Do you play the lottery ? Is this any reflection on your trading ?

[oildaytrader]

Got more chance of making money mugging an old lady and not going to jail, or robbing an old lady's pension from AUM and getting a bonus for it,than winning anything on the lottery.I'd rather stick to trading in the city.

 

[gooseman]

here comes that green-eyed monster again.

 

[DionysusToast]

OK - my take on this is that the lottery people did an extremely good job of

- setting the price at a level the majority felt comfortable
- setting the jackpot at such a high level that people would ignore the inevitability of losing

So - they did a brilliant job of setting the price and number of selectable numbers to sell you something that there is virtually no chance of winning AND selling you that over & over again in the face of prior losses.

 

[Paulie_5]

OK - my take on this is that the lottery people did an extremely good job of

- setting the price at a level the majority felt comfortable
- setting the jackpot at such a high level that people would ignore the inevitability of losing

So - they did a brilliant job of setting the price and number of selectable numbers to sell you something that there is virtually no chance of winning AND selling you that over & over again in the face of prior losses.

.... and don't forget the odd tenner people win once every two years to remind themselves that a) it is indeed possible to win the jackpot and b) they are paying for their tickets out of winnings.

... and also that 50% of every ticket goes to charity, so people can feel that despite losing they've done some good.

 

[DionysusToast]

good point.

Although I'm not sure that a lesbian pottery school qualifies as a 'charity' in my book

 

[Paulie_5]

good point.

Although I'm not sure that a lesbian pottery school qualifies as a 'charity' in my book

 

[HawkTrader]

... and also that 50% of every ticket goes to charity, so people can feel that despite losing they've done some good.

I seem to remember from a few years ago that they spent a couple of million from the rake on some useless statue of some kn*b outside a hostpital. How about using some of that money in the hostpital? :whistling

 

[oildaytrader]

OK - my take on this is that the lottery people did an extremely good job of

- setting the price at a level the majority felt comfortable
- setting the jackpot at such a high level that people would ignore the inevitability of losing

So - they did a brilliant job of setting the price and number of selectable numbers to sell you something that there is virtually no chance of winning AND selling you that over & over again in the face of prior losses.

The resemblance in city trading, investment management and investment banking is :

Offering to manage pensions , yet creating worthless instruments like credit default swaps and unprofitable hedge funds ,and selling them to funds under management.Advising and creating leveraged buyouts , mergers and acquisitions and structured finance, most of which was designed solely for the benefit of the financial industry and robbing pensions.We call it trading.

 

[DionysusToast]

I agree with that ODT - but I think there are some parallels that are closer to home.

For instance, there are 2 products that track the US market - the e-mini S&P and the mini DOW. One is $50 a point and one is $5 a point. A typical 1 point move on the S&P is a 10 point move on the DOW. Despite the difference in price, because the DOW tends to move 10x more that the S&P, they have been effectively priced the same.

Now - given that the full size S&P futures contract exists - what is the point of the mini contracts ? Is it just to attract people that are lower down the food chain ? Again, are they using the concept of a more reasonable entry level with the hope of riches at the end of it ?

The same for forex - isn't the whole leverage thing geared around ensuring the retail punters can play and bleed slowly ?

Of course, I'm not saying any one individual can't make money in any market BUT it appears that these products, like the lottery have been priced to attract the maximum number of players. Is that their reason to be.

Although the exchanges go out of their way NOT to talk of untold riches, there is an underground industry doing exactly that.

Of course, the players have more chance of winning than the lottery - yet still it's very slim.

I'm not saying Wall St is a casino or anything...

 

[oildaytrader]

Here are more resemblances

50 % of lottery goes to charity, 50% of all pension contributions end up in fees and hidden pilfering of funds.

Workers pay money into a pension every week , some play the lottery, both hope for wins, nothing is guaranteed.

Every time a crooked trading instrument is created eg Credit default swaps,there may be a reflection on lottery players and pension lottery players.Just a bunch of mugs won't know how much the cdos will cost, write a few more cdos for more pensions loot.

 

[gooseman]

yet again you don't seem to have got to grips with these terms. CDS are extremely useful tools in hedging against risk. Agreed they can be used as speculative instruments but show me a product that can't be. Aslo rememebr that CDS are traded OTC so the counterparty has to play a part in determining credit risk.

CDO are a completely different kettle of fish.

you're too busy pursuing your agenda you won't even look at reason. i'm not saying everyone is innocent here I am saying there is more than "blah blah pensions blah theft blah"

 

[oildaytrader]

Gooseman

Both types of instruments resulted in demise of investment banks.

http://en.wikipedia.org/wiki/Collateralized_debt_obligation

They can only be useful in any system , if counterparties are managing risk properly.

 

[gooseman]

i do know what they are thanks. and not from what i read on the internet.

