THE STOCK MARKET & CASINO SLOT MACHINES


~I have been involved in the stock market for approximately 30 years.  My activity was both short term & long term.  I've traded mostly on a short term basis & invested, in many cases, for my long term interests. Since I'm a mathematics professor, I wanted to understand this market so that I could make very logical decisions. Well, sometimes I could, but most of the time, I couldn't. The market, most of the time, seemed to have a lack of logic & was not subject to reasonable, logical thought.

~Part of my research interests was gaming, specifically the casino slot machines. I was fascinated by them & wanted to find some sort of a system to beat them.  See Casino Slots & Beating The Slots
Well, during my 17 years of research (including approximately a year living in Vegas), I've had very little success.

~However, during the years I've been involved in both the market & the slots, I've noticed a remarkable reverse similarity.  In statistical terms, a negative correlation of activity. Finally, I got what I wanted, an understanding of the market (in my opinion). Let me explain.

~During my casino slot play, I realized that the odds were against me winning in the long run.  However, in the short run, anything could happen.  Many days, I would win, sometimes big, and other days the opposite would happen. I knew that, in the long run, I could not beat these machines for one basic simple reason: They are programmed by a microchip to beat you over the long term. Saying in another way, they are guaranteed a profit for the casino over a long period of time. In the short term, however, anything could happen.  You could lose a bundle or win big. I've done both.
One day at Mohegan Sun casino, I did hit $12,000. The most I've lost was in a 3 day stay at Foxwoods casino many years ago. That was approximately $3,000.  Most of the time, I place a limit on my losses at about $500. When I reach this limit, I quit playing. Some folks do not have the discipline to stop playing & lose much more than they can afford.

~What I noticed was the reverse similarity of successes playing slots with my successes in the market.  For example, the market has proven to be the best place for your money for the long term. This long term could be quite long. The NASDAQ has still not recovered from the tech bust of the late 90's.  That average was over 5000 then and is about half of that presently. However, I believe, in time, it will recover. It just will take more time.

~What I mean by a reverse similarity or negative correlation is that the slots are one of the worse places for your money in the long term, while the market would be one of the best. Every time you get a nice hit playing the slots, equate that with a loss in stocks.  In the long term, the slots will get that money back, while in the market, you'll have the chance of recouping your losses.  My big loss during the tech bust of 2000-2001 is equivalent to a very large hit on a slot machine.  It might take time, but the casino will get that money back.  With my stock loss, it might take time, but I will get some or most of my money back.  Of course, only if I invest or trade wisely.

~So, in summary, if you want to understand the stock market, play the slots & use the reverse logic described in my article. Let me emphasize that this is my own personal opinion & some readers would have completely different ways of thinking of the market. These opinions from others are well respected.

Update: As of 4-23-2015, the NASDAQ composite is at 5056, a new all time high. It took approximately 14 years to recover it's losses from the 2001 tech crash. Update2: As of 12-9-2020, the NASDAQ compostite is at 12,559 and the DOW is at 30,169. Needless to say, all time highs. These averages confirm my theory discussed in this article.