smoky
Unterland, Zrich Switzerland
Posted: Apr 6, 2008, 8:09 AM CST
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.
Then they never saw the man nor his assistant again, only
monkeys everywhere! Now you have a better understanding of
how the stock market works.