Chris Edmonds and Eric Gillin Chat on Yahoo!

Chris Edmonds and Eric Gillin chatted on Yahoo! Aug. 23 at 5 p.m. EDT. Click here to hear the event.

laura_the_street: Thanks for joining us this afternoon. We are live from the TSC offices in New York, San Francisco, and our own little corner of Atlanta.

Eric Gillin and Chris Edmonds will discuss Francis Ford Coppola's most recent offering of "Apocolypse Now."

K.C. Swanson is in the house with the Five Dumbest Things on Wall Street This Week, and of course, we'll be taking your questions.

rm_egillin: Greetings and salutations, my name is Eric Gillin and I'm the host of TheStreet.com's Martini Chat along with Mr. Chris Edmonds.

rm_egillin: It's a fairly cruddy Thursday here on Wall Street and we're coming to you live from the bustling TheStreet.com newsroom.

For the next hour, we'll be discussing Francis Ford Coppola's Apocalypse Now Redux -- fitting, considering the current market mood.

Also, the Five Dumbest Things on Wall Street at 5:15 and market headlines at 5:20. Plus, Airtran and the airline industry, your questions and more Microsoft. Please send in your questions and make 'em good. The more questions you ask, the less you have to listen to us. And that's a good thing.

But before we start the show, it's time for the Toast. Twenty-two years ago this week, Business Week ran an obituary-cum-cover story called "The Death of Equities." It was a terrible call, but who could blame them? In 1979, Iran was in the middle of a revolution and stocking up on the hostages.

Jimmy Carter was president, and with the oil crunch in full swing, said he'd found a "crisis of confidence" in America. Then again, the more things change, the more they stay the same. Perhaps it was fitting that Francis Ford Coppola's Apocalypse Now bowed in theaters in 1979 and again this year. Many thought the economy was deader than a pool float in a pushpin factory -- Business Week certainly did. Many think the same thing now, pointing to statistics that show people are pouring money into fixed income and out of the broader stock market.

That's not exactly what happened in '79. Both the Dow Jones Industrial Average and Nasdaq Composite Index, then entering its eighth year in existence, had gains. Then again, the Comp hadn't even broken 200, let alone 5,000, and a good day of trading on the Nasdaq Stock Market was 25 million shares thick. Despite the advances in the market, the late 1970s were not a fun time.

Technology was entering a new phase, as the transistor makers of yesterday couldn't keep up with the rise of IBM and the computer world. Some investors got creamed by refusing to sell, just like now. But here's the nice parallel -- chipmaker and PC stocks took the brunt of the market damage on the bad days.

Who would have thought back then that things would get better? Business Week didn't. Misery and pain were everywhere -- just like it seems now. By 1982, just three years later, everything had changed. Bob Pittman saved us from Yes and disco by creating MTV, Steve Jobs started Apple and helped add ballast to the PC industry, which kicked off a tech-fueled bull market. I'd say this market's in the same place, or a similar one.

We've heard the Internet charge in the way Lt. Col. Bill Kilgore did, with Wagner blaring and guns blazing. And now we're all in the same boat, floating downriver, looking for signs of improvement. Things are going to get worse before they get better. I have hope that things will get better, but we need to hit bottom. We need to retest April's low on the Nasdaq. We need to break past 10,000 on the Dow.

Despite what we've seen, we haven't seen enough. To get through this heart of darkness, we need to journey to the core. We need the horror, the horror...

rm_egillin: So, Chris do you agree?

chris_edmonds_tsc: You make some interesting comments about the bottom ... but the very dire views you talk about may be exactly what we need to start thinking about a bottom. If I look at the email I get now, if I look at what I hear on the street, in the barbershop (not that I need to go very often) and what I hear at cocktail parties -- people have given up, simply given up on this market.

Except for one place ... and that's the big irony -- they are still holding on to some tech -- thinking it might come back. Until that is gone, I think capitulation isn't quite here.

You need to see that wash out and people get more realistic. That said, I also think there is simply a lot of apathy -- a lot of people have walked away and say they may never come back. Sentiment is bad and that is some indication that a bottom is closer than maybe you think.

rm_egillin: What about the VIX, which hasn't been moving higher -- indicating a bottom?

