*Extra* Checking Back With This Column's Most Vocal Bear on Amazon

And guess what? He believes the company is in worse shape than even he originally thought. Tell us what you think on our message board.
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The downgrade of

Amazon.com

(AMZN) - Get Report

by several analysts

after

the

news was, as usual, after the fact. Kudos from this corner to hedge fund manager

Jeff Matthews

, who had the guts in August to

write in this space that he thought Internet time had caught up with Amazon and that its good days had passed it by. (If you haven't read it, take the time -- lots of lessons in it.)

Amazon: Join the discussion on

TSC

Message Boards. What's Jeff thinking now? Pretty much the same. "Is there anybody but me," he asks, "who thought it was strange to hear a dot-com say that it's stockpiling inventory?" He was referring to Amazon's comments yesterday about its concerns over having enough inventory.

Worse, however, is Amazon's incremental gross margin -- one way to look at how much Amazon is making on each sale. "What you love to see is a company that is generating extra sales and where the margins on those sales are higher than what they were getting in the past on their core business," he says. "That means they're fundamentally getting more profitable.

Yahoo!

(YHOO)

is an example of that." But with Amazon, last quarter's incremental margin was 7%; that compares with 24% a year earlier. "That means every extra product sold last year brought in 24 cents on the dollar," Matthews says. "This year every extra sale has brought in 7 cents on the dollar. It means all of these new initiatives are killing their model. Their model has been killed."

And Matthews believes it's not just Amazon's problem. He also thinks Internet time is catching up with

eBay

(EBAY) - Get Report

, and that it will catch up with the entire consumer e-commerce sector before long. He notes that many companies appear to be rolling the dice on the fourth quarter by boosting their marketing programs by tens of millions of dollars.

But odds are slim, he says, that they'll get a good enough bang for those bucks to satisfy investors. "I personally believe that when the dust settles, the Internet business -- for the likes of

Lands' End

(LE) - Get Report

,

Federated Department Stores

(FD)

and Amazon -- will be comparable to the catalog business, which means they'll be niche players with some market share. And they'll be an important adjunct to bricks-and-mortar retailing. Bricks and mortar ain't dead."

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.