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> taking $100,000,000 dollars home All this money allows this people to buy many things, properties, services... Do our society can afford for all that in exch
by Hokusai 6y ago
> taking $100,000,000 dollars home
All this money allows this people to buy many things, properties, services... Do our society can afford for all that in exchange of some luck?
There are limited resources and society have decided that these people deserve a big chunk of that resources.
Weird.
- vkou 6y agoIt can afford the existence of a monied class which collectively commands tens of trillions of dollars in wealth, so it can probably afford it. Whether or not we want to afford it is a different question.
- cma 6y agoHopefully at worst it is just something like instead of artists working on cinematography and graphic art for Coke commercials and advertisements to give people diabetes, they will be making artwork for these people's mansions that might not be enjoyed as widely as they could be in a more rational system but that at least won't give people diabetes.
- bsanr2 6y agoI don't see how it's different from what already exists. If you're questioning them, why not Gates, Bezos, [redacted], [unknown], etc.?
- WA 6y agoTrading is a zero-sum game.
- kasey_junk 6y agoThis is only true if you assign no value to risk mitigation or liquidity.
- Hokusai 6y ago> risk mitigation Is that still an argument after the housing collapse of 2008? Far from mitigating risk it seems that risk was increased.
- kasey_junk 6y agoI’m sorry can you explain how you are connecting bespoke mortgage backed securities and their derivatives to commodities trading?
- WA 6y agoIn dollar terms and with futures described in the article, one parties losses is the gains of another party. Risk mitigation or liquidity are parts of the portfolio management, not the trade itself. I sell you the future, you buy it. Difference of price is my loss and your gain or the other way around.
- kasey_junk 6y agoThats an extremely restrictive definition of zero sum. If that were the normal definition most transactions would be considered zero sum. But its not. Zero sum has to do with the utility provided to each side of the transaction. I may have a completely different desire to own a future than you. Perhaps my portfolio needs less risk or my predicted oil needs have changed. In those cases I gain a lot of utility by being able to move out of the future into cash, even if later you make more than I would have by selling it.
- hnracer 6y agoIt's positive sum in utility but zero sum in dollars. People get caught up on the latter when all that matters is the former. Think of a pawn shop on a street corner. They trade by making markets, engaging in a zero dollar sum game. But it's absolutely positive sum in utility.
- WA 6y agoThe pawn shop is the exchange and yes, they provide utility. But one person sells a contract, another buys the contract. One loses money, the other gains money. The exchange isn’t part of the equation. It’s zero-sum between contract parties.
- hnracer 6y agoThe pawn shop is the market maker (ie trader) since they hold inventory and provide a bid ask spread. Exchanges don't provide this service. I could make the same claim that you've made about pawn shops as a reductio ad absurdum. That individual with second hand jewellery gained X dollars when they sold it to the pawn shop and the pawn shop lost X dollars. So it's zero sum. Although it isn't except in the most myopic sense (that of dollars). Transactions (on financial markets or otherwise) are always subjectively positively sum in utility and that's what matters. Here's some examples. Suppose someone gets a terminal illness and needs to sell all their stocks to a willing buyer in order to get cash. It's zero sum dollars (just like every material transaction in the economy) but utility was gained, the person that needed the liquidity got it immediately and with near zero slippage. Other examples: The farmer that needs to hedge their crop yields, the airliner that needs to hedge oil prices, the gold miner that needs to hedge gold prices. The supply side and demand side of this equation gains utility from engaging.
- WA 6y agoGood examples and yes, that makes the utility clear. But it's still zero-sum in dollar terms. So, if there is a big story about "The boys who made 600 million dollars with oil futures contracts", that is strictly in terms of dollar value and their gain (a good trade), is someone else's loss. That is what I'm talking about in response to my parent poster, who claimed: > "There are limited resources and society have decided that these people deserve a big chunk of that resources." As if society decided collectively to pay an unfair amount to a good/lucky trader. They took it from other market participants and not from average joe. My intention with my initial comment was to point out that it simply doesn't matter if one market participant has 600 million more than before, because others in the market lost it.
