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Bubble Trouble

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Last week, in one of the darker moments of the market's charnel house, we struck five and change. So with something in excess of $4 a share in cash -- we have $100 million in the bank, never spent, from the IPO -- I guess you could say we might be worth more dead than alive, once you sort out the assets.

And we aren't the only ones with bizarre ratios of cash to stock. Barnesandnoble.com, the jaded son of Barnes & Noble, and ilife.com are within pennies of being less valuable than their stock positions. You could bust these up and come up positive provided the furniture's worth something. These companies' execs better hope they don't have hefty key-man insurance -- those multi-million-dollar life-insurance policies on the top dogs -- because disgruntled dot-com workers might get the itch to tip the balance.

Ahhh, but before you reach the conclusion that these companies are worth speculating on, remember that they have the suffix that kills attached to their names. Like many with that homicidal tail, TheStreet.com has to turn profitable one day to make it, because the crash you heard last week was all the doors slamming shut on any more financing. So now we choke on our own losses or somehow make it to the promised land of profitability before the cash runs out. For us, as well as for many of the dot-coms, it will be a footrace, and the winner can't yet be predicted.

So what's it like living among the carnage of the 52-week-low list? At first, I found it quite lonely and depressing. My wife always said I had the kind of personality that didn't like being graded, and all of a sudden I had a flashing report card blinking at me every second on the job, and my work was receiving extremely low marks.

Now, finally, we've been joined by everybody else. In fact, there are many dot-coms that trade at equally embarrassing levels, some at even more embarrassing ones, and some come with terrible letters from the school principal, the outside auditors, informing shareholders that they may not even be going concerns at this pace. Ouch -- it's not enough to lose millions publicly, they then expel you from the darned club! Each day during the sell-off, dozens of dot-coms and their associates, the infrastructure and business-to-business plays, joined us on the new-low list. We love the company, by the way. Makes us feel less singled out for our woes, which were legion our first year as a public company.

The crash you heard last week was all the doors slamming shut on any more financing. Now we choke on our losses or somehow make it to the promised land of profitability before the cash runs out.

For me, ensconced in a day job where I see fortunes wiped out almost daily, the recognition that my dot-com millionaire status is just points away from going to six figures comes somewhat easily. But for those who tasted the joys of paper wealth and had it dangled in front of them without their being able to sell it, the crash is a true comeuppance. Only the very few, the really early gold miners, were able to offload their shares at high prices before the collapse. The vast majority of workers experienced the wealth vicariously.

Some -- we don't know how many -- borrowed against their paper fortunes and actually bought real property. As the margin clerks silently recall these loans, I suspect that you might be able to do better than you thought when you look for an apartment but much worse than you thought when you go to sell your house. The dot-com inflation boom will soon be removed from the Fed's agenda, and with it will come a return to more rational Hamptons pricing.

What happens now? Oddly, the closing of the window is great news for those who got their starts as dot-coms and now have profitable businesses. These companies will be able to cherry-pick among the rest of us, looking to fill in niches with brands built by others. Companies like Yahoo! and America Online managed to turn profitable while everyone else was consuming cash, so they will be able to extend their lead, knowing that no competitors are about to get public funding again. They can pull so far ahead of the pack that their market caps may actually make sense. (I own them both.) Their stock-for-stock lifelines will be well received by any of the sinking dot-coms now clinging to flotsam in the capitalist ocean.

And how about all of those companies that provide the picks and axes and jeans to the dot-com miners, the Kanas and the E.piphany's and the Art Technology Groups -- the companies that host sites and help lure more Web customers and keep them happy? Are their jobs safe and their stocks worth owning? Yes, their jobs may be safe, but no, their stocks aren't worth owning, because they needed the gold rush to last even longer than it did. They needed to see hundreds more dot-coms get funded if they are going to live up to the market caps forged during the heyday of infinite growth. I wouldn't touch any of them.

Is there a lesson in all of this? Nothing that The Treasure of the Sierra Madre didn't teach us already. When the end came, all that mattered to me was that I didn't want to be Bogart. I wanted to play again, to laugh like Walter Huston at the vaporized riches swirling in the wind, proud to know that I gave it my best shot while it lasted.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had positions in Intel, Cisco, Sun Microsystems, Oracle, Yahoo!, AOL, Applied Materials, and TheStreet.com (of which he is also the largest shareholder). His fund often buys and sells securities that are the subject of his articles, both before and after the articles are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this article represent a recommendation to buy or sell stocks or a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites comments at jjcletters@thestreet.com.


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