Is Stock Market becoming Casino ?

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johnpau
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Is Stock Market becoming Casino ?

Post by johnpau »

With past few months volatility and stock market seems detached with real economy wondering
if the Stock Market is becoming Casino ?
austin757
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Re: Is Stock Market becoming Casino ?

Post by austin757 »

I was reading somewhere that the increased volatility can partially be attributed to the influx of unsophisticated investors looking to make a quick buck. Some of these people would normally bet on sports and in a casino, but instead treat the stock market as such since most of those betting outlets are closed. Also to blame is better technology that makes the market more accessible to young people (Robinhood, Weeble, etc.). I'm sure the media is to blame as well. MSNBC and others promoting short-term trading.
sd323232
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Re: Is Stock Market becoming Casino ?

Post by sd323232 »

i think stock market is being stock market.
am
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Re: Is Stock Market becoming Casino ?

Post by am »

Short term voting machine, long term weighing machine is right.
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ruralavalon
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Re: Is Stock Market becoming Casino ?

Post by ruralavalon »

am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
+ 1.

The stock market and the economy are different things. They don't move to in lockstep. A rising stock market is a prediction that the economy will get better sometime in the future.

Stock investing has always been a bit of a gamble.
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Re: Is Stock Market becoming Casino ?

Post by nisiprius »

am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
Not quite. In Security Analysis, Graham and Dodd wrote that "The stock market is a voting machine rather than a weighing machine." However, Jason Zweig has said that has ever been able to find anything in Benjamin Graham's writings about it being a voting machine in the short run and a weighing machine in the long run. The idea that it is a weighing machine in the long run is something that Warren Buffett recalls Graham as saying, but it's never been documented.

Hopefully the stock machine isn't a slot machine.

A recent New York Times article asserts that Trading Sportsbooks for Brokerages, Bored Bettors Wager on Stocks and notes that $13 billion formerly went into sports betting, and quotes various people's guesses that that it is now going into the stock market and that it is enough to be a factor.
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livesoft
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Re: Is Stock Market becoming Casino ?

Post by livesoft »

Stock market was always a casino. so no change there. If you are only noticing it just now, then you were probably not looking back in 2008 and many other times.
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jhsu802701
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Re: Is Stock Market becoming Casino ?

Post by jhsu802701 »

Yes, the stock market is indeed cuckoo for Cocoa Puffs. It feels like the Dot Con bubble.

I thought it was crazy enough that people preferred large cap US stocks over my favorite undervalued international stock ETFs. That's small potatoes now.. People were recently more interested in Hertz stock (in the process of going under) and airline stocks (ditto) than in my favorite undervalued international stock ETFs. Tesla stock has been making new highs even though it has yet to show any profit.

Oh, wait, the Blair Witch is busy leading international stock markets in circles in her woods while propping up everything else. :)
TonyDAntonio
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Re: Is Stock Market becoming Casino ?

Post by TonyDAntonio »

The more people that want to put their money in the stock market the better. I think it's that simple.
3funder
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Re: Is Stock Market becoming Casino ?

Post by 3funder »

sd323232 wrote: Tue Jun 16, 2020 10:59 am i think stock market is being stock market.
+1
Global stocks, US bonds, and time.
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willthrill81
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Re: Is Stock Market becoming Casino ?

Post by willthrill81 »

johnpau wrote: Tue Jun 16, 2020 10:40 am With past few months volatility and stock market seems detached with real economy wondering
if the Stock Market is becoming Casino ?
The stock market has never moved in lock-step with the economy.

The stock market has always had periods of high volatility, a phenomenon known as volatility clustering.
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Re: Is Stock Market becoming Casino ?

Post by 3funder »

am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
+1
Global stocks, US bonds, and time.
ianferrel
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Re: Is Stock Market becoming Casino ?

Post by ianferrel »

Matt Levine, in his excellent financial news/humor column Money Stuff, has had several recent articles touch on this topic, and his answer is to some extent, yes.

His analysis is basically that people like betting on stuff, and the thing that most people bet on, sports, is not happening right now, leaving people with an appetite for entertaining risk that goes unfilled, and they've mostly filled it with retail investment wagers on volatile/newsworthy stocks. This is his explanation for Hertz, which is apparently going to offer new shares while in bankruptcy. It's totally crazy that their share price has risen after declaring bankruptcy, but, hey, it's kinda fun, so whatever.
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Re: Is Stock Market becoming Casino ?

