Harry:
In all likelihood the earth would quake and whole cities would be swallowed up if I agreed with you. So I don't disagree just to be contrary. I don't want to appear unfriendly. Let's just say it's my civic duty.
I don't think anything can beat the scrutiny that AOL endured during the access "crisis." Spots on the network news, headline hunting attorneys general in every state, class action lawyers...
Just how exuberant are investors over that shimmering image that is AOL's "potential?" That is indeed a key question. Clearly they are not as wildly overenthusiastic as they were in the spring of 96, when the stock reached similar levels, but far in advance of any of the fundamental news that has come down the pike this year. At the opposite end of the spectrum, we saw a pretty good capitulation by the bulls in this stock late last year and at the start of this year. I'm not sure how you measure all that, but I think common sense suggests (along with the continued presence of bears on this thread and the cautious volume levels during most of the buying spree days) that it would be hard to take investors back through the entire emotional spectrum this fast.
Finally, as to pricing in the CSRV contribution prematurely since the acquisition can't close for six months -- hmmm? It's been noted that CSRV looks to be a losing proposition for a time, so I guess that's a positive for the stock that they can't absorb it right away.
More generally, remember that the market has a deserved reputation as a pretty good discounting and forecasting mechanism. Sure it's oversensitive -- the old joke is that it has forecast nine out of the last four recessions. We all spend our time as investors looking for opportunities when the market gets out of whack with reality, which can cause you to lose perspective. Those bubbles and manias do happen. But they stand out precisely because they are the exception. Look how well you can do not thinking about any of that stuff, just buying the S&P 500 index and relaxing.
Except at market extremes, which on average is only a couple of times a decade, and less than that lately, the market is doing a passable job of forecasting the future most of the time. Certainly the market knew before any economist that we were heading toward this low inflation, solid growth nirvana.
So when you say the market is wrong and factoring something in that won't be there for a virtual lifetime -- I know the odds say that the market is more or less right about that and you're the one who's on shaky ground. |
