What do you expect the press to do, embrace the Net? Who can blame the David Fabers or the John Cassidys (CNBC, The New Yorker) for being skeptical about valuation?
Who can criticize them for noting the high valuations? Six-hundred-times-earnings this. Size-of-
that. Equal-to-all-the-steels those. And so on.
If I were a journalist, a card-carrying one as opposed to the two-hatted commentator gig that I am doing, I would be writing the same thing. You can't demonstrate why these stocks trade as they do. It makes sense to discuss the valuations because the valuations are wildly different to other valuations.
Notice I didn't say absurdly valued. Differently valued and absurdly valued are two different things. I refuse to be pejorative about these valuations, because it has been costing me too much to be skeptical. I have shorted Net stocks dozens of times on these valuation arguments and all that has happened is that I have underperformed those who were long them.
Unlike the journalists, I am paid by performance. I would love to be able to sit on the sidelines and talk about how it is ridiculous that
sells at four bazillion times the value of
has a market cap three times that of the nations south of the 38th parallel.
But I have to perform. I am a creature of performance. Last year I bought into these logical, rigorous journalistic arguments and at the end of the year I had millions of dollars yanked from me by logical, rigorous investors.
So, am I now the greater fool, trying to figure out ways to justify my Net longs?
I look at it differently. I am running a business, trying to bring in inventory that I believe will be worth more after I buy it. On one matrix, these valuations make no sense, almost as nonsensical as the small-caps I know that are selling through their cash positions. On another matrix, the matrix that says that certain stocks are meeting or exceeding growth targets, a process that drives stocks higher, the Net makes a whole lot of sense to me and other managers. Many, but obviously not all, Net stocks exude the characteristics of equities that the market wants: high growth even at the expense of earnings.
Right now that matrix, and not the matrix of valuation vs. other equities, is what is driving stocks. As I am a businessman, trying to keep and grow assets, not a spectator indifferent to investors' preferences, I must obey that matrix. When the matrix changes, the skeptical journalists will make you money. Until then, I am a net Net buyer.
Care to challenge me on these views, or any others for that matter? Come chat with me on AOL at 5 p.m. EDT (keyword: Live). My brain and my fingers are engaged and ready.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo! and AOL, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at