Author Topic: Not Enough Stocks For Everybody?  (Read 3781 times)

dougules

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Not Enough Stocks For Everybody?
« on: January 09, 2017, 11:00:35 AM »
Help me understand this.  There is somewhere in the general neighborhood of $25T of total market cap of companies publicly traded in the US.  If you divide it out you get vaguely $80k of shares per person.  That's not very much at all, really.  So if everybody buys up stocks for retirement, how is that going to play out?  I can't quite wrap my head around it. 

talltexan

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Re: Not Enough Stocks For Everybody?
« Reply #1 on: January 09, 2017, 11:09:58 AM »
First, stocks are not the only asset class, you also have bonds and real estate. It wouldn't surprise me if you have more in each of those than you have in stocks. Total US wealth is approximately $80-90 Trillion, perhaps more.

Second, not everyone is the same age. Some are indeed accumulating stocks, but some (who are often retired) are dis-accumulating, so they have a reason to be selling.

Finally, since money moving into the stock causes price appreciation, the natural process of younger buying stocks from older will be an increase in price. Since many stocks are growing earnings, that increase is supported by fundamentals, and is not just a pyramid scheme.

JAYSLOL

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Re: Not Enough Stocks For Everybody?
« Reply #2 on: January 09, 2017, 11:52:11 AM »
Many American investors own international stocks along with US in their portfolios, which would increase this limit as well.  Also, no matter how awesome the ideal of financial independence is, there are still going to be a large chunk of the population that won't or can't save a damn thing.  I wouldn't worry about a stock shortage any time soon. 

marty998

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Re: Not Enough Stocks For Everybody?
« Reply #3 on: January 09, 2017, 01:28:09 PM »
Bloody Americans. They think they are the only ones on this planet lol.

The rest of the world buys your stocks too mate. Your denominator needs to be much much bigger than 300 million...

talltexan

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Re: Not Enough Stocks For Everybody?
« Reply #4 on: January 09, 2017, 02:16:51 PM »
Median Household wealth for the world--adjusting for currency conversions--is about $2,200. Roughly equal to my HSA contributions since labor day. Indeed there are a lot of investors internationally, but there are plenty of non-investors as well.

dougules

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Re: Not Enough Stocks For Everybody?
« Reply #5 on: January 10, 2017, 10:41:03 AM »
If people buy more stock, prices rise and companies will eventually issue more stock at the inflated price.  They will make investments, creating more underlying value (increased assets and earnings).  So the rising stock market has a way of creating more wealth and balancing the P/E.

I hadn't thought of it in that way.

Bloody Americans. They think they are the only ones on this planet lol.

The rest of the world buys your stocks too mate. Your denominator needs to be much much bigger than 300 million...

We're the only ones that matter.  We would have already invaded brought democracy to your country, too, but we don't really like kangaroo meat. 

Seriously, though, I used just the US because the math gets even worse when you expand out to the whole world.  World market cap is only about $50T (and that's in greenbacks, not the fake monopoly stuff).  You divide that by 7 billion, and you get.. (well I was educated in Alabama, so you'll have to do the long division for me). 

Many American investors own international stocks along with US in their portfolios, which would increase this limit as well.  Also, no matter how awesome the ideal of financial independence is, there are still going to be a large chunk of the population that won't or can't save a damn thing.  I wouldn't worry about a stock shortage any time soon.

You're probably right about the average Joe (or Jane or Aditya or Liwei or Maria) not saving anything, but even a decent minority of the population could cause a shift.   And a significant chunk of people are already buying through automatic pre-tax retirement accounts (eg 401k).  I also think there could be a cascading affect as people notice more folks around them walking out well before traditional retirement age. 

Prairie Stash

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Re: Not Enough Stocks For Everybody?
« Reply #6 on: January 10, 2017, 11:27:09 AM »
i jut added up my immediate family from my parents down to cover some generational issues. That makes 12 people (parents, 3 kids, 7 grandchildren) or $960,000 in total. My family tree is under by a large amount, since a lot of NW is in Real estate, bonds and non-stock assets. How does your family tree compare, are they over or under achieving?

A lot of us are balanced by low income siblings/parents/children, kids have some stocks in education savings so they count in the buyer category. I wonder what the median stock amount is for Americans? How much do the billionaires skew the average away from the median?

Mtngrl

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Re: Not Enough Stocks For Everybody?
« Reply #7 on: January 10, 2017, 02:30:30 PM »
Am I the only one who first read this as Not Enough Socks for Everybody -- and pictured someone with a sock-eating washer.

gReed Smith

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Re: Not Enough Stocks For Everybody?
« Reply #8 on: January 10, 2017, 03:24:22 PM »
$25T is just the current value.  If millions more people invested, the value would increase.  It would increase until returns were no longer sufficient to attract additional money, and then people would buy rental properties, limited partnerships, mineral interests, banana farms, bonds, stamp collections, non-public companies, lawn mowers and any of the thousands of other alternative investments that exist.

LadyFI

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Re: Not Enough Stocks For Everybody?
« Reply #9 on: January 10, 2017, 04:30:05 PM »
Am I the only one who first read this as Not Enough Socks for Everybody -- and pictured someone with a sock-eating washer.

