While the mainstream media never passes an opportunity to peddle the most vapid stupidity capable of snagging a click, this one takes that cake. CNBC had on their front page an article touting why you would have been better off investing in Apple stock compared to buying a home 10 years ago. Aside from the sheer stupidity of the idea of even analyzing this, let’s consider the gaps in this logic realistically speaking:
- Bad Assumptions: One of the dumbest parts of this story, aside from the idea itself, is that this dopey author uses $228,000 as the starting investment since that was the “typical American home cost” in 2002. Well, that’s a dumb analysis because virtually nobody was buying homes in cash back then. Realistically, people were putting either 0% down, 5% down or maybe 10% down. So, really, the investment is a full order of magnitude smaller than stated for a “typical American” since that’s the brilliant benchmark being batted about. People bought homes with leverage whereas this assessment assumes Apple shares were bought with the full home amount. So, to take it to another absurd degree, why not assume Apple stock was purchased with leverage? Or perhaps even stock options – LEAPS. Sure, rather than buying a home, people went out and bought perfectly placed out of the money call options on Apple stock. And they lived in a tent knowing they’d become rich.
- Survivorship Bias: I’ve written about survivorship bias before in the lionization of winning mutual fund managers or successful CEOs in that you ONLY hear about the winners and don’t consider the losers. i.e. Gates, Jobs and Zuckerberg are all college dropouts, therefore, by dropping out of college, you’ll be a billionaire, right? Duh. Well, same here. The dope goes and selectively picks one of the top performing (and most popular to get a click) stocks of the past decade and uses that as an example. That is no different than me saying, if you simply went back and played the Lottery using numbers 3,14,32,45,62 back on Jan 3, 2002, you’d be a millionaire. Or if you shorted airline stocks on September 10, 2011, that was a great investment. It’s hindsight, selective history, just plain stupid.
- The Ultimate Cherry-Picker: Wonder why he chose to use 2002 to start this dumb analysis? Well, see, Apple stock dropped from about $35/share in 2000 all the down to $7/share in 2002 before it finally took off for good in 2003 and beyond. So, he selectively chose the pivot bottom for the stock to make some sort of thesis about Apple stock compared to real estate. How convenient. If I wanted to move the chains back a bit and compare Apple stock from 2000-2002, it lost 80% of its value. Is a -80% return a better investment than a house? Not even in Las Vegas.
- And The Dumb Just Gets Dumber – He then goes on to compare the value of a college education and how your kid would be worth over a million dollars if you put all the college funds into Apple stock back then. I mean, it’s just downhill from there. I’d like to meet the parents who read this article and put their kids’ college funds into Apple stock tomorrow and tell Johnny to wait it out – he won’t need a college degree because that Apple stock will make him rich.
I could come up with all kinds of stupid examples just like this – if you had bought out of the money call options on March 9, 2009 when the market reversed, you’d have returned 100,000% on your money; if you’d shorted financials with out of the money puts in 2007, you’d have returned 200,000%. I mean, anyone can cherry-pick some historical market move and make a story out of it. Stupid.
I hope this also demonstrates that while yesterday I wrote an article defending Apple’s outsourcing and worker conditions, today I am NOT defending buying Apple stock instead of a house, or instead of anything for that matter. Any individual stock like Apple should be considered as part of an overall investment plan, portfolio, or whatever. It should not supplant sending a kid to college or putting a roof over your head.
Dumb, Dumb, Dumb.
Do You Have an Article That Outdoes this one in Terms of Stupidity You’d Like to Share?