Thursday, November 13, 2008

How the financial markets actually work

It was autumn, and the Red Indians on the remote reservation asked their new chief if the winter was going to be cold or mild. Since he was a Red Indian chief in a modern society, he couldn't tell what the weather was going to be like.

Nevertheless, to be on the safe side, he replied to his tribe that the winter was indeed going to be cold and that the members of the village should collect firewood to be prepared.

But being a practical leader, after several days of contemplation, he got an idea.

He went to the phone booth, called the National Weather Service and asked 'Is the coming winter going to be cold?'

'It looks like this winter is going to be quite cold indeed,' the meteorologist at the weather service responded.

So the chief went back to his people and told them to collect even more firewood.

A week later, he called the National Weather Service again. 'Is it going to be a very cold winter?' 

'Yes,' the man at National Weather Service again replied, 'It's definitely going to be a very cold winter. '

The chief again went back to his people and told them to collect every scrap of wood 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 cold?'

'Absolutely' , the man replied. 'It's going to be one of the coldest winters ever. '

'How can you be so sure?' the chief asked. 

The weatherman replied, 'One of the key components of our forecast model, The Red Indians, are collecting firewood like crazy. That is how we deduced that this winter will be the coldest ever.'

And that my friends, is how the financial markets actually work!!!

h/t RamSarit

7 comments:

Vinod_Sharma said...

Sagarone, this is amazing! One was expecting another serious, analytical piece, considering what you have been writing...and the suspense built up till it the laughter just broke!

But,the joke apart,financial experts have proved to be as 'scientific' as the hi-tech weathermen. So much for the great advances made in economics and management strategies. At the end of the day, it all boils down to simple, unadulterated greed, to learn about which you don't have to go to an Ivy League university.

Does it matter said...

Haha.

As they say, financial experts exist only to make astrologers look good.

Check out this interesting article on fat cat I-bankers!

http://www.livemint.com/2008/10/31003840/The-fat-cat-bankers-had-it-com.html

1conoclast said...

:-D

Pinku said...

awesome good...and perfectly true...

Anrosh said...

That pretty much sums the financial engineering course - Very well said. And a great answer for an interview when they ask me this question next time. I'll have to risk the job then because I'll be telling the truth isn't it?

borneveryday said...

LOL, Thats a nice one. And yes am new to your blog (relatively)

Sagarone said...

Welcome to my blog, Borneveryday!