Monday, August 02, 2004

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Why This Stupid Obsession with Absolute Stock Price? With announcement that the Google IPO target price will be substantially greater than $100, there is a hubbub of excitement over the high stock price. This is just so SILLY, I don't understand why people continue to make this mistake. The absolute stock price, of course, means NOTHING. What matters is the relative price (change in price over a period), or the valuation (price times outstanding shares). 10,000,000 shares at $100, or 100,000,000 shares at $10 are equivalent. It is one thing for the general public to make this silly mistake. But now I see the cover over this month's Barrons making it (unforch, subsription, so I can't link effectively). It is praising Bear Stearns, and contains the speculative headline "A $100 stock in a year?" Well, is it a $150 stock now, in which case that represents a collapse? Or is it a $95 stock now, in which case that is a modest gain? Of course the powers at Barrons have to know better, they just find it expedient to resort to this attention-getting, fallacious shorthand. This is a case of the specialized press performing the same dis-service the general-interest press often does in characterizing the executive as the maestro of the economy. 10:49:22 AM    comment []