Is stock trading a sin?

[Freestylers09]

You are wise and have a high degree of awareness. The cloak of money has shrouded the entire financial industry's shadowy workings. The root of the troubles of the world today lies in the design flaws of the monetary system. In the past when barter trading was the only way the economy worked, everything had an expiry date and no one could hoard anything. A chicken farmer produced just enough to feed the community and the community reciprocated by providing him other consumables or services in exchange. Today, the concept of money allows hoarding to take place and that has resulted in the great divide between the "rich" and the "poor". When the disparity grows too large, what generally follows is devastation and a collapse of civilisation. It has happened to many civilisations and it will happen to ours as well if there are no changes made to the foundations of our civilisation.

 

 

but to be frank,if without such changes,

 

are we in the stage as in what we are now? or will be better or worst?

 

just like how a revolution takes place..But i never see any differences leh,still unfair for those who not so lucky and privilegde ..make no sense to me at all

Edited January 30, 2010 by Freestylers09

[OmOm]

but to be frank,if without such changes,

 

are we in the stage as in what we are now? or will be better or worst?

 

just like how a revolution takes place..But i never see any differences leh,still unfair for those who not so lucky and privilegde ..make no sense to me at all

 

What are we all working towards?

 

Is it having the latest technology of i-pods and i-phones, being first in class and school, earning $200k a month?

 

Or is it finding a way out of the physical, mental, emotional and spiritual suffering that we experience on a daily basis?

 

What is true happiness? The leaders and people of the world today make us think that it is the achievement of material wealth and the endless pursuit of technological improvements. Do these necessarily lead to greater and true happiness?

 

When was the last time you were genuinely happy, not the kind which fade away in a day or two, but a deep-seated joy and happiness that comes from deep within you?

[Freestylers09]

if u seen my post b4..i confirm is not those u describing...

 

for me,simple and contented is always the greatest happiness

 

thats why i can always play ps3 without stress ma..u can ask my khakis in ps3 thread..haha

 

i just not sure when the last time i feel stress and i always sleep v well at nite,tats all nia..

[OmOm]

You are most right. One of the keys to happiness is in contentment.

 

安于状态， 知足常乐

 

I wish you well in having that contented heart always.

 

if u seen my post b4..i confirm is not those u describing...

 

for me,simple and contented is always the greatest happiness

 

thats why i can always play ps3 without stress ma..u can ask my khakis in ps3 thread..haha

 

i just not sure when the last time i feel stress and i always sleep v well at nite,tats all nia..

 

[Sosaria]

I think the best compromise is to assure your loved ones that you're not doing stock trading on credit, i.e. none of that contra thingy, and you always have enough cash to buy the stocks. Are you?

 

Stock trading is nothing bad if not done in excess. Those who get 'burned' are those who treat it like gambling and then get addicted to it like gambling...

 

Older generation are more conservative hence they'd rather stick to 'safe' ways of building their nest egg, using methods that are not far removed from stashing money under the mattress!

 

You need to convince them that nobody grows rich this way, and will be a 'job slave' the whole life, and what kind of life is that, even if they have enough to feed themselves?

 

Then again, i've seen uncle and ah-peks stock trading with their CPF windfall... these are the type that treat the stock exchange like IR, so need careful monitoring...

 

[1fast1]

Thanks for your sharing. Your post highlights one half of the equation, specifically the pre-event aspects - the cause. This covers the gamut of intention and motivation. However, it does not cover the post-event second half which is specifically the effect(s).

 

All actions, in spite of the underlying intentions and motivations, have effects. Like a stone that is cast into a lake, regardless of how much force you apply in casting the stone, there will be ripples that are formed when it breaks the surface of the lake. This is due to the physics of the system that we are in.

 

The definition of sin varies across cultures, religions and beliefs. However, for the sake of discussion, it will be necessary to put some form of meaning to it. Within the context of our discussion, I would propose defining sin as the connotations that one's thoughts and actions have with regards to general vices in humanity i.e. sloth, greed, gluttony, lust, envy, wrath and pride. Thus the degree of sinfulness is directly proportional to how much sloth, greed, etc is generated in oneself and in others through one's actions and thoughts. The more one's thoughts and actions results in himself or others tending towards the vices, the more sinful the actions and thoughts.

