Monday, 11 February 2008

Walking away is a decision

Sometimes the best decision is not to get involved further. Bidding at an auction is a good example. You need to be very clear about what your top bid is and when you get there you need to be disciplined to walk away otherwise you get caught up in the desire for the object and the competition with the other bidders. That way lies penury. Saito san, when President of Daishowa Paper paid massively over the odds for his Van Gogh portrait of Doctor Gachet, at the time a world record for any picture, just to show that he could. No wonder the Japanese paper industry has a reputation for over investment and poor returns. They used to get away with it because their major shareholders, the banks, were unable to walk away beacuse they were all bound together with cross shareholdings.

Luqman Arnold of Olivant last week demonstrated how it shold be done when he withdrew from the Northern Rock auction citing the impossibility of meeting the government's critieria and also delivering a satisfactory return for his shareholders. He will have enhanced his reputation as a thoughtful investor .

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