Linkonomics 101 - Short Selling in Hyrule!

As a former student of economics and a finance buff trying to break into the investment industry, there has always been one concept that many people THINK they understand but don't really get it; short selling. I thought it would be a neat idea to explain it using characters from the Legend of Zelda to show you how I would have made my money instead of breaking tons of pots. Perhaps you will learn a little something to impress a future employer!

The Short Sale: Example 1- Very Simple

1. Link has a jar of Blue Medicine worth 100 rupees today.

2. I borrow the Blue Medicine from Link, promising to return it in 5 minutes.

3. I sell the Blue Medicine to Gannon for 100 rupees.

4. I now have 100 rupees.

5. I purchase another jar of Blue Medicine from The Witch who brews various medicines in her hut for 100 rupees.

6. I now have no rupees and 1 jar of Blue Medicine.

7. I now return a jar of Blue Medicine to Link.

8. Everyone is happy!

I just engaged in a Short Sale contract with Link and made zero rupees. This was a very simple example. Now, suppose I want to make some rupees!

Example 2:Making Rupees with a Short Sale

1. Link still has that jar of Blue Medicine worth 100 rupees today.

2. I borrow the Blue Medicine from Link and tell him I will return it in 30 days.

3. I sell the Blue Medicine to Gannon for the current market price of 100 rupees.

4. I have heard that the Witch is overstocked with Blue Mushrooms so her supply of Blue Medicine will rise significantly over the next month.

5. Over the next month, the price of Blue Medicine drops to 60 rupees due to the surplus of her supply.

6. On the 30th day, I take my 100 rupees and purchase a jar of Blue Medicine from the Witch for 60 rupees.

7. I now have 40 rupees and a jar of Blue Medicine.

8. I return the jar of Blue Medicine to Link like I promised.

9. I now have 40 rupees and everyone is happy!

**Both of these examples are very simple and don't take into account premia and interest. So don't flame me for that! If you really want a more sophisticated example, I am more than happy to ablige! (But I doubt anyone will :D haha)

This is how I would have made my money in Hyrule if such financial vehicles existed :)

Short selling is a simple concept but many have a lot of trouble understanding it. Simply put, you are selling something that doesn't belong to you because you feel the value of that item will drop in value over some period of time. You borrow the item, sell it, hold onto the money and repurchase it at a later date, return it to the lender and keep/lose whatever the difference was in the market prices from day 1 to the final day.

I guarantee you won't find an explaination of Short Sales using Zelda in any textbook! Most people will probably get bored to sleep by this, but hopefully someone out there will appreciate the silliness of this post and learn something in the process.

Thanks for reading,

Mute

I doubt most users will read all of that, but good job man.

Hah, you're probably right, but thanks for the compliment ^^

It was fairly interesting.

I read it :). Nice explanation but what if Link refuses to lend me the medicine :x. Is violence the way forward?

But wouldn't you give the 30 day stipulation if you knew she was overstocked and would drop the price before hand? Because that is a very dangerous chance you just pulled there. It's like russian roulette with the master sword.

But wouldn't you give the 30 day stipulation if you knew she was overstocked and would drop the price before hand? Because that is a very dangerous chance you just pulled there. It's like russian roulette with the master sword.

freek666

This may be the greatest thing I have heard anyone say ever.

Short selling is very risky.

The problem with this scenario is that Link isnt charging you any kind of fee for using his medicine jar for an entire month. In the real world people just dont let you have stuff with no incentive to do so or no personal gain for themselves.

The problem with this scenario is that Link isnt charging you any kind of fee for using his medicine jar for an entire month. In the real world people just dont let you have stuff with no incentive to do so or no personal gain for themselves.

Alter_Echo

I didnt read that part. In order to keep it simple...:P

Cut me some slack....im tired.

Now, suppose I want to make some rupees!whitemute

[QUOTE="freek666"]

But wouldn't you give the 30 day stipulation if you knew she was overstocked and would drop the price before hand? Because that is a very dangerous chance you just pulled there. It's like russian roulette with the master sword.

Bloodaxe726

This may be the greatest thing I have heard anyone say ever.

[QUOTE="super_mario_128"]I've heard of this before. It's interesting, but I imagine impractical... Besides, what kind of monster would give Ganon some Blue Medicine? D:Jandurin

You don't give ANYTHING to Ganon. Would you SELL Black Magic to Ganon?! Would you SELL the location of Zelda's wherabouts to Ganon?!

If the answer is yes then you are a terrible person. :(

[QUOTE="Jandurin"][QUOTE="super_mario_128"]I've heard of this before. It's interesting, but I imagine impractical... Besides, what kind of monster would give Ganon some Blue Medicine? D:super_mario_128

i'm a terrible person :(Jandurin

[QUOTE="super_mario_128"][QUOTE="Jandurin"] he SOLD it to him. Jandurin

[QUOTE="Jandurin"][QUOTE="super_mario_128"] What different does it make? You don't give ANYTHING to Ganon. Would you SELL Black Magic to Ganon?! Would you SELL the location of Zelda's wherabouts to Ganon?! If the answer is yes then you are a terrible person. :(freek666

The adult wallet, 10 Skulltulas needed.

