| >But secondary trading is still a zero-sum game. No, since stocks can uniformly rise. Thus I can trade a lower performing stock (which can still increase) for a higher performing one, so that was not zero sum for me. The buyer could have turned cash into those stocks, so he could have gained too. So we both gained from the transaction didn't we? Doesn't seem zero sum while stocks grow, and there's no mathematical requirement them to return to those previous prices. This also doesn't cover value for price signalling, the empirical fact these patterns have returned significant money to investors through lower spreads, or the fact that primary markets don't function without functioning secondary markets. Calling it zero sum is a bit shortsighted I think. > you have to wonder why so many firms like these continue to print money year after year They haven't. A few have - most don't do so well. Buffet's hedge fund bet ended pretty spectacularly. As a group hedge funds have underperformed index funds for some time (if not always, net of costs), so they're not extracting money, except from investors. Net gains from the top 20 or so funds are around $20B annually, while managing a few trillion in assets. This seems like an incredibly small amount of gain for the assets managed. |