Aren't the stock markets (AMEX, NYSE) just different forms of legalized gambling?

Not at all. If you gamble, you know you that losings are larger than winnings, since the house takes a certain percent of all winnings. Overall, there’s no way that the collective group of gamblers can come out ahead. It simply isn’t possible.

With the stock market, you know if you buy an index fund and hold it, that over time, it will go up an average of 8% a year. Yes, you can lose, but it’s not guaranteed, and most people win. In gambling, it’s guaranteed that the gamblers collectively will lose.

Besides which, in the stock market, you are taking a risk with how productive the economy will be. In the casino, nothing is produced, except money for the casino owners. If you love gambling, buy casino stock.

legalized gambling for good christian capitalist

@daloon: You’re a stock broker in real life, right?

Are you part of the (forgive me) Merrill LYNCH MOB?

August 23, 2008, 3:45 PM EDT

If I were a broker, would I be suggesting index funds? Nope, I’m just an investor, and I use Vanguard funds. I like to park the money and forget it.

I had a broker friend who once told me to avoid so-called “funds,” especially mutuals, saying, quote, “I could do better with a blindfold and a dartboard!”

August 23, 2008, 5:19 PM EDT

An “average” of 8%/year?

I can do better with my Copenhagen account! (14% vs. 8%)

August 23, 2008, 5:43 PM EDT

Brokers boast a lot of things, but it turns out that few of them produce, and by far, some 90% do worse than the indexes. If that’s the case, why imagine you can pick one of the few brokers who can do better? Just buy the index.

I don’t know what a copenhagen account is, or who is eligible to invest in it, nor what the risks are, but if you care to share, 14% per year for over 80 years sounds good to me. Or was that not an average over the history of that investment tool? Shoot, I’ve gotten lucky sometimes. One year recently, I invested in an energy fund. It went up 50% in a year. I sold it. It went up even more. I didn’t get back in. Now it’s tanking. I still have my 50% from that year.

But don’t think I’m a good stock picker. I lost an awful lot of money in the tech boom. But then, that’s how I knew to sell the energy fund, when it had done so well so fast.

Remember the old saw about the visitor to New York who was being shown around. When his guide pointed out the many yachts of the brokers and Wall Street bankers, he said, “Where are all the customers’ yachts?”

An absolutely EXCELLENT point!

August 23, 2008, 9:09 PM EDT

Gambling is randomized, and in the case of casino gaming, is designed (and intended) to produce an overall net loss of capital to its participants.

A corporation, as in a market through which its shares are traded, is intended to produce an overall net gain of capital to its participants.

If you invest in a company without knowing why it is likely to provide a return to you, then you are implicitly allowing randomized results and you could call that gambling. But even along those lines, if you randomly select a broad range of corporations (such as the S&P 500), you will likely see a long-term overall return because the institutions, on average, do produce (read: “have produced”) returns to their shareholders.

But as far as casinos and formal gaming goes, I find it absurd that we popularly call these schemes “gambling.” They are not gambling at all; they are a very sure way to lose your money, and they do so by design.

The end resul is the same, be it brokerage house or slot machine.

You put money in and MAYBE you make a profit on what you put in, or MAYBE you lose your ass.

Neither offers any guarantees, whatsoever.

Brokerage houses call it “investing,” probably to get around anti-gambling laws.

August 24, 2008, 12:52 PM EDT

Seen that way, then yes it is gambling. Then again, every step you take is a gamble. Your life is a gamble. I thought you were talking about something interesting: the relative risk of various gambles. If you’re merely pointing out that all life is a gamble, and every little part of it is, too, then go ahead.

What roadventer and I have been explaining is that the relative risk of the different kinds of gambles makes them practically incomparable for any sane person. Well, for many insane people, at that.

But I leave it to you. If you want to park your money in a casino somewhere, and try to make it grow by gambling, as opposed to parking it in stocks, particularly a fund of the 500, 1000, or 5000 largest stocks on a given market, be my guest. Do me a favor though, and come to my casino. Please?

You want to know what makes stocks less of a gamble? There are huge numbers of companies where the federal government guarantees them a profit, at our expense. The health insurance industry, the military industry, aerospace (arguably), and so many others deemed essential to national security. The government won’t let them lose money, much less go out of business. The government does this in a variety of ways: sometimes by guaranteeing to purchase stuff at a huge write-up, other times setting up rules that make it extremely difficult for anyone in that business to find a way to screw it up.

I’d take those odds any day. Though I work every day to stop it, because it isn’t fair to have government sponsored profits for the selected few.

I agree with you 100%, that investing in a company gives better odds of success, than casino gaming.

However, BOTH are still forms of gambling, regardless.

