Except for stocks, bonds, options, futures, and forex. Wall St is the only authorized online gambling establishment.
Even that is debatable. In just about every state, when they added a lottery "that funds eduction", they reduced the state contribution to the education budget by exactly the amount that was being added by the lottery. So while technically yes it goes to education, in reality it does not.
Lotteries are my prime example when I want to highlight that humans don't act rationally
What if $5 per week for the rest of their life doesn't impact an individual's standard of living, but $10 million would drastically improve it?
Does it then make (more) sense to participate?
But if you get some other value out of it you place at least $5/wk utility on, sure. Maybe you get more utility out if it than a movie a month, or whatever.
Already maxing my ROTH and 401K so I figure it's like $80 a year well spent to entertain the phantasy.
I don't think most people even consider the odds when playing the lottery.
OTOH, people pay for the dream of winning the lottery, which has some value, adicts withstanding.
Insurance on the face of it is irrational -- insurance companies make money, therefore buying insurance is paying a premium above what the expected reimbursement is over the lifetime of the insurance. It's a reverse lottery; the expected outlays exceed the expected returns.
What you pay the premium for in insurance is to reduce downside variance.
What you pay the premium for in a lottery is to increase the upside variance.
I think the correct contrast would be legalized state lotteries.
There is a sister post that in trying to argue against this only seems to support the point. "a house that always wins"; as has been echoed on HN ad infinitum, _don't stock pick_, (Edit; child is correct, this is more about day trading, but the broader advice probably still holds to some extent) because if you do, you're the dumb money handing it over to the HFT firms. So even if the intent is not for wallstreet to be a gambling house, if it looks like a duck and quacks like a duck and benefits from regulatory capture like a duck...
"Google announced that it was buying a private company called Nest, for instance, and the entirely unrelated stock of Nestor Inc. (ticker: NEST) was up 1,900 percent"
This explanation should be very familiar to those who have frequented groups like bogleheads that drink the indexing koolaid. (I admittedly do, as one could probably tell from the above)
I think you mean _don't day trade_. HFT is a tax on changing your bets. If you pick a stock and stick with it for years, it's negligible.
It still might be good advice not to stock pick, but I don't think HFT is the reason.
When I buy options contracts as a trader, I'm speculating the price will go up or down. I'm not adding anything productive to the economy. For me to win, another trader must lose.
But I'm still gambling on an outcome in a zero sum game. What is the purpose of anti-gambling laws? To protect the common man? But the state is okay with you losing everything on stocks? The point is its an unjust hypocrisy.
Gambling is a useful analogy but what is missing is that a person creating a business or buying a house, fixing it up, and flipping it are taking a risk on /profit/ but fully intend on creating real value whether they end up losing money or not.
That's quite a bit different than laying a bunch of money on red at a roulette table. The only value created -- the fun of the gamble itself -- is completely intangible and immediately destroyed.
Of course, there's a spectrum there, too. How much value is created by the efficient allocation of capital in our markets? Lots, it can be easily argued. Well, what about the marginal micro-transactional allocation in HFT? Well, maybe not so much.