If you read Businesspundit regularly, you probably weren't surprised to see Google hit a point of diseconomies of scale, because on this blog, we don't like to accept temporary hype as gospel. I wrote last July about swarm theory and Google's demise, and that a 1.65 billion all cash deal for YouTube, a company with no revenue, was evidence of a bubble. I also wrote recently about how Google might be suffering from selective perception. And of course the Motley Fool has been criticizing Google's valuation for over a year.
Stock investors sometimes remind me of those people who forward the emails that say Bill Gates will give you $10,000 for passing it along and testing his new email tracking program. The senders always preface the email with "this probably isn't true… but just in case". Investors see GOOG going up, they realize the company is probably overvalued, but they get so afraid they may miss the boat that they buy.
UPDATE: In response to a couple of emails discussing why GOOG is still a buy, I want to clarify why I don't like them. Google may well go on for years as king of the web, but if serious competition strikes successfully, Google is WAY more vulnerable than most companies. I can't see a startup knocking out most billion dollar plus companies very easily, but under the right circumstances, Google could collapse quickly.