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August 18, 1999






Day-trading called gambling by a new name
___By Dwayne Hastings
___SBC Ethics & Religious Liberty Commission
___NASHVILLE, Tenn. (BP) --The game doesn't involve rolling dice or dealing cards, but day-trading is gambling by any other name, a host of experts on the stock market say.
___Day-trading--the high-pressure avocation of Mark Barton, who killed his wife and two children and then nine people in two Atlanta investment firms July 29 before committing suicide--is the rapid-fire buying and selling of shares of stock to capture small upward ticks in stock prices, seizing quick and sizable financial gains.
___"These traders don't bet on who's gonna win a race; they bet on who's gonna be in the lead after half a lap," mused Jerry Knight of washingtonpost.com in an on-line discussion July 30.
___The meteoric rise in volatile Internet stocks like Yahoo and Amazon.com has made it easy for many to seek quick profits in intense direct-access trading sessions. Stock analysts indicate many of the wild swings common among such technology stock offerings can be traced to trading by these rebels who shun traditional Wall Street admonitions to buy and hold for the long term.
___"Day-trading offers risk-takers one more way to risk everything for the big score," said Barrett Duke, an authority on gambling for the Southern Baptist Convention's Ethics & Religious Liberty Commission.
___"The day-trader expects to make large sums of cash in an extremely short period of time by betting on the mood of the market. While that's not as reckless as betting on a number on a roulette table, it is, nevertheless, gambling."
___"We call it the gambling addiction of the new millennium," said Edward Looney, executive director of the Council on Compulsive Gambling of New Jersey. Speaking in a USA Today article, Looney called day-trading "fertile ground for dangerous compulsions, because day traders place big bets on small, short-term swings in stock prices."
___With the lure of instant wealth has come a flood of eager investors who post large amounts of cash as surety in transactions with no consideration for the value underlying a stock, instead being consumed with its potential for upward movement.
___And this feverish compulsion to beat the odds, getting in and out of a stock purchase at exactly the right moment, remains insatiable. One industry research group estimates that on-line trading has more than tripled since 1996 and will nearly triple again by the year 2002. On-line trading accounts for 14 percent of all equity transactions in the market, reports www.thestreet. com, an Internet investors' daily.
___Valerie Lorenz, director of the Compulsive Gambling Center in Baltimore, in the USA Today story, compared day-trading to slot machines: "It's fast action, constant action, total involvement, and there is an immediate payoff. It's pure gambling. When they lose, it is not just a loss of money, it is a loss of self-esteem and self-assurance."
___Just as the gambler who travels to the casino cocksure he has developed the strategy to beat the house, the attraction of effortless wealth in the trading of securities is intoxicating. It is the better-educated, more affluent traders who think they come with "a strategy, a protocol, a methodology to this day-trading that will inoculate them from risk or extreme loss," said James Marlen, a Dallas securities lawyer, in The Wall Street Journal.
___Yet reality argues otherwise. Most traders lose money. USA Today reported a complaint filed by the state of Massachusetts against Block Trading, a firm catering to day-traders, alleged that only one of 68 accounts in the firm's Boston office was profitable.
___Wall Street patrons insist there's a big difference between the efforts of day-traders to ride the minute-by-minute gains of a particular stock and the labors of traditional stockbrokers to build profitable portfolios for the long haul. And the ERLC's Duke agrees.
___"Day-trading represents the abuse of a system of equity investment that gives ordinary people the opportunity to invest their hard-earned money in the financial strength of the world's businesses. Stock market investing is a legitimate way to make your money grow--for the long term in companies that demonstrate the promise of sound financial growth."

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