Stocktake: Dumb trades can be very profitable

After Elon Musk praised messaging app Signal, an unrelated penny stock soared

The messaging app Signal. Photograph: Giulia Marchi/The New York Times

The messaging app Signal. Photograph: Giulia Marchi/The New York Times

 

Stocktake has previously pointed out that speculators can make a bundle by betting on stupidity – that is, anticipating uninformed traders will pile into the wrong stock in a case of mistaken identity.

Stocks such as Tweeter Home Entertainment (think Twitter), Snap Interactive (think Snap) and Nestor (think Nest Labs) have all briefly soared at various times for this very reason.

The latest such case is penny stock Signal Advance, which went bananas after Tesla’s Elon Musk recommended messaging app Signal. That weekend, multiple media outlets reported on the stock’s massive gains and the fact the two companies were unrelated.

Nevertheless, Monday saw the stock gain another 438 per cent. It eventually sank, but even now it remains 20 times higher than it was the day before Musk’s tweet.

Sometimes, doing the wrong thing can be very, very profitable.

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