Wednesday, April 18, 2012

Lotto Fever

“How come you never see a headline like 'Psychic Wins Lottery'? “
- Jay Leno

I was gonna clean up!  I would be walking down the streets of Seattle handing out $100 bills to everyone – everyone!  I’ve been here before, but $600 Million?  Huh-uh.  So I bought four chances – my world was going to change in a big way.  I was sure of it – damn sure.  So sure in fact, I was tempted – very tempted - to buy more chances.  I’m sure of one thing now: I didn’t win.  But up to the point where my logic kicked in, the fantasy going on in my head was exhilarating, intoxicating.  It was indulgence pure and simple, and I rationalized it by telling myself that everyone else in the country was dreaming the same dream.  Call it a collective dream.

A similar dream has taken over the stock market: call it Apple Fever.  The price of Apple stock was $405 at the close of 2011.  It was $600 at the end of March – a 48% rise in just 3 months.  Headlines of “Apple to $1,000” started to appear.  At one point Apple represented 4.5% of the total market value of the S&P 500 Index – bigger than the perennial leader Exxon.  Apple stock is the largest or second largest holding in six of the ten largest mutual funds in the US.  Anyone invested in a large company mutual fund or large company index fund owns shares of Apple.  “Apple” is on everyone’s lips.  If you want to see it in real time, check out www.stocktwits.com with the symbol $aapl or www.twitter.com with the symbol #aapl.  We are all invested in the price of Apple going higher.  The collective investment dream is almost palpable.

Lotto Fever broke with the actual drawing of the winning numbers – “Whattya mean I only had one number?”.  Except for the lucky winners, the collective dream ended, we all woke up, and I was glad it was only four chances thrown away and not 40.

For better or worse, Apple Fever has yet to break and unlike the Lotto, there is no “final drawing date” - only higher or lower prices.

What’s my takeaway?  Avoid catching fever, dream your own dreams.

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