Because most philosophies that frown on reproduction don't survive.

Friday, September 23, 2011

In Which I Become Very Rich

I was standing around with "the guys" after a dinner here tonight, and a friend was talking about how Apple stock is now trading over $400 a share.

"Did you know they nearly went out of business back in the mid '90s?" someone asked. "Can you imagine if you'd bought stock back then?"

Ah, but you see, I did. Have I mentioned that I'm rich?

Well, that's because I'm not. But here's my "brush with riches" story.

Back in the summer of 1996 I was the right mixture of arty and nerdy to be an Apple fan back when Macs were beige boxes and Steve Jobs was still in exile. I bought an Apple PowerBook (one of the early color ones) and an Apple printer to take to college the next year. I was in the throes of writing a novel, and I'd worn out the keyboard of my dad's old laptop. Somehow, I'd taken to reading the financial section of the newspaper (okay, so I was an odd kid) and I was shocked to discover that Apple stock was selling in the $4 range, so I raided my college savings and invested $2,000 in Apple stock for $4.85 a share.

Apple did well over the next few years. By the fall of 1999 that $2000 has become $9000, which to my eyes was a lot of money. I'd read that it was important to diversify your investments, so I sold two thirds of the Apple stock for $22 per share. I invested a third in other stocks and took a third out in cash to buy a 1989 Honda Accord so I could work off campus and make more than minimum wage.

In 2002 we were a young married couple, short on money, and Apple wasn't doing so well, despite the fact that trendy teenagers were now going around with white earbuds. The stock was selling for around $10 per share. So I sold all the stock that was left (Apple and otherwise), paid off our credit card bill, and put a bit under 2000 into a Roth IRA. I bought a couple different stocks in the IRA, including 60 shares of Apple stock. Being hard up (and having access to a 401k at work where I could put money away without paying taxes on it first) I never put any more money in the IRA, and so never bought any more.

At the time, that was about $600. Now it's $24,000. (Which I hadn't realized till my friend told me Apple was trading so high. Since I haven't touched the account in eight years and I can't access it till I'm in my 60s, I make a point of never looking at it in order to avoid worry.)

Still. I couldn't help thinking that if I'd never taken any money out of that original account, I would have, if I'm doing the math right $166,497. (And the cost of that 1989 Accord, in opportunity cost, was $56,000.) Which maybe isn't rich, but it's a heck of a lot of money from where I sit.

Which I guess just does to underscore that you have to have money to make money. Through the brand loyalty of a 18-year-old -- certainly not any true financial perspicacity -- I stumbled on a 83x return over 15 years. But you still don't make millions unless you have a fair amount of money to invest.


JMB said...

I attended a work conference in Chicago in 1993 and Steve Jobs was our guest speaker! Was he CEO of Next then? I don't know. I wish I could remember one thing he said but I don't.

Once we bought an internet stock. Netscape. We bought it for the low teens and within a couple of months it shot up (I kid you not) to 150 something a share. So I told my neighbor who worked at Merrill Lynch at the time. He told me to sell half the shares. I didn't listen to his advice - hey it might even go up higher! Anyway, we ended up selling the shares at a loss at something like 6 bucks a share. Go figure!

But the best stock story is this. We outgrew our 3 bed house. The market in our area was just getting hot. We put it on the market and this young couple from NYC bought it for 25K over our asking price. We thought that they were crazy. It turns out he worked for an internet stock company (March 2000) and cashed out on most of his shares to put 50% down on the house. Within 6 months, his remaining stock was worth next to nothing. To this day (they still live in the house and we moved a few blocks away) every time we run into them they thank us for selling our house when we did!

hierogamous said...

I'm well aware of that "It takes money ..." right now trying to promote my book(s) and new blog, Hierogamous News, here at blogspot. When a friend said, "But you already are rich.", meaning rich spiritually, I remembered my grandfather's saying "I wish I was rich and had a lot of money." You can be rich without having money and you can have a lot of money and not be rich.

Matthew Lickona said...

I am here shedding a tear for you.

Darwin said...

Shed no tears! I got a good story and a year's retirement out of it.