Who says... SPOILERS
Who says the whole thing was in his mind? I say yes. I think everyone he came across on his journey wasn't really there. I think it was all in his mind. Little by little, he was picturing all the people that he wronged and all the things that led to his life going down the drain. I think he was trying to tell himself what was happening and in his state he imagined everyone. I think Ned Merrill was a sick man. I especially believe that the whole scene with Julie was fantasy and in his mind.
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