Is Wall Street a Casino? part II

wall street

“It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges.”

– John Maynard Keynes

On Friday evening my wife drove to a casino in Oklahoma to attend the Rascal Flatts concert (which was very good by the way!), enjoyed dinner and played the slots.  We always have a great time at the Winstar  and the entertainment this casino brings in, is top tier (last month we saw Alabama in concert at this exact same venue).

We play the penny slot machines and usually leave the casino coming out ahead.  We each bring $100. and as luck would have it, we’ve always exited the casino with more than we started with.  Maybe it’s because as soon as we hit a win, we cash out and walk away.  We don’t feed our greed and hang on for more.  That’s what any casino thrives on, greed.  But isn’t that exactly what Wall Street thrives on as well?  Are brokerage houses (the Goldman’s or the now deceased Lehman Brothers and Bear Sterns to name a few) operated like casino’s?

Gambling and Investing often are considered one in the same.  Anti-Capitalists will definitely place them in the same category, but there are distinct differences.  Allow me to provide the textbook definitions of each (Random House Dictionary):

  • Gamble: To play at any game of chance for stakes. To stake or risk money, or anything of value, on the outcome of something involving chance.
  • Invest: To put money to use, by purchase or expenditure, in something offering profitable returns.

Objectively speaking,  there is very little distinction between the two.  Is an investor or gambler not betting on an outcome that is uncertain?  Is an investor not taking a risk by placing their money at risk with the hope of financial gain, yet no guarantee of a favorable outcome?  Where does one draw the line?

An investment is simply a gamble in which you’ve managed to tilt the odds in your favor.

-Peter Lynch (former manager of the Fidelity Magellan Fund)

To me investing is participating in and making a positive contribution to something (like a public or private company) with a future.  Investing contributes to productivity.  It’s a way for the common man like you and I to participate in capitalism, which benefits not only ourselves but the greater good.  This is especially true if the growth of those companies we’re investing in increases payroll, or provides a product or service that benefits many.  Keep in mind I am speaking of Investing, NOT day trading.

Gambling on the other hand is not considered productive, nor does it make a positive contribution to anyone except Casinos.  Not to say that gambling doesn’t indirectly increase payrolls.  After all the economies of Las Vegas, Reno, Atlantic City and Indiana Reservations throughout the US all thrive and remain vibrant, and they provide many jobs.

I could go on and on and provide arguments in either case or direction, some favoring investing and dismissing gambling as mere entertainment. Or I could take a more staunch religious view and say it’s all speculation and thus BAD.  What it comes down to is an individual’s own moral dilemma.  I’ve known astute investors who’ve done extremely well and paid forward with their success, by giving to charities, tithing their church, etc.  I’ve also known a fellow who was a compulsive gambler, both in casinos as well as options trading.  During the week he speculates in options and when the markets are closed on the weekends, he spends his time and money in casinos.  Very sad.

As for me, I am a proponent of Capitalism and I’m a fan of Wall Street.  I invest in stocks, mutual funds and exchange traded funds.  I am a limited partner in hedge funds, I invest in real estate.  On occasions, when I find the risk/ reward is tilted in my favor I will trade a few options contracts.  It’s pure speculation but I do it on rare occasions and only when the odds favor my trade having a profitable outcome.  I limit this type of trade to no more than 2% of my portfolio.  I also gamble on occasion, not online sports betting.  In fact, I don’t have any association with “bookies” and I don’t make sports bets.  Heck, I hardly watch sporting events on television.  When I do gamble it’s with a set-amount of money brought to the casino ($100. per day limit) and it’s confined to penny slot machines only.  It’s fun for my wife and I and we enjoy the free Bloody Mary’s.

In conclusion, with the exception of that unfortunate fellow I mentioned earlier, (the one who gambles all week, either options trading or casino’s) investing is not gambling.  There is a definite difference.  Investing is a grower of wealth.   Gambling if used to satisfy an addiction, is a destroyer of wealth (just as investing can also destroy wealth if it’s purpose is to satisfy an individual’s greed).  The irony is that both Wall Street and the Gaming Industry are heavily regulated and that’s a good thing.  Very few boiler rooms exist anymore.  Casino’s?  Well, they have it figured out.  A worthy investment might just be to purchase stock in gaming companies (LVS , WYNN).  This is not advice…..

 

 

 

DISCLAIMER:  This site is not an investment advisor and any stocks mentioned in this article are a recommendation.  This site has no affiliations with any companies mentioned and receives no compensation from the mentions.

 

 

 

 

 

 

 

 

 

 

 

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