Today’s (Dec 13 ‘11) intraday movements of the Nifty index was a classic example of volatility caused by uncertainty, with alternate bouts of buying and selling making the index gyrate about its previous day’s closing level.
Neither bulls nor bears were able to make up their minds about what to do, after yesterday’s big sell-off following the announcement of the negative IIP numbers for Oct ‘11. It reminded me of the ‘Buttered Cat paradox’ – which is a thought experiment based on two adages:
- If you drop a cat from a height, it always falls on its feet
- If you drop a slice of buttered toast, it always lands with the buttered side down
What will happen if some one straps a piece of buttered toast (with the buttered side on top) on the back of a cat and then drops the cat from a height? The toast will try to make the cat land on its back. But the cat will try to land on its feet. The end result will be a gravity-defying equilibrium where the cat will hover just above the ground level and keep whirling round and round!
Rest assured that I didn’t make this up after imbibing a few too many. It is all over the Internet. I’m even providing the wiki link from which the cartoon below was copied:
Those of you who are enamoured by the unrealised potential of alternative energy stocks like Praj (ethanol) and Suzlon (wind) can imagine the potential of harnessing emission-free green energy from hundreds and thousands of whirling buttered cats.
If you enjoy thought experiments, here is one more. Imagine a fisherman living on a small island in the middle of the Pacific Ocean very near the international date line. Every morning, he sets out on his boat and crosses the international date line (thereby gaining 24 hours). After fishing the whole day, he returns to his island by crossing the international date line once more (this time losing 24 hours). Will he ever get old?
