It's just remarkable.Originally Posted by BoSox
How about some assembly line information for Henry Ford? Or maybe search algorithm design for Larry Page?
Yeah, I thought about it. If the BJA group can charge $3k a head for learning something as simple as Hilo, then just think what I could charge teaching something much more complicated and more interesting. Lol.
The reason I put this out there is to see if my logic is incorrect. Since most people just attack me and not my ideas, I’m pretty confident what I’m saying is correct. I got Warren Buffet on my side too and that usually that isn’t a bad thing. He knows quite a bit about investing and the stock market. He was the person who helped me better understand casinos and how they are a zero sum proposition.
Btw, I would like to take Ed Thorp out to lunch sometime and explain to him why his parellels between bj and the stock market don’t make sense. One is math, the other one involves concept outside of math. You don’t need to be a math wizard to be smart enough to invest in Google or Amazon 10 years ago. You just needed to see a market need and two good companies that were able to meet that market need.
There is a lot more to investing than math. I actually bought quite a few call options on Google when it first went public. I know some would call this speculation. I was pretty confident Google was the real deal so I didn’t see this as speculation. I saw it as a great investment. And I didn’t use any math when I bought these options and they multipled several times. Maybe I should start my own hedge fund. Lol
I don't think it's stupid to compare the stock exchange with a casino; many people have made money in stocks using this approach. An example is to be found in the book "Wall Street:The Other Las Vegas" by Nicholas Darvas, a sequel to "How I made Two Million Dollars in the Stock Market." While most publicly owned companies grow and add value to the economy, many fail due to poor management, loss of market, or accounting fraud. My favorite example of this is recited in the book "A Mathematician Plays The Stock Market", by John Allen Paulos, Ph. D. There he describes his strategy of buying shares of Worldcomm as they were declining and losing everything when the company went bankrupt. He could have made a fortune in the stock but he used the wrong strategy.
I know of two strategies that can make money in the stock market. One is a "quant" strategy. The first quant fund manager was Edward O. Thorp, yes the same one who discovered AP in blackjack. He claims to have had a 20% return in all kinds of markets. His results are described in his recent book "A Man For All Markets." I don't know the mathematical details for this kind of strategy so I use a trend following strategy, which works only some of the time. It worked well up until October 2018 but is not working well just now. A short introduction to this strategy can be found in "How To Trade In Stocks" by Jesse Livermore, available online. Livermore made millions both by buying stocks and selling them short in bear markets.
Some posters have mentioned "zero sum game." I agree that futures are a zero sum game because one never holds a futures contract up until the delivery date, except by accident, and what the longs gain the shorts lose, or vice versa. I have read the arguments that trading stocks and options is not a zero sum game but I don't think that whether or not this is true affects the proper strategy. There is an important difference between stocks and futures and options: futures and options expire whereas stocks do not unless the company goes out of business. Thus, one cannot realize long term gains in futures or options unless one exercises a call option.
I'm glad that this thread has become worthwhile. I was worried at first!
There was nothing stupid about my post. You made the claim that when you win at the casino the casino will have less profits and thus it will pay less to the government in taxes. This is true. However, you left out the part that casino patrons also pay taxes on winnings or at least are suppose to so the government gets its share no matter who wins.
You said:
"In fact, I’m probably extracting value from society when I take money from a casino since this means the casino will pay less profit on their taxes...and at the basics of why casinos are legal is to raise revenue for our government, local, state and federal."
"pay less profit on their taxes."
s/b pay less taxes on their profits.
Email: [email protected]
"Yeah, I thought about it. If the BJA group can charge $3k a head for learning something as simple as Hilo, then just think what I could charge teaching something much more complicated and more interesting. Lol."
"Btw, I would like to take Ed Thorp out to lunch sometime and explain to him why his parellels between bj and the stock market don’t make sense. One is math, the other one involves concept outside of math."
"So next time you hear somebody say something like “the stock market is the worlds biggest casino”, you can tell that person how stupid he is."
Luckily for Don S, he did not take that approach. Have you ever read the Epilogue "3rd paragraph" in Don's book? I will quote it for you:
"Indeed, when I was first approached by the individual who, ultimately, was successful in luring me away from teaching and onto Wall Street, his sales pitch went something like this: "Don, it's the biggest casino in the world, and ... they can't throw you out!" "
Maybe you did read it and just thought Don made the wrong career change.
