Monday, July 14, 1997
Shooting Stars
by
o2jibe
I was out hiking in the mountains of Southern California last evening when I saw a shooting star. It was brilliant, lasted maybe a whole two seconds. I smiled and made a wish as always. Then a Foolish thought occurred to me that made me raise an eye-brow and smile again. When I got home, I sat down at my computer to write this fribble.
The lure of easy money is very strong. Most people, unfortunately, just can't resist. You just have to show them some great profits for as little as a even a week, and they are ready to give you their hard-earned cash in hopes of making a fast buck. They aren't looking for education; they don't care if you have a solid track record. The only thing they see, (or rather, are blinded by), are the dollar signs. They would much rather give their money to a stock-picking, market-timing "golden boy" or girl than spend the time educating themselves to be able to make smart investments.
The stock market has the amazing ability to make anyone a star, putting him in the lime-light, albeit briefly. With one or two lucky picks that these stars "knew" were going to "hit" big, they light up the sky at night, and people make wishes upon them. "Trust me baby, I got the feel." If this sounds a bit like gambling to you, you are right; it is.
The scary thing is that this is not much more different from how the majority of people invest in the stock market -- putting their money in the hands of a broker or mutual fund manager. Of course there is a little difference here; I exaggerate a bit, not by much though, considering most of their track records. More than 75% of all money managers can't even match the market average. This is just the plain fact. Why pay someone to mishandle your investment capital? You wouldn't hire someone to drive your kids to school if most of the time they got lost on the way.
Recently, I happened to hit big, on paper that is. I was the golden boy. I threw a few stocks that I liked into a paper portfolio just for fun. Shall I divulge them? They aren't very well known.
Compaq Computer, 3Com, Dell Computer, America Online
Okay, so a few people know about them. These four totaled over 36 million shares traded Tuesday July 8th, CPQ and DELL making up 25 of the 36 million. In a little more than a week's time, with equal shares of each of the four, this magic portfolio was up 13.5 % as of close July 8th. I guess I really am a star. Kidding aside, I was shocked by my luck in market timing. Does this mean I expect this to continue? Absolutely. Just think, 13.5 % per week, compounded for 52 weeks, that's over 72,000%. Okay, okay, I'll be serious now. What did I do that anybody else could not have done? Nothing. But just the fact that I did it means I have some sort of special ability, right? Haven't I joined gooroodom? Of course not. I just happened to be looking in the right place at the right time. Kind of reminds me of the other night's heavenly display.
So, the next time you see a shooting star on Wall Street, just try to imagine that broker or fund manager bouncing along the atmosphere, his expensive Armani suit beginning to glow red hot, and then, "poof." All gone. Now smile, and make a wish for another more Foolish year.