....not as long as you have investors totally hamstrung on the long side (401k's) and you have 'cannot short lists'
All due respect, you don't understand what I meant by closed or open in regard to games. To be a zero sum game, all gains are offset by another's losses, the game is "closed" in that all the money in the game comes from the players. In theory poker is a zero sum game, it is less than zero sum when the "house" takes a cut.
If the stock market was a "closed" game then commissions and spreads would create a negative expected return. But in the case of the stock market, the game is open, because money comes from outside the funds provided by the players, it comes from a return on the business activity paid out in the form of dividends.
the 'game' has rules imposed that are weighted to one side, despite that, there are entities (hedge funds) that are not constricted by the same rules, btw, doesn't mean they can't lose money as well, their liquidating as we speak
The only way the equities game can become a game with a less than zero sum is if the sum of all spreads and commissions (the money leaving the game) exceeds the amount of money paid out to long holders, from outside the pool of "players" in the form of dividends.
This can happen in short periods of either high commissions/low dividends or high volumes of trading but in a long game without time boundaries, like the stock market, it can't happen forever or even for long because players go bust.
Trading introduces negative expected returns because of the sheer volume of money siphoned off. Large short selling positions increase the probability of negative expected return because all short selling requires two transactions and involves margin, trading as opposed to holding. A long holder could simply buy once and live off the dividend for the rest of their lives. |
