Pokemon Go – Gotta Blog About Em All

Pokemon deja vu


The second coming of over one hundred catchable Pokemon as a phone app has created a lot of excitement. And ‘Pokemon Go’ has sent the blogosphere into full hyperbolic overdrive.

I have to admit that even I’ve got a little caught up in the frenzy. Well if you can’t beat ’em, join ’em. And it’s a feeling of deja-vu.

Over fifteen years ago I queued up for hours at Nintendo’s Pokemon store in the Ginza district (think Oxford Street) of Tokyo to buy a Pokemon branded GameBoy. And then I did it again as they only sold one at a time and I have two daughters.

So last weekend, when my Pokemon loving eldest daughter returned home to celebrate her 24th birthday, I was feeling somewhat nostalgic and made her a Pikachu cake. And the theme continued when she arrived. She had her ‘Pokemon Go’ in hand and the first thing she told me was there are pocket monsters in our driveway.

And there’s the hook. Whether you’re a chartered wealth manager or a Phd student of atmospheric science, you can’t help but look.

To be fair, she said they were just the common ones; the pidgeys, zubats and rattatas. There’s no more merit in catching them than a cold. But, lurking in our Jurassic garden she also found an Oddish, Eevee and even a Jigglypuff which are far higher up the Pokemon gene pool.

At this point I’d ask all the Big Pokemon Game Hunters amongst you that, before entering our garden, could you kindly knock first? And please take a business card on the way out.

All right, it's not the best interpretation of Pikachu, but there are some worse ones out there!
All right, it’s not the best interpretation of Pikachu, but there are some worse ones out there!

Risk assessment needed


As delightful as the game is, it’s not without its unintended risks as one young man found out when his girlfriend checked his phone. The app’s tracking history showed that he’d been playing hunt the ‘Weedle’ and ‘Wigglytuff’ at his ex-girlfriend’s place.  Ouch!

But I’m safe.

It’s over 34 years since I had an ex-girlfriend. And I can’t play the game even if I wanted to – I have a Windows phone and there is no windows app. And that is a clue to what I am supposed to be writing about in this blog. The problem for investors surrounding the value of the Pokemon Go to Nintendo.

 

A roller coaster ride for Nintendo shares


Microsoft, the owner of everything Windows, has upset plenty of software firms getting to where it is. So some app developers won’t cater for its phone operating system. It also doesn’t have the scale of Apples iOS system or Google’s Android.

Nintendo, as a hardware and software maker, didn’t want to be in Microsoft’s position. To avoid a conflict of interest with Apple or Google, it spun off everything Pokemon into a separate venture.

After the wildly successful launch of Pokemon Go in the States the question then was, ‘how much of that venture does Nintendo own and how much money will they make from it?’. But the answer didn’t seem to bother those caught up in the hyperbole.  From July 6th to July 19th Nintendo shares more than doubled from 14,380 yen to 31,770 yen.

During that run a sobering assessment of Nintendo’s Pokemon Go earnings on July 13th by John Gapper in the FT was ignored.  But people did pay attention when Mr Gapper’s assessment was backed up by the company themselves on July 25th. Nintendo said earnings from the game would be ‘limited’.

On the Monday before that announcement one headline stated, ‘Nintendo breaks stock market records thanks to Pokemon’. After the company’s mea culpa there was a change of tone, ‘Nintendo feels pressure after biggest fall in 26 years’ and ‘Nintendo loses $6 billion in value’.

But as I write it’s still at 21,080 yen compared with 14,380 yen at the start of the month.

 

Keep calm and carry on


What happened to Nintendo shares this month is a demonstration of how emotive investing can be. And it’s not helped by headline writers stressing the most absurd comparative statistic without any constructive context.

And that emotion can lead to bad outcomes. I wrote about a variety of cognitive biases that can lead to bad decision making here.

The answer is to plan and manage risk where possible. From auto-enrolment workplace pension schemes to stock index investments to balanced funds to currencies, there are different ways of approaching all of them.

 


Please remember:

  • past performance is no guide or guarantee of future returns;
  • the value of stock market investments can rise and fall over time, so it is quite possible to get back less than what you put in, depending upon timing;
  • this blog does not constitute financial advice and is provided for general information purposes only.

