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Politics : Ask Michael Burke
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To: BGR who wrote (62485)6/16/1999 2:29:00 AM
From: Don Lloyd  Read Replies (1) of 132070
 
BGR -

(...The opinion even on the farthest ends of the spectrum affect the average price, as it has an effect on the supply and demand for the equity...)

You've convinced me that the argument can go a step further. Supply and demand are also irrelevant unless and until they occur at the margin. It makes no difference how many shares I am willing to buy at 25 if nobody is willing to sell me any. We probably need to distinguish between current price and the future trajectory of price as every trade has the potential of moving the margin. If I am willing to buy an infinite number of shares at 25, my demand _can_ set a lower barrier to the future trajectory of price.

(...OTOH, LT B&H's similarly put upward pressure on the equity price as they reduce the supply of equity available for trading...)

Not at all. The shares that are held will be available for sale at some price, representing a temporary topside price barrier until they are depleted. The subjective value of the shares, based in part on their proportion of ownership, is not changed due to B&H. Your use of the word 'supply' here is not consistent with normal usage. The reduced number of traded shares results in increased volatility of price, not necessarily in an upward trend.

Regards, Don

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