Popularity comes at a price

My wife's recent Hunt for Piano


I knew practically nothing about Piano and consider myself musically challenged. But after months of accompanying my wife on her hunt for a replacement to her 40+ year old Schubert Piano (the company went out of business in 1937), I found a striking similarity to the way I search for my car and the way I approach investment in general.

Established brands

The search began on piano forums such as Piano World Forums and familiar names of Yamaha and Kawai came up in recommendations more often than other names. We went from showrooms (Yamaha @ Plaza Singapura, Robert Piano @ Parkway parade) in major shopping centres to 2nd-hand warehouses (Asia Piano @ Citimac Industrial Complex). All sale persons we spoke to (all could play the piano quite well, at least to a music idiot like me) gave their recommendations. As expected, all recommend established brands like Japanese made Yamaha or Kawai, either exorbitantly expensive first hand or more down to earth prices but exorbitantly old (20 to 30 year old) 2nd hand ones.

'Unpopular' brands

We went on to look at other brands, particularly non Japanese brands (the supposedly 'better' but ridiculously expensive European brands are not in her consideration list). There are Chinese brands like Pearl River, Hailun and Korean brands like Samick and Young Chang.

Shortlist

While all the pianos sound beautiful to me, so long as I'm not playing it, my wife could tell the difference. Once she finalise her needs, a upright piano with a height of about 120cm (taller pianos are better, but disproportionately more expensive) she went through her choice:

1. Yamaha U1: 121 cm, $8,600 (new), Japan
   
2. Yamaha U3: 131 cm, $4,000 (26 years old), Japan
   
3. Hailun HL125: 125 cm, $3,600 (new), China
   

The shorter Japanese made U1 can buy 2 Chinese made Hailun. Even its 26 years older ancient cousin cost more than a brand new Chinese made one! Much had happen to Chinese made products, from food to toys to clothes... that the consumer confidence had plummeted over the years, but the difference in pricing is seemingly alarming.

Before coming out as a brand call Hailun, the piano company had already been manufacturing for prestige brands in the West. Being establised as Hailun only in 2000, bored down as a Chinese brand, made Hailun highly 'unpopular'. Thus the Hailun piano is fine. The music is pleasing (to my wife) and the piano design is comparable to most standard piano. The manufacturer is confident of their design, as seen from the 10 year defective parts warranty (compared to 6 for Yamaha).

Thus if she are to buy the Yamaha piano, is she paying for quality or brand? Chances are the Yamaha piano could indeed be better than the Hailun Piano, but for each difference in dollar, I would think more is attributed to popularity in branding than absolute quality. If the China made produce could one day improve in their general quality and weed out unscrupulous manufacturers keen to take consumers for a ride, and if people finally realise the true quality of the Piano, I am quite sure the price difference of a Yamaha and Hailun would not be this huge.

Anyway, my wife is a happy owner of the Hailun HL125 piano, judging from the din of the piano music in the background as I am blogging now. :)


My Hunt for Car 6 months ago

I recall my car hunt about 6 months ago. My wife had been 'emphasising' how inconsiderate most people in trains and buses who are oblivious to pregnant women standing around them and a car would be a nice thing to have if we can afford one. Her specifications to me was simple, she doesn't need prestige, power, look etc... She just hope to have 4 wheels. So out I went, looking for 4 wheels, any 4 wheels.

6 months ago, COE was far more expensive than $2 sold recently. After some financial estimates and budgeting, I found that we could only afford a car below $50,000 comfortably without being a slave to the car. We drive the car, no the other way round.


Popular brands

As a newbie, the first thing that came to my mine was Toyota. I still remember I told my friend back in University that I'm contented with a humble Toyota when I have more disposable income. When I found out that a Toyota Vios cost about $57,000 then, I realise I couldn't even afford a humble Toyota.

Shortlist

• After searching sgcarmart and comparing the specifications, I simplified my preferences:
• 1.6L sedan
• Safety features such as Airbags and Anti-lock Brake System
• Spacious

and narrowed now my list to two cars:

1. Mitsubishi Lancer GLX - $47,000
   
2. KIA Cerato Variant 2- $46,999
   

Specifications (Mitsubishi Lancer GLX)

• Engine: SOHC 16V, in-line 4 cylinder
• Power: 106 bhp
• Torque: 142 Nm
• Dimensions: 4535 x 1695 x 1445mm
• Wheel Base: 2,600mm
• Kerb Weight: 1,140kg
• Safety features: Dual Air bag, ABS
• Fuel Consumption: 12.74km/Litre

Specifications (KIA Cerato Variant 2 )

• Engine: DOHC CVVT
• Power: 121 bhp
• Torque: 143 Nm
• Dimensions: 4500 x 1735 x 1470 mm
• Wheel Base: 2,610mm
• Kerb Weight: 1,266kg
• Safety features: Single Air bag, ABS
• Fuel Consumption: 12.92km/Litre

Unpopular brands

Kia, being a Korean brand was obviously not as popular compared to major Japanese brand like Toyota, Honda, Nissan and Mitsubishi. Japanese cars of similar specifications are Toyota Altis, Honda Civic, Nissan Slyphy, all way beyond my budget. The Mitsubishi Lancer was within budget because it was an old model giving way to the new Mitsubishi Lancer Evolution X.

After going to showrooms, chatting with colleagues and friends, the reputation of Korean cars came across as one with low resale value (more expensive car obviously have higher resale value since it depreciate from a larger number), poor reliability (what is the regular maintenance for?) and poor fuel consumption (I don't drive like there is no tomorrow).

Hence am I paying for popularity (brand) or quality? Car technology don't really jump by leaps and bounds compared to computer technology. Thus I am more willing to bet on a new Kia Cerato Variant 2 (just released in late 2007) compared to the Mitsubishi Lancer (released in 2005). In order to stay in business, the Koreans would have tried their best to catch with with the Japanese. It is only a matter of time people realise their worth.

6 months down the road, I am still a happy owner of my Kia Cerato Variant 2.

Stocks and Popularity

Considering the way the Piano is chosen by my wife and how I choose the car, it became apparent to me that popularity comes at a price. Just because more people know how good some thing is, it commands a higher price.

The same goes to stocks. An undiscovered gem can go unnoticed for months, years. The price will languish at some ridiculous level, thinly traded (nil volume for days) with huge bid-ask spread. But when some analyst finally discover this gem, and started to initiate coverage on it, more people knew about it, the price starts to jump, so does the volume. When the market capitalisation grow big enough, the bid-ask spread flattens and trading volume surge, the institutions got in. That is when everyone starts to talk about it. By this time, the price will have been prohibitively expensive.

I am often questioned why I look at stocks with almost NO volume. How am I going to sell them? For good or bad I cannot be sure (despite all the margin of safety and diversification), at least I know most people do not know or care about them... yet.

When I bought Golden Agri-Resouces back in 2005 as I foresee the palm oil demand, the volume was so thin and bid-ask so huge. There can be days when it is not even traded. Fast forward to 2008, it was almost on top volume EVERYDAY.

Conclusion

When something is good, it only make sense to get it when it is cheap, and not wait until it became popular and expensive. Popularity does not make something good. It is the goodness that ultimately make something popular.