Feb. 5, 6: Guest Bob Olstein - TheStreet

Participants on Feb. 5 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Adam Lashinsky, Gary B. Smith, Dave Kansas and guest Bob Olstein. The transcript is unedited, and phonetic spellings are indicated with a (ph).

BRENDA BUTTNER, HOST:

Up next, information you need to make smart investing decisions. And if your money hasn't been in the market for the last nine years, you've missed out.

This is the longest economic boom in U.S. history. But are we in for a fall? What could make this boom go bust? Get the "Word on TheStreet."

Plus, we put Cramer in the hot seat. Yep, he's doing "Stock Drill." Don't worry, we'll be just as tough on his picks as he is when he's the one asking the questions.

Don't forget about "Predictions." But first, the headlines with "Fox News Live."

BUTTNER:

Hi, everybody. I'm Brenda Buttner, and you are connected to "TheStreet.com." We're here to help you do it yourself when investing in the stock market. And what a market it's been, another record close last week for the

Nasdaq

.

So what happens next? That's the real question. Let's get the "Word on TheStreet."

With us from

TheStreet.com

, Jim Cramer, who also runs a hedge fund, Senior Writer Herb Greenberg and Editor-in-Chief Dave Kansas. Also, Bob Olstein, who runs the

Olstein Financial Alert

fund. That fund returned on average 25% a year for the past three years.

First topic, hey, things are good here in America, huh? For over nine years, the economy has been growing, the longest stretch in history. And if you've been in the market, that's no surprise. Since the beginning of March of 1991, the

Dow

is up nearly 280%, nothing of course compared to the Nasdaq, which gained more than 840%.

So this is uncharted territory for the economy. Jim Cramer, anything that you see out there that could make this boom blow up?

JIM CRAMER, THESTREET.COM COMMENTATOR:

I have to tell you, this was an amazing week because what's happened is that bond market used to control the stock market. When we had strong economic data, we got a big selloff in bonds. And then we got a huge selloff in the stock market.

They've decoupled. The 30-year is no longer as relevant as it used to be. I saw nothing this week, including the

Fed

tightening...

BUTTNER:

Right.

CRAMER:

... that gave me pause to possibly want to stay away from tech and all my other faves.

BUTTNER:

Wow.

DAVE KANSAS, EDITOR-IN-CHIEF:

So it's still morning in America. I mean, everything is just perfect?

CRAMER:

Actually, you know, it's that guy, Reagan. I mean, I loved Reagan. He was a wild man. But the budget deficit was absurd then. It's the fact that there is no budget deficit that makes things so great in America.

BUTTNER:

Wait a minute, Herb, I know you have some red flags.

HERB GREENBERG, SENIOR WRITER:

There's going to be a red flag here. It's going to be something you don't expect. I think something is...

CRAMER:

What? Meteor from...

GREENBERG:

I think something as simple as

Amazon.com

not being able to get its stock offering that it hasn't even announced yet done could cause big problems in this world.

BUTTNER:

You're nodding your head, Bob. What do you think?

BOB OLSTEIN, MANAGER, OLSTEIN FINANCIAL ALERT FUND:

It's going to be the dog instead of the dog wagging its tail, it's going to be the tail wagging his dog. There's going to be a crater in these overvalued Internet stocks, some of these overvalued high-techs. And these newly minted millionaires are going to stop spending. And that's going to get the economy.

BUTTNER:

OK, let's talk...

CRAMER:

You'd better talk to my wife because we're in that category.

(LAUGHTER)

CRAMER:

No, I'm just kidding. I hear what you're saying. I hear what you're saying.

BUTTNER:

Bob said crater, Dave. How messy is this going to be? I mean, we have more people borrowing more to invest more than any other time in history.

KANSAS:

Well, I think if Bob's -- what he says comes true, it's horrible. Yeah, if all these stocks go down, I mean...

OLSTEIN:

Not all of these stocks...

BUTTNER:

No, just the overvalued ones.

KANSAS:

Just the overvalued, only the overvalued stocks?

OLSTEIN:

... Here's my prediction. The Dow is going to fall 1000 one day, 1000 for -- not the Dow, I mean...

KANSAS:

The Nasdaq, because the Dow is you. That's that

GM

.

OLSTEIN:

The Nasdaq is going to fall 1000 points. And you're going to have more advances than declines, I think, because most of the market is undervalued.

KANSAS:

I don't think that's the case. And to follow on Herb's point, I don't think any one stock we've seen --

Lucent

-- I don't think any one stock can stop this market.

GREENBERG:

This is one stock that is the...

(CROSSTALK)

KANSAS:

I don't believe that.

CRAMER:

No, but he has a point, which is that we keep thinking, well, hold it, if

Intel

blows up. And then Intel blows up and nothing happens...

(CROSSTALK)

CRAMER:

... or

Microsoft

gets sued by the

Justice

-- but Lucent, the most largely held stock, if that blows up. And then it blows up.

GREENBERG:

You sound very complacent to me.

OLSTEIN:

Everybody is too complacent.

KANSAS:

We're nervous. We're really nervous, Herb, because we need that wall of worry to climb up. But I don't think that a whole sector just disappears like that.

OLSTEIN:

I've had a client tell me he turned $500,000 into $2 million trading

Qualcomm

, and he's going out to buy a Mercedes-Benz.

BUTTNER:

Is there something wrong with that? What's wrong?

(CROSSTALK)

CRAMER:

... take it off the table. I took it off the table, then we're OK...

OLSTEIN:

No, he says he's...

CRAMER:

... If he's still riding it and he's borrowing against it, then we're in trouble.

OLSTEIN:

He's borrowing against it.

(CROSSTALK)

BUTTNER:

And that is the issue, I think.

OLSTEIN:

That's right.

GREENBERG:

I have to say, if we had this conversation a year ago or two years ago, I know because I've talked to you, you have told me the same thing would happen. And this is about to happen, given the same span of time.

OLSTEIN:

It's geometric proportions now. There are so many newly minted millionaires. The economy is now dependent on these people.

KANSAS:

Oh, I disagree. I disagree. I think that threat doesn't come from some Internet stock exposure. I think a threat comes from consumption, I mean money going into the real economy. And not from the Internet sects crashing. That's not going to happen...

(CROSSTALK)

BUTTNER:

... Paper profits though.

CRAMER:

Why is always the threat, the threat, the threat? Why is always the Floyd Norris,

New York Times

view that when we look back, 2001 was when everyone started selling apples in the street? What happens if it just stays good for a real long time?

BUTTNER:

Well, it has so far, though.

CRAMER:

I think it can continue to stay good.

OLSTEIN:

Absolutely...

CRAMER:

For how long?

OLSTEIN:

... But eventually, you have to have some kind of...

CRAMER:

As far as the eye can see.

OLSTEIN:

You know, I remember everybody saying back in '72 there's no more recession. There will be another recession, we just don't know when.

KANSAS:

Well, maybe there's another recession. But if you look at since World War II, the expansions get longer and longer and longer. The highs are not as high, the lows not as low. You see the long-term trend on it, you could make an argument that we're not in for the big boom-bust thing that people remember back from the '50s or the '30s or whenever it was.

I mean, things have changed. People...

(CROSSTALK)

OLSTEIN:

How about a correction?

(CROSSTALK)

BUTTNER:

Even on a correction, though, people will buy. I mean, that's what happens. We're seeing the small investors buy at that point.

OLSTEIN:

If you're worth $2 million one day and $700,000 the next day, you may be concerned. But that's funding.

CRAMER:

I would enjoy that scenario.

(LAUGHTER)

(CROSSTALK)

BUTTNER:

You're not talking journalists' salaries here.

GREENBERG:

Guys like you, Jim, you're feeling your oats right now. The market's been generally good. But I have seen you and I have seen other people when I'm on the train going home on a bad day and how people feel. And you forget what it's like on a bad day.

CRAMER:

Well, that's because we're manic depressive.

OLSTEIN:

You know what's happening too? You see a three-day correction sometimes. And people will see market craters. They haven't seen a real correction.

(CROSSTALK)

OLSTEIN:

Three days does not make a correction.

BUTTNER:

But then again, the Nasdaq up almost 10% last week.

CRAMER:

Thank you.

BUTTNER:

All right.

