David Gaffen chatted on AOL's MarketTalk, hosted by Sage, on Thursday, June 7 at 2 p.m. EDT.
Live from New York, N.Y., please welcome
, senior writer,
Dave can answer questions about the markets and investing. Visit Keyword:TheStreet
Hi! I'm looking forward to all your questions!
Does it appear that once again tobacco litigation fears will pressure Philip Morris's MO?
Looks like it, yeah. This verdict, I believe, was a bit surprising in its scope.
Do you think INTC earnings report will hurt market tomorrow?
It depends, obviously, and I hate to answer it in that way. The hope, from what I gather, is that INTC will be able to say something about how business is going and if they see some kind of pickup just yet.
But if one listens to many other tech companies, and news out of names like HWP, so far the news doesn't seem to be so good.
What's ironic here is that the market was basically counting on a year-end recovery, and now it's weighing the year-end recovery against what happens in the next couple of quarters.
Which is odd. It shouldn't matter, theoretically, if you believe the market. But I believe there's going to be a reaction, and it may indeed not be a good one.
We've written several pieces on this, including stories by
The Semiconductor Industry Association expects this year to be one of the worst for the chip industry with a 14% decline in sales, but expects the sector to pick up with 20% growth in year 2002. Are they being to optimistic?
There does seem to be a lot of unfounded optimism right now. By 2002, there should be some kind of recovery. But both the association and the market itself are counting on an improvement that may not come.
Ultimately, and I admit to some pessimism, that may be the source of market malaise in coming months. Not that the market will hit a recession or something, but more likely that the growth expectations at this time are still too optimistic.
There should be some recovery, but after a 10-year capital-spending boom, some retrenchment on the order of a couple of years would be more likely. So far, we've barely reached one year.
In anticipation of a tech comeback, any favorites?
I can't make recommendations on stocks, as part of our policy at
I'd however caution against betting heavily on the same names one was looking at in the last few years.
There's a significant overdevelopment of infrastructure, which makes picking companies harder now, other than trading opportunities or as "these are undervalued" opportunities. Those are gone now, I'd say. I'd be cautious.
What areas of the market do appear to be doing well?
Up until the last week or two, when the market started to pause, the participation was actually quite broad, in that most sectors were doing OK.
Since the beginning of May, the areas seeing some nice interest are the small-caps, the mid-caps, some of the oil and gas companies, some of the specialty retailers, and some of the commodities names, although that last group has pulled back in recent weeks.
Given the uncertainties, do you suggest investors underweight technology in a diversified portfolio?
I can't really recommend over or underweighting. Obviously, diversified is the way to go, and people are going to see, over time, the most direct benefit from growth stocks like technology.
However, these stocks are positioned to breathe for quite a while, and that doesn't mean 3 months; it may be years, while one watches small and mid-caps perform well. It has to be company-specific.
Simply buying "tech" isn't the way to play, at least not right now.
Engineering and construction stocks had a very strong run ... do you feel the bull run in that area will continue?
Looks like those stocks are giving back some now. If there's economic demand for products like these, i.e., in the chemical industries or the energy industries, then overall they should do reasonably well.
But they've had a pretty darned nice run through the last year and a half when many other stocks haven't done as well -- some are up more than 50% since the end of the fourth quarter.
Certainly not something to complain about, and in turn, probably not a bad time to be prudent.
What are your thoughts on the mania that has pushed Krispy Kreme KKD?
Well, as some sources have said, this is not a stock that anybody wants to short right now. People are trying to short it, but it's not working, and the stock continues to run up higher.
Meanwhile, it is executing well, and it's continuing to expand. However, the stock is at $72 a share, for Pete's sake. It was less than half that two months ago. I can't recommend to purchase or not to purchase, but it's one to be wary of.
Are you with the same company as
Yes, I am indeed. Jim was the co-founder of this company in 1996.
I joined in 1998 as a staff writer, and remain so.
Do you look for 2 Q earnings and warnings to cause a sell-off in Naz stocks?
I think the market has set itself up for some pain in the next couple months.
The market has discounted a recovery in the far-off future, based largely on the assumption that Fed cuts will save the day. But it may have gotten ahead of itself here, I'd think. And it's hard to see it otherwise.
Maybe the bad news is "priced in," so to speak, but investors are still going to want to know what companies are going to say as earnings reports come out.
Whether they're optimistic or not may be the determinant.
Do you look for much improvement in the market next year? There's an assumption that economic growth will improve by the end of this year, and should carry over to a stronger 2002 than 2001, for sure.
So that's a positive, but that said, corporate earnings may still suffer due to rising wage costs.
If that's the case, stocks could be sluggish again. Or, it could spur more job losses, which would hurt consumer spending.
I think 2002 will ultimately be a better year than the last 2 years, but the economic situation will become more twisted; it won't be a uniformly strong year like 1999, I wouldn't think.
guys seem down on banks now; what is your view?
There are a couple reasons to be pessimistic as the quality of portfolios deteriorate, and the earnings picture worsens as a result of that.
One of the positives, however, is that the stock market has recovered, which will help trading and IPO activity.
I'm not a pessimist, but certainly loan activity and rising interest rates do not help the situation. It's a mixed picture, just as almost everything is in the market at this time.
Does it appear as if value investing will continue to outperform growth?
That may continue for a while. There's been long periods where value investing "catches up" to growth investing, especially in such a mixed picture like we're in right now.
It's more that growth can't keep up with its earlier pace, essentially, while value stocks, ignored, do better.
Value stocks, by some measures, are even starting to get expensive too, which leaves people shaking their heads.
The market's going to continue to be a mixed bag and a tough place, just because expectations remain very, very high.
Thanks for all your questions. See you next time!
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