what does it mean to say "money flowed into stocks"?

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thermo
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what does it mean to say "money flowed into stocks"?

Post by thermo »

From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."

This doesn't make sense to me. All stock buys are matched by sales. The money flowing in has to equal the money flowing out.

There must be some meaning to these statements that I haven't interpreted correctly. What have I missed?
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Re: what does it mean to say "money flowed into stocks"?

Post by dbr »

thermo wrote: Sat Jun 18, 2022 3:52 am From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."

This doesn't make sense to me. All stock buys are matched by sales. The money flowing in has to equal the money flowing out.

There must be some meaning to these statements that I haven't interpreted correctly. What have I missed?
I suppose there is a definition somewhere, but I don't follow the concept either. Of course stocks are not money so the image of a conserved quantity flowing in and flowing out makes no sense. The value of stocks computed from number of shares times price of shares can be created or destroyed in great volumes on any day.

Note one illogical aspect of the data above is a source that supplied $68.6B feeding a sink that absorbed only $16.6B. I have no idea what that is supposed to mean.
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Re: what does it mean to say "money flowed into stocks"?

Post by bertilak »

dbr wrote: Sat Jun 18, 2022 11:45 am
thermo wrote: Sat Jun 18, 2022 3:52 am From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."

This doesn't make sense to me. All stock buys are matched by sales. The money flowing in has to equal the money flowing out.

There must be some meaning to these statements that I haven't interpreted correctly. What have I missed?
I suppose there is a definition somewhere, but I don't follow the concept either. Of course stocks are not money so the image of a conserved quantity flowing in and flowing out makes no sense. The value of stocks computed from number of shares times price of shares can be created or destroyed in great volumes on any day.

Note one illogical aspect of the data above is a source that supplied $68.6B feeding a sink that absorbed only $16.6B. I have no idea what that is supposed to mean.
Could it mean high (increasing) volume with high (increasing) prices? That would be my guess.
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Re: what does it mean to say "money flowed into stocks"?

Post by martincmartin »

thermo wrote: Sat Jun 18, 2022 3:52 am From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."

This doesn't make sense to me. All stock buys are matched by sales. The money flowing in has to equal the money flowing out.
To simplify, imagine a world where there are only two securities: 100 shares of company XYZ worth $1 each, and 100 of something called "bonds" for $2 each. So market cap at start:

XYZ: 100 x $1 = $100
bonds: 100 x $2 = $200

Now, company XYZ announces its new product: the eyeRoll. OMG! So cool! Everybody wants one! Everybody is buying one! So XYZ will be making higher profits than we thought before the announcement, and those profits will be paid to shareholders as dividends.

So people say "I wanna get me some shares of XYZ!" The people who hold bonds are willing to sell them to get the money to buy shares of XYZ. But most other people are doing the same thing, so there are lots of sellers of bonds and bond prices are dropping. And there are lots of buyers of XYZ shares, so the price of those are rising. But who's on the other side of these trades? The much smaller group of cynics. "The eyeRoll is fad! A year from now, shares of XYZ will be back to $1 which I believe is their long term average, and bonds will be back to where they were too. So I'm happy to sell my XYZ shares at a premium to these suckers fellow investors, and use the money to buy bonds on the cheap! I'm laughing all the way to the bank!" At the end of the day, the last trade was someone selling two bonds, at $1 each, in order to buy a single share of XYZ, at $2. The other side of that trade was a cynic, who used the $2 from selling the XYZ share to buy two bonds for $1 each. Each trader thought they were smarter than the other.

So now the market cap is:

XYZ: 100 x $2 = $200
bonds: 100 x $1 = $100

In some sense, $100 has flowed from bonds into shares of XYZ, even though:

- The total money invested stayed the same: $300
- The total number of XYZ shares stayed the same: 100
- The total number of bonds stayed the same: 100
- For every seller there was a buyer and vice versa.
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Re: what does it mean to say "money flowed into stocks"?

Post by grabiner »

It's probably a report on mutual fund flows. When the stock market is rising, individual investors tend to move their IRA and 401(k) money into stock funds; these funds may then buy stocks from pension funds, hedge funds, and other institutions.

The overall flow into stocks is determined only by issuance and redemption of shares. If a corporation has an IPO or secondary offering, all shares bought at the offering create new flows into stocks.
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Re: what does it mean to say "money flowed into stocks"?

Post by dumbmoney »

thermo wrote: Sat Jun 18, 2022 3:52 am From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."

