Page 25 - ARUBA TODAY SEPT 8
P. 25
BUSINESS A25
Tuesday 8 September 2015
A Q&A with Wall Street’s top psychiatrist on market turmoil
MATTHEW CRAFT reflected in the prices. Peo- behavior based on his six months ago? It’s just fish- of course it’s going to hap-
AP Business Writer ple see the bad news and emotional state and what ing for a reason. pen in markets, too.
NEW YORK (AP) — When it say, “The party is still on. I’m he says, the information he
seems like the stock market not going to leave.” You communicates. Q: What’s the better expla- Q: Is there anything like this
has lost its mind, big banks in daily life? When many
and investment firms often Andrew Silverman, left, and a fellow trader work on the floor of the New York Stock Exchange. people hear a fire alarm,
turn to one particular psy- When it seems like the stock market has lost its mind, big banks and investment firms often turn they often sit still until oth-
chiatrist: Richard Peterson, to one particular psychiatrist: Richard Peterson, CEO of MarketPsych. er people get out of their
CEO of MarketPsych, a firm seats. You think, “Maybe I
that applies research from (AP Photo/Richard Drew) need to take this seriously.”
behavioral science to fi- A: That’s a good analogy.
nancial markets. can see the bad news roll- The information people get nation? In this case, people know
MarketPsych’s comput- ing in. People were under- from the media can influ- A: Maybe it sounds like they shouldn’t pay atten-
er programs attempt to reacting, and that usually ence their emotional state voodoo to people. Look, tion to the ups and downs
gauge the market’s mood happens after a long pe- and change what they’re information affects our will- of the market. But what
by scanning news and riod of good news. We’ve likely to do. That’s the whole ingness to take risks, and makes them pay attention
Twitter and other social had this long run in the goal of advertising, right? our willingness to take risks and decide to collectively
media. The data feed it stock market for years. Peo- Advertisers aren’t stupid. had been evaporating. bail out? Does China re-
sells to traders sifts through ple just get complacent. They wouldn’t spend all It’s the accumulation of ally matter all that much?
more than 3 million articles that money on advertising bad news from multiple They’re slowing down from
each day, registering con- Q: The news usually doesn’t if it was a waste of money. places: from the oil sec- 7 percent a year econom-
fusion, optimism and fear. lead people to take ac- They’re driving people’s tor, from the mining sector, ic growth. Big deal. Falling
Recently, Peterson warned tion. What does? behavior. from China. As bad news oil prices are good for ev-
his investor clients that they A: The key to what’s hap- accumulates, it makes erybody.
were in for a rough ride pening here is how infor- Q: What’s the most ridicu- people gradually less likely So how does this get
and probably “a real cor- mation flow affects human lous analysis you’ve heard to take risks. The probability framed as a negative? In
rection” later in the sum- behavior. How you feel during this turbulence? that a small decline will turn conditions of uncertain-
mer. “Fear is creeping in,” determines what you’ll do. A: I think a lot of the expla- into a big decline increas- ty, we tend to look to the
he said. For me as a psychiatrist, I nations about China are ri- es. It’s like a forest that herd to tell us whether it
In an interview with The As- was trained to try and pre- diculous. It’s when people hasn’t had rain in a while. matters, and the best rep-
sociated Press, Peterson dict people’s behavior. If pin it on an exact cause. To A few sparks fall on the un- resentation of the herd is
fielded some questions somebody is in my office say it was China not step- dergrowth, and they don’t prices. People assume the
about the recent market and he’s upset, I have to ping in to save the market start anything. But eventu- herd knows something im-
volatility. The interview has decide if he’s dangerous on Monday, so of course ally, the tinder gets so dry, portant and has better in-
been edited for length and to others or dangerous to they had to sell. Oh, that’s it becomes a conflagra- formation. The herd knows
clarity. himself. I have to predict logical. Why now? Why not tion. We see it in nature so something they don’t. So
when the herd starts mov-
Q: How do you explain all ing, you think, “I better stick
with them, because I’m
the turmoil over the past safe if I’m with the herd.”
It’s an intelligent adapta-
few weeks? tion for use in uncertain
situations, just not in the fi-
A: It has to do with the flow nancial markets.
of information. People of- Q: You usually advise big
investment funds. Any ad-
ten respond slowly. So in vice for the average Joe?
A: People have to decide
behavior finance, there’s if they’re going to try and
time the market or sit and
under-reaction where hold on. If you’re going to
buy and hold, stop paying
news hits the market and attention. Review once a
month or once a year. You
people don’t respond right need to have discipline.q
away. And there’s overre-
action. People collectively
say, “Oh my goodness, it’s
terrible,” and sell in a pan-
ic.
In July, we changed our
outlook to negative, be-
cause the news flow was
getting negative. It wasn’t
Tesco agrees to sell South Korea business in $6 billion deal
YOUKYUNG LEE Singaporean investors is this year, pending share- zation. been restructuring its busi-
AP Business Writer the largest ever in South holder approval from Tes-
SEOUL, South Korea (AP) Korea and one of the big- co and South Korean gov- Two Canadian pension nesses. It closed 43 unprof-
— British retailer Tesco PLC gest deals in Asia so far ernment approval.
agreed Monday to sell its this year. Homeplus is South Korea’s funds and Singapore state itable stores in April.
South Korean retail busi- Tesco said it will use the 4 second-largest retailer. Its
nessto a locally led con- billion pounds ($6.1 billion) chains of discount stores investment company Homeplus, meanwhile, is
sortium in a deal worth of cash proceeds from the generated annual reve-
about $6 billion. sale to reduce its debt, nue of 8.6 trillion won ($7.1 Temasek are part of the facing criminal and civil
The acquisition by South which amounts to 4.2 bil- billion) through February
Korean private equity lion pounds. The deal is ex- with 788 billion won earn- consortium. The MBK-led lawsuits in South Korea.
firm MBK Partners and a pected to be completed ings before interest, taxes,
group of Canadian and during the final quarter of depreciation and amorti- consortium said it will in- Company executives
vest 1 trillion won in Home- were charged in Febru-
plus over the next two ary for selling the personal
years. data of millions of custom-
Tesco, which reported ers to insurance compa-
a full-year loss of $8.5 bil- nies, which used the infor-
lion through February, has mation for marketing.q