 

Stock trading is almost no different from selling someone a magic stone who then in turn sells it to someone else. At the end of the day, someone will end up with the stone and will have no way of unloading it onto another person. Like a game of musical chairs, that chap ends up bearing the major cost of the whole chain of trades.

 

Due to the advent of technology, it is possible to do stock trading on platforms that cross borders. One's stock trades immediately affect the lives of numerous individuals all over the world. When he earns from a trade, it means that someone (or a group of people) would have lost money (in either the past, present or future) that resulted in his gain. Thus one benefits from the trade gain through the loss of others.

 

The enormous network of connections between individuals created by electronic trading platforms translate into huge effects by one's simple action of clicking a buy or sell button on his screen. Coming back to the concept of sin, one would see that the gain or loss of money through a trade often results in a negative outcome. When one gains from a stock trade, he looks at it as easy money and would likely spend it more easily than money earned through blood and sweat. When one loses from a stock trade, the temptation to "recoup" his losses is very strong and he gets drawn even deeper into the whole trading process. Although not everyone is subject to these to a large extent, this is a common line across most people due to human nature.

 

The effects of a single seemingly innocuous trade thus are far-ranging and are heavily cast in vice due to the way the ripples form across human beings participating in the same trading realm.

 

What you say is true, to a certain extent. It is not entirely true insofar as there can exist circumstances whereby a stock (or more realistically, an index linked fund with a beta close to one) can continue to move up in the long term. In this case, if the stock keeps changing hands, everyone benefits down the line, albeit a little less each time. I suppose you could argue that the counter should "eventually" fall, which is true, and the "last" person is left holding the bag, which is equally true, but no-one has really intended this to happen.

 

In defining a crime and weighing its gravity -and I suppose the same would hold for a "sin"- the guilty intent or mens rea is important. It is possible for a person to sell a stock for an non-market related reason, e.g. to increase liquidity to make a big purchase - in which case he does not necessarily "intend" for someone to take possession of an asset he considers not worth holding onto - he just wants cash, and fast. However, most stock sales don't involve this sort of circumstances - which means the seller is relying upon someone else to value an asset more greatly than he himself does. In other words, there is a sort of intent to make someone else a greater fool.

 

What makes this whole thing more or less ethically acceptable is that there is no definite way to predict future stock movements, and therefore, no unequivocal way to value an asset. If your guess is as good as mine, then there's no evil intent. Strict moralists (like you, perhaps) might, nevertheless, balk at the intent of the sellers. I'm not so sure. But one case is clear-cut - those who are trading on information asymmetry ("insider trading") are, of course, clearly wrong - ethically, morally and legally.

 

I've not even addressed derivatives trading, which is a whole different can of worms - the "sinful" aspect of that is, if anything, even more clear-cut than stock trading.

Edited January 30, 2010 by Turboflat4

[Metblue]

Bro, I used to do stock trading before and I made money from it. Today, I no longer trade stocks other than buying IPOs and earning the dividends from these counters. I have also donated away the money that I have made from the stock trading to certain charities. The reason for this is the understanding that I have gained over the last few years about the practice of stock trading.

 

Your mom is right in a way. Unlike other forms of trading businesses which involves end-products which serve a purpose to the final purchaser (e.g. rice, meat, eggs), there is no value creation in stock trading. The value creation comes at the beginning of the trading chain, not at the end (unlike other trading businesses). The value creation at the start of the chain is only during the IPO process where the owners of a company sell their shares on the open market in a bid to raise funds for company expansion. The moment such funds are raised and the equivalent shares floated on the trading platforms, there is no further value creation.

 

Basically any money that you make through stock trading comes from another person's loss. This loss can be from someone's purchase (and subsequent sale to you) in the past or it can be from someone's purchase (and subsequent sale to another party) in the future. Someone has to pay for your gain and unlike other trading businesses which involve physical products, the last person holding the stock is the one who bears the brunt of the damage. This usually happens when the stock goes to zero for many different reasons such as the company going bankrupt, nationalisation, etc.

