Dot-Com Overload Spells Trouble

The trader spies the end of dot-com mania around the bend.
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Many months ago I wrote that the dot-com obituaries were all premature. There was too little supply, there were too many bulls, there was too much money still to be made. I wrote in these pages that we would have to see a surfeit of underwritings, a ton of secondaries and much, much more red ink before it would be time to throw in the towel.

I said it would be obvious that we would be sick of the dot-coms. We wouldn't be able to look at them. We would greet the creation of more dot-coms with disdain. We would get tired of their losses. We would begin to reject the notion that pageviews equaled money. We would begin to hear companies say, "We are not a dot-com. We are a business." We would no longer hang on every

Media Metrix

survey. We would find ourselves wishing we were in good old tech, if not

P&G

(PG) - Get Report

or

Bristol-Myers

(BMY) - Get Report

.

Ladies and gentlemen, we are right around the bend from that point. We can't be more than a mile or two from that exquisitely horrible moment. You may think that we were already there, judging by the action of so many dot-coms now bouncing along their public lows, but in truth the market is still robust, because it is still allowing IPOs. Tons of IPOs. A market that allows IPOs is still healthy, even if it is daytraders providing the ammo. And a market that is still up 40% for the year, as the

DOT

index is, can't be considered sick no matter what you say.

So what makes me so worried that we are nearing the end? It was a conversation with my partner,

Jeff

, we had on the cell phone right before I entered the Lost River Caverns in Hellertown, Pa., that told me the truth about the sector. I had taken the day off, not even signing on with Igor, the fifth member of the family. (Yes, when you take time off your kids nickname your computer the meanest thing because it is the enemy to playtime with them.) We were talking about how I insist on keeping a handful of the best dot-coms on the sheets no matter what, the ones that are profitable, that are real businesses that make sense even in the non-dot-com world. He said that it was too late for such niceties, that he was cutting our exposure to tag ends, for all but one or two names. "All these stocks do is go down. They don't even bounce any more. They come public, they stay up for a couple of days, and then they descend. And they never stop."

I argued for a few minutes. I typically just say, no way, these stay. I need these companies on these sheets. But it was hot. The kids were going crazy waiting for me to go down into the cave, where it was a cool 52 degrees. The wife told me that she was going to throw away my cell phone if I checked in again. I was worn down. Finally, I said go ahead. Cut them back to where they can't hurt us.

Then I went into the cave. It was cool. We had some fun. And when I came up, we owned just a token amount of the Net. I can't believe how relieved I felt.

Yep, we are getting real late in the dot-com game when the creators of dot-coms are sick of dot-coms and don't want to defend them anymore to those who are just cold-blooded stock-pickers.

(Oh yeah, and for those who would use Jeff as a contrary indicator, forget about it. I wish you luck. You may be right for a couple of hours. You will be wrong after that. And he will revel in how wrong you are.)

Right now there are just too many dot-coms to like, including another dozen mentioned in

Ben Holmes'

excellent

column on the site today. Until the window on new dot-coms closes, it may not be safe to like any of them.

I am still feeling the cool air of that cave. And the lift from the dot-coms that were taken off my back while I was inspecting the stalactites. Feels just fine.

Random musings:

I know, I wasn't supposed to be here. But the selloff has taken on an important and decisive bent and I can't manage it from the cell and the computer. Sometimes it is just better to admit there are other, less crucial times to be away...

As for my river raft trip yesterday, we had to abort. We started out on the lazy Wickicheokee River, a tributary to the Delaware, and no sooner did we get to the banks than a giant goose attacked us. In an attempt to keep him from nipping at my girls, I jumped in front of him and he latched on to my swimsuit in the most ridiculous and painful of areas. My kids were shrieking with fear, my wife shrieking with hysterical laughter. Me? I was just hurting. By swirling around and kicking wildly I managed to shake the son of a gun off my suit, but by that time the girls were scared to death and wanted no part of the river. We spent Sunday playing Chinese checkers and rummy and I went back to work today.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.