"V" <vfr44[at]aol.com> wrote
- quote -

You have the tail wagging the dog. Funds do not create
stocks. Companies do. Generally speaking: (1) The number of
shares of stock of a company is fixed and large; (2) There
are always enough entities (individual persons; mutual
funds; ETFs; corporations in the business of buying stock)
to satisfy both those who want to buy and those who want to
sell at any given time.

What does continually grow is the number of companies
offering stock. But this merely reflects the growing
population; the evolution of an economy from no-tech to
high-tech; and the cultural evolution of the world from
satisfying basic needs to having time for leisure activities
and the companies that offer products supporting leisure.

Also, many mutual funds fail.

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V wrote:

- quote -

John's reply is true, but I'll add this: Each year I have X dollars (say
$10,000) I wish to invest. An equity fund takes money that might go to
individual stocks and invests it in a portfolio of stocks, it's no
different once you have a thousand such investors, that $10M might be
spread out a bit differently, but the nature of the funds doesn't change
thing to the extent you suggest. The funds (along with ETFs) add
liquidity, which is good.

Joe

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In article
<4dbd8a6e-0bd3-4b0b-8f7a-142036d6a9ab[at]d62g2000hsf.googlegroups.com> ,
V <vfr44[at]aol.com> wrote:

- quote -

Lets suppose for a moment that you are correct. If what you
describe was happening, stocks prices would increase without
bound while the value that they represent would stay more or
less the same. The way that this can be measured is by looking
at the P/E ratio. That is the ratio of the price to the earnings
of the stock, and earnings represent the true value of a stock
over time. If what you say is true, the P/E ratio of the entire
market should be at record levels and be increasing at a very
large rate.

What we actually see is a P/E ratio that is higher than its
traditional average, but also one that is relatively stable,
and is actually down from a year 2000/2001 peak.

Since we are not seeing the behavior that would be required
for your statement to be true, we can conclude that your
statement is false.

-john-

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Is the stock market a mega Ponzi scheme built on the constant creation
of new equity funds?

When I look at the massive growth of equity funds over the last 15
years I wonder how much of the stock market is pumped up by the
creation of these fund buying stocks to outfit their portfolios.

They say that 70% of the GDP is based on consumer spending. Without
the constant creation of new funds to keep buying stocks, what would
happen to the stock market?

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