Friday, February 09, 2007

The Philosophy of the Stock Market

Once upon a time in a village, a man appeared who announced to the villagers that he would buy monkeys for Ksh 10. The villagers, seeing that there were many monkeys, went out in the forest and started catching them. The man bought thousands at Ksh 10 and as supply started to diminish and villagers started to stop their effort, he announced that now he would buy at Ksh 20.

This renewed the efforts of the villagers and they started catching moneys again. Soon the supply diminished even further and people started going back to their farms. The offer rate increased to Ksh 25 and the supply of monkeys became scarce such that that it was an effort to even see a monkey let alone catch it. The man now announced that he would buy monkeys at Ksh 50!



However, since he had to go to the city on some business, his assistant would now buy on behalf of the man. 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 Ksh 35 and when the man comes back, you can sell it to him for Ksh 50." The villagers queued up with ALL their savings to buy the monkeys.

After that, nobody found that man and that assistant, only monkeys and monkeys and monkeys…


Happy Valentines week, you monkeys!!!!

Labels:

9 Comments:

At 2/10/2007 5:12 am , Blogger Ssembonge said...

Good analogy. I hope its only a correction and not the start of a crush.

Allow me to make a correction. Strictly speaking, changes in price do not cause a change in supply. Have a look at the Supply & Demand curve. Changes in price can only cause a change in QUANTITY SUPPLIED. Only non-price changes cause a change/shift in SUPPLY.

Everyone should understand your point only that you used the wrong terminology. Same applies to demand.

 
At 2/11/2007 6:58 pm , Blogger Odegle said...

very funny. very very funny.

you mean there was no CMA to regulate the buying and selling. as in they allowed only one man to affect the tempo of the market like that. or maybe that man was the CMA! Happy valentines but us monkeys hope the positive turnround has started with the announcements coming in and Kibaki having allayed fears of an early poll.

 
At 2/13/2007 7:47 pm , Anonymous bomseh said...

is this the same man who wanted to buy chameleons in kyuk land?i have an investment light bulb moment now.

 
At 2/13/2007 11:37 pm , Blogger coldtusker said...

LOL... well, are you a villager, man or his assistant?

BTW, keep your comments coming!

 
At 2/15/2007 3:37 pm , Blogger mwasjd said...

@Ssem:
Fundamentally, your argument is absolutely correct. But try telling that to the mwananchi on the ground...

@Odegle:
I thought that all the arguments on the blogsphere point to a toothless CMA that allows crazy deals to take place in the NSE, thus harming the mwananchi

@bomseh
I'm not sure whether they are related, but considering monkeys and chameleons, I'm dying to find out what bright idea just popped in your mind!

@CT:
When I grow up, I want to be like the assistant. Maybe the man did come back in Season II...

 
At 2/16/2007 10:28 am , Blogger TheQueen said...

LOL,
a very nice story.
Roberta

 
At 2/19/2007 9:28 am , Blogger mushenzi said...

lol..lol..and lol again. The villagers were left holding onto worthless creatures (share certs-:)

 
At 2/22/2007 6:54 pm , Blogger pesa tu said...

Interesting analogy...by the way r u a monkey catcher or seller?

 
At 2/24/2007 8:24 am , Blogger mwasjd said...

@Roberta

Thanks for visiting. Nice story indeed.

@Mushenzi
Worthless certs, you've gotten the philosophy exactly!

@Pesa Tu
Unfortunately the way my portfolio is looking at the moment, I'd rather be trading monkeys than shares

 

Post a Comment

Subscribe to Post Comments [Atom]

<< Home