OLSTEIN:

I guess it's going to go up forever.

CRAMER:

Last word. Bob's got the last word.

BUTTNER:

Of course he does. That's all right. We'll get in on him later. All right, thanks guys. That's it for "Word on TheStreet." But something special is up ahead. Cramer, you are the guest for "Stock Drill." We'll get your three favorite stocks. But you'll have to fend off Herb and Bob Olstein.

CRAMER:

Oh, I'm shaking.

BUTTNER:

We've got questions for you.

(LAUGHTER)

BUTTNER:

All right, guys. Are you ready? That's a bit later. After this break, which two stocks does the "Chartman" get asked about most? Find out next.

BUTTNER:

Welcome back.

You know, here at "TheStreet.com," we like to accommodate you. So here are the top hits, that's right, the most requested stocks on the charts.

What are they? We know who to ask.

Gary B. Smith is of course the "Chartman." Gary joins us from Washington, D.C.

And also with in San Francisco is Silicon Valley columnist Adam Lashinsky, who reports on companies on a more fundamental level.

Adam does not own any of the stocks in this segment. And Gary has longed the second stock that we will be talking about.

OK, guys, Gary, the top hits. You're Casey Kasem tonight.

GARY B. SMITH, "CHARTMAN":

All right.

BUTTNER:

Your two most requested stocks. What's the first one?

SMITH:

Yeah, the first one is

JDSU

is the first one. And I get so many requests for these, I've had to start naming them, like our hamsters at home.

And this first one I call my Johnny Cash stock. And you know, you haven't asked me to sing in a while...

BUTTNER:

Oh, I hear a song coming on. All right.

ADAM LASHINSKY, SILICON VALLEY COLUMNIST:

I was afraid of this.

BUTTNER:

All right, go ahead.

SMITH:

Well, this it.

SMITH

(singing): I seen that train a'coming.

SMITH:

And that's what it is with JDSU. This stock is a freight train. You know, in that recent tech carnage, which was just like two weeks ago, it seemed like two years ago at this point to most people, this thing barely got nicked. I mean, for JDSU, it barely went down. But it barely got nicked. It never went off the uptrend.

This thing is moving. I am saying JDSU $300. I'm going to pre-empt you...

BUTTNER:

Oh, I'm going to ask you. You know it.

SMITH:

... I know you're going to ask, Brenda. By May...

BUTTNER:

By May...

SMITH:

... This is by May.

BUTTNER:

... all right, so in a couple of months, it will be up to $300.

SMITH:

You betcha.

BUTTNER:

You know we'll get you on that one. All right, Adam...

SMITH:

I know.

BUTTNER:

... hot, hot company, sizzling sector, fiber optics. But pretty pricey. Or is it worth the price?

LASHINSKY:

Well, Brenda, you know, periodically, I feel compelled to explain to Gary why his charts are doing what they're doing. That's what I'm going to do for you.

SMITH:

Thank you for that.

(LAUGHTER)

LASHINSKY:

With the case of JDS Uniphase, which in the very hot photonics or fiber-optics field, valuation really doesn't matter right now as long as the market stays high. We've got a company with revenue and earnings growth of 50%-plus that's very attractive. It's in a really fast growing segment, which means that it's becoming positively

Cisco

-like in two ways. The first way is that it's beating Wall Street's estimates on a consistent basis. That's terrific. Which leads me to my last point, which is just like

AOL

and Cisco became companies that institutions had to hold, JDS Uniphase, which a lot of people still don't know about, is becoming like that. In other words, if you have a fund, you feel like you have to own this stock.

BUTTNER:

A must-have. All right, Gary, second most requested chart, B2B

VerticalNet

. Dare I ask you to sing its praises?

SMITH:

I don't do a very good Elvis. But this is my Elvis.

LASHINSKY:

Oh, no.

SMITH:

VerticalNet has left the building. The old uptrend was not good enough for VerticalNet. It needed a higher plane.

And what it did was it gapped up on strong volume. And now since that gap up, it rose a little bit. When tech got slammed, it pulled back. But it's pulled back nice and gently. In fact, it has not come back down yet to the gap up area.

I'll tell you what. If you want to play the safe move, you'll wait until it bursts up from that congestion.

