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Tuesday, January 04, 2011

Mania? 

When you read about company valuations such as this, one wonders if even bright people can be overcome by bubble mania.  Or, perhaps Facebook has magic that has escaped even knowledgeable outsiders.  Whatever the reason, as an observer, I'm puzzled.  Facebook is not producing revenues yet to match its valuation and may never, but Goldman Sachs is betting that it will.  Goldman has the credibility to make the rest of the financial world pay attention.  It is giant act of faith and an expensive one.  Should Goldman prove wrong in the end, it will take years for its reputation to recover, but right now the PR value of its valuation is of immense aid to Facebook.

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