Really Bad Advice And The Yes Set

Yesterday, while surfing The Motley Fool, an investment website well worth adding to your favorites, I came across an article entitled, “Stock Advice So Bad It Will Make You Cringe,” and I did. The author received an invitation to one of those “free” luncheon workshops where the presenter will teach you how to make money in any market, even in markets that are going down or not moving at all.

Ha!

It turned out the workshop was a high pressure sales pitch for something called EduTrader, a computer program that flashes green (good), yellow (neutral), or red (bad) for any company in its database. All you then need do is buy a stock flashing green when the Moving Average Convergence Divergence (MACD) test crosses the line on the way up and sell when it crosses the line on the way back down.

Humbug! Bah, humbug!

For general information of the reader, MACD is one of many real measures used by technical analysts.

From Stockcharts.com
“Developed by Gerald Appel in the late seventies, Moving Average Convergence-Divergence (MACD) is one of the simplest and most effective momentum indicators available. MACD turns two trend-following indicators, moving averages, into a momentum oscillator by subtracting the longer moving average from the shorter moving average. As a result, MACD offers the best of both worlds: trend following and momentum. MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. Traders can look for signal line crossovers, centerline crossovers and divergences to generate signals. Because MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels.”

What is interesting to me is not the Indian root elixir being sold by this particular medicine show, but the skillful use of the Yes Set by the presenter. This is a tool frequently used by salesmen and politicians.

The Yes Set works like this (I hear it all the time).

Politician: Don’t you love your families
Audience: Yes
Politician: Don’t you love America and want the best for our children’s future
Audience: Yes
Politician: Then vote for me
Audience: Loud mindless cheers

Salesmen are taught the same technique. If a salesman can get a prospective customer nodding his head in the affirmative as he makes point after point about his product, he will likely be able to successfully close the sale.

In the example presented in the article, the salesman delivered an enthusiastic evangelistic pitch about the importance of patience and research in investment combined into a stirring “knowledge-as-empowerment” stew. Then he ascended step by step from truisms and reality into Cloud Cuckoo Cuckoo Land.

That is the way this manipulation technique works. The salesman or politician will start with subjects and ideas you believe and gradually move you towards his goal. Salesmen are even taught to calibrate their subjects by discussing topics unrelated to the sale. When they talk about the weather, sports, or current events they are watching your reactions. They will remember your eye twitched a little when expressed displeasure at recent increase in the state sales tax or you moved your hands in a certain way when discussing a recent victory by your favorite football team. He will then use your reactions to measure his effectiveness as he delivers the pitch.

You can successfully learn how to build wealth, but the keys to an increasing net worth are not to be found by listening to a snake oil salesman offering a free lunch.

As the song says:

I know you're looking for a ruby in a mountain of rocks
But there ain't no Coup de Ville
Hiding at the bottom of a Cracker Jack box