The main difference is that, with a slot machine or at the craps tables, the results of your “investments” are INSTANTANEOUS, where with brokerage houses, it may take months or years to know if your instincts were “successful.”

I don’t have that kind of time to “invest.” I just have the money.

August 24, 2008, 1:22 PM EDT

Jack, save yourself the trouble. Just give me half the money, and be done with it.

But I see you are a gambler, with the instincts of a gambler, and a gambler’s approach to the world. Did you make your own money in some kind of lucky way, or inherit it? Risk excites you, I bet. It makes you high. You feel alive!

I wonder if you have an idea in mind of when you’ll die? What kind of time horizon are we talking about? Is it a live fast, die young kind of thing? Do you know what’s going to kill you? I’m just trying to figure out why you seem to need instant gratification financially speaking.

I don’t know you, Jack, and I don’t mean you any harm. I find you to be a bit of a mystery. So I’m going to indulge myself in some amateur pschologizing. It’s probably totally off base.

However, if someone forced me to guess, I’d say you are somewhat distant from yourself. Maybe even feel like there’s the public you, and then there’s the real you inside watching the public you, and somehow the two can’t quite believe they are actually related. You keep looking for feelings, even bad feelings—anything, so long as it is strong. But it ain’t happening.

You remind me of the characters in Jerzy Kosinsky’s books. The one that nearly was killed in WWII, when Nazi’s broke in. He escaped, but he had all kinds of traumatic adventures after that, and he got rather distant from his environment and from people, so he could survive. It became all about survival, and there wasn’t room for anything else, and then when he did survive, he couldn’t find the parts of him that were concerned with other things besides survival.

The reason the stock market is not gambling is simply in-line with the traditional definition:

1. To bet on an uncertain outcome of a contest.
2. To play a game of chance for stakes.

The stock market on the other hand, is not “betting” so much as investing. It may be semantics, but essentially the heart of gambling lies in betting on a game, where as the heart of the stock market is to literally buy a small piece of a company (or a commodity) you believe in.

And then “bet” on the company making a profit, or losing money.

You are gambling on a company’s future. Nothing is guaranteed.

If there was a guarantee, then everyone who visits a casino every year, would instead be ‘investing” in a guarantee.

In both stock markets and casino wagering, there is an element of RISK.

August 26, 2008, 11:34 PM EDT

Hmmm… I see why you’re making the argument you’re making, but think about it like this- if you owned your own business, you would hope it makes a profit. That’s not “gambling.”

Investing in the stock market is essentially buying up a tiny portion of a company. You are a partial owner, and you benefit when the company does, because in a way, it’s YOUR company.

That’s why I don’t consider it gambling. Risk and gambling aren’t the same thing to me. There is a semantic difference.

Respectfully, I wish to relate the following:

My no-good cousin wanted me to “invest” in his business, so I bought part ownership in his company, for US$30K.

Less than one year later, his company liquidated and went totally under.

I lost the entire US$30K, and he and I haven’t communicated with each other, since.

I “took a chance” with my lousy cousin, “invested” US$30K with him, and lost my ass.

In other words, I GAMBLED on my cousin’s business by becoming part owner of his company, and one year later, my “investment” (GAMBLE) was totally gone.

If I had taken US$30K, placed it on “the wheel” and said, “RED,” I would have gotten better odds of walking away from that wheel, with US$60K.

That’s what I should have done.

August 29, 2008, 7:49 PM EDT

@jackadams: did you do any due diligence on the company? Read the business plan? Assess the key movers and shakers to see if they can do what they say?

Yeah, if you don’t do that, it’s gambling. Most people learn that lesson the expensive way. Mine cost about as much as yours!

If you have known someone all of their lives, and you are related to them, there is a tendency to want to help them, when they come to you, begging, and uttering phrases like, “I give you my sacred Word of Honor, on the lives of my children!”

Had he not been a relative, I would not have given him a dime.

Incidentally, he is no longer a relative.

August 29, 2008, 9:57 PM EDT

Investing in your no-good cousin’s business doesn’t have anything to do with the stock market.

It had to do with investing, and becoming a part owner of a company, even if the business wasn’t on “The Exchange,” per se.

September 2, 2008, 4:46 AM EDT

@JackAdams – I don’t know if you’re making a serious argument or not… You have to be able to see the difference in investing in your cousin’s business idea and buying stock. If you can’t see the difference between those 2 things, then there’s nothing else I can really say to try to answer your original question.

Glad to know you’re quitting.

Investiing is Investing, and part ownership of a company is just as valid, whether it is done via a brokerage house, or via notrarized documents done with the help of attorneys.

The end result is as originally stated: “Youse pays youse money, and youse takes youse chances.”

September 3, 2008, 3:30 PM EDT