This doesn't make sense to me. All stock buys are matched by sales. The money flowing in has to equal the money flowing out.

There must be some meaning to these statements that I haven't interpreted correctly. What have I missed?
They're talking about fund flows. It's meaningless noise, but since the data is readily available, it gets reported.

Money does flow into and out of stock markets, bond markets, etc. - they aren't static - but such flows are rarely discussed as flows. They would say "IPOs raised $X billion", not "$X billion flowed into stocks".
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Re: what does it mean to say "money flowed into stocks"?

Post by gmaynardkrebs »

It means you are spending too much time watching CNBC. It's nonsense.
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Re: what does it mean to say "money flowed into stocks"?

Post by JackoC »

The common numbers give are definitely 'fund flows' as in flows into or out of different types of fund vehicle, namely mutual funds and ETF's (rather than 'flow of funds' generally). Sometimes the TV or print journalist will imprecisely quote the numbers as 'money moving into/out of the stock market' but such stats don't tell you that as others already noted. There is net flow in/out of the stock/bond market via net issuance and redemption of stocks/bonds by companies, but the commonly quoted numbers are just telling you the net amount which flowed to/from MF/ETF's (generally from/to individuals or entities holding stocks/bonds outside those structures). There are people sophisticated enough to know that who still believe the figures are of some interest because they gauge the mood of relatively smaller individual investors who hold most of their stock/bonds though MF/ETF. But obviously institutions also own funds (particularly ETF's), 'small' individuals directly own shares/bonds. And it's not obvious anyway what you can deduce from 'small' investors 'liking' the market more or less than other participants. Lots of discussion on TV as if you can, but...

Another case like this is quotes of short interest. There has to be a new long for every short. If a stock has $10bil of float and $20 bil wants to be short at that price there has to be another $20bil willing go to long at that price, it's $30bil-$20bil. It might be significant that it's $30bil-$20bil rather than $12bil-$2bil but sometimes it's discussed as if there's somehow a lot more $'s that want to be short the stock than long it at now's price, which can't be. Same also with quotes of 'short positions in the futures market' for X or Y. It has to be excluding the positions of some participants (for example trading firms on the exchange) or else it would always be zero.
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Re: what does it mean to say "money flowed into stocks"?

Post by nisiprius »

File it under Just Stuff People Say. Don't waste time trying to figure out if it means anything.
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Re: what does it mean to say "money flowed into stocks"?

Post by toddthebod »

thermo wrote: Sat Jun 18, 2022 3:52 am The money flowing in has to equal the money flowing out.
That is self-evidently false. Otherwise how would you ever sell for a higher price than you paid?

There's an IPO. The company's shares are valued at $100. A bunch shares are sold at that price. You come along at a later date and want to buy a share. You pay someone $101 for their share. One dollar just "flowed in" that wasn't there before.
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Re: what does it mean to say "money flowed into stocks"?

Post by grabiner »

toddthebod wrote: Sat Jun 18, 2022 5:31 pm
thermo wrote: Sat Jun 18, 2022 3:52 am The money flowing in has to equal the money flowing out.
That is self-evidently false. Otherwise how would you ever sell for a higher price than you paid?

There's an IPO. The company's shares are valued at $100. A bunch shares are sold at that price. You come along at a later date and want to buy a share. You pay someone $101 for their share. One dollar just "flowed in" that wasn't there before.
The IPO is what created the flow. When the company IPOed, new stock was created, and $100 was invested in stock that had not previously been invested in stock. In contrast, when you bought the share for $101, someone else sold the share for $101, so the total amount invested in stock didn't change.
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Re: what does it mean to say "money flowed into stocks"?

Post by Logan Roy »

The way I'd describe it is in terms of supply and demand. If there are more buyers than sellers, those sellers may demand a higher (ask) price. Buyers have to decide if they want to offer a higher (bid) price. So that asset you bought for $100, you're now selling for $110.

Take a hypothetical, in which there's just one share of a business being traded. If I bought it yesterday for $100, and I'm selling it today for $110, then $10 has flowed into that stock's market value.
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Re: what does it mean to say "money flowed into stocks"?

Post by bertilak »

Logan Roy wrote: Sun Jun 19, 2022 3:20 am The way I'd describe it is in terms of supply and demand. If there are more buyers than sellers, those sellers may demand a higher (ask) price. Buyers have to decide if they want to offer a higher (bid) price. So that asset you bought for $100, you're now selling for $110.

