Going Viral

Most social media-savvy people know that “going viral” means something that gains rapid popularity due to acknowledgements, re-postings and re-tweets in social media. Things or people that were unheard of yesterday suddenly become the talk of the town today. The thing or person has achieved that currently much sought-after attribute: popularity. Also, don’t forget that it is the CoronaVirus that has the world economy in peril, and so it seems Virus is trending in all sorts of ways these days.

Remaining Viral

It is one thing to go viral, but it is another thing to remain viral. People have short memories, especially in social media, so it seems the trick to remain viral is constantly to reinvent one’s self and go viral over and over again. No small feat to do so. Perhaps this is who “celebrities” who become and remain viral are so handsomely paid – it is a difficult trick to pull off. Kudos to those who understand this world and capitalize on it.

Stocks Are Viral

As I write this, it appears that stocks and investing in the stock market are becoming viral. A big chunk of the US work force is still working from home, and some of them have financial media such as CNBC and Fox Business News on their TV’s while they Zoom in to work. This is feeding a boost in interest in stock investing, options trading, and the amassing of one’s own capital. These have been abetted by easy-to-use trading platforms such as Robinhood.com, as well as by free commissions for some trades. Those companies that are doing well in this stay-at-home economy have benefitted, and this has driven the tech-heavy Nasdaq 100 index up about 26% this year and about 73% since it hit a Covid-influenced low of about 7000 this past March. Investing in one particular stock, Tesla, and its options, has caused its price per share to increase almost 3 1/2 times this year. That is as viral as it gets in the stock market.

Is Viral Good?

A virus itself is not a good thing; see: Coronavirus. But it seems that going viral is a good thing in the short term. For stocks, going viral means everyone is jumping on the bandwagon and investing, perhaps regardless of the underlying company fundamentals. As with one-hit wonder social media stars who become viral but flop back to earth when they can’t maintain their popularity, so to can “viral” stocks return to earth quickly without any substance. One example: Eastman Kodak, which went from the $2-range up to a high of $60 (!!) in the course of a couple of days in late July due to its apparent involvement in a government program to help with the manufacture of Coronavirus medications. When that deal didn’t pan out as hoped, Kodak fell back to the $8/range – still higher than $2 but nowhere near $60. So, for every Tesla, which so far has maintained its viral nature, there are many Kodaks.

IMO

Don’t fill your investment portfolio with viral stocks. Make diversified funds the bulk of your portfolio. If you must, designate a small portion of your wealth as “fun money” to play the viral game. The ability now to buy fractional shares in some companies make it easier to get involved, especially for lower net-worth investors. Or, buy call options on what you think may hit it big soon, keeping in mind that call options expire at some point. If you load up too much on viral stocks, you run the risk of infecting your entire portfolio with losses, and losses are hard to overcome.

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