Costa Bolsa is a small island country in the Pacific near South America. Even though it is distant from the rest of the world and has a very limited population, a few of her merchants actively trade with her Latino neighbours, like Brazil or Colombia.
Mr Manny Pulnik is one of the richest merchants on the island because his company is the dominant distributor of coffee imported from the outside world. Since no one could live without coffee, it ensures Manny a steady source of income year after year and leads a very comfortable life on the island.
Unfortunately, even though things are very stable, Manny feels that it is rather dull just selling coffee because the demand is so stable. He wonders: since he is the only reseller of these beans, and the people in the country do not honestly pay much attention to the industry trend anyway, is it possible to take advantage of it and make more money?
It happens that Manny has a friend called Mia Deer, who is a famous radio show anchor on the Island. She is also a notorious gossiper who can never keep a secret. One day, Mia interviews Manny for her programme and asks him what does he think about the cellular phone market. It suddenly strikes Manny that God has given him an excellent opportunity to make a lot of money.
After the interview, Manny pulls Mia aside and says he knows an insider secret about the coffee industry, and he is telling her because she is a good friend whom he has known for a long time. Mia promises that she will never tell anyone about it, and waits for Manny to continue. Manny says he hears from some Brazilian friends that the weather has been abnormal this year. It has adversely affected the crop, and he expects the supply to dwindle in the coming six to nine months.
Although Mia has promised to keep her mouth shut, she has also failed to do so. She tells her family and co-workers that she hears from a reliable source that the coffee price is expected to go up soon, and it may be a good idea to buy a little immediately from the Central Market on the island to see if it is true. By the way, the Central Market is the biggest bazaar on the isle where one can freely buy or sell almost any kind of goods there.
Manny watches the coffee market carefully. In the first few days, nothing happens. However, two weeks later, the hawkers in the Market tells Manny that people have developed a sudden eagerness for coffee, and the sales are almost a double of usual. Manny appears baffled, but he was laughing greedily inside. Since he controls all the supply of coffee, why not raising the price right now?
Next day, all the sellers in the Market come to know that the wholesale price of coffee has gone up by five percent because of “problems concerning foreign affairs”. They are a little worried because they fear that the high price will force people to buy tea or Coka-Cola instead. However, some of the buyers are happy to see the price going into their expected direction, and gladly purchase even more!
As a result, within a few months, the coffee price has gone up a lot at a remarkable pace. The public starts to wonder what is going on. The Finance Minister of the Costa Bolsa begins to notice the abnormality, and he summons Manny in an informal meeting for an explanation. Of course, Manny does not tell the truth. He fabricates rumours of terrible weather and ensures the Minister that he has nothing to do with it. The Minister says nothing and lets him go.
Manny survives this time, but he knows he must make the whole situation looks realistic before the government gets suspicious again. Also, since he wants to sell more coffee at a higher price anyway, it is preferable to make as many people believe his story as possible. Manny immediately thinks of his friend Mia. When they meet at a cocktail party, he tells her that the coffee price is going to rise again as the weather problem is more severe than imagined.
By that time, Mia and her friends have already held a lot of coffee. She knows that even if what Manny says is not entirely true, it is still to her advantage to broadcast the coffee problem to the public so that they can sell their positions at a higher margin. Within a week, the whole country knows about the rising price of coffee, and in fear of missing the chance to make some money, everybody rushes to the Market to buy as much coffee as possible.
The coffee price goes up like a rocket. Some of the more intelligent buyers already notice that something is not right. They would rather sell their coffee back to the Market immediately than to participate in this madness. Manny does not mind that, as he still has a lot of foolish buyers who want to buy at a higher price from him. Together with Mia and other early purchasers, he begins to sell his stock of coffee to the market and rips a huge margin of profit.
It all goes happy and merry until one day Manny finds that his coffee is quickly running out of stock. The Market is running out of coffee soon. The next shipment to Costa Bolsa takes some more time to arrive, but he cannot last that long. He has no choice but to suspend the supply because of “a cargo delay”. However, sooner or later, everyone will notice that there is no more coffee supply on the island. Not only the public will panic, but the government will torture him and probably put him in jail. What shall he do?
His deliberation goes on for days, but Manny still has not come up with a solution. Then, Mia meets up with Manny again, and she tells him a worrisome piece of news which she gathers from the Market. Some hawkers tell her that no one has supplied them any coffee for a few days already. Is there anything wrong with Manny’s company?
As Manny tries to come up with a response, it suddenly dawns on him that there is only one solution to his problem: to entice the public to sell the coffee back to him. He responded quietly to Mia as if he is afraid that someone may overhear him. He says that the experts have overestimated weather devastation and an abundant supply is on the way. The quantity of coffee has increased the workload of workers and hence delayed the shipment, but it will arrive within three days. He urges Mia and her friends to sell all their coffee if they still have not done so.
Being a great gossiper, Mia starts to tell everyone about the flooding in of coffee coming in days, and openly broadcasts to the country that a reliable informant has told her that this coffee bubble is going to burst. At the same time, Manny also informs the sellers in the Market that a larger-than-expected quantity of coffee is going to arrive soon, and he will sell his beans to them at a lower price than usual. The coffee price falls abruptly overnight.
The sharp dive in price compounds the bearish effect of a purported surge in supply. Countless people queue up outside the market with their large bags of coffee, trying to resell them back to the merchants. Some poor fellows, who entered the market too late with too much money, even kneel on the ground to beg the dealers to take their coffee. Sadly, given the sudden large supply, the coffee sellers are in no hurry in accepting the offer.
A brown ocean of coffee beans has drowned the Market, looking for individuals who want to bring them home. The news reaches every corner of the island and the public panics. More and more people become desperate and rush to the market to sell. Within a fortnight, the coffee beans have gone from expensively overpriced to almost worthless. Manny happily buys back the beans at a ridiculously cheap cost which is nearly as minuscule as that he pays his foreign supplier. His long empty warehouse starts to get filled with coffee again.
Needless to say, the event has shocked the government, and the police have no choice but to arrest Manny for possible price manipulation. Manny explains that this bubble is a by-product of market mechanism and it is beyond the ability of anyone to sustain a rising price in a free market for so long. Finding no evidence that Manny has been collaborating with other sellers in the Market, the police drop the charge and let him go home.
The coffee market quiets down after a while. Manny cannot sell any of his coffee for quite some time, but he does not care, because he has just made more money than ever, so much so that he can afford to retire with a comfortable life immediately. On top of that, the people on the island are simply very forgetful. After a few months, life returns to normal, and people once again buy and sell coffee as if nothing has ever happened.
Well, the story does not end here. With the newfound fortune, Manny has expanded his business into tea and become the largest distributor of red tea on the island. He wonders if he could repeat his feat in a new market.
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