Take a hypothetical, in which there's just one share of a business being traded. If I bought it yesterday for $100, and I'm selling it today for $110, then $10 has flowed into that stock's market value.
I THINK this is what I said above: Money is flowing into the market when there is activity in a rising market. I think it can be quantified based on the amount (volume) of activity. I should probably have added as a a factor the amount prices have risen.
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Re: what does it mean to say "money flowed into stocks"?

Post by Logan Roy »

bertilak wrote: Sun Jun 19, 2022 5:43 am
Logan Roy wrote: Sun Jun 19, 2022 3:20 am The way I'd describe it is in terms of supply and demand. If there are more buyers than sellers, those sellers may demand a higher (ask) price. Buyers have to decide if they want to offer a higher (bid) price. So that asset you bought for $100, you're now selling for $110.

Take a hypothetical, in which there's just one share of a business being traded. If I bought it yesterday for $100, and I'm selling it today for $110, then $10 has flowed into that stock's market value.
I THINK this is what I said above: Money is flowing into the market when there is activity in a rising market. I think it can be quantified based on the amount (volume) of activity. I should probably have added as a a factor the amount prices have risen.
Yes. I think for the phrase to make sense it would have to involve some equivalence of volume between a price move.
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

Seems to me that it means that people were net buyers of stock. That is, if I move money from a money market and buy your stock, but you use the proceeds to buy another stock, there has been a net inflow into stocks. The person from whom you purchased your stock may have shifted the money to a different stock, etc. If such transactions are measured over a finite time period, you will see a net shifting of dollars between asset classes.
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Re: what does it mean to say "money flowed into stocks"?

Post by toddthebod »

grabiner wrote: Sat Jun 18, 2022 11:43 pm
toddthebod wrote: Sat Jun 18, 2022 5:31 pm
thermo wrote: Sat Jun 18, 2022 3:52 am The money flowing in has to equal the money flowing out.
That is self-evidently false. Otherwise how would you ever sell for a higher price than you paid?

There's an IPO. The company's shares are valued at $100. A bunch shares are sold at that price. You come along at a later date and want to buy a share. You pay someone $101 for their share. One dollar just "flowed in" that wasn't there before.
The IPO is what created the flow. When the company IPOed, new stock was created, and $100 was invested in stock that had not previously been invested in stock. In contrast, when you bought the share for $101, someone else sold the share for $101, so the total amount invested in stock didn't change.
That math implies we are just talking about market capitalization. In that case, if there are million outstanding shares, my purchase of a single share for $101 has increased the "total amount invested in stock" by a million dollars. And the amount the seller had invested increased by a dollar just by virtue of my bid price.

I agree that in certain contexts it makes sense to use language like that, for example if I invested $100,000 and now it was worth $200,000, I would say I have $200,000 invested in the market. But in this context it doesn't make sense.

Consider instead something less easily valued and not as fungible as shares of equities. Ten people invest $100,000 in ten different things, and until they sell, all we can say is they have $1,000,000 invested in those things. One guy sells his thing to another guy for $110,000, so now ten people collectively have $1,010,000 invested in things.

Anyway, that's a lot of words for something silly and meaningless.
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Re: what does it mean to say "money flowed into stocks"?

Post by mega317 »

Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am but you use the proceeds to buy another stock,
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
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Re: what does it mean to say "money flowed into stocks"?

Post by JackoC »

Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am Seems to me that it means that people were net buyers of stock. That is, if I move money from a money market and buy your stock, but you use the proceeds to buy another stock, there has been a net inflow into stocks. The person from whom you purchased your stock may have shifted the money to a different stock, etc. If such transactions are measured over a finite time period, you will see a net shifting of dollars between asset classes.
But somebody also sold the 'different stock'. :happy Their money 'flowed out of the market'. It really would come out to zero net if there was no issuance or redemption of shares (or bonds, keeping in mind these 'flows' numbers are often quoted for bond funds too). If the total share float was constant, the value of that float could vary widely, but there would be no sensible concept of net money flowing in or out of the stock market, because there would always have to be a seller taking out the same $'s as the next buyer is putting in.