Although I would say it's a good thing that people shrugged when the Fed cut, people need to give up the ghost. They need to want to sell.

People aren't as scared as they were in April. And they should be, because nothing has significantly changed. They still love tech. It's confusing.

My question: Aren't we just setting ourselves up for a bigger fall? Especially after the 100-point gain on Wednesday?

chris_edmonds_tsc: The VIX is clearly saying something a little different than sentiment. And, from a bottom standpoint that is significant. However, with regard to April, the market is much thinner than it was then.

You have lost a lot of the momentum players, all the daytraders are flipping burgers at McD's and so you have a lot of individuals that fall into two camps: paralyzed and don't have a clue as to what to do and, so, don't do anything or, apathetic don't want to look at their portfolios, have given up and it hard to tell what they will do.

You may be right -- a big wash down might put in a bottom, but it is possible we are just basing near these levels on low summer volume and we could turn as the players -- those that are left and care -- come back as fall and winter approach.

There is a big malaise in the market right now I think it is more directionless than anything else. Tony Dwyer said it best the other day -- the market participants are 100% apathetic.

That doesn't make it fun or exciting, but that's the way it is.

rm_egillin: Everyone talks about leadership and asks what leads next. I don't know what's next?

chris_edmonds_tsc: First, it won't be tech as we know it today. Second, "next" very well could be tech, although I'm not smart enough to tell you what that means. We, as investors, become pretty myopic at times. Right now, to us, tech means computers, it means the Internet, it means telephony, it means storage, it means everything that is now old and passe.

rm_egillin: But is it really? I'm not entirely convinced that anyone even needs any more technology. It used to be the Internet. It used to be networks. Or phones. Or storage. Something. But that was then and this is now. So now what, Chris? Now what?

chris_edmonds_tsc: There will be a next generation of something that will capture the imagination of investors, of great innovators and consumers, the business world. And the markets will run with it. For now, you still need to avoid tech. On a strategic note, what is working and has been working of late is boring. One of the best performers of the year -- yawn -- is REITs, those pesky real estate companies nobody could run fast enough from just two years ago. There, it's all about places to hide and dividends to collect.

Dividend-paying names have performed well. Are they next? No, they are now. But they are in and it is just an example of a way people have made money in this market. Yet, all you seem to hear is talk of how nobody is making money in a market like this. WRONG!

rm_egillin: I'd say investing in tech is a pretty dumb thing now.

And speaking of dumb things, and bad segues, we have K.C. standing by ... K.C.?

rm_kc2000: In the explain-this-to-me-again category, Lucent said it will pay its former CEO Rich McGinn -- ousted for poor performance last fall -- $5.5 million for the privilege of not working there.

That's a pretty sweet premium for a company that also recently said it plans to fire up to 20,000 of its employees, on top of earlier mass layoffs. It just posted a $3.25 billion third-quarter loss, said it would take a charge of up to $9 billion in the fourth quarter and announced it would ax its dividend.

Ciena took an awfully long time to lower guidance, even though everybody knows how much service providers have reined in spending. When it finally did slash estimates, it dropped its forecast for sales growth all the way from close to 50% down to the low teens.

Ford adds one more embarrassing revelation about its safety record to a growing list, in a lawsuit concerning faulty ignitions.

The company's reputation for dragging its feet on safety certainly can't help business at a time when the pace of vehicle sales is already slowing. Also, this week a UBS Warburg analyst raised the terrifying prospect that Ford could cut its dividend within the next year.

The trading upwards in some biotech shares, leading up to President Bush's decision on stem cell research funding, looks more than a little foolish.

The stocks dropped after President G.W. Bush said he would allow only limited funding for research, with StemCells falling the most, at 25%. But it's surprising the group didn't fall harder, in view of the fact that stem cell research isn't likely to get much federal backing during a Bush administration.

