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Your data speaks about the companies but not about dollars invested in the stock market. If more people invest more (compared to the growth of companies/stocks

Your data speaks about the companies but not about dollars invested in the stock market. If more people invest more (compared to the growth of companies/stocks) the value increases.

adventured 9y ago
> If more people invest more (compared to the growth of companies/stocks) the value increases I'm not sure why you pointed that out. Of course my data speaks about the companies, the future potential earnings of said companies is mostly what is being (over) paid for.
- ecesena 9y ago
  Maybe I said something imprecise, but my line of thoughts is that the number of people putting money in the stock market in increasing, as well as the total amount of money. If you assume the number of companies and shares is constant, then the value increases. Why some companies and not others? Maybe their ability to attract these money. (The amount of companies/stocks isn't constant, I agree, that's why I was comparing relative growth.)
  - adventured 9y ago
    > Why some companies and not others? Maybe their ability to attract these money. It isn't some companies, it's most of the public companies containing substantial invested capital. The S&P 500 earnings multiple has gone up ~60% since 2011. Currently near 25 times, it's at roughly the second highest non-recessionary level in US history.
    - ecesena 9y ago
      Got it - I misinterpreted your original point and I thought you were specifically pointing to some companies. I think the rest of my argument still holds, more availability of cash = increase value. (I actually just noticed that the top comment says basically the same.)
tedsanders 9y ago
Dollars are not really invested in the market. Every buyer is always matched with a seller, so net cash flow into the market is zero. Dollar flows express valuations but they do not drive them. This is a technical point, but in my opinion it's also an important conceptual point. Stock market prices do not rise because dollars are flowing into them.
- adventured 9y ago
  > so net cash flow into the market is zero That's incorrect. New capital flows into or out of the market constantly. Very frequently the market sees immense net cash flow in, for example typically toward the end of an expansion and just before the next recession or crash. Joe & Jane investor tend to be very late to the party, especially after getting burned badly by the last two asset bubble parties, they joined this one quite late into the expansion. Large amounts of capital - trillions of dollars in the US alone - are essentially always sitting on sidelines, sometimes more of it moves into the market, sometimes more of it moves to 'safety' and out of the market. You can track these capital in and out flows, it's mostly public information. For example, this huge burst after the election: "A whopping $63 billion has poured into U.S. stock funds since Donald Trump won the presidential election, according to the latest tally by Bank of America Merrill Lynch. ... Investors have yanked $37 billion from bond funds since the election. Most of that money rotated right into stock funds. This "great rotation" could be a major story in 2017." http://money.cnn.com/2016/12/19/investing/investors-pour-63-billion-into-stocks-after-election/index.html http://money.cnn.com/2016/12/19/investing/investors-pour-63-...
  - tedsanders 9y ago
    To be clear, after the headline, the first line of the article says that $63B went into stock funds (as opposed to stocks). To make this more concrete, let's imagine how this actually happens. Joe & Jane send $10 to a stock fund. The fund places a market order to buy stock. The market matches the buy order with the lowest sell offer. The fund sends the money to the seller, and the seller sends the stock to the buyer. At the end of the transaction, both the amount of money is conserved (J&J are down $10, but the seller is up $10) and the amount of stock is conserved (J&J have one additional share and the seller is down one share). Money did not move "into" the market. On the opposite side of every buy, there is a sell. For every dollar that J&J sink into the market, sellers are pulling exactly that many dollars out. As the article you link says, there can be net inflows into stock funds. But that's only possible because there are entities besides stock funds that have equal and opposite outflows. In aggregate, buying stock cannot put money into the market because every purchase is also a sale.

Your data speaks about the companies but not about dollars invested in the stock market. If more people invest more (compared to the growth of companies/stocks) the value increases.

adventured 9y ago

> If more people invest more (compared to the growth of companies/stocks) the value increases I'm not sure why you pointed that out. Of course my data speaks about the companies, the future potential earnings of said companies is mostly what is being (over) paid for.

ecesena 9y ago
Maybe I said something imprecise, but my line of thoughts is that the number of people putting money in the stock market in increasing, as well as the total amount of money. If you assume the number of companies and shares is constant, then the value increases. Why some companies and not others? Maybe their ability to attract these money. (The amount of companies/stocks isn't constant, I agree, that's why I was comparing relative growth.)
- adventured 9y ago
  > Why some companies and not others? Maybe their ability to attract these money. It isn't some companies, it's most of the public companies containing substantial invested capital. The S&P 500 earnings multiple has gone up ~60% since 2011. Currently near 25 times, it's at roughly the second highest non-recessionary level in US history.
  - ecesena 9y ago
    Got it - I misinterpreted your original point and I thought you were specifically pointing to some companies. I think the rest of my argument still holds, more availability of cash = increase value. (I actually just noticed that the top comment says basically the same.)

tedsanders 9y ago

Dollars are not really invested in the market. Every buyer is always matched with a seller, so net cash flow into the market is zero. Dollar flows express valuations but they do not drive them. This is a technical point, but in my opinion it's also an important conceptual point. Stock market prices do not rise because dollars are flowing into them.

adventured 9y ago
> so net cash flow into the market is zero That's incorrect. New capital flows into or out of the market constantly. Very frequently the market sees immense net cash flow in, for example typically toward the end of an expansion and just before the next recession or crash. Joe & Jane investor tend to be very late to the party, especially after getting burned badly by the last two asset bubble parties, they joined this one quite late into the expansion. Large amounts of capital - trillions of dollars in the US alone - are essentially always sitting on sidelines, sometimes more of it moves into the market, sometimes more of it moves to 'safety' and out of the market. You can track these capital in and out flows, it's mostly public information. For example, this huge burst after the election: "A whopping $63 billion has poured into U.S. stock funds since Donald Trump won the presidential election, according to the latest tally by Bank of America Merrill Lynch. ... Investors have yanked $37 billion from bond funds since the election. Most of that money rotated right into stock funds. This "great rotation" could be a major story in 2017." http://money.cnn.com/2016/12/19/investing/investors-pour-63-billion-into-stocks-after-election/index.html http://money.cnn.com/2016/12/19/investing/investors-pour-63-...
- tedsanders 9y ago
  To be clear, after the headline, the first line of the article says that $63B went into stock funds (as opposed to stocks). To make this more concrete, let's imagine how this actually happens. Joe & Jane send $10 to a stock fund. The fund places a market order to buy stock. The market matches the buy order with the lowest sell offer. The fund sends the money to the seller, and the seller sends the stock to the buyer. At the end of the transaction, both the amount of money is conserved (J&J are down $10, but the seller is up $10) and the amount of stock is conserved (J&J have one additional share and the seller is down one share). Money did not move "into" the market. On the opposite side of every buy, there is a sell. For every dollar that J&J sink into the market, sellers are pulling exactly that many dollars out. As the article you link says, there can be net inflows into stock funds. But that's only possible because there are entities besides stock funds that have equal and opposite outflows. In aggregate, buying stock cannot put money into the market because every purchase is also a sale.