Robert,
I feel like complaining today ...
WSJ, Money and Investing, Heard on the Street, "For Some Bellwether Stocks, Managers Will Pay Any Price," March 16, 1999.
"To own a company like AOL, you had to throw out traditional measures of valuing companies," he [Eric Gustafson of Stein Roe] says. "We had to say we have to own what we think is the dominant franchise in the Internet. It was a space that as a money manager you simply have to be in."
"How can he justify the high price of AOL, which sells for 388 times trailing earnings, or 238 times projected earnings? Mr. Gustafson says major communications or industrial revolutions, such as railroads in the 19th century or radio in the early 20th century, brought valuations 'that had never been seen before.'"
***
Yeah, ask the British bondhodlers how their railroad investments panned out ... and, you pick a radio station during the bubble and I'll give you a crappy return ...
What is going on? AOL is an "internet franchise"? I have been on the internet for over ten years (I was using Prodigy on my old IBM before that ...), yet I have never used AOL. They have sent me probably 75 floppy disks, 25 CD's and I have never used one of them ... except, to store info on the floppies ... Why do people use AOL? For e-mail? Do people really think that AOL's content is going to dominate the world?
As a Williams alum, I hope that Steve Case does incredibly well ... and donates a couple of billion to the school ... but, an $85 Billion market cap? Give me a break.
The almost complete absence of analysis by the geniuses who supposedly have a fiduciary obligation (or at least their boards do) to manage their clients money in a prudent fashion are acting like vapid, morons. I understand the structural problems with the industry as well as anyone. I realize that people need to become, in effect, closet indexers in order to appease the consultants, pension managers, et. al. Still, is it that difficult to see they are getting it wrong? 91% of the managers (who are, by in large, closet indexers) still can not beat the S&P 500 ... and 84% can not beat the Wilshire 5000?
What is going on in this market?
--Duker |
