How Sub-Prime works..

One day, a plain-looking man came in with a pretty girl to the Gucci
store in Causeway Bay (Hong Kong Island).

He chose an Gucci hand bag worth HKD65,000 for the pretty girl. 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 the 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 and complained
bitterly and called him names. The client calmly told him:

"What is the big deal?

Neither you nor I have suffered any loss?

Last Saturday night, I went to bed with that girl and had a night of
terrific sex. Oh, by the way, I thank you for your co-operation."

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 Gucci hand 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 stock market speculators are like this pretty woman.