The reason with have bots in the first place, is due to selfish ideology. I mean do you really need to make trillions of dollars in trades each day to gain a mere cents per share.
A mere cents per share adds way up when you have millions and millions of dollars. Someone like you running the bot might make a few cents a day if you're lucky. These other guys can make millions a day.
A mere cents per share adds way up when you have millions and millions of dollars. Someone like you running the bot might make a few cents a day if you're lucky. These other guys can make millions a day.
I know they have massive volume to make the dollars. But that defeats the purpose of the stock market in first place, that was my point. It's purpose is the allocation of capital to the most productive company, so they can expand and be more productive.
Tell me how trading lots of shares for a few cents gain, is adding value to the companies involved?
Its trading just to make money independent of what the company is worth.
If you want proof that bots (algorithms) can blow up in your face just google Long Term Capital Management. They were Nobel laureates...
Tell me how trading lots of shares for a few cents gain, is adding value to the companies involved?
It certainly and clearly adds value to the companies that handle the trading like eTrade, etc.
It vastly increases their purchasing power and opportunity capital? I guess I don't really understand your question. The way I'm reading it boils down to, "Tell me how making money is a good thing."
Yeah, no shit. Espeically when they charge like $20 per transaction!
Let's say that you trade 10,000 shares of stock. Your transaction price is $20 (it's not remotely that high for the people who trade in volume). You get your stock at $10 and sell it at $10.01. You have just made $80. Rinse and repeat for glory.
Let's say that you trade 10,000 shares of stock. Your transaction price is $20 (it's not remotely that high for the people who trade in volume). You get your stock at $10 and sell it at $10.01. You have just made $80. Rinse and repeat for glory.
Repeat hundreds of times per second with a lot more than 10,000 shares at a time.
@Jason, that's such an American perceptive on things "how is making money from money a bad thing". Capitalism at it's finest.
I'm very bad at articulating my point, so bear with me. Basically I want to know how making money from money without generating anything of real value (ie goods or services), good for the economy?
When you have a derivatives market that is several orders of magnitude more then the total monies in the world. Which is effectively a bet placed on a bet of a bet. And it doesn't generate anything of value, how is that a good thing?
Just waiting for the day that house of cards falls down in a heap.
Your mistake is in thinking that it doesn't create anything "of value." Increasing capital increases opportunity. Opportunity is a commodity. The economy only exists because of opportunity. It only works because people create extra revenue that can be reinvested. Generating interest and derivatives provides that base revenue.
This is pretty much the basis for all of economics.
@Jason, that's such an American perceptive on things "how is making money from money a bad thing". Capitalism at it's finest.
I'm very bad at articulating my point, so bear with me. Basically I want to know how making money from money without generating anything of real value (ie goods or services), good for the economy?
When you have a derivatives market that is several orders of magnitude more then the total monies in the world. Which is effectively a bet placed on a bet of a bet. And it doesn't generate anything of value, how is that a good thing?
Just waiting for the day that house of cards falls down in a heap.
Do you wanna be BFF with me?
The economy only exists because of opportunityimagination.
Codger, just to bring you up to speed with everybody else's argument, nobody believes currency has any meaning besides "I want this or that, and you have it", which includes the want and having of currency itself. It's extraordinarily subjective with no formal basis in mathematical axioms.
Thus all forms of stock market, commodities markets, international trade, even debt, are just forms of ... want. Subjective. Not meaningful unless you don't have enough. Once you don't have enough, money seems to be a whole lot more real.
@Bryan, absolutely! I'll fight in your corner, read the thread you link to and some of the things said... OMG! From my understanding of it, its ok to create something from nothing. As long as the government is there to bail us out if anything goes wrong. They want all the benefits of the free market and the protections of the regulated market.
I was so glad when you mentioned sustainability as well, which is something seriously lacking when we're debating about economics.
@Starfox, maybe students should be studying economic history first and learn where modern markets evolved from. Are seriously asking what the function of the stock market is?
@Jason, and look at where your commodity have lead us. Down a rabbit hole so deep, the only way out is to keep digging and hope you find the side (which is never going to happen). How can you have such a short memory, remember 2008 when everyone realised that your so called opportunity (CDOs) never came true. And the opportunities made from those opportiunities came crashing down. Thats what happens when you have a ever expanding capital, based your definition of value.
If we are talking about revenue thats whole other can of worms.
