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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (37720)	11/29/1998 4:01:00 AM
From: Skeeter Bug	Respond to of 132070

cb, it isn't a zero sum game. it can be net positive or net negative depending on how well the economy that makes up the sum total of the companies that make up the market does. if you buy at $1, sell at $5, that person who bought at $5 sells back to you at $10 and you sell at $15 then both you and the person you sold to made money. of course, this works in reverse, too. at least, all us bears hope it does ;-) if two people take opposite trades and sell at the same time then the game is zero sum - but by choice...

To: Ilaine who wrote (37720)	11/29/1998 12:36:00 PM
From: Knighty Tin	Respond to of 132070

Coby, The market looks like a zero sum game, with the possible exception of new issues as they are currently manipulated, and probably is a zero sum game in the end, but it is not in the middle. Hope that cleared everything up. <G> Let me elaborate a bit. New issues under the current scam may not be a zero sum game as they are creating fictional value where no real value exists, and both the buyer and the seller can profit or lose on this deal. A group of insiders sells a small portion of their fluff co. to institutions and well-heeled individuals. That deal sets a price for the entire corporation. And, since the supply of shares is kept artificially low, both the insiders and the institutions benefit. The insiders see the bulk of their holdings appreciate overnight. The institutions eventually feed their shares out to suckers who buy after the offering at inflated prices, so they benefit. The original transaction is a win/win game. The second transaction, fleecing the lambs, is a zero sum game where the institutions benefit by ripping off the mouth breathers. In normal, every day transactions, it looks like the buyer or seller can only make or lose what the other makes or loses in the opposite direction. But that does not take into account the holders who are impacted by the trade and the price it sets. For example, if I pay $1 over yesterday's price to buy 100 shares of IBM from somebody else, the transaction between us is a zero sum game. However, the upward price of $1 that we establish benefits holders of the stock in a fantasy sort of world. Of course, we all know that if they all try to sell it, that $1 and many others will quickly be shaved off the price. But, on paper, they benefit and nobody loses. We could say that the person who sold the shares to the holders lost that $1, but those sellers may have had huge gains and certainly don't consider themselves losers on the stock. Opportunity cost is not a true cost in capital appreciation. Selling short and actually losing money, or buying and actually losing money, is a cost. Not getting the best price is not. In the long run, the market is a way of shifting wealth from one group of people to another. On paper, wealth can be created with more winners than losers, or, destroyed, with more losers than winners, but throughout the society, especially globally, these things should balance. For example, the Depression of the 1930s looked like it hurt everyone. But, in retrospect, we can see that it did not hurt the merchants of menace who supply arms to the military, or the power structure of the world's military machines. It helped them immensely. Another important point is that the stock market should reflect the real economy, which is not a zero sum game. There is real growth longer term. Not in the amount that is often reflected in stock market gains, but a definite positive bias. MB