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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.
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.
- 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.