Is the stock market a mega Ponzi scheme built on the constant creation of new equity funds?

Lets suppose for a moment that you are correct. If what you describe was happening, stocks prices would increase without bound while the value that they represent would stay more or less the same. The way that this can be measured is by looking at the P/E ratio. That is the ratio of the price to the earnings of the stock, and earnings represent the true value of a stock over time. If what you say is true, the P/E ratio of the entire market should be at record levels and be increasing at a very large rate.

What we actually see is a P/E ratio that is higher than its traditional average, but also one that is relatively stable, and is actually down from a year 2000/2001 peak.

Since we are not seeing the behavior that would be required for your statement to be true, we can conclude that your statement is false.

-john-

"V" wrote

You have the tail wagging the dog. Funds do not create stocks. Companies do. Generally speaking: (1) The number of shares of stock of a company is fixed and large; (2) There are always enough entities (individual persons; mutual funds; ETFs; corporations in the business of buying stock) to satisfy both those who want to buy and those who want to sell at any given time.

What does continually grow is the number of companies offering stock. But this merely reflects the growing population; the evolution of an economy from no-tech to high-tech; and the cultural evolution of the world from satisfying basic needs to having time for leisure activities and the companies that offer products supporting leisure.

Also, many mutual funds fail.

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