Greenberg: This Market's the Greater Fool Theory

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."

To which I wanted to scream in 140 characters or less: No, pal, price is nothing more than a number.

Jim gets the concept that, at these prices, many investors (all but those who genuinely think they're geniuses who are beating the house) are holding their nose when they buy.

In an email exchange last night, I told him: "These stocks are high-wire acts."

He to me: "I love a high wire act."

Me to he: "So do I, believe it or not. I got to know Karl Wallenda before he died -- pushed off the wire by a gust of wind in Puerto Rico! This market is like that -- waiting for a gust of wind."

That's why, as I mentioned to Jim last night, I call this is greater fool theory kind of market.

Cramer to me: "How about the smarter fool theory?"

Me to he: "Classic Cramer."

Reality: All of these stocks have melted up because of short squeezes, momentum gone wild or just good old-fashioned fears of missing the out on all of the fun. We've seen this before. We know how it ends. Until then, make sure you appoint a designated driver.
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.

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