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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Pink Minion who wrote (11877)	9/27/2003 8:32:39 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 95541

>> You buy stocks and it could come from selling bonds, real estate, your mattress, etc. Let me examine each of these. 1- selling bonds. When I sell my bonds, the buyer removes money from the sidelines to give to me. If I do nothing beyond selling the bond, then I'll put exactly the same amount that was removed from the sidelines back into the sidelines. 2- selling real estate. Generally the buyer will borrow 80%. Since the bank can lend 10 times what they have in deposits, that can really multiply the money supply. That's how the Fed creates money. By making a deposit at your local bank, so the bank can lend it out 10 times over. But how often do people sell real-estate to buy stocks ? 3- mattress. People who hoard cash never buy stocks. I think of the sources of money for the market, the most likely one is from wage earners' savings, and from companies' pension plan savings. The Fed keeps adding money into the economy to keep pace with the growth of aggregate wages and spending. I think during 1999 money for stocks came from borrowings. Mainly margin. And the collapse occurred because once stock prices dropped a little, margin calls could only be met by selling stock. Speculators had no other assets to sell quickly. And the selling kept going until all the margin was squeezed out. Sarmad