Nope. My first thought was 'um, buy some at Costco? Price/quality is usually pretty good there.'

Gondolin

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Re: Not Enough Stocks For Everybody?
« Reply #10 on: January 10, 2017, 05:18:13 PM »
Quote
I also think there could be a cascading affect as people notice more folks around them walking out well before traditional retirement age. 

Keep in mind that "more folks walking out" is still like .00001% of the population.

Recent stats suggest that about 50-55% of Americans - one of the richest countries - are invested in the stock market. There are billions of people without access to sophisticated stock markets. Hundreds of millions working for $1/day who couldn't afford stocks even if they wanted to.

In the US alone if you cut out the youths and elderly there are probably only 200M adults who could invest. Half don't. So...100M investors max, across all asset classes AND account for the fact that 75M of those people probably just have small 401K balances.

Dicey

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Re: Not Enough Stocks For Everybody?
« Reply #11 on: January 10, 2017, 06:28:43 PM »
So many more eggs in the investment basket than just stocks. Half of our NW is in RE. A lot in low-cost mutual funds and ETF's, how to count those? In fact, I only own one specific stock that I have a share certificate for, and it's only for sentimental reasons (first job). I think I own about 40 shares, set up as a DRIP.


dougules

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Re: Not Enough Stocks For Everybody?
« Reply #12 on: January 11, 2017, 10:37:36 AM »
Am I the only one who first read this as Not Enough Socks for Everybody -- and pictured someone with a sock-eating washer.

Nope. My first thought was 'um, buy some at Costco? Price/quality is usually pretty good there.'

Ooo yes, Costco sock are nice.  Very soft.  And there are enough for everybody.  I have a pile of them. 


Quote
I also think there could be a cascading affect as people notice more folks around them walking out well before traditional retirement age. 

Keep in mind that "more folks walking out" is still like .00001% of the population.

Recent stats suggest that about 50-55% of Americans - one of the richest countries - are invested in the stock market. There are billions of people without access to sophisticated stock markets. Hundreds of millions working for $1/day who couldn't afford stocks even if they wanted to.

In the US alone if you cut out the youths and elderly there are probably only 200M adults who could invest. Half don't. So...100M investors max, across all asset classes AND account for the fact that 75M of those people probably just have small 401K balances.

How many people know the folks in that .00001%, then how many folks know them, etc. etc.  If that .00001% expands exponentially, it wouldn't take all that long. 

The numbers are going up for people and investments.  Even if not in the US, a decent number of the children of the $1/day folks are doing a lot better than their parents.  Of course, that also makes earnings go up, so that's probably more part of the solution than part of the problem. 


So many more eggs in the investment basket than just stocks. Half of our NW is in RE. A lot in low-cost mutual funds and ETF's, how to count those? In fact, I only own one specific stock that I have a share certificate for, and it's only for sentimental reasons (first job). I think I own about 40 shares, set up as a DRIP.

Even if you add in real estate, bonds, and everything else that produces a return, does it really significantly change the math?  I don't have any numbers on what the total value/earnings on all of that is, except for the $20T in US federal debt. 

Also, I would think that stocks would be the only one of those investments that would be subject to extra investors fueling growth. 

Gondolin

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Re: Not Enough Stocks For Everybody?
« Reply #13 on: January 11, 2017, 12:01:58 PM »
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If that .00001% expands exponentially, it wouldn't take all that long. 

Do you see any evidence of exponential growth of stock based FI-aspirants? Genuine question cause I sure haven't.

This specter has been raised before both on this forum and in the industry via the question "What if everyone started index investing?". The typical answer is that while indexing as become much more popular it is no where near growing exponentially or threatening 'traditional' market activity.

My opinion is that while it's an interesting though experiment, any scenario predicated on absolutes (everyone, always, never, etc.) constitutes an economic edge case that can't be realized in reality.

talltexan

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Re: Not Enough Stocks For Everybody?
« Reply #14 on: January 12, 2017, 08:27:07 AM »
I actually think our society has the opposite problem: the low yields on debt for every developed country mean that there are not enough BONDS for everybody, i.e. too much money is seeking a safe harbor, and governments aren't running high enough deficites to create those harbors.

chucklesmcgee

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Re: Not Enough Stocks For Everybody?
« Reply #15 on: January 12, 2017, 07:33:18 PM »
If you divide it out you get vaguely $80k of shares per person.  That's not very much at all, really.


Most people have jack squat in the way of savings or even a retirement account.

Roland of Gilead

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Re: Not Enough Stocks For Everybody?
« Reply #16 on: January 13, 2017, 07:10:40 AM »
You could do similar math for gold.   I recall it being like 0.6 ounces per person or something like that for how much gold is available from all that has been mined through history.

dougules

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Re: Not Enough Stocks For Everybody?
« Reply #17 on: January 18, 2017, 09:59:55 AM »
You could do similar math for gold.   I recall it being like 0.6 ounces per person or something like that for how much gold is available from all that has been mined through history.

That's interesting given how many people have gold wedding rings (mine is platinum and palladium, though).  I'm assuming you're talking the population of  the world, though, so I think a lot of those people don't make enough for gold jewelry. 

If more demand pushes up the price of gold, there will be more incentive to mine more, though.