• The Wall Street Journal , Monday, July 20, 2009 2:27 PM

In a guest column appearing in The Wall Street Journal, James Altucher, managing partner of Formula Capital, an alternative asset management firm, advises investors to "run for the hills" when it comes to investing in the Internet. "The days of infinite margins, 1,000% productivity gains, and growth of market throughout the universe are long over," he says. "Internet companies now should be treated, at best, like utility companies that get bought at about 10 times earnings and sold at 13 times earnings. Even then, I'm not sure I would give the Internet sector the same respect as the monopoly-protected utility sector."

Why? Because "nobody can figure out a business model," says Altucher. He points out that Time Warner, for example, would rather keep its shrinking print business than hold onto AOL, one of the biggest Web companies, while News Corp. recently had to clean house at MySpace and it still can't figure out what to do with the social network. Other examples: Microsoft has spent billions on its Web strategy "without a dime of profit," and even Google can't seem to make money from anything other than search, its cash cow.

"Let's face it," Altucher says. "Electricity greatly improved our quality of life. But I'm not going to get excited about buying a basket of utility companies. Same for the Internet. Can't live without it, but can't live with it (in my portfolio)."

Read the whole story at The Wall Street Journal »