Nasdaq will become a laughing stock after all this is over. First Amazon is being added to the creme de le creme of Nasdaq, the Nasdaq 100. Think about that for a while. A company that has never earned a penny in profits, has lost hundreds of millions of dollars, has NEGATIVE tangible net assets is going to be one of Nasdaq's top 100 companies.
With the price action in Ebay over the last month, according to Nasdaq 100 listing requirements, Ebay will certainly join the Nasdaq 100 in short order. A company founded on beanie baby auctions will join the illustrious ranks of the Nasdaq 100.
If the net stocks continue their price mania at this pace for even a few more months, half of the Nasdaq 100 will be replaced with net stocks that have revenues and profits smaller than a medium sized local car dealership. But that doesn't matter- because they'll all have market caps of billions and billions of dollars.
And these companies will have in aggregate a valuation greater than many countries.
Either one of two things will happen:
The very foundation of economics will change, and profits will no longer have any bearing on the value of a corporation. All a company will have to do is say "Of course we'll make billions in profit 20 years from now" and they'll be given buckloads of money. Gold will become interchangeable with net stock certificates, as Amazon is currently trading for twice the price of an ounce of gold, given the 2:1 split earlier this year.
The bubble will collapse and people will lose everything, and the Nasdaq will become the equivalent of the Vancouver stock exchange. (IE, the first thing the pops into people's minds when you mention VSE is fraud and non-existant companies taking people's cash)
Take your pick.
Let's put it this way: if all that is required to make your company instantly worth 1 billion dollars is to append "dot com" to the end of the name and set up a website, how long before every company on earth does the same thing? So far, it has worked. If every company does this successfully, then a can of pepsi will end up costing $50,000.
The difference between a wise man and a fool is that a wise man knows that everything occurs in cycles. The fool thinks everything will continue in the current state forever. |
