with 10-year yield at 2% and SP earning yield at 6%... what's preventing someone from buying up the entire stock market? this is already happening with buy backs and privatization. aren't we gonna eventually run out of shares?
There will always be sellers and buyers. Otherwise the market would have ceased to exist 1000's of years ago.
If there is a buyer new shares will be issued or temporarily shorted until new supply will hit the market. There are other sources of shares because we have brilliant financial engineers. Simply put supply is unlimited. No worries.
I seem to recall reading that this is the type of question people ask at the end of a bull market. Rather like when the dentist starts asking you for stock tips, or when the shoe shiner starts giving you stock tips.
I don't think it's that simple. First of all, a lot of the top-quality mid-to-small-cap companies are getting bought out. There have been plenty of articles lately lamenting shrinkage in the number of public companies, which has been cut in half over the past 20 years. There are a number of factors behind this, but surely ZIRP is making it much worse, given how easy it is to just issue a bunch of junk bonds (at what would otherwise be T-bill yields) to raise cash for acquisitions. There's also plenty of bankruptcies due to ZIRP. MF Global a few years ago, as well as the many energy companies more recently, are a direct effect of debt binging and then things not going quite as planned. I think 0% interest rates also have a psychological effect on even the most "sophisticated" borrowers -- it's easy to "forget" that you still have to repay all this "cheap" money. Younger people are less likely to start companies today. Again, there have been many articles over the last few years on this -- for example, http://blogs.wsj.com/experts/2015/0...-starting-businesses-and-why-thats-a-problem/ Another issue with share counts is that many of the biggest silicon valley companies tend to have share classes that give most, if not all, of the voting power within the company only to the one or a handful founding members. So what John Q Public ends up holding is inferior, and that may become a problem as large corporate governance issues emerge (e.g., very bad management decisions, or executives using the company resources to pursue personal political agendas that the other shareholders may not agree with).
This kind of made me laugh. The market is like the Deep Blue Sea (or water) ...it will never run out.
First, let's look at some number. The market cap of the U.S. stock market is $22.5T There are a finite number of banks to lend money for LBOs, a finite amount of money each bank can/will lend to finance LBOs, and a finite amount of capital to be spent on the equity portion of LBOs. That finite amount is significantly less than $22.5T. Its also worth noting that if a company is 100% publicly owned and buys back 50% of their shares, the company is still 100% publically owned, each shareholder now just owns twice as much of the company as they did before. Nothing was taken off the global "equity available" table. A privatization does take the stock off the table, but the PE firm privatization model still very much involves refloating the company or selling it, generally to a public company, after increasing its enterprise value. So net net, privatization isn't really taking equity off the table either.
Yes it is, Have you ever heard about stock broker saying "sorry we run out of shares for sale" ? Issuance of stock or any tradeable paper is much easier than you think. the only problem is to find buyer for this paper.