When gauging supply and demand for shares in the stock market—which determines price—it's important to consider mergers & acquisitions (M&A) since the shares of companies being acquired are removed from circulation. (THREAD)
When we account for M&As, the difference between supply of shares and demand for them becomes very lopsided. The chart below shows the 12-month rolling sum. /2 
The chart below shows the cumulative supply and demand since 1982. I view the early 1980s as the start of the modern financial era, so that seems like a good place to start. /3
On an inflation-adjusted basis, the US equity market cap has grown since 1982 from $1.86 trillion to $38.5 trillion. The supply of equities via IPOs and secondaries totals $5.5 trillion, and the demand for equities from buybacks totals $12.4 trillion. /4
The demand for all equities from M&A totals $26 trillion. The demand from retail investor flows (equity mutual funds, and later on ETFs) is a measly $4.1 trillion. /5
Investor demand is likely much higher than this, since this series does not reflect direct investments or purchases of hybrid funds (e.g. target date). /6
It’s safe to say that the demand for US equities has blown away the supply. Eyeball the chart above: It looks like about a 10-to-1 ratio. /7
We all know that price follows earnings, but in my view the supply/demand dimension is equally important. Every secular trend has its own unique features, and this supply/demand dynamic is a central one for this secular bull. /8
It’s a story that’s fairly unique to the US, which is why the US stock market has dominated the rest of the world. /END
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