So, you think you're rational?

Israel and Palestine have been in bitter conflict for decades. Stanford psychologist Lee Ross once showed why problems like this last so long with so little progress.

Ross and his colleagues took peace proposals written by Israeli and Palestinian negotiators and swapped the authors' names. He then asked Israeli citizens what they thought of each proposal. "The Israelis liked the Palestinian proposal attributed to Israel more than they liked the Israeli proposal attributed to the Palestinians," Ross said. Palestinians analyzing proposals attributed to the wrong author did the same. The two sides in Ross's studies weren't fighting each other. They were fighting a more complicated enemy: their own opinions.

Another psychologist, Geoffrey Cohen, did a similar study in the U.S. He showed Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans (and the opposite for Republican voters).

People disagree with each other because they think the other side is biased into making bad decisions. They rarely assume that they, themselves, might be just as biased. Psychologists have a name for this: blind-spot bias. It's a bias that prevents us from realizing how biased we are. And it is pervasive in investing.

Behavioral finance is one of the fastest-growing branches of psychology. People love reading about flaws people fall for when handling money. But few of them admit, or even realize, that they're reading about themselves.

Everyone wants to think they are rational, and biases are things that afflict other people. "The brain is designed with blind spots," Caroll Tavris and Elliot Aronson write in their book Mistakes Were Made (But Not by Me), "and one of its cleverest tricks is to confer on us the comforting delusion that we, personally, do not have any." This is why so many of us are not only bad with money, but make the same mistakes over and over again. We're blind to our blind! ness.

"People see themselves as less susceptible to bias than others," writes Princeton psychologist Emily Pronin. Part of this is because we judge others based solely on their actions, but when judging ourselves we're flooded with internal dialogue justifying our own bad decisions. If I see you buying stocks when the market is booming and selling after a crash, I assume you're an emotional klutz. But if I did the same thing, I could tell myself a story about how this new market is rigged, and it's rational to get out now before things go even lower. Because people can reason and tell themselves stories, they're able to make up all kinds of excuses to justify their mistakes – even the same mistakes they criticize others for.

Ironically, the smarter you are, the worse this gets. In one study, blind-spot bias was shown to be positively correlated with things like SAT scores and other measures of intelligence – the smarter you are, the more blind you are to your own biases. Why? Because the smarter you are, the more elaborate and sophisticated stories you can tell yourself to justify your bad decisions. An average investor could never convince themselves that leveraging your balance sheet 30-to-1 with subprime mortgages was good idea. You need to be Harvard stupid to do that. The more rational we think we are, the more self-deluding we engage in, and the more biased we become.

The sad truth is, there might not be much we can do about this. Some biases are hardwired from birth. Stephan Siegel of the University of Washington and a colleague compared 4,600 sets of identical twins, who are nearly genetic duplicates, to fraternal twins, who aren't. Looking at investing behaviors like risk aversion, lack of diversification, and portfolio turnover, identical twins were about twice as likely as fraternal twins to behave like their sibling. "Genetic differences explain up to 45% of the remaining variation across individual investors, after controlling for observable individual characteristics,! " the res! earchers wrote. "Investment biases are manifestations of innate and evolutionary ancient features of human behavior." Daniel Kahneman, who won the Nobel Prize studying biases, once wrote: "Despite 45 years of work in the field, I am still inclined to make over-confident predictions." It's just part of who he is, and who most of us are.

Those least susceptible to biases share a common trait: they're skeptical of their own beliefs. Humility is the ultimate antidote of biases, and the most rational people are those who realize how irrational they can be. Investors with the best track records are often the ones willing to say "I don't know," "I screwed up," "Maybe you're right," and "I was wrong." They're comfortable changing their minds and abandoning past beliefs. George Soros once said: "I think that my conceptual framework, which basically emphasizes the importance of misconceptions, makes me extremely critical of my own decisions. I know that I am bound to be wrong, and therefore am more likely to correct my own mistakes." It's a neat trick, if you can pull it off.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Should Domino's and Papa John's Fear Pizza Hut's Big Menu Changes?

Until now the differences between Yum! Brands (NYSE: YUM  ) Pizza Hut, Domino's (NYSE: DPZ  ) , and Papa John's (NASDAQ: PZZA  ) have been mostly a matter of personal preference. Aside from the occasional special offer or novelty pie, all three chains offer a basic take on pizza.

That has changed as Pizza Hut, the lagging member of this trio of mediocre national pizza purveyors, has radically overhauled its menu. The company, which in recent years has resorted to stuffing cheese into its crusts, has added a wealth of new choices built on the idea that customers want customization. It's pizza on the Chipotle model with choices including 10 different crust flavors, six sauces, and a variety of new toppings.