Brexit – Welcome to Poundland

Letter to The Times, 24th June 2016


Sir,  It is now surely unthinkable that we can continue to call our country the United Kingdom of Great Britain and Northern Ireland. The only thing uniting us is our currency. Perhaps Poundland would be more appropriate

David Jones W11

 

Beware of the Bull


I sincerely hope that, whatever your views on the Brexit vote, you’ll appreciate the succinctness and humour of Mr Jones’ letter.

Succinctness and humour are not however words I’d use to describe aspects of the rival ‘Leave’ or ‘Remain’ campaigns.  I would not describe the sheer volume of analysis provided by financial companies as being a delight either.

A better description would be something I trod in while on a hike around the beautiful village of Braunston (nr Oakham). The sign in the picture gives you a clue as to its origin.

WP_20160528_18_38_18_Pro

 

 

The first week after Brexit.


In my last blog I wrote,

It’s important to understand that, whatever the outcome of the referendum, that the world of finance is already very ‘stressed’.

And in the paragraph titled ‘Special FX’ I explained how in a world where central banks are managing interest rates (and indirectly asset prices), the only escape valves for economic reality are exchange rates.

In the week since the Brexit vote we’ve seen another example of what this can mean in practise with the sudden and abrupt changes in several currencies.

From coverage in the media you might think it was all about ‘Poundland’ and the fall in sterling, but there were also significant changes in the value of the yen.

Bank of America Merrill Lynch, referring to the foreign exchange markets, called Brexit day ‘the most volatile day in modern history’. And it’s easy to see why. While all the talk was of the pound falling I took this screenshot of changes in the yen against a variety of different currencies.

Brexit day yen crosses
This is a snapshot taken from Yahoo Finance once the Brexit result was known. The ‘% Change’ column shows the falls in the relevant currencies compared to the Yen.

 

Those are remarkable gains for the yen in one day, especially for a currency that its central bank wants to see weaken – but markets regard as a safe haven. And it highlights the bind central banks are in. They’re all pursuing variations of quantitative easing but they don’t all have the same economic fundamentals of debt, foreign reserves or balance of trade.

Perhaps the limits of quantitative easing are now being realised.  And that could eventually have an impact on the beneficiaries of that policy, namely asset prices.

 

How to react?


In terms of what the effect of the Brexit vote has on personal finances there’s not much point on me adding to this article on the BBC.

From a purely investment perspective, you might wonder what all the fuss is about. The FTSE 100 where 70% of company earnings come from overseas – and therefore benefit from a weaker pound – is barely changed from before the vote. Albeit with a bit of a wobble in between.

But, inward looking UK companies did not fare as well, the FTSE 250 index is down 10%. And there will be implications for government debt if the pound keeps on weakening as overseas investors have been the biggest losers this week.

The standard advice is ‘keep calm and carry on’, but it’s a lot easier to do that if you have a professionally tailored plan.

To repeat what I wrote at the end of my last blog before the referendum –

‘The mispricing of rates and assets also means that we have to take great care and be especially wary with any income investment strategy. This will be as true of the trustees of pension schemes as those looking to grow and drawdown income from their own pension.

And it’s not just about the risk of prices moving up and down. It’s also about liquidity risk, the ability to get to your money when you want to.

I’d add, for those of you who might have a significant foreign exchange risk now, or sometime in the future, please get in touch and I’ll explain some options that are available to you.

In light of the cancellation of withdrawals from three commercial property funds my constant banging on about liquidity risk remains a valid as ever. It’s not that you should avoid illiquid assets entirely just that you need to manage the amount of exposure and check if there’s a better alternative.

You also need to understand that the ease at which you can get money out of certain investments can change as it has with the commercial property funds. I remain very concerned about the p2p loan market for example.

More on that soon.

 


Please remember:

  • past performance is no guide or guarantee of future returns;
  • the value of stock market investments can rise and fall over time, so it is quite possible to get back less than what you put in, depending upon timing;
  • this blog does not constitute financial advice and is provided for general information purposes only.