We not at the “2000 levels of stupidity yet, but we are getting really close according to Kevin Muir. Business Week recently published that Muir said that darling of the bubble days, Sun was priced way beyond perfection, it was priced so far beyond it that is was head-shakenly-stupid. In 2009 after the stock reached $64, McNealy predicted that the stock would drop down below single digits before it was bought at -0.25% by Oracle for a sum of $7.4 billion. So, the big question is, will there be an overheating period for the stock market like it was back in the heydays of the dot-com days, and on this Muir says it is not time to sound the alarm although that day is moving closer.
Muir said that it is not near 2000 yet although he needs to acknowledge the numbers that never lies and by looking at the metric, we are but a few tricks away from matching the stupidity of the Dot-Con days.
Kevin Muir is a market strategist at East West Investment Management
Muir revealed in the April publication of Business week that the quote he loves the most is that of Scott McNealy on the Bubble and Regulation, he feels it shows how absurd the SUN Microsystems was evaluated at the high of the Dot-Con bubble, it was the time when trading was all about the system beasts.
The computers were the best in power, compared to the behemoths, Windows PCs were nothing they were toys. The SUN microsystem everyone believed would rule the world, the company priced for perfection was that of Scotty Mc Nealy, or as Muir now puts it, it was priced so far beyond perfection that it was nothing but stupid and insane.
Twenty-Eight Trades at Fifteen Time Revenue
He brings up Scott’s tweet as a reminder at just how absurd valuations were at the time. Twenty-nine stocks at the time traded above ten times their revenue during the dot-com mania, today Facebook is one of the 28 that traded at more than fifteen-time revenue, and that is actually over 50% above what the Sun Micro did during its peak.
What is ironic is that Facebook today resides at the old headquarters of the Sun. Muir says he can’t say that the social media giant will follow the same path but what he can acknowledge is that tons of investors will at some point in the future. Jesse Felder agrees with Muir and says that the stock market, today is as stupid and crazy as it was during the peak of the Dot-Com mania.