More Sellers Than Buyers

I worked for a VC named Bliss McCrum early in my career. He had been on wall street for about twenty five years before getting into VC mid/late career. He loved investing. He taught me technical analysis/charting and a lot of other things about stocks.

I used to ask him “why did that stock go down yesterday?” and he would always respond “more sellers than buyers.”

I loved that response and sometimes would ask him the question just to hear that answer.

What I really wanted to know was the underlying reason for more sellers than buyers. Did the company post weak earnings? Did a competitor enter their market? Was the CFO fired?

But Bliss would never take the bait.

Just “more sellers than buyers.”

His point, I think looking back after thirty years, was that markets are markets and you need to treat them as such and respect them as such. They are not always rational but the supply/demand for the stock doesn’t lie.

This week we are finally getting an Uber IPO. Its competitor Lyft’s stock has been weak post its recent IPO.

I don’t have a view on either stock but we will get to see if there are more buyers than sellers or the other way around.

I think this is a good thing, for those companies, for their shareholders, and for the entire tech and startup sector. We should let markets work. They do their job very well.


Comments (Archived):

  1. jason wright

    I wonder if Uber drivers and power users will be trying to buy the IPO?

    1. fredwilson

      More likely protest it

      1. Pointsandfigures


      2. jason wright

        my comment points to a future of decentralised platform ownership. The Uber model is just the latest technique of labour orchestration by and for the benefit of a few. Uber to Unter.

      3. Jim Peterson

        On a Lyft ride to the airport the driver was lamenting they had been cut from .85 to .65 cents per mile at the start of the year. Lots of grumbling in the ranks, trying to organize strikes.It seems desperate trying to find that much money on the backs of your work force.

  2. DJL

    I know you have written about it before, but how did you come to work with Bliss in the first place? Course 10 -> Finance -> VC. Would love to hear the short version again or link to the long one!

  3. Richard

    In the short run the market is a voting machine, In the long run the market is a weighing machine. Ben Graham

  4. Mike

    Perhaps a nod to value investing beyond the short term gyrations of the market.

  5. Philip Forte

    For every share of stock that’s sold there’s a buyer as a counterparty. So technically there can never be more sellers than buyers. As the sell pressure increases the bid & asks shift downward but there’s the same numbers of bought and sold shares

    1. Patrick

      There can never be more people who bought than more people that sold, but there can be more potential buyers than more potential sellers (and the other way around).

    2. Dennis Mykytyn

      The expression “more sellers than buyers” means at a certain price, not that more shares were sold than bought overall. There can certainly be more shares for sale at a given price than buyers at that price. So the price is lowered to entice buyers to step in and fill the sell orders.And in the old days, from when Fred quoted, specialists/market makers actually made markets, eg they bought or sold stock for inventory when there was excess sell or buy pressure. They were temporary owners, so in essence there could be more shares bought or sold, with market makers absorbing the difference. Pretty much that form of market making is gone now.

  6. KB

    Love this. Bliss made sure his answer was correct each time you asked.

  7. GB

    Markets do their job really well when they are regulated properly.

    1. Pointsandfigures

      That’s not true. Read this: chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://varoufakis.files.wo… In many cases regulation eliminates competition, or creates imbalances. I am not dismissing regulation entirely, but I think it is the wrong framing to say a market needs it to be competitive and do the job of asset allocation and price discovery.

      1. GB

        I didn’t say that markets need to be regulated to be competitive, allocate assets, or allow for price discovery. I merely made and continue to make the point that markets do their job really well when they are regulated properly. Failure to do so can lead to events like the 2008 Financial Crash.

        1. Pointsandfigures

          Uh, there was plenty of regulation in 2008.

