This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Greenberg: This Market's the Greater Fool Theory

By: Herb Greenberg | 09/18/13 - 02:06 PM EDT

Click here to read "Cramer: This Market's the Smarter Fool Theory"

Editor's Note: This article was originally published on Real Money on Sept. 18. To see the latest commentary as it's published, sign up for a free trial of Real Money.

"It is not contradictory to dislike Herbalife's (HLF) business and like the stock. It is not illegitimate to say that Netflix (NFLX) is overvalued but it can go higher."

And, with that, Jim Cramer has struck at the heart of everything that is wrong (or right, depending on your perspective) with this market.

I fully understand where he is coming from; doesn't mean it doesn't make my stomach turn. Many -- but certainly not most -- people, including Jim, understand the risk to that way of thinking: That it's OK as long as you're not the guy left holding the bag.

So many of these companies, whether they're Herbalife, Netflix, or Tesla (TSLA), are likely properly valued at a certain level -- likely much lower than where they're trading today.

Of course, many of us said that about Amazon (AMZN) in 1999, when it was trading in the high $80s -- on its way to $7 in 2002 -- before its long climb to its current nosebleed level of $300.

Amazon doesn't consistently make money? No worries, it's a great place to shop. Netflix doesn't consistently make money? No worries, it's disrupting broadcasting. Tesla makes money but, then again, does it really? As for Herbalife, well, there's no need to rehash that old story. All you need to know is that a bunch of well-respected hedge fund managers are betting against Bill Ackman, who dared to publicly lay out his case for shorting Herbalife -- so he must be wrong.

Then there's Ulta Salons (ULTA). Its inventory is through the roof, rising almost twice as fast as sales. That's almost always a red flag. Layer on yesterday's comments from top fragrance-maker Coty's about de-stocking by its customers, among which Ulta is one of its largest, and -- as I mentioned on Real Money's Columnist Conversation -- you can't help but wonder what that disconnect is all about.

Doesn't matter. Certainly not to Jim, and definitely not to investors who are making a killing -- yeah, just the way house-flippers once did! "You're flogging a losing call," is the way someone put it to me on Twitter last night. "Price is truth."

  1 2

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security.

To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.

Markets

DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Herb's Tweets

Brokerage Partners

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
Real Money Pro

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Trifecta Stocks

Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.

Product Features:
  • Model portfolio
  • Trade alerts
  • Recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
Stocks Under $10

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Dividend Stock Advisor

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Breakout Stocks

Bryan Ashenberg, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.

Product Features:
  • Model portfolio
  • Small-cap and mid-cap focus
  • Intraday trade alerts
  • Weekly roundups
Options Profits

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
Top Rated Stocks Top Rated Funds Top Rated ETFs