Post by Robot Monster »

jhsu802701 wrote: Tue Jun 16, 2020 11:24 am Oh, wait, the Blair Witch is busy leading international stock markets in circles in her woods while propping up everything else. :)
That Blair Witch better watch her back. The BOJ, BOE, and the ECB are hot on her heels.
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AnalogKid22
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Re: Is Stock Market becoming Casino ?

Post by AnalogKid22 »

am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
BOOM!! If this wasn't an election year, you'd see a far different situation.
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firebirdparts
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Re: Is Stock Market becoming Casino ?

Post by firebirdparts »

johnpau wrote: Tue Jun 16, 2020 10:40 am With past few months volatility and stock market seems detached with real economy wondering
if the Stock Market is becoming Casino ?
The derivative market, which is huge, has always been a casino. The only thing new there is the way that the current unpleasantness is changing all the rules, sometime suddenly. Since there are no sports to be on, and casinos were closed, there was some effect of new people who were already gamblers getting involved in derivatives.

There are some people buying actual shares in this category of "robin hood investor" or whatever you want to call them. I don't know how many, but I do talk to folks who do this. It appears to me that there has been an increasing interest in day trading stocks as well.
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Clever_Username
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Re: Is Stock Market becoming Casino ?

Post by Clever_Username »

The nice thing is you can get your share of the house's take very easily.
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alfaspider
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Re: Is Stock Market becoming Casino ?

Post by alfaspider »

I've never understood the appeal of literal casinos given that the stock market exists. If I wanted to straight gamble with a bunch of booze and bright lights, I could just take my laptop to a bar and daytrade. At least that way the odds are nominally in your favor.
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Re: Is Stock Market becoming Casino ?

Post by milktoast »

It's not a casino.

In a casino, the expected value (and standard deviation) of every bet is knowable up front. Your model may or may not be precise. For instance, if your model accounts for every card in the blackjack shoe which has been revealed, you'll eventually be asked to leave.

If you are buying stocks for the future value of dividends and stock buybacks from the company, the stock market is a way to purchase rights to that future income stream.

If you are buying strictly for capital appreciation, the stock market is a ponzi scheme.
Monsterflockster
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Re: Is Stock Market becoming Casino ?

Post by Monsterflockster »

I don’t think it’s a casino but rather the old comic & baseball card shops of the late 80’s. You’re card is only worth what someone will pay for it.

Looking back I should’ve sold that José Canseco rookie card at its peak & bought Jordan’s.
ballons
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Re: Is Stock Market becoming Casino ?

Post by ballons »

johnpau wrote: Tue Jun 16, 2020 10:40 am With past few months volatility and stock market seems detached with real economy wondering
if the Stock Market is becoming Casino ?
No, you can lose at a casino.
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Orbuculum Nongata
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Re: Is Stock Market becoming Casino ?

Post by Orbuculum Nongata »

johnpau wrote: Tue Jun 16, 2020 10:40 am With past few months volatility...
Who critiques the stock market and thinks it has somehow changed based upon the past several months?
Potential - distraction = performance.
jello_nailer
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Re: Is Stock Market becoming Casino ?

Post by jello_nailer »

3funder wrote: Tue Jun 16, 2020 11:39 am
sd323232 wrote: Tue Jun 16, 2020 10:59 am i think stock market is being stock market.
+1
Said Chris Rock...
Some of you will know what that means, and what it is in reference too.
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ruralavalon
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Re: Is Stock Market becoming Casino ?

Post by ruralavalon »

jello_nailer wrote: Tue Jun 16, 2020 5:25 pm
3funder wrote: Tue Jun 16, 2020 11:39 am
sd323232 wrote: Tue Jun 16, 2020 10:59 am i think stock market is being stock market.
+1
Said Chris Rock...
Some of you will know what that means, and what it is in reference too.
Why keep the rest of us in the dark?
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David Jay
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Re: Is Stock Market becoming Casino ?

Post by David Jay »

nisiprius wrote: Tue Jun 16, 2020 11:18 am
am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
Not quite. In Security Analysis, Graham and Dodd wrote that "The stock market is a voting machine rather than a weighing machine." However, Jason Zweig has said that has ever been able to find anything in Benjamin Graham's writings about it being a voting machine in the short run and a weighing machine in the long run. The idea that it is a weighing machine in the long run is something that Warren Buffett recalls Graham as saying, but it's never been documented.
Nisi:

I don’t get why you have to “correct” the poster, it doesn’t feel like your normal, careful style.

