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How The Stock Market Bubble Burst - Investment - Nairaland

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How The Stock Market Bubble Burst by teemy(m): 2:56pm On May 23, 2016
Had the experience of meeting Mr Olumide Emmanuel a bank manager who was looking for corpers during my NYSC year. He narrated a story which I believe you would find exciting.

As retold in my own words.

Hunter kasai visited a village and bought all available monkeys at the rate of N100 per monkey.
Seeing that by the next day there would not as much monkeys as he would like, he offered an incentive of buying at N150 per monkey to encourage the villagers to resource for more. He came, he bought at N150. Then he promised to buy at N300 when next he comes around.

By Visit 3 every Tom, Dick and Harry was interested in supplying Hunter Kasali who as promised came and bought at N300 promising to buy next time at N500. The jungle however has a limit it can supply by then there was no more monkey to hunt and all of a sudden from one corner comes Mr. Suberu who claimed to have a secret source of monkeys and would supply at the rate of N350 per monkey of which the smart villagers promptly bought planning to resell to Huter Kasali at N500. Fastforward to the DDay and Hunter Kasali failed to show up. Unknown to the villagers Suberu was Kasali's business partner and all monkeys bought at N100, N150 and N300 were the same sold back to the villagers at N350. The villagers' losses became Mr Kasali and Suberu's gains whose only transport and storage of the monkeys.

Lesson 1. There is a limit the world can supply
Apart from seed multiplication from agric, virtually all resource is limited and so not too many people can make a living from doing the same things as the law of diminishing returns comes into play and those that once gained would begin to lose. Any business proposal that claims everyone would make money is an alert that a lot of people would lose money over time. Even forex that could have made that true works on 'the house always wins' model.

Lesson 2. Know where the money is coming from
If you go on to buy soap from Mr Giwa the shopkeeper, you lose money and Mr Giwa loses the soap and each of you is happy with your gain and losse. If you cannot find out who is happily losing to you i.e your customer you should know that is a business set to fail or a scam. You can use this model to know when an employer would lay off staff so you don't get caught unawares.
At this season of recession in nigeria you would see a lot of 'investment' offers strategically meant to rip you off (I am saying there are no real ones). Now you are better enlightened to sort the chaff from the weath.

Lesson 3. Too much noise is an indication of bellyup
About a year before the stock market crash in 2008, seminars on blue chip and penny stocks were just springing up everywhere. About that time Warren Buffet (Then world second richest) exited the stock market massively and when the crash happened he was unhurt and became world richest. Remember the price of a stock is just its perceived (paper) value. It goes up and down as perception changes.

At this season of recession in nigeria lots of 'investments' strategically fashioned to make you lose your hard earned money would crop up. Now you can conduct your own litmus tests to know which is true.

Wishing you well - Teemy

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