Is It A Correction When You Can Smell Sulphur?

Five months down, and seven months to go in a year that so far has seen the
worst fears of Internet investors realized.

Despite occasional moments such as Tuesday’s one-day record-breaking rally
(as well as Thursday’s run-up), the mood is grim and the trend is down as
Internet stocks continue to grope desperately for the floor.

After looking at numbers generated for’s Internet StockTracker
newsletter, it’s clear that what has been routinely characterized by most
market analysts (including myself, many times) as a “correction” more
resembles Dante’s Inferno.

Am I being too harsh? Judge for yourself. Of the 298 Internet stocks that
have been trading since the beginning of the year, only 20 have risen
through May. That’s less than 7 percent.

The bottom is where things get really crowded. An amazing 184 of those 298
‘Net stocks, or 62 percent, have lost at least half their value since last
Dec. 31.

Ah, but let’s drill down further. Six Internet companies have seen shares
fall by 90 percent or more, another 30 have lost between 80 percent and 90
percent, and 58 others have dropped between 60 percent and 70 percent.

Some correction.

Judging by May’s numbers, things aren’t getting better particularly fast.
Only 43 of the 370 ‘Net stocks trading during all of last month gained
ground. But 58 Internet tickers plummeted at least 40 percent in May alone –
this after nearly six weeks of freefalling.

With two rallies in three days, plus reports indicating that economic growth
is slowing (thus easing fears of more interest rate hikes), it’s tempting to
think that the worst is behind us and ‘Net stocks will bounce back soon.

I’ll reserve judgment on whether the worst is over, but I do know that
dozens of Internet companies that have hit bottom bought a one-way ticket.

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