Tuesday, November 11, 2008

Bubbles ( kumilakal )

Was going through a presentation, Bit small one ( not sure on the author but it was rotating by email )

Preface :

This is a small story. In starting you may be bit confused but once you go till end of the story, everything will be fine.

Lets start reading.

In a small island ( not iceland ) there are 3 inhabitants.

and Kochutresya

Kunjunni and Kochutresya doesn't own any land but both have a dollar each in hand.
kunjumoosa does not have any money, but island is owned by him.

Kunjunni got a desire to buy the island. He gave a dollar and brought the island

Balance sheet :

Kunjunni has a dollar valued island
Kunjumoosa has a dollar
Kochutresya has a dollar

Total Value in island : 3 dollar

Seeing this, kochutresya also want to buy the island.But she was sure she cant get that for a dollar. She borrowed a dollar from kunjimoosa and brought the island for $2.

Balance sheet :

Kunjunni has two dollar valued island
Kunjumoosa has a dollar to get from Kochutresya.
Kochutresya has two dollar valued island but she got a debt of a dollar.So she has a dollar net value.

Total value in island : 4 dollar

Kunjumoosa felt sad on the land sale because he felt it was too worthy and its going up. So he decided to buy back.

He took loan of two dollar from Kunjunni and brought the island for three dollar. Two dollar cash and one dollar as credit of the one dollar she loaned before.

Balance sheet :

Kunjunni has two dollar value - which is loaned to kunjimoosa
kunjumoosa has three dollar valued island.
Kochutresya has two dollars.

The bubble went big and big. Every one happy and every in profit.

Days passed, Kujunni started thinking again .. do real estate rise this much ? do i get the money back ?

Kunjumoosa and kochutresya also started thinking - d this land cost this much ?

Kunjunni asked the money back. Kunjumoosa tried to sell.
The market for land went down.now its back to a dollar.

Konjumoosa because bankrupt and gave away the land to kunjunni and declared chap: 11.

Balance sheet :

Kunjunni has dollar valued land.
kunjumoosa - 0 dollar.
Kochutresya has two dollars

Total value in island : 3 dollar

End of story.


Nobody knows when the bubble bursts. The person with cash at time of bust gets it. So don't worry if bank doesn't give you a loan. They want to secure cash in hand for now.

Management fundus will say kunjimoosa to sell the island divided etc but we want to make story simple so no side lines added.

special thanks : Gopakumar

© yankandpaste®

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