 

This understanding is not something that you will hear from many people. The reason for this is because the world today has painted stock trading as a legitimate form of investment. The man-in-the-street additionally will not spend time thinking about the chain of events and actions which take place for stock trading, and therefore will not and (even choose not to, for those with greater awareness) understand the implications of stock trading.

I fully understand and appreciate your insight in stock trading. But I would just like to point out that in every business or job that you do, there are bound to have negative effects although it's not a "zero sum game" like stock trading. For example, the fact that I help to clinch a major business for the company I'm with caused one of my competitors to lose its market share and this lead to the down sizing and retrenchments in the competitor's company, leading to many people losing their jobs. So should I feel sinful that because I indirectly cause people to lose their jobs and I should donate my commission to charity? I do not mean to mock you, but I would just want to explain that in almost every business you do, whatever you gained will be some other people's lost.

[Sabretan]

stock trading is like another form of career.

 

In stock trading or in any form of trading activities, be it in financial instruments or actual physical products or services, some will win, some will lose. This is the TRUTH....for every success story behind a brand, hundreds or even thousands could have fallen.

 

Stock trading is not a sin as long as you do it right and not through insider trading or stock manipulation...as long as you earn your money through good strategy, good money management, good discipline, you are no different from businessmen who are successful.

 

 

cheers,

[Throttle2]

Bro, I used to do stock trading before and I made money from it. Today, I no longer trade stocks other than buying IPOs and earning the dividends from these counters. I have also donated away the money that I have made from the stock trading to certain charities. The reason for this is the understanding that I have gained over the last few years about the practice of stock trading.

 

Your mom is right in a way. Unlike other forms of trading businesses which involves end-products which serve a purpose to the final purchaser (e.g. rice, meat, eggs), there is no value creation in stock trading. The value creation comes at the beginning of the trading chain, not at the end (unlike other trading businesses). The value creation at the start of the chain is only during the IPO process where the owners of a company sell their shares on the open market in a bid to raise funds for company expansion. The moment such funds are raised and the equivalent shares floated on the trading platforms, there is no further value creation.

 

Basically any money that you make through stock trading comes from another person's loss. This loss can be from someone's purchase (and subsequent sale to you) in the past or it can be from someone's purchase (and subsequent sale to another party) in the future. Someone has to pay for your gain and unlike other trading businesses which involve physical products, the last person holding the stock is the one who bears the brunt of the damage. This usually happens when the stock goes to zero for many different reasons such as the company going bankrupt, nationalisation, etc.

 

This understanding is not something that you will hear from many people. The reason for this is because the world today has painted stock trading as a legitimate form of investment. The man-in-the-street additionally will not spend time thinking about the chain of events and actions which take place for stock trading, and therefore will not and (even choose not to, for those with greater awareness) understand the implications of stock trading.

 

erm, that (in bold) is incorrect.

it's about valuations, if valuation keeps going up, everyone makes.

if valuations continue to fall all loses

 

It is not a zero sum game like Forex Trading.

 

anyway, i'm not bothered to go into the mathematical details or technical explanation so go think about it a little and you will understand.

 

but in case you cant figure this out, imagine this very simple (but realistic, mathmatically proven) example

 

There are 5 people in this whole world and they all trade this one stock which is IPOed at $1

If everyone is optimistic and value the stock at $5, they will buy and sell changing hands until it hits $5.

Between $1 to $5, no one will lose any money, be it paper or realised. Some will make more than others though.

 

So when does the loss happen? you may ask.

the loss comes only to the last one standing who catches the stock at the high and it turns around.

 

Similarly, all will lose if the price starting from $5 starts going back down to $1.

It's all about valuation.

 

Hope this clarifies.

 

 

You're welcome.

Edited January 30, 2010 by Throttle2

[Throttle2]

I fully understand and appreciate your insight in stock trading. But I would just like to point out that in every business or job that you do, there are bound to have negative effects although it's not a "zero sum game" like stock trading. For example, the fact that I help to clinch a major business for the company I'm with caused one of my competitors to lose its market share and this lead to the down sizing and retrenchments in the competitor's company, leading to many people losing their jobs. So should I feel sinful that because I indirectly cause people to lose their jobs and I should donate my commission to charity? I do not mean to mock you, but I would just want to explain that in almost every business you do, whatever you gained will be some other people's lost.

 

Here, I repeat, stock traing is not zero sum game like you said.

 

Your example of real business is good but should not be used as a one to one analogy with stock trading.

Your example of real business is talking about opportunity costs and it works that way becos in real business, there are many many many many more factors in play, and the market is inefficient and there is limited business (in stock trading, financial mathematics terms, it is effectively illiquid and may not be replaceable)

 

ooops, i shall stop getting too technical or i can go on and on.

 

anyway good luck to the bros here who dabble in the stock market.

Over and out.

[Smhomie]

I fully understand and appreciate your insight in stock trading. But I would just like to point out that in every business or job that you do, there are bound to have negative effects although it's not a "zero sum game" like stock trading. For example, the fact that I help to clinch a major business for the company I'm with caused one of my competitors to lose its market share and this lead to the down sizing and retrenchments in the competitor's company, leading to many people losing their jobs. So should I feel sinful that because I indirectly cause people to lose their jobs and I should donate my commission to charity? I do not mean to mock you, but I would just want to explain that in almost every business you do, whatever you gained will be some other people's lost.

 

I think omom points towards a morality issue in which you do have a choice to exercise.

 

Watch Wall Street and how Charlie Sheen in the end did not help pull the plug on the airline company even though he was within Gordon Gecko's trust camp and everything was just 'business'. If you don't do it, someone else would, they like to say...

 

If alot of folks needed drugs and you sold them cheaply, does it mean you are a social hero and this qualifies you absolution since you have kept them off the street thereby preventing robbery, theft and rape from happening to the general society? Same for counterfeiting, if you print money and gave it cheaply this stops people from stabbing one another. Fatality associated with print money would be non-existent.

 

Besides, if your example of the company closing down due to your devastating blow of one major contract is true, I would consider it 'market efficiency' as weaker parties are eliminated. Besides, the company would have multiple 'smaller' contracts, not overly reliant on one 'major' contract to sustain itself.

 

Even if true, displaced workers are able to be redeployed in other sectors of commerce. There is no economic loss.

 

It not what you gained or lost, its how you gained or lost that matters to omom

[Carndablues]

Basically any money that you make through stock trading comes from another person's loss. This loss can be from someone's purchase (and subsequent sale to you) in the past or it can be from someone's purchase (and subsequent sale to another party) in the future. Someone has to pay for your gain and unlike other trading businesses which involve physical products, the last person holding the stock is the one who bears the brunt of the damage. This usually happens when the stock goes to zero for many different reasons such as the company going bankrupt, nationalisation, etc.

 

This understanding is not something that you will hear from many people. The reason for this is because the world today has painted stock trading as a legitimate form of investment. The man-in-the-street additionally will not spend time thinking about the chain of events and actions which take place for stock trading, and therefore will not and (even choose not to, for those with greater awareness) understand the implications of stock trading.

 

You're right in that stock trading creates no true value, it is simply an instrument for one man to gain and another to lose, but it serves a higher purpose, it's a diversion.

 

Divert from what? From excessive trading in the futures market, a market which has been around for a much longer period of time, farmers and merchants were trading in BC times.

 

Why is futures trading bad? Because they deal in real commodities, which directly effect the common man on the street, such as in 2007, when speculators, essentially futures traders drove up the price of oil, rice, sugar, palm oil resulting in a massive hits to our wallets each time we went into NTUC or Shell etc.

 

I trade in all markets, equities, currencies and commodities, and nothing makes me feel worse making money going long on any of the commodities, I don't know whether it's a moral choice I make subconsciously, but I realise my trading pattern is such that my short positions on commodities are, on average, twice as large as my long positions!

 

So please, tell your mum, TS, stock trading is good, because you're not affecting the place where everyone trades, the supermarket!

[OmOm]

Thanks for your sharing once again.

