(FORTUNE Magazine) – When December quarterly earnings from companies like Yahoo, Excite, and CNET are released in the next few weeks, don't be surprised if it looks as if the Internet's prayers for stronger advertising revenues have finally been answered. The news may spark another round of Internet insanity, as investors sense that someone has finally figured out how to make money online. But before you get carried away, here is a reality check: The fourth quarter is always the strongest for advertising, the economy is booming, and advertising is cyclical. Yes, more dollars are going into Websites, but nothing about the Internet makes it immune to normal ad cycles. In an economic slowdown, says David Simons, managing director of Digital Video Investments, an institutional research firm, the "Netcos," as he likes to call them, will be hurt as badly as traditional advertising-dependent publishers. They may be hurt worse: When advertisers cut back, the first outlets to be thrown overboard are new media.

Meanwhile, the Netcos will try to magnify the impact of whatever earnings do appear. Consider trade journal publisher CMP Media (that's its home page above), which told analysts to expect Net revenues to quadruple in the third quarter. When they merely tripled, the stock plunged 26%. "We need to be more conservative in our forecasts," says Mitchell York, head of product development for CMP's Internet operations.

That, of course, is the old earnings expectations game, which will make it even harder for investors to figure out the reality behind Internet stock prices. Until Netcos can generate a pattern of earnings growth, Simons believes the online world is best left to traders, not investors. "The odds of company fortunes' changing rapidly are too great," he says. "Ditto for investor sentiment, which [in Internet companies] is an unusually large component of valuation." What about Yahoo, America Online, and some of last year's other big Netco stock winners? Remember that Wall Street is littered with the ruins of the first and biggest names in new technology niches: Think of Apple, Wang, Commodore, and Atari. "The issue isn't whether the Internet will change our future," Simons says, "but how to navigate the devious path to that future." Unfortunately, he adds, when it comes to Internet stocks, "investors have elevated current mindshare to articles of faith. Religion does that too, and it's nonprofit." Amen.

CANDLES IN THE WIND. Since going public in 1994, Blythe Industries has been hot. Literally. As a leading maker of scented candles, it has been a surprising growth story, with quarterly gains of more than 30%. However, recent market-share figures from IRI Data suggest not only that sales of scented candles overall have started to sputter but also that Blythe has lost share in the industry. A spokeswoman says the figures are misleading. She adds that Blythe hopes to rekindle growth by exploiting international opportunities and capitalizing on the company's acquisition last year of Sterno heating candles. Scoffs one skeptic: "Blythe is portraying itself as a growth company in a business that clearly isn't."

ALL THAT GLITTERS. Why would anybody still invest in gold? Because it is cheap, says Ed Levy of Levy Harkins, a New York hedge fund. The metal just crashed to an 18-year low of $282 an ounce, but Levy calls it another discredited asset class that one day will regain its shine. That's why he owns gold-mining stocks like Royal Oak Mines and Bema Gold, which have sizable gold reserves, and Golden Star Resources, which owns shares in significant new discoveries in South America. But Levy says the metal won't start to run until "all of us who own gold run out of patience." What'll be the catalyst? Levy doesn't have a clue, but he points out that so much gold has been sold short that even a moderate squeeze by speculators could boost prices. If that happens, mutual fund companies could start loading up on gold stocks. "Do you know what would happen if Fidelity put 2% of its portfolio in gold?" he asks. "It would go berserk." Crazier things have happened.

HERB GREENBERG is a business columnist at the San Francisco Chronicle. He can be reached by E-mail at bizinsider@sfgate.com