There's a funny thing about valuation and the Street's hottest stocks. High prices, of course, beget hype, which begets higher prices, even though this is a road we have all been down before. Yahoo! (NASDAQ:YHOO), Cisco (NASDAQ:CSCO), the names and charts are familiar. Are we seeing something similar in the case of Google (NASDAQ:GOOG)?

It sure looks that way to me. Consider that, once again, we have analysts playing Name That Crazy Price, a la Blodget and his famous call on (NASDAQ:AMZN). Five hundred? Five-fifty? Hey, put me down for $650. For no other reason than this thing is already nuts, so really, what's the difference?

The final proof to me that Google's shares are floating on a sea of irrationalism came after last week's news regarding a possible deal between Microsoft (NASDAQ:MSFT) and Time Warner's (NYSE:TWX) AOL. Briefly put, the rumors last week were that Mr. Softy was edging out Google for an AOL deal, a situation that would conceivably bite a chunk out of Google's current moolah machine, as well as create a potent future foe.

The stock barely budged.

Now I'm not saying investors should have run for the hills on a rumor, but I think it's safe to say that any other company on this planet, upon news that Microsoft was encroaching on some of its primo turf, would take a big dive. The fact that Google shares didn'tmove strikes me as both absurd and instructive.

In fact, as talk about the rumored Microsoft deal intensified during the week, Google's stock actually went up. Take a peek at the five-day chart.

Here's a bone for the Google fans: Maybe Google will go on to be the biggest company in the world. Of course, it pretty much has to do that to make an investment at these levels worthwhile.

I'm not going to try and argue Google's valuation here. I have colleagues who've done that already, repeatedly and eloquently.

I'm just saying "hmmm." When a $120 billion company with a P/E near 100 continues flying on both good news and bad, something's just not right.

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Seth Jayson didn't just fall off the turnip truck. At the time of publication, he had shares of Microsoft but no position in any other company mentioned. View his stock holdings and Fool profile here. Amazon and Time Warner are Motley Fool Stock Advisor picks. Microsoft is an Inside Value pick. Fool disclosure rules are here.