That's not true in the real world because there is net issuance of new shares and redemption of existing ones. But, that is *not* what the 'flows' numbers bandied about on CNBC etc. are measuring. They are simply measuring the flow into and out of stock 'funds' as in Exchange Traded *Funds* and Mutual *Funds*, not 'funds' as in any money involved in any stock transaction. That number can vary widely positive or negative, the other side of which is stocks net purchased/sold by people or institutions directly holding shares, not via MF/ETF. There's an argument that such numbers have significance because they gauge the sentiment of the type of investor who uses MF/ETF (an argument which could also be rejected) but that's what it means. It doesn't mean net issuance/redemption of underlying stock shares, and without new issuance/redemption the total $ flow into the stock market every day is zero.
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Re: what does it mean to say "money flowed into stocks"?

Post by nisiprius »

I have the feeling this is something like differential calculus, and Zeno's paradox of the arrow.

The arrow must always be some place, therefore at any literal instant of time it must be motionless, therefore it can't move. Differential calculus introduces the idea that it isn't really motionless, the motionlessness is just the mathematical limit of what happens to the change in position as the change in time approaches zero.

The tricky bit is what it means to say there is money "in" a stock.

My self-invented explanation:

At any given moment, a stock has a market value. Because of the liquidity of the stock market, the market value is very close to being "real," you can reliably buy or sell the stock at something very close to the market price. The stock is "worth" the market price. For some purposes, we accept the idea that there is money inside the stock. We can take it out by selling the stock, we can put it in by buying the stock.

Let's accept that market value = price at which the stock last traded = the amount of money that is "in" the stock at that instant of time.

If you sell me a stock for $100, I give you $100 and at that moment that's the last trade, $100 is the market price, the stock is still "worth" $100. You have taken $100 "out" of the stock, I have put $100 "in" the stock, so, net, no money has flowed out of or into the stock.

Now someone offers to buy the stock for $101. You agree.

Because of the offer, the market value of the stock rises to $101. They pay you $101, you receive $101.

The market price of the stock is the price of the last transaction. It is now $101. Money has indeed flowed "into" the stock.

The time when the money flowed in was not the moment of either transaction. It was the moment when the agreement was made to transact at $101, when the last transaction had been $100.

A has the stock. B has $100.
B has the stock. A has $100. A took $100 out of the stock.
Now C comes in. B has the stock. C has $101.
Now B has $101. C has the stock. C put $101 into the stock.

The "flow" is what happens in between A taking $100 out of the stock and C putting $101 into the stock.

In order for money to "flow into stocks," it's not sufficient for someone to have cash and want stocks. It is necessary for someone to have cash, want stocks, and willing to make a bid at higher than the price of the last transaction. It's the willingness to buy at a higher and higher prices that makes it possible for money to flow into stocks.

Unfortunately, to say that "money is flowing into stocks" simply means that stock prices are rising. It's not an explanation, just an obfuscated description. It's like saying "why are people driving faster? It's because they are stepping on the accelerator more."

Saying "money flowed into stocks" is silly, because it doesn't explain anything. But saying "it's impossible for money to flow into stocks because the purchase and sale amounts in a transaction match" is wrong, given a plausible definition of what "the money in a stock" means.

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Re: what does it mean to say "money flowed into stocks"?

Post by dbr »

nisiprius wrote: Mon Jun 20, 2022 10:15 am I have the feeling this is something like differential calculus, and Zeno's paradox of the arrow.

The arrow must always be some place, therefore at any literal instant of time it must be motionless, therefore it can't move. Differential calculus introduces the idea that it isn't really motionless, the motionlessness is just the mathematical limit of what happens to the change in position as the change in time approaches zero.

Actually it is the opposite. In differential calculus the limit of change in position divided by change in time just exactly does not equal zero, which is how we can understand that the "motionless" arrow is in fact moving. Defining velocity as the derivative of position as a function of time is what gets us there along with getting to the idea that said position function is continuous.

The mathemartical definition of continuity and the definition of derivative that follows from it is a monumental breakthough in mathematics that poor Zeno did not comprehend in the slightest. The insight started with the concept of infinitesimals by Leibniz in the seventeenth century but was not finished until Cauchy and Weierstrass in the nineteenth century and by then understanding of the continuum of real numbers by Dedikind and finally Cantor at the turnover to the twentieth century. Even today not all of mathematics completely accepts all the notions.


The tricky bit is what it means to say there is money "in" a stock.

My self-invented explanation:

At any given moment, a stock has a market value. Because of the liquidity of the stock market, the market value is very close to being "real," you can reliably buy or sell the stock at something very close to the market price. The stock is "worth" the market price. For some purposes, we accept the idea that there is money inside the stock. We can take it out by selling the stock, we can put it in by buying the stock.

Let's accept that market value = price at which the stock last traded = the amount of money that is "in" the stock at that instant of time.

