Financial Trading - can it be spiritually fulfilling?

[coma]

Hi Guys,

Just thought I'd put this question out there, since I've been grappling with this issue myself since I am thinking about starting a career in trading:

In the practical / real world context - financial trading is zero-sum, ie. if you make money on a trade, someone out there is losing money. It's a giant game of poker. With this in mind, how can this be a spiritual fulfilling / sustainable career? It's not really in-line with a world view of win/win, which is what I personally believe in, and I think many of us on this forum believe as well?

Another way of looking at it is just a means of the Universe transferring large amount of money to you (assuming you are a successful trader), and perhaps with the money earned, one can do positive things with it -- help out with the problems of the world, create other opportunities, but it all seems like a rather indirect way to reach the end goal!

What are your thoughts?
Coma

[Dave Kaminski]

Technically speaking, you're supporting the economy by being part of the market as well as supporting the companies you're investing in. "Don't use saving the world as an excuse to forget about your family"

[coma]

Not really. If you're talking about long term investing in a company then yes, that's economic support, but traders are only looking to extract profit by buying and selling. And short-selling a stock is definitely not supporting the company in question!

The only real contribution I can think of is probably 1. comissions paid to the brokers, and 2. making the markets more liquid.

Otherwise, I think trading is a pretty self-centered activity..

[Dave Kaminski]

Originally Posted by coma

Otherwise, I think trading is a pretty self-centered activity..

All action is essentially self-centered. Although you might be helping someone else, it still gives you joy to do so, and therefore your motives are partially internal. The only example I can think of that's not is Santa Claus or the Easter Bunny, and they're both one of a kind. (Don't even try to tell me they're fake.)

You could even make a case against Santa, because he's Jolly Old Saint Nick. Stop being so greedy and giving everything away you big red hedonist!

:-P

If you're tithing and supporting yourself and your family without being outside of trading, I wouldn't worry about it. Seizing opportunity I guess

[Richard_Todd]

Originally Posted by coma

In the practical / real world context - financial trading is zero-sum, ie. if you make money on a trade, someone out there is losing money.

Hi, great to see you are considering trading. I think it's a wonderful profession to try, for anyone even remotely interested. My thoughts:

I don't view trading as a zero-sum game, actually. I see people say this a lot, but I still don't get it (and I'm a professional trader!). I guess all interactions between two traders is zero-sum, but the market is much bigger than 2 people, and not everyone buys so they can sell.

As far as spiritually fulfillment, I suppose it depends on what you are after. I can say without hesitation that I have become a much more conscious person in the year or so that I've been trading. To be successful as a trader, you really have to conquer your personal demons. That, and the freedom that trading gives me has enabled me to help others much more than when I used to have a day job. There's more time and energy for philanthropy when you aren't working 80hrs a week on software projects. :-)

Is that more fulfilling than having a day job that's in-line with what you consider to be your purpose (assuming you don't consider it your purpose to be a trader)? I don't know. I guess you have to ask yourself whether the way you support yourself needs to be the way you live your life's purpose. Maybe in 10 years I will see trading as a necessary stepping stone to my ultimate vocation. But, it's also rather fun, so I could see myself trading indefinitely.

[Richard_Todd]

Originally Posted by coma

Otherwise, I think trading is a pretty self-centered activity..

I'm sure there's plenty more conversation we could have on whether there's value added to the universe by keeping financial markets liquid, and on the positive aspects of short selling, etc.

But, you seem like you had pretty much made up your mind before even asking the question, so I won't try to sway you. I'll only say that, as long as you have this negative opinion of the spiritual value of trading, I don't see how it could possibly be "right" for you. If you feel this way, I wonder why you are considering it as a career?

[Vanessa]

I agree with Richard, as a trader I don't view trading as a zero-sum game. I also don't see trading in the same way as gambling. I've been trading for a a little over a year now and see it as one of the surest ways for me to grow spiritually, I face every personal issue I have by trading. If I don't grow beyond my issues, my trading success plateaus or drops.

The markets don't care wheter I make money logicially or lose everything I own emotionally. I find true fulfillment in trading because I love seizing moves before they happen. I find success in numbers. I reach goals, have structure, consistency and rules that I am responsible for. Trading the markets is a medium, a means to a greater end for me.

I'm sure portfolio managers or traders at investment banks --where there are career opportunities, would have a completely different perspective on trading. I know that I would not be as fulfilled by trading if it was removed from my personal meaning.

