The theory of reflexivity - see Soros papers - ... it makes real good sense to read the ref, Dak pasted.
Whatever I will write here, will be half-cooked (but I can still try;) A posteriori one can of course take the scalpel and cut up the past in some predetermined, surgeon-like way ("Was it a fraud? What did SEC have to say about it? was the Rev a maniac/ insane/ coockoo?"). What is the best wishy-washy description, would be a "self-fullfilling prophecy". Anyhow something very much away from our assumption of efficient markets.
Rationally - missing probably the whole issue, but again, read Soros - one could say, in the case of the earnings discussed, that the run-up in the number of believers caused the run-up in the market price, which made the dilution possible without diluting the capital ("just take my money, Rev, Hallelujah"). With all the bathtubs full of money you can buy up competition and their cashflow etc... I mean, Im just extemporizing from my (fond) memories of cisco blow-overs.
And then, there comes a moment when somebody shows up with numbers that prove that, given the current multiples, every household in the world will have to own one CSCO router, in 6 quarters at the latest.
A great idea, a great chance, resonant cavity (standing waves reflecting from the worldwide walls, filling up our greedy ears) and after that everything is different. Worldwide phase transition.
Again, here's the ref
soros.org
dj |