Now you mentioned, Brenda, I'm long. I bought it yesterday in the high 200s because I think it's going to stay there and it's going to move up just like JDSU, probably into the $300 range shortly.

So I like VerticalNet right here. I'd like it a little bit better if it burst up through that congestion.

BUTTNER:

OK, Adam, Vertical did take a bit of a hit on Friday. Do the fundamentals suggest that it should be heading lower then?

LASHINSKY:

They do. Now it pains me to do this twice in one show...

(LAUGHTER)

LASHINSKY:

But I agree with Gary. The people I talk to say VerticalNet has really good opportunities largely because it's relatively cheap compared to other B2Bs. It has terrific momentum right now because of the huge monster deal that it signed recently with Microsoft.

Gary, that's what sent the stock running. However, it's easy for competitors to get into this field. The industrial exchanges on the Internet are very hot. There's a lot of players in it, which leads me finally, it's cheap, but only compared to other B2Bs.

When this sector comes tumbling, as it inevitably will, VerticalNet will be shaky because we're talking about a tiny company here, $15 million of revenues, very unprofitable revenues.

SMITH:

Adam, let me ask you a question. You mentioned this with JDSU. I think it's the same with VerticalNet. If the big institutions are not yet in, who's buying these stocks other than my 50 shares?

LASHINSKY:

Well, big institutions are in, certainly with JDS Uniphase especially. It's already an $80 billion-plus company. But those are institutions that specialize in tech. There's lots more out there.

SMITH:

Excellent.

BUTTNER:

All right, Gary and Adam, thanks as always. And next week, it's Adam's turn. His top requests.

Stick around, though, because we still need to hear your predictions in a few minutes, guys. But up next, the tables are turned on Jim Cramer. He's the one in the hot seat when we do the "Stock Drill" next.

BUTTNER:

Welcome back. It's time for "Stock Drill."

That's right. Jim Cramer is in the hot seat this week. He's got three stocks that he thinks you should check out. They are Cisco, Microsoft, and

Nokia

. And he has longed all three. His money is where his mouth is.

Bob and Herb are back -- look at them -- salivating over the chance to drill Jim on those picks and help you decide if they make sense in your portfolio. Neither Herb nor Bob hold shares in any of the three stocks.

OK, Jim, you know I love you, but I'm not going to call you "Out-on-a-Limb Jim" anymore. I mean, give me a break, Cisco, Microsoft, Nokia? Safe stocks.

CRAMER:

There's nothing the matter with dominance, Brenda.

BUTTNER:

OK. All right, but aren't you a little bit late to the party with, for example, Cisco? You're just getting in now...

CRAMER:

Cisco just became public in 19...

BUTTNER:

... Yes, but you're telling people to buy it now.

CRAMER:

... I own it. I bought some more today in a period of weakness.

This is a dominant company. When I try to describe Cisco to be bought, I don't talk about the greatest rally (ph) company ever. I talk about the '27 Yankees, I talk about Chicago Bulls...

GREENBERG:

Wait, wait, wait, wait, wait, Jim, Jim, Jim, Jim, Jim, Jim, Jim, Jim...

CRAMER:

... I can't come up with a dominant team as good as John Chambers and his company.

GREENBERG:

... No one is going to dispute John Chambers is a good CEO...

CRAMER:

Good. Then that's enough.

GREENBERG:

... However, the revenue growth within this company, Jim, has been falling in recent years...

CRAMER:

But it's going to grow 38%.

GREENBERG:

... Jim, Jim, Jim, wait a second. That 38%, some of that is coming from acquisitions. This company has made 40 acquisitions in the past six years...

CRAMER:

Herb, (UNINTELLIGIBLE) most brilliant acquirer...

GREENBERG:

... One is the eternal growth -- Jim, let me, Jim. I'm asking the questions here. Let me ask you a question. What is the internal growth of this company without the acquisitions?

CRAMER:

Herb, they're in the fastest-growing end of the fastest-growing markets, which is...

(CROSSTALK)

OLSTEIN:

... recognizing in the P/E ratio at this point in time (UNINTELLIGIBLE)?

