Looking Beyond the Tech Sandbox: Chris Edmonds Chats on AOL

Chris Edmonds chatted on AOL's MarketTalk, hosted by Sage, on Wednesday, Aug. 22, at 11:15 a.m. EDT.

Comment: Live from Atlanta, Ga., please welcome Chris Edmonds, contributing editor, TheStreet.com, Inc. Chris can answer questions about the markets, funds, utilities and the wheelings and dealings of Warren Buffett.

CSEonTSC: Welcome -- sorry to be a bit late -- nice early rally and, as is so typical, it fizzled.

Let's talk about it -- I'm ready for your questions!

Question: Is JDSU ever going to reach 70 again?

CSEonTSC: When cows fly over the moon -- that's not the right question to be asking. The right question is what should you be doing today when tech is not the place to be.

Question: Seems that the market has been responding more to what Fed Chairman Alan Greenspan says than what he does. Nowadays, talk is often just "spin" and it seems he could use a "spin doctor." If he were infallible, he would not have continued to raise rates until time to cut.

CSEonTSC: A lot of people in the market could use a spin doctor. I don't think you can blame the malaise completely on the Fed.

Sure, you can make the argument they were a bit aggressive on the tightening side, but this is not the full-blown recession everyone thought it might be. The consumer remains surprisingly strong -- not sure how long that lasts.

But this is a business recession and, in fact, you would have thought the businesses would have reacted more quickly to the Fed easing.

That hasn't happened, which is symptomatic of the reverse of the bubble we saw in many of these companies a year-plus ago. Euphoria followed by near depression. No doubt, the cycle is overstated here, but that is not all a result of Fed action

Question: How will recent Monopoly "scandal" affect McDonald's stock?

CSEonTSC: Ask the FBI -- probably not at all. However, it does make for good TV. And, the right question here is probably how it will impact the security company where the employees that attempted the rigging work.

Question: How good is Calpine stock, is it a good investment?

CSEonTSC: I'm long Calpine and short Calpine calls. I think it makes some sense at these levels, although I wouldn't chase it much above 35. There is a lot of potential there as the company's conference call indicated this week, but there is still a lot of political risk and there still is the overbuilding risk that was highlighted in Barron's.

However, I think that was a bit overdone. Be sure and tune in to this weekend's Streetside Chat on TheStreet.com for the TSC Energy Roundtable -- some very interesting comments on Calpine can be found there.

Question: I have owned Red Oak Technology fund since practically inception and I am finally getting hit with a loss, running a bit scared, would you sell while the loss is small or hold for the long run. I have 20 yrs. until retirement.

CSEonTSC: Why did you wait? Tech will come back but not like it was. I hope you are diversified.

Question: Is there any hope for a turnaround in companies like XOXO and LVLT?

CSEonTSC: Are you kidding ... seriously, I think Level 3 is sort of interesting in here.

Bill Miller at Legg Mason value has been buying, and there are always talks about Warren Buffett's connection to the company. You have to get over the liquidity and balance sheet hump, but if I were playing in that arena I would look at LVLT as a potential flyer.

By the way, discount the talk you hear about Buffett's connection -- I do think it is largely talk

Question: What is wrong with AOL? Growth but the stock drops!

CSEonTSC: Look at the layoff announcement ... things aren't rosy in Steve Case-ville. It is a very different company today than it was five years ago.

Question: Is AT&T internet service a strong competitor to AOL?

CSEonTSC: That's a good question. Clearly, AOL is the player here, probably followed by MSN and then EarthLink. I knew a couple of people who liked ATT's ISP but don't think it has the real scale to compete.

It's sort of strange that they can't leverage their customer base. I never quite understood, from a business standpoint, why the baby bells and major LD companies couldn't make bigger inroads into that business.

Question: Is now a good time to do any investing? There still seems to be no bottom for the sinking stock market.

