Trading's Value
#1
Posted 29 July 2007 - 12:44 PM
"I also think trading, where one spends all his daily attention to monitor every minute movement of the indices, is unproductive to the society. If someone is good enough in catching all intraday ups and downs to consistently make money, he is a very smart person to be as successful in other productive efforts.
The above is just my personal attitude towards trading."
Firstly, you know how we know that trading is productive to society? It makes money. If you don't over time, then you're just distributing your income to better traders and investors, but if you do, you are, by definition improving the efficiency of the market, which is why you are rewarded with income.
Secondly, while some traders (one in particular comes to mind) are quite smart, I know many other profitable traders who aren't all that bright.
Some of us (me, for instance) are simply better intellectually/emotionally suited to day trade than to position trade or to invest. Were I to move to solely trading for a living, I would largely day trade (and hold long term high quality issues with serious taxable money). This would trim my day from 10-12 hours now, to 6.5 hours, unless I'm trading Globex. I wouldn't have to travel in order to work, so I would burn very little fossil fuel and I wouldn't waste time in traffic annoying and being annoyed by others. Also, I could take off pretty much whenever I chose. All I'd have to do is pass on a trade. That's time that I would then be able to spend giving my or my family's children love and attention, or volunteering to help other kids learn, or time that I get to create something beautiful or cool, or whatever.
Now, who are you (or anyone) to say that's not productive to society? Compare this to someone who makes video games, or cigarettes, or someone who sues folks for a living, or someone who sells soft drinks, or someone who counts beans for the government.
Every activity has its own costs and benefits but if the FREE market pays you a lot for a relative little, then you can be pretty darned sure that what you are doing is of considerable benefit to society. If you do something that covers your basic needs quickly and easily and frees you up to do other things--good things like caring for kids or teaching others or building communities, you have a duty to yourself to do that thing if you enjoy it. Society will benefit more from that than from you doing something that some judgmental person* asserts you should be doing. Of course, you should focus on furthering YOUR OWN rationally held values and let "society" worry about itself.
Mark
*shades of Ellsworth Tohey or Wesley Mouch see google for more.
Mark S Young
Wall Street Sentiment
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#2
Posted 29 July 2007 - 12:57 PM
The fact that "traders" trade paper assets is no less valuable than trading paper assets for groceries.
Which, in the end is the reason for trading stocks.
If you want to consider an activity which is a real waste of human resources consider the brain power which goes into the valueless activity of TAX PREPARATION!
To paraphrase:
"I also think tax preparation, where one spends all his daily attention to monitor every minute movement of the tax law, is unproductive to the society. If someone is good enough in catching all tax law changes to consistently save paying excess taxes, he is a very smart person to be as successful in other productive efforts.
The above is just my personal attitude towards tax preparation."
On this, I could be no more serious.
BIGGEST SCIENCE SCANDAL EVER...Official records systematically 'adjusted'.
#3
Posted 29 July 2007 - 01:14 PM
#4
Posted 29 July 2007 - 01:16 PM
If I get rich enough out of this, I will spend the entire money for kids. I mean it...
If I get rich enough out of this, I will not make my kids support me. I mean it...
BIGGEST SCIENCE SCANDAL EVER...Official records systematically 'adjusted'.
#5
Posted 29 July 2007 - 01:33 PM
#6
Posted 29 July 2007 - 01:33 PM
Firstly, you know how we know that trading is productive to society? It makes money. If you don't over time, then you're just distributing your income to better traders and investors, but if you do, you are, by definition improving the efficiency of the market, which is why you are rewarded with income.
You are not including opportunity cost in the calculation. Let's consider IYB, who runs a mortgage business and also does swing trades. If he instead starts to chase action of every hour, but loses his mortgage business, will he be making money on the net?
Secondly, I do not understand what efficiency is created by chasing movement of every minute. All I see is a zero sum game, where money gets redistributed among traders, while time of each one is wasted. Is it any different from the casinos, where few people make money, most lose and the casino owners always make a profit? Aren't those winning money in the casinos bringing efficiency to the society? Great scientists like James Watt invented steam engine, Graham Bell invented phone, benefits of which we enjoy even today. Please tell me, what benefit to the society daytraders will bring that will be remembered after 100 years?
It's the illiquidity, stupid !
#7
Posted 29 July 2007 - 02:37 PM
Firstly, you know how we know that trading is productive to society? It makes money. If you don't over time, then you're just distributing your income to better traders and investors, but if you do, you are, by definition improving the efficiency of the market, which is why you are rewarded with income.
You are not including opportunity cost in the calculation. Let's consider IYB, who runs a mortgage business and also does swing trades. If he instead starts to chase action of every hour, but loses his mortgage business, will he be making money on the net?
That's not the issue. I can make more money doing lots of things. I choose to do what I do because I like it and it pays me. I have no obligtion to "society" to make the most money possible at any PERSONAL cost. And the opportunity cost is irrelevant. The benefit to society (nothing more than an amalgam of traders, in point of fact) is ample proof of value. Relative value is not a matter for our consideration.
Secondly, I do not understand what efficiency is created by chasing movement of every minute. All I see is a zero sum game, where money gets redistributed among traders, while time of each one is wasted. Is it any different from the casinos, where few people make money, most lose and the casino owners always make a profit?
Do you know why there's only a $12.50 spread in the ES? Traders make it that way. That means that the market works at very efficient levels and THAT makes it less volatile and more conductive to prudent investment. Without traders and lots of them, the market would trade at lower multiples in order to compensate for the added difficulty in getting in and getting out when assets need to be redeployed. That means higher costs of capital. That means lower productivity and that means a lower standard of living for mankind, over time.
Aren't those winning money in the casinos bringing efficiency to the society?
Well, money IS finding it's way back to it's rightful owners... I.e. stupid people will give up their money in games of chance and the smart will take it. But, basically, casinos, when they aren't milking idiots dry are merely entertainment. A bit of fun. Who can value that? Not me. I know this, I want a society where folks get to have fun, whatever fun they like.
Great scientists like James Watt invented steam engine, Graham Bell invented phone, benefits of which we enjoy even today. Please tell me, what benefit to the society daytraders will bring that will be remembered after 100 years?
What benefit will a street cleaner bring to society that will be remembered in 100 years? What benefit will George Soros bring to society that will be remembered in 100 years? That one is yet to be written, but I'll bet that wanker is remembered in a century, though. The whole argument is bunk anyway. 99.9999% of traders aren't inventors, otherwise they'd be inventing. BUT, if they make enough money at trading they can FUND an inventor. One who might otherwise languish if traders did what people like you think they "should" instead of pursuing their own values via a means that pays well because it improves liquidity.
Mark
Mark S Young
Wall Street Sentiment
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http://wallstreetsen...t.com/trial.htm
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#8
Posted 29 July 2007 - 02:42 PM
#9
Posted 29 July 2007 - 03:06 PM
#10
Posted 29 July 2007 - 03:20 PM