Chris Edmonds Chats on AOL, May 31

Chris fields questions on stocks, mutual funds, the Fed and the market's immediate future.
Author:
Publish date:

Christopher Edmonds chatted on AOL MarketTalk on Wednesday, May 31. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live).

Comment:

Live from Atlanta, GA, please welcome Chris Edmonds, contributing editor, TheStreet.com. Chris can answer questions about the markets, funds, utilities and the wheelings and dealings of

Warren Buffett

.

CSEonTSC:

Thanks -- it's great to be here. A somewhat disappointing close. I'm ready for your questions. Hit me with your best shots. Here we go.

Question:

What do you think the

Fed

will do at their next meeting in June and what effect will this have on the market?

CSEonTSC:

Good question -- I'm not solidly in the "raise some more" camp. I think if the market continues to sell off, or even doesn't rally, we might see a "wait and see" stance in June. As for the market, I think we expect at least 25 basis points and nothing in June could be a short-term negative.

Question:

Are all of the recent interest rate hikes by the Fed starting to curb the rate of inflation?

CSEonTSC:

Not sure what inflation you are talking about. I do think they are beginning to have an impact on spending and consumer attitudes toward future purchases. I also think they are beginning to have an impact on home purchasing decisions. At least that's the info I'm getting from my real estate friends.

Question:

I have

Kemper High Yield Fund A

, which is going down in value daily. I depend on it for income. Should I stick with it and see if it goes up in value?

CSEonTSC:

Don't know the specific funds. I'm not sure I want to be in a high-yield fund as rates go up. High-yield debt is the most risky as rates increase. Values decline, borrowing costs increase and those companies could be in trouble. I'd take a close look at the holdings in the fund and try my best to judge the nature of the credits.

Question:

Would you consider switching out of

MOT

into

NOK

where there appears to be better growth prospects at this time?

CSEonTSC:

Good questions - I am long Nokia. That's part of the answer. I think Motorola might be an interesting play after we get through this congestion in tech. I'm headed to Finland in a couple of weeks. Ask me when I get back - I'll have a better answer for you!

Question:

Do you feel that

GE

will continue to do well after its CEO retires? I'm thinking of how KO has fallen after Cosueto.

CSEonTSC:

Certainly Jack has been a great CEO -- I think the situation with KO is a bit different, however. I think it deserves watching very closely, but I would NOT bail at this point.

Question:

Your six-month projection on

AOL

?

CSEonTSC:

Not going anywhere -- I am long the stock -- I think it will be slightly higher in six months -- I think the

Time Warner

issues need to be resolved before anything significant happens, however.

Question:

How do I sell my stock on the Internet?

CSEonTSC:

Pick a broker, set up an account, and go from there. There are a lot of good sources of information on online brokers. Prime among them is

TheStreet.com

survey of Internet brokers. Over 10,000 readers responded with their experiences. I'd take a look before I do anything. Great stuff!!

Question:

So, what do you think the market is going to do?

CSEonTSC:

Trade ... just kidding. I think we have some more choppiness in the coming weeks -- at least to the June Fed meeting. And, then, I think we need a catalyst to push us higher.

CSEonTSC:

Right now, apathy and disinterest seem to rule. That isn't good for the bulls and, by definition, makes it good for the bears. So, look for good news -- maybe second-quarter earnings beginning in July to set the tone for the rest of the summer. Until then, good luck!

Question:

Chris, do you believe that the almost 40% decline in the

Nasdaq

signifies a bear market or just a healthy correction considering that earnings remain great and fundamentals intact?

CSEonTSC:

I think the definition of a bear market is being challenged here. Certainly, this is a big pullback, not just a small correction. Yet, you are right, a lot of the first-quarter earnings data is very encouraging.

CSEonTSC:

I think you pick your stocks and look for ways to ease into them in the next couple of months. I would bet a year from now we are higher -- significantly so -- than we are today!

Question:

Are you bullish on the laser vision correction sector and stocks like

Visx

and

Laser Vision Centers

?

CSEonTSC:

Don't pay that much attention, but the

BEAM

news last week may cause speculators to push prices higher!

Question:

Is the business-to-business Internet sector a good place to invest for growth or was it just a fad?

CSEonTSC:

Not a fad, a revolutionary change in the way many companies do business. That said, the investment world in that area is tough as heck right now -- I'd tread very lightly, make my moves only when you have great conviction in a company and then slowly!

Question:

What are your thoughts on the online brokerage sector and stocks like

Schwab

,

E*Trade

and

AmeriTrade

?

CSEonTSC:

You've named the leaders. I think the real test is where these companies go next.

