We can't all win.

[darktone]

Not necessarily , as i've shown you on my example above , prices can go up and there is some investors who are willing to pay more , i made money but that doesn't mean someone else should lose , that is a myth , inflation effects stock prices and commodities as well , ie : customers spend more money to buy an ipad and an iphone , apple makes more money , stock price go up in value .

Inflation is a more than required increase in the money supply. Banks create money..
The market as far as im aware are an exchange, they dont create money.

 

[DionysusToast]

Not necessarily , as i've shown you on my example above , prices can go up and there is some investors who are willing to pay more , i made money but that doesn't mean someone else should lose , that is a myth , inflation effects stock prices and commodities as well , ie : customers spend more money to buy an ipad and an iphone , apple makes more money , stock price go up in value .

OK - let's put it like this.

Let's say there's just one broker....

1,000,000 traders put $1,000 into the market.

Brokers get fees - Let's say $10 per person. So actual investment is $990 per person.

Then later on the 1,000,000 million traders take out $1,100 out of the market.

1,000,000,000 went in
1,100,000,000 was taken out
10,000,000 was extracted in commissions

Where did the 110,000,000 come from?

We are talking about money being created from nothing.

People only put 1,000,000,000 into their accounts but took more out, even after the brokers had their share.

Inflation didn't put more money into the brokers account. Apple didn't put more money into the brokers account.

What did?

The issue of course is that when academics look in simplistic terms such as price x number of shares, they ignore the fact that when the 100,000,000 traders start to extract their money from the market, it has a negative impact on prices.

The fact is that the price of a share may have gone from $90 to $100 overnight. Let's say there are a million shares. So the company 'value' went from $90M to $100M. This could have happened just because some poor schmuck brought 100 shares at the market in the overnight session.

That's 1 trade of 100 shares - total value of $10,000 but now the 'value' of the company has increased by $10M. Now, if you saw this new price of $100 and tried to sell 100,000 shares, there is no way you'd get $100 or even $90 as an average price. So - the price of a share is irrelevant. What is relevant is how many buyers remain that will pay that price.

If players pull out of the market, prices go down.

number of shares x last traded price is not much more than an illusion. It is nothing to do with prices you could get if you sold lots of shares. That is determined by the laws of supply and demand.

 

[tar]

Inflation is a more than required increase in the money supply. Banks create money..
The market as far as im aware are an exchange, they dont create money.

The market is not an isolated place ...

 

[DionysusToast]

Inflation is a more than required increase in the money supply. Banks create money..
The market as far as im aware are an exchange, they dont create money.

Correct & inflation does not put money into trading accounts, either...

 

[darktone]

The market is not an isolated place ...

Meaning!?

 

[tar]

OK - let's put it like this.

Let's say there's just one broker....

1,000,000 traders put $1,000 into the market.

Brokers get fees - Let's say $10 per person. So actual investment is $990 per person.

Then later on the 1,000,000 million traders take out $1,100 out of the market.

1,000,000,000 went in
1,100,000,000 was taken out
10,000,000 was extracted in commissions

Where did the 110,000,000 come from?

We are talking about money being created from nothing.

People only put 1,000,000,000 into their accounts but took more out, even after the brokers had their share.

Inflation didn't put more money into the brokers account. Apple didn't put more money into the brokers account.

What did?

The issue of course is that when academics look in simplistic terms such as price x number of shares, they ignore the fact that when the 100,000,000 traders start to extract their money from the market, it has a negative impact on prices.

The fact is that the price of a share may have gone from $90 to $100 overnight. Let's say there are a million shares. So the company 'value' went from $90M to $100M. This could have happened just because some poor schmuck brought 100 shares at the market in the overnight session.

That's 1 trade of 100 shares - total value of $10,000 but now the 'value' of the company has increased by $10M. Now, if you saw this new price of $100 and tried to sell 100,000 shares, there is no way you'd get $100 or even $90 as an average price. So - the price of a share is irrelevant. What is relevant is how many buyers remain that will pay that price.

If players pull out of the market, prices go down.

number of shares x last traded price is not much more than an illusion. It is nothing to do with prices you could get if you sold lots of shares. That is determined by the laws of supply and demand.

Algos and marketmakers can move their prices to the fair value without the buying pressure ... ( gaps )

 

[tar]

Think of it like the housing market , my house increased in value 20% i sold and made money , where is the loser ?

 

[DionysusToast]

Think of it like the housing market , my house increased in value 20% i sold and made money , where is the loser ?

What year did you sell it & in which country?

 

[tar]

Meaning!?

You said banks creates money but not the market , the market is not isolated it is part of the the cycle , any individual who has the money can go and buy a house or a stock for that matter ...

 

[tar]

What year did you sell it & in which country?

 

[DionysusToast]

You see the point though. Chances are he's sitting on a 40% loss now...

