Thoughts during the Cambridge MBA


Tuesday, June 06, 2006

The philosophy of the stock market.

An old floating mail. Just got it again today so thought I would share it as its quite insightfull as to how people make money out of false supply gaps.

Once upon a time in a village a man appeared who announced to the villagers that he would buy monkeys for Rs. 10. The villagers seeing that there were many monkeys went out in the forest and started catching them. The man bought thousands at 10 and as supply started to diminish and villagers started to stop their effort he announced that now he would buy at 20 rupees.

This renewed the efforts of the villagers and they started catching moneys again. Soon the supply diminished even further and people started going back to their farms. The offer rate increased to 25 and the supply of monkeys became so 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 the man. 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 comes back you can sell it to him for 50.

The villagers queued up with all their saving to buy the monkeys.

After that no body found that man and that assistant, only monkies and monkies and monkies.....



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