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Notwithstanding Ira's true statement that stocks have no intrinsic value
other than what the going price is at any given time, it seems to me that
the simple answer to Don's question is that money flows into the market when
the total amount of $ that is put into the market by the sellers is greater
than the total amount of $ that is put into the market by the buyers .Let's
do an example Person A buys 100M of XYZ stock from Person B. A now has 100M
of XYZ and B has 100M in Cash. So far eveything is equal. However it is
important to note that A wanted the stock and B wanted the Cash. Since B
wanted Cash it is more likely that he will not reinvest the entire 100M back
into the market. He was a seller. He wanted Cash. He may put some of it in
real estate, he may buy precious metals or other commodities.He may give his
daughter a fancy wedding. He may take a fancy vacation. Who knows how much
he will put back into the market. 40M, 50M, 60M, 70M. Let's assume he puts
back 60M. The market has now gained 60M. Obviously,all transactions are
intertwined in a complex matter.This is just a simple transaction. However,
it seems to me that Don's original question of how does $ flow into stock if
for every buyer there is a seller was a good question. Prices would normally
go up on $ inflow and go down on $ outflow simply as a result of
supply/demand. Dennis is correct in the fact that stock cap. go up or down
based on $ inflow and $ outflow however, it should be noted that the
companies are really not that affected (not counting takeovers, buybacks
etc.) by the change in their stock capitalization.They get their cash in the
initial IPO.Indirectly they are affected if the stocks go down because the
economy follows suit and business slows down and their profits go down.
Dom
.
----- Original Message -----
From: "DH" <catapult@xxxxxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Saturday, March 31, 2001 3:40 PM
Subject: Re: [RT] Buyers/Sellers/Money market
> I think we're making this way too complicated by looking at bids,
> offers, who is buying and selling, and all that micro stuff. Setting
> aside Ira's point that stocks have no intrinsic value, let's look at the
> big picture. The total value of a stock is its price times the number of
> shares. The number of shares stays the same (usually.) So, price goes
> up, the market cap of the company goes up and "money (wealth) flows into
> the market." Price goes down, the market cap of the company goes down
> and "money (wealth) flows out of the market."
>
> Where does the money go when it flows out of the market? Simple. It goes
> to money heaven. Tune in next week for a simple explanation of the
> mysterious and often misunderstood tooth fairy. :-)
>
> --
> Dennis
There is an outfit in Connecticut that measure this during the day
on any given stock
His name is bervarini report
he appeared Many times on CNBC
(my spelling of his name is inaccurate)
his projections have been 100% accurate
However
time is LEADING by 1-2 month
Best regards,
Ben
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