Basketballs and The Market?
Posted by MC on Jun 26, 2008
You start with a basketball from Walmart bought at the reasonable retail price of $10. At some point the owner signs the ball Michael Jordan and claims to be selling a MJ signed ball. The bidding goes up because what was worth nothing and was common, is now all the sudden deemed a rare piece of memorabilia triggering peoples emotions and greed. As the bid goes higher so does the interest in this item, it must be worth even more otherwise why would people be so interested right? The advertised price is now extreme and the original seller, knowing it was a fake, prances away with $990 in profit. Now the new owner only bought it based on his greed, so he turns around to try and sell it for $2000. Only now there is no COA (certificate of authenticity) and people are questioning the validity of the signature. Now his offers are now in the $500 range, because there’s still a slight chance it’s legit and greed tells bidders they could still resell for profit. Fast forward…it’s been exposed a phony signature. The bid collapses and now is back to being worth $10. The owner tucks it away for a few years till he has a garage sale. There someone buys it for $20 despite being told it’s a fake. The seller is just happy to get some money back, and the shady buyer knows the signature is passable. The new owner opens an auction with new naive customers who know nothing of the prior auction. What do ya know, he sells the ball for $1000 again, and the cycle repeats over and over.
Of course there’s allot more in the markets movement than a clear cut point A to point B. This is a simplistic look at things to say the least. One thing to take from this may be that what transpires in the middle is essentially noise and greed driven. The greed portion can linger on for quite some time, as long as the hope of selling for profit is around. Now on the other hand, the extremes of the range often have quick reactions thanks to fear being the stronger of the emotions.
Another reason I feel this is a fair depiction of the market is the fact that the ball holder creates the bag holder. This market is not a fair game, there is deception at work. The “smart money” in the market preys on “dumb monies” greed and fear. “Not fair” some would say, well no, but what in life is fair? LOL
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