The Dot-Com Death Spiral

After it's over, there will be some serious bargains to exploit.
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Do we now go from wildly overvalued to wildly undervalued in the dot-com world with the blowups of

CDNow

(CDNW)

,

drkoop.com

(KOOP)

and

Peapod

(PPOD)

?

Our heads are spinning here over how fast these companies burned through cash. What the heck? Where did it all go? Did these companies just think that the stock market would always be there to tap and if not then they could go to the bank?

Didn't they know that no bank would lend them what the stock market would? Didn't they know that the public is a much more forgiving taskmaster than every other financial entity?

But let's get back to that first point, about undervalued dot-coms. With the incredible crash of these three companies (mind you I wrote "companies" not stocks), you have to expect that the reverberations are going to be swift. People are going to go back to that inaccurate but poignant piece in

Barron's

that talked about cash burn and they are just going to sell, sell and then sell again lest they be caught in the next Peapod or drkoop.com or CDNow.

As each one of these companies faces its appointment in Samara, we are stunned that the unwinding can happen so swiftly. If we hardcore cynics are stunned, can you imagine what the true believers are thinking?

That means a week from now, if I know the rhythm of the market, you will have to do a new screen: companies that are selling through their cash value that aren't burning money that fast.

You will have to do that screen because this market gyrates from one extreme to another. As "we" decide to annihilate all of the dot-coms for fear that Dr. Kevorkian is going to make a house call after he is done with Dr. Koop, there will be bargains galore.

But don't jump the gun. Let euthanasia work its overkill magic and then strike.

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.