I want to bring up a few things from today's discussion. Tom said:
Tom, for every buyer there is a seller. When you sell a stock at "market price", you aren't selling it back to the company. You're selling it to someone who's willing to pay the current "ask" price.
There are a finite amount of shares of a given stock owned by individuals at any given time, and this amount doesnt change day to day. It only changes when a company decides to sell more shares. For example, Microsoft company has exactly 9.57 billion shares owned by individuals/companies today. They will have 9.57 billion owned next week, and the week after that too.
So this idea of more or less people being in or out of the market is basically nonsense.
See answer above. What changes isn't the number of people in the market. The only change that occurs is what these people/companies are collectively willing to pay for the finite number of shares that are already distributed and sold.
When an IPO is issued, the total shares made available for sell, i presume are scarfed up before the first day ends. Again, the only thing that changes is the price of those shares. If they're deemed not valuable by the masses, the share price drops.
Yes, there are price splits and reverse splits, but these happen on a specific day and that day generally has no correlation with a bad or good day on the market.
Let's say that there are just 100 people who control the total market. They are the only ones doing the buying and selling, and let's say all 100 say they are currently bearish. Where do you think the market would go from there? Because they are all bearish, they are likely to have all of their money in cash or somewhere other than in stocks.
So, who is left to sell? No one. At worst, the market would stay where it is, that is until one of those 100 folks realizes that the market isn't going down anymore and perhaps he decides he'd rather take a shot at stocks again after being bored by the 4% or 5% his cash account made him.
Tom, for every buyer there is a seller. When you sell a stock at "market price", you aren't selling it back to the company. You're selling it to someone who's willing to pay the current "ask" price.
There are a finite amount of shares of a given stock owned by individuals at any given time, and this amount doesnt change day to day. It only changes when a company decides to sell more shares. For example, Microsoft company has exactly 9.57 billion shares owned by individuals/companies today. They will have 9.57 billion owned next week, and the week after that too.
So this idea of more or less people being in or out of the market is basically nonsense.
Once the last of our 100 investors decides he can no longer take the pain of missing the rally, we now have 100% of our investors calling themselves bullish. Now what happens? The market stops going up because there is no one left to buy. Now the market can start to move lower again.
That's why too many bears is bullish for stocks, and too many bulls is bearish. get it?
See answer above. What changes isn't the number of people in the market. The only change that occurs is what these people/companies are collectively willing to pay for the finite number of shares that are already distributed and sold.
When an IPO is issued, the total shares made available for sell, i presume are scarfed up before the first day ends. Again, the only thing that changes is the price of those shares. If they're deemed not valuable by the masses, the share price drops.
Yes, there are price splits and reverse splits, but these happen on a specific day and that day generally has no correlation with a bad or good day on the market.