Accepting that is where one of the problems starts. There is no money "in" the stock. It is true we value assets in units of money but that does not make assets money.

The rest of your explanation is probably ok except that I am pretty sure what the articles that talk about money flows are talking about is not this. I think the post by JackoC may be the explanation. In any case the data cited by the OP is actually coming from someplace where someone is tabulating statistics that must be defined by someone.


If you sell me a stock for $100, I give you $100 and at that moment that's the last trade, $100 is the market price, the stock is still "worth" $100. You have taken $100 "out" of the stock, I have put $100 "in" the stock, so, net, no money has flowed out of or into the stock.

Now someone offers to buy the stock for $101. You agree.

Because of the offer, the market value of the stock rises to $101. They pay you $101, you receive $101.

The market price of the stock is the price of the last transaction. It is now $101. Money has indeed flowed "into" the stock.

The time when the money flowed in was not the moment of either transaction. It was the moment when the agreement was made to transact at $101, when the last transaction had been $100.

A has the stock. B has $100.
B has the stock. A has $100. A took $100 out of the stock.
Now C comes in. B has the stock. C has $101.
Now B has $101. C has the stock. C put $101 into the stock.

The "flow" is what happens in between A taking $100 out of the stock and C putting $101 into the stock.

In order for money to "flow into stocks," it's not sufficient for someone to have cash and want stocks. It is necessary for someone to have cash, want stocks, and willing to make a bid at higher than the price of the last transaction. It's the willingness to buy at a higher and higher prices that makes it possible for money to flow into stocks.

Unfortunately, to say that "money is flowing into stocks" simply means that stock prices are rising. It's not an explanation, just an obfuscated description. It's like saying "why are people driving faster? It's because they are stepping on the accelerator more."

Saying "money flowed into stocks" is silly, because it doesn't explain anything. But saying "it's impossible for money to flow into stocks because the purchase and sale amounts in a transaction match" is wrong, given a plausible definition of what "the money in a stock" means.

(And now, for my next act, I shall explain why a mirror reverses left and right, but not top and bottom.)
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Re: what does it mean to say "money flowed into stocks"?

Post by JackoC »

nisiprius wrote: Mon Jun 20, 2022 10:15 am
Let's accept that market value = price at which the stock last traded = the amount of money that is "in" the stock at that instant of time.

If you sell me a stock for $100, I give you $100 and at that moment that's the last trade, $100 is the market price, the stock is still "worth" $100. You have taken $100 "out" of the stock, I have put $100 "in" the stock, so, net, no money has flowed out of or into the stock.

Now someone offers to buy the stock for $101. You agree.

Because of the offer, the market value of the stock rises to $101. They pay you $101, you receive $101.

The market price of the stock is the price of the last transaction. It is now $101. Money has indeed flowed "into" the stock.
No, the value of the stock market measured in $'s as the unit of account has increased in the second case over the first, but the second transaction is exactly the same as the first in terms of the flow of $'s as means of exchange. In the first case the seller, A, takes $100 out of the market but the buyer B puts $100 into market. In the second transaction B, now a seller, takes $101 out of the market but only can do that if there's a C putting $101 in. Let's say A, B, C all take or put the relevant funds into checking accounts at the same bank. The total cash balances at that bank are unchanged. The correct meaning of 'flow of funds into the stock market' would be if the bank's cash balances decreased (as a direct result of that activity). Which would be true if A, B or C purchased a newly issued share of stock. If they are merely exchanging existing shares with one another there is never by definition any net flow of money into or out of the market. 'Creation of new value' does not equate to 'flow of money into the market', those are two different things.

Though again, the commonly quoted 'funds flow' numbers mean flow into/out of one subset of stock holdings, those held by MF/ETF, that's what 'funds' means in 'funds flow', not 'flow of money'. When the net flow is into (shares held by Mutual or Exhange Traded) funds, and ignoring new issuance (often small compared to 'funds flow' in a given period) it must be out of shares held directly, and vice versa.
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Re: what does it mean to say "money flowed into stocks"?

Post by nisiprius »

JackoC wrote: Mon Jun 20, 2022 1:44 pm...'Creation of new value' does not equate to 'flow of money into the market', those are two different things...
Point taken.
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Re: what does it mean to say "money flowed into stocks"?

