Yes, precisely.
I don't mean to paint it outlandishly, but in order to achieve something so handsome one must consider outlandish collateral assumptions. Which is the whole juicy dilemma.
We want 13% p/y returns. Many people view CSCO as a 20% p/y equity (or more), and would see 13% as a little low. Indeed, nobody seems content that CSCO might have gone from $20 to 22.60 in six months as "good", let alone in the space of six hours.
We look at 13% per year and say Sure, Cisco will do way better than that. We look at 180 B$/y in revenue and say "no way". But these are reflections of each other. So we must scratch our head and say "how do we reconcile these two views".
One way is to yell "Shut up Shannon, you are pointing out something we don't care to know". Another way is to say "you guys are all idiots, I'm taking my toys to another sandbox".
The third way is a nice hybrid. It is merely to accept what is happening with a fairly enlightened understanding.
We are seeing something completely disconnected from market size or revenue or profits or economic benefit. We are seeing irrational. Sizzle. Hype. Mania. No rational analysis describes what we see.
I sound like I think doom and gloom for Cisco. In reality I am more optimistic in the short term for the stock price than perhaps even Mindmeld. But I'm not kidding myself or anyone here that it's because of some "fundamentals". Which I take pain to point out.
I am optimistic for the stock price because I think there is a proponderance of people out there who are willing to purchase Cisco at this price, hoping that they will be able to sell it at a higher price. The greater fool theory hard at work.
And indeed I think that the very professional folks who gap the stock up in the morning on a few million shares and then let it drift by a lot less while a hundred million more shares trade hands are professionals. They lose maybe a few million in the morning and launder a billion in the afternoon during the money go round. Quite a nice effect if you ask me.
Their task is to find fools greater than the smarter fools who bought yesterday and so on. Which makes the smarter fools geniuses and the greater fools merely good investors, and the cycle starts all over again. These professionals are very good at their job.
And the fools (lesser and greater), or should I say "astute investors" as we prefer to call ourselves are all coping in our various ways. Many are dancing and chortling.
Some are even making a great deal of money.
And as long as the Fed is printing money faster than shares can be printed to sop it up, and as long as the lemming gates of interest rates are held low... well the "price" will keep rising. And then drop a bit and rise a bit and drop a bit... and after a while the greatest of the fools will have their pockets emptied while the least of the fools will find theirs filled.
It helps to start in the morning with "I am a fool, and it is OK".
Tomorrow will be another day.
John. |
