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People "made" 700k for him to lose it, less fees. Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedgi

People "made" 700k for him to lose it, less fees. Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather.

logicchains 6y ago
>Because speculative trading is a zero sum game, it creates no wealth. Speculative trading is a key component of markets. People speculate that X is undervalued, so they invest in X, this gives X more resources, so resources are allocated based on what people think has most potential for growth. People who continuously make bad predictions get filtered out of the market, so "what people think has most potential for growth" comes to approximate "what has most potential for growth", and we get efficient resource allocation.
- amiga_500 6y ago
  It's the secondary market. Companies get nothing on a bet they win or lose. People betting on a soccer game have zero effect on the future of soccer.
  - logicchains 6y ago
    Secondary markets can definitely influence the price of the underlying asset, especially if they're more liquid.
    - amiga_500 6y ago
      Derivatives? Do Barcelona change their tactics because I keep winning big on the first goal scorer? This is a socially useless activity. Stop trying to force it.
Ghjklov 6y ago
I agree
wpietri 6y ago
Yeah, I think fees and externalities mean that speculation is a negative-sum game. I used to work for financial traders, but I quit that industry because I decided it was, however lucrative, a net societal negative.
- hejja 6y ago
  that plus the industry pulling in a lot of smart people who could have spent their time elsewhere
- chii 6y ago
  speculating is not a net societal negative - it allows one party to trade the risk away. But of course, the same instrument can be abused by gamblers. But it's not the instrument itself that's the problem - it's that there are people gambling with money they can't lose.
  - wpietri 6y ago
    Market-makers are sufficient to allow one party to trade the risk away. I agree gamblers are also a problem, although I'm not sure it's really a distinct group from speculators. But if you look at the amount of resources spent to in effect lower insurance premiums, I think you'll find it's much larger. So yes, the lowered insurance premiums are good, but the costs are so high that on net it's negative for society.
webmaven 6y ago
> Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather. Even farmers hedging bad weather isn't what it used to be: http://nategabriel.com/egblog/wp-content/uploads/2019/01/6-2-Kaufman.pdf http://nategabriel.com/egblog/wp-content/uploads/2019/01/6-2...

People "made" 700k for him to lose it, less fees. Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather.

logicchains 6y ago

>Because speculative trading is a zero sum game, it creates no wealth. Speculative trading is a key component of markets. People speculate that X is undervalued, so they invest in X, this gives X more resources, so resources are allocated based on what people think has most potential for growth. People who continuously make bad predictions get filtered out of the market, so "what people think has most potential for growth" comes to approximate "what has most potential for growth", and we get efficient resource allocation.

amiga_500 6y ago
It's the secondary market. Companies get nothing on a bet they win or lose. People betting on a soccer game have zero effect on the future of soccer.
- logicchains 6y ago
  Secondary markets can definitely influence the price of the underlying asset, especially if they're more liquid.
  - amiga_500 6y ago
    Derivatives? Do Barcelona change their tactics because I keep winning big on the first goal scorer? This is a socially useless activity. Stop trying to force it.

Ghjklov 6y ago

I agree

wpietri 6y ago

Yeah, I think fees and externalities mean that speculation is a negative-sum game. I used to work for financial traders, but I quit that industry because I decided it was, however lucrative, a net societal negative.

hejja 6y ago
that plus the industry pulling in a lot of smart people who could have spent their time elsewhere
chii 6y ago
speculating is not a net societal negative - it allows one party to trade the risk away. But of course, the same instrument can be abused by gamblers. But it's not the instrument itself that's the problem - it's that there are people gambling with money they can't lose.
- wpietri 6y ago
  Market-makers are sufficient to allow one party to trade the risk away. I agree gamblers are also a problem, although I'm not sure it's really a distinct group from speculators. But if you look at the amount of resources spent to in effect lower insurance premiums, I think you'll find it's much larger. So yes, the lowered insurance premiums are good, but the costs are so high that on net it's negative for society.

webmaven 6y ago

> Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather. Even farmers hedging bad weather isn't what it used to be: http://nategabriel.com/egblog/wp-content/uploads/2019/01/6-2-Kaufman.pdf http://nategabriel.com/egblog/wp-content/uploads/2019/01/6-2...