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May 24, 2008

The Credit Crisis & Ways of the Market Explained

Comics John Bird and John Fortune have a hilarious video that explains how "markets work" and why it is only correct for regulators to bail out investment banks whose actions have caused havoc in the financial markets.

Here's how the skit starts (hat tip: Paul Kedrosky):

John Bird: You have to remember a couple of things about the market. They are made of very sharp and sophisticated people, some of the greatest brains in the world. And the second thing you have to remember is that the financial markets, to use the common phrase, are driven by sentiment.

John Fortune: What does that mean?

John Bird: What does that mean. Well. Things are just going on as normally in the markets, and then, suddenly, out of the blue, one of these very sharp and sophisticated people says, "MY GOD! SOMETHING AWFUL IS GOING TO HAPPEN! We've lost everything! My God, what are we going to do?"

John Fortune: Shall I jump out of the window?

John Bird: Shall I jump out of the window. Exactly! Let's all jump out of the window! We've lost it ...

John Fortune: Sell!

John Bird: Sell! Sell!

John Fortune: Sell!

John Bird: Yes, precisely ... and then, a few days later, these same sophisticated persons say, "You know, I think things are going rather well." And everyone else, "Yes, I agree. We're rich. We're rich."

John Fortune: Rich! Yes. Buy! Buy! Buy!

John Bird: Yes. Buy! Buy! Yes. And that's what we call market sentiment.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.