I’ve seen this before, but it seems the time is right to put it out there again.
Once upon a time, in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to
the forest and started catching them. The man bought thousands at $10
and, as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20 for a monkey.
This renewed the efforts of the villagers and they started catching
monkeys again. Soon the supply diminished even further and people
started going back to their farms. The offer increased to $25 each, and
the supply of monkeys became so small that it was an effort to even find
a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since
he had to go to the city on some business, his assistant would now buy
on behalf of him.
In the absence of the man, the assistant told the villagers. “Look at
all these monkeys in the big cage that the man has collected.
I will sell them to you at $35, and when the man returns from the
city, you can sell them to him for $50 each.”
The villagers rounded up
all their savings and bought all the monkeys.
They never saw the man nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how the Stock Exchange works.
One thought on “A quick lesson on how the Stock Exchange works”
Ok so I’ve only just realised you moved your blog, call me slow (:
This is a beautiful illustration. Perhaps it only preaches to the converted like me although perhaps in light of the recent credit-related debacles, people may be more receptive to this sort of critical thinking than before. For some reason the stock market has become unassailably ‘good’ or ‘necessary’ some time over the past few decades, and I’m not sure I agree. Down with the sacred cows!