Any advice in day trading?

If the day traders benefit anything, they benefit the market or stock (not the company) they are trading because they can add liquidity, which means they add trading volume, which means they help make it easier for others to  buy and sell the stock - which has nothing whatsoever to do with being vested in the company.

I've heard this, but I cannot believe it's immoral, first of all because it is no more speculation then it is to open a business hoping people will buy your product. In fact, a lot more day traders lose all their money compared to business owners who go under.

For A Moment, Ignore Everything You Know About Stocks, the investment system and everything that took place over the past 400 years. Imagine yourself in the early 1600s at a time when no one knew what stocks were yet, but they were about to be introduced as a new investment instrument.

You’re going to hear two proposals, and I want you to think about how the early investors would have reacted to the introduction of stocks.

Proposal One: A business owner approaches a group of investors and says, “I’m selling shares of my company. If you invest in my business, you’ll receive a note that says you own a piece of the company, and if the business makes money, you’ll receive a share of the profits. The note is transferable, so you can also sell it to other investors. If you’re lucky, you might even receive more than you paid.”

Proposal Two: A business owner says to a group of investors, “I’m selling shares of my company. When you invest, you’ll receive a note that says you own a piece of the company. However, you won’t receive any money from the business, and the company is not obligated to pay you anything, ever. But, you can make money by selling the note to other people. You might get lucky and get more than you paid.”

Now, which proposal do you think early investors would have considered, and which do you think they would have avoided? Which one sounds like a legitimate business investment, and which one sounds like a shady scam?

History shows that when stocks were first introduced to investors, they were designed to perform like investment proposal number one, where companies paid dividends and shared profits with investors.

But today, the common stocks that are being issued to investors behave like proposal number two, where shareholders receive nothing from the business, and the only realistic way investors can make money is by selling their shares to other investors.

One of the biggest myths about stocks is the idea that profits from stocks come from the earnings and growth of the underlying company. The assumption is, when a company makes money, they share the profits with their investors. But in practice, most public companies never pay dividends, and when they make money, which can be millions or even billions, they keep everything.

The reality is, profits from stocks come from other investors who are buying and selling stocks. When an investor buys a stock for $ 10 and sells it for $ 11, that $ 11 comes from another investor, someone who will then start hunting for yet another investor who will give him or her $ 12, and so on. This is actually a negative-sum situation because the underlying company isn’t involved in the transaction. The investors are just cannibalizing each other for profits, and there are fees attached to every transaction.

(. . .)

There are supposed to be “two ways” for investors to make money with stocks.

One is through dividends, which is money that comes from business profits.

The second is through capital gains— the buy-low, sell-high gamble on possible stock value appreciation.

Profits from dividends are legitimate profits because they come from business activities and are paid by the underlying business. Profits from capital gains are Ponzi profits because they come from other investors. There is nothing wrong with a scenario where investors can make money from both dividends and capital gains. But there is something extremely wrong with a zero-sum scenario where the only guaranteed way investors can make money is by taking it from other investors with capital gains. And sadly, this is exactly how most stocks work in the current system.

The majority of the stock market is made up of common stocks, which are basically notes with the company’s name on them, but they don’t guarantee any dividends or payments. In some cases, like with Google’s class C shares, which make up the majority of the company’s shares, they don’t even come with voting rights. Common stock shareholders are not entitled to any operational profits from the business, and the only practical way investors can make money is by selling their shares to other investors using the Ponzi process.

There are exceptions, of course. Companies like Microsoft and McDonald’s have a history of paying regular dividends— whether the amounts paid are reasonable compared to the profits the companies earn can be subjective, but they do pay their investors on a regular basis. However, these are exceptions, and we can’t use exceptions to generalize what is the norm for common stocks in the overall market.

Finance people will argue that all common stockholders do have a “claim” to dividends, but this is not a legitimate claim. There is a difference between something that can happen versus something that is legitimately likely to happen. In practice, most public companies never pay dividends because they are not obligated to. They can always make up an excuse for why they can’t pay, and there are enough fine print and legal loopholes in their docuмents to let them get away with it. This is why companies like Google, which is about as mature and successful as a public company can get, have never paid dividends.

A shareholder’s “claim” to dividends is meaningless because the normal practice is; public companies do not pay dividends, and shareholders receive nothing from the business. A common stock in the open market is treated like a game of hot potato among investors. It gets passed around from player to player, no one wants to hold it as an end product, and every player wants more money back than they put in. The companies that issued the stocks won’t contribute any money to the game, but they’ll encourage the frenzy from the sidelines with phrases like “We’re going to make our share value grow and our shareholders happy!” This is why I refer to common stocks as Ponzi assets.

There are extremely rare situations where a company repurchases some of their own stocks or pays nonguaranteed dividends. But these unlikely events are unforeseeable and, for most companies, nonexistent. If it happened once, it might never happen again. And even if does occur, the amount of money the firm gives back is minuscule (like a small fraction of a penny on the dollar) compared to the profits they take and hoard from investors. Even finance people don’t consider these actions as sources of profit for stocks.

The legitimacy of an investment instrument needs to be judged by how the instruments behave on a regular basis— not by unscheduled events that may never occur. And what we can clearly observe from day to day are investors cannibalizing each other while the company they believe they own hoard profits. There is no way to predict “if” or “when” a company will pay dividends or buy back their own stocks. But what is predictable, certain, and observable is that if investors want to receive money for the stocks they are holding, the only foreseeable way it can happen is if they sell it to other investors and engage in the Ponzi process.

The reason why common stocks exist is because companies can use them to raise money they’ll never have to pay back.

