Dave Gaffen Chats on AOL, Nov. 22

<I>TSC</I> reporter Gaffen chats about bond yields, the Fed, Y2K and more.
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Dave Gaffen chatted on AOL MarketTalk Monday, Nov. 22. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.

SageMoola:

Live from New York, NY, please welcome Dave Gaffen, markets editor at TheStreet.com. Dave can answer your questions about the markets and investing.

Tscnygaff:

Hi there. I'll be happy to answer questions about bonds, the economy, and the markets.

Question:

Seems rates continue to move higher on the long bond. Do you anticipate that we will test the 6.50% level in the not too distant future?

Tscnygaff:

Sentiment has been pretty negative lately. But I think the market is going to be rangebound for a while now. Activity is really going to wind down for the end of the year, and the economic data is going to be distorted by Y2K.

Tscnygaff:

If we do see more signs of inflation than we've already seen, it's certainly possible though.

Question:

Do you foresee a "Santa Clause rally" to close out the year?

Tscnygaff:

We're going to have to watch to see if people pour money into safer assets due to Y2K. The way the markets have treated Y2K the last few months, I'm not sure that it will happen. But there may be a rally in anticipation of a problem-free date change, as people try to jump in before the beginning of the year.

Question:

Do you think we can sustain the recent push above 11,000 on the Dow for some time, or is it volatility until the end of the year?

Tscnygaff:

I think the market is going to be volatile for some time. The Fed picture is still a bit unsettled and it's unclear whether consumer demand is going to be sustained. The Dow's proven resilient as a long-term investment for 17 years now, but that doesn't mean we're not going to encounter a little more choppiness for the time being.

Question:

If you were on the Federal Reserve, how would you have voted at the last meeting and why?

Tscnygaff:

I would have probably voted to stop confusing the market with their opaque policy statements. More seriously, I'm not an economist -- I think the Fed's been trying to see how low the unemployment rate can go without it causing inflation, and they're to be commended for that.

Question:

Is the bond market already pricing in another anticipated Fed increase in February?

Tscnygaff:

Given the market's poor reaction to this hike, I'd say no. However, they're starting to adjust to that possibility slowly, based on the Fed's statement. They've been paying close attention to the dwindling pool of workers and how that may cause imbalances eventually, something TheStreet.com wrote about on the site today.

Question:

Any interesting action in Washington, DC that investors should be watching out for?

Tscnygaff:

Well, you may have heard, Microsoft is now considering some kind of settlement agreement. There's a lot of people who think somehow the company will be broken up, but just how that might happen is hard to say.

Tscnygaff:

Congress is also considering several different bills to protect privacy and outlaw certain activities (such as gambling and gun sales) on the Internet, which may effect e-retailers. So far, it hasn't happened. There's always rumblings about Congress trying to tax the Internet, but the DC folk seem to still be figuring out the Web on that front.

Question:

With record volume on the NASDAQ this week, do you think it is slowly becoming "the" market in the US, thus eclipsing the Dow and S&P in importance?

Tscnygaff:

Well, the Nasdaq and S&P hold a certain appeal the Dow does not simply because very few funds index to the Dow. Both are in many ways a broader indication of what is happening in the current economy, but what's truly important to recognize is that both the S&P and Nasdaq have had a bit of top-heavy performance.

Tscnygaff:

They're divided between a minority of stocks that have been great all year, and a larger number that aren't doing so well.

SageMoola:

Thank you for joining us today Dave!

Tscnygaff:

Thanks for having me here -- and I'll see you on TheStreet!