Apr

12

A recent NY Times op-ed reminds me of your Junto remarks last Thursday about how insider buying can transmit a deceptive signal. Daniel Gilbert's op-ed has some examples of other potential false signals. Gilbert wrote:

"In an advertising campaign that began last week, Nissan left 20,000 sets of keys in bars, stadiums, concert halls and other public venues. Each key ring has a tag that says: "If found, please do not return. My next generation Nissan Altima has Intelligent Key with push-button ignition, and I no longer need these." …There is no selfish reason to bend down and pick up a key ring, but Nissan knows that we will bend without thinking because the impulse to help is bred into our marrow. Our best instinct will be awakened by a key ring and then punished by a commercial. Like rubes throughout the ages, we will be lured by a false cry of distress and quickly cured of our innocence and compassion. We are used to commercial tricks that play on our fears. The official-looking letter marked "Verification Audit" is actually a magazine subscription renewal form; the credit card company's ominous call to "discuss your account" is actually an attempt to sell new services…" 

Gordon Haave adds:

The biggest investment disaster I have been a part of was Edison Brothers Stores, which went to zero. A couple of months before it went under, all the directors bought some shares on the same day. After the fact, it was clear that it was doomed when they purchased. It was a clear head-fake.


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