 

What you say is true, to a certain extent. It is not entirely true insofar as there can exist circumstances whereby a stock (or more realistically, an index linked fund with a beta close to one) can continue to move up in the long term. In this case, if the stock keeps changing hands, everyone benefits down the line, albeit a little less each time. I suppose you could argue that the counter should "eventually" fall, which is true, and the "last" person is left holding the bag, which is equally true, but no-one has really intended this to happen.

 

Yes, the last person standing when the music stops ends up holding the baby. This is also the reason why pyramid selling is fundamentally unsound. It appears highly profitable for all participants. However, that promise for "all" participants holds true if and only if the scheme continues to roll forward. Eventually, due to certain structural and/or environmental limitations e.g. the scheme running out of new participants, the scheme folds and the music stops.

 

In defining a crime and weighing its gravity -and I suppose the same would hold for a "sin"- the guilty intent or mens rea is important. It is possible for a person to sell a stock for an non-market related reason, e.g. to increase liquidity to make a big purchase - in which case he does not necessarily "intend" for someone to take possession of an asset he considers not worth holding onto - he just wants cash, and fast. However, most stock sales don't involve this sort of circumstances - which means the seller is relying upon someone else to value an asset more greatly than he himself does. In other words, there is a sort of intent to make someone else a greater fool.

 

Yes, the mens rea is important but it is not the keystone of sin. The effects of one's thoughts and actions are also important. If I accidentally knock down a cat while driving, there will be repercussions regardless of the fact that I did not mean to kill the cat. The effects upon oneself and others create the ever-expanding chain of cause and effect. The stock trader who is unaware of the negative ripples nonetheless still creates these ripples through his activities that influence countless numbers around the world.

 

What makes this whole thing more or less ethically acceptable is that there is no definite way to predict future stock movements, and therefore, no unequivocal way to value an asset. If your guess is as good as mine, then there's no evil intent. Strict moralists (like you, perhaps) might, nevertheless, balk at the intent of the sellers. I'm not so sure. But one case is clear-cut - those who are trading on information asymmetry ("insider trading") are, of course, clearly wrong - ethically, morally and legally.

 

I would assume that traders can be partitioned into two groups. Those who trade based on information asymmetry and those who don't. For the former, they are capitalising on the knowledge gap to create an advantage for themselves. Therefore, according to your stated viewpoint, they are wrong ethically, morally and legally. How about those in the second group? If they are trading simply based on their gut feel and luck, are they not simply just gambling and speculating? Based on your understanding, what usually happens to people who are heavily involved in gambling?

 

I've not even addressed derivatives trading, which is a whole different can of worms - the "sinful" aspect of that is, if anything, even more clear-cut than stock trading.

 

I hope we can come to that subsequently as it would be very good to dissect that for all to see. :)

[OmOm]

Bro, thanks for your sharing and viewpoints.

 

Your example on business competition is valid for certain cases. We however need to look at the end-product which is being sold by the company. Is there value creation by the company? What product and service does it sell? Do the products and services meet certain basic survival needs of the community or do are they there simply to cater to and thrive on the vices of human beings?

 

To put things into perspective, let's move down the process chain of rice production. The bottom of the production chain is the farmer. He puts in time and effort to sow the seeds, grow the rice plants and eventually harvest the rice which is sold to the agent. We can see the value creation in this. The agents along the line then create channels and harness vehicles through which the rice is distributed commercially throughout the world. The value creation is also apparent here. At the top of the process chain, the consumer benefits through his purchase of the rice because he derives sustenance and nutrition from the end-product.

 

The value creation flows from bottom to top. Everyone benefits and there is no one who does not benefit at the end of the chain. Unlike stock trading, once the chain stops (which it must eventually), the last one loses what he has put into the system.

 

When one works in a rice distribution company, one helps his company compete against similar agents and through such competition create even better value for the consumer. Costs of distribution can then drop due to improvements in technology used for distribution and perhaps result in savings for the consumer. Compare this to one working in a company that specialises in formulating financial derivatives or other instruments of financial wizardry. The nature of the company determines the effects of one's work.