You've got negative association with what it would mean to be a successful trader or accumulating money. Would you feel bad about having the market's money from your succesful trades? The markets have no emotions or associations about who gets its money. Only people put that meaning to money.

Trading can be a good way to realize your vision if it lines up with your strengths and passions. But you have to define what that vision is and how you want to get there.

[Eggzachery]

Alright. I'm not exactly sure where this "zero sum" business originated where the economy is concerned. That sentiment is based in ignorance and misinformation.

I am not here to be anyone's economics professor, but it is all pretty much summed up in "a rising tide lifts all boats." I am also not, nor will ever be a trader. Most of the people I know that put themselves out as (day) traders are about five minutes from broke.

There is no reason any financial transaction can't be mutually beneficial. Unless, that is, you're trying to f**k the other party over.

[FXTraderWill]

Originally Posted by Eggzachery

Alright. I'm not exactly sure where this "zero sum" business originated where the economy is concerned. That sentiment is based in ignorance and misinformation.

I am not here to be anyone's economics professor, but it is all pretty much summed up in "a rising tide lifts all boats." I am also not, nor will ever be a trader. Most of the people I know that put themselves out as (day) traders are about five minutes from broke.

There is no reason any financial transaction can't be mutually beneficial. Unless, that is, you're trying to f**k the other party over.

Trading futures and option markets are zero-sum games, actually negative when you consider commissions (though someone is earning the commissions and someone else paying, so you can consider it zero-sum if you'd like). If you trade options or futures, and make money, that money is money that someone else lost.

Stocks don't work that way, everyone can make money in stocks as new money can flow into stocks from A) economic growth and B) other markets.

If you trade futures and options, your money comes from someone else because the contracts are designed such that someone is on the other side of every trade you make.

As far as trading being spiritually fulfilling, most traders I know who are also good people love what they do and love their lives and seem very spiritually fulfilled. There are also traders who trade for the ego and will never be happy. Trading is spiritually fulfilling if you want to do it and do it for the right reasons.

[coma]

Originally Posted by Richard_Todd

I'm sure there's plenty more conversation we could have on whether there's value added to the universe by keeping financial markets liquid, and on the positive aspects of short selling, etc.

But, you seem like you had pretty much made up your mind before even asking the question, so I won't try to sway you. I'll only say that, as long as you have this negative opinion of the spiritual value of trading, I don't see how it could possibly be "right" for you. If you feel this way, I wonder why you are considering it as a career?

Thanks for all the replies guys, they are all very helpful and have made me think!

I'd like to clarify a little about my stance on trading, when i said it was a "self-centered" activity, I meant that in the strict, literal sense of the word, without any emotional / judgemental baggage. (ie. Self-centered not equals to Selfish). I have read about the amount of personal/emotional development and discipline that a successful trader needs to master (like Vanessa and Richard mention), and yes, I agree that it does sound very meaningful.

I definitely haven't made up my mind, which is precisely why I'm posing this question. Right now, I have actually two choices I can take, given my personal circumstances (internships really), which is:

1. Trading

2. Private Equity / Venture Capitalism

and I guess I'm just pondering over the overall philosophy that guides these two industries -- and option 2 just seems to be more in-line with overall "value add" to the universe in a sense. I could be wrong, but after reading the posts, I'm still unconvinced that trading is not zero-sum. If you earn money on a trade, someone out there is losing money. For one George Soros, there are thousands of traders who have lost money and their jobs.

Also, I would try and detach myself from this vague, nebulous concept of "the market". "The market" is only a representation of all participants in the market.

[Richard_Todd]

I've never done any VC work, so I can't comment on the differences. Well, whichever you pick, I think it will be exciting, and I wish you well! Since it's an internship situation, it should be fairly easy to switch later if you change your mind.

Originally Posted by coma

I could be wrong, but after reading the posts, I'm still unconvinced that trading is not zero-sum. If you earn money on a trade, someone out there is losing money. For one George Soros, there are thousands of traders who have lost money and their jobs.

Well, keep thinking about it, and maybe you will see it at some point. You could also do a web search. I type "why the stock markets are not zero sum" into google and this was one of the first links I got. Someone pointed out, rightly, that the options and futures markets are zero-sum. I'm embarrassed that I didn't think to mention that earlier. Maybe if you think about what is different between the equities markets and the futures markets, you can spot how there are win/win opportunities in equities. I don't see what the Soros vs. failures statement has to do with anything. For every sucessful restaurant, there are lots of failures, too...

