Is speculative trading productive?

[~Sophia~]

I said: I think the bottom line is that to make money (short of initiating force) is moral, no matter what you trade in.

QUOTE (~Sophia~ @ Nov 16 2007, 06:10 PM) Since, the judgement of morality does not only depend on the harm done to others (but most importantly to yourself) this statement is not true.

And here I thought you were a capitalist

I am. What I am not however is a libertarian.

There is no harm being done if you are making money by trading assets according to what the market will bear.

In other words, making money is good for you, and therefore it is moral.

Making money is not always good for you. It all depends on how good for your life is what you are making this money from. I can think of all kinds of things which would make me some money which would be highly immoral in the context of my life.

[intellectualammo]

And here I thought you were a capitalist

She is, but more: she's one, like I, that does not forget the objective theory of values that LFC is based upon, either.

[Thomas M. Miovas Jr.]

Careful folks, I said making money is moral. This is not the same thing as getting cash. In other words, making a profit is what needs to be considered and whether or not one is actually making a profit or just getting cash. One might get cash by selling, say, one's body parts or prostitution, but I don't know that this is making a profit unless the price is very high.

For example [spoiler flags added on edit],

Monna Vanna was very willing to prostitute herself for the sake of saving Pisa -- a city-state she loved, which had people in it, like her father-in-law and her husband, who she loved. Of course, force was involved, which would anoint her against any immorality she did to alleviate it, but still, she would have done it for a profit; at least theoretically (in the context of the play).

In Red Pawn, the heroine prostitutes herself for a profit -- freeing her husband. Again, force was involved, so she is anointed from a possible immorality.

I don't really want to get into a discussion of drugs, prostitution, body parts, and the like; which should be legal even if one thinks they are immoral.

But I would say that so long as a profit is made -- in full context, with man's life as the standard -- then it is moral. If you own it, then you have the right to sell it at a profit; which is basically the issue of this thread. Determining whether or not an actual profit was made would be the contention.

Selling one's assets for cash when there is no profit involved, as in a liquidation, would only be moral if one didn't have any other choice. If, in a market, that asset becomes mostly worthless, then liquidating rather than holding onto the assets would be moral, to get cash so as to start over again. But to liquidate at less than market value, to sell at a loss (less than what you paid for it), would be immoral, if you had a choice at that time to sell it for a profit to some other buyer.

I stand by what I said: Making money is moral.

[edited to correct spelling error]

Edited November 17, 2007 by Thomas M. Miovas Jr.

[~Sophia~]

What the term money represents is not an overall profit qua one's life. It is only a currency of exchanging values in a market.

[KendallJ]

Careful folks, I said making money is moral. This is not the same thing as getting cash. In other words, making a profit is what needs to be considered and whether or not one is actually making a profit or just getting cash. One might get cash by selling, say, one's body parts or prostitution, but I don't know that this is making a profit unless the price is very high.

Good God, Movias. As Sophia has pointed out that is only true if you translate all value into money terms. There is no possible interpretation where "making money" can possibly include an accounting for spritual debasement, but I see you're trying to define it that so you don't have to reneg. I knew there was a reason you're on my ignore list. Error in judgement to hit that "unhide this post" link. YOu can be I wont do it again.

[Thomas M. Miovas Jr.]

Since Kendall has decided to ignore my posts, it means he won't be getting the benefit of my wisdom -- which is fine by me.

For the rest of you still reading my posts, what I had in mind was something along the lines of needing to raise cash quickly, say in order to save a loved one. For example, let's say you are a woman who is married and love your your husband more than anything else on earth, but the only way to get the million dollars in time to save him (say from a fatal disease) would be to prostitute yourself to a very high bidder. No force is involved, and you don't have the cash, and there is no other way to get the money in time. Would it be moral to commit an act of prostitution in that case?

I think it would be and I think she would be making a profit by man's life as the standard. Of course, she might try to find some other way of gaining the cash, which would make for a very good moral drama -- including whether or not her husband would still respect her afterwards (let's say he wasn't involved in the decision, because he is unconscious and won't find out until after the operation). This situation is very similar to Monna Vanna. And for the record, I do think that all of Monna Vanna's decisions were moral.

And one can translate spiritual values into monetary terms. For example, I had the option of getting a PhD in philosophy; which would have netted me anywhere from $50k-$100K per year afterwards. Given what my undergraduate degree in philosophy did to me, I decided it wouldn't be worth it. That is, the tangled mess of my spirit that would result from me getting a modern PhD in philosophy wasn't worth the extra years it would take me to untangle it; even though I'd be making a lot more money. At a higher price, maybe $500k per year or more, it might have been worth it; since I could have retired early and written several books against my education. I could write those books now, but I don't have the full context for what is being taught these days in the details.

Also, if one is in a position, similar to either Monna Vanna or the other example, then one might be put in a position of having to translate one's spiritual values into monetary terms. Say, your wife is kidnapped and being held ransom for all the millions you do have. Would it be worth loosing all of your wealth to save her from certain death? I certainly think it would be, though I would be sure to hunt the mf's down afterwards. Or similarly, if one had to spend all of one's wealth to save a loved one from a deadly disease. In these cases, it is very necessary to translate spiritual values into monetary terms.

Now, do I think it is worth while being immoral in order to make a buck -- hell no, I wouldn't "sell my soul" in that sense, because the long-term effects of being immoral outweigh monetary benefits. But I don't think a woman in the situation of Monna Vanna or the one with a deathly ill husband is being immoral -- not by man's life as the standard. It's not something that either should do lightly, but I don't think after careful consideration that it would be immoral.

[intellectualammo]

And for the record, I do think that all of Monna Vanna's decisions were moral.

Yes, I definately agree. I think it is Emily that brings this up in podcast #8 on the Monna Vanna Blog.

I would agree that such acts of prostitution, that you had mentioned, are moral. I often think of Kira (who actually isn't having sex with Andrei for money directly, only to keep him around, in order to give her money for her family, I've mentioned this in a thread a long time ago here) Isn't there another female Rand character from her early fiction, that does something similar in going to a prison? I think it is Red Pawn...I do not own a copy of The Early Ayn Rand, but since I've read it only once, my memory so fails me in this...

Edited November 17, 2007 by intellectualammo

[John McVey]

I think the bottom line is that to make money (short of initiating force) is moral, no matter what you trade in. Objectivism would say trading an asset would be immoral, for the most part, only if one initiated the force that drove the market a certain way that it would not have gone if no force was applied.

...

In other words, making money by trading in assets of any kind is moral, unless you initiated force.

That is flat-out WRONG. There is a standard of value operative in all levels of morality, from the highest abstract level of principles of action in general down to the application of the virtue of productivity to the production of individual objects and services for sale. Sophia has pointed out the spiritual side, so I will stick to more of what Moebius had in mind. Thus for productivity, the question is: how are you contributing to the generation of actual end-user values that are both

a ) valid human values as judged by an objective standard of value appropriate for human life in general, and

b ) desired enough by consumers for revenues to exceed costs of moral methods of production?

BOTH of these have to be satisfied, not just the latter, for profitable activity to be moral. It is not sufficient just to make a profit merely without force or fraud for that profit to be morally made. Knowingly taking advantage of others' irrationality and pandering to it are not moral. For example, no true Objectivist would knowingly produce bibles or other mystics' paraphernalia. Of course, that holds to the extent it is meaningfully within that Objectivist's power to control - I wouldn't fault an Objectivist working for an employer who had one of the said producers as one customer among many.

Speculators et al are moral, not merely because they aren't using fraud to get their profits, but because they are earning their profits by positively contributing to the eventual production of objective values for end-users. The provision, protection, and efficient reallocation of capital are fundamental steps in the process of producing the best values and getting them to us as consumers. For example, secondary markets trading (and the maintenance of liquidity thereby) reduces the exit barriers for primary market investments and so encourages more primary market activity (hence capital formation), derivatives traders (both in their own primary and secondary markets) allow risk-sellers to redeploy capital to more production, and so on. Without them, we would actually be materially worse off. Similar arguments apply in defence of other allegedly parasitical industries, such as marketing and advertising, incidentally.

Sophia is entirely correct in pointing out that you are making the libertarian mistake of thinking that what ought be legally permitted in a free country is by that reason automatically a valid value to pursue if you want it. That includes accounting net profits, which are not automatically valuable. Steve is also entirely correct in noting that your position amounts to the wholesale rejection of the concept of objective value, again just as the libertarians hold.

In other words, making money is good for you, and therefore it is moral.

Uh, no. THAT is exactly the kind of thing Lenin had in mind with the comment about capitalists selling him and his ilk the rope they'd use to hang capitalists with. In a real-life example of this, I am just old enough to recall how Toshiba copped a well-deserved blasting for producing and selling precision machine tools to make quieter sub propellers with to the Soviets. Toshiba was downright IMMORAL to do so, with or without the profits it intended to garner from the sales.

But I would say that so long as a profit is made -- in full context, with man's life as the standard -- then it is moral.

Merely making money to spend on oneself without using force or fraud to do so is hardly keeping the full context in mind! There is FAR more to the standard of value and touchstone of morality than the mere ability to say "I get back more money than I spent - goodie!!" As Miss Rand noted in Francisco's money speech:

Did you get your money by ... pandering to men's vices or men's stupidity? ... By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame.

JJM

Edited November 17, 2007 by John McVey

[KendallJ]

Since Kendall has decided to ignore my posts, it means he won't be getting the benefit of my wisdom -- which is fine by me.

Well, Thomas, you think much too highly of the benefit your wisdom brings an informed Objectivist.

[Steve D'Ippolito]

Thomas, you have succeeded in both insulting a couple of your fellow Objectivists and evading the fact that you have failed to make the distinction between "moral" and "rights violation" and that they called you on it.

Should it be legal to sell crack and heroin to people for recreational use? Yes. Is it moral? In every context that I can think of. no. Your example from Monna Vanna is a context dependent example and simply clouds the fact that you made a sweeping statement (with no context limiting it) and refuse to concede your error.

[Thomas M. Miovas Jr.]

Some general replies:

Yes, it was Red Pawn in which the heroine prostitutes herself in a prison that is holding her husband. I had forgotten about Kira, but she did basically the same thing in We the Living. It is interesting that the men in these stories did not respect their women for what they did -- they would rather be dead than to have their wives prostitute for them, which is part of the drama.

I thought of other ways one translates spiritual values into monetary terms: every time one buys some work of art, one is giving a monetary evaluation of a spiritual value. Is it worth eight bucks to see that movie? Is it worth $200 to frame your favorite work of art on paper? Is Atlas Shrugged worth $20 for the semi-hardback with Dr. Peikoff's preface in the 35th anniversary edition (there is no 50th anniversary edition)? I certainly thought so, as I just bought a copy!

For things like pandering to the mob or selling items to one's enemies, I would say that such transactions are not profitable; as Gail Wynand of The Fountainhead found out. To assess whether or not someone made a profit, I think you do have to take man's life as the standard into account over the long-range. If, for example, one sells submarine parts to a lethal enemy, then it is not profitable -- especially if they use those to destroy your country. Likewise, pushing something that is immoral, like the Bible for cash, is most certainly not making a profit. One is getting cash, but it is not profitable. In the long run, one is giving fuel to one's spiritual enemies, and thereby destroying one's future culture of reason.

When I said making money is moral, I most certainly did not mean that in a pragmatic way, as some people evidently thought I meant. How you earn your living must take into account all of the factors involved and whether or not they are for your life or against it. For example, is it worth pushing ads on one's website that counter man's life as the standard, or that supports one's enemies -- physical or spiritual? I don't think so, since it is not profitable by man's life as the standard -- in the long run.

So, stop trying to paint me as a Libertarian or a pragmatist.

[KendallJ]

So, stop trying to paint me as a Libertarian or a pragmatist.

Actually Thomas, if there was any "painting" going on it was you trying to paint Sophia as a non-capitalist. Maybe you ought to take your own advice.

[Thomas M. Miovas Jr.]

Thomas, you have succeeded in both insulting a couple of your fellow Objectivists and evading the fact that you have failed to make the distinction between "moral" and "rights violation" and that they called you on it.

I didn't see this post, because the reply came out at about the same time as my previous reply, so it wasn't included in my general reply.

I was not trying to insult anyone, including Sophia. We had a misunderstanding regarding what I meant versus how she replied, that's all. I think the issue has been clarified enough that I can reply more succinctly. I apologize for any confusion I may have caused.

The question of the thread is: Is speculative trading productive? It then switched to: Is speculative trading (and other ways of making money) moral?

In the economic sense, any time one makes money it is productive -- your monetary wealth increases. You don't have to go into the details, such as what speculative trading does and how it benefits the market and everything else involved in that to say that it is productive in the economic sense. If you are making money, you are being productive (in the economic sense).

In the philosophic / ethics sense, you need to know more about how the money is made; such as is force involved or is one violating man's life as the standard, before one can ascertain if one is being productive in the sense of productiveness being a virtue in the Objectivist ethics.

But I don't know that a day trader or a speculator has to be aware of every moral implication in making a trade before he makes a trade.

For example, let's say that Toshiba's stock went up right after they announced that they had sold those parts to China; and you traded on it speculatively and made money after that announcement, and sold the trade at a profit. Are you morally culpable by benefiting from that trade? Do stock traders have to be aware of the long-term consequences of giving such equipment to an enemy of the United States (or whatever country one lives in)? Is the stock trader guilty of moral treason by proxy?

I think if the stock trader knows ahead of time that a particular company is about to commit an immoral act, then he should vote no on that company. I don't mean sell the stock short, but not get involved in that type of trade. In other words, in the long run, Toshiba is acting as their own destroyer, and the potential destroyer of the United States, and therefore one ought not to vote a yes for that decision by buying stocks of Toshiba, even though the stock price went up.

Similarly, if there is a way to make money by the distribution of Korans in the Middle-East, I would say don't get involved in that; even if one could make an economic profit.

In order for you actions to be moral, one has to gage it against man's life as the standard. And the actions of a company that you sanction by buying that stock -- basically voting yes for that decision -- ought to be weighed according to man's life as the standard.

But I certainly don't think that this requires omniscience. That is, the stock trader does not have to know every decision that a company makes before investing in that stock; but the big decisions count, and the trader ought to take those decisions into account before investing in said company. The stock price going up is an incentive for the company managers and major stock holders to keep doing what they are doing, and I do think those buying those stock are morally culpable for giving an incentive to the company and to the major stock holders. If you have read The Fountainhead, then you wouldn't want to invest in The New York Banner no matter how much money you could make, because it set out to destroy men like Howard Roark.

The issue is similar to why Roark turned down that commission to design that bank; he didn't want to give them a sanction for doing that.

In other words, in a way, your money is your life -- don't spend it on things that are against your life; even if you can make an economic profit by doing so.

[John McVey]

In the economic sense, any time one makes money it is productive -- your monetary wealth increases. You don't have to go into the details, such as what speculative trading does and how it benefits the market and everything else involved in that to say that it is productive in the economic sense. If you are making money, you are being productive (in the economic sense).

That's your entire problem right there. By failing to identify how speculation is productive you haven't actually answered Moebius' question at all. Making money is productive - but how do you know when that has taken place?? As you hold, there is a distinction between "making money" and merely generating a cash profit - but unless you do show how speculation is productive you aren't showing how it is both the former and latter rather than just the latter alone. By failing to tie the principle of man's life as the standard of value to concrete examples of how that standard is served (eg the half dozen ways I showed in which the actual production of end-user values is enhanced), your principle is but a floating abstraction.

In the philosophic / ethics sense, you need to know more about how the money is made; such as is force involved or is one violating man's life as the standard, before one can ascertain if one is being productive in the sense of productiveness being a virtue in the Objectivist ethics.

And just how do you know that part about not violating the standard? How do you know that speculation isn't just taking advantage of quirks of the system, and being parasitical in the process? How moral is a speculator if what he is doing is merely taking advantage of other's ignorance to their net detriment, hence also being parasitical? Without knowledge of how is actually producing something rather than merely taking, he may think that at best he's just something along the lines of a dung beetle - creatures that are necessary but thoroughly unappealing and should be kept out of public sight if at all possible. There are commentators who have made exactly that kind of comparison. What do you offer to speculators et al in response to that insult?

I think if the stock trader knows ahead of time that a particular company is about to commit an immoral act, then he should vote no on that company. I don't mean sell the stock short, but not get involved in that type of trade.

...

In order for you actions to be moral, one has to gage it against man's life as the standard. And the actions of a company that you sanction by buying that stock -- basically voting yes for that decision -- ought to be weighed according to man's life as the standard.

And that's a perfect example of floating abstraction. What does it mean to "vote no" or "vote yes"? Why shouldn't someone sell the stock short if they know the company has made a grevious error? What do you do when there are multiple ways you can not merely avoid losses but actually generate profits in relation to that stock? What is the morality in relation to trade in these to profit? If one makes cash profits, is one stealing from hapless existing holders of instruments by stealth means? Then there are issues like what if you think others who also make judgments about the stock are overreacting or underreacting - what's the morality of you attempting to profit from that? The questions go on.

You're also focusing solely on one thing - the stock of a company. There are myriad other instruments one can trade in. How about speculation in commodities futures? Interest rate swaps? Currency options? None of those relate to the decisions of specific corporations you can make moral judgements about. You say "one has to gage it against man's life as the standard" - HOW!? There are instruments and entire subindustries dealing with them, whose trade and oustanding value world wide runs into the trillions, that exist solely as a result of governments doing things they shouldn't - is trade in them automatically immoral? Hint: don't say yes.

All these and more were asked about by Moebius, and you had nothing of substance to offer. You're in way over your head, completely ignorant of the detail of financial practice, and are resorting to empty platitudes and admonitions all floating off into the sunset.

JJM

Edited November 19, 2007 by John McVey

[Thomas M. Miovas Jr.]

All these and more were asked about by Moebius, and you had nothing of substance to offer. You're in way over your head, completely ignorant of the detail of financial practice, and are resorting to empty platitudes and admonitions all floating off into the sunset.

Not at all; I was speaking in terms of principles. If I told him speculating is moral, so long as he is not advocating the use of force or engaging in the use of force or acting against man's factual nature nor encouraging others to do that, then he might go on to ask -- well, what about arbitrage, or exchange rates or selling short or whatever. The principled answer is that so long as these terms are met and he is increasing his personal wealth, then he is being productive in both the economic sense and in the philosophic / ethics sense -- the increased value of his portfolio proves that.