 

[new_trader]

Think of it like the housing market , my house increased in value 20% i sold and made money , where is the loser ?

If the increase was the result of inflation then the losers are the people with savings and those on fixed income and anyone behind the inflation curve. They have all lost purchasing power. Basically, 'society' overall is poorer from your gain.

 

[tar]

You see the point though. Chances are he's sitting on a 40% loss now...

In Jordan and saudi arabia prices still going up so no :cheesy: . The point it is not necessarily to have a loser for every winner in the market , it is not like a betting pool or a casino , we are exchanging securities here at different prices and who is willing to pay more doesn't mean he is a loser ...

 

[darktone]

Think of it like the housing market , my house increased in value 20% i sold and made money , where is the loser ?

Okay. When banks make loans they create money. Around 90% of lending goes towards housing / speculation. This where the the huge rise in house prices have come from.

Re you making 20%. How long did you hold the property for out interest?

 

[wackypete2]

Where did the 110,000,000 come from?

From the trader(s) who now OWE the broker that money due to no stop loss and a margin call that ended up creating a deficit account balance. That money is owed, but not put into the system. It may or may not eventually. No different than banks creating money by lending. When you trade on margin you are borrowing money. The semantics are somewhat different for delivery vs non delivery type of market.

Peter

 

[tar]

Okay. When banks make loans they create money. Around 90% of lending goes towards housing / speculation. This where the the huge rise in house prices have come from.

Re you making 20%. How long did you hold the property for out interest?

It was a hypothetical example

 

[trendie]

Think of it like the housing market , my house increased in value 20% i sold and made money , where is the loser ?

no, no, and thrice no.

EVERYONEs house went up by 20%.
If you sold your house at 20% profit, you would now be rich, but homeless.

If you wish to be housed, you have to buy a house.
If everyones house, of similar style, also increased in line, you would have to pay the going rate.
So, any gains on your sale would be lost on buying a similar property.
Less commissions, stamp duty, estate agent fees, moving fees, mining reports, etc.

You make your money on the exit. When you're out of the game.
Thats when the money is to be counted.

If EVERYONE sought to monetise their property increase, there would be all sellers and no buyers, the prices would fall back to, say, 100%.
The last person into the market pays the most, and the last person out of the market makes the least.
At some point, there will be cross-overs where the exit price is less than the entry price, realising a local, personal loss.
Some will exit at a price higher than entering, hence a local, personal profit.

But, overall, the money remains the same.
Just redistributed somewhat.

Ok, I admit it, I am thick on this subject, and I just can't get my head around the idea that we all win. We can't.
We, sadly, need the losers.

I don't know if trading is ponzi, greater-fool, or what.
But money isn't being created. Value is perceptual.
Money is just being redistributed.

EDIT: actually, the example of property prices seems closer to pump-and-dump.

 

[tar]

no, no, and thrice no.

EVERYONEs house went up by 20%.
If you sold your house at 20% profit, you would now be rich, but homeless.

If you wish to be housed, you have to buy a house.
If everyones house, of similar style, also increased in line, you would have to pay the going rate.
So, any gains on your sale would be lost on buying a similar property.
Less commissions, stamp duty, estate agent fees, moving fees, mining reports, etc.

You make your money on the exit. When you're out of the game.
Thats when the money is to be counted.

If EVERYONE sought to monetise their property increase, there would be all sellers and no buyers, the prices would fall back to, say, 100%.
The last person into the market pays the most, and the last person out of the market makes the least.
At some point, there will be cross-overs where the exit price is less than the entry price, realising a local, personal loss.
Some will exit at a price higher than entering, hence a local, personal profit.

But, overall, the money remains the same.
Just redistributed somewhat.

Ok, I admit it, I am thick on this subject, and I just can't get my head around the idea that we all win. We can't.
We, sadly, need the losers.

I don't know if trading is ponzi, greater-fool, or what.
But money isn't being created. Value is perceptual.
Money is just being redistributed.

No i dont have to buy a new home , i could rent a nice flat and with the the rest i buy apple stock

 

[darktone]

It was a hypothetical example

Ok fair one.

As an example of a chat i had with a friend a while back, he was saying how his flat has still gone up in value despite the crisis etc.
Bought 6 years ago at 150k its now worth 175k ish. For most people this means "excellent! im up 25k". If we estimate real inflation at say 5% (i think its closer to 8 - 10%. The gov numbers are :whistling). His flat would have to be worth
near 200k to breakeven, in real terms.

So, you can see how this having bearing on the "ive made 20K when i sold my house example".

 

[darktone]

Correct & inflation does not put money into trading accounts, either...

Well indirectly i think it does. Banks speculate. The real question as NT points out is what is the true buying power of that money, if your good enough to be adding money to your trading acc.

I think it comes down to this, we should all ask ourselves this question.

What is money? Where does our money come from?

Sorry, i couldnt resist!