[Greg]

I have to agree with everyone who posted that trading shares is not a zero-sum game.

In essence, what are you doing? Well, you are:

a) Helping someone get money that they might need/want at the time
b) Indirectly supporting a company(if you are buying) that may use share price to get more capital for further expansion. This supports the economy and can create jobs.
c) Buying into a specific area of an economy and therefore justifying its price
d) Helping yourself by making money and being in a greater position to give back.
e) Endorsing this method of commerce

...and there are probably more that I haven't thought about. One could probably think of some negative effects from stock trading but in general I think there is a net positive effect.

[Athena]

Wow cool! I had a similar question, Coma, forming in my mind this past week. But besides trying to understad the spritual value to SELF of choosing a career in trading, I'm wondering what is the value to SOCIETY and to others in choosing this career. (I personally have no interest in trading, just trying to understand the career choices of others)

A few of you touched on that, but it seems like trading is a very indirect way, if any way at all, to add value to society.

In understanding the role of career in social contribution, I see that ideally we should choose careers that are focused on bringing light to the greatest good of all, contributing our knowledge and talents to benefit others. Money should come as a by-product of that flow, and should be to sustain us while we contribute to society.

I can see how this principle plays out directly in many careers, but I don't understand primarily money-driven careers, such as stock trading for a living. Some traders seem to be primarily focused on money, on self-gain, ACCUMULATION, rather than flow.

Also, Greg wrote that investing in a company can add value to its progress and to part of the economy, but very few traders seem to be interested in the social value of a company, whether net negative or positive effect, and interested only on the financial value.

For instance-- would you invest in Phillip Morris stock, if it looks like a sure gain for you, even though its net contribution to society is negative and destructive? Most traders would, it seems, only look at the numbers, not the underlying values or social effects of a company.

[Richard_Todd]

Originally Posted by Athena

Also, Greg wrote that investing in a company can add value to it's own progress and to part of the economy, but very few traders seem to be interested in the social value of a company, whether net negative or positive effect, and interested only on the financial value.

Maybe this is a small point, but I'd like to clarify. When I buy a share of Altria (aka Philip Morris), that money doesn't go to Altria. It goes to whomever I bought the share from. Only when a company issues shares do they get money as part of the public offering process.

Buying a share from some random dude just means I have part ownership of Altria for a few minutes before I sell it for a profit (at least, that's the plan!). I would say the social value of this action is null, neither good nor bad. In a rare case, a company may initiate a vote on something during the time I am a shareholder (this has happened to me a few times, despite my short holding times). In that case, I can vote on an issue and have some small positive impact. Of course, they never vote on whether or not they should continue to manufacture cigarettes

[coma]

Originally Posted by Athena

I can see how this principle plays out directly in many careers, but I don't understand primarily money-driven careers, such as stock trading for a living. Some traders seem to be primarily focused on money, on on self-gain, ACCUMULATION, rather than flow.

Hi Athena, totally agree with you -- that's more or less exactly what I wanted to say!

Actually, when I think about this question - I think George Soros is a good case study. When he earned US$1 billion on the trade against the bank of england when the peg of the pound became unsustainable, there was undeniable destructive impact on the jobs and economy of Britain. And of course causing thousands of traders to lose money and jobs as well, like I mentioned earlier. But yet, he is a generous philantropist and contributes largely to social / open society causes etc. So what's the overall net benefit to society of George Soros' existence? It's very questionable. I don't think I would want to be George Soros.

[Richard_Todd]

Originally Posted by coma

Actually, when I think about this question - I think George Soros is a good case study. When he earned US$1 billion on the trade against the bank of england when the peg of the pound became unsustainable, there was undeniable destructive impact on the jobs and economy of Britain.

Is there something about the FX market that I don't know about, whereby the bank of england had no choice but to take the other side of Soros's trades? If not, then why on earth would anyone attribute the bank failure to Soros, rather than the irresponsible traders at the bank?

EDIT: I'm reading about this fiasco now, and I see that the government did essentially sign up to prop up its own currency artificially. Ha! It's hard to blame all the speculators (of which Soros was only one) for taking advantage of this. Plus, in the larger view, the wikipedia entry says that it may have been a net positive event for England in the long run. So, things are not always very black-and-white.

