Glut and Gluttony

It's no secret. At the base of the Internet hoo-ha lie two things every investor can understand: Greed and fear.
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Where are all the e-sellers? Where are the insiders, eager to lock in these incredible gains? Where are all the venture capitalists, sitting on massive, massive wins? Where are all of the employees, on paper rich as


but in reality poorer than church mice until they can ring the register? Where are all the chief financial officers, who know that they are burning through the IPO money with no profits to show for it and deficits as far as the eye can see?

The answer is that they are a few weeks away, in 1999, eagerly lining up to take advantage of these prices in a new tax year. There will be insider selling and secondaries and expired lockups galore in January and February. And there better be, because Christmas comes but once a year, and last I looked it had already happened. Or did I miss what



and all of the other basically cyclical/seasonal e-tailers have planned for an encore?

The prospectors of the great Internet gold rush are about to discover what happens to the price of gold when so much is dug up at once. I imagine it will be a little like what happens in the world of oil when there is too much oil. The price of the glutted commodity goes down.

Monday's barrage of press releases from the e-world was as thick as one of those pre-Normandy beach bombardments. It softened the buyers for the coming onslaught of insider selling and secondaries. They will occur naturally because in almost every case, the amount of stock trading in the stock market is no more than a fraction of what's been locked up.

And these sellers, whether they be officers, employees or venture capitalists, for the most part have bases that allow them to be incredibly insensitive to where they get out. They are your worst nightmare as an existing shareholder; they don't think there is any difference to


(AMZN) - Get Report

at $400 or Amazon at $300. Not when their cost basis is a few pennies, they don't.

Hold it, you say. This time is different. The Net is so great that nobody will want to sell. Why sell when much higher prices have to occur if there are more glowing press releases and more alliances ahead? Why sell when, heck, Christmas is only 360 days from now and next year's Christmas is bound to be even bigger for the Net? Why sell when there is so much future in the future?

To which I answer with two simple words: greed and fear. Greed because there is no sense being rich only on paper. That's not where it matters; it matters in the bank. Fear because nobody wants to see these gains go up in smoke without cashing in some chips first.

Don't get me wrong. My credentials as a Net lover are on display every day of the year. I have bought in to the notion that e-tailing has the best margins, that e-publishing will crush non-e-publishing, that e-brokering is much better than non-e-brokering. I have accepted the radical change in thinking that got these stocks to where they are today.

But don't ask me to forget greed and fear. They have been with us for too long. They seem to work even when everything else fails. We are hardwired as humans to react to these two emotions. Even the Net can't change that.

So, get ready for the avalanche. If the cycle is the same as previous manias, the first handful of secondaries will be super. In fact, you will hear that

National Gift

, a company with 2 million shares floating out of a total of 24 million, has filed a secondary, and your instincts will be to buy the stock ahead of the roadshow! You will want to catch the pop from that lunch at the Intercontinental in New York. You will be juiced about National Gift, so juiced you will want 10% of the deal.

All I can say is the day you start doing that is the day when you will have to decide which two or three Net stocks you are willing to stay long through the coming nuclear winter. You get that kind of fallout when things get that hot ahead of offerings. And don't try to get into my fallout shelter. We only have enough crackers and water for the people and partners of

Cramer Berkowitz


Random musings:



Dave Kansas

, informs me that a technology changeover is on the horizon and that initially all may not go smoothly (meaning that I am going to be screaming at someone as I did on Sunday afternoon at 4:30 when the site was down). The changeover is for a better, more intelligent design.

Remember, you and I are in this together. Whatever doesn't work on your screen, whatever aggravates you, will probably aggravate me, too. Let's bear with Dave and the team and give them the benefit of the doubt. They deserve it. Complain to me and I will do some yelling and screaming, but in the end, I've got no more to do with the changeover than any other customer. Where I am from -- and I know Dave agrees -- the customer is all that matters. So complain to him.

Everybody must stop and read

Erik Pupo's

letter in the story with readers' views about what will kill the Internet stock game. This letter comes as close to the emperor as is allowed at this stage of the naked game.

James J. Cramer is manager of a hedge fund and co-chairman of At the time of publication, the fund was long, although positions can 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 by sending a letter to at