When I was in Santa Monica last week for a Dimensional Funds seminar, I also had a chance to hang for a bit with Rocco Pendola, the social media director of TheStreet.com. He told me a story about a CNN security guard who put $1,000 into Facebook (FB - Get Report) on its first day of trading.
The context: The media were focusing on the stock's impressive rally that began on July 25. But Rocco contends (and I agree) that the stories of small individual investors, like the security guard, are more indicative of the euphoria and hype (OK, those are my words, not his) surrounding widely-touted stocks like Facebook. Here's Rocco's story:
I was thinking about the hypey-stock phenomenon after I talked with Rocco. I have plenty of experience in this arena, having taught growth-stock trading seminars for years before running to the light of a balanced, allocated, indexed portfolio. It wasn't all that long ago that Apple (AAPL - Get Report) was the gotta-have-it stock. Other flavors of the month, at various times, were Google (GOOG), Yahoo! (YHOO - Get Report), EBay (EBAY - Get Report), Taser (TASR - Get Report) and Monster Beverage (MNST - Get Report).
I don't have any moral or ethical objection to trading growth stocks. It can be fun and exciting, and sometimes even profitable -- assuming the trader times his or her buys and sells exactly right.What I do object to, however, is the idea that certain stocks are "must haves," and are the ticket to riches. In some circles, you'd think that anybody who missed out on Monster Beverage (the company formerly known as Hansen's Natural) would be facing a lifetime of financial ruin. The financial media and their partners -- Wall Street and brokerages -- are complicit in whipping up people's emotions about a particular stock. Occasionally, it is possible to get people worked up over something stodgy like a DJIA component. But most of the time, it's a high-profile growth stock that is the subject of a feeding frenzy. A few days ago, the iPad app for a popular market-oriented news weekly (I sound like a " Wheel of Fortune" contestant with descriptions like that) directed me to a some stories, which, I admit, caught my attention. (See, even though I'm aware of the manipulation, I still fall prey to it!)
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV