Morality of the stock market

[AkronPonderer]

The secondary stock market is zero-sum game. Every dollar into one persons pocket, means a dollar removed from someone elses.

Is it moral to invest in such financial instruments?

Is the person whose dollar is being removed, harmed by the person whom is receiving it?

Or, are there “new rules of morality” one implicitly agrees to by taking a investment position?

 

[Little_Mary]

You might check out Ave Maria Funds. I think they have a website. There are other faith based funds, but that’s the Catholic one that I know of. Their performance has been pretty good over the last ten years, but you can check that our for yourself.

www.avemariafund.com

 

[Little_Mary]

Upon re-reading your original post, I’m not sure if I addressed what you were asking…but I was reminded of these funds so I hope it helps somewhat…

 

[AlanFromWichita]

Recently I was talking to a person with all their money invested in the stock market, going off about how “gambling” is wrong and that poker is intrinsically evil.

It seems this correlates with the opinions of those conservative Republicans I used to hang around with (I was elected as one of them) in Kansas. They think gambling of any form is evil, except when it is a fundraiser for their parish.

Their point seems to be that one is just putting money out there with no idea whether it will be coming back. For some reason, it’s OK to have state-run lotteries and horse racing, which for some reason is more moral than poker.

I expressed a counter point that in poker, at least there is some component which is skill, and the only parts of the game that are completely out of a person’s control are the randomness of the cards (which is "fair) and the actions of the other players, which is not unlike competing business plans.

In stock market, there is some skill in choosing a stock, but the major factors that influence its price in relation to others on the market are often unknown and in fact are often secret and even illegal, and completely out of control of the investor. I don’t see how that is moral and poker is immoral.

To me, if I invest money I’m doing it with the hope it will give a return. If I do it knowing the possible paybacks and risks, I can make a sober decision and it has nothing to do with spirituality.

Also I think that the story of the “dishonest servant” teaches us that one must be wise in the world, as a separate issue from having a well developed spiritual life. The man cheated on the money, but he was smart enough to use whatever power he still had available to build a future for himself.

Also we have the story of the three servants who were given talents, and the one who was praised was the one who invested it and it returned tenfold. This is an investment of money, which I think could bear moral equivalence to the stock market. Personally I think it’s more of a spiritual reflection, and what is important is somebody using and investing their ability to love and reap spiritual gifts, but I can also see how it can be applicable to stock market, as written.

Alan

 

[Liberian]

Akron (and others),

There are at least two reasons for putting money into the stock market. The first is as an investment that you reasonably expect to provide you with a return over time; the second is for speculation, in which you effectively gamble that a particular stock or fund will increase (or decrease) significantly in price very quickly. Investment is perfectly reasonable and moral; I’m not so sure about speculation.

Akron is right that the secondary stock market–options, futures, and the like–is a zero-sum game in terms of money. What is being traded there, though, is not money as much as it is risk. In the case of futures, for example, a farmer is willing to “take a hit” on the price of his crops as long as he is guaranteed that lower price; the alternative is to have either a boom year if he has a good crop and prices are high or a bust year if he does not get a good crop and prices are low. As such, since money is not the only thing being traded around, I don’t think that it is intrinsically immoral.

For the record, by the way, I do not recommend that anybody get involved in any secondary stock markets unless he knows what he is doing. It may not be immoral, but it is an EXCELLENT way to lose a lot of money very quickly. (Does anybody remember Nick Leeson and Barings Bank?)

• Liberian

 

[Ridgerunner]

I think the stock market can be like gambling. Or, it can be like a man buying a 1/2 interest in a going business hoping it will prosper. Hopefully, the latter knows what he is doing, or he can lose his socks just as quickly as the man who “gambles” on the stock market.

The stock market is not a “zero sum game”. It’s not just a game where somebody takes one man’s money and gives it to another. If the company never made any money, and people were stupid enough to keep buying its stock, it would be. But it’s not a Ponzi scheme. To know that, all you have to do is look at the net worth of a given company over time. Most companies on the market are profitable operations. Those profits are reinvested in the business or paid out to stockholders; usually some of both.

Many companies are very capital-intensive, and require a great deal of capital to achieve their maximum profitability; often so much that no one person or likely small group can come up with that much. So what’s the answer, give up? The purpose of the stock market is to provide sufficient capital to fund business operations. If the business is good, it returns profits to the investors. If its profits are increasing year over year, then I, as a potential investor, might be willing to buy a stock that only pays a 2% divided, anticipating that someday in the future it will pay 10% on the money I invested. Now, if, at that point in time, somebody else believes that he/she is willing to accept a 2% return in order, someday to get 10%, he will pay more than I originally paid for my stock. He will then pay me more than I paid for it. It’s really pretty simple.

No one should invest in the stock market unless he has a pretty good understanding of the business he’s investing in. Yes, there are crooks and accounting tricks. But there are also pickpockets on the street, and there are mechanisms and laws to prevent that kind of thing, and they are mostly successful.