Post by langlands »

JackoC wrote: Mon Jun 20, 2022 9:20 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am Seems to me that it means that people were net buyers of stock. That is, if I move money from a money market and buy your stock, but you use the proceeds to buy another stock, there has been a net inflow into stocks. The person from whom you purchased your stock may have shifted the money to a different stock, etc. If such transactions are measured over a finite time period, you will see a net shifting of dollars between asset classes.
But somebody also sold the 'different stock'. :happy Their money 'flowed out of the market'. It really would come out to zero net if there was no issuance or redemption of shares (or bonds, keeping in mind these 'flows' numbers are often quoted for bond funds too). If the total share float was constant, the value of that float could vary widely, but there would be no sensible concept of net money flowing in or out of the stock market, because there would always have to be a seller taking out the same $'s as the next buyer is putting in.

That's not true in the real world because there is net issuance of new shares and redemption of existing ones. But, that is *not* what the 'flows' numbers bandied about on CNBC etc. are measuring. They are simply measuring the flow into and out of stock 'funds' as in Exchange Traded *Funds* and Mutual *Funds*, not 'funds' as in any money involved in any stock transaction. That number can vary widely positive or negative, the other side of which is stocks net purchased/sold by people or institutions directly holding shares, not via MF/ETF. There's an argument that such numbers have significance because they gauge the sentiment of the type of investor who uses MF/ETF (an argument which could also be rejected) but that's what it means. It doesn't mean net issuance/redemption of underlying stock shares, and without new issuance/redemption the total $ flow into the stock market every day is zero.
Do you know a reliable place to get flow data? I've noticed that reporting on this topic is typically spotty, with the type of "flow" being discussed seemingly purposefully left vague. Here are two articles that seem to give contradictory impressions of retail flow (both written in mid-May). I'm sure if you dig in, both articles are technically "correct," but that just confirms my point that there is no well accepted and robust way of interpreting this data.

Retail inflows at nearly all-time high despite market turbulence
Retail traders no longer ‘buyer of first resort’ as US stocks slide

Your point that ultimately without redemptions, flow is net zero also doesn't seem to be emphasized. One gets the feeling reading these articles that likely the author doesn't even realize this. Otherwise, I'd expect a clearer delineation on who exactly is buying and selling (since it's mostly zero sum), i.e. retail has been net buying ETF's and single names like TSLA, which has been offset by institutions selling single names in large quantity, especially retail favorites like TSLA, etc. etc.
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

mega317 wrote: Mon Jun 20, 2022 1:34 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am but you use the proceeds to buy another stock,
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
Not exactly. Over a finite period of time, sellers of stock can all buy stock with the proceeds.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

JackoC wrote: Mon Jun 20, 2022 9:20 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am Seems to me that it means that people were net buyers of stock. That is, if I move money from a money market and buy your stock, but you use the proceeds to buy another stock, there has been a net inflow into stocks. The person from whom you purchased your stock may have shifted the money to a different stock, etc. If such transactions are measured over a finite time period, you will see a net shifting of dollars between asset classes.
But somebody also sold the 'different stock'. :happy Their money 'flowed out of the market'. It really would come out to zero net if there was no issuance or redemption of shares (or bonds, keeping in mind these 'flows' numbers are often quoted for bond funds too).
Not true over a finite period of time - which is how this is always measured.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: what does it mean to say "money flowed into stocks"?

Post by JackoC »

Call_Me_Op wrote: Mon Jun 20, 2022 4:42 pm
mega317 wrote: Mon Jun 20, 2022 1:34 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am but you use the proceeds to buy another stock,
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
Not exactly. Over a finite period of time, sellers of stock can all buy stock with the proceeds.
Yes exactly, over any time period. If there's no redemption or issuance of new shares, every purchase of existing shares ('money going in') has a corresponding sale ('money going out') of existing shares for the same $ amount. 'Sellers of stock can all buy stock with the proceeds' yes, but if it's existing shares they have to buy from them from somebody else, who is then the one 'taking money out of the market' for that same amount. The net flow of money into/out of the stock market via all trading of existing shares is zero, axiomatically, not depending on timeframe.
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

JackoC wrote: Tue Jun 21, 2022 8:47 am
Call_Me_Op wrote: Mon Jun 20, 2022 4:42 pm
mega317 wrote: Mon Jun 20, 2022 1:34 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am but you use the proceeds to buy another stock,
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
Not exactly. Over a finite period of time, sellers of stock can all buy stock with the proceeds.
Yes exactly, over any time period. If there's no redemption or issuance of new shares, every purchase of existing shares ('money going in') has a corresponding sale ('money going out') of existing shares for the same $ amount. 'Sellers of stock can all buy stock with the proceeds' yes, but if it's existing shares they have to buy from them from somebody else, who is then the one 'taking money out of the market' for that same amount. The net flow of money into/out of the stock market via all trading of existing shares is zero, axiomatically, not depending on timeframe.
True, but if that money is not deposited into another asset class over the time period in question, this can be viewed as money having flowed into stocks. I think the precise answer to this question depends upon exactly how the net in-flow/out-flow is being measured.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: what does it mean to say "money flowed into stocks"?

