on a more subtle level) and wanting them to have skin in the game so they're incentivized to provide useful analysis (rather than YOLO: stock goes up/down and I don't care because it's other people…
At virtually all banks, equities analysts are banned from trading in their coverage. Banned as in, if you, your spouse, your dependents, etc. have an interest you didn't proactively disclose and dispense with you're fired on the spot.
FINRA regulation states that registered equities analysts (i.e. the ones working at banks) at a minimum cannot trade against their ratings [0]. At most / all banks there are further restrictions that ban trading in coverage.
[0] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
#100Earlier quoted context omitted.
> Depending on who you talk to, Lebed was either viewed as a person who knowingly abused the system and broke the law, or someone ... actually performing no wrong-doing. Funny how selectively quoting a bit differently makes that appear far less so.
It all comes down to selective enforcement by the not-actual-real-judges at the SEC. You have to go through their kangaroo court with an ALJ, and arger likely getting a judgement against you, can you actually go to a real court. And this is combined with different rules for different income classes. Kid from middle income family gets smacked down hard. Whereas billionaire employees doing work on wall street either ge…
If you read the article, it looks like he got punished pretty lightly - had to pay back some of the gains, got to keep others, and had no further repercussions.