How the stock market works - An Analogy

It was autumn, and the squirrels asked the oldest wisest squirrel if the winter was going to be long or mild. Since he was a squirrel in a modern society, he couldn't tell what the winter was going to be like.

Nevertheless, to be on the safe side, he replied to the other squirrels in his dray that the winter was indeed going to be long and that the members of the forest should collect many nuts to be prepared.

But also being a practical squirrel, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked

'Is the coming winter going to be long?'

'It looks like this winter is going to be quite long indeed,' the weather man responded. So the old squirrel went back to his tree and told the fellow squirrels to collect even more nuts. A week later, he called the National Weather Service again.

'Is it going to be a very long winter?'

'Yes,' the man at National Weather Service again replied, 'It's definitely going to be a very long winter.' The old squirrel again went back to his people and ordered them to collect every single nut they could find. Two weeks later, he called the National Weather Service again.

'Are you absolutely sure that the winter is going to be very long?'

'Absolutely,' The Man replied. 'It's going to be one of the longest winters ever.' 'How can you be so sure?' the squirrel asked. The weatherman replied, 'The squirrels are collecting nuts like crazy.'

And now you know, this is how Stock Markets work.