If you don't mind, I've been curious about this for quite a while. I don't know what I'm talking about, but it seems to me that fed infusions of $5 billion here or there isn't enough to pump the major indexes.
When the fed injects 5 billion or so into the primary banks, I don't imagine all of it goes directly into stocks. The fed also drains at times, and I have a hard time imagining that on a drain day the primary banks are forced to liquidate stocks to meet fed redemptions. Much of the infusions must be kept in cash or they enter circulation in the form of loans.
Also, if msft trades 50m shares in an average day, that's about 1.3 billion in msft trading alone, and that doesn't assume the stock is actually going up. If we have maybe 3 to 4 billion shares traded in a day between the nyse and comp, with an average share price of say $25 (just a guess) that's $75 to $100 billion a day. I didn't put any homework into this, but it seems like in order to make multiple indexes rise substantially in a day, it would take more than an infusion of 5 or 10 billion, much of which isn't actually going into stocks, to do it.
Do you know if my assumptions way off? Thanks.
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