Yesterday Cramer Berkowitz paid 176 times trailing earnings for 10,000 Cisco (CSCO) - Get Report. Frankly, as recently as three years ago, that would have been unbelievable. Every analyst would have downgraded the stock on price or valuation. More portfolio managers would be short the stock than long it. We would have sold every share.

How did this happen? How did the whole world (except the troglodyte

value managers) come to understand that the price-to-earnings multiple valuation work, the traditional work, didn't work anymore? (Newbies confused? Don't be. I am doing a special how-to-get-started piece today that will continue into Personal Finance Friday/Saturday. It will explain all of this multiple gibberish.) How did it become routine to pay 100, 200 and 300 times earnings for some stocks, while totally avoiding other, much, much cheaper equities?

Join the discussion on

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Message Boards. To me, this devaluation of the price-to-earnings multiple is the greatest story of this particular investment era. When I got to

Goldman Sachs

(GS) - Get Report

17 years ago, the first thing they taught us in how to value stocks was to see if the multiple was out of whack. We didn't want to recommend expensive stocks to our customers. We wanted to recommend cheap stocks.

How did that come out to be wrong? How did that become something that lost you more money than it made?

Here are a few theories. One, in an era where almost every company lost pricing power either to competitors, the overseas companies or the Net, only a handful of companies could maintain gross margins and maintain organic growth. Those companies we began to pay anything for. Two, individuals became the marginal buyers and they never understood this P/E stuff anyway. And three, the capital gains for selling winners is too high, so people refused to sell, making new buyers have to pay up to get stock.

I don't want to outthink this. I think that those are the reasons. Let me know if you think I am wrong. This is the most important debate of the era, and I am open to suggestions.

I will rewrite this piece this weekend to drive these points home.

Random musings:

I know some people were skeptical when we started a column with Victor Niederhoffer. Let me say this to the skeptics: You are wrong. Take a look at this

column yesterday about trader maxims. This one should be printed out and studied. It is just plain excellent. ... Speaking of excellent, our nighttime coverage trading has started to get really good, with this

Eric Gillin

writing the single best

recap of trading on or off the Web. ... Let's talk about

Bank One

(ONE) - Get Report

. I own some calls on this stock, but it is really getting hammered -- much worse than it was during the real estate fiasco of '90. Anybody know what is going on? ... Can you believe how bad that

Vlasic

(VL)

number was? Holy cow, spinoff from hell. ... Lot of people recommending

Bell Atlantic

(BEL)

lately. What are they smoking? ... Could this apparel group get any worse? Yes. ... How about that drug-stock collapse yesterday? Looks like

Melissa Kasper

, our biotech person, and I are going to have to develop a biotech rotisserie league so we can get to know these stocks better. Out of pharma, into bio. ... Gene Marcial from

Business Week

seems to have cooled it with the bogus takeover rumors since he buried everyone with that

Dial

(DL) - Get Report

trap. That would be a good thing for journalism. ...

Yahoo!

(YHOO)

chat boards had me in San Francisco yesterday doing some big deal. Wrong! I was at kindergarten reading -- sorry to disappoint. And I haven't been to San Francisco in months, but I like the food there. ... Am I the only one who stopped reading Serwer and his acolytes in that

Fortune

e-mail bulletin because I decided he was just a warmed-over me with sports scores? Man, did this business ever go to that guy's head. Get me Stetson -- he may have a Big Hat, No Cattle problem. I remember him as a likable, approachable guy on

Faber's

old "Bull Session." Oh well. Maybe his new bosses at

AOL

(AOL)

will find a way to bring the old Andy back. They can humble anybody!

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco, Goldman Sachs, Bank One, Yahoo! and America Online. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may 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

jjcletters@thestreet.com.