Henry Blodget proposed interesting game:
If you were the owner of all Google's shares: would you keep Google or take Cash?
What would you do with your cash?
You can bet this was my response:
"I would take cash: for 110 billion I will buy All gold mining companies in HUI index, then I will buy Lundin Mining - 5.5 billion, 50 billion for Oil&gas companies in Canada, Brasil, Russia and China; for 20 billion I will become King of Junior mining sector and will buy All promising deposits in Gold/Silver/Copper/Zinc/Lead/Nickel/Uranuim and will put 10 billion to short Google over 600. I will keep 4.5 billion in mix CAD/AUD/Euro in order not to think about my investments for 25 years. In 10 years I will buy for 100 million spin off from XinHua Agency former Google just to keep my blog ranking No 1 in WEB 2.0 Bubble search"
It is very simple, but powerful approach to see behind the trees. Very much Warren Buffett style: will you buy not stock, but business at this valuation or you would rather sell?
With economy going into recession, housing slump and credit crunch how will Google survive this valuation? Margins are falling, growth is slowing from the beginning of this year and market is full of rumours about disaster (be careful with this one it is too ground breaking)?
This is total insanity - stock price is pump out and earnings are almost irrelevant: who will care even if Google will miss again and growth will slow further? Now everybody is waiting for Gphone...and we have new target price of 745 to chase another 25% for the crowd amusement.
This company has not produced anything meaningful revenue wise apart from search so far, why it will be different this time?
How will we remember these days in 25 years time? Old Wise Guy Once sad: "Five most dangerous words in investing: It Is Different This Time" The more illusion is going on the harder fall will be, when crowd will through into the towel and not only stock price but shire existence of this company could be threatened.
What will happen if tomorrow there is no google.com page? Will your car stop, or there will be nothing to build that car with? Nothing to build your house with? Nothing to eat or cure your headache? You can not find your way to nearest pizza? Wait, there are still Yahoo!, MSN, ASK. What is the secret? We are very close to find out...
Google WEB 2.0 Bubble:
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