What's the responsible thing to say about Facebook's billion-dollar acquisition of Instagram, a company with13 employees and no revenues?
That's obvious: This is a market top, this is the "greater fool" theory in action and we are now in a tulip bulb market.
Just like the market in 1998, when we first saw these kinds of nutty valuations for companies that were losing money but were making it all up in eyeballs.
Here's the problem: The bubble that was dot-com valuations lasted until 2000. You continued to make a ton of money playing the "greater fool" theory. I suggested you play it until the middle of March 2000, one of the greatest calls of my life. But I was soon ridiculed by everyone who heard me say I liked the dot-com stocks, so I had no standing to say I no longer did -- and people said I really hurt people. That was patently false, but it was easy to look at speeches and stories I did here and say, "Look how bullish Cramer was!" Sure I was. It was right to be bullish. You made fortunes until we topped.
That's what I struggle with now. Do I run the risk of rendering myself irrelevant by saying, "Ignore this group of stocks, and recognize that Facebook's playing with this generation's wampum"? Do I deliberately cause you to miss big gains while clearly being "right" about the notion it is foolish to pay a billion for a company without earnings or sales -- even if it will help develop a key mobile strategy and needed to be bought to block Google (GOOG)? Do I say that it's just stupid because right now it can't be monetized, when I know that Yahoo! (YHOO) should have made a lot of acquisitions that couldn't be monetized at the time?
Boy, do I ever want to. I want clean hands when we top. I want to be able to say, "I got you out."
But you know what? I am not ready to say it.
I am not ready to lower my own personal boom on this new social media era. I say, let's do this. Let's see what happens with Facebook. With the IPO. Maybe that will be the moment to get negative. In the interim, I am taking all of this case by case.
After all, what am I supposed to do, tell you to sell Yelp (YELP) because of Instagram? I already don't like it and think it should be sold. Sell Groupon (GRPN)? I have said over and over again from the day this one came public it should be sold. Sell Zynga (ZNGA)? Until they figure out a way to monetize Scramble with Friends and Words with Friends, I don't want to buy it.
I think that makes me skeptical enough. I don't need to be any more negative than my current stance right now.
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