Once upon a time, in a village, a man appeared and announced to the villagers
that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to
the forest and started catchingthem. The man bought thousands at $10
and, as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20 for a monkey.
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 increased to $25 each, and
the supply of monkeys became so small that it was an effort to even find
a monkey, let alone catch it!
The man now announced thathe would buy monkeys at $50! However, since
he had to go to the city on some business, his assistant would now buy
on behalf of him.
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 the man returns from the
city, you can sell them to him for $50 each."
The villagers rounded up all their savings and bought all the monkeys.
They never saw the mannor his assistant again, only monkeys everywhere!
Now you have a better understanding of how Wall Street works.