I'm not the first to equate investing in the stock market with gambling, lots of people have compared the public markets to a casino. And that's never more true than with speculative and money losing companies, no matter whether they're OTC penny stocks or those listed on more senior exchanges like the Nasdaq.
I'm not a big fan of casinos, in the past five years I think I've only been once, during a weekend trip to Niagara Falls Ontario. In fact the only casinos that I've ever been to are in Ontario, twice to Niagara, once to Rama, and perhaps about ten times to an Indian run casino up near Port Perry. And that's over the past 20+ years.
If you don't include the stock market I'm not much of a gambler. Besides the odd visit to a casino I might play a game of Hold 'Em with friends once or twice a year.
So why do I think the stock market can be worse than a casino? The reason is simple, I think its easier to walk out of a casino.
When you sit down at a blackjack table and start betting sometimes you'll hit a a streak. Depending on the stakes you might go up a few hundred dollars in a short period of time. Then you can choose to walk away, cash in and go home. But once you leave the table you'll never know whether you would've have made even more money by staying, or if you picked the perfect time to hit the cashier.
While you're sitting at the table you can bemoan or congratulate yourself for not taking another card based on what the player to your right draws. But once you leave its over, you'll never know whether you left at the right time.
The stock market is different. Maybe you're watching a stock, my favorite hypothetical ticker symbol ABC, and its trading for $5. You don't buy but you are watching. Then big news comes out and it climbs 40% in one day, going to $7. DAMN, I COULD'VE TURNED $10,000 INTO $14,000!!!
Maybe the reason you didn't buy ABC was because your money is tied up in another company, XYZ where you have 1,000 shares and its trading at $10. You keep watching ABC and after its big 40% climb it pulls back and settles once again at $5. Your 1,000 shares of XYZ aren't doing anything, still worth $10 each....so you dump them and use the money to buy 2,000 shares of ABC.
So what happens? Unlike a blackjack table where you'll never know what cards you would have been dealt after you leave the table, with stocks they keep trading and you can keep watching. Maybe XYZ, the stock you just sold for $10 gets big news of its own and climbs to $15, while the share price of ABC, instead of rebounding off the $5 price you bought in at, it loses support and falls even further to $4.
Dontcha just love the market?
If you've ever played hold 'em then you probably have seen someone fold their hand and then ask to see what the flop would've been. Then they want to see the turn card and the river. Its happened to me. Say you're dealt a pair of jacks, after going ten or more hands of seeing twos and nines. "Finally" you think, "a hand I can play". Then the big stack tries to force you all in and you have a decision to make. Do you risk your entire stack knowing full well you could be going up against AA? If its a game with friends in your basement you might fold and then ask the dealer to draw out the flop, turn and river cards to see if you made the right choice.
That's sort of what the stock market is like, only worse....because the table never closes. ABC and XYZ will probably be trading for years and you'll be able to look back whenever you want, to either congratulate or kick yourself.
And there's another reason I consider the stock market to be worse, social media.
One of the things I don't like about casinos is that I often find the people in them to be anti social. I'm a friendly guy, a talker....but at a casino table I find an awful lot of people who are deadly serious. I assume that to be because they're probably gambling because they're in financial trouble and hoping lady luck provides them with a quick fix. Its depressing. When I see someone who's in a good mood and relaxed, that's someone I figure who is there for the right reasons, for fun. I also find they're the types who tend to be lucky.
My last trip to Niagara I walked out after about an hour with about $150 more than I walked in with....I think its part of that whole "law of attraction" thing. But I digress.
Where was I? Oh yeah....why social media makes the stock market worse than a casino.
Imagine going to a casino and being badgered to play at one table or another, or sitting down at a slot and having someone come up and start telling you the machine you're playing, that its a piece of junk that will never pay out. That's what stock social media sites are like with all the pumping and bashing.
Some people say that comments posted to a message board or to sites like Stock Twits or Seeking Alpha don't matter. I have a two word reply to that view, and the first word is Bull.
Yahoo Message Boards, StockTwits, InvestorVillage, Investorshub, Stockhouse, RagingBull, SeekingAlpha, MotleyFool, InvestorsHangOut,
That's just the tip of the ice berg, there are countless forums and social media sites where investors can go to read and express views on just about any stock trading anywhere in the world. Why? If message boards and such have zero impact why are there so many of them? Because, in my not so humble opinion, they do.
Ultimately stocks trade on supply and demand. Cards on the other hand, its luck of the draw.
Every investment social media site is almost like a casino on the Vegas strip. Each one vying for customers, and when you go in you'll be told what tables to play and which games to avoid. In my opinion, if you're smart.....you won't listen.
sadsad
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