It's fine to take advantage of market quirks brought on by governmental interference in the economy or other market players overreacting due to such (or overreacting to financial news), so long as one speaks out against governmental interference. As to trading quirks that might exist due to the nature of the market, take advantage of them, if you can, so long as those conditions mentioned above are met.

For example, it was well known that Greenspan wanted to pop the dot com "bubble." He said it many times, and increased the basic rates to do just that. He was being evil when he did that, but so long as one advocates that the Feds should keep their manipulative hands out of the market, it is perfectly moral to take advantage of the "bubble bursting" by selling dot coms short. On the other hand, if one was selling short when the market was still going up, and then one advocated the initiation of force to pop the "bubble" because one is losing one's arse, that would be at least intellectually aiding and abetting an evil, and it would be immoral to advocate and to benefit from that.

Likewise for exchange rates and other means of making monetary units work from one economy to another (US to Euros or whatever). The government should not be setting those rates, and so long as one advocates a hands off approach, then benefiting from governments manipulating the monetary exchange units is perfectly moral.

There is no need to go down the entire list of ways of making money, in financial markets or other markets. If you can find a way to make money in a market without initiating force (directly or indirectly) and your new-found cash isn't going to give a sanction to those advocating your destruction (hence the New York Banner or selling Korans references), and your own wealth increases, then you are being productive in both the economic sense and in the moral sense.

[aequalsa]

You are right that what ultimately bothers me might not be trading itself, but the prospect of doing it as a career, although I have been giving what money means to me a lot of thought. I know exactly what I want the money for -- complete financial freedom. To be able to go where I want, do what I want, whenever I want, without regards to money. And I want to achieve this before the age of 45, right around when my (future) children will be entering college. To me, this is the only way to live and the single most important goal in my life. And to achieve this, I do not need a billion dollars. Given my lifestyle, it'll mean a nest egg somewhere between five to ten million dollars.

The dilemma here is that having money doesn't necessarily makes me happy, but not having (enough) money definitely makes me unhappy. And while there are many things I enjoy more than trading, none of them translate into stable careers. Ultimately, as much as I know that money is not a value in and of itself, it does make me feel good making some. Yes, sometimes it feels kind of hollow because I don't have anything to spend it on at this stage of my life, so they're just numbers on a screen. But at least it gives me options once I find something to do with it.

I realize your concern, but think that you should reevaluate the notion that a stable career cannot be had in other fields that would be more rewarding. That is rarely the case. Though it is probable that they would be initially less financially rewarding, most successful people become successful doing what they love. Not what they have to do or feel they should do.

Additionally, doing something else does not necessarily mean giving up trading. You seem to have a very good start. It is entirely possible that you could be able to both work in some other field and manage your wealth on the side. You could even set a quantity or date deadline. Stay in trading until you reach that goal and then manage only your own money to build your nest egg and do what you enjoy with the rest of your time. Eventually when what you enjoy becomes more profitable then trading, you can make the switch then. It doesn't have to be all or nothing. No one ever regrets the things they did in life during their old age. Most people regret all of the things they did not do. Money is certainly important, but not nearly so important as self actualized fulfillment.

[Moebius]

I realize your concern, but think that you should reevaluate the notion that a stable career cannot be had in other fields that would be more rewarding. That is rarely the case. Though it is probable that they would be initially less financially rewarding, most successful people become successful doing what they love. Not what they have to do or feel they should do.

In my experience, most successful people become successful doing what they are good at -- not necessarily what they love. Those two things are not mutually exclusive, but more often than not are not the same. Anyway what I love to do more than anything else is playing basketball, and it isn't as if I am making it into the NBA any time soon. The most I can hope for is dominating the playgrounds on weekends.

Nevertheless I agree that it is possible to find something more rewarding that I also love. I just haven't found it yet. Like I said earlier though, for a long time I have had this personal goal of making a million dollars before I turn 30. I want to hit that goal first before I depart to do something else.

Additionally, doing something else does not necessarily mean giving up trading. You seem to have a very good start. It is entirely possible that you could be able to both work in some other field and manage your wealth on the side. You could even set a quantity or date deadline. Stay in trading until you reach that goal and then manage only your own money to build your nest egg and do what you enjoy with the rest of your time. Eventually when what you enjoy becomes more profitable then trading, you can make the switch then. It doesn't have to be all or nothing. No one ever regrets the things they did in life during their old age. Most people regret all of the things they did not do. Money is certainly important, but not nearly so important as self actualized fulfillment.

You are right of course that I won't have to give up trading to do something else. But realistically I would change from a trader to a long term investor. The biggest problem here is that the things I enjoy do not tend to make money, be it traveling, eating good food, playing sports, reading, or video games. Thinking as a 25 year old (and this very well could change later), I would definitely regret it as an old man if I did not go where I want, eat what I want, or play the sport that I love, while I am still young and have the energy to do so. My parents worked pretty damn hard when they were my age running a construction company, and by the time they made their fortune and can begin to enjoy themselves, they are old and get tired by nine o'clock. That's why I want the money now, before I am weighed down by career and family.

