David Gaffen chatted on AOL's MarketTalk, hosted by Sage, on Tuesday, May 15 at 11:30 a.m. EDT.

Comment:

Live from New York, N.Y., please welcome Dave Gaffen, staff reporter at

TheStreet.com

. Dave can answer questions about the markets and investing. Visit Keyword: TheStreet.

Tscnygaff:

Glad to be here. I'm happy to answer your questions.

Question:

Thoughts on T. Thanks

Tscnygaff:

AT&T's had a rough time dealing with competition and various debt it's taken on when it went on that acquisition spree a while back. So now they're trying to deal with it, but it's likely to take them some time to work these issues out.

Question:

Is this the right time to get in?

Tscnygaff:

It depends on what your horizon is. I tend to think if you're investing over the long term, there's no problem with getting in now. It sounds stupid, but diversifying is about the only option here; stocks have done so well, for so long, that it's hard to see them repeating that performance in coming years. So be cautious.

Sagecalc:

Would you suspect that the technology companies reporting earnings in the near term will all issue words concerning lack of visibility?

Tscnygaff:

Yes, I believe they will. I believe they're likely to say the visibility issue remains a problem for many -- but at some point they're not going to be able to use that excuse anymore.

With the Fed cutting and the consumer spending, eventually people will figure out that certain stocks won't go up on sheer will alone.

Question:

Do you think the markets would react negatively to a 25-basis-point cut?

Tscnygaff:

I think so, although there's some people thinking that it could happen now, which could limit the disappointment. It could be that the Fed couches their statement in such a way that makes people think they're optimistic.

Besides, it could cause a rally in long-term bonds, which is good in the sense that it lowers borrowing costs for companies.

So, a disappointment, yes, but not too great a disappointment. We wrote about this yesterday; you can find the story on the Markets page.

Go to www.thestreet.com and click on "markets" in the left column.

Sagecalc:

Does it appear that inventory overcapacity issues will work themselves out of the wireless sector well ahead of the telecommunications infrastructure hardware area?

Tscnygaff:

That's probably likely; one is more an issue of demand by consumers, the other is a more involved one regarding production capacity itself.

Question:

British-based telecommunications provider Cable & Wireless PLC

CWP is offering to buy e-business network provider Digital Island

ISLD for $3.40 per share, well below ISLD's high of $122 a share a year ago.

Comment:

Should we expect to see a rash of takeovers of Internet companies at prices far below what a majority of individual investors most likely paid for these issues?

Tscnygaff:

Most definitely. Forget about getting back those prices. It isn't going to happen.

Unfortunately, these things operated in the market based on hype and the greater fool theory for a long time, and a lot of people made money by selling stocks that were valued only at that price because someone else "had to have it at that price."

As a result, there's going to be lots of losers.

Sagecalc:

Currently, which sectors do you view most favorable going forward?

Tscnygaff:

I can't recommend stocks or sectors, as part of our policy at

TheStreet.com

. But I'll say that in this market now there's really a lot of people unsure about what bets to take.

And you can see it in the stocks making new highs lately -- CAT, Jones Apparel, lots of insurance companies. If the economy is going to recover, which I think it will, then the companies that will benefit are growth names that aren't saddled with excessive loads of debt.

That's a broad way of saying it, but that's how I see it now.

Sagecalc:

Engineering & construction stocks had strong runs partly on expectations of power plants being built out What are your thoughts on this area?

Tscnygaff:

I think that's going to be the case for a while. Don't expect anything major very quickly -- this takes time. It's a true long-term investment in this case, but I think your general thinking is likely to be proven right.

Sagecalc:

Are there any indications that California's power crisis problems will occur elsewhere in U.S.?

Tscnygaff:

So far it seems most likely that the energy issue may become a problem in the Northeast in addition to the Pacific.

Sagecalc:

How soon does it look like a tax cut will get pushed through and how will it most likely impact the market?

Tscnygaff:

We're looking at a likely tax cut somewhere around the middle of the year.

The most recent word was that it isn't likely to contain much in the way of rebate-type stimulus, instead focusing on lowering overall rates.

That kind of money becomes a nice stimulus over time; would probably add around 0.5% to GDP in the next year or so. On a very general basis, that's going to help the market.

But that won't necessarily help valuation, debt issues or any other existing problems for specific companies.

Overall, it's good. For specific companies, it's not a basis for an investment strategy.

Sagecalc:

Why do you feel the euro continues to stay weak with respect to the dollar, even after the ECB cut rates?

Tscnygaff:

The perception is still that the U.S. will be stronger than Europe, which explains why the euro stays weak.

Cutting rates, in addition, makes your interest-rate instruments like bonds less attractive, so that's why it won't necessarily help immediately.

Sagecalc:

What are your thoughts on the bears, like David Tice, who scream the dollar is overvalued?

Tscnygaff:

He's probably right. David Tice says a lot of smart things, but he'd do well to remember the famous Keynesian quote: "The market can remain irrational much longer than you can remain solvent."

I think that these issues of building debt, overvalued dollar, profits weakening, etc., are all things to be concerned about. And ultimately, they can prove to be destabilizing.

But if that means you're going to miss a five-year rally for the sake of peace of mind, you're not going to win friends that way.

Stocks, over time, show a proclivity for going up. Not all the time -- and not even over, say, 10 or 15 years, when they can be consistently terrible.

So to blindly invest isn't smart unless you're 22 and pulling it out when you're 66.

But most people aren't like that. These worrisome trends that Tice is talking about were ignored b/c of the huge amt. of money flowing into the system. It's been interrupted somewhat now, but the Fed's cutting aggressively.

So essentially he's waiting until the Fed has to raise rates, or something.

Sagecalc:

David Tice has also been very bullish on gold & silver mines for years as well...

Tscnygaff:

And gold and silver weren't really going anywhere for a long time.

Lately, gold has been rising and silver as well. Which says something.

So the environment is changing, as he notes.

Comment:

Thank you for joining us today, Dave! We have been speaking with Dave Gaffen, markets reporter,

TheStreet.com

, Inc. Visit Keyword: TheStreet

Tscnygaff:

Thanks very much. See you at

TheStreet.com

!