A great illustration of the sub-prime problem in layman language.?
I see, now i have a better understanding of the sub-prime mortgage crisis.
One day, an ordinary-looking man came with a pretty-looking sweet young thing (SYT) to the Louis Vuitton (LV) store in Causeway Bay, Hong Kong. He chose an LV bag worth HKD 65,000 for the sweet young thing. When it came time to pay, the man took out a cheque book and wrote out a cheque.
The salesperson was hesitant because the couple hadn't shopped there before.. The man discerned what the salesperson was thinking and he said calmly: "I sense that you are concerned that this cheque may bounce, right? Today is Saturday and the banks are closed. Let me suggest that I leave the cheque and the handbag here. When the cheque clears on Monday, you can deliver the handbag to this lady. How about that? "The salesperson was reassured and gladly accepted the suggestion. In addition, he waived the delivery charges. He promised that he would personally make sure that this gets done. On Monday, the salesperson took the cheque to the bank.
The cheque bounced! The irate salesperson called up the client, who told him: "What is the big deal? Neither you nor I have suffered any loss. Last Saturday night, that girl and I had a good time in bed! Oh, by the way, I thank you for your cooperation."
This story reveals the nature of the sub-prime mortgage crisis.When people have high hopes for huge future returns, they lower their guard about the potential risks. ?This pretty girl thought that the HKD 65,000 LV bag was going to come home on Monday, and so she lowered her guard.
Therefore, she believed that her investment in the ONS (one night stand) was worth it even though it was based upon huge and highly uncertain risks. Investment companies are great with packaging high return but high risk deals. The Chinese stock speculators are like this pretty woman. As such, they deserve to lose money.
Without people like these, how are people going to make money from the stock market? As for the media and the stock analysts, they often play the role of the Louis Vuitton salesperson.