Bye Bye Banks and Wall Street

[sleepyjeff]

My brother is a VP at a major US bank. He explained it to me like this:

Let's say there are 5,000 boxes on display. You can't look into any of the boxes but you know that 4,900 of them contain a million dollars.......the remaining 100 contain nothing. What value would you assign to any one box?

If you assign a million dollars to one box and it turns out to have nothing in it you end up in the hole for a million dollars.......so you are likely to assign a lower value to any given box, even though in all likelyhood that box is still really worth a million.

Yeah, I still don't get it either

[Alex]

Originally Posted by sleepyjeff

My brother is a VP at a major US bank. He explained it to me like this

That's true. You'd assign the boxes a value of $980,000. But I don't see what it has to do with the current situation.

[sleepyjeff]

Originally Posted by Alex

That's true. You'd assign the boxes a value of $980,000. But I don't see what it has to do with the current situation.

Now suppose you can only afford one box......do you still assign it a value of $980,000...or do you elect not to play?

..and no, I really don't see what it has to do with anything either....just repeating what I heard and there's a good chance I didn't even hear it all.

[Morrigoon]

Originally Posted by Alex

That's true. You'd assign the boxes a value of $980,000. But I don't see what it has to do with the current situation.

That strategy would work if you were investing in all the boxes. Unless it turned out that 80% of the boxes ended up being empty.