The Stock Market Explained

Want to buy some some sheep?

I spent all of Wednesday morning listening to the riveting testimony of Harry Markopolos, the whistleblower that went to the SEC repeatedly over a period of many years trying to get them to blow the whistle on the Bernie Madoff ponzi-scheme fraud which cost many scores of thousands of Americans (and a lot of folks in Europe and Latin America too) an estimated $50 billion dollars.

For the record, $50 billion is a stack of $100 bills 50 miles high.

Harry is a true patriot, a great American, and a very funny man. He sometimes tells this story when explaining how the stock market works:

Once upon a time in a Greek village, an ill-kept man man appeared and announced to the villagers that he would buy sheep for $10 each. The villagers, seeing that there were many sheep around, went out to the forest and started catching them.

The ill-kept man bought thousands of sheep at $10 apiece, and as supply started to diminish, the villagers stopped their effort.

The slovenly Greek then announced he would now buy sheep at $20 apiece. This renewed the efforts of the villagers and they started catching sheep again. Soon the supply diminished even further and people started going back to their farms.

The Greek then increased the offer to $25 per sheep, and the supply of sheep became so little that it was an effort to even see a sheep, let alone catch it.

The Greek man then announced that he would be buying sheep at $50! However, since he had to go to the city on some business, his fat and lazy assistant, Wendy Burger, would now be buying the sheep on his behalf.

In the absence of the Greek man, the assistant told the villagers. 'Look at all these sheep in the big corral that the Greek man has collected. I will sell them to you at $35 apiece, 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 sheep. Then they never saw the Sloppy Greek man or his fat assistant ever again, only sheep everywhere!

And that, my friends, is how the stock market works! It all started with sheep . . . .
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