Warren Buffet has written that Graham said that and Graham was one of his Professors. Are you stating categorically that Graham did NOT say that to his class and that Buffet is lying about mis-remembering it? That is a very strong position for you to take as a 3rd party who wasn’t in the class (and, I might add, neither was Zweig).
Last edited by David Jay on Tue Jun 16, 2020 7:08 pm, edited 1 time in total.
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Re: Is Stock Market becoming Casino ?

Post by jello_nailer »

On Roy Horn being mauled: "That tiger didn't go crazy. That tiger went tiger."
garlandwhizzer
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Re: Is Stock Market becoming Casino ?

Post by garlandwhizzer »

2020 Mid-year market commentary from Liz Sonders of Charles Schwab. A lot of dramatic ups and downs in the market as the economy withers. At current prices optimism holds sway, probably expecting a V shaped recovery. Personally, I think the current market run to the upside is overdone, certainly relative to underlying economic fundamentals as they exist now. On the other hand as J M Keynes said, "the market can stay irrational longer than you can stay solvent." Hard to make big bets now on the near term future. A lot of the recent upside has been driven by FOMO, MOM investors, and short covering, all three of which can disappear quickly. On the other hand the intermediate and longer term picture IMO looks a lot better than the current sad state of the economy. For long term investors portfolio changes do not necessary to me. The money flows moving this market are IMO largely short term speculation.

https://www.schwab.com/resource-center/ ... nd-economy

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ohboy!
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Re: Is Stock Market becoming Casino ?

Post by ohboy! »

Check out r/walstreetbets (reddit)

Accessibility to leverage for the avg retail investor is probably some of the culprit for volatility.
sd323232
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Re: Is Stock Market becoming Casino ?

Post by sd323232 »

jello_nailer wrote: Tue Jun 16, 2020 5:40 pm On Roy Horn being mauled: "That tiger didn't go crazy. That tiger went tiger."
LOLOLOL, chris rock
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Re: Is Stock Market becoming Casino ?

Post by finite_difference »

nisiprius wrote: Tue Jun 16, 2020 11:18 am
am wrote: Tue Jun 16, 2020 11:01 am Short term voting machine, long term weighing machine is right.
Not quite. In Security Analysis, Graham and Dodd wrote that "The stock market is a voting machine rather than a weighing machine." However, Jason Zweig has said that has ever been able to find anything in Benjamin Graham's writings about it being a voting machine in the short run and a weighing machine in the long run. The idea that it is a weighing machine in the long run is something that Warren Buffett recalls Graham as saying, but it's never been documented.
Warren Buffett is renowned for both his memory and honesty, so if he’s gone on the record recalling that Graham said that, then I’d argue that’s pretty good documentation.
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Re: Is Stock Market becoming Casino ?

Post by whodidntante »

I hope so! Can someone kindly point me to the poker room?
JonnyB
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Re: Is Stock Market becoming Casino ?

Post by JonnyB »

Forget that Efficient Market nonsense.

The DOW is just a graph of rich people feelings.
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Cam894
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Re: Is Stock Market becoming Casino ?

Post by Cam894 »

Invest with the house. It always wins.

These people will trade themselves right out of the game.

Shoeshine boy market.
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Re: Is Stock Market becoming Casino ?

Post by stocknoob4111 »

It isn't a casino but it isn't a free market anymore... Fed chief Powell on 60 minutes recently stated that he has unlimited money and he is prepared to use it to support the "markets" - bonds but there is implication that equities will also be supported, if not directly then indirectly. Hence the run up. In a way the market at the moment is price fixed since earnings and valuations do not support anywhere close to current levels.
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Re: Is Stock Market becoming Casino ?

Post by Grt2bOutdoors »

Captain Renault: I’m shocked, shocked to find that gambling is going on here! :wink:

Croupier: Your winnings sir!

Captain Renault: Oh, thank you very much!
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Re: Is Stock Market becoming Casino ?

Post by Grt2bOutdoors »

whodidntante wrote: Tue Jun 16, 2020 7:26 pm I hope so! Can someone kindly point me to the poker room?
Aw, craps!
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JoMoney
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Re: Is Stock Market becoming Casino ?

Post by JoMoney »

Day-trading / Swing-trading in the securities markets has always been a bit of a casino.
There are plenty of current examples of sports-betters and others looking for a gambling thrill moving to the financial markets during the pause the in sports. Even before the sports pause, I've seen what feels like an up-tick in the interest of 'retail investors' getting into esoteric commodity and leveraged ETF's, options, and other ways to make big-bets on small moves in the market.
I don't think it's "becoming" a casino, it's always been used that way by some people (but it doesn't have to be).
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Re: Is Stock Market becoming Casino ?

Post by JackoC »

milktoast wrote: Tue Jun 16, 2020 2:26 pm It's not a casino.

In a casino, the expected value (and standard deviation) of every bet is knowable up front. Your model may or may not be precise. For instance, if your model accounts for every card in the blackjack shoe which has been revealed, you'll eventually be asked to leave.

If you are buying stocks for the future value of dividends and stock buybacks from the company, the stock market is a way to purchase rights to that future income stream.

If you are buying strictly for capital appreciation, the stock market is a ponzi scheme.
I don't necessarily agree with some of those statements but bolded one is really important I think. Though usually with regard to expected returns rather than whether 'the stock market is becoming casino'.

A lot of people implicitly assume that the markets are a like game of chance with known rules, a known roulette wheel or dice, a card game with a standard deck. The outcome is random but future returns will be a new sampling of the same statistical distribution as past returns. That really cannot be assumed with the stock market. It's more like playing roulette or dice with a wheel or dice whose design may have changed since the past but you can't see it yet, or a card game played with a constantly varying fractions of standard card decks you don't know.

As to 'becoming casino' the simplest explanation for higher realized volatility and VIX since March would seem to be higher uncertainty from an unprecedented event. Unless you have severe recency bias, you'd realize the US stock market just finished a several year period of unusually low volatility after the big run up from the 2009 low and early iterations of the Euro crisis. The VIX averaged ~20.5 from inception in 1991 to the end of 2012, but only 14.9 in 2013-2019. From when it broke above the latter avg (2/20/20) to now it's averaged 40, but it's not like you have to go looking for arcane explanations for that. :happy The main explanation seems pretty obvious.
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Re: Is Stock Market becoming Casino ?

Post by ruralavalon »

JonnyB wrote: Tue Jun 16, 2020 7:40 pm Forget that Efficient Market nonsense.

The DOW is just a graph of rich people feelings.
It is called the "Efficient Market Hypothesis" for a reason.
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Re: Is Stock Market becoming Casino ?

Post by phxjcc »

livesoft wrote: Tue Jun 16, 2020 11:20 am Stock market was always a casino. so no change there. If you are only noticing it just now, then you were probably not looking back in 2008 and many other times.
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Re: Is Stock Market becoming Casino ?

Post by sperry8 »

I'm not sure how this thread is actionable, so likely get closed soon.

Anyway, to those who think it's a casino, ponzi scheme, etc. then you must believe that it has been since inception. Because it has returned ~10%, on average, since then. Find me a casino that does that and I'll be first in line.

What many misunderstand is the stock market is not the economy. The stock market is a selection of publicly traded companies which may represent a portion of the economy, but it is surely not the economy. All those restaurants that are closed? Barber shops, nail salons, personal trainers, etc... not part of the stock market. Sure, the people who are unemployed are part of the economy and due to closures they may have reduced spending for some period of time. But with unemployment and stimulus checks, that issue is somewhat mitigated. Meanwhile, many publicly traded companies are doing better with covid-19... tech, groceries, work at home companies, etc.

The stock markets value represents not only future earnings, but future earnings taking into account inflation rates, interest rates, and any Fed stimulus. With no inflation, zero interest, and continued Fed stimulus (which has been in place for a generation), you can see why the stock market is valued where it is. Personally, I think it's undervalued in this environment, not overvalued.

Remember, the stock market is not the economy.
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Re: Is Stock Market becoming Casino ?

Post by MrDrinkingWater »

johnpau wrote: Tue Jun 16, 2020 10:40 am With past few months volatility and stock market seems detached with real economy wondering
if the Stock Market is becoming Casino ?
No, the stock market is an opportunity to invest in companies and build wealth.
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Re: Is Stock Market becoming Casino ?

Post by JonnyDVM »

The stock market has always been like a casino except the players have a long term positive expectation instead of a negative one. Short term the casino player can win but over long periods of time they will always end up losing. The stock market is the exact opposite. Short term can be crazy. Long term the odds say you will win.
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