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Over the bountiful kingdom of the Internet, the retail buyer reigns.

Retailers, not institutions, dominate trading of the Internet stocks, in the nominally high-quality companies and second-rate alike. Smart money has stayed away from the






-- and even the


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-- while retail has cavorted. In worse cases, the institutions

shorted. And now they regard the markets with sick feelings of bafflement and fear.

Institutions and Wall Street old-timers fear the rapid-fire buying power and recklessness of the small retail investors. Using the Net, retailers pour into Internet names, minute by minute, day after day. They pay little regard to "traditional" fundamentals. Net champions proclaim the phenomenon a democratizing of the stock market, but institutions view it as a terrifying dictatorship of the proletariat.

But elsewhere, things are different. The institutions, long lords of the market, still rule over the backwater of biotech.

Take the case of



. Early Jan. 14, the company came out with a press release suggesting that its HIV vaccine had promising results in monkeys. Message boards went wild. The stock went bonkers, rising as much as 488% before settling for a 269% rise that day.

But Wall Street institutional players -- not the


or the


but a collection of small money managers -- entered the picture. They went short or quashed the story in discussions and phone calls.

Speculative fervors such as Cytel have begun to hit the biotechnology sector over the past year. But they differ from what's happening with Internet stocks. There are fewer. The fever isn't as hot. And they last for a much shorter time than they do for the Internet stocks. Why? Because institutions and experts still dominate in biotech.

That dominance reaps rewards. "I view it as the biggest transfer around of wealth from the naive retail investor to the smart money," says Wayne Rothbaum, who works for

The Carson Group

, a consulting company that tracks movement of institutional investors.

In the case of Cytel, Wall Street experts knew that the history of biotechnology is littered with drugs that worked in animals but failed in humans. The history of HIV vaccines is riddled with failure as well. Savvy institutions understand that the other frenzies in biotech over the past year are built on similarly flimsy hopes.

Similar speculative blips "probably have started to appear in all sectors now that the Internet investor is empowered," says Rich van den Broek, a biotech analyst for

Hambrecht & Quist

. "With the Internet sector, the investors are so crazed that they can even overrun the institutions. In other areas, it provides short-term opportunities for the smart money."

The analyst adds, "I think you're seeing maybe a small community with small capital bases and with knowledge who can probably do quite well" in these situations.

Cytel isn't the only example.



cancer vaccine received some enthusiastic

press attention on the Friday after Thanksgiving, and it shot up from 2 to 17 1/8 in a day. It closed that day at 4 25/32. Now the stock trades at 3 and change.


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, a retail favorite, has a chart that looks like an EKG: It has had four moon shots on promising but extremely early scientific data. Then comes the fall, almost all the way back down. Memorably,



ballooned to a high of 85 last May, only to sag to 40 3/4 that day. The stock then drifted lower and is residing in the low 30s today.

These stocks often form bases slightly higher than where they were trading before the explosions. In contrast, the Internet companies that come back to earth -- the second- and third-tier names like K-Tel -- form price bases significantly higher than their lows.

The first tier in biotech also is dominated by institutions. There is some froth in some of the high-quality biotech companies, though not to the extent that there is in Internet companies.






are widely seen as "ahead of themselves," as the Street phrase goes. But while institutions own 41% with and 29% with Yahoo, they own 86% of Sepracor and 95% of Medimmune, according to

Market Guide

. An exception in biotech land is



. It is illiquid, gaps up like an Internet stock, sports a $5.5 billion valuation and is owned only 46% by institutions.

So what's going on?

For one, biotech already had its frenzy and its disappointments. In the early 1990s, any company with proteins growing (in the lab or elsewhere on the premises) skyrocketed. Subsequent clinical failures brought a severe bear market for years. The prolonged suffering made biotech the province of the institution; retail money by and large still has not returned.

In addition, biotech is difficult to comprehend. The majority of people don't realize that developing a drug can require hundreds of millions of dollars and take up to 10 years. Investors aren't that patient. Dan Mathisson, head stock trader at

D.E. Shaw Securities

, says that because biotech has been around longer, institutions have "more infrastructure in place who say, 'This is overdone.'"

"Curing cancer, curing HIV, these things are not understood," says Carson's Rothbaum. "The announcements artificially drive up the prices." Internet investors buy what they know, he says. They've shopped on Amazon and they go to Yahoo Finance to get stock quotes. "With the Internet companies,

investors can touch and feel them. They can chart the progress, but with the potential unlimited, their imaginations can run wild."

The instant gratification isn't there because of the length of drug development and dearth of relevant progress reports. The biotechs "don't provoke the sustained interest" that the Net companies do, says D.E. Shaw's Mathisson. "There's no sustained buying frenzy because the retail interest is not there."

Retail was less involved during the earlier frenzy. "The market was different then," Mathisson adds. "The retail investors didn't play the way they play today." Back then, they would call a broker before trading. "They had somebody sort of holding them back."

But here's a scary thought. H&Q's van den Broek says, fatalistically, that things could change in the retail hands' favor. Institutions rule in this sector for one simple reason: "It's only because biotech's not that hot now."