As an example, years ago I was in the banking business. I learned it pretty well, then went on to another occupation. But it taught me enough to have a pretty good idea what makes a bank profitable and what its likely growth rate is. So, I pretty much limited myself to buying bank stock. A pharmacist might see a particular medication improvement come out that he/she knows will replace half or more of the existing medications that have the same purpose. If the pharmacist buys the stock of the company that makes the new medication, he/she is making an informed decision. He is not gambling.

The single most frequently failing business in the U.S. is the small restaurant. It fails more than any other, by far. Far more than listed stock companies. And yet, you see people start them all the time. Maybe any given restauranteur knows enough to make it work. Maybe not. Jumping into a business you don’t understand is a mistake; whether that move is investing in a stock company or in a family restaurant.

If you ask me, gambling on the market is immoral if you can’t afford to do it, just as gambling is in a casino. Perhaps it’s immoral even if you can afford it. But there is a big, big moral difference between investing and gambling.

 

[vern_humphrey]

The stock market isn’t gambling – anymore than buying a house or car is gambling. When you buy stock, you buy ownership in a company. As the company profits, so do you.

While there are risks in buying stocks (or houses or cars), the net effect on the economy and the welfare of the American people is positive.

 

[Texas_Roofer]

Recently I was talking to a person with all their money invested in the stock market, going off about how “gambling” is wrong and that poker is intrinsically evil.

It seems this correlates with the opinions of those conservative Republicans I used to hang around with (I was elected as one of them) in Kansas. They think gambling of any form is evil, except when it is a fundraiser for their parish.

Their point seems to be that one is just putting money out there with no idea whether it will be coming back. For some reason, it’s OK to have state-run lotteries and horse racing, which for some reason is more moral than poker.

I expressed a counter point that in poker, at least there is some component which is skill, and the only parts of the game that are completely out of a person’s control are the randomness of the cards (which is "fair) and the actions of the other players, which is not unlike competing business plans.

In stock market, there is some skill in choosing a stock, but the major factors that influence its price in relation to others on the market are often unknown and in fact are often secret and even illegal, and completely out of control of the investor. I don’t see how that is moral and poker is immoral.

To me, if I invest money I’m doing it with the hope it will give a return. If I do it knowing the possible paybacks and risks, I can make a sober decision and it has nothing to do with spirituality.[chopped]

I somewhat agree with those republicans, and think you have struck on the real issue of gambling which really has very little overlap with the stock market.

Gambling - The placing a wager of unknown outcomes. The moral problems here are 1) Very few actually understand the probability of winning, in fact many psychologist claim the human mind can not conceive of the lottery statistic! 2) Addictions, leading or providing self destructive system for our brothers, 3) The “vice” most casinos define cheating as winning yet they actually manipulate the gamble to win in ways most people consider cheating- but the people do not understand the manipulation. So the problem can you truly understand “gambling” and choose to gamble. You well note that poker can be a game of skill thus the better player wins (on average) thus the outcome can be known

Stock market - financial system in which businesses pay for the use of money. As the pay is risky it requires a higher return (on average) but is not guaranteed. This is obviously misunderstood on this tread. A stock must pay 1)return(economic), 2) inflation, plus 3) risk premium. But a bond is the same, and so is a saving account. The bond has less risk than a stock because it is hedged by the stock. The savings account in insured thus the risk is even lower. What appears missing is the confusion between what the stock actually does (97% of the time) and the anomalies (stocks changing selling price drastically in short time windows)

 

[vern_humphrey]

I somewhat agree with those republicans, and think you have struck on the real issue of gambling which really has very little overlap with the stock market.

Gambling - The placing a wager of unknown outcomes. The moral problems here are 1) Very few actually understand the probability of winning, in fact many psychologist claim the human mind can not conceive of the lottery statistic! 2) Addictions, leading or providing self destructive system for our brothers, 3) The “vice” most casinos define cheating as winning yet they actually manipulate the gamble to win in ways most people consider cheating- but the people do not understand the manipulation. So the problem can you truly understand “gambling” and choose to gamble. You well note that poker can be a game of skill thus the better player wins (on average) thus the outcome can be known

Stock market - financial system in which businesses pay for the use of money. As the pay is risky it requires a higher return (on average) but is not guaranteed. This is obviously misunderstood on this tread. A stock must pay 1)return(economic), 2) inflation, plus 3) risk premium. But a bond is the same, and so is a saving account. The bond has less risk than a stock because it is hedged by the stock. The savings account in insured thus the risk is even lower. What appears missing is the confusion between what the stock actually does (97% of the time) and the anomalies (stocks changing selling price drastically in short time windows)

A decision not to invest is just much a decision as one to buy stock. And carries as much or more risk.

An apalling number of Americans have no investments – and hence must rely on the rest of us to support them when they reach retirement age.

 

[Al_Masetti]

One of the reasons for the popularity of mutual funds is that pooled investment funds spread out the risk and a fund will hire full-time employees to watch the companies that they invest in.

Numerous publications provide a variety of comparative statistics on how well various corporations and mutual funds are performing.

So, it is possible for individual investors to spend just a little time and energy investing (by using the medium of mutual funds) or a lot of time and energy (by researching individual stocks using tools such as Value Line, Stock Charts, Yahoo Finance and a number of other publications).

One way of looking at the stock market is that it is just one large garage sale. You have money in your pocket and you look over the vast array of merchandise offered for sale. You have the opportunity to pick and choose and ask a lot of questions about the quality of the stuff being offered.

 

[vern_humphrey]

One of the reasons for the popularity of mutual funds is that pooled investment funds spread out the risk and a fund will hire full-time employees to watch the companies that they invest in.

Numerous publications provide a variety of comparative statistics on how well various corporations and mutual funds are performing.

So, it is possible for individual investors to spend just a little time and energy investing (by using the medium of mutual funds) or a lot of time and energy (by researching individual stocks using tools such as Value Line, Stock Charts, Yahoo Finance and a number of other publications).

One way of looking at the stock market is that it is just one large garage sale. You have money in your pocket and you look over the vast array of merchandise offered for sale. You have the opportunity to pick and choose and ask a lot of questions about the quality of the stuff being offered.

I think it would be instructive to read First Timothy, Chapter 5:

1 Do not rebuke an older man, but appeal to him as a father. Treat younger men as brothers,
2 older women as mothers, and younger women as sisters with complete purity.
3 Honor widows who are truly widows.
4 But if a widow has children or grandchildren, let these first learn to perform their religious duty to their own family and to make recompense to their parents, for this is pleasing to God.
5 The real widow, who is all alone, has set her hope on God and continues in supplications and prayers night and day.
6 But the one who is self-indulgent is dead while she lives.
7 Command this, so that they may be irreproachable.
8 And whoever does not provide for relatives and especially family members has denied the faith and is worse than an unbeliever.
9 Let a widow be enrolled if she is not less than sixty years old, married only once,
10 with a reputation for good works, namely, that she has raised children, practiced hospitality, washed the feet of the holy ones, helped those in distress, involved herself in every good work.
11 But exclude younger widows, for when their sensuality estranges them from Christ, they want to marry
12 and will incur condemnation for breaking their first pledge.
13 And furthermore, they learn to be idlers, going about from house to house, and not only idlers but gossips and busybodies as well, talking about things that ought not to be mentioned.
14 So I would like younger widows to marry, have children, and manage a home, so as to give the adversary no pretext for maligning us.
15 For some have already turned away to follow Satan.
16 If any woman believer has widowed relatives, she must assist them; the church is not to be burdened, so that it will be able to help those who are truly widows.
17 Presbyters who preside well deserve double honor, especially those who toil in preaching and teaching.
18 For the scripture says, “You shall not muzzle an ox when it is threshing,” and, “A worker deserves his pay.”
19 Do not accept an accusation against a presbyter unless it is supported by two or three witnesses.
20 Reprimand publicly those who do sin, so that the rest also will be afraid.
21 I charge you before God and Christ Jesus and the elect angels to keep these rules without prejudice, doing nothing out of favoritism.
22 Do not lay hands too readily on anyone, and do not share in another’s sins. Keep yourself pure.
23 Stop drinking only water, but have a little wine for the sake of your stomach and your frequent illnesses.
24 Some people’s sins are public, preceding them to judgment; but other people are followed by their sins.
25 Similarly, good works are also public; and even those that are not cannot remain hidden.

Note that Paul is insistant that those who can support themselves should support themselves – and for those who cannot support themselves, the responsibility falls on their families to support them. Only those with no resources or family are entitled to be supported by the community.

We are charged to be self-supporting in our old age. And the best way to do that in the modern world is to have a well-informed program of savings and investment.

 

[wcknight]

Plus there are a lot of mutual funds where the risk is very low (balanced funds or funds with “low betas”), even in down markets. Nothing is a sure thing but some investments are much safer than others.

As long as you remember to place your trust in the Lord and not in your portfolio, you should be on safe ground.

 

[vern_humphrey]

Plus there are a lot of mutual funds where the risk is very low (balanced funds or funds with “low betas”), even in down markets. Nothing is a sure thing but some investments are much safer than others.

As long as you remember to place your trust in the Lord and not in your portfolio, you should be on safe ground.

And as I said, the decision not to save and invest is also an investment decision – and a very bad one!

 

[Al_Masetti]

Money Quote by Charles Dickens

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

 

[vern_humphrey]

Money Quote by Charles Dickens

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

A lesson he learned the hard way.

As Saint Paul points out in First Timothy, we have an obligation to support ourselves, if we can. In the modern world, virtually all of us can support ourselves – and during our 40-odd working years we have both the opportunity and the obligation to make preparations for our old age.