To be honest, in a lot of ways trading is like the perfect job for me. You have far more freedom than running a business, you do not really have to answer to a boss, your income is directly determined by your skill and discipline (and definitely some luck), and winning and losing is so obvious and immediate. My only issue was only with the fact that it really feels like I am making money while visibly producing nothing of value, and the fact that it almost feel like I am ripping people off or at least taking advantage of their ignorance for a living -- both of which was answered by this thread. I dislike the fact that I have really nothing to show for my work save my bank account, but a lot of that really have to do with the fact that at my age and lifestyle, I really have nothing to spend money on. Once I begin to shoulder financial responsibilities I am sure I will see it differently.

[Thomas M. Miovas Jr.]

My only issue was only with the fact that it really feels like I am making money while visibly producing nothing of value, and the fact that it almost feel like I am ripping people off or at least taking advantage of their ignorance for a living -- both of which was answered by this thread.

You are not ripping anybody off if you make a profit, provided the terms I mentioned earlier. I run a gallery and do picture framing for a living, and if we get a good deal on our materials, and then turn around and make a 500% profit by selling at the market price (what the customer is willing to pay for a framed item), then we are not stealing anything from them, nor are we using their "ignorance" against them. If you can better predict the market, and buy when it is low and sell when it is high (or other means), then it is not their ignorance that you are taking advantage of -- they have access to the same information that you do; especially now that most all financial news is available via the Internet in real time (almost immediately). What they make of that information has no baring on what you make of that information, because the mind is individual.

Regarding feeling like you haven't accomplished anything, I ran into something like that when I was working on a novel. Because I used a word processor program to write it, I had no material or visible means of assessing whether or not I was creating anything. I had over 300 pages written, but my hard drive was not getting visibly bigger, so psychologically I felt like I wasn't getting anywhere. Then I printed it out and let some of my friends read it. Being able to hold my novel in my hands and getting feedback from my story really helped me to concretize that I had accomplished something.

Similarly, perhaps you ought to concretize your accomplishment by not letting it just be numbers on a computer screen. Go out and enjoy your wealth. Go buy that fancy sports car or that luxury boat or whatever. Don't spend all of your wealth, of course, but buy something that is material that you can look at and feel to help you realize that you have made something of value. In other words, making money is a means of living, so live a little already

[Moebius]

You are not ripping anybody off if you make a profit, provided the terms I mentioned earlier.

I know I'm not ripping anyone off. It just feels that way sometimes, especially when you see good people lose money day after day. It's kind of depressing. The market in Taiwan is different from the US because there is a far smaller pool of companies accommodating a huge amount of cash (Taiwan has an even higher percentage of millionaires than the US, only with a far greater wealth disparity), and with an extremely high stock market participation rate at roughly 12% - 15% of the total population (which means discounting children and the poor, that figure becomes ridiculously high). The prices of many stocks - even of quality companies- can be pumped artificially or at least manipulated heavily with enough money, and the evaluation of stocks (at least for me) often have more to do with reading the hand behind the prices through technical analysis than through financial statements (you still need them but not nearly as important if you are a trader as opposed to a long term investor).

I heard this from my mentor, and it is probably the closest thing to what I do: Your average investors are like a bunch of hapless tiny sardines in the ocean. Herding them are the the large mutual fund/brokerage/international hot money dolphins who chase, swoop, envelop, and manipulate them into a HUGE and ever tighter wad of sardine ball, waiting and refraining patiently for the ball to become a sufficient size before ripping into their prey. Meanwhile, traders like me are like seagulls tracking the dolphins from above the sky. We can't see under the water like the dolphins, and we don't have the muscles to compete. But we know that where ever there are dolphins, there are sardines. So we follow, and whenever a sardine breaks from the group and skip out into the water, we swoop down and pick it up, eating our fill. We need to be fast, but more importantly, we are opportunistic and therefore need to have the financial longevity to last through the wait.

Similarly, perhaps you ought to concretize your accomplishment by not letting it just be numbers on a computer screen. Go out and enjoy your wealth. Go buy that fancy sports car or that luxury boat or whatever. Don't spend all of your wealth, of course, but buy something that is material that you can look at and feel to help you realize that you have made something of value. In other words, making money is a means of living, so live a little already

I have no idea what I would do with a sports car. I almost never speed. If anything I'd get a house, but it just ain't worth it right now without a family to live in it, no matter how I cut it. I am much happier in a crappy bachelor pad studio with my computer, a TV, a bunch of books, and a basketball. At least it takes like 10 minutes to clean. In general I just have pretty low material needs: comfortable clothes, good food, and enough money to get me a plane ticket for two anywhere in the world at a moment's notice.

