Once upon a time, in a Canadian town, a man appeared and announced to the town folks that he would buy beavers for $10 each. The Canucks seeing that there were many beavers around, went out to the nearby ponds and forest, and started trapping them. The man bought thousands at $10 and as supply started to diminish, the folks stopped their effort.
He further announced that he would now buy the beavers at $20. This renewed the efforts of the folk and they started trapping the animals again. Soon the supply diminished even further and people went back to their farms.
The man’s offer then increased to $25 each and the supply of beavers became so little that it was an effort to even see a beaver, let alone trap it!
The man now announced that he would buy beavers at $50! However, since he had to go to his Bay Street office on some business, his assistant would now buy on his behalf.
In the absence of the man, the assistant told the town folks, “Look at all these beavers 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 folks excitedly gathered together all their savings and bought all the beavers.
Days and weeks passed. And it came to be that the town folks never again saw the man nor his assistant – only beavers everywhere!
Now you have a better understanding of how stock brokers work.
THE BAY STREET MORAL: If you plan on trading, expect to be pelted.
