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Google's irrational exuberance

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Who's market cap is greater than eBay and Yahoo combined, greater than six time that of Amazon, greater than Cisco's, nearly twice that of Dell's, and just about half of Microsoft's? Google, of course.

In one of the pages of my book, under the Fundamental Analysis section, I write: "Ask yourself whether the company deserve a market cap of x dollars." Well, I asked myself whether Google deserves a market cap of nearly $130 billion, I just can't make a case. On his radio show last night, Jim Cramer, was predicting even higher values for Google, essentially encouraging his listeners to buy Google shares. Talk about a case of irrational exuberance.

No, I am not slamming Google. I love the company, just not its stock right now. I realize how innovative it is and how the possible deal with AOL could give it a nice boost. But this has now reached the too-good-to-be-true level and when that happens, a sobering correction could be around any corner.

I am not predicting doom and gloom for Google. It has too much momentum now to quickly surrender to gravity. Who knows? It could continue its rise for a long time surprising even the optimists like Cramer. But even if does so, it wouldn’t change the fact that the stock has gotten too lofty and that the traders have now entered the speculative zone vis-à-vis Google.

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