[JasonC]

It is a fine measure of demand for stocks by retail investors, but has exactly nothing to do with the money supply. Every dollar sent to a mutual fund and used to buy stocks, bought those stocks from someone who already owned them, and every time a mutual fund sells stocks, someone pays them the dollars they give their investor as they cash out. Same stocks and same dollars before and after, either way. Just in different hands. Trade in existing securities (including FRNs) does not change the quantity of the items traded, in existence.

The amount of stock in existence rises from IPOs and options issuance to insiders, and declines from share buybacks and cash takeover offers. The amount of dollars in existence changes when dollar banks make loans, or retire assets without making new loans to match (a net positive cash flow toward banks). The amount of FRNs in existence changes when customers want more physical notes and fewer deposits or vice versa. No other process changes the quantities of these things in existence, they only shift around who holds how much of which type.

[groanup]

That's all nice and it sounds the same as when I first heard it 30 years ago. We were talking about definitions of money.

Money stock vs. M1 vs M2. As toddster pointed out when you cash in a CD the money therein reverts from M1 to Money stock. So when you sell a stock the funds go into the measures of money supply also as long as you put the proceeds into a money market fund or checking account of some kind.