How stock markets function?

My brother works in financial market and one day he provided me insight that I want to share with my friends:

One day a stranger comes to a village to buy chickens. He asks the villagers to sell him all their chickens for a price of Rs. 100 a chicken. The price is too good. The villagers sell all their chickens to him.

The same person comes next day and says that the demand for chickens is rising and he is ready to pay Rs. 125 per chicken. Some lucky ones who hadn't sold their chickens to him already find it a good opportunity to make cool profit and he gets few more chickens.

He comes next day again, this time he has raised price to Rs. 150 per chicken. Only one person who hadn't sold his chicken also gets greedy and sells it at Rs. 150.

The stranger arrives next day again and says he will pay Rs. 300 per chicken and needs lots of them still, the market for chickens is suddenly so hot. The villagers are sad, angry, some start crying over the fact that they lost so much profits. The stranger promises to come after three days to check again.

Next day a big truck carrying chicken passes through their village. The villagers stop him. He says that he has to deliver all these chickens to wholesale market@ Rs. 240 per chicken. The villagers get calculating. They decide to buy all his chickens @ Rs. 250 per chicken. They would sell it at Rs. 300 per chicken and still make cool profits. Some sell their gold, house, everything they own to the Zamindar and buy all the chickens @ Rs. 250 per chicken.

It was more than three months back and I last heard that the villagers are still waiting for the stranger to return after three days and buy their chickens @ Rs. 300 per chicken.

Commitment: If it is to be, it is upto me

I read something beautiful few days back. Would like to share this:

Can I walk the length of two feet by four feet (2’/4’) board lying on the ground?

I am sure all of us can do this.

Now, if somebody gives me a million dollar to walk on the same board; only difference is that this board is hanging between two skyscrapers, 1000 feet off the ground.

Any takers? :-)

May I add another detail here: My child’s life it at stake and my child is in the other building. Only way I can save the child’s life is by reaching the other building walking on this two by four board.

Is the same decision not much simpler for all of us now?

Friends: It is all about commitment and what is at stake. We all have different commitments towards different people/ things in life. There can't be total commitment towards everything in life.

If I have 100% commitment towards family, that is good; towards my faiths and believes, very good; but if I have same level of commitment towards my favorite TV program, that is dangerous.

Each of us has to recognize what is at stake for every individual and our personal commitments towards that. Nobody else can tell it to us; everyone has to find it for himself.

If it’s to be, it’s upto me.

Sunil

Current economic crisis and panic created

The current economic crisis and the subsequent layoffs remind me of an old anecdote:

Once in a village ( XYZ) there was famine. It was predicted to last an year. No food whatsoever. The villagers started dying. They went to the Zamindar ( Head of the village) and asked him for food so that they may live on and when the famine is over, they will start harvesting again and pay back. They would also be indebted to him forever for his help. He refused.

The Zamindar knew he had enough stock for his family for 11 months. He had a plan: He asked his family to go without food for first one month so that rest 11 months they can feast and continue the same lifestyle...one month of struggle followed by 11 months of luxury. The family accepted the plan and they started starving. In the meantime, villagers continued dying of starvation.

While this was happening in village XYZ, the exactly opposite was happening in village ABC. The zamindar there had a different approach. He shared his stock with villagers, his family and villagers ate only once/ twice a day to ensure that stock lasts 6 months or more.

After about a month, this Zamindar was visiting village XYZ. He found dead villagers, dead zamindar and his family members and one store full of 11 months of food for 8 people or 3 months of food for around 50 people as per his approach.

Just can't help remembering this story when I read the news papers daily about people getting laid off and companies selling themselves in panic.....