CRAMER:

OK, I want to stipulate that this is an expensive stock in a market that loves expensive stocks. I am not looking for value in Cisco. But if you look at the earnings estimates in the year 1993, it looked expensive. It blew those numbers away. It will keep blowing the numbers away.

BUTTNER:

OK...

OLSTEIN:

(UNINTELLIGIBLE) times earnings, and it's now at 100 times earnings or over that, isn't it?

CRAMER:

It represents in my book -- as long as it executes, it's going to keep going higher.

OLSTEIN:

Discounting two generations of Cramers.

BUTTNER:

Microsoft is also a pricey stock. And that means that everything has to go right...

CRAMER:

A lot of ways to win...

BUTTNER:

... The Department of Justice is not expecting...

CRAMER:

... A lot of ways to win on Microsoft. First of all, they give millions of dollars to companies who might choose alternate technologies. They buy them off. It's a brilliant strategy that unfortunately is legal.

Secondly, the Justice Department is probably going to take the powder on these guys and fall down. You can get a compromise that's going to make this stock go higher.

And then, yes, there's actually earnings. Windows 2000 is going to be a very good success.

OLSTEIN:

What about the fact that now portfolio gains are playing a bigger factor, the accounts receivables are starting to jump? You've got them taking a more aggressive start along their reserves.

I know it's in between products. But what if Windows 2000 is not as successful as you expect it to be?

CRAMER:

You know, Bob, a lot of times -- oh, look at that, I was fumbling. He's going to say, he's fumbling on Microsoft. A lot of times we've seen iterations where it's not supposed to be so good. Pentium I wasn't supposed to be good. Pentium II was good for Intel. Windows 97 was going -- Windows 95 maybe not so good.

These guys are a dominant player. They are a monopolist, OK?

GREENBERG:

Jim, you've got PC, Jim, PC growth at this company -- PC growth in general starting to slow down a little bit. This is...

CRAMER:

That's why they're giving millions of dollars to everybody else to dominate markets, everything from VerticalNet, which both Gary and Adam loved in a previous segment...

OLSTEIN:

Jim, Jim...

CRAMER:

... to Comcast, who they write checks to (UNINTELLIGIBLE)...

OLSTEIN:

... No one's going to argue, great company. Is it going to be a great stock?

CRAMER:

I think this stock is actually depressed vs. where it would be if it weren't for the fact that people are a little bit concerned about Windows 2000. I'm not.

OLSTEIN:

Is this a psychological term depressed?

CRAMER:

Oh, no that's manic depressed...

BUTTNER:

OK...

CRAMER:

... Just you got the right diagnosis.

BUTTNER:

OK, cell-phone giant Nokia again just a dominant market leader. It has seen incredible run-up.

CRAMER:

What do you recommend? Penny stocks?

BUTTNER:

No, not penny stocks, but we've seen...

CRAMER:

Philip Morris

? Oh, good for the long term. Come on, Brenda. I have to recommend dominant companies that I personally believe if they continue to execute will go higher. This Nokia had the quarter...

GREENBERG:

Look, this is a Jim Cramer-type thing.

(LAUGHTER)

GREENBERG:

Let's take a look at this thing. If you have it down here...

CRAMER:

Oh, excuse me for liking a stock chart that goes straight up, Herb.

GREENBERG:

But it's right here, Jim.

BUTTNER:

When does it stop?

GREENBERG:

Do you buy it right here, Jim? This is a company that has potential...

(CROSSTALK)

CRAMER:

... 191 on a pullback.

OLSTEIN:

But they're a cell-phone company. You're maybe 20, 30 times (UNINTELLIGIBLE)...

CRAMER:

That's what -- they're going to be much more than a cell-phone company...

OLSTEIN:

... You'd going to have to put cell...

CRAMER:

... This is going to be your communicator.

OLSTEIN:

... You're going to have to put cell phones on Mars to get this growth going.

CRAMER:

You can have every man, woman and child in Finland has a cell phone, including high schoolers. Same thing is going to happen worldwide. And Nokia is leading its revolution.

OLSTEIN:

Great company valuation again.

CRAMER:

Thank you. Valuation -- do you, OK, Philip Morris is a real cheap stock...

BUTTNER:

But you're buying it at this point.

OLSTEIN:

No it's not.