And now a drum roll, please, for the company that was fastest to back off its earlier guidance for the quarter and throw its hands in the air. It took Scientific Atlanta, a maker of cable set-top boxes, only a month to ditch its forecast for the current quarter. As silly as that turnaround may look, though, give Scientific Atlanta credit for playing it straight with investors -- especially given that bigger and better-known companies like Cisco still haven't ditched their unrealistic growth expectations.

And coming up on the five dumbest things appearing (Friday): Shares of Simon Worldwide, a promotions agency, dropped 77% the day after the FBI arrested one of its employees for rigging $13 million worth of McDonald's contests. The staffer allegedly sneaked out prize game pieces to people who agreed to pose as legitimate McDonald's "winners," in exchange for a cut of the proceeds. But the most damning part is, the con had been going on since 1995.

rm_egillin: Thanks for reporting from San Francisco. Now we're going to have some news.

laura_the_street: Cisco announced a major shakeup of its executive suites, and the big news: top executive Kevin Kennedy is departing. Under what Cisco calls an 11-part restructuring, Kennedy will step down as the head of Cisco's struggling service provider business, signaling the company's full assault on the phone networking industry is now beating a retreat. The company's stock rose 4% in after-hours trading.

Blue-chips closed lower, and tech stocks followed suit late in the day by moving to the downside. The Dow Jones Industrial Average lost 0.5% to 10,229.15.

The Nasdaq was down 0.9% to 1843. Among the big movers, Ciena 2.1% on news that the company's stock will replace American General in the S&P 500.

Lucent was the most active stock on the New York Stock Exchange following its midday conference call. The telecommunications equipment maker traded down 3 cents, or 0.5%.

Krispy Kreme Doughnuts said it beat Wall Street's estimates by a penny with earnings of 10 cents a share in the second quarter.

The company earned 6 cents in the year-ago period. The doughnut shop operator also expects earnings to beat estimates in fiscal 2002 and 2003.

Kmart lost $22 million, or 4 cents a share, in the second quarter, excluding a charge related to BlueLight.com. The bottom line met analysts' estimates.

This morning, the Labor Department released its weekly initial jobless claims report, which provided a snapshot of current labor market conditions. The number of first-time claims rose to 393,000, ahead of economists' expectations of 389,000.

rm_egillin: Chris, noticed you wrote about Airtran last week, the company once known as ValuJet. I can't say that I agree with your points.

chris_edmonds_tsc: Well, uh, Eric, its obvious investors don't agree either, although this morning's warning, which I didn't see coming given the investors and analysts I talked to, didn't help. That said, it is an airline that will still post a profit in a very tough economic climate while the majors are: hemorrhaging. Still the stock went from an $8 in front to a $5 in front today. Ouch!!

rm_egillin: I think that Delta will keep their prices low and eventually take Atlanta from them. It will take some time, but Delta's not going to give up the ghost for that one.

They'll take Atlanta the way Sherman did. And today, the company missed the quarter. So there. Your thoughts on Airtran?

chris_edmonds_tsc: I think Joe Leonard, AirTran's CEO, has done a good job of stabilizing the brand and creating opportunities that, if executed, make the company worth a look. . .after a slight delay in takeoff ... guess you could call that pick -- GROUNDED!!

chris_edmonds_tsc: That doesn't mean there aren't risks, something I noted last week. If Delta ever gets its act together, it could squash Airtan, but I don't know that will happen. You know, in Atlanta, I have a choice between Delta and Airtran. And, while I have been a faithful Delta flyer in the past...

rm_egillin: One thing that bothers me about this industry is that it's essentially a monopoly and they mess it up.

Nothing competes with the airlines. Only they can get you to L.A. in seven hours.

I have chosen Airtran on a number of occasions this year because of price and without having to sacrifice.

rm_egillin: There's no competition.

And yet, they have too many problems. Labor woes and high costs and low airports.

Shouldn't there be a lot more innovation in the industry?

chris_edmonds_tsc: Schedule. And, what I like most, for $25 I can upgrade to business class regardless of the cost of my ticket.

rm_egillin: Shouldn't they have an easier go of it? Why don't they build pilot schools to have a steady supply of pilots?