Last edited by BoSox; 01-14-2019 at 05:37 AM.
Midwest Player, please reread my whole post. Bottom line is our government will make more money if everybody is a loser in a casino. If what you say is correct then why doesn’t the government make everybody a winner in the lottery rather than one person (or two or three if they hit the lucky number). People who hit the lottery pay a huge tax bill, sometimes in the millions if the lottery is big enough. But the govenrment would still make more money if everybody was a loser. 100% of something is better than 30 or 40% of something. But we know the government has to pay someone a big jackpot so people play. Yes, that person has to pay taxes on their win, but the government is still making less than if they could keep the jackpot money, and not pay it out.
Here’s what your missing in your logic. Casinos are a zero sum game. No one is debating that, or at least no one should be debating that. The more profit a casino makes, the more tax they have to pay on it. If everybody is a loser (which is the objective of a casino), then the casinos will pay more tax. When a gambler or AP wins and pays taxes on their wins this is less than the government would have collected if there were no winners.
I know some will say, but the casino also keeps some of the money (the government doesn’t keep all of it), and that’s true. The casinos are a private industry used by our government to collect voluntary taxes. The shareholders and people working in the casino industry will therefore also make more money if everybody is a loser and there are no APs. Guess what? Employees of a casino and shareholders pay taxes too. The more they make, the more taxes they pay.
What I’m trying to explain to you is the government will collect MORE taxes, not less taxes, from casinos if everybody is a loser, the same way our government will make more money from lotteries if everybody was a loser and there were no winners. And this has nothing to do with APs not paying their taxes on their winnings. You need to think about this for a while for it to sink in.
This does not mean an AP is doing anything wrong by extracting money from a casino. Card counting and using your brain in a casino is legal. But what an AP is basically doing is undermining the government’s voluntary tax program (casinos). We’re kind of like on welfare, but we go to the casino to pick up our welfare check, rather than a state welfare office. Lol.
krarchik, I’m glad you enjoy this thread and good to see you contributing. I do think it’s stupid to compare the stock exchange with a casino. With this said, I know this is a popular take on our economy. The phase “the stock market is the worlds largest casino” has been popularized by the left. I don’t want to get into why, but it’s basically to scare the public into allowing the govenrment to have more control over our economy. The left believes this will bring more stability to the markets. I have not read the book you’re referring to but I’ve read several with this slant and none of them made much sense (as I said, this is a popular view among intellectuals).
As far as Ed Thorp’s book, I’ve seen it advertised and read reviews on it, but I have not read it. I’ve also read several articles on how Ed Thorp thinks the math behind bj helped him with the stock market. There are many reasons I disagree with this premise. I have already discussed some in a previous thread so I won’t go over them again here in detail.
Basically, I think it’s ridiculous to think some game of probabiiity (bj) has any relationship to something as complicated as our markets. I know people have been trying to come up with mathematical models to predict the market forever so Thorp trying to do this is nothing new. All these models work when the market is stable. When there is some unforeseen event, they all break down.
Whenever a hedge fund beats the market, what they’re doing is using leveraged vehicles. This works and gives good returns when the market is stable. I encourage you to do some research on Lehman Brothers to see what happens when unforeseen events occur. As far as WorldCom and Enron, this was corruption. Yes, there will alway be some corrupt companies in the world so this is nothing new. Lehman Brothers downfall was not due to corruption. It was due to very smart people who thought they could use math to give them outized returns, which basically meant they were too over leveraged in securities (mortgages) that people though would never fail at the rate they did. Bottom line is most companies are not corrupt. Corruption is not what makes markets fall or rise. It’s much more complicated than that.
Markets are far too unpredictable and there are too many variables to ever be able to use a math model to predict
their performance. I used to live on the east coast and I had friends on Wall Street, some who made some serious money. I’d have good discussions with them on this topic, but they never quite understood it. They were young and had seen some very good years doing their leveraged trading, so they thought they had figured it out.
An an interesting side note to illustrate my point, the reason Bennie Madoff was caught was because someone noticed how constinent his hedge fund returns were. This was a major tip off something wasn’t right with his fund.
