What Much Ado teaches you about market rumours

published 31 August 2018

911-Much-Ado-634 — Kenneth Branagh and Emma Thompson in Much Ado about Nothing

Much Ado about Nothing is a comedy by William Shakespeare, thought to have been written in 1598-99. Having won a military victory, Don Pedro and his soldiers travel to Messina, where they are invited by the governor, Leonato, to stay for a month. Benedick, one of Don Pedro's companions, is reunited with former lover Beatrice, though the two are unable to admit that they are still in love with each other.

Meanwhile, Claudio proposes to Leonato's daughter, Hero, and the two plan to get married. However, Don John, Don Pedro's half-brother, is unhappy about the turn of events and plans to sabotage the wedding.

The key moment

In an attempt to sow discord, Don John claims to Claudio that Hero has been unfaithful to him. Don John even arranges for Claudio to observe what seems to be his fiance cheating on him, though in reality the person he sees is Margaret, Hero's attendant, having an assignation with Don John's servant, Borachio.

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As a result, Claudio humiliates Hero by refusing to go through with the wedding, denouncing her in front of everyone. This enrages Don Pedro, and also infuriates Beatrice, who demands that Benedick kill Claudio.

Lessons for investors

Blindly following tips and rumours can lead to disaster. One of financier Bernard Baruch's top ten investment rules was "beware of barbers, beauticians and waiters or anyone bringing gifts of inside information or tips".

Such tips show "that there is no more dangerous illusion than the belief that one can get something for nothing". Even if the source is reliable, its easy to misunderstand them, like the relative who bought shares in a company after overhearing Baruch talking about it on the phone, only to overlook that he was really shorting the stock.

Other financial wisdom

It's illegal for people to divulge (or act) on inside information, so even if you do make money, you could end up in jail. Usually, the people giving the tip either don't have any genuine inside information, are advancing their own agendas (just like Don John in the play) or both. It's common for scammers pushing dodgy stocks to claim to have inside information, to ensure that victims avoid the authorities because they don't want to get into trouble themselves.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri