Jerry Yang’s $500 Million Big Balls of Steel

Let’s say you’re gonna buy a company. Wouldn’t one of the ways you choose to buy a company be based on what it’s gonna earn next year? They have a stat for that; it’s called Forward P/E. It’s the Market Cap of a Stock divided by How much the company is expected to profit next year.

A higher number means a more expensive company when comparing Apple’s to Apples. (Everyone still with me?)

GOOG and YHOO are arguably in the same business. What’s not arguable who is in a better position in the Industry. One is an 800 lb Gorilla, the other is Yahoo.

So even after this whole YHOO – MSFT debacle, for some reason the market thinks that YHOO should trade at Forward P/E (1 yr): of 43.52 while GOOG trades at a Forward P/E (1 yr) of 24.04.

Apples to Apples (or Pears to Pears so some dipshits don’t think I’m talking about AAPL stock), Investors value YHOO 79% higher than GOOG.

So . . . for the Universe to get back into balance, YHOO has to go to .61 / share, GOOG has to go to 65 / share, or some combination of the two (like YHOO to .50 and GOOG to 3). Either that Jerry has to whip out that super secret sauce he’s been saving up to suddenly get Yahoo’s profits to start skyrocketing.

de’Nile ain’t Just a River in Egypt!

. . . it flows through wall street too. Some investors are still hoping or praying that MSFT is gonna up their offer and close the deal. They just can’t accept that this deal is deader than . . . umm . . . some really, really dead thing.

The other big reason the stock’s being propped up? Jerry Yang is putting his money where his balls are and is buying up 0 million of YHOO with his own wad.

It’s a Ballsy Move. Only time will tell if it’s a Brainy one too.