In any case, my bankroll is untouchable. I'm counting on it to hopefully help me roll more dough, and on top of that I need to have enough set aside to start over in case of some sort of catastrophic system shock.

[softwareNerd]

I heard this from my mentor, ... hapless tiny sardines ... hot money dolphins ... seagulls tracking the dolphins from above the sky.

Interesting analogy, but if I understand what you're trying to say, wouldn't it be more accurate to imagine the dolphins leading the sardines on with some bait, with you being a pretend sardine eating up the bait but being the first to swim away when you see the bluff is going to be called? [i figure this is far enough into the thread to risk straying a bit from the topic.]

[Moebius]

Interesting analogy, but if I understand what you're trying to say, wouldn't it be more accurate to imagine the dolphins leading the sardines on with some bait, with you being a pretend sardine eating up the bait but being the first to swim away when you see the bluff is going to be called? [i figure this is far enough into the thread to risk straying a bit from the topic.]

Well, no. Because the money you make is ultimately off of average investors/sardines -- your food source. The dolphins set off the market-wide chase systematically and cooperative over the course of a bull market/ocean, steering the sardines toward the killing ground/choice stocks (the killing grounds are generally "industries of tomorrow" type stocks -- web related, solar power, LED, etc). The sardines on the other hand only sees what is ahead of them, and when the sardines work themselves into a feeding frenzy, the dolphins strike. The seagulls study the patterns of their hunt, carefully picking their entry point and exit point, and swoop in for the kill. You're not a pretend sardine swimming among fishes because you are studying the market-wide patterns from the air, and you expose yourself to risks only for the duration of the trade. If you dive and miss, you expend energy. If you miss too many times you become exhausted and fall into the ocean, where your body is picked by other fishes. That is why the seagull values longevity over everything else.

I'm probably not a good seagull right now. I'm a young, strong flier with a good eye for patterns, but I stay way too close to the water, which means for one thing it's hard for me to see the full picture, and for another I put myself in a position where a sudden killer wave/systematic risk (ie. sub-prime loans crisis) can drag me into the water. I also persistently dive way more often than I should or need, sometimes just for the hell of it, because the sardines are so plentiful this year. But then, I know most of my weaknesses, and I am working to purge it out of my game.

[Thomas M. Miovas Jr.]

Well, no. Because the money you make is ultimately off of average investors/sardines -- your food source. The dolphins set off the market-wide chase systematically and cooperative over the course of a bull market/ocean, steering the sardines toward the killing ground/choice stocks (the killing grounds are generally "industries of tomorrow" type stocks -- web related, solar power, LED, etc). The sardines on the other hand only sees what is ahead of them, and when the sardines work themselves into a feeding frenzy, the dolphins strike. The seagulls study the patterns of their hunt, carefully picking their entry point and exit point, and swoop in for the kill.

This, along with your tag line, The Strength of the Pack is the Wolf, is too much like the statement of a prudent predator. And it's a horrible analogy to what you are doing. You ought not to think about it as "making a killing", even though that phrase is often used when someone makes a huge profit, but rather as "earning a living."

It might be difficult to see where trading value for value comes in when you sell a stock at the top and it comes crashing down shortly after, if you are riding a bull market wave, but whoever bought the stock from you was using his mind (rationally or irrationally) to buy that stock based on his knowledge and experience, because he thought he was going to make a profit (short run or long run). And if the company being bought makes a profit, then over the long run the stock value will increase past that point over time.

I do think the market over-reacts at times, and more so now that just anybody can become a trader in the stock market, and there does seem to be a feeding frenzy at times; such as the dot coms bull run. I mean those companies were not making a profit, for the most part, but people kept buying into them. Like YouTube and Napster being bought for, what was it, a billion dollars each? I'm not making any money on my website either, so if you want to buy it for a billion dollars, I will consider the offer

However, in the long run, this is how new industries are formed. If it wasn't for all of that money being poured into the Internet, we wouldn't have it; because no one would go through the effort of expanding usage of the Internet if they weren't being paid for it (in the long run). Besides, a billion dollars today is like what a million dollars was at the turn of the last century (due to inflation). All those millions going into, say, the car industry or the radio and television industry is how we got to be able to enjoy radio and television today. So, in the long run, those huge run-ups on stock prices gives incentive to develop that industry further. Sure, some people lost a ton of money, and will continue to lose a lot of money even without governmental "bubble bursting," but that's the way it is in any business sector. Some are successful start-ups and some aren't.

[Moebius]

This, along with your tag line, The Strength of the Pack is the Wolf, is too much like the statement of a prudent predator. And it's a horrible analogy to what you are doing. You ought not to think about it as "making a killing", even though that phrase is often used when someone makes a huge profit, but rather as "earning a living."

