Saturday, March 22, 2008

Monkeys

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. 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 little that it was an effort to even see 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 with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant again, only monkeys
everywhere!

Now you have an understanding of how the stock market works.

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