Post by JackoC »

Call_Me_Op wrote: Tue Jun 21, 2022 8:55 am
JackoC wrote: Tue Jun 21, 2022 8:47 am
Call_Me_Op wrote: Mon Jun 20, 2022 4:42 pm
mega317 wrote: Mon Jun 20, 2022 1:34 am
Call_Me_Op wrote: Sun Jun 19, 2022 6:29 am but you use the proceeds to buy another stock,
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
Not exactly. Over a finite period of time, sellers of stock can all buy stock with the proceeds.
Yes exactly, over any time period. If there's no redemption or issuance of new shares, every purchase of existing shares ('money going in') has a corresponding sale ('money going out') of existing shares for the same $ amount. 'Sellers of stock can all buy stock with the proceeds' yes, but if it's existing shares they have to buy from them from somebody else, who is then the one 'taking money out of the market' for that same amount. The net flow of money into/out of the stock market via all trading of existing shares is zero, axiomatically, not depending on timeframe.
True, but if that money is not deposited into another asset class over the time period in question, this can be viewed as money having flowed into stocks. I think the precise answer to this question depends upon exactly how the net in-flow/out-flow is being measured.
No, buying/selling stocks among entities outside the company which issued the shares results in zero net money 'flowing' into or out of stocks. It' s axiomatic, no exceptions in any timeframe, any calculation which comes up with a net number other than zero due to all secondary trading is wrong.*

The only way money can 'go into the market' net is by issuance of new securities. There is a minor definitional issue there. Companies sometimes hold their own shares, called 'treasury shares'. But sale/purchase of treasury shares by the company is primary issuance/redemption, in economic essence the same as creating new shares or extinguishing existing ones. If the company sells treasury shares or creates new shares either one *does* cause net money to move into stocks. If the company buys its own shares, whether they technically become treasury shares or are actually extinguished, net money has moved out of the stock market. Likewise an important way 'money moves into the market' is where the higher *value* of existing equity shares allows the company to issue more bonds (the added equity value represents more current or future asset value as collateral to make lenders willing to lend more). But secondary trading, exchanging securities for cash among entities outside the company, can't result in 'money moving into the market' net. Buyer for every seller, same $ amount, iron law.

*going back to thread topic, published numbers of 'fund flows' do not purport to show the 'net money flowing in and out of the stock market' overall but rather money moving from one kind of holder (those who hold their shares via MF/ETF's) to another kind (those who hold their shares directly). Be assured the people who actually compile this data understand that difference, even if not everyone who uses the data does.
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Re: what does it mean to say "money flowed into stocks"?

Post by Tanelorn »

JackoC wrote: Tue Jun 21, 2022 10:50 am buying/selling stocks among entities outside the company which issued the shares results in zero net money 'flowing' into or out of stocks. It' s axiomatic, no exceptions in any timeframe, any calculation which comes up with a net number other than zero due to all secondary trading is wrong.* ... Buyer for every seller, same $ amount, iron law.

*going back to thread topic, published numbers of 'fund flows' do not purport to show the 'net money flowing in and out of the stock market' overall but rather money moving from one kind of holder (those who hold their shares via MF/ETF's) to another kind (those who hold their shares directly). Be assured the people who actually compile this data understand that difference, even if not everyone who uses the data does.
Exactly this. There is no net money flow, seller gets what the buyer paid. The “fund flows” are some subset of the market, like mutual funds, where those funds can be net buyers or sellers, but of course hedge funds or institutional investors are then in aggregate net sellers or buyers in the same amount to square the books.
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

