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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: VS who wrote (17122)	3/20/2002 11:24:53 PM
From: GraceZ	Read Replies (1) \| Respond to of 74559

Re: Demand and Supply; I think it does work in determining stock & bond prices. In open markets, how else could prices be set if it weren't for demand and supply? Stocks can change price without any transactions having occurred. Where's your supply demand there? Stock price is set at the margin. You could say marginal demand and marginal supply set the price but that doesn't quite account for it all. All the time you see large numbers of 100 share orders moving price up while large blocks are thrown in as sells with little or no price concession, the total number of shares sold is higher than the buys, money flow is seriously out, yet the price moves up. Then there's a lag in the action and boom the next 3 market orders to sell 100 shares tick the price down each time. This is usually when some bozo on a stock chat board says the price is being manipulated by the MM, but all that happened is that there was a lull in the instantaneous market orders to buy so in order to execute the market order to sell the price has to move in the direction of the booked orders to buy, which in this case is away and below. Now even though the number of orders to buy greatly out number the shares being sold the price moves down. Sometimes the price moving down will bring in marginal supply, sometimes marginal demand.....depending on what? Expectations for future price. Whether those expectations are for 6 cents or 60 dollars, for the next 15 minutes or 15 years, what makes a person press the buy or sell button is that they expect the price to change within a certain time frame. Other factors would be risk premiums, time value of money, availability of capital, govt surpluses/deficits. A change in any of these should result in a change in long term rates. I was talking about long term treasuries, which are usually referred to as zero risk (unless you are talking about principle risk caused by.....you guessed it, expectations for inflation and/or rising rates). TVM is determined by the rate and term, not a cause of it. Availability of capital....let's see have they ever held a treasury bond offering and nobody came? govt surpluses/deficits This is one that the politicians always trot out. Please show me where surpluses and deficits determine long term rates because in my memory we've had huge deficits and low long term rates and we've had huge deficits and high long term rates, we've also had a surplus with low rates and a surplus with high rates.