The Google Bubble

Henry Blodget has a post about Google’s stock price that brings back some bad memories from the late nineties and early oughts.

Back in the nineties, I became a great investor like everyone else who bought tech stocks. I made some nutty (paper) returns for a few years, got quoted in a few investing articles, was selected for SmartMoney Magazine’s Investor Panel and got on the cover of Money Magazine. Then I lost all of the paper profit when the tech bubble burst. I also lost the deal to sell ACCBoards.Com for seven figures and a bunch of stock, but that’s another sad story.

I think Google rocks. I really do. But it’s about more than rocking; it’s about making money. And Google trades at a PE Ratio in the hundreds. Back in the day, I would have thought about taking a small position just to join the fun and see what happens. Not today. I learned my lesson.

Some of the stocks I can think of off the top of my head that I rode all the way to (or near) zero are Exodus, Enron, MCI, 360 Networks and JDS Uniphase. Yes, I made a lot of money on Cisco, Applied Materials and eBay (I still own those at a very low split-adjusted price), but it wasn’t all that long ago that my losses on the bad buys were greater than my profit on the good ones. Buying stocks is like playing golf: one bad pick won’t kill you, but three bad holes will. If you make a handful of triple bogies, it doesn’t really matter how you do on the rest of the holes.

I think Google rocks, but I’m sitting this one out.