And besides, the majority (if not all, given Volcker restrictions) of sales and trading is from market making, rather than risk taking / directional punts on the markets.
I'm not trying to pick on Goldman. They were just an example of a large institution that makes huge amounts of money by doing exactly what these guys did. Betting against the market is absolutely routine behavior.
As for Goldman, do you really think they are clearing 100 million a day by being market neutral and just collecting premiums? When they buy/sell it absolutely moves the markets just on the sheer volume.
“Do you know how naive you sound, Michael? Presidents and senators don't have men killed.”
“Oh. Who's being naive, Kay?”
https://www.goldmansachs.com/s/2012annual/assets/downloads/G...
I was just contrasting that large institutions can short the market and easily move price due to the volume they trade at without being investigated but there is outrage when handful of random guys do and the price collapses.
All this money allows this people to buy many things, properties, services... Do our society can afford for all that in exchange of some luck?
There are limited resources and society have decided that these people deserve a big chunk of that resources.
Weird.
If I stumble across gold in the ground, quietly buy the land and start to mine it, I don't 'deserve' that gold. But I've got it, and the system of property rights is there to dissuade me from just taking it by force instead of buying the land first (or other people taking it from me once I've got it).
"In most countries of the world, all mineral resources belong to the government. This includes all valuable rocks, minerals, oil and gas found on or within the Earth. Organizations or individuals in those countries cannot legally extract and sell any mineral commodity without first obtaining an authorization from the government"
In the USA is not exactly liked that but "Property rights and mineral rights were originally tied to the land. The owner owned both. However, mineral rights and property rights can be severed, meaning the owner can sell one and keep the other. So, the original owner of your land may have sold the property rights to one person and kept the mineral rights or sold it to another person. By the time you bought the land, the mineral rights may have been sold already."
So you could be committing a crime by mining gold with only the property rights, you also need mining rights.
It's more like this is how reality is. You've probably never been a trader, most traders lose their money, it's an extremely risky profession. For every win you hear about there are at least 10 losers.
At the end of the day the activity of traders readjusts the asset prices on ongoing basis closer to their true valuation. The more trading occurs the more precise the price is. Without enough trading activity an end user might be forced to overpay for an asset.
We have one where when the banks and people make bad decisions and get bankrupted with valueless contracts, the government save the banks, and the corporations and let common people go bankrupt.
Whether or not we want to afford it is a different question.
But its not. Zero sum has to do with the utility provided to each side of the transaction. I may have a completely different desire to own a future than you. Perhaps my portfolio needs less risk or my predicted oil needs have changed. In those cases I gain a lot of utility by being able to move out of the future into cash, even if later you make more than I would have by selling it.
Is that still an argument after the housing collapse of 2008? Far from mitigating risk it seems that risk was increased.
Think of a pawn shop on a street corner. They trade by making markets, engaging in a zero dollar sum game. But it's absolutely positive sum in utility.
I could make the same claim that you've made about pawn shops as a reductio ad absurdum. That individual with second hand jewellery gained X dollars when they sold it to the pawn shop and the pawn shop lost X dollars. So it's zero sum. Although it isn't except in the most myopic sense (that of dollars). Transactions (on financial markets or otherwise) are always subjectively positively sum in utility and that's what matters.
Here's some examples. Suppose someone gets a terminal illness and needs to sell all their stocks to a willing buyer in order to get cash. It's zero sum dollars (just like every material transaction in the economy) but utility was gained, the person that needed the liquidity got it immediately and with near zero slippage. Other examples: The farmer that needs to hedge their crop yields, the airliner that needs to hedge oil prices, the gold miner that needs to hedge gold prices. The supply side and demand side of this equation gains utility from engaging.
> "There are limited resources and society have decided that these people deserve a big chunk of that resources."
As if society decided collectively to pay an unfair amount to a good/lucky trader. They took it from other market participants and not from average joe. My intention with my initial comment was to point out that it simply doesn't matter if one market participant has 600 million more than before, because others in the market lost it.
>If the group had made $7 million that day instead of almost $700 million, they’d probably be celebrating. But the size of their winnings, coupled with their backgrounds—and political pressure to understand what happened—means that Vega has the attention of regulators.
Indeed...