Aug

31

Quote of the Day, from Kim Zussman

August 31, 2010 |

4 Comments so far

1. dave whitesel on August 31, 2010 2:22 pm

   “Well, Maria, the market went down today because there were more sellers than buyers….”

   well Nick, my experience says that the probability of buyers causing the market to go down, is greater than, or equal to the probability of the market going down on selling.

   Admittedly my results are skewed due to restrictions of what stocks to admit into portfolios, set by relative float size.

   when a big, medium or even small hedge fund is known to be going down, shutting its doors, or for watever reason abandoning daily operations, those sales are guaranteed to be met with lower prices, which is systemic utility.

   in most all other circumstances, its public buying that causes prices to fall, simply because the rinse function is the surest way to sustain and neutralize activity, before trying to locate that which is bought is subject to review and audit.

2. Nick White on September 1, 2010 6:24 am

   Well, I’m not particularly clever, so you may be right. However, my belief is different to yours. I suppose your point is somewhat analogous to jumping and the laws of physics. You have a hypothesis that you can defy gravity, so you test it. It’s easy to say - at at the apex of your jump - that you are triumphing over gravity…yet a split second later, the laws re-assert themselves and you find yourself back on the ground.

   And so it is with your point.

   Whilst my comment was tongue in cheek, the truth remains: price fluctuations are, in part - but nonetheless a very large part - a function of supply and demand.

   Revisit here: http://www.amazon.com/Principles-Microeconomics-N-Gregory-Mankiw/dp/0324319169/

   and here:

   http://www.amazon.com/Trading-Exchanges-Market-Microstructure-Practitioners/dp/0195144708/

   Your hedge fund example is odd, too: those redemption sales are met with lower bids….because the other participants know the liquidating fund must sell!!! (see LTCM). Why pay 10 for a stock when you know a seller is reloading volume at every step on the way down? Vice-versa where the fund holds shorts.

   I kind of see your point; buyers might be waiting for prices to go down….but they are in no way “causing” prices to go down as you suggest. In fact, they are behaving precisely as microeconomics 101 would suggest…lots of supply from sellers…less demand from buyers. Your probability comment definitely needs some revision!

   Again, dumb public buying in the face of reloading paper is not “causing” prices to fall….it’s the paper doing it!

3. dave whitesel on September 1, 2010 10:47 am

   You actually believe what you believe. Here is what actual Supply is; The markets float is a relative constant, i’m surprised more folks dont appreciate that.
   The Nasdaq Market Float Since 1997
   Mon/Yr..Trade Days..# Compy..TotlVol…AverD Vol

   Jul-97. 22…..6388… 14,659,052,996.. 666,320,591
   Mar-98. 21…..6143… 17,694,084,535.. 842,575,454
   Jul-99. 21…..5400… 21,249,135,986.. 1,001,863,618
   Jan-00. 20…..5233.…. 33,859,912,232.. 1,692,995,612
   Jul-03. 22…..3671… 38,984,813,325.. 1,772,036,969
   Jan-04. 20…..3560… 46,649,555,963.. 2,332,477,798
   Jul-05. 20…..3441.…. 33,681,072,462.. 1,684,053,623
   Apr-06. 19…..3384… 40,846,016,058.. 2,149,790,319
   Jul-07. 21…..3348… 46,780,102,818.. 2,227,623,944
   Jan-08. 21…..3299… 56,616,100,438.. 2,696,004,783
   Nov-08. 19…..3199… 42,460,731,579.. 2,234,775,346
   Jul-09. 22…..3024… 48,456,198,558.. 2,202,554,480
   Apr-10. 21…..2982… 53,597,263,077.. 2,552,250,623
   May-10………2977….57,205,068,222.. 2,860,253,411
   Sept10 2914companies avg daily Vol about 1.9bil.

4. Savio Shetty on September 2, 2010 3:18 am

   Ha ha….Good one Nick !