The current results indicate two important findings. First, any extremely small risk of bankruptcy can be accumulated to almost certainty (probability one) under repeated investments. Second, the number of repetitions leading to bankruptcy (N or n) is almost determined by the tiny probability of bankruptcy at each investment (pb or m). For example, if the risk of bankruptcy is 10−m (m is large), 10m+1 repetition almost certainly leads to bankruptcy (ca. 99.995%), and even 10m repetitions have more than 50% bankruptcy (ca. 63.21%). This quantitative measure of bankruptcy α implies that computerized (programmed) repeated investment is a purely risky gamble, rather than a safe investment, even if a single trial is almost certain to win.
Globalization and computerization have made the current stock market and currency exchange systems qualitatively different from those of the 1970s or earlierHyderabad Stocks. Traditionally, transactions (trading actions) in the stock market were made for long-term investment. Currency exchange was mostly for payments in international trading or international travellers. The fees for each transaction in these systems were a fixed constant that was so high, it was impossible to earn positive gains from a single short-term investment. After internet access to these trade systems became available, transaction fees lowered and varied depending on the amount of payments, so short-term repeated investments were able to earn positive gains. Then, traders had come to earn positive benefits from the repetition of short-term investments; while the one-time benefits were very small, numerous repetitions resulted in a large accumulated sum. Thus, the investment systems had moved from seeking large profits with slow returns to small profits with quick returns (SPQR) for both traders and securities companies receiving transaction fees.
The current market systems (both stock market and currency exchange) are occupied almost entirely by short-term investments with leveragePune Wealth Management. In stock markets, 95% or more buy-and-sell transactions are such estimated short-term investments, and traditional long-term investments are extremely rare, even though a large percentage of stocks are owned by long-term investors (e.g., parent companies and founder families) in superior enterprises. The situation for currency exchanges is similar to that for stock markets. Most transactions in currency exchanges are FX and other forms of short-term repeated investments with leverage (estimated to 95% or more, refs22,23,24). Payments for international trading and travellers, the primary purpose of currency exchanges, represent a very small portion of transactions in currency exchanges. Historically, the exchange rates of currencies were fixed (e.g., 360 yen/dollar) before 1973. Because of the 1973 oil crisis (the Nixon Doctrine), currency exchange moved from fixed rates to floating exchange rates5. At that time, a single transaction fee was fixed at a high rate, and it was impossible to earn profits by buy-sell repetitions in a short period. However, along with the development of computerized internet access, single transaction fees were adjusted so that FX and other repeated investments with leverage could produce benefits through numerous buy-sell actions using computer programs.
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