As a former student of economics and a finance buff trying to break into the investment industry, there has always been one concept that many people THINK they understand but don't really get it; short selling. I thought it would be a neat idea to explain it using characters from the Legend of Zelda to show you how I would have made my money instead of breaking tons of pots. Perhaps you will learn a little something to impress a future employer!

The Short Sale: Example 1- Very Simple

1. Link has a jar of Blue Medicine worth 100 rupees today.

2. I borrow the Blue Medicine from Link, promising to return it in 5 minutes.

3. I sell the Blue Medicine to Gannon for 100 rupees.

4. I now have 100 rupees.

5. I purchase another jar of Blue Medicine from The Witch who brews various medicines in her hut for 100 rupees.

6. I now have no rupees and 1 jar of Blue Medicine.

7. I now return a jar of Blue Medicine to Link.

8. Everyone is happy!

I just engaged in a Short Sale contract with Link and made zero rupees. This was a very simple example. Now, suppose I want to make some rupees!

Example 2: Making Rupees with a Short Sale

1. Link still has that jar of Blue Medicine worth 100 rupees today.

2. I borrow the Blue Medicine from Link and tell him I will return it in 30 days.

3. I sell the Blue Medicine to Gannon for the current market price of 100 rupees.

4. I have heard that the Witch is overstocked with Blue Mushrooms so her supply of Blue Medicine will rise significantly over the next month.

5. Over the next month, the price of Blue Medicine drops to 60 rupees due to the surplus of her supply.

6. On the 30th day, I take my 100 rupees and purchase a jar of Blue Medicine from the Witch for 60 rupees.

7. I now have 40 rupees and a jar of Blue Medicine.

8. I return the jar of Blue Medicine to Link like I promised.

9. I now have 40 rupees and everyone is happy!

**Both of these examples are very simple and don't take into account premia and interest. So don't flame me for that! If you really want a more sophisticated example, I am more than happy to ablige! (But I doubt anyone will :D haha)

This is how I would have made my money in Hyrule if such financial vehicles existed :)

Short selling is a simple concept but many have a lot of trouble understanding it. Simply put, you are selling something that doesn't belong to you because you feel the value of that item will drop in value over some period of time. You borrow the item, sell it, hold onto the money and repurchase it at a later date, return it to the lender and keep/lose whatever the difference was in the market prices from day 1 to the final day.

I guarantee you won't find an explaination of Short Sales using Zelda in any textbook! Most people will probably get bored to sleep by this, but hopefully someone out there will appreciate the silliness of this post and learn something in the process.

Thanks for reading,

Mute

whitemute

[QUOTE="Jandurin"][QUOTE="super_mario_128"]I've heard of this before. It's interesting, but I imagine impractical... Besides, what kind of monster would give Ganon some Blue Medicine? D:super_mario_128

You don't give ANYTHING to Ganon. Would you SELL Black Magic to Ganon?! Would you SELL the location of Zelda's wherabouts to Ganon?!

If the answer is yes then you are a terrible person. :(

Why would Ganon buy medicine from you, anyway? Wouldn't he just kill you and simply take the medicine?

Oh, and then there's always the chance that when Link inevitably defeats Ganon, he may discover that you've been secretly selling potions to him and he may very well come after you. It sounds like this Short Selling is dangerous business. :?

Good thread, and I learned something today :D

I'm extatic and blown away at the response to this post, haha. I thought it might make a couple people LOL and make the rest roll their eyes. I loved all your responses (especially the one about the wallet not holding all 100 rupees!) Perhaps I will make "Linkonomics" a regular post! Would be very interesting to see how the land of Hyrule adapts to contingent claims (options) and customized forward contracts. Who says learning can't be fun! Thanks for all your support, you all made my day!

I'm extatic and blown away at the response to this post, haha. I thought it might make a couple people LOL and make the rest roll their eyes. I loved all your responses (especially the one about the wallet not holding all 100 rupees!) Perhaps I will make "Linkonomics" a regular post! Would be very interesting to see how the land of Hyrule adapts to contingent claims (options) and customized forward contracts. Who says learning can't be fun! Thanks for all your support, you all made my day!

whitemute

That was incredible.

There is a huge problem with this concept..

You'll never get market prices on used items/pre-owned.

I'm extatic and blown away at the response to this post, haha. I thought it might make a couple people LOL and make the rest roll their eyes. I loved all your responses (especially the one about the wallet not holding all 100 rupees!) Perhaps I will make "Linkonomics" a regular post! Would be very interesting to see how the land of Hyrule adapts to contingent claims (options) and customized forward contracts. Who says learning can't be fun! Thanks for all your support, you all made my day!

Your logic is flawed. The proper way to do what you suggest is as follows:

1. Borrow blue potion from link and promise to return it, bit cross your fingers behind your back.

2. Sell blue potion to ganon for a hundred rupees.

3. Kill Ganon and reclaim blue potion.

4. Keep money, drink potion to heal wounds from Ganon battle.

5. If Link asks for potion back, kill him.

It works in real life too!