As far as Ed Thorp, did you know his first hedge fund (Princeton/Newport Partners) was shut down after becoming embroiled in the junk bond schemes of Micheal Milken? His hedge fund was cleared of any wrong doing, but this could be a legal way of saying they didn’t have enough evidence on his fund to press charges. This fund only returned 15%. I know some people have quoted 20% returns for his funds, but I don’t know where they get these numbers.
I have ordered Thorp’s book “A man for all markets” and will read it when it comes in. I’ll report back after I’ve read it. It should be interesting.
"I’ve also read several articles on how Ed Thorp thinks the math behind bj helped him with the stock market. There are many reasons I disagree with this premise."
I tried to take some of your comments seriously, but now you've shown that you're just a consummate asshole.
Have you any idea what you're saying? Why isn't it possible, when people don't know their ass from their elbow, to just shut the fuck up, instead of opening their mouths and removing all doubt as to what imbeciles they are?
Are you aware that Ed Thorp is worth $800 million conservatively? Are you aware that he made it running one of the most successful statistical arbitrage operations in the history of Wall Street? Are you aware that what he did was 100% PURE mathematics and that, among many other things, he discovered a form of the Black-Scholes model before Black and Scholes did?
Can you please do us a big favor: If you have no idea what the fuck you're talking about, could you consider just being quiet on a subject on which you are profoundly ignorant?
Don
Email: [email protected]
Don, yes I am aware of this. I am very aware that Ed Thorp is worth a lot, and he made most his money running hedge funds on Wall Street. And yes, I understanding leveraged trading contributed to Thorp’s success. What I’m calling into question is a different point. Did all this have anything to do with bj or his experience in casinos? Many people made/make this type of money on Wall Street and they didn’t play bj or know the math behind bj. I think it’s kind of silly to attribute Thorp’s success on Wall Street to bj.
All math in the stock market is based on using the past to predict the future. Most of the time this works since our markets are some of the most stable in the world. But when an unforeseen even happens, this math breaks down. Are you aware of what happened at Lehman Brothers? Their complicated math models broke down due to an unpredictable event, the housing bubble and crash.
Since what Ed Thorp did occurred over the short run, he succeeded. This happens with gamblers too. We don’t know what would have happened with Throp’s strategy in the long run. I expect the same thing that happened to Lehman’s Brothers, since no one can predict the future no matter how good their math is. What we’re in essence talking about is using math to predict the future in stocks, since the data that will be used is alway from the past. One of the first things most investors learn is that “the past does not predict the future”.
I just found a quote from Ed Thorp on what happened to him in 2008. He said: “At 2008, I didn’t have any place to hide”. He lost a significant amount during this time and he said he still hasn’t fully recovered from that. It appears his great math model failed him during this time.
Don't worry Don, many of my big time Wall Street friend don’t understand this either. They also disagreed with me, but they were more polite in their disagreement. When someone has had success doing something in the short run, they start thinking the’ve figured it out. The good news for our Wall Street buddies is when they mess up (which inevitably happens) we know our government will bail them out. That’s what happened during that last financial crises 10 years ago. If it wasn’t for our government bailing them out, many big banks and financial institutions would have gone under, doing pretty much what Ed Thorp was doing. So the big guys win, and us little tax payers lose, even when the big guys are wrong. I don’t agree with that, but that’s part of our system.
Btw, did you know one of Ed Thorp’s hedge funds was shut down due to being embroiled in the junk bond schemes from Michael Milken? Just because someone made a lot of money doesn’t mean they made it an ethical way. A person’s net worth does not indicate his intelligence. Think about that for a while.
One last comment. Did you know Ed Thorp has paid to have his body cryogenic frozen when he dies so he can be brought back to life in the future when our technology is further ahead. I’m not making this up. Look it up. Ed Thorp has actually given the odds that he will be brought back to life at 2%. Do you think this is smart too? You may since Ed Thorp is worth $800 million. That appears to be your measuring stick for how you determine if someone is smart. If they are wealthy, then you believe they must be smart. Btw, I give the odds of Ed Thorp being brought back to life at 0%.
Don: I'm so glad someone finally came along and told you how it is! You should celebrate by calling Ed and having a good laugh with him.
Dbs: You're so ignorant on these matters I can only conclude you're a troll, and one with too much time on their hands. I guess you only know of Don from his contributions to blackjack. Why you think you can educate him on trading is mind blowing.
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