Nonconsequentialist Reasoning

I am reading the book 'Irrational Exuberance' by Robert J. Shiller, and come across this interesting term 'Nonconsequentialist Reasoning', originated by psychologists Shafir and Tversky. I quoted the description here, people cannot decide until the events actually occur.

I believe this psychological effect is experienced by many investors. In fact, in my blog, I have recorded at 2 such events.

One was when FSL reduced its distribution, and the price held up for several days before going south. The investors could not decide until they see the next distribution in sight is reduced. On the other hand, when Rickmers cut its distribution immediately, you see that the price went south immediately.

The other one is on Chartered Semiconductor. With the latest player Globalfoundries into the competition space, bloodbathing is logically expected. But the investors seems like cannot decide what to do, they may want to wait till they see blood.

On a bigger picture, I think this also explains why Technical Analysis is working in many cases. If market is efficient, and any information is digested immediately and fully reflected on the price, there is no way TA will work.

So, as an investor, we must remind ourselves to make rational decision ... timely.

Let's hope for a colorful future

Study by AkzoNobel, owner of ICI paint, shows that people generally prefer neutral colors such as black, white and grey for interiors, during economic downturns, while more intense colors when they are more confident.

This should serves as no surprise, as economic downturn definitely spoils our mood. Who has the luxury and mood to design a more colorful interior in a downturn? Whereas in a upturn, there is more room, and maybe budget, for more imagination.

You may apply this when you walk into a company's office in future. It may tell you something about how the company views the economic outlook.



** Quote **

Link between colour trends and economy

Tags: Akzo Nobel colour trends economy

Written by Edge Malaysia
Friday, 31 July 2009 17:07

KUALA LUMPUR: A study by AkzoNobel, the world's largest paint and coatings company, on colour trends during economic changes, showed a co-relation between the state of the economy with colour trends.

Although regional preferences can have an impact, "colour trends have been fluctuating in waves over the last few decades as the economy ebbed and flowed," said Jeremy Rowe, AkzoNobel managing director for decorative paints, South East Asia & Pacific.

"During an economic downturn, neutral colours such as black, white and greys are favoured for interiors while more intense colours are used when people feel more confident," explains Rowe at a breakfast meeting with the Malaysian media on July 31.

He added that in Western Europe at the moment, sober whites and off-whites are the most popular while in the US, beige and grey are dominant.

Asia, he added is definitely more colourful with fresh colours such a yellows and pink and light blue preferred.

In the months ahead, Rowe said, "colours will be lighter in mood and more optimistic in feel" as the world emerges from the current economic downturn.

AkzoNobel acquired Imperial Chemical Industries (ICI) paints last year. It is the manufacturer of the Dulux brand of paints.

ICI Paints (Malaysia) Sdn Bhd managing director Goh Cheok Weng said the paints and coatings sector has shown improvement in Q2 indicating a return in consumer confidence.

The Amsterdam-based AkzoNobel posted revenue of 15.4 billion euros last year. It expects to maintain Asia's 20% contribution to its total sales up till 2012.

ICI Paints Malaysia also launched a month-long nationwide roadshow to raise awareness on the need for sustainable, environment-friendly products and its commitment to produce low odour, low volatile compound (VOC) green certified paints.

It is the first decoration company to introduce the full range of low odour, low VOC interior emulsion paints with Singapore's Green Label accreditation in Malaysia.

http://www.theedgemalaysia.com/business-news/146300-link-between-colour-trends-and-economy.html

TheEdge 200709 - 7-11 Biz opportunity in Shanghai?

I gather these points in Sunita Sue Leng's article.

1. Taiwan has highest density of convience store, 1 for every 2500 people
2. President Chain Store Corp controls 52% of it, ie 4,810 outlets.
3. In Beijing, there are 75; In Guangzhou 512. Shanghai? 4.
4. Map of control for 7-11 in China, North: 7-11 Japan, South: Dairy Farm HK, East: President Chain Store.
5. President took 7 years and 100 stores to break even in Taiwan. It estimates to take 3-4 years and 250 stores to achieve break even in Shanghai.

It certainly looks like there is a big potential market, and an experience and determined franchisor. Doing a franchise 7-11 was one of the many business ideas I considered once, but I dropped it when I saw it almost every corner, and don't forget NTUC Cheers. Anyone interested in running the business in Shanghai may consider it. :)

Rocking Wall Street

This is a very mind opening book, written by Gary Marks, who is a fund manager, and unexpectedly also a songwriter.

A weird combination maybe, but if the title of the book or his music talent makes you think that he is a risk taker, then you are totally wrong.

In fact, he is against risk taking, to an extent that surprises me. For example, he is against market timing, short term trading, equate these to gambling. He suggests long term trading only on good companies, treasury, and well-managed hedge fund or fund of funds.

He also look at investment from a bigger picture, from the perspective of life. You do not want to waste your life monitoring the market, worrying about your investment.

We probably do not have the luxury to invest in treasury or hedge funds, but the book certainly makes me have a different view on risk and life.

I strongly recommend every investor to read this book.

The Human Side of M&A

This book is on HR management during Merger and Acquistion, written by Dennis C. Carey and Dayton Ogden, both are veteran in top/senior management recruitment and advisors in M&A.

The reason I invested my time reading this book is to learn what makes a M&A successful, and what makes it not. I hope this can help me to make appropriate investment judgement and decision when a company is involved in M&A.

Unfortunately I do not gain the confidence after finishing the book. The authors advocate proper attentions and efforts taken to manage the transition and to keep the talents. However, exactly how? I suspect due to confidentiality, the authors did not disclose much details.

One thing I learnt though, be skeptical when a M&A is announced, the success is still pretty much a big question mark.