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Wall Street Gamblers, Las Vegas Investors

LAS VEGAS (TheStreet) -- Las Vegas and Wall Street have a lot in common. That isn't always such a bad thing.

A casino is like a stock exchange. Cash-backed securities and stocks are similar to monetized gambling chips. Each buy-in at a poker table is akin to a securities purchase. Stock-market fluctuations are like hot and cold streaks. Risk management and a careful re-investment of wins or earnings are vital.

"Gambling lies at the heart of economic ideas and institutions, no matter how uncomfortable many people in the financial industry are with that idea," Aaron Brown writes in "The Poker Face of Wall Street," which argues that the card game can be used as a tool for learning how to evaluate and embrace financial risk. "Not surprisingly, the game most like the financial markets -- poker -- is hugely popular with financial professionals."

While many who describe financial markets as "gambling" do so in a pejorative way, understanding the winning ways of both cards and stocks -- how to manage risk and maximize reasonable returns -- can be beneficial.

Goldman Sachs (GS), the most profitable investment bank, makes most of its money by speculating where the securities markets are headed. The New York-based bank's FICC unit, which stands for fixed income, currency and commodities, takes bets from clients and charges a fee, and also places wagers with its own money. A key metric is value-at-risk, the sum a bank thinks it could lose from trading in a single day. Goldman's was $208 million last quarter, more than its main rivals, which include Morgan Stanley (MS) and JPMorgan (JPM).

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