Simplifying Management
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Saturday, November 3, 2007

Understanding Market


Once upon a time………there was a small village……..villagers were simple and innocent…
One day a big trader from an unknown place came to the village and asked villagers to sell “cats” at price 1 Rs. Some villagers made effort and sold it. Next day trader increased the price at 2 Rs. now more villagers got involved. This was continued up till price was 100 Rs. but there was no cat left into the area to be caught.
Now some of the villagers thought to accumulate cats and sell when price will increase to 150 Rs.
So villagers started trading with each other and some of them started accumulating. This made an intense scarcity of cats into market. Price was rising each day aggressively.
One very fine day, another trader came to village with some cats to sell at little lower than market price.
Villagers left their daily working routine….sold all their properties to buy cats to accumulate it.
(Reason being high return.)
The cat trade was most famous business into the market and all other business like Cat’s feed, Cat’s cage etc. were on boom.
People were very happy and happily buying from second traders, accumulating and selling to first trader. Mean while first trader disappeared. But the cat trade was still the hot business. People still buying cats from second trader and accumulating it.
One dark night second trader also disappeared after selling all cats.

Note: Both the traders were friends and second trader bringing cats from first only.
At last villagers left with many casts and all property sold.

Where they went wrong?
Always look fundamental for long term investment.
Fundamental: -
Why trader buying cats?
What he is doing with it?
What is real worth of cat?







5 comments:

M.P.Singh said...

amazing story hats off dear, I believe two main reasons why innocent villagers go for cats purchase 1) greediness and 2)no market knowledge.

Spiritualmanager said...

Great yaar believe me u just wrote the shortest version of Bhagwat Gita. Its a truly Holy article, can be used in every field and more often than not in day to day life.

icecool said...

This is the simplest way somebody has ever explained how stocks and markets work. Gr8 job. This story indeed tells the importance of fundamentals. The villgers were fooled into overvaluing the cats du to demand and supply gap.

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