I still believe that on the secondary market, stocks and bonds ain’t zero-sum games, because each of these products generate new wealth/profit out of thin air — NZSG[non-zero-sum games]
- In contrast, I believe options and futures do not have such trends and therefore zero-sum. I would say for all of these derivatives, there’s no income generated out of thin air like bond coupons.
- long-dated oil futures .. inflation-based growth asset. ZSG.
- casino game .. Classic zero-sum game
- bccy .. speculative growth asset, related to inflation and FOMO. ZSG.
- Rental rEstate .. productive asset. Also a speculative growth asset based on FOLB. People’s desire for better home is insatiable mostly due to FOLB.
A related concept is productive_asset — assets that generate net-positive current payout
- div stocks
- rental rEstate having positive cash flow
- coupon bonds, and short duration zero bonds
- bank deposits
— stocks .. There’s a general trend of long-term appreciation. We can see the trend based on official closing price (fair valuation).
Many early stage hot tech stocks are not productive. They are speculative assets, driven by FOLB.
Dividend cashcows, are productive_asset. They can also be growth assets. Utility stocks, oil stocks, tobacco stocks, eReit.
Value stocks are still growth assets, (in theory) based on earnings growth.
— bonds + bond mufu .. NZSG. They are suitable for insurers, foreign reserves,
If, hypothetically, the bond coupon is so low as to be wiped out by transaction costs, then between the buyer and seller, this is a zero-sum game.
— How about physical gold coin? If you keep it at home for 50Y, then it is likely to appreciate. This likelihood is the same if the gold coin changes hands over the 50Y. Therefore, trading gold is not zero-sum game.
Fundamental reason behind the NZSG — accounting_currency (denomination currency) inevitably loses value against gold. If two school boys trade marbles and cards it’s clearly a zero-sum game, but now they receive one point for each game and those points give them special privilege . Counting by the points the trading is NZSG.
gold .. inflation-based growth asset. ZSG.
Now, bbcy also generates no income, but is it an inflation hedge like gold?