[coma]

Originally Posted by Richard_Todd

Is there something about the FX market that I don't know about, whereby the bank of england had no choice but to take the other side of Soros's trades? If not, then why on earth would anyone attribute the bank failure to Soros, rather than the irresponsible traders at the bank?

Do you think then, that George Soros has had no negative impact on the countries / economies of those currencies (eg. Malaysia, UK) that he choses to speculate in?

What are your thoughts on profiting from tragic events? Eg. 9/11, terrorist events, natural disasters. Do you see it as just making use of information and situations and acting against mis-pricings in the market?

[Richard_Todd]

Originally Posted by coma

Do you think then, that George Soros has had no negative impact on the countries / economies of those currencies (eg. Malaysia, UK) that he choses to speculate in?

What are your thoughts on profiting from tragic events? Eg. 9/11, terrorist events, natural disasters. Do you see it as just making use of information and situations and acting against mis-pricings in the market?

Well, like I edited into my previous posting (don't know if that was in time for you to see it or not), I see that some economists now believe that the bank of england thing may have been a net positive event for the UK. So, things are not always so clearly good or bad.

Lets say I have an orchard and sell apples. And, one day meteors, or war, or fires, or disease, wipe out several competing orchards. Suddenly, people are willing to pay me a lot more for my apples. Have I done something wrong by making that money?

Assuming you agree there's nothing wrong so far: Is it a morally different story if I perceived--for whatever reason--a high probability of danger to the competing orchards before I got into the business? Should my guess about the future supply/demand situation keep me out of the apple business, and allow someone else to make the money instead? Maybe I would take some of my profit and plow it into philanthropical efforts (much as Soros has done), and the person who made the money instead of me wouldn't.

EDIT: And what if I know by indirect means (trends in production, trade patterns, whatever) that the price of apples is about to rise, but I have no idea that it could be because of impending tragedy? Is it only bad to make the money if I know that it has a tragedy catalyst? The action I'm taking (buying the orchard) in either case is no different.

[Athena]

Richard,

I think the technicalities for how you would get involved with a certain trade may not be as important in answering these questions as is the reason WHY you would do it.

What is your primary motive?
Are you getting involved with the business primarily to make money (self-gain) or primarily to serve others (societal gain)?

You may say 'both', if you intend to serve society by investing in 'good' companies with a positive impact on society, but you also suggested that it would be okay to invest in Phillip Morris company even though it has a negative impact on society. So there, your motive seems to be primarily self-gain, without regard to net impact on society.



==

Also- I understand where you explained the technicality behind money tranfser in trades, but doesn't your buying into Phillip Morris stock benefit the company in many ways?

Greg wrote:

In essence, what are you doing? Well, you are:

a) Helping someone get money that they might need/want at the time
b) Indirectly supporting a company(if you are buying) that may use share price to get more capital for further expansion. This supports the economy and can create jobs.
c) Buying into a specific area of an economy and therefore justifying its price

It sounds like you're still feeding the monster.....?

[dreck]

Hi all,

I found this thread when richard_todd made reference to an article on a new site i am working on called yourmoneybuddy and i just had a few comments to make.

Most people seem to be focusing their energy on the motivations of the investor, in terms of whether their intentions are self gain or societal gain. I think that this is pretty insignificant because the argument should be focused around the system itself and the value that it has to add.

richard_todd made a correct statement that trading in the secondary market doesnt provide capital to the company after the fact (the IPO). However, it is due to the existence of the secondary market, that investors are willing to invest greater amounts of capital into the IPO. By having a secondary market available, liquidity risk (and in some ways default risk), are reduced, and the investment is worth more, thus allowing the company to raise more.

It would be hard to justify speculation as having positive gains for society. However, long term investors who allocate their capital where capital is needed are definitely contributing to the good of society. Even if the company is not so moral, such is the case with cigarettes, they still only exists because the public want them to exist and their are people who want their products. This reasoning may not be satisfactory for some, and to those people I say allocate your money elsewhere - There is limited capital in the world and many areas/sectors that need it. Take it a step further and invest in some bonds such as fannie mae and sallie mae. A very safe (and moral) investment to make indeed.

Take the market crash in Argentina as an example. Many people have made a lot of money since the crash as they went in and bought very cheap assets and supplied capital for the re-development. The people in Argentina have benefited, as have the investors, and their high returns can be related back to the high amount of systematic risk they took on, which others werent willing to even look at. When people allocate capital where it is needed, good things usually happen. When people allocate money out of greed, they often get burnt.

Sorry if my first post was a little long.

Adam