Let me narrate a story that I first read many years back and found doing the rounds recently on the WhatsApp groups:
Once upon a time in a village a man named Ishwar came from nowhere and announced that he was interested in buying monkeys for Rs 100 each. The villagers, seeing that there were many monkeys roaming around freely, went out and started catching them. Over time, Ishwar bought thousands of monkeys at Rs 100. As supply started to diminish and villagers realized that their effort was not worth the price he announced that now he would buy the monkeys now at 200 rupees.
The villagers started with renewed efforts and started catching moneys again. Soon the the monkey availability diminished even further, and people started going back to their farms and other professions. The offer rate was increased to Rs 300 by Ishwar and after some days the supply of monkeys became so scarce that it was an effort to even see a monkey let alone catch it.
“Now, I would buy monkeys at Rs 600 each”, announced Ishwar to villagers, “However, since I have to go to the city for 7-8 days on some urgent business I would do so on my return. Meanwhile, my assistant, Devi Prasad would handle my office and warehouse”
When Ishwar had gone to the city, the assistant told the villagers, “Look at all these monkeys that Ishwar has collected in the big cage. I will sell them to you for Rs 500 each and when Ishwar comes back you can sell it to him for Rs 600”
The villagers saw an opportunity to earn a fortune within 7-8 days without any effort by simply doing an arbitrage over time, “Buy now, sell a while later”, they exclaimed and squeezed out all their savings and bought the monkeys from the assistant to be sold to Ishwar when he returns from the city.
Soon Devi Prasad was able to sell all the monkeys.
Thereafter the villagers never saw Ishwar or his assistant, Devi Prasad.
Only monkeys and monkeys all around – in every home!
That’s Stock Markets for you!!
Image by brgfx on Freepik