 

[Benton D Struckcheon]

.....
For instance, there are 2 products that track the US market - the e-mini S&P and the mini DOW. One is $50 a point and one is $5 a point. A typical 1 point move on the S&P is a 10 point move on the DOW. Despite the difference in price, because the DOW tends to move 10x more that the S&P, they have been effectively priced the same.
.....

"Market segmentation".
All of these things are products to be sold. It's the same reason there's the regular IPod, the IPod Nano, and the IPod Shuffle.

 

[Shakone]

If the same person offered to double your few hundred dollars but looked just as dodgy, you'd say no. As the word 'million' is bandied about, despite the fact you know it's still not right - it suddenly becomes worth a shot.

This isn't risk:reward. This is something else.

Are we naturally wired to cling to false hopes ?

This is Utility theory, a well known and long standing economic concept. Utility theory without getting too into it, expresses the fact that an amount of money can have different VALUE to different people. The standard example, is Bill Gates walking along the road and seeing £10. Is it even worth his time to pick up? His daily interest alone will far outweigh that money, so it has little value to him. Whereas someone with no money will be happy to pick that up. That £10 is a fixed amount of money, but it doesn't have the same value to each of them.

The lottery is another example of this. Sure, the expectancy is negative, but the multi-million pound payoff has huge value to some people and so it is a reasonable decision to play the lottery. It is about what it is worth to the person, not just an absolute number.

What else are you going to do with your £1? Make one trade at 10p a point with a 10 pt stop and try to turn that into millions? However, unlikely and negative expectancy aside that £1 in the lottery could be life changing. Your .10p a point trade with positive expectancy is a lot more unlikely to be life changing.

 

[montmorencyt2w]

Although I'm not sure that a lesbian pottery school qualifies as a 'charity' in my book

I'd pay a quid to watch them smear plaster all over each other and then lick it off...



Utility theory: surely even Bill Gates would find the lottery prize significant, even if he only wanted to add it to his various charitable contributions.

 

[Shakone]

Well montmorency, does it have the same VALU to Bill Gates as to you, or me? That is what Utility theory expresses. I don't believe it does have the same value.

 

[virtuos0]

This is Utility theory, a well known and long standing economic concept. Utility theory without getting too into it, expresses the fact that an amount of money can have different VALUE to different people. The standard example, is Bill Gates walking along the road and seeing £10. Is it even worth his time to pick up? His daily interest alone will far outweigh that money, so it has little value to him. Whereas someone with no money will be happy to pick that up. That £10 is a fixed amount of money, but it doesn't have the same value to each of them.

The lottery is another example of this. Sure, the expectancy is negative, but the multi-million pound payoff has huge value to some people and so it is a reasonable decision to play the lottery. It is about what it is worth to the person, not just an absolute number.

What else are you going to do with your £1? Make one trade at 10p a point with a 10 pt stop and try to turn that into millions? However, unlikely and negative expectancy aside that £1 in the lottery could be life changing. Your .10p a point trade with positive expectancy is a lot more unlikely to be life changing.

I think you misrepresent utility theory by associating it with the word value. It should be expressed like this:

man A has £1 in his pocket, he has numerous choices including for example
1) Keeping it in his pocket
2) Putting it into a savings account in a bank
3) Spending it on a chocolate bar
4) Spending it on a lottery ticket

At any given time man A will always use the £1 in such a way that maximises his utility. If this man chooses to buy a lottery ticket it doesn't necessarily mean that his conception of the value of the win is different to any other mans conception, it simply means that at that moment the lottery ticket increased his psycholgical wellbeing to a greater degree than the next best choice.

 

[montmorencyt2w]

Well montmorency, does it have the same VALU to Bill Gates as to you, or me? That is what Utility theory expresses. I don't believe it does have the same value.

No, in the sense that he does not personally need it.

However, he knows the value of money probably better than most, and would know how to put it to good use, whether for charitable purposes, or for business investment.

 

[DionysusToast]

What else are you going to do with your £1? Make one trade at 10p a point with a 10 pt stop and try to turn that into millions? However, unlikely and negative expectancy aside that £1 in the lottery could be life changing. Your .10p a point trade with positive expectancy is a lot more unlikely to be life changing.

I don't think so. My opinion is that you should not be thinking of ways to turn $1 into $1 million.

A dollar is a dollar. A found dollar origami swan is a found origami swan. It's a pretty thing you could put on your mantlepiece that would occasionally remind you of a sunny day in Venice Beach after lunch at Figtrees Cafe. Perhaps even remind you of the roller skating guitar player or other assorted wierdo's. Perhaps it's on your mantlepiece like a family photo that you often look at but seldom notice. Then occasionally, you stop for a minute & take pleasure from it.

ON THE OTHER HAND....

Let's say that twice a week, we allow ourselves to get excited about the lottery, we spend a few hours thinking about what we could win. As the balls are being mixed, we have a shiver of anticipation running down our spine. Then the first ball comes out, isn't on our ticket, then the second - now we have the loss, the comedown.

Is there no negative psychological impact from going through this anticipation/excitement/dissapointment cycle twice a week ?