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Message: Burn rate

Parable on how markets work

in response to by
posted on Oct 16, 2008 06:15AM

Posted by: longforcash on October 09, 2008 12:55PM

Here is a parable that I copied from the PLE board:

"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 monkeys at $20 each. 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 scarce it was an effort to even find a monkey, let alone catch
it! The man now announced that he would buy monkeys at $50 each!
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 already 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 lots and lots
of monkeys! Now you have a better understanding of how the stock market
works."

Always nice to know what the "game"is!!

Best Regards,

Long for Cash

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