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Dopamine and finance #finance #rewards

Dopamine is a neurotransmitter that helps control the brain’s reward and pleasure centres. So what does this have to do with finance? The fact that people crave pleasure and rewards has everything to do with finance. Take a look at the photos of those celebrities leaving Buckingham Palace right after being rewarded with a medal for services rendered. They are positively beaming. Rewards can come in many ways, a person simply being nice to you can zap those reward centres of your brain with dopamine. That can be the check out girl at Aldi (yes, they are trained to do it) or the assistant in Harrods who treats you like royalty. Besides buying products, you also get an experience.

The dopamine effect

Adding an experience

The idea of adding an experience to shopping isn’t new and you can see the concept being deployed by many successful retailers. Supermarket shopping isn’t very rewarding and so many ideas have been tried from assistants saying ‘have a nice day’, to music while you shop. The new boss of Debenhams is trying the same idea. Debenhams isn’t quite Harrods but they sell similar things to a different class of people. They now need to train their staff to serve without being servile. Their problem could be the location of their stores. My nearest Debenhams is in a pedestrianized precinct with inadequate car parking. They would be better at a retail park like Matalan. Debenhams share price seems to undervalue the company so if the new strategy works, the shares could be a bargain.  Since 2015 the share price has halved.

Dopamine starvation

There seems to be such a thing as dopamine starvation. Some people have few rewards in their lives and so can’t wait for that dopamine hit. These are the people who splash the cash and who can’t live without a credit card. These are the people who took out payment protection insurance without reading the small print. They have been compensated and that has hit banks in the past few years but banks are now recovering from that scandal and so I’m optimistic that Lloyd’s as one of the biggest banks will recover and their share price will soon pass the pound mark. They sit at under 70p today, that seems cheap for such a large company. They are in a good position to profit from any increase in interest rates, which is long overdue. They are also closing branches and becoming more efficient and adapting to the digital age. Lloyd’s can provide the credit and loans for the people who want their dopamine hit today and can’t wait. The danger is they will lend too much to a subprime credit market.

The markets

Money moves around from one market to another and from one sector to another. Money has been moving from the FTSE 250 to the safer FTSE 100 recently. Now money appears to be moving from the stock market to bonds and property indicating concerns over the economy. I’m just sitting tight and waiting for all this Brexit nonsense to be over and done with. We need a clear indication of trade deals to replace the ones with the EU. The value of my portfolio keeps falling and so I’m making paper losses. My portfolio is part of my financial security and it is seeping away. The only bright spot is Immupharma which is giving me a nice 10% profit on my investment. I’m hoping it will go even higher. Their lupus drug is still in the trials phase so that could be an AIM share that gives me really good rewards. Immupharma like Verona Pharma has broker recommendations to buy and I think both those share prices could double in the next year.

Solo Oil

Solo Oil always has promise but private investors are now tired of waiting. The 1 for 20 consolidation took place this week and didn’t do too much damage. They are still being sold and I suspect it is mainly institutional investors that are dumping them. If there is some major good news, I doubt it will have the same impact as the news of NT3 which tripled the share price. News from the Horse Hill development could send the price up again next month and Tanzania holds the potential for a jackpot. The most encouraging indication at the moment is the rising oil price which is now above the magic $50 a barrel. That could mean the difference between pumping oil at a profit and pumping oil at a loss for Solo’s partners in the future. If oil goes to $60 a barrel it will benefit all the smaller oil companies.

Dopamine treats

While I’m still on the subject of dopamine zapping our reward centres I can’t ignore the effect of food. The success of many well-known brands has relied on the added taste that sugar and salt give to our food. While these additions are considered unhealthy and are being replaced in drinks like Coca Cola. The sweet drinks and foods are still popular. Premier Foods still has a long way to go to become the successful company it used to be but new products like Sweet Treats means it’s getting there. I have stuck with them through thick and thin, mostly thin! I do have high hopes they will come good eventually. I have seen their shares as low as 4p and as high as 185 since I got on board and I’ve even been through a PFD rights issue. I should have sold at 185 but there is still time for them to make a comeback. I hope they will soon realise that in the 21st century Mr Kipling’s exceedingly good cakes need to be exceedingly gluten-free for people like me!

That all for this week. If you’re investing then remember to diversify and don’t panic when the economy goes through a bad patch because that is when you can pick up the bargains. If possible diversify into property and gold as well as the stock market.

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