 

I hope for your understanding that I am not trying to show a "holier-than-thou" attitude. In fact, to me the concept of right and wrong is just a matter of perspective. Right and wrong are dependent on the context and frame of reference. The discussion is simply to help highlight the cause and effect of everything that we do, including but not limited to stock trading, and how the simplest of our actions and even thoughts can affect everyone else in one way or another. Only through information and sharing can we be given a choice of actions and thoughts.

 

I fully understand and appreciate your insight in stock trading. But I would just like to point out that in every business or job that you do, there are bound to have negative effects although it's not a "zero sum game" like stock trading. For example, the fact that I help to clinch a major business for the company I'm with caused one of my competitors to lose its market share and this lead to the down sizing and retrenchments in the competitor's company, leading to many people losing their jobs. So should I feel sinful that because I indirectly cause people to lose their jobs and I should donate my commission to charity? I do not mean to mock you, but I would just want to explain that in almost every business you do, whatever you gained will be some other people's lost.

 

[OmOm]

Thanks for sharing.

 

erm, that (in bold) is incorrect.

it's about valuations, if valuation keeps going up, everyone makes.

if valuations continue to fall all loses

 

Through mechanisms such as short-selling, not everyone loses when valuations fall. Short-sellers make a windfall when the counters that they are shorting fall to zero.

 

It is not a zero sum game like Forex Trading.

 

anyway, i'm not bothered to go into the mathematical details or technical explanation so go think about it a little and you will understand.

 

but in case you cant figure this out, imagine this very simple (but realistic, mathmatically proven) example

 

There are 5 people in this whole world and they all trade this one stock which is IPOed at $1

If everyone is optimistic and value the stock at $5, they will buy and sell changing hands until it hits $5.

Between $1 to $5, no one will lose any money, be it paper or realised. Some will make more than others though.

 

So when does the loss happen? you may ask.

the loss comes only to the last one standing who catches the stock at the high and it turns around.

 

Similarly, all will lose if the price starting from $5 starts going back down to $1.

It's all about valuation.

 

Hope this clarifies.

 

Thanks for the clarification and also pointing out the fact that the last one who holds the stock when the market turns around is the one who loses. This is the point that I would like to emphasise. Is this any different from someone selling a product that has no utility value i.e. it ends up not having any real-world use? If I invent a magic stone (http://www.encyclopedia.com/doc/1P2-17792822.html) and then start selling it to people claiming that its value will increase over time, and there are people who subscribe to this belief, does it mean that buying and selling the magic stone is a legitimate investment? There will come a point when the market realises the magic stone is nothing more than just a con-job. The last one holding the magic stone pays for all the gains of the ones before.

 

You're welcome.

 

Thank you!

[OmOm]

Thanks bro for your sharing.

 

It not what you gained or lost, its how you gained or lost that matters to omom

 

Both do matter. The "how" and the "what". In fact, the "why" also matters as well. They are all parts of the equation. :)

 

[Scoots]

As above, my mom seems very negative abt me trading stock lately, i been trading for over a yr and nv ill treat her and i give her 2 k +/- per mth consistently from my trading but she keep nagging and say its like gambling etc, such money earn already not gd, such money take already muz return back in other ways etc many funny reasons. Ask me to stop.... But to me its like buying low selling high kind of biz, juz like what every legal biz man is doing, buy an item at low price and sell to a willing party at higher price legally. I dunno whats wrong with that.... I am someone easily affected by words esp from my parent, now her words make me very low morale and lose all my confidence and drive to trade again. 1 hr plus later trading start, i feel very down now to trade, all mood is gone.

 

 

You didn't steal

You didn't kill

You didn't force anyone to enter into a trade with you

You didn't do anything illegal

 

So how is that a sin?...

 

Her issue is that she belongs to the "poor dad' mentality of study-hard-get-good-degree-and-go-into-good-company-to-slog-and-the-company-will-take-care-of-you... which is becoming less and less true each day

[Freestylers09]

ah...this is what i i trying to say but do not know how to put it in words nicely, but i sure u will come in and advise

 

u Super wiper indeed words are different

 

CAVEAT EMPTOR