CSEonTSC:

The net platform will not be enough if all they are doing is $5 trades. Look for companies that will expand their reach -- E*Trade has done some of that with both funds and banking. But, I want to see more.

Question:

What do you think of

Microsoft

in light of the problems that it is having with the Government?

CSEonTSC:

I am long MSFT and can't see how whatever happens is a long-term negative. That said, it is likely DEAD money for the next several months. Uncertainty is the worst enemy of equity investors. And this is the ultimate case of uncertainty.

Question:

What type of exposure to foreign stocks should a long-term investor have?

CSEonTSC:

I'd be comfortable with 10-15% in foreign equities -- through mutual funds mostly. I don't think the individual investor can buy foreign equities individually in a cost-effective way.

CSEonTSC:

You might take a look at a core international stock fund (

T Rowe Price

,

Templeton

, or

Fidelity

) and then a small-cap fund -- my favorite there is

Federated Intl. Small Company

-- Tracy Stouffer has done a terrific job of running that fund in the past three or four years.

Question:

Walgreens

, do you think this is a good long term buy? Now that

CVS

is going to contest them for business in their own backyard.

CSEonTSC:

I don't own either, but like Walgreens as a business. They are invading the Atlanta market and are likely to give

Eckerd

and others a run for their money. They know how to execute and their new stores are as nice as anyone!

Question:

Do you think that oil prices will start to fall now that

OPEC

has agreed to increase production?

CSEonTSC:

I thought they would about six weeks ago and it was a head fake. I wish I knew. I'm not confident that prices can fall as quickly as they increase. That is a real issue with oil. And, quite frankly, the only real inflationary issue out there today and one, candidly, the Fed can do nothing about!

Question:

In light of the

Justice Dept.'s

decision to try to impede the

FON/WCOM

merger, would you be a buyer of WCOM at current levels?

CSEonTSC:

Probably not. I think you have better telecom options. After all,

AT&T

and porn -- what more do you want. Couldn't resist!

Question:

Do you think

CHINA

is a stock to hold?

CSEonTSC:

Depends on your thoughts on the markets. I'm staying away from all of the Internet stocks I don't understand and that's one of them. How's that for honesty!

Question:

Doesn't David Nasdiq's

OpenFund

(OPENX), which discloses its holdings real-time on

MetaMarkets.com

, defeat the idea of professional money management?

CSEonTSC:

Great question -- depends on your thoughts. I tend to think discussing investments and your ideas can sometimes dilute their impact. However, at the same time investors have a right to know what a manager is doing with their money.

CSEonTSC:

It's an issue that will haunt us for years to come and I don't know for certain what the right resolution is. I tend to like more disclosure, rather than less. That's why I tell you if I own a stock when I talk about it. I think its fair and it's the right thing to do.

CSEonTSC:

I think people like

Fidelity

go a bit too far in their secrecy. My opinion only!

Question:

What about

ICGE

as a way to play the B2B group?

CSEonTSC:

It's getting tempting at these levels. Like I say, pick your companies, pick your entry point and go slow in this market. It isn't going to hurt you in the long term if you miss a point or two and it sure will save headaches as we continue to bounce around in here at these levels.

Question:

What is your opinion on

Firsthand Fund's

decision to disclose their holdings less frequently?

CSEonTSC:

See above -- I think it's a good idea, with limits. I just don't know for sure what the limits should be. That's the beauty of the Internet and experimentation We'll know soon!

Question:

Do you feel that the overall Nasdaq market will continue to be weak and volatile for the remainder of the year?

CSEonTSC:

Not necessarily for the year, but for the next couple of months. I think there is a good chance the Fed will make a bullish statement in June and earnings will begin to look good through July and we could finish higher than we were in March.

CSEonTSC:

That said, the Fed could ruin the party if they choose. We'll have to see come June! It will be an interesting summer, to say the least!

Question:

How is your portfolio performing so far this year?

CSEonTSC:

Better than the market -- made a nice REIT purchase in March that has helped a lot! We also own some financials that have not helped, but haven't hurt, and have been almost completely out of Internet-related concerns since February.

CSEonTSC:

Doesn't mean we don't own some dogs of late -- MSFT among them -- that have hurt us. But, we look for low risk stocks in this environment and are happy with a little gain and the nice dividend streams until we come out of the spring doldrums!

Comment:

Thank you for joining us today Chris!

SageCrystl:

We appreciate your insights today Chris.

CSEonTSC:

Thanks to everyone at AOL and Sage. You are great. Invest wisely and look for lots of help at

TheStreet.com

. See you on "TheStreet"!!