Big Country Posted August 27, 2011 Share Posted August 27, 2011 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. 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 all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere! And now you know how the stock market works... Quote Link to comment Share on other sites More sharing options...
BillyBalata Posted August 27, 2011 Share Posted August 27, 2011 Wait....where's the wave come into play? Quote Link to comment Share on other sites More sharing options...
Avernus Posted August 27, 2011 Share Posted August 27, 2011 I thought the monkeys evolved into us? I'm lost... Quote Link to comment Share on other sites More sharing options...
Scooby's Hubby Posted August 27, 2011 Share Posted August 27, 2011 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. 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 all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere! And now you know how the stock market works... Actually, the Tulip market in Amsterdam is a better analogy and those of us who have their series 7 know that the Dutch Tulip market was really the first organized stock market, circa 1700's Quote Link to comment Share on other sites More sharing options...
JoJoTheWebToedBoy Posted August 27, 2011 Share Posted August 27, 2011 Wait....where's the wave come into play? Duh........ They were surfer monkeys Quote Link to comment Share on other sites More sharing options...
Puddy Posted August 27, 2011 Share Posted August 27, 2011 Actually, the Tulip market in Amsterdam is a better analogy and those of us who have their series 7 know that the Dutch Tulip market was really the first organized stock market, circa 1700's A hundred years earlier but still a fascinating story. The amount the market declined from peak to bottom: This number is difficult to calculate, but, we can tell you that at the peak of the market, a person could trade a single tulip for an entire estate, and, at the bottom, one tulip was the price of a common onion. Synopsis: In 1593 tulips were brought from Turkey and introduced to the Dutch. The novelty of the new flower made it widely sought after and therefore fairly pricey. After a time, the tulips contracted a non-fatal virus known as mosaic, which didn't kill the tulip population but altered them causing "flames" of color to appear upon the petals. The color patterns came in a wide variety, increasing the rarity of an already unique flower. Thus, tulips, which were already selling at a premium, began to rise in price according to how their virus alterations were valued, or desired. Everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits. The true bulb buyers (the garden centers of the past) began to fill up inventories for the growing season, depleting the supply further and increasing scarcity and demand. Soon, prices were rising so fast and high that people were trading their land, life savings, and anything else they could liquidate to get more tulip bulbs. Many Dutch persisted in believing they would sell their hoard to hapless and unenlightened foreigners, thereby reaping enormous profits. Somehow, the originally overpriced tulips enjoyed a twenty-fold increase in value - in one month! Needless to say, the prices were not an accurate reflection of the value of a tulip bulb. As it happens in many speculative bubbles, some prudent people decided to sell and crystallize their profits. A domino effect of progressively lower and lower prices took place as everyone tried to sell while not many were buying. The price began to dive, causing people to panic and sell regardless of losses. Dealers refused to honor contracts and people began to realize they traded their homes for a piece of greenery; panic and pandemonium were prevalent throughout the land. The government attempted to step in and halt the crash by offering to honor contracts at 10% of the face value, but then the market plunged even lower, making such restitution impossible. No one emerged unscathed from the crash. Even the people who had locked in their profit by getting out early suffered under the following depression. The effects of the tulip craze left the Dutch very hesitant about speculative investments for quite some time. Investors now can know that it is better to stop and smell the flowers than to stake your future upon one. Read more: http://www.investopedia.com/features/crash...p#ixzz1WG5HQw9z Quote Link to comment Share on other sites More sharing options...
Pope Flick Posted August 27, 2011 Share Posted August 27, 2011 Even the people who had locked in their profit by getting out early suffered under the following depression. Read more: http://www.investopedia.com/features/crash...p#ixzz1WG5HQw9z And yet it seems people still ignore the lessons of history. Quote Link to comment Share on other sites More sharing options...
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