OT: Stock Market Explained

[Robatoy]

My buddy from Florida sent me this...:

-------- If you have difficulty understanding the current world economic situation, the following should help:   Once upon a time in a village, a man announced to the villagers that he would buy monkeys for $10.

The villagers seeing there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts. The man 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 rate increased to $25 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 act as buyer, 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 and when he returns from the city, you can sell them back to him for $50.'

The villagers squeezed together their savings and bought all the monkeys.

Then they never saw the man or his assistant again, only monkeys everywhere!

             Welcome to the Stock Market!!!!!

[busbus]

Holy cow!!!

This explains a bubble better than I ever heard before. Actually, a bubble combined with a Pnzi scheme, which the US financial industry was involved in and got their ineptness paid for ny the citizens....

[Leon]

AND FIY the "Media" is the man's assistant.

More and more I believe that reckless freedom of speech should be against the law.

[Tom Veatch]

Best explanation of the stock market I've ever seen is the tale of the two farmers and the mule:

Once upon a time, there were two farmers. One farmer owned a mule and the other didn't. One day Smith decided that he needed to do some plowing and since Mrs. Smith absolutely refused to be hitched to the plow again, he went to see Jones about borrowing his mule. Jones thought about it awhile and decided that he didn't want to loan out his mule but he would sell it to Jones. After some dickering around, Jones bought the mule for $50. Well, Jones went ahead with his plowing but before he was finished, he saw Smith approaching across the field. Smith had realized he needed to plow his fields and he couldn't get either Mrs. Smith or any of the little Smiths to pull the plow. So he headed over to Jones's to buy back his mule. Jones realized he had an opportunity right there in front of him and refused to sell the mule. But, after some more dickering, Smith succeeded in convincing Jones to sell the mule for $100 for a profit of $50. Well, this went on for several plowing seasons with Smith selling the mule to Jones and then turning around and buying it back before it was too late to plow his own fields. After several years of selling the mule back and forth with the price of the mule reaching $30,000.00. After the most recent sale, Jones was leading the mule home and the mule fell over dead. Smith saw the mule fall and came running out to see what happened. On seeing the mule was dead, he looked at Jones and said, "You know, I'm really sorry to see that mule die. We was getting rich selling that mule!" And that is the stock market in a nutshell, folks getting rich selling a mule back and forth. The real value of any company's stock is how much the stock would receive from the proceeds from liquidating the company. Every dollar paid for a stock over and above that small amount is the same as a chip pushed out onto a roulette table. I don't know why people think there is some intrinsic value in those pieces of paper that are traded back and forth in the various stock exchanges. Well, in fact, they aren't even pieces of paper anymore. They only exist as a ledger entry in the books of the corporation. There was a deal in the paper the other day with a headline to the effect the some 700 billion dollars had evaporated out of the stock market. There's something wrong and very misleading with that headline. Every dollar someone spends to buy a share of stock is given (less commissions) to the someone who sold the stock. None of it remains in the "market". So that 700 billion dollars was never in the stock market to "evaporate". The stock market is no less a negative sum game than that roulette wheel I mentioned earlier.

Tom Veatch Wichita, KS USA

[Tom Veatch]

Shouting "FIRE!!" in a crowded theater, ya think? But, it gets ratings, so it can't be all bad.

Tom Veatch Wichita, KS USA