Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: mc who wrote (862)	8/29/2000 4:11:11 PM
From: Dan Duchardt	Respond to of 1426

mc, Your point is well taken. I agree with what you say, and that accounts for my hedge word "nearly". This was never meant to be a precise calculation, just a rough estimate of what it would cost to insure against investment losses. For some estimates, including this one, a zero sum approximation is good enough. For many other things is would be terrible. Nearly is a relative term. If you look at the total (not net) gains and total losses taken during the course of a year, they far exceed the net gain or loss in the market, and therefore must be comparable to one another. I have no hard data to calculate the total gains and total losses, but it can be inferred from the volatility, float turnover, and that average net 10% market gain. Insurance premiums collected on all trades would have to cover the benefits paid on all losing trades. With total losses being nearly the same as total gains, that would amount to approximately 1/2 the total losses plus 1/2 the total gains, unless there was a huge "deductible" to limit benefits to large losses only. Only if the total gains far exceeded the total losses would it be possible to insure against all losses at modest premiums. In fact, we know historically, that the market averages about a 10% return per year. Well above inflation. Actually, there is a chart out there somewhere that shows inflation adjusted market returns. There is a period of 16 years surrounding the 1970s where the market trailed inflation on average. Still no better place to park your money considering the non-adjusted growth, except for maybe real estate if you lived in the right part of the world. Since the low of that period, adjusted market returns have been a lot better, especially in the 90s. Dan

To: mc who wrote (862)	8/29/2000 10:23:27 PM
From: ISOMAN	Read Replies (1) \| Respond to of 1426

hey...all I have to do is be smarter than 99.5% of the people out there and I will succeed. let me check.... Ok I qualify.

To: mc who wrote (862)	9/2/2000 11:28:28 AM
From: Robert Graham	Read Replies (3) \| Respond to of 1426

Yes, I agree that the game is not "zero sum" when longer term players enter the picture. But is a stock or instrument is traded strictly by the day trader, then I think this could be considered a zero sum game. On a different but related topic, just imagine what will happen when the government allows individuals to invest the money that would normally go to Social Security. Or better yet, how about allowing the government to invest Social Security pension fund money into the stock market. The market driven by this tremendous infusion of cash would be a picnic for the short term trader. But understanding the government and how people in general operate, this would likely come at a market top. So they could end up being the losers. Bob Graham