William :
I would like to offer an analogy with what is going on in the internet sector from an investment standpoint. (Yes, I am short, through puts). You'll know where I a going immediately.
I would compare opportunities in e-commerce to opportunities in emerging markets.
In both cases, huge potential, apparent excessive valuations, justified by the promise of fortunes to be made, and good and bad apples.
What gave its legitimity to emerging markets was their endorsement by firms and individuals of ever growing stature.
Investors always had a nagging feeling that some of these markets were rotten, and that valuations were excessive, but when they saw those very smart and serious people moving in, and making a killing, well, the masses moved in, and standard investing practices like due diligence, fundamentals, and valuation were twhrown out the window, the domino effect started and then the bloodbath.
What is important here is to recognize where we are at in the level of legitimacy enjoyed by internet stocks. I would venture to say that we are very, very late in the game now. (AOL -Japan- has started its decline, and few Thailand-type stocks like N2K have already bit the dust.)
When prestigious people like Bank Morgan and Deutche start recomending internet stocks in the context of what is going on in the world economy, and encourage their followers to take insanely great risks, you know the musical chair game is almost up. Days, or weeks, not months.
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