Why We’re “Such Irresponsible Stock Boosters”

Yesterday a reader griped that we were too negative.  Now, a bunch of readers are griping that we’re too positive.  TechCrunch’s Michael Arrington is so angry, in fact, that he wants us “muzzled” (or me at least).  Why?  Because we laid out that scenario in which Google could go to $2,000 over the next few decades.  (It could also go to zero–we said that, too.  Very clearly).

Given that it’s me and not my respected colleagues that people are complaining about, let me drop the royal “we.” Michael deems my post “irresponsible” because Google is a public stock so “people could lose money”–whereas TechCrunch covers private start-ups, so people can’t.  I would have thought that Michael had more respect for our collective readers than that.

But just to be on the safe side, let me go beyond my earlier Google musings and actually provide some investment advice:

Don’t buy Google. Buy index funds. Why?  Because this is by far the smartest investment strategy.  I feel so strongly about this that I wrote a whole book about it  [You can read free excerpts here or read the 16-part series I wrote on Slate.com two years ago.  Or, better yet, read anything by John Bogle].

But back to the business at hand… 

While watching Wall Street show for the past few years, I have been dismayed at the reaction every time an analyst says something startling–which is to say, “radically different than the consensus.” If what the analyst says is positive, the analyst is deemed an irresponsible idiot.  If what the analyst says is negative, the analyst is dismissed as a bitter critic.  Come on, people–relax.

Remember when Google went public at $85 a share?  The consensus then was that $85 was ridiculous.  Then Google went to $125.  Then analysts published price targets of $180–and were immediately branded irresponsible.  Then $200.  Then $220.  The Times soon wrote about how Wall Street’s cheerleaders had regressed right back to the 1990s. Then Google blasted through $200.  Then $300.  Then $400.  Then Safa Rashtchy put a $600 target on the stock and was nearly ex-communicated.  Etc.  (Meanwhile, the only guy who floated a theory about what Google could really do was Jim Cramer.  I was grateful to Jim for that.  Why?  Because it helped me understand what I might be missing.)

Let me be the first to say that I don’t know where Google is going next.  It could go to $100 (really).  It could go to $250 and stay there for a decade.  It could go to $600, $700, etc. And it could, conceivably, over the next 20 years or so, go to $2,000 (is that really so preposterous?  If it is, every long-term investor who owns it should sell it immediately).  One thing I do know is that all of these scenarios are worth considering. 

I’m not condoning vapid analysis, of which there is plenty.  If you think the logic underlying the “Google $2,000” scenario is flimsy, then please weigh in (as many readers already have).  But don’t be appalled by the mere act of attaching numbers to a scenario that most Google fans have been musing about for years.

Now back to our regular programming…