How the Market Works - Good Analogy
Once upon a time in a
village, a man appeared and announced to the villagers
that he would buy monkeys for $10 each.
villagers seeing that there were many monkeys around, went
out to the forest and started catching them. The man
bought thousands at $10.00 and as supply started to
diminish, the villagers stopped their effort. He further
announced that he would now buy at $20.00. This renewed
the efforts of the villagers and they started catching
Soon the supply diminished even
further and people started going back to their farms. The
offer increased to $25.00 each and the supply of monkeys
became so little that it was an effort to even see a
monkey, let alone catch one!
The man now announced
that he would buy monkeys at $50.00 however, since he had
to go to the city on some business, his assistant would
now buy on his behalf.
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 $35.00 and when the man returns from
the city, you can sell them to him for $50.00
The villagers rounded up all their
savings and bought all the monkeys. Then they never saw
the man nor his assistant again; only monkeys
Now you have a better understanding of
how the stock market
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