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PaperclipPerfector  10mo ago (text post)   3402 thread views

Small-Scale Question Sunday for July 2, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

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Got an economics question:

I was watching 'Margin Call' the other day, and there is a scene where two day traders are lamenting the (then incipient) 2008 financial crisis. The senior of the two gives his justification for existing to the other:

the only reason they [normal people] all get to keep living like this is because We've got our fingers on the scale in their favour. I take it off, then the whole world gets really fucking fair really fucking quickly and nobody actually wants that.

Is there anything to this? if so, how does that work? I always assumed that day traders basically created no value and just shuffled wealth around to nobody's benefit.

If long-term investing is good, then day trading must also be good but less so. I might hold an investment for years because I think it has unappreciated value, this helps direct investment to good places, or at least places that people think are good. Someone should react to news, analyse whether recent events should have capital reallocated. At minimum they provide some liquidity for transactions.

High frequency trading is a waste of time though, compared to the brainpower that goes into it.

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