On 2/9/2011 11:25 AM, Doug Henwood wrote:
> You have vast amounts of organized money almost exclusively on one
> side of the trade. Against that, you have dispersed sellers, some of
> whom may be selling a position they bought just yesterday. The
> consensus, though, is that prices have only one way to go.
Exactly. It's about the formation of that consensus. Not about how money is "out there."
> I don't get the idea that there aren't measurable net flows of money
> in and out of asset classes.
I don't see how you could meaningfully measure that, even in principle. I mean, the flow of money has to be a price times a quantity. But presumably the quantity in question (of contracts traded, for example) is the same thing as "trading volume." Now I don't know the first thing about this technical stuff, but my understanding is that there's no simple correlation between volume and prices. Sometimes the stock report says "prices were up on light volume"; other times it says "prices were down on heavy volume." That's the opposite of the "expected" relationship. (I guess you could argue that trading volume always evens out "in the long run," but is that even true?)
In a literal sense, the "net flow of money" into and out of an asset class is always zero. Metaphorically they can rise or fall, but they're not literally net flows of money.
SA