Firms have the option of using bonds or preferred stocks to raise money as well, but those instruments would obligate the firm to repay what they borrowed or share profits (guaranteed dividends) with their investors. Those obligations do not legitimately exist with common stocks. There might be some language in the docuмents that make it sound like the company will repay their common stock investors at some point, but there’s nothing definitive, and firms can always find a way to avoid paying their investors.

(. . .)

According to historians, the first stocks came into existence in the early 1600s in Europe, and the first joint-stock companies were in the shipping and trade business. The fact that the first stocks were related to the shipping industry was not a coincidence. If you think about it, shipping was an expensive and risky business that also had very low hands-on work involvement by owners. The owners secured the financing, but they didn’t have to go on the long voyages themselves.

The historian Ranald C. Michie described it as a situation where “Ownership and operation were divorced.”

 It was an ideal situation for silent investors— people who want to own a business without getting their hands dirty. And naturally, in return, investors also expected to receive a portion of the business profits. Back then, people didn’t get involved in something that didn’t pay dividends.

It is docuмented that companies like the Dutch East India Company— which was also believed to be the first joint-stock company to issue stocks— and the South Seas Company paid annual dividends that yielded between 12%– 62%. This means if the stock was $ 100 a share, the investor would receive anywhere between $ 12– $ 62 for every share he or she owned every year.

This shows that the first public companies didn’t just pay dividends, but they paid reasonable & regular dividends. Those companies didn’t pay something unscheduled and trivial, they shared a reasonable amount of profits with their investors and paid them on a regular basis. It shows how vital dividends were for the investors. And, it also shows how much the underlying companies respected their investors’ participation, ownership, and profit-sharing agreement.

The practice of paying dividends was not unique to early European stocks; it was also the norm for American companies until the twentieth century. According to Dr. Bryan Taylor, from Global Financial Data Inc., “virtually all” stock returns during the 1800s came from dividends, not capital gains. Dr. Taylor also says that “the behavior of financial markets in the 1800s, because of the returns to investors, was fundamentally different before and after 1914,” and mentions that one reason why dividends were important was that most people invested in bonds at the time and thought stocks were risky. Dividends weren’t just important to the early European investors; they were an intrinsic part of early US stocks as well.

As I mentioned earlier, there are two ways investors can make money with stocks: dividends and capital gains. These two profiteering methods are fundamentally different. Profits from dividends come from the business, whereas profits from capital gains come from other investors. This is a material difference that regulators and people in finance ignore, but it is literally the difference between legitimate investment profits and Ponzi profits, and the difference between a real equity instrument and a gambling instrument.

If you eliminate dividends from stocks, the stock becomes a fundamentally different financial instrument. History clearly shows that stocks were designed to pay dividends. But today, the common stocks that are being sold to investors behave nothing like the way stocks are supposed to function.

The early stocks before the 1900s were indeed real equity instruments because they paid dividends. They had a legitimate connection to the business because investors’ profits came from the business. The early stocks were not just Ponzi assets that investors traded; the money investors made was directly dependent on the success of the underlying businesses. There’s even evidence that says the very first stock market crash, which took place in London in 1720, was triggered after the South Seas Company missed its dividend payment.

Sure, investors at the time also made money speculating on capital gains; however, their profit was not entirely dependent on the Ponzi process like it is now.

Dividends were not just a source of profit for investors— they were not just an ornamental accessory when the idea of the stock was first conceived. Dividends were an essential component that legitimized stocks as real equity instruments in a company. It established a connection between stocks and the underlying businesses through a profit-sharing agreement. History shows that dividends made stocks legitimate investment instruments. Dividends were the primary source of profits for investors, and the only reason the first investors invested in stocks. The presence of dividends in an investment is also in-line with what we expect from basic intuition and logic: If people invest in a company, then they should expect to receive a share of the profits from the business they own. Frankly, it would be a little disturbing if the investors didn’t expect it.


Stocks are transferable securities, so there’s always the possibility of making money through capital gains. But capital gains were meant to be a secondary source of profit for the investment— a side bet from selling legitimate equity instruments that paid dividends. The possibility of earning capital gains does not bridge a connection between the stock and the underlying company. It does not legitimize stocks as real equity instruments because it does not establish a genuine investment and profit-sharing relationship between the shareholders and the business.


The legitimacy of stocks as an equity instrument is dependent on dividends, not capital gains. There is nothing in history that shows stocks were designed around the idea of capital gains, nor is it logical to think that an owner of a company is not entitled to any profits from the underlying business. Investors back then weren’t stupid. They wouldn’t have gambled on the new stock investment instrument if there was no profit sharing agreement or legitimate promise of repayment from the underlying company. Investors would have invested in government bonds, which they were familiar with and the idea of stocks would have been dead on arrival.

Stocks came into existence because of dividends, and stocks without dividends are nothing more than Ponzi assets.

The common stocks that dominate the stock market today are not equity instruments— they are a mutated form of what legitimate equity instruments once were. When people refer to stocks as equity instruments now, it is nothing more than a false, artificial label. The same people who think common stocks are legitimate equity instruments are also the same people who know nothing about the real history of stocks. They are unaware of the fundamental differences between the early stocks when the idea of the joint-stock company was first conceived, and the common stocks that dominate the market now. The early stocks were legitimate equity instruments because they paid dividends, and the common stocks today are Ponzi assets because they don’t.

In other words, one man's loss is another man's gain.

It's immoral based on the same principles St. Thomas applies to usury, where you make profit without providing any value.  And when people make money trading stocks it always comes at the expensive of someone else who's lost money.

The above post was mine.

Here's a video: