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Pastimes : The Big Picture - Economics and Investing
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To: Arik T.G. who wrote (600)1/31/1999 8:45:00 AM
From: Moominoid  Read Replies (1) of 686
 
Basically the situation seems to be that younger investors are producing net saving in mutual funds and older/retired investors are doing net dissaving in directly held stocks. Foreign investors are also buying US stock (can't remember whether corporations are net buyers or sellers - Yardeni has good stuff on this).

(In all investment markets) overall savers are just balancing dissaving retirees and debt increasing poorer young consumers so that the aggregate household savings rate is zero (Good recent stuff on this in Journal of Economic Perspectives).

If the number of shares was constant then buyers could try to buy as many shares as they like and existing holders as resistant as they like but there would be no net saving through the stock market. Stock prices and market capitalization would go up but those capital gains aren't counted as savings. If that gain in value were tied to actual investment by firms it would be the firms doing the saving not the households.

Like you I don't understand why people think money in money market funds will go into stock. Some of these accounts are tied to brokerage accounts and some not. Even when those are brokerage tied accounts the money might just as well be withdrawn than go back into stocks. (I have three MMs one in US tied to broker and two in Aus one tied to broker and one not).

David
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