Yes, exactly. And that's the kind of euphoria that really is asking for huge losses. As I said before, the internut craze is a "greater fool theory" game in action.
I have no data to back this up, but I wouldn't be surprised if the combined capitalization of the e-tailers exceeds the combined capitalization of traditional retailers like Sears and Dayton-Hudson. Doesn't it strike you as odd that people are talking about valuations in terms of multiples of sales?
The investment paradigm has not, and never will change. It is always based on the expectation of future cash flows. When people base their "investment" decisions on other factors like astrology, the phases of the moon, and other patently irrelevant issues we smile at them because we know better. But when our compatriots "invest" in stocks simply because they went up yesterday and the day before, and the day before that, and they justify their "investments" by saying that company sales increases are driving value, I can't help but think that these people are equally deluded. They have managed to disconnect the issue of cash flow from valuation, and have replaced the traditional methodology of valuation, difficult and dicey as it may be, with double talk centered on sales, or eyeballs.
There will come a day when the investment community runs out of fools. As a PT Barnum sign once read: "This Way To The Egress", or as I believe Polonius said to Laertes "A fool and his money are soon parted".
TTFN,
CTC |