@Jason, and look at where your commodity have lead us. Down a rabbit hole so deep, the only way out is to keep digging and hope you find the side (which is never going to happen). How can you have such a short memory, remember 2008 when everyone realised that your so called opportunity (CDOs) never came true. And the opportunities made from those opportiunities came crashing down. Thats what happens when you have a ever expanding capital, based your definition of value.
The only reason there is a recession is because fiat money created such a vast improvement in the standard of living to begin with. You may thank me using the computer and instant communication brought about by my "fake" and "worthless" money.
If you mean improvement as in living up to your eyeballs in debt... Never being able to pay it back and eventually defaulting. Good job guy!
I don't think the people who are now homeless can relate to your improved standard of living. And let's not forget that median real income (adjusted for inflation) has been declining in American for the past 30 years. How is getting paid less for doing the same job, while goods and services inflate in price. An improvement in standard of living?
Yeah I thankful for all those dotcom companies that went bust in the early 2000s NASDAQ crash. They really created something of value there... What happened to all your opportunities then? It seems to me that you think all pass transgression can be forgiven, as long as money can be made.
So in order to be acceptable in Codger's eyes, an economy must: a) Never cause debt, which means that people can never be allowed to borrow. b) Never intimate any risk, which means no free will. c) Have equal distribution of wealth. d) Never have inflation or deflation. e) Never have negative consequences as a result of growth.
a) Never cause debt, which means that people can never be allowed to borrow. b) Never intimate any risk, which means no free will. c) Have equal distribution of wealth. d) Never have inflation or deflation. e) Never have negative consequences as a result of growth.
I don't see where he's making claims a, b, c, d, or e
I agree with this last quote, but I'm going to respond to some of those items:
Debt should be allowed only when one is borrowing against one's future resources. This is not currently done. See defaulting. Defaulting creates money (and unearned economic advantage) when debt is forgiven rather than being paid in full.
Risk will always exist, like crossing a busy street. Similarly, giving anyone money with the promise of repayment is a risk, because they might not have that money to pay back later or they themselves might get hit by a bus. This represents a loss to you (and hence a risk). This is effectively what the stock market is supposed to be: give companies money, and they promise to pay you in kind when they've used your money to make more money (or you lose money if not). I think Codger was saying that the stock market is currently about investors gaining currency while almost never losing it (for the right players), and much less about funding companies who will pay you back for your contribution. Not having risk does not imply no free will in any practical situation; it does imply limited free will.
Having inflation does have merit: it allows the amount of currency everybody has to be divided into a finer granularity. This means more flexibility. This is just like a stock split. However, having only inflation without any deflation means that the smallest value within that granularity becomes devalued to negligibility. Higher denominations will also become devalued to negligibility as inflation continues. Eventually new, larger denominations must be defined or utilized (e.g. the $10,000 bill or paying $1 trillion for anything) because the currency has been overgrowing some more realistic value upon the things which can be bought. This implies things do have some amount of intrinsic value, which I will absolutely agree that the practical value is modified by desire. Deflation must also occur in some sort of lock step with inflation (even if delayed) to keep a currency from becoming overly granular to the point where practically nobody uses the smallest divisions of granularity. This is inefficient. Imagine if some company's stocks split without bounds, until their value was sub-penny levels. Does that seem like a good idea?
I think Codger and I both would rather see an economic system where the currency system is founded in more physical principles than desire. The desire for wealth has caused wealth to devalue itself. You could still buy your computer and your electronics and your internets with a currency that is founded in some mathematically closed system. You just couldn't create more currency through all kinds of various tricks and loopholes created by people writing laws who want more of it for themselves.
Debt should be allowed only when one is borrowing against one's future resources. This is not currently done. See defaulting. Defaulting creates money (and unearned economic advantage) when debt is forgiven rather than being paid in full.
No it doesn't. The lender paid what was lost, and suffered the opportunity cost of the loan amount. Loans don't create money at the level we talking about.
However, having only inflation without any deflation means that the smallest value within that granularity becomes devalued to negligibility... to keep a currency from becoming overly granular to the point where practically nobody uses the smallest divisions of granularity. This is inefficient.
You beg the question that this is actually a bad thing, and make no real argument for it being actually inefficient. There is no harm in a small unit disappearing or becoming effectively valueless. You assume that this is somehow a flaw or danger.
Imagine if some company's stocks split without bounds, until their value was sub-penny levels. Does that seem like a good idea?
