12/2018
Confabulation was originally described as a neurogenic form of memory distortion.
Confabulation is defined as the neurogenic production of fabricated, distorted or misinterpreted memories about oneself, investments or the world without the conscious intention to deceive.
Confabulation ranges from frequent, spontaneous or bizarre recollections to occasional, plausible and provoked intrusions or distortions of memory.
Severe confabulation is frequently associated with lesions to the ventromedial prefrontal cortex, as well as other surrounding areas, including the basal forebrain, the anterior cingulated cortex and other anterior limbic areas.
Investors who suffer from confabulations are typically very confident about what they claim to “know”, evidence notwithstanding. In my close to 3-decades of teaching investments and REITS, I find that prodding investors to answer in areas of unfamiliarity or when they don’t know exactly how an event unfolds, often result in a confabulated response.
I looked up Morten Kringelbach, an Oxford neuroscientist when I detected a sense of routineness for confabulation when questioning students in my classes over the past decade.
According to Morten, an intriguing possibility that we simply do not have access to all of the unconscious information or which we base our decisions, so we create fictions upon which to rationalize them.
From my routine probing of my students, it has become clear to me that many-a-times, students would resort to confabulation to justify a BUY or SELL decision, more so if they have seen recent images or news of the REIT, be it calling for a rights issue, a private placement, an acquisition etc. Witness the huge sell-down on First Reit whose share price collapsed 19.1% in just 3 days last week.
Many in fact combine confabulation with share price under-performance and assumes the status quo will remain. But for the smart investor, that is the furthest from how events will indeed unravel.
Let me use ESR-Reit, our next Reit that we will be profiling on 8 Dec 2018 in our Reit Symposium & Investors Meet to illustrate.
ESR-Reit share price has been stuck in a trading range of 48 cents – 52 cents for the past 7 months since the first announcement of its merger with Viva Industrial Trust.
Investors have been guided that post-merger, ESR-Reit is going to derive costs savings from operational synergies and economies of scale via portfolio integration. Essentially, this would come via 2 ways – clustering of property management services and bulk tender contracts for property services. Quantifying and knowing when these savings would kick –in will be a share price determinant as the unfolding of such events permeate down to the DPU (and hence the share price) seems to be in the region of known unknowns at the moment.
Coupled with the lackadaisical market for REITS in the past few months, many have just been playing a waiting game. But for the smart investor, questions to be asked would be –
Do I fall into a routine confabulation just because you simply do not have access to all of the unconscious information on which you base your decisions, so you create various versions of events upon which to rationalize them?
OR
Do you come and learn how the variables of profitability affecting ESR-Reit will pan out post the merger?
We will delve into this discussion in our SOLD OUT ESR-Reit Symposium & Investors Meet on 8 Dec 2018
Click HERE to be directed to our GCP Global website to find out more.
There will be 150 UHNI, HNI investors, Family Offices and boutique funds angling for an intellectual discourse on eradicating confabulation in one’s REIT decision making process which will decide how one’s wealth will grow.
Another Safe and Save Investing event brought to you by GCP Global.
Comments