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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Raymond James Norris who wrote (2387)	7/14/1999 10:16:00 PM
From: pgsachs	Read Replies (2) \| Respond to of 10027

"That's how investing is. For every dollar in profit there is a dollar in loss." Sorry, but I beg to differ in a big way. In the futures and options markets, you are correct, since both markets depend upon two parties to agree to a contract that specifies quantity, price, etc. One cannot establish a position without a counter party. In equities, one can be long without anyone being short (unless you consider the issuing corporation the short, but don't forget, they got the cash). It is this one sided aspect of equities that brings the Federal Reserve into the picture. When stock prices go up, money (& value) is created, expanding the money supply. I can [and have] withdrawn the SMA in my margin account. Voila! Money out of thin air. Unfortunately, when prices drop, the money supply contracts, occasionally vigorously, as in the downward spiral we witnessed last August. ”If you think about it logically, the only way that trading exists today is because it is a zero sum game. A zero sum game can go on forever. A positive sum game, however, cannot.” No, equity investing is not a zero sum game. Look out your window. Every building, every car, every artifact is owned by someone, sometimes in aggregate, such as a municipal asset, sometimes privately, as in homeownership, but a huge proportion is owned by corporations. Over time, equities have a positive real return. As I recall from Econ 101 (I should remember: I took it several times), wealth creation is a function of capital and labor. Yes, the population has increased, but the productivity of capital (i.e., the real equity return) has been a major factor in the creation of the amazingly wonderful society we live in. We do not just push the poker chips back and forth across the table: the pile of chips increases, and the common measure used to estimate the size of that pile is the GDP. (Actually, that's the revenue line, which the economists use to input the value of aggregate asset, i.e., equity). Without it being a positive sum game, we're still eating fruit on the edge of the savannah.