One, this doesn't happen because US equities are regulated with minimum increments in price and US exchanges have minimum price requirements to even be listed. (Until relatively recently with decimalization, stocks were priced at set intervals with no granularity in between: see the old fractional listings). Two, it doesn't happen because it wouldn't benefit anyone to choose to do it.
Splits serve to increase potential liquidity. They also keep prices reasonable from a semantic perspective: BRK.A, for example, has never split. As an investment, it's fine. As a currency, it would be useless.
You don't want deflation. If you somehow think that you do, then you misunderstand currencies.
would rather see an economic system where the currency system is founded in more physical principles than desire... a currency that is founded in some mathematically closed system. You just couldn't create more currency through all kinds of various tricks and loopholes created by people writing laws who want more of it for themselves.
You have no idea what you're talking about. Closed-system or intrinsically-limited currencies are a ludicrous idea in the modern world. Currency manipulation is probably one of the most important functions of government, and if ideology were different, could be used progressively just as well as regressively.
Don't attack the tools, attack the people using them. The tools aren't the problem.
This conversation is inspiring kind of a cool idea in my head for a sort of robotic overlord situation, where all economic and political decision-making is handled by various bots and AIs, but humans are given the illusion of choices and influence that the machines allow us to have in order to keep us sane while they keep us safe. So everyone thinks the President of the United States has an AI to help him in his day-to-day task, where in actuality the AI is filtering all the information the President sees and is actually the power behind the throne, etc. The stock market would be entirely artificial; all economic shifts are handled by bots, and when a guy wants to feel as though he is investing he orders his brokerbot to handle it, it networks with all the other brokerbots, and they shift some numbers around. The machines can't really lie to anyone, so the market is actually moving, kinda, but the interlocking system of networks and the prefection with which they handle all the bullshit systems humans have invented means that any actual potential for missteps is gone. Instead of the robots having overthrown us, we accidently optimized ourselves out of power.
Ok, continue with your serious big boy conversation.
Its purpose is the allocation of capital to the most productive company, so they can expand and be more productive.
Can you cite this, or is it just opinion?
Asserting "the stock market's purpose is X" implies that the stock market has a single purpose. I'm not sure this is accurate, many people use financial markets for different things. Any single definition of its purpose would have to be so broad as to be meaningless. "The" stock market isn't even a well-defined term to begin with.
So I'm going to agree with you, Rym, that most of what I say isn't founded in easily cited economic theory, because if it was, I wouldn't have much of a problem with the current system. It is difficult for me to defend my concepts without a language to do so. I am using the language I have at my availability to demonstrate and explain my position, and without being asked very specific questions, it is difficult for me to respond.
make no real argument for it being actually inefficient
I believe I did make an argument, but you have diminished the argument's value by implying it is not real, without giving me any sort of effective tool to defend my position. For example, what is unreal about my argument? I feel that I made it very clear that inflation without deflation and thus an ever-increasing nominal value of currency without an appropriate increase in the commodities and services for which the currency is being used to trade causes an inherent growth of nominal values of such traded things to go to infinity. Yes, I'm taking it to the limit, but that's what one does with mathematical systems to test if they are viable in theory. Once the growth has gone to infinity, the system completely breaks down. Thus it is degenerative, mathematically speaking. I believe I illustrated this in the utility of small values being completely useless. For a system of want and subjectively, why does anyone want to have denominations that are entirely useless? Please don't say an argument isn't real if you disagree with it, and if you don't understand, please ask for clarification.
One, this doesn't happen because US equities are regulated with minimum increments in price and US exchanges have minimum price requirements to even be listed. (Until relatively recently with decimalization, stocks were priced at set intervals with no granularity in between: see the old fractional listings). Two, it doesn't happen because it wouldn't benefit anyone to choose to do it.
Splits serve to increase potential liquidity. They also keep prices reasonable from a semantic perspective: BRK.A, for example, has never split. As an investment, it's fine. As a currency, it would be useless.
So when a stock divides, it opens up the possibility of selling or buying shares they might not have been able to afford previously, or perhaps weren't interested in trading at such high levels but now have better levels to trade at. As Jason said it, this is "opportunity." Dividing stock increases opportunity, just as inflation increases opportunity. If it doesn't benefit people to divide stocks ad infinitum, why does it benefit currency to inflate as such? Why is it okay to devalue a penny, a nickel, a dime, etc onwards, while it is considered bad form to do the same thing with the value of a stock?
I guess I make an assumption that currency is, in fact, a form of stock that represents the business of the United States of America (or whatever country or economical system it covers).