- neximo64 6y agoIt's only zero sum if the things being traded are in fixed supply. You can always pull more oil out of the ground and you can always create new fiat currency.
- WA 6y agoBut not within a few hours or days. For the type of trade described in the article, someone was at the other end of the futures contract. Their loss is Vegas gains. There is nothing else to it. Zero-sum. I don’t talk about long-term investing.
- bpodgursky 6y agoThis profit is a forcing function to punish producers and middlemen who didn't build enough oil storage infrastructure.
- morlockabove 6y agoDeserve? No. Get? Yes. If I stumble across gold in the ground, quietly buy the land and start to mine it, I don't 'deserve' that gold. But I've got it, and the system of property rights is there to dissuade me from just taking it by force instead of buying the land first (or other people taking it from me once I've got it).
- Hokusai 6y ago> But I've got it "In most countries of the world, all mineral resources belong to the government. This includes all valuable rocks, minerals, oil and gas found on or within the Earth. Organizations or individuals in those countries cannot legally extract and sell any mineral commodity without first obtaining an authorization from the government" In the USA is not exactly liked that but "Property rights and mineral rights were originally tied to the land. The owner owned both. However, mineral rights and property rights can be severed, meaning the owner can sell one and keep the other. So, the original owner of your land may have sold the property rights to one person and kept the mineral rights or sold it to another person. By the time you bought the land, the mineral rights may have been sold already." So you could be committing a crime by mining gold with only the property rights, you also need mining rights.
- morlockabove 6y agotechnicality
- mypalmike 6y agoAn imperfect analogy on HN. Thanks for letting us know.
- retube 6y agowhilst luck plays its part, this is the reward for taking risk (a lot of risk). and without the possibility of reward for risk taking, there'd be no incentive to invest in anything.
- mulmen 6y agoMoney is not a consumable resource. They didn’t remove $100,000,000.00 from the economy. If they buy things, properties and services then the money is reallocated to the providers of those things, properties and services.
- fredguth 6y agoBut there is a cap on how much an individual consume. The same amount distributed among thousands would reallocate the money more efficiently.
- barry-cotter 6y agoI can spend $100 million in a year on things I value with ease of necessary. I’ll start with seeding an Irish startup ecosystem of any note. Actually that could easily swallow the entire fund in one year by itself. I trust you see my point. Bill Gates has spent a lot of money on trying to make the world a place more to his liking, a place without malaria. That’s consumption.
- jjeaff 6y agoEven if they don't spend it and just keep it in bank accounts, it will still be loaned out and invested.
- laurent92 6y agoIf we lived in USSR, economy would be driven by the central planners. In capitalism, economy is driven by decisions at every level to allocate funding. Those who forecast the future best are the ones who get rich, because it allows the right companies to receive funding. Our economy wouldn’t be so big if it were organized by central planners, so I pardon those, although it does seem extreme here.
- fredguth 6y agoThe comparison with USSR is naive. The question is not capitalism vs communism. Is the kind of capitalism we have. We have one where when the banks and people make bad decisions and get bankrupted with valueless contracts, the government save the banks, and the corporations and let common people go bankrupt.
- bostik 6y agoSometimes aptly called Socialist Capitalism.
- varvar 6y agoWho the heck is society? That's just us. But we don't come together and decide like that, so I don't think society exists in the abstract the way you think it does. It's more like this is how reality is. You've probably never been a trader, most traders lose their money, it's an extremely risky profession. For every win you hear about there are at least 10 losers. At the end of the day the activity of traders readjusts the asset prices on ongoing basis closer to their true valuation. The more trading occurs the more precise the price is. Without enough trading activity an end user might be forced to overpay for an asset.
- calvano915 6y agoExcept for that whole "markets can remain irrational longer than you can remain solvent" and all...