JackoC wrote: Tue Jun 21, 2022 10:50 am
Call_Me_Op wrote: Tue Jun 21, 2022 8:55 am
JackoC wrote: Tue Jun 21, 2022 8:47 am
Call_Me_Op wrote: Mon Jun 20, 2022 4:42 pm
mega317 wrote: Mon Jun 20, 2022 1:34 am
What happened to the seller of that stock? Either into a non stock (no net change from your original non stock position) or buys another stock and the question can be asked of the next seller and so on.
Not exactly. Over a finite period of time, sellers of stock can all buy stock with the proceeds.
Yes exactly, over any time period. If there's no redemption or issuance of new shares, every purchase of existing shares ('money going in') has a corresponding sale ('money going out') of existing shares for the same $ amount. 'Sellers of stock can all buy stock with the proceeds' yes, but if it's existing shares they have to buy from them from somebody else, who is then the one 'taking money out of the market' for that same amount. The net flow of money into/out of the stock market via all trading of existing shares is zero, axiomatically, not depending on timeframe.
True, but if that money is not deposited into another asset class over the time period in question, this can be viewed as money having flowed into stocks. I think the precise answer to this question depends upon exactly how the net in-flow/out-flow is being measured.
No, buying/selling stocks among entities outside the company which issued the shares results in zero net money 'flowing' into or out of stocks. It' s axiomatic, no exceptions in any timeframe, any calculation which comes up with a net number other than zero due to all secondary trading is wrong.*
I see where you are coming from with that statement assuming that no new shares are created or redeemed - except that brokers do leak money out of the system (bid-ask spread).
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: what does it mean to say "money flowed into stocks"?

Post by hi_there »

I don't know if the result is meaningless, if we think fund inflows and outflows are a gauge of investor sentiment (and the counterparties would be market makers, share issuers, and so on). The same investors who drive fund inflows might also be the ones who evacuate and drive market prices lower if sentiment changes.
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Re: what does it mean to say "money flowed into stocks"?

Post by blueskytoo »

:oops:

I think every one has missed the original meaning that was expressed.

"The bank reported"
is the correct context, and presumably, it is both a bank and broker.

If in the relevant month, the customers rebalanced their portfolios to the extent that they:

Sold 40% of their bonds.
Used 30% of their deposits to buy stocks.
Used the 40% from the bond sales to buy stocks.

They would then report that their customers had flows of 40% out of bonds, 30% out of deposits, and 70% into stocks.

The flows that they are reporting are internal to the bank/broker, and unrelated to the external sources of stock or bonds.

They are reporting the magnitude of their customers shift in sentiment on the value of holding stock, money, and bonds.

When digesting such information it is important to remember that they are reporting NET flows for each category, and some customers bought bonds, others sold stock, but the Net bought and sold is the reported flow.

:beer
There are always contrarians, every day. In this case, the contrarians are mostly at other brokerage houses, which would have net purchase flows of bonds, and net sales of stock.
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Re: what does it mean to say "money flowed into stocks"?

Post by Call_Me_Op »

blueskytoo wrote: Tue Jun 21, 2022 2:52 pm :oops:

I think every one has missed the original meaning that was expressed.

"The bank reported"
is the correct context, and presumably, it is both a bank and broker.

If in the relevant month, the customers rebalanced their portfolios to the extent that they:

Sold 40% of their bonds.
Used 30% of their deposits to buy stocks.
Used the 40% from the bond sales to buy stocks.

They would then report that their customers had flows of 40% out of bonds, 30% out of deposits, and 70% into stocks.

The flows that they are reporting are internal to the bank/broker, and unrelated to the external sources of stock or bonds.

They are reporting the magnitude of their customers shift in sentiment on the value of holding stock, money, and bonds.

When digesting such information it is important to remember that they are reporting NET flows for each category, and some customers bought bonds, others sold stock, but the Net bought and sold is the reported flow.

:beer
There are always contrarians, every day. In this case, the contrarians are mostly at other brokerage houses, which would have net purchase flows of bonds, and net sales of stock.
Seems to me that such a measure is only applicable to the reporting bank/broker, and does not represent net flows into any asset classes.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: what does it mean to say "money flowed into stocks"?

Post by blueskytoo »

Precisely right! :beer

Post Sat Jun 18, 2022 3:52 am

"From a recent sell side report:

"More data from the bank showed $16.6 billion flowed into stocks in the most recent week, $18.5 billion from bonds and $50.1 billion from cash."
"

:confused That is what the original quote said. The statement is only valid for the flows to and from a single institution, or group of such institutions.

As I pointed out, the "Contrarians", or customers at other institutions were doing the opposite, as the sells one place must be balanced by buys another place.

:arrow: For practical guidance, the individual is not wise to follow such "Bits" of information, as they are heavily biased by the choices of the provider.
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