Everything Old Is New Again With Dot Com Price Targets

from the here-we-go-again dept

It seems that everyone is talking about the silly "price targets" that various stock analysts are setting for Google. As soon as I heard about the "Google $600" call, followed quickly by the "Google $2000" target, I thought of Henry Blodget's infamous "Amazon $400" target in late 1998 (right after the dot com IPO market came back from its temporary slump). That call catapulted Blodget from a no name into "the name" in dot com stocks, got him a nice new job, but eventually fines, a bit of disgrace, and a general "not welcome here" on Wall Street. Of course, it turned out that Blodget's original Amazon $400 target wasn't just right, it was self-fulfilling -- and quickly. After he made that announcement, it didn't take long for the clueless stock buyers to say "well, if it's going to hit $400 in a year, I might as well buy it now while it's cheaper." Of course, it was really self-delusionally fulfilling. Even people who knew that analysts have no real insight into stock prices assume that everyone believes them anyway, so you might as well buy based on the news of the target, rather than any fundamental reason -- and that, of course, leads to new targets, and more buyers, which keeps Wall Street happy. So, I was curious what Blodget had to say about these new Blodget-like calls. He doesn't disappoint, with his blog post, basically saying that price targets are a fool's game -- which is amusing, since the only reason people care what he has to say is because he played that same game. Anyway, the whole thing is best summed up by Andy Kessler by pointing us back in history a bit to his own book, where he discusses why price targets are stupid (and why he made his up when he was in that business) and about Blodget's famous target. "The ducks didn't care about reputation – they simply wanted stocks that were going up, and analysts to pound the table to keep them going up." If you want some perspective on the whole thing, read the Kessler piece, and remember that it's not discussing this particular bubble, but the last one. Everything old is new again...