Once upon a time in a place overrun with monkeys, a man appeared andÂ
announced to the villagers that he would buy monkeys for $10 each.Â
The villagers, seeing that there were many monkeys around, went outÂ
to the forest, and started catching them.
The man bought thousands at $10 and as supply started to diminish,Â
they became harder to catch, so the villagers stopped their effort.
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The man then announced that he would now pay $20 for each one. ThisÂ
renewed the efforts of the villagers and they started catchingÂ
monkeys again. But soon the supply diminished even further and theyÂ
were ever harder to catch, so people started going back to theirÂ
farms and forgot about monkey catching.
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The man increased his price to $25 each and the supply of monkeysÂ
became so sparse that it was an effort to even see a monkey, muchÂ
less catch one.
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The man now announced that he would buy monkeys for $50! However,Â
since he had to go to the city on some business, his assistant wouldÂ
now buy on his behalf.
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While the man was away the assistant told the villagers…’Look atÂ
all these monkeys in the big cage that the man has bought. I willÂ
sell them to you at $35 each and when the man returns from the city,Â
you can sell them to him for $50 each.’
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The villagers rounded up all their savings and bought all theÂ
monkeys. They never saw the man nor his assistant again and onceÂ
again there were monkeys everywhere.
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Now you have a better understanding of how the stock market works.
