What Much Ado teaches you about market rumours

Blindly following tips can lead to disaster as William Shakespeare's famous comedy shows, says Matthew Partridge.

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.

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.

Recommended

Great frauds in history: Carlton Cushnie’s befuddling Ponzi scheme
People

Great frauds in history: Carlton Cushnie’s befuddling Ponzi scheme

Carlton Cushnie set up a finance company which was valued at an estimated £230m, but made only one trade finance loan in its existence, which actually…
28 Oct 2020
Being unpopular can make life easier for companies – just ask BP and HSBC
Investment strategy

Being unpopular can make life easier for companies – just ask BP and HSBC

When you're as hated as banking and the oil sector, it doesn't take much to pull off a nice surprise. John Stepek explains what that means for investo…
27 Oct 2020
Robin Geffen: dividend cuts aren't all down to Covid
Stockmarkets

Robin Geffen: dividend cuts aren't all down to Covid

The seeds of recent dividend cuts and cancellations were sowed many years ago, says veteran investor Robin Geffen.
25 Oct 2020
Dividend payments will take a long time to recover
Income investing

Dividend payments will take a long time to recover

Companies are gradually resuming dividend payouts, but we can expect only a modest rebound in 2021, says Cris Sholto Heaton.
25 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020