James Cramer Chat on AOL

The trader offers his insights on Net stocks, the banking sector and more.
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James Cramer chatted on AOL Monday at 5 p.m. EDT. As with all chats, this transcript is unedited.

Question:

What do you think of the internet sector as a whole?

TSCNYjjc:

People keep wanting to write off this sector. Last Monday, while I was playing in the sand, a whole bunch of new people wrote the Net's obituary, As I said today twice in

TheStreet.com

, you simply don't get an end to things right here, not when the growth is still outstanding. There will be stinkers, there will be losers, but when you are on as many conference calls as we are. You drool for a Net call because it is growth, growth, growth, and opportunity, opportunity, opportunity --that's what the market wants and the Net has it. In spades.

Question:

Why has YHOO been under-performing the rest of the net sector, over owned, or too expensive?

TSCNYjjc:

I think Yahoo, which I am long, has underperformed for two reasons, a decline in its Media Metrix numbers and the arbitrage from the Broadcast.com . When the latter closes and Media Metrix numbers show some lift, which I think they will. It will come back.

Question:

Jim, do you see any correction in here a buy op in your favorites? (PS, thanks for

THESTREET.COM

!)

TSCNYjjc:

More than welcome, re:

TheStreet.com

. As far as a correction, I think we just got a vicious one 8 days ago and I would think that we would have some room to maneuver to the upside in the interim.

Question:

JJC any thoughts on DELL?

TSCNYjjc:

When I was on vacation, Jeff added Dell back on the sheets. This is a big statement as Jeff got us out of this stock much higher. He feels confident that Dell is having a kick butt quarter. Please, I am uncomfortable saying go buy Dell, but I will always disclose my positions on this. This is a big change for us and I don¿t want to minimize it however.

Question:

What do you think about E-trade as a long term hold?

TSCNYjjc:

As I am long E-trade, take this with a grain of salt, but these guys have all of the momentum and I am very impressed with these guys (

TheStreet.com

has a deal with them so again, I want to disclose that.)

Question:

Jim, should we be scared into selling CSCO at their P/E figure?

TSCNYjjc:

Cisco is my BIGGEST position so I am not scared. You may be and you have a right to be scared because it is selling at a much higher multiple than historically but it is doing so great that I want to be there

Question:

If you've peeked at ebay's results what do you think they will do to other net stocks manana?

TSCNYjjc:

I think these stocks are still trading as a group but not as much as they used to. I think what is good