Favorites like the Meat Lover's Pizza will remain, but customers will now be able to order it with a variety of enhancements. So, for people who want their pepperoni and sausage with honey Sriracha sauce and "Ginger Boom Boom" or "Curried Away" crust, Pizza Hut will have it for them.

The new Cherry Pepper Bombshell pizza by Pizza Hut Source: Pizza Hut

Why is Pizza Hut doing this?
Pizza Hut has reported sales declines for each of the last eight quarters and this new menu is an attempt to turn things around. "This is the biggest change we've ever made," Chief Marketing Officer Carrie Walsh told USA TODAY. "We're redefining the category."

Pizza Hut needed to do something; as it has struggled, Domino's and Papa John's have been chugging along nicely. In the third quarter Domino's posted 7.7% domestic same-store sales growth year over year and growth of 7.1% internationally, marking the 83rd consecutive quarter of international same-store sales growth. In its third quarter, Papa John's posted a 7.4% gain in its North American stores while gaining 5.5% internationally.

Will it work?
One industry analyst told USA Today the chain might be trying to do too much too fast. "It would appear that the brand that has lost touch with the consumer is trying to change too much overnight," Darren Tristano, executive vice president at Technomic, was quoted as saying.

Pizza Hut might be aiming to please customers with a shift to Chipotle-like customization, but it's going to be a challenge for a Yum! Brands property to gain a similar reputation. Chipotle has succeeded not just because it offers customization, but because it has a well-known commitment to quality food. Neither Pizza Hut nor sister chains Taco Bell and KFC have reputations based on offering good food. Pizza Hut may find that simply adding trendy flavors like Sriracha may not be enough to win quality-conscious millennials.

On the plus side, the chain will be adding new toppings including banana peppers, cherry peppers, and spinach. On the negative, filed under "please don't insult our intelligence," the pizza purveyor will be renaming a number of its standard toppings, ostensibly to make them more appealing. The customer who cares where Chipotle sources its beef from may not be fooled by Pizza Hut renaming black olives as "Mediterranean black olives" or red onions being dubbed "fresh red onions," even though nothing has changed.

Can Pizza Hut be reinvented?
While Domino's rebuilt its brand by revamping its pizza a few years ago, the company just improved its recipe, it did not radically change its menu. What Pizza Hut is doing amounts to a massive change in direction, an attempt to differentiate itself from its two major competitors.

Pizza Hut's moves might even send some of its customers running for its rivals. Though the chain will still be selling "normal" pizzas, it runs the risk of confusing people who just want a plain old pepperoni pie and do not want to have to wade through a wealth of options. Those customers may well switch to Domino's or Papa Johns.

The potential gain however is not in stealing traditional, undiscerning pizza eaters from its rivals, it's a bigger growth strategy of winning over fast-casual diners not necessarily looking for pizza. Domino's and Papa John's have largely penned themselves in to a specific audience -- people who want familiar pizzas cheaply.

Pizza Hut is looking to break the mold and widen its potential customer base -- a move that could push it ahead of its rivals. That is a huge risk because the company could scare away its existing customers while failing to win new ones. For this to work the brand has to win customers not just from its pizza rivals, but from fast-casual restaurants including Chipotle, which have a higher perceived quality.

To do that, Pizza Hut needs to up its game. It's one thing to offer more choice, but a lousy salted caramel organic beet pizza with an artisanal cheese crust won't be successful just because it has a lot of trendy words attached to it.

To make this new offering, which rolls out Nov. 19, work, the company is going to need to actually deliver quality pizza that people want to come back for. Fancily named olives and balsamic drizzles won't be able to disguise a mediocre pie.

You can't afford to miss this
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Nike on a Growing Spree

Nike (NKE), based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. It is one of the leading athletic apparel and footwear enterprises, and has its presence in approximately 190 countries around the world.

Fourth Quarter Results

Revenues for NIKE, Inc. rose 11 percent to $7.4 billion, up 13 percent on a currency neutral basis. Revenues for the Nike Brand were $7.0 billion, up 13 percent on a currency neutral basis powered by growth in every key category and geography except Japan, where revenues were in line with the fourth quarter last year. Revenues for Converse were $410 million, up 15 percent on a currency neutral basis, mainly driven by strong performance in our largest direct distribution markets: the United States, China and the United Kingdom.

Gross margin expanded 170 basis points to 45.6 percent. The increase was primarily attributable to higher average selling prices and continued growth in the higher margin Direct to Consumer (DTC) business, partially offset by higher product input costs and unfavorable foreign exchange rates.

Net income increased 1 percent to $698 million while diluted earnings per share increased 3 percent to $0.78, reflecting a decrease in the weighted average diluted common shares outstanding.