All I hear, in summary, is "well that's just how it's done because that's how it works" and "if it worked better differently, then that is what would already be." I'm trying to understand the perspective of these people saying I'm crazy, or in the most recent case, just plain stupid. None of my questions are rhetorical, and hopefully my questions have not been inflammatory.
I just watched the following TED talk which pretty strongly related to the thread topic.
Before I watch this video, I just want to declare I f'n love TED talks.
If its on my side, then yay for better people than myself arguing my point for me. If its against my side, it will probably be quite enlightening. If it isn't on either side, it will probably still be enlightening. In fact, in any case at all, it will probably be enlightening.
I just watched the following TED talk which pretty strongly related to the thread topic.
oh mang, physicists on wall street. They totally took my suggestion of learning physics! It's like they read my post in that other thread, went back in time, and made it happen.
The talk absolutely addresses "bots in the stock market" and some small amount of implications. It didn't really discuss the long term implications for the markets themselves, but rather how the industry is evolving with this new change.
Asserting "the stock market's purpose is X" implies that the stock market has a single purpose. I'm not sure this is accurate, many people use financial markets for different things. Any single definition of its purpose would have to be so broad as to be meaningless. "The" stock market isn't even a well-defined term to begin with.
Sorries for the late reply. No internets makes Codger a very dull boy.
Can I cite history as a source to the purpose of a stock market? Cause if you look up the Dutch East India company from the 1600s. One of the firsts stocks offered to public investors. You can see what purpose it was for, to expand capital and use it to build ships for the spice trade. The Netherlands is where the first stock markets were formed.
Now obviously stock markets have evolved over time, but its original purpose is still there. Its just that money men have so perverted the system and the education of economics for so long. People just look at it as a way of making money.
@Bryan, right on! Agree with everything you say, but change is a slow process. Hope we're still BFF...
@Rym, I would disagree with your statement about currency manipulation, one its unfair when you are the worlds reserve currency and can print your way out of debt. Second you can't claim to be a free market and change the rules i.e. devalue your currency at the same time. Finally put up or shut up, you can't blame the Chinese for fixing their RMB (so you can all have your cheap goods) and at the same time inflate the debt you own them away! I'm blaming the tools and the people that created them.
Comments
Tell me how trading lots of shares for a few cents gain, is adding value to the companies involved?
Its trading just to make money independent of what the company is worth.
If you want proof that bots (algorithms) can blow up in your face just google Long Term Capital Management. They were Nobel laureates...
I'm very bad at articulating my point, so bear with me. Basically I want to know how making money from money without generating anything of real value (ie goods or services), good for the economy?
When you have a derivatives market that is several orders of magnitude more then the total monies in the world. Which is effectively a bet placed on a bet of a bet. And it doesn't generate anything of value, how is that a good thing?
Just waiting for the day that house of cards falls down in a heap.
This is pretty much the basis for all of economics.
Thus all forms of stock market, commodities markets, international trade, even debt, are just forms of ... want. Subjective. Not meaningful unless you don't have enough. Once you don't have enough, money seems to be a whole lot more real.
I was so glad when you mentioned sustainability as well, which is something seriously lacking when we're debating about economics.
@Starfox, maybe students should be studying economic history first and learn where modern markets evolved from. Are seriously asking what the function of the stock market is?
@Jason, and look at where your commodity have lead us. Down a rabbit hole so deep, the only way out is to keep digging and hope you find the side (which is never going to happen). How can you have such a short memory, remember 2008 when everyone realised that your so called opportunity (CDOs) never came true. And the opportunities made from those opportiunities came crashing down. Thats what happens when you have a ever expanding capital, based your definition of value.
If we are talking about revenue thats whole other can of worms.
I don't think the people who are now homeless can relate to your improved standard of living. And let's not forget that median real income (adjusted for inflation) has been declining in American for the past 30 years. How is getting paid less for doing the same job, while goods and services inflate in price. An improvement in standard of living?
Yeah I thankful for all those dotcom companies that went bust in the early 2000s NASDAQ crash. They really created something of value there... What happened to all your opportunities then? It seems to me that you think all pass transgression can be forgiven, as long as money can be made.
@Starfox
a) Never cause debt, which means that people can never be allowed to borrow.
b) Never intimate any risk, which means no free will.
c) Have equal distribution of wealth.
d) Never have inflation or deflation.
e) Never have negative consequences as a result of growth.
What economic system are you proposing?
