Rethinking Net Skepticism

The Excite-@Home development has caused Cramer to change his 'short-term peak' thesis about the Net stocks.
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Nothing like being wrong right out the box. Over the weekend, when I was penning a story about how the Net stock-picking business was about to become more rigorous, I was struck by how the stocks seemed to have reached some sort of short-term peak.

Count me as someone who has become too skeptical as well, because this

Excite

(XCIT)

deal changes everything. Not just because of its high price, but because there were so many bidders for the darn thing. I feel like a shark just gaffed while swimming in a cloud of bearish chum! What had me spooked was that earlier in the week, the Net portal stocks, and Excite in particular, had huge jumps. But then nothing happened, and they came down hard. I thought that showed traditional trading weakness.

Wrong! We now know that the spike we saw was probably related to advanced feelers regarding a potential takeover of Excite. What may have looked like a topping-out process by traditional stock patterns was just a precursor to the much larger move we will have today.

Where did I go wrong in my analysis? Quite frankly, I forgot that these companies have a currency that, while may be considered powered by mania, still works as a currency. In other words,

@Home

(ATHM) - Get Report

, which I am long, has seen its stock skyrocket. How @Home's stock got to where it is may be because of Net mania, but the fact remains it has a stock it can use to go buy whatever it wants.

I still think that we will have to become more skeptical about the new Net companies, the ones that might not have been able to go public in another time. My analysis of the underwriting process and the margin rules will be right. But I sure wish I had kept my Excite this morning. That's the bottom line, as always.

Guess it is still too early to be too skeptical about this greatest of all manias.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At the time of publication, his fund was long @Home, though positions 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 by sending a letter to TheStreet.com.