the FAT finger..dont get GOOGLED

December 9, 2005

Hello,

To GOOGLE or Not, that is the question? I know what your thinking I have been wrong about this stock since day one. Is it me am I the only one that feels he has heard all this before. When I first heard the calls that GOOGLE was a $500 stock I checked my calendar to see if it was 1999 or was it simply a ghost of Christmas past? This email discussion is not about weather GOOGLE is a buy or not it is more a function of what a realistic valuation of a stock is and what realistic investor expectations are. Does the call for a $500 GOOGLE sound similar to past prognostications, like QCOM at $1000 or AMZN at $400? Sure does to me. I realize pay for advertising is big business, and they do offer some premium services but so do most search engines. I have been using GOOGLE for about 8 years and I am not sure they have ever made a dime form me. So the jury is out the stock is up big and the hype is out of control. Remember hype is free so don’t buy it. Is it a sell well I am not sure ,but as the old Wall street adage goes ; you don’t go broke by taking profits. Would I short it? Not me I am not in the habit getting in front of a freight train and as for buying it now? It is no bargain so I would pack a Para shoot if I did. And last of all the time to pray is before you buy it not after. It is important to remember that even if the BULLS on the stock are absolutely right revenue and earnings acceleration won’t move in a straight line for long, often some unexpected event or some unforeseen issue knocks down the growth rate. IT just always happens sometimes sooner than later, but none the less always seems to happen. Change is not a constant, it is more like 2 steps forward 1 step back, than a straight rate of change.

As for the market this year well I think the whole thing has ended up being a whole lot of nothing. It seems enormous earnings and huge increases in productivity were no match for the FED’s incremental interest rate increases and continuing higher oil prices. This leads to the old Wall Street adage, “don’t fight the FED” and that leads to a second Wall Street adage,”the gas tank is always half empty”. Ok that’s not really a Wall Street adage but it does seem that higher fuel prices have kept a lid on higher equity valuations. I look at next year and see a topping of interest rates sometime by mid year and a flatting out of energy prices staying high but slowing down in the velocity of change and not going higher as quickly.

James