I don't mind using superficial analogies, or for that matter empirical data (that must be obvious by now)... Just food for thought.
I've always felt plain vanilla stock market investing to have a very different financial 'frame of reference' as far as the type of investor and why they are investing. Certainly there's an element of gambling... and indeed, at one time, I even considered derivatives to be a legitimate hedge. I just don't see any enonomically or socially useful function to 'playing the spread' etc. I suspect that internet day-trading created a major moral morass out of a type of financing that used to be almost exclusively institutional, with SOME checks & balances regarding risk, and now I think brokerage reciepts should contain the same warning as lottery tickets, with referral numbers for gamblers anonymous. Leigh
On 3/8/07, Leigh Meyers <[EMAIL PROTECTED]> wrote: > You mean to say investing pennies on the dollar for price-volatile > derivatives which are often traded in and out at prices that just > clear the brokerage costs ISN'T gambling? That's a rather superficial similarity. Aside from the fact that motel managers gamble when pricing their rooms, I don't see a similarity between this example and derivatives. In a certain sense all economic activity involves some form of gambling and most of the time it is harmless (who is being harmed because of the pricing of motel rooms?) On the other hand I see derivatives as a disease. Not only is the gambling aspect taken to a ridiculous extreme here, but a lot of derivatives trading may be closely tied to various forms of tax dodges, moral hazard scenarios and such (see Frank Partnoy's "Infectious Greed" for an interesting account of derivatives in the 1990's). I am very interested in seeing how the current explosion of "financial innovation" plays out when the apparent "liquidity glut" of today dries up. -raghu.
