STOCK market history, in common with all other types of history, repeats itself. So it is unsurprising to see shares in Google, the internet search engine, flying through the roof. Nor can one be too startled to see Google taking full advantage of its inflated share price by raising large wodges of cash.

It is remarkable, however, to observe a new dot-com bubble inflating so soon after the last one burst in such spectacular fashion. Google shares looked expensive when they were floated exactly one year ago at $85. At $281.20 yesterday, the stock trades below the $317.80 peak attained on July 21 this year. But the current price is no less eye-watering for that. If you assume that Google’s earnings per share double this year, the stock sits on a p/e ratio of 94 — or about seven times higher than the average UK listed equity.

Shares in Google, notwithstanding the fact that it is powerful company feeding on a rich seam of demand, are overpriced. Google share-price mania, however, does not represent an exact re-run of the dot-com boom and bust that straddled the turn of the millennium.

For one thing Google is making money. The p/e ratio may be hugely inflated but at least it exists and gives some sort of tangible benchmark. In the late 1990s and early 2000s companies, analysts and investors had to dream up other valuation techniques because there were no earnings to feed into the tried and tested p/e ratio model. Some, such as those that put share values in the context of multiples of sales rather than multiples of profits, stretched credibility. Other methods, such as the one that justified share values in the context of the number of times an internet site was visited, were simply implausible.

In years past, dot-com stocks attracted massive valuations because of some airy-fairy association with the internet. Entrepreneurs, analysts and investors were right to be excited about the world wide web — it created a new way of living and working at the same time as being useful and easy to use. The mistake made was to assume that novelty and popularity would automatically translate into profitability.

The Google example shows that association with the internet is not enough. Companies also have to offer actual products or services that can generate hard cash.

One of the chief risks now is that people will look at Google and believe that the internet, of itself, is a money-making machine. It is not. Google may look as if it is generating profits, and capital value, out of thin air. In fact, of course, Google’s cash comes from advertising.

Google also makes it look easy to make money from the internet because the business idea is so simple. In its entirety there is a bewildering array of information on the web and this creates a problem. There is information on every conceivable subject on the world wide web. It is possible to buy anything and everything while contacting anyone and everyone. But presence on the net does not mean that users can locate what they want.

Navigation was quickly identified as a problem but Google did not provide the first variety of answer. Remember how much time, money and effort was spend on domain names? Having a memorable website address was, largely erroneously, seen as the way to attract internet traffic.

A lot of time money and effort was spent on internet portals too. In essence, Google is a portal but unlike many long-forgotten predecessors it is backed by a remarkably powerful technology.

The quality of the technology at the heart of the Google business may pose another danger for those that think the Google story provides proof that there is easy money to be made out of the internet. Google technology, in common with all good technology, is largely invisible. But this does not mean the know-how is either unimportant or easily replicated.

There are risks for investors who are tempted to chase companies that, like Google, are directly linked to the internet. There is danger that other companies may destroy capital with misplaced internet investment decisions.

That said, there could be good money to be made if, thanks to Google, the dot-com bubble reinflates. Investors profit from rising share prices and, up to a point, it does not matter whether share prices are rising for silly reasons. Great care needs to be taken to ensure that entries and exits are well timed, however. Where Google is concerned, it may already be too late to get in — but not too early to get out.

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