Huh?

It might be difficult to see where trading value for value comes in when you sell a stock at the top and it comes crashing down shortly after, if you are riding a bull market wave, but whoever bought the stock from you was using his mind (rationally or irrationally) to buy that stock based on his knowledge and experience, because he thought he was going to make a profit (short run or long run). And if the company being bought makes a profit, then over the long run the stock value will increase past that point over time.

Uh. Yeah, I guess the value will increase in the long run. It's just that the long run might be a decade. Might be two decades. Meanwhile people have mortgages to pay and children to raise. More often than not when you lose, you lose. That's why we have things like stop loss orders.

I do think the market over-reacts at times, and more so now that just anybody can become a trader in the stock market, and there does seem to be a feeding frenzy at times; such as the dot coms bull run. I mean those companies were not making a profit, for the most part, but people kept buying into them. Like YouTube and Napster being bought for, what was it, a billion dollars each? I'm not making any money on my website either, so if you want to buy it for a billion dollars, I will consider the offer

The dot comers should have seen it coming. Anyway if your website can generate a few million hits a day, I'm sure you will be able to sell it for a handsome profit too!

However, in the long run, this is how new industries are formed. If it wasn't for all of that money being poured into the Internet, we wouldn't have it; because no one would go through the effort of expanding usage of the Internet if they weren't being paid for it (in the long run). Besides, a billion dollars today is like what a million dollars was at the turn of the last century (due to inflation). All those millions going into, say, the car industry or the radio and television industry is how we got to be able to enjoy radio and television today. So, in the long run, those huge run-ups on stock prices gives incentive to develop that industry further. Sure, some people lost a ton of money, and will continue to lose a lot of money even without governmental "bubble bursting," but that's the way it is in any business sector. Some are successful start-ups and some aren't.

I don't even get what you're trying to say here... Is this some random musing or are you responding to something I said?

In any case, I think you have it backwards. What you're saying is that huge rises in stock prices gives incentive to develop the industry further, which doesn't make sense at all. The stock prices rise sharply because the industry is already developed and is making a shit load of money, and/or is standing to make a shit load more in the near future (rightly or wrongly). Anyway you realize that the difference in value from a stock sale -millions, billions, whatever- doesn't end up in the pocket of the company itself right?

And what is the point you're making with the inflation thing anyway? I read that like 5 times and still don't see the relevance.

And what does failed start-ups have to do with investment losses? Is that an analogy? I don't know... you lost me somewhere in there.

[Thomas M. Miovas Jr.]

In any case, I think you have it backwards. What you're saying is that huge rises in stock prices gives incentive to develop the industry further, which doesn't make sense at all. The stock prices rise sharply because the industry is already developed and is making a shit load of money, and/or is standing to make a shit load more in the near future (rightly or wrongly). Anyway you realize that the difference in value from a stock sale -millions, billions, whatever- doesn't end up in the pocket of the company itself right?

I didn't mean to ignore this thread, but I was involved in other ones and didn't have a chance to reply.

What I was getting at earlier is that I don't think one ought to compare the productive effort of man using his mind with animals hunting prey; so I am against the analogy of a seagull swooping down on small fishies. It makes you sound like you consider the small investor as prey.

I realize that the money paid for stocks doesn't go to the company, at least not directly; but many companies that are up and coming do have a stock purchasing incentive plan that wouldn't work if the stock prices were continuously going down. And stock prices going up in one sector does encourage others to follow suit in making an IPO (initial public offering). That's one reason we had so many now well known dot coms going public back in those day. Millions were generated for these start up companies, and more than one of the major stock holders sold their stock before the price collapsed (though some employees were forbidden from doing that). Mark Cuban, for example, made billions, which most certainly encouraged others to follow suit -- it's one thing that drove the Internet to become as well developed as it is today. For more established companies, a good stock evaluation (going up) leads to confidence in that company or industry; it's all tied together in the market -- both the consumer market and the general economy and stock market.

[DMR]

I start to feel like I am not actually producing anything or contributing to the economy.

This is possible. John McVey's point about your communicating valuable information to the market is correct, although it may or may not be true that you actually do this. I would have to know a lot more about trading in general and your job in particular to know whether or not this is the case.

Our government and laws are sufficiently irrational that it is quite possible to make a great deal of money via unproductive or even evil behavior. To be clear, I am not saying that this is the case, but that it is something you might want to look into. I would not want to get rich any way besides providing something that was genuinely good for humans.

The virtue of a rational society is to effectively automate the solution of this question. That is, in a rational society, you do not need to ask whether or not a particular way of making money is ethical. You only need to know whether it is a safe and reliable way to make money, and, metaphorically speaking, society will ensure that a pursuit is financially rewarding to the degree that it is ethical.