  8. Girish Mehta

    Since its less than 48 hours since the Berkshire annual meeting…here’s Buffett putting it simply more than 30 years back – do you care if the stock market opens tomorrow ?…BTW, “more sellers than buyers” is inaccurate to describe why a stock went down. (1) – You can have one large buyer buying from 10 smaller sellers on the other side, or the reverse and that doesn’t characterize why a stock would go up or down (2) – Every stock sold has a counterparty that bought the stock. Number of stocks sold = Number of stocks boughtWhat you mean is that there are more volumes of stock available for selling than are available for buying at a given price…that shifts the clearing price downward. At the clearing price, stocks sold = stocks bought.

    1. Tom Labus

      What lineage from Benjamin Graham to Warren. That’s Adam Smith too!!!

      1. Girish Mehta

        Yes. Jerry Goodman. And while this interview is from 1985, Goodman (Adam Smith) first brought Buffett to the attention of the broader public in 1972. From Goodman’s book preface – In 1970 Ben Graham wrote to him from the South of France saying that he wanted to meet Goodman. He met him and said – “I want you to work on the next edition of the Intelligent Investor. There’s only two people I’d ask – you and Warren Buffett”.Goodman replied – “Who’s Warren Buffett ?”And that’s how he went on to introduce Warren Buffett to the broader world in 1972 (he was already known to some for his investment track record, but not well known outside those circles).Many years later, Buffett gave him this interview. (and an endorsement on the book jacket).

    2. JamesHRH

      There are like 20 great things in this clip.Humility, acceptance, a lit arrogance.

      1. Girish Mehta

        Yes. And maybe a little chutzpah about what one knows well is Ok when accompanied by a lot of humility of (1) what one doesn’t know, and (2) that which is unknowable.The trick of course is to be very clear about the limit of one’s knowledge/competence.

        1. Vasudev Ram

          Quote (ancient Persian?, maybe) that I saw years ago; approximate wording:- He who knows not that he knows not is a fool – avoid him.- He who knows that he knows not is a learner – teach him.- He who knows not that he knows is wise – learn from him.- He who knows that he knows is a sage – follow him.

    3. sigmaalgebra

      > (1) – You can have one large buyer buying from 10 smaller sellers on the other side, or the reverse and that doesn’t characterize why a stock would go up or downOf COURSE. But this whole subject of Wall Street is so astoundingly sloppy that we’re supposed realize (1) but not be so socially awkward to SAY so!!!!

  9. Patrick

    You allude to the it in your post when you mention an ‘underlying reason,’ but I always find the ‘more sellers than buyers’ response (which still is given A LOT today) to be very glib and unhelpful.On the other hand, I often find the explanations given for market moves, especially on CNBC, tend to be backed into after the fact and lacking in conviction/explanatory power.So, I guess I get the point, but I always bristle when someone tells me ‘more sellers than buyers.’

  10. William Mougayar

    The trick here is that markets are a lot about psychology, and that’s the hardest part to predict. What markets do is the output of causes we don’t always see so bluntly. Different sentiments can bring smart (or less smart) money who behave differently.

  11. Pointsandfigures

    They are about to enter an efficient market compared to an inefficient one. All information about those companies will be dissected and imputed into the price. People forget that venture investing is an inefficient market.

    1. Jim Peterson

      Great point on inefficient markets.In the stock market:In the short run, the market is a voting machine but in the long run, it is a weighing machine.Benjamin GrahamUber will win “votes” from some, but in the long run it will be weighed against other public companies. Unless something changes dramatically, it won’t be pretty.

      1. Vasudev Ram

        Great quote, that. Keeper.

  12. JamesHRH

    McCrum Mondays would be Blissfull.

    1. Vasudev Ram

      A sugar-coated quote 🙂

  13. Donna Brewington White

    Not sure where I saw this quote recently: “The markets may be wrong but never lie.”

    1. Vasudev Ram

      Another quote: Greed and fear drive markets.

  14. Steven Kane

    Hi Fred. I get your point and it’s a great one. But… stock prices go down because bidders bid lower. And yes there can be more supply than demand. But am I wrong to think there simply can’t be more sellers than buyers? Every trade has to have a buyer and a seller! 🙂