Aug. 9, 1995

By James Cramer

We didn't know what it was. We had never opened a browser. We had never gone on the Net. But we had heard that the deal would be hot, so we at Cramer & Co., my $250 million hedge fund, dutifully put in for our share of stock in the initial public offering of Netscape. We got several thousand shares. And we, along with most everyone who got some, made an absolute killing. The stock, which we thought was going to be priced at $12 a share, came at $28 and then opened at $71. (It peaked at $97.62 on March 17, 1999.) We were giddy. We had never made money that quickly in our lives. We thought it was going to be a one-time event, never to be repeated.

Looking back now, we recognize that Netscape was simply the blueprint, the unchoreographed start of what would become the greatest bull-market show in history. Taken to market by Frank Quattrone, the now fallen investment banker who would turn Silicon Valley greener than irrigation made the San Joaquin; nurtured by analyst Mary Meeker at Morgan Stanley, who would later admit that she was "trying to value companies without any historical valuation tools or rules;" and overfed by hyped-up traders who could buy stock online using their Netscape browser, this deal changed everything. We began to classify every company as new economy vs. old economy, and the chorus of bankers, analysts and traders would embrace the new despite its unproved nature, inability to generate profits and lack of operating history.

Forces coalesced to create the greatest bubble in history. Valuations, earnings and common sense were sacrificed on the altar of instant IPO riches. If Netscape worked, the next 100 Netlike deals could work, and the next 200, because the online economy would have to supplant the off-line economy. Dotcom alchemy had begun. Trillions of dollars in losses later, we now know what hit us: a mania that eventually destroyed the bull market itself. The banker perpetrators are now being pursued by the authorities, the analyst anointers held in low esteem.

And what became of Netscape? It got swallowed up by AOL, under which it lost most of its already dwindling market share to Microsoft--and now operates primarily as a Web portal, one of the legions fighting for eyeballs and Internet dollars.

Cramer is markets commentator for TheStreet.com and co-host of CNBC's Kudlow & Cramer