Debt should be allowed only when one is borrowing against one's future resources. This is not currently done. See defaulting. Defaulting creates money (and unearned economic advantage) when debt is forgiven rather than being paid in full.
Risk will always exist, like crossing a busy street. Similarly, giving anyone money with the promise of repayment is a risk, because they might not have that money to pay back later or they themselves might get hit by a bus. This represents a loss to you (and hence a risk). This is effectively what the stock market is supposed to be: give companies money, and they promise to pay you in kind when they've used your money to make more money (or you lose money if not). I think Codger was saying that the stock market is currently about investors gaining currency while almost never losing it (for the right players), and much less about funding companies who will pay you back for your contribution. Not having risk does not imply no free will in any practical situation; it does imply limited free will.
Having inflation does have merit: it allows the amount of currency everybody has to be divided into a finer granularity. This means more flexibility. This is just like a stock split. However, having only inflation without any deflation means that the smallest value within that granularity becomes devalued to negligibility. Higher denominations will also become devalued to negligibility as inflation continues. Eventually new, larger denominations must be defined or utilized (e.g. the $10,000 bill or paying $1 trillion for anything) because the currency has been overgrowing some more realistic value upon the things which can be bought. This implies things do have some amount of intrinsic value, which I will absolutely agree that the practical value is modified by desire. Deflation must also occur in some sort of lock step with inflation (even if delayed) to keep a currency from becoming overly granular to the point where practically nobody uses the smallest divisions of granularity. This is inefficient. Imagine if some company's stocks split without bounds, until their value was sub-penny levels. Does that seem like a good idea?
I think Codger and I both would rather see an economic system where the currency system is founded in more physical principles than desire. The desire for wealth has caused wealth to devalue itself. You could still buy your computer and your electronics and your internets with a currency that is founded in some mathematically closed system. You just couldn't create more currency through all kinds of various tricks and loopholes created by people writing laws who want more of it for themselves.
Splits serve to increase potential liquidity. They also keep prices reasonable from a semantic perspective: BRK.A, for example, has never split. As an investment, it's fine. As a currency, it would be useless.
You don't want deflation. If you somehow think that you do, then you misunderstand currencies. You have no idea what you're talking about. Closed-system or intrinsically-limited currencies are a ludicrous idea in the modern world. Currency manipulation is probably one of the most important functions of government, and if ideology were different, could be used progressively just as well as regressively.
Don't attack the tools, attack the people using them. The tools aren't the problem.
Ok, continue with your serious big boy conversation.
Asserting "the stock market's purpose is X" implies that the stock market has a single purpose. I'm not sure this is accurate, many people use financial markets for different things. Any single definition of its purpose would have to be so broad as to be meaningless. "The" stock market isn't even a well-defined term to begin with.
I guess I make an assumption that currency is, in fact, a form of stock that represents the business of the United States of America (or whatever country or economical system it covers).
All I hear, in summary, is "well that's just how it's done because that's how it works" and "if it worked better differently, then that is what would already be." I'm trying to understand the perspective of these people saying I'm crazy, or in the most recent case, just plain stupid. None of my questions are rhetorical, and hopefully my questions have not been inflammatory.
Shudder.
If its on my side, then yay for better people than myself arguing my point for me. If its against my side, it will probably be quite enlightening. If it isn't on either side, it will probably still be enlightening. In fact, in any case at all, it will probably be enlightening.
I f'n love TED talks.
The talk absolutely addresses "bots in the stock market" and some small amount of implications. It didn't really discuss the long term implications for the markets themselves, but rather how the industry is evolving with this new change.
Can I cite history as a source to the purpose of a stock market? Cause if you look up the Dutch East India company from the 1600s. One of the firsts stocks offered to public investors. You can see what purpose it was for, to expand capital and use it to build ships for the spice trade. The Netherlands is where the first stock markets were formed.
Now obviously stock markets have evolved over time, but its original purpose is still there. Its just that money men have so perverted the system and the education of economics for so long. People just look at it as a way of making money.
@Bryan, right on! Agree with everything you say, but change is a slow process. Hope we're still BFF...
@Rym, I would disagree with your statement about currency manipulation, one its unfair when you are the worlds reserve currency and can print your way out of debt. Second you can't claim to be a free market and change the rules i.e. devalue your currency at the same time. Finally put up or shut up, you can't blame the Chinese for fixing their RMB (so you can all have your cheap goods) and at the same time inflate the debt you own them away! I'm blaming the tools and the people that created them.