CRAMER:

Really? Well, I don't know. I mean, on a P/E basis...

BUTTNER:

Maybe for a reason, yeah.

(CROSSTALK)

CRAMER:

I am not recommending value stocks. I am recommending expensive stocks in a market that loves expensive stocks...

OLSTEIN:

Everybody (UNINTELLIGIBLE).

CRAMER:

... I'm suggesting the ones that will execute the best. And if they continue to execute, these stocks will go higher, and you'll want to own them.

OLSTEIN:

There is disassociation between the company and the price of the stock.

CRAMER:

I totally agree with you. I totally agree with you.

BUTTNER:

All right, on that note, thanks for doing the drill, Jim. And you know we're going to keep a close eye on those three picks as well. But you're not off the hook yet. Up next, "Predictions." What's happening next with Amazon.com stock? You'll want to stay tuned.

BUTTNER:

And now our panel is going to look into the future and tell you what they see. Yes, it's time for "Predictions."

Rejoining us from

TheStreet.com

are Jim Cramer, Herb Greenberg and Dave Kansas. Over in Washington, we've got "Chartman" Gary B. Smith, and in San Francisco, Adam Lashinsky.

OK, Jim, you lead off.

CRAMER:

OK, major food-and-drug company about to get a bid, and I'm not talking about

Warner-Lambert

. There's going to be some real fireworks in the next 10 days.

KANSAS:

You like the drugs again, Jim? You didn't like them when (UNINTELLIGIBLE)...

CRAMER:

I like them for takeover. I don't like them for earnings.

KANSAS:

OK.

BUTTNER:

OK, Herb.

GREENBERG:

Amazon.com will within six weeks probably announce a stock offering a major, major offering of some sort of securities. This deal is going to get done. But after it's done, those investors who buy that stock are going to dump that stock. That stock is going to go straight down.

BUTTNER:

All right, Dave.

KANSAS:

Earlier this year, Gary B. said the Nasdaq is going to 5000, I believe it was, Gary?

SMITH:

And now you're joining me, right?

KANSAS:

No, no, you're wrong, Gary.

SMITH:

Oh, come on.

KANSAS:

You're wrong because you said May...

SMITH:

How about last week, I'm so right?

KANSAS:

... You said May. It will be March.

(LAUGHTER)

KANSAS:

By my birthday.

(CROSSTALK)

BUTTNER:

Oh, God, here we go.

KANSAS:

March 28.

BUTTNER:

Buy the presents now. But that's like 750 points. You think it's going to be up and down, or are we going straight up?

KANSAS:

Oh, I don't think it will go straight up...

(CROSSTALK)

BUTTNER:

Yeah. Right. Gary B., your turn. And last week, you did nail it. You said that the market rallies...

SMITH:

Thank you.

BUTTNER:

... regardless of the Fed. That was on the money for the Nasdaq. But what do we have today?

SMITH:

Let's see if I can make it two in a row. You know, I looked at a lot of charts lately. I love a lot of tech.

We talked about some of them earlier. One segment I think is dead, R-I-P, is this whole Linux stuff.

Red Hat

,

VA Linux

, they will never approach their '99 highs again.

BUTTNER:

And Adam, you get the last word.

LASHINSKY:

When the

Palm

IPO comes, the spinoff from

3Com

, their underwriters will raise the price. They're going to end up raising more than $.5 billion. Very hot.

BUTTNER:

All right, and you do have the final word on those "Predictions." Just go to our TV page on

TheStreet.com

Web site. After you rate the predictions, feel free to send us a question or comment. We do read and respond to all of our email.

And once you're on the site, there's lots more to see. Dozens of writers and columnists write daily to help you become a better investor.

Whether you just want to check out a stock price or find out why there's a big move in the stock market,

TheStreet.com

has all the information that you will need.

And that's going to do it for this edition of "TheStreet.com." We'll see you here next week. Until then, we hope you invest wisely.

END

To order a tape or transcript of this "TheStreet.com" program, please call 888-44-FOXTV or use our online

order form.

Copy: Content and Programming Copyright 1999 Fox News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 1999 Federal Document Clearing House, Inc., which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, Inc.'s and Federal Document Clearing House, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.