Why don't they use the 5,000 plus smaller airports that no one uses? According to an article I read in the Atlantic Monthly, 98% of Americans live within 30 miles of some kind of a public landing strip. And those just sit there, empty.

Why doesn't this industry innovate? What's wrong with them? Is it the management?

chris_edmonds_tsc: Generally, airlines are poorly managed. It's a hard industry to understand and there are a number of dynamics that are constantly changing -- fuel costs, labor pressures, congestion, regulation, air traffic issues, weather ... you name it ... there are a lot of exogenous factors that impact the airline probably more than any other industry, except maybe energy...

chris_edmonds_tsc: That said, look at Southwest -- a model that has worked and it has worked consistently because of innovation, great management and motivated employees. Delta doesn't have that, American doesn't have that, Northwest sure doesn't have that. The only major that comes close is Continental.

Bethune has done a nice job of taking a heap of steel and turning it into an airline that has a lot of loyalty. You would think, for example, people in Atlanta would rave about Delta, their hometown airline. Just the opposite, they hate them. Bad service, bad attitude, bad experience. What's wrong with that picture.

I want to love the airline business. It would seem to be one of the easiest businesses to fall in love with - but, alas, the allure of flying has turned in to the agony of the air.

rm_egillin: I wonder if any of our listeners out there -- you are out there aren't you? Have any questions on Airtran -- AAI to investors?

rm_egillin: Today's results weren't so good. Laura, what do you have for us?

remy_sab1: Could you give us your opinion on the dollar?

rm_egillin: I like having them. Many many companies are affected by them so a weaker dollar is not a bad thing.

holoveczimre: What is the future of Euro currency.

rm_egillin: Tourists may be a little saddened by it.

chris_edmonds_tsc: I agree with Eric -- there are companies that have found it hard to compete with a strong dollar -- I think a weaker dollar helps that, at least one that seems more in line with recent norms.

Tough to understand the politics. From a pure selfish standpoint, I love it when I travel.

rm_egillin: I think that it's going to take some time to get accepted. Not everyone over there is on the same page. I really think that everything's going to change once they actually print the stuff though.

rolexpresident_2000: What do you think of buying euro dollars. I'm in Canada. Should I do it?

rm_egillin: I don't know Canada at all. Alex Trebek's from Canada.

chris_edmonds_tsc: I wouldn't -- but then I'm not a good source on Canadian currency...

rbane: It seems like it is obvious that our markets are going down. Why not play the market down then by shorting or buying puts. Isn't that the smart way to play this market?

rm_egillin: Yikes. Options are super risky. And I don't like this place enough to really play those wild and woolly games. It's really too risky for the average investor. If you're savvy, then go nuts.

chris_edmonds_tsc: Depends on your time horizon. I don't want to say not do it, but I also don't want to ignore that side. You can make money there -- just understand the risks and be disciplined.

rm_egillin: Also, the options market has a lot of creepy insider stuff going.

andy_fiasco: What is investments banking? Is it different from corporate banking?

rm_egillin: Great question! Very, very happy you asked that. A lot of people think they know the difference. Chris?

chris_edmonds_tsc: Investment banks tend to do capital work for corporation -- corporate bankers typical handle the banking services that you and I think of when we walk into a bank -- structured loans, deposits, cash managements, etc.

rbane: CSCO announces a restructuring (which tells me there are problems in the company ) and people begin buying like there is a fire sale. It's amazing how stupid today's investors are!

rm_egillin: hahahahahaha

chris_edmonds_tsc: Capital work by that I mean placement of equity and public debt offerings...

rm_egillin: Nice "question." It's a combination of fear and hubris. Cisco may recover, probably not back to the 30%-50% growth that they insist they can hit.

rbane: It looks like Japan is heading down the toilet. How do you think that will affect our markets?

rm_egillin: But it's still a huge risk.

chris_edmonds_tsc: Heading down the toilet. How much further can they go?

rm_egillin: Japan has been in the toilet for years now. If anything, if they pop their head out of the bowl, it's a great sign here. Japan's not my worry. Europe is.

laura_the_street: But what about Argentina and Brazil? Should we be worried about them defaulting?

rm_egillin: I'm not super concerned, but then again, I'm really watching a lot of European stuff, especially related to tech. Emerging markets are very tricky.

chris_edmonds_tsc: I do think there are political risks. There could be some issues that affect us politically and therefore economically.

andy_fiasco: I read that investing in South Africa is unethical why is that?

chris_edmonds_tsc: The old apartheid policies form a social perspective were considered unethical. It used to be that a lot of social funds who's criteria was to avoid purchasing stocks in countries who did buisiness in South Africa because of their apartheid policy.

rm_egillin: As far as ethics go for me, business isn't an ethical place to be. Ethics and business are tough to fuse together.

chris_edmonds_tsc: There is a difference between ethics in business and ethics in investing. When I was in the banking business, a mutual fund manager told a group of people who were gathered after someone begged this manager to get Philip Morris out of his top 10 so he didn't have to show it to his clients. He responded you don't pay me to make ethical decisions, you pay me to make money."

steve52252000: Chris, do you see any solid plays in the energy sector?

rm_egillin: Ah, the energy questions...

chris_edmonds_tsc: Good question --

rm_egillin: "Good question..." Naturally, Mr. Energy loooooves his Energy questions...

laura_the_street: You know, when they see Chris' cherubic face, they know they can ask about the "Texas Tea."

chris_edmonds_tsc: Longer term there are some great plays. Check out this weekend energy Roundtable -- it will be on Real Money Saturday. ... We talked about the fundamentals in the business and where you might make some money in the business.

marvelous_meganus: Does Eric have a girlfriend?

rm_egillin: No, sadly, I work for a living. But thank you for asking.

rm_egillin: I wanted to talk about Apocalypse Now. I saw the original in college on a double bill with the Heart of Darkness making of the film. I saw it as an essay on the Vietnam war.

rm_egillin: Chris, what was your impression of the film?

chris_edmonds_tsc: I enjoyed it. I haven't seen the remake. It has a much deeper message about war and life. I loved it and I can't wait to see the redo.

chris_edmonds_tsc: I'm taking a week off, so maybe I'll be able to see it.

rm_egillin: The added stuff adds another layer. When that film came out, what was the public reaction? It's a pretty insane film.

chris_edmonds_tsc: I think there was a very broad range of reactions to that film.

laura_the_street: Here's some trivia, Laurence Fishburne was only 14 when that came out.

rm_egillin: He lied to get into that movie. There's some messed up stuff that happened on that set.

rm_egillin: Any new movies coming out?

laura_the_street: Let's see, what's coming out. One movie that's been promoted by Nickelodeon is Jimmy Neutron, when it finally comes out will make Viacom a ton of $$$. -- It looks like it's a riot.

chris_edmonds_tsc: It just dawned on me about "Apocalypse Now." Just think about how much different it would be if that were made today. Think about the technological innovations that could be used to simplify some of the more tedious tasks that you know had to be done in.

rm_egillin: They'd probably make all that explosions digital. They blew a ton of things up. That's what makes that movie so cool. Making it was steeped in madness.

laura_the_street: It would cost 150 mil. to make -- just to say they spent more on making it than Planet of the Apes. The cool thing about apes is that they dressed everyone up in those costumes. They borrowed choppers from the Philippine Army. Can you imagine the U.S. Army doing that?

laura_the_street: They do it all the time there is a credit "Special thanks for the U.S. Army."

chris_edmonds_tsc: Yeah, it's done all the time.

chris_edmonds_tsc: This has been a great chat -- thanks for being here -- we get better at this every week. Join us next week when we tackle more market mania, more "dumbest things" and maybe even drink a martini or two. And, of course, join us during the week for bring market news, insightful and edgy commentary and a lot of give and take on RealMoney.com and our flagship site, TheStreet.com!!

rm_egillin:Remember -- EVERY single Thursday 5 until 6. You guys rule. Have a very nice night.

laura_the_street:Thanks again for joining us. A transcript of today's event will be available at www.thestreet.com.

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