CSEonTSC: Good question and exactly the kind of question I would like to see more of. The more negativity there is, the better chance we are done going down. Remember, people like Warren Buffett, like Sam Zell, like Bill Miller make the most money when there appears to be blood in the streets. I don't think we are quite to that point yet, but questions like this make me feel like we are getting closer.

Question: The stock market headed south on the day of the most recent and seventh 0.25 percent rate cut done by the Federal Reserve. Has monetary policy become completely ineffective as a means to spur corporate capital spending?

CSEonTSC: Tony Dwyer of Kirlin Holding this morning put it best -- people are apathetic about the Fed -- after seven cuts, people are simply anticipating the 8th.

I don't think it is ineffective, but I do think that we need more, at least that is what the street is saying.

Question: What is your opinion on Enron at current level: buy, sell or hold? Thank you.

CSEonTSC: Good question -- I think Enron is a bit oversold here as a result of the news on Jeff Skilling's departure. That said, I think there is still a lot of uncertainty in that company and it still trades at a premium to its peers.

I might play it for a trade in the mid-30s but not much more than that until Broadband, India, California and the CEO issues are resolved.

Question: What's going on with A&P (gap) up 40% in last 6 wks?

CSEonTSC: Great question -- one that had missed my radar screen. A ML upgrade on the 18th might have something to do with it. And, some big insider buys ... nice chart.

Question: You said tech is not the place to be today. But how about in the future? I think a tech rebound will occur.

CSEonTSC: I think you are right, but it is a matter of when and how much. And, it will be selective!

I think you need to pick core names and be realistic about returns. Think about the chip and PC businesses, for example. They are no longer prolific growth businesses. Think about telecom -- there are so many balance sheet issues there that it is hard to imagine a big ramp anytime soon.

Tech has a place in most long-term portfolios; it just isn't the same kind of tech of the past and not the same exposure or expectations of the past. Be careful and be diligent

Question: What about MO and SPG?

CSEonTSC: I like Philip Morris -- you will see a dividend pop soon and that is a good thing in this kind of market. As for Simon, a decent mall company, but their portfolio is so spread out, including tertiary retail markets, that I think you can do better in this kind of market.

Retail REITs have too much exposure to the downside -- except for major city mall retailers. TCO may be an example of a decent play, although there are some management concerns there.

Question: CIEN, NT, SCMR, TXN, GLW, RBAK -- are these buys now or too soon? Thank you.

CSEonTSC: I'm not sure I want to play there at this point, although Nortel is an intriguing, albeit very high-risk proposition. I think, in general, I'd wait ... You'll have plenty of time in those names later.

Question: What about Siebel (SEBL) over the next three months? Does it go up from here at $23.61?

CSEonTSC: I have no idea over the next three months -- you tell me the catalyst and [I'll] tell you whether or not I think you are smoking something not made by Philip Morris.

Question: I don't believe any stock has held up in the last year -- who could have made money?

CSEonTSC: There are plenty of stocks that are up -- you could have made money in some of the large, integrated oil companies, you could have made solid double-digit returns in many of the Real Estate Investment Trusts, the pipeline master limited partnerships are up considerably and I could go on.

Don't forget, a number of short-sellers would argue with you about making money in this market. But, that's probably not what you wanted to hear!

Comment: Thank you for joining us today, Chris! We have been speaking with Chris Edmonds, contributing editor, TheStreet.com, Inc.

CSEonTSC: Thanks, as always to Sage and to you for your great questions. This is a tough market but keep your chin up, do your homework and be patient. It always gets better. And, there are plenty of places to play other than the tech sandbox.

Look for those opportunities with open eyes and you'll do fine. And, of course, cash isn't always bad if you are worried. Don't be foolish -- prudence is what you need to make money in this market.

Finally, congrats to Sage on a nice partnership with Multex. Look forward to being back soon and, until then, I'll see you on TheStreet.com and RealMoney.com. Have a great Labor Day!

>To order reprints of this article, click here: Reprints