16 August 2008

Where is the money?

Who moved my cheese? One does not realised his cheese is gone. Where is the money gone? It is not someone who wins everything it has travelled back to the past. Why?

Let me think one analogy to describe what I am thinking....

Err... a piece of land... a piece of farm growing fruits tree. It is empty at first but a farmer put some apple seeds. After 3 years this land will be filled by apple trees, each tree bears 100 apples and each quarter you sell the apples and gets $100. You wanna chip in money to buy seeds? Everyone chips in $2 to buy a share for this farm, the farmer used $2000 to buy seeds.

After 6 mths you could see young trees, all right some of us wants the money back. Mr. A offers $10 to sell the shares that he chipped in. You want to buy? Ok I sell you, Mr B.

After another 6 months trees grew bigger, Mr. B sells $20 each tree. I got shares for 10 trees, that makes up to $200. You will get $400 for each tree per year, $4000 per years for this $200, you wanna buy? Ok I sell you, Mr. C.

After 1 years later, yeah, 1 years later these trees going to bear fruit. I want my money back because I want to buy something. Mr. C sold everything that he bought to Mr. D for $4000.
Wow, finally three years had past. Hey, bugs season. These bugs will eat a lot of our apples. We will only get 10 apples out of a tree. You will get $40 per tree. $400 for a year. Oh my god, I paid $4000 for all these trees. I thought I am going to break even in one year, now what? 10 years to break even? The apple trees could only lives 5 years. I am going to sell everything for $1000 making loss of $3000. Hey, anyone wants to buy for $1000? You will get $2000 after 5 years.

Mr. E bought everything from Mr. D for $1000 thinking to double fold his investment in 5 years. Not bad for a bugs season.

Well, Mr. D asked himself, where is my money gone? If everyone don't want these trees, everyone will have cash right? Why the condition is still so bad?

If everyone is selling, who is the buyers?If everyone thinks there are plenty of cash outside, so where is the 'cash' in this story?

Look back again:
Mr. A - paid $2 to buy seed, sold for $10, earns $8
Mr. B - paid $10 to buy young trees, sold for $200, earns $190
Mr. C - paid $200, sold for $4000, earns $3800
Mr. D - paid $4000, sold for $1000, loss $3000
Mr. E - paid $1000, holding trees

You see Mr. A has $8, Mr. B has $190, Mr. C has $3800. Well, total cash in everyone's pocket is $3998. The trees yield $2000 in 5 years. Are you going to buy it?

Now, ask yourself where does the money gone? My thoughts is the money gone back to past (Mr. A, Mr. B and Mr. C pocket). But, Mr. A, Mr. B and Mr. C can be another Mr. D that loss $3000.

Well, Singapore can't grow apple. Poor Mr. E.

Related articles:
When Stock Prices Drop, Where's the Money?

House Number

01 AmFraser
08 CS
12 Lim&Tan
20 Philip
21 KimEng
25 Daiwa
26 BNP
31 DMG
35 SBI E2
36 Fortis Clearing
37 Lehman Brothers
39 Instinet Singapore
71 Nomura
72 Daiwa
73 Macquarie
77 ABN
78 Merrill Lynch
79 JPM
82 MS
83 Citigroup
84 UBS
86 DBSV Online
87 Westcomb
Thanks ccloh for providing my long lost house number list


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