HYIP-- do "stupid ppl" not realize that "investing" is a "fixed sum game"?

Hi

I'm a precocious know-it-all in finance from a top-25 private university.

I am writing my thesis on comparing "zero sum games" vs "fixed sum games".

My logic is that zero sum games are STRIKINGLY SIMILAR to "fixed sum games".

For example, retarded people, believe that they can "one up" the market, and make "above average" investment returns, at the expense of no one.

These people believe in a "synergy" of if enough people invest in a concrete asset, that the "gains" can offset the "losses" by an infinite amount.

That is, that people who make a huge gain on investing on a stock which makes average gains, can do so, at no-one's expense.

These magicians believe that "everyone can make a HUGE R.O.I. (ret on inv) on a stock that goes up only 5%" whereas my conjecture is that "exceptional returns come at the expense of "fool's losses"

Please state your opinion, and tell me your credentials for those who are truely motivated to end "investor false-confidence".

ty

Many authors on the market talk about it as though it was a "zero sum game", that those that make money do so at the expense of those that lose (the losers didn't buy the author's book, I guess). On the other hand, there are days when the market tanks, like Feb. 27. I am hard put to know where the money went. If it were a zero sum game, someone would have it somewhere because so many lost theirs. I think that logic casts serious doubt on the "zero sum game" idea. Many of the authors I have read almost sound like a athletic coach, trying to get the investor to be motivated and get on his "market face". "Be smart, make money, show you are better than the other team." Well, attitude is important, but stay cool.

I believe, as many authors do, that the price of stock has little to do with economics and has mostly to do with psychology, that the market is like a "Mercado" where people come together to trade their goods, to barter, to bid and offer.

Remember the Tulip Panic of the late 1800's? Did the tulips have any particular intrinsic value? Only in the minds of the speculators of the time.

On the other hand, HYIPs are almost all cons and P.T. Barnum knew all about that sort of stuff. Nothing to do with investing, everything to do with the two-headed lady.

I think that your opinion of HYIPs is correct. They are generally Ponzi games. On the market, in general, I do not accept the "zero sum" hypothesis. Or "random walk"either. Both are the exclusive property of academics.

"Come into My Trading Room", by Elder is a great read on the subject generally.

Sounds like somebody lost their shorts in the market over the last few weeks and is a little bitter about it.

Professional investors know the money comes from other people. We just know that everyone in the market is in there by choice. No one is hold a gun to the public's head and making them invest. If it wasn't for all the"retarded" people you mention, the game would be a whole lot harder.

investing is a stupid thing to be doing right now :)

First, investing in equity markets is neither a zero sum game nor a fixed sum game. Equity markets create wealth as capital, both financial and human, is employed to generate profit.

Some markets are zero sum (e.g. commodity futures markets are zero sum if considered a closed system and the gains on the non-futures side is ignored for true hedgers.

None the less, you're a moron. Equity and real estate markets create huge amounts of real wealth and have done so for centuries. You're comparing apples and oranges. If you'd limited your comments to active investors vs. index investors you'd have a point but you didn't do that. Because the equity markets create wealth, gains don't necessarily come out of someone else's pocket. Rather they are paid for by the profits generated by companies, even if those profits are kept as retained earnings.

My credentials? MBA from the Kellogg Graduate School of Management at Northwestern Univ. and CFA. Call me when you actually manage to get your bachelors degree.