Japanese Potato Panic

In this video, I’ll look at Japan’s potato panic, and what it shows us about human behavior in the stock market.

In mid-April 2017, Tokyo-based Calbee announced it would temporarily halt sales of 15 types of potato chips due to a bad crop in the key potato-producing region of Hokkaido, which was struck by typhoons last year.

Calbee, which is 20% owned by PepsiCo, commands a 73% market share of potato chips in Japan.

The prospect of a shortage sparked soaring prices, with bags that usually sell for $1.20 going for $12 to $14.

However, as they did, plenty were available.

The possibility of shortage was enough to send prices up ten-fold, and make even people who hadn’t eaten chips in years suddenly desire them like mad!

Calbee and other chip companies are finding back-up suppliers, both inside and outside of Japan. Production will resume.

Therefore, we could say the potato panic of 2017 was irrational. By some angles, it was unjustifiable.

Historically, these prices were too much to pay, but people wanted those chips so it wasn’t irrational to them. Their emotions were goaded by media.

If products as well-known as potato chips can see their market situation change on a dime due to an emotional reaction, imagine those same emotions unleashed in the stock market. Coupled with the 24-hour news cycle, no wonder stock prices fluctuate in unpredictable ways.

Remember this the next time somebody claims to know where stock prices are heading.

The people buying and selling stocks are just like the people consuming potato chips. Weather, news, trends can cause the madness of crowds to take over at any time.

These variables fan the flames of emotion, sending both chip prices and stock prices all over the map. There’s no predicting these short-term moves because there’s no predicting the emotions that drive them.

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Thank you for watching!