It takes no extra money to bid a share price up. 100 shares can change hands, rising in price each time the same two people pass them back and forwards, trading fewer and fewer as the price rises, day trading their way to riches, and all the other shares are reported as having that value. How much money is in circulation is irrelevant. The key factor is that people think they are going to get rich from share price rises.
A corny joke makes the point.
A cowboy, Tex, sold his good horse, Stomper, to his friend, Hoss. He missed the horse, and offered to buy it from Hoss for a few dollars more than Hoss has paid. Hoss agreed. Belatedly, Hoss became aware that he too missed Stomper and therefore offered to buy him from Tex for a few dollars more than Tex had paid.
Stomper's stock kept rising in both cowboys' minds, and Tex and Hoss kept trading Stomper back and forth, the transaction costing each just a few dollars more than the previous one until Tex decided to sell Stomper to someone else.
This last sale of Stomper enraged Hoss. After getting properly liquored up, he brandished his six shooters at Tex, exclaiming:
"How could you do that, you snake, we wuz both making a good livin' off that horse!" |
