How the stock market really works

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Once upon a time a man appeared in a village 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. 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 little 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 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 with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant, only monkeys everywhere!

Now you have a better understanding of how the stock market works.

Source: Unknown.

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3 comments to How the stock market really works

  • I find it disturbing that you believe this is how the market works. First of all, in this story the villagers got EXACTLY what they deserved. They planned to steal from the man who had done nothing but treat them fairly. Once they acted, so did he. He lost all of the monkeys he had paid them for, but he did get his money back. (Plus a fee for their trying to cheat him.)

    The market, on the other hand, is everyone buying what they believe will go up or selling what they believe will go down. Some are right and some are wrong, but no one is trying to cheat the other by first stealing their property and then trying to sell it back to them.

    Why would you call this “a delightful analogy of the workings of the stock market”?

  • Cindy: It is a tongue in cheek comment! After all, it is included in the humor section.

  • basehitz

    How about another example:
    1) The WS frat boys are looking to buy oil at $35. They send their profits of gloom and doom everywhere to tell how the world is ending, how oil is going to the $20s, etc. So people give up their oil (we’ll use GS for an this example)
    2) So GS accumulates a lot of oil in the $30s and now sends it’s analysts out to start upgrading oil price targets and anything that remotely resembles the industry.
    3) The sheeple start buying and the price moves higher. GS may also buy more. Oil continues to move higher.
    4) Since even the sheeple will eventually catch on, change the analysis. First it’s recovery, then reflation trade, then USD falling, then. . . whatever. Just make anything up.
    5) Oil is now approaching $70, so GS now raises the target to $85.
    6) Sheeple are afraid to miss the rally so they chase prices higher. GS dumps their position. Maybe goes short.
    7) The sheeple now have bought all the oil. GS downgrades a bunch of oil drillers, downgrades WMT. Whatever.
    Since the WS frat boys are no longer providing “stick saves” at 3:35 pm, the “hope” rally cannot sustain itself on it’s own merits and sells off. The sheeple are fleeced again.
    8) rinse, repeat.

    Oh, and one more important point. Be sure to send all your “analysts” out via Tout TV, who are willing shills in this theft.

    You can’t fight it. Just know it exists. It is not fair, but you can make money off it.

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