> Do you have in mind the drivers or triggers that will get it to that price?
I'm becoming convinced that the only "event" that will bring internut stocks back down to earth will be a general market collapse.
It seems as though the market gets more insanely overvalued every day, but that doesnt have any effect on investor enthusiasm- it actually breeds more complacency and mania. It looked as if interest rates would do the trick, but Greenspan rolled over and said "Bubble? What bubble?" and the tequila began flowing again.
Internet stocks rarely have earnings, but nobody cares. Tens of millions of people per year plunk down cash in state lotteries, even when they know the chances of ever seeing their money again are literally 1 in a million or worse. If the chances of making a mint in internut stocks is even 5%, I suspect people will continue pouring money in.. Hell, the rates are closer to 100% if you've been long the last few years.. I can't see any situation in which they would suddenly start caring about valuations, except a general market collapse where people attempt to keep what profits they may have remaining.
At some point, eventually, the government will realize that our entire economy's stability is based directly in the stock market. Everyone knows this on a gut level- witness housing prices in california, or witness the largest federal tax surplus in our history, directly attributable to capital gains explosions. (it certainly wasnt higher wage taxes, as the govt's own statistics show that wages have barely risen) It's so big that clinton predicted 15 more years at this rate, and we'll pay off the national debt. Consumer spending continues to rise, and our personal savings rate is now firmly negative. There's not an economist out there who doesnt admit the "wealth effect" (that allows people to be confident in their purchasing) isnt directly attributable to stock market gains in recent years.
Of course, Greenspan has shown he is perfectly willing to bail out the private sector when they get in trouble in the financial markets, ie Long Term Capital Management. If that one fund was "too big to fail" it seems reasonable that the Nasdaq, for example, is too big to fail also. Will we monetize collapsing INTL/MSFT prices to save the pension funds who will be unable to pay out benefits when the market cracks? The answer is probably yes.
We're in the midst of an equity bubble, as surely as Japan had a real estate and equity bubble in the years leading up to 1989. I personally have no clue what the trigger event will be. Anything small will be smoothed over by the fed. It'll take something I can't even imagine right now.. Any theories? |
