[swingdoc]

Mmmm, you're partly correct, G2CU. I would strongly argue that ALL stock trades are speculation on the part of the public investor. I previously dealt with why buying stocks is useful for the companies involved and, consequently, the economy as a whole. Here I'll try to explain why buying stocks is a useful activity for the individual investor and why trading stocks owned by individuals or financial institutions is actually NECESSARY for the success of IPO's - where the company issuing stocks actually makes their money.

First, why is buying stock good for the individual investor? At least in part, my previous post touches on this. When the entire economy benefits from a series of transactions, the individuals within said economy will also benefit. For instance, by going public a pharmaceutical company may be able to increase their R&D budget by 500%. Newer and better drugs reach the market 5x faster. But again, this is really just rehashing my previous post. Individuals ultimately buy stocks because they either plan to profit from the company's revenue sharing directly, or by selling the stock when it increases in value (indirectly due to increased revenue). I can see asking here, "How is this different than poker?" It's different because you are buying something that has an intrinsic value and the trader to trader trades are necessary in order for a company to sell their stock in the first place (more on this to come). In poker you are buying the possibility that your cards form a better hand than your opponents (or will in the future). This does not have ANY intrinsic value.

Okay, now I'm going to try to show you why allowing public individuals to trade shares of company X's stock is necessary for the company to initially profit. If each individual were only allowed to buy a stock from the company and only allowed to sell that stock back to the same company, then shares would be worth considerably less than they are under the current policy. Under such a system, the individuals would profit only by 1) receiving revenue sharing (no real difference than current system) or 2) by selling the shares back to the company, which, as the only possible purchaser of these shares of stock, would only pay the investor his initial cost + appropriate share of revenue since the stock was purchased. I hope you can see why this would cause the stocks to have far less value, as #1=#2.

Again, this only deals with stocks in companies. Wholly different arguments would have to be used if we were talking about trading futures, foreign exchange, etc. Please don't misunderstand me, I love playing poker and I have a great deal of respct for those who play it especially well. I just don't think any of us should delude ourselves into thinking that playing poker is at all beneficial to the society or economy or world as a whole. It's beneficial to the person playing. Period.