19 March 2008

It is just counting;

Gamblers paradise - some make money at the casinos and some others make money on wall street. One would deride the others in that gambling at the casinos is an addiction while betting money on wall street is a mathematical exercise. I see no difference in both. The very first time we invested money on wall street, in a few days we were at atlantic city throwing dice trying to beat the odds.

Casinos have mathematical geeks who model games which rely highly on theories of probabilities and stocastic processes with an added advantage to the casinos treasurey, while on wall street the projections are founded on complex theories of probabilities and alogrithms. So when bear stearns the financial giant known for high risk taking equally with a high revenue production company was sold at $2 after an almost 50 (? not sure) year reign in the industry, the wall street tumbled once again prompting the former ex-chairman of federal reserve Alan Greenspan to declare that the US economy is now in the trench, so deep that it has not faced since world war II. When the casinos loose money no economy is shattered.

However the law of inertia is well balanced in both.

Back in the days when the first hedging on wall street was taking place, the society would eye "wall streeters" as gamblers that has detered the face of the society. Since some of the people who made their money in the bull market put it to some charitable use and gained the reputation of the society, many others also followed suit and in larger numbers. In the days of the internet even commoners (like me) with little money to spare have tried to gamble on wall street with sometimes not very satisfying results. That happened at the dot com bust and inflated stock prices in 2000's and now the same thing has happened with major home loan lenders like citigroup and other institutions which had defaulting borrowers. In both cases the inflated price of the stocks and the inability of the borrower to pay back has driven the wall street lenders to run hither and thither. The probability theories hit a huge rock.
So what 's the difference between the casino and wall street ? Structurally both of them own a stretch of land with tall buildings and kitschy architecture which does not hold the interest of the eye when the lights are switched off. The adrenalin rush at both ends are high when the winning streaks are bright. The risks, the winning and the losses follow one after the other. Surprisingly I can gamble on wall street and play in the casino at the same time online. Noone has to know my gambling addiction at the casino and everyone can know I am one of the brokers working with a famous brokerage firm on wall street. But tomorrow if the famous brokerage are caught bypassing laws, I will be hold in same contempt as I would be if I am a gambling addict at the casino. But this I sure know , the mathematical gurus who made wall street a darling numbers game business are the same people who have made casinos happen and thriving. The arena may be different, but the ring is still the same.

Will we stop playing on wall street or will we stop playing at the casino ? If we stop one, we will definitely stop the other, May be or May be not. What do you think ?


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