The Stock Market as a Restaurant

If we were to imagine the stock exchange as a restaurant, where an investor's earnings equates to the satisfaction deriving from the quality of the food and the price paid for it, then

Investor Returns = Quality of Food divided by Price Paid for Food

When the restaurant enjoys a rip-roaring business due to hear-say, leading from "hear-says" from food bloggers (equities analyst who sets target prices), impossibly long queues from natives and tourists alike (speculators) are form.

It would be quite sensible to assume that the quality of food will drop when the restaurant is busy. After all, the chefs are faced with a growing list of tickets from the servers.The broth will be diluted.. the purchasing supervisor might be tempted to lower his/her standards and purchase lower quality food, and perhaps pile up on stock in case of shortages.

Investor Returns = Lower Quality of Food divided by Price Paid for Food

In response to the overwhelming patronage, the restaurant has no choice, possibly due to greed or increases in variable costs, to raise prices (just like how a stock's price is increase).

Investor Returns = Lower Quality of Food  divided by  Higher Price Paid for Food

 

Isn't it time to start cooking at home or to eat at another restaurant?

How many times have you queue for an hour and realize the food is only passable?