Share Repurchases

During the recent quarter, NKE repurchased shares $912 million ( a total of 12.3 million shares). As of the end of fiscal 2014, a total of 51.9 million shares had been repurchased under this program for approximately $3.4 billion, at an average cost of $65.83 per share.

Growth Prospects

Nike is currently concentrating on an expansion in Europe after making its presence felt in the United States. The momentum gained by the company surrounding the World Cup will help the company to grow forward throughout 2015. The incline towards stylish and comfortable clothing, rise in disposable levels of income and a sudden increase in fitness-conscious people will boost the company's growing popularity. The next few years may see the company shifting its focus towards other stylish accessories like sunglasses, etc. Innovation has always played a key role in Nike's success.

"The NIKE Brand is expected to deliver nearly $10 billion in incremental revenue by Fiscal 2017 and our apparel, women's, and e-commerce businesses will support this growth," said Trevor Edwards, president of the NIKE Brand. "Over the last three years, the NIKE Brand has grown close to 40 percent and we will continue to innovate and grow by focusing on products and services that capture the imagination of our consumer and help athletes perform at their highest potential."

The company expects its emerging markets geography to grow at a mid-teens average annual growth rate and for Greater China to return to growth, reaching an average low double-digit rate of annual growth for fiscal year 2014 through fiscal 2017.

Converse is projected to grow at a mid-teens average annual growth rate, to $3 billion in revenues by the end of fiscal 2017.

Final Thoughts

Today, Nike continues to seek new and innovative ways to develop superior athletic products and creative methods to communicate directly with their consumers. NKE is a hit among the brand-conscious consumers, and customers don't mind paying extra for this brand. It definitely lives up to its slogan "Just Do It." Nike's tremendous financial performance will help the company stay a step ahead of its competitors.

It has already witnessed tremendous success in the North American region. The Asian countries hold tremendous opportunities for this company. With robust innovation, continuing research and development activities Nike is bound to create shareholder returns.

(The above data is based on extracts taken from company's website)

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Mid-Day Market Update: Nu Skin Dips On Weak Forecast; EOG Resources Shares Jump

Related BZSUM Mid-Morning Market Update: Markets Open Higher; Time Warner Earnings Top Estimates #PreMarket Primer: Wednesday, November 5: Democrats Lose Control Of The US Senate

Midway through trading Wednesday, the Dow traded up 0.46 percent to 17,463.41 while the NASDAQ surged 0.16 percent to 4,631.15. The S&P also rose, gaining 0.45 percent to 2,021.13.

Leading and Lagging Sectors

In trading on Wednesday, utilities shares were relative leaders, up on the day by about 0.94 percent. Top gainers in the sector included NRG Energy (NYSE: NRG), up 3.2 percent, and NextEra Energy (NYSE: NEE), up 2.6 percent.

Technology shares rose by just 0.05 percent on Wednesday. Top losers in the sector included Pegasystems (NASDAQ: PEGA), down 13.4 percent, and HomeAway (NASDAQ: AWAY), off 11 percent.

Top Headline

Time Warner (NYSE: TWX) reported upbeat earnings for the third quarter.

The New York-based company posted a quarterly net profit of $967 million, or $1.11 per share, versus a year-ago profit of $1.18 billion, or $1.26 per share. Adjusted EPS rose to $1.22 from $0.91. However, adjusted earnings, excluding tax benefit, came in at $0.97 per share.

Its revenue climbed 3% to $6.24 billion. However, analysts were expecting earnings of $0.94 per share on revenue of $6.16 billion.

Equities Trading UP

Coupons.com (NYSE: COUP) shares shot up 28.09 percent to $15.94 after the company reported upbeat quarterly results.

Shares of Callidus Software (NASDAQ: CALD) got a boost, shooting up 14.16 percent to $15.56 after the company reported better-than-expected Q3 results and issued a strong revenue forecast.

EOG Resources (NYSE: EOG) shares were also up, gaining 6.67 percent to $96.30 after the company reported better-than-expected quarterly earnings and raised its production growth forecast.

Equities Trading DOWN

Shares of Albany Molecular Research (NASDAQ: AMRI) were down 22.34 percent to $17.61 after the company reported a Q3 loss of $0.02 per share on revenue of $62.47 million.

FireEye (NASDAQ: FEYE) shares tumbled 15.15 percent to $29.06 after the company reported downbeat third-quarter revenue.

Nu Skin Enterprises (NYSE: NUS) was down, falling 16.43 percent to $42.13 after the company issued a weak forecast for the current quarter.

Commodities

In commodity news, oil traded up 1.10 percent to $78.04, while gold traded down 1.70 percent to $1,147.90.

Silver traded down 2.68 percent Wednesday to $15.53, while copper fell 0.38 percent to $3.01.

Eurozone

European shares were higher today. The eurozone’s STOXX 600 climbed 1.65 percent, the Spanish Ibex Index climbed 1.14 percent, while Italy’s FTSE MIB Index jumped 2.60 percent. Meanwhile, the German DAX rose 1.63 percent and the French CAC 40 jumped 1.89 percent while UK shares climbed 1.32 percent.

Economics

The MBA reported that its index of mortgage application activity declined 2.60% in the week ended October 31, 2014.

Private-sector employers added 230,000 jobs in October, versus 225,000 in September. However, economists were expecting an addition of 220,000 jobs.

The final reading of Markit services PMI fell to 57.10 in October, versus a prior reading of 57.30. However, economists were expecting a reading of 57.10.

The ISM non-manufacturing PMI fell to 57.10 in October, versus a prior reading of 58.60. However, economists were expecting a reading of 58.00.

Posted-In: Earnings News Guidance Eurozone Futures Commodities Econ #s Markets

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Activision Blizzard Earnings: Record-Breaking Results Setting Up a Record-Breaking Year

Destiny has been a smash hit so far. Source: Destiny website.

Activision Blizzard  (NASDAQ: ATVI  ) just turned in a smash hit of a third quarter. 

Revenue came in well above the company's -- and Wall Street analysts' -- projections. Earnings on both a GAAP and non-GAAP basis more than doubled expectations:

Source: Activision Blizzard Q3 release,

Let's take a closer look at the specifics. It was a busy quarter, but it's setting up what should be a much busier fourth quarter, and potentially many more to come. 

Something old, something new fueling growth
The much-anticipated Destiny -- which seemed to be a potential disappointment based on early reviews -- has turned into the best-selling new franchise ever launched in the United States. We knew it did $325 million sales to end users in the first five days, but 9.5 million users point toward more than $500 million in end-user sales so far. With both Microsoft and Sony discounting their newest consoles as they fight for market share heading into the holiday season, the first expansion pack coming out in a few weeks, and the core users that are coming in at 3 million per day, playing more than three hours per day on average, it's likely that Destiny sales will be strong in Q4 as well. 

Likewise, Activision's newest title, Hearthstone: Heroes of Warcraft -- the company's most successful free-to-play game for the PC and iPad -- reached 20 million registered users in the quarter. The game will launch for Android in December. While the company doesn't give a breakout of revenues for each title, Hearthstone -- which is free to play and brings in revenue only through in-game purchases -- contributed enough to get a mention in the 10-Q as a driver of Activision's sales growth.

Warlords of Draenor is driving users back to WoW. Source: Blizzard

Old Activision racehorses Diablo and World of Warcraft were big contributors in the quarter as well. Diablo 3: Ultimate Edition made its debut on consoles in August and was the quarter's No. 4-selling console game, while Diablo 3: Reaper of Souls for the PC, released in March, is the No. 2-selling PC game in 2014. 

The biggest surprise to me -- it was announced before earnings, and somehow I missed it -- was that WoW saw its subscriber base grow to 7.4 million at the end of the quarter, largely driven up by a number of in-game freebies, updates, and promotions before the upcoming release of World of Warcraft: Warlords of Draenor in mid-November. While the game has seen a consistent decline in players since the end of 2010 -- which is a big deal, because WoW users pay a monthly fee to play -- a rebound in users more than six weeks in advance of the release of the update indicates there should be strong interest in it. 

Skylanders toys are a big part of the game's popularity. Source: Activision.

Skylanders continues to perform well, with SWAP Force sales in both Europe and the U.S. remaining strong, even with a new Skylanders game rolling out for the holidays. How strong is this franchise? Skylanders toys have outsold the No. 1 best-selling action-figure line in Europe and the U.S. so far in 2014. That's pretty powerful, considering that Disney's Infinity 2.0 franchise, which also features handheld toys that are part of the game, includes many of Disney's most popular characters. 

Looking ahead to Q4: A new "magnificent seven" driving growth
With the earnings release, management also raised its revenue guidance by $85 million for the full year.

Source: Activision Blizzard Q3 release,

Considering that Activision will launch Call of Duty: Advanced Warfare, World of Warcraft: Warlords of Draenor, and Skylanders Trap Team, during the quarter, as well as the Android version of Hearthstone and the first expansion pack for Destiny, called The Dark Below, it shouldn't be a surprise that the company has been expecting to have a record second half of the year in 2014. 

With the new generation of consoles now one year old, the successful debut of Destiny, and Hearthstone for mobile bringing the core of major franchise titles to seven, Activision Blizzard is in great shape going into the fourth quarter and beyond. 

 

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- the Apple Watch. The secret is out, and some early viewers are claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!