3 ms·

>I'm struggling to even understand what a market with "no negativity" means. Just imagine basically... every single other market. The price of goods at Walmar

by cwhiz 6y ago

>I'm struggling to even understand what a market with "no negativity" means. Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the price. The market doesn't need uninvested third parties sitting outside the ring gambling on the supply and demand outcome in order to set a price.

amalter 6y ago
I think you're arguing for a market with only direct investments and no secondary derivatives. If that was all the equity market was, we could be in the same zip code. However, we live in this hyper-securitized world, where every part of the economic fabric has bets for and against, with insurance, leverage and information asymmetry baked in. The only way to "discover" price is to provide instruments that provide "gravity" for both upward and downward price movements. The lack of supply on it's own is not enough, especially when malicious actors are pushing on the supply and demand levers.
kqr 6y ago
For better or worse, derivatives-based economies are incredibly resource-efficient. By creating a formal system for actually assigning universally-understood value to promises, we can do a lot more with a lot less. Sometimes bad things happen, but you can be sure we'd have none of the niceties of modern society without a derivatives-based economy. Immediate cash just has a ceiling for what it's capable of supporting.
- RGamma 6y ago
  Well the general discontent with the financial system stems, I believe, from it being perceived as mostly a walled garden in which professionals have built a complicated and highly self-referential system few control (Blackrock cough) that makes and keeps them disproportionately wealthy. To anyone in the working population it must seem like an instrument designed to keep the pressure on and not serve general society or those providing actual tangible things of value to the market, like goods and (non-financial) services. I actually tend to agree but it's pointless to battle the market's cold logic (which often does make sense to me from what little I know) or existing power structures. Solutions/counterforces need to come from society and civil institutions. If those are weak, gotta fix that first and the market would depict a more equitable society without prejudice. It's the same old rich vs poor repainted with complicated terminology and systems, really. Another thing to improve would be transparency and education about what's going on in finance like with personal accounts of people working there for instance, making it less of a stranger and showing some of its internal logic and the things it does well or not so much.
arthurcolle 6y ago
> The price of goods at Walmart is not based on your bet on supply and demand. This is a specious argument. You literally could go out, borrow your friend's crate of 10,000 bananas, sell them on the open market, then wait for the price of bananas to crash, and then buy them back (maybe even the same crate!) and give them back to your friend, plus whatever the banana margin costs. Effectively, if you were to do this at scale, you would directly be influencing the price of goods at Walmart. Mechanically, this isn't how it works, and I don't think there are banana futures and options, but thinking that all derivatives activity is speculation is simply naïve. On the GameStop excitement, all I have to say is... "Apes, together.. strong."

by cwhiz 6y ago

amalter 6y ago

I think you're arguing for a market with only direct investments and no secondary derivatives. If that was all the equity market was, we could be in the same zip code. However, we live in this hyper-securitized world, where every part of the economic fabric has bets for and against, with insurance, leverage and information asymmetry baked in. The only way to "discover" price is to provide instruments that provide "gravity" for both upward and downward price movements. The lack of supply on it's own is not enough, especially when malicious actors are pushing on the supply and demand levers.

kqr 6y ago

For better or worse, derivatives-based economies are incredibly resource-efficient. By creating a formal system for actually assigning universally-understood value to promises, we can do a lot more with a lot less. Sometimes bad things happen, but you can be sure we'd have none of the niceties of modern society without a derivatives-based economy. Immediate cash just has a ceiling for what it's capable of supporting.

RGamma 6y ago
Well the general discontent with the financial system stems, I believe, from it being perceived as mostly a walled garden in which professionals have built a complicated and highly self-referential system few control (Blackrock cough) that makes and keeps them disproportionately wealthy. To anyone in the working population it must seem like an instrument designed to keep the pressure on and not serve general society or those providing actual tangible things of value to the market, like goods and (non-financial) services. I actually tend to agree but it's pointless to battle the market's cold logic (which often does make sense to me from what little I know) or existing power structures. Solutions/counterforces need to come from society and civil institutions. If those are weak, gotta fix that first and the market would depict a more equitable society without prejudice. It's the same old rich vs poor repainted with complicated terminology and systems, really. Another thing to improve would be transparency and education about what's going on in finance like with personal accounts of people working there for instance, making it less of a stranger and showing some of its internal logic and the things it does well or not so much.

arthurcolle 6y ago

> The price of goods at Walmart is not based on your bet on supply and demand. This is a specious argument. You literally could go out, borrow your friend's crate of 10,000 bananas, sell them on the open market, then wait for the price of bananas to crash, and then buy them back (maybe even the same crate!) and give them back to your friend, plus whatever the banana margin costs. Effectively, if you were to do this at scale, you would directly be influencing the price of goods at Walmart. Mechanically, this isn't how it works, and I don't think there are banana futures and options, but thinking that all derivatives activity is speculation is simply naïve. On the GameStop excitement, all I have to say is... "Apes, together.. strong."