Are you currently shaking your head wondering what is going on
in the financial markets? Here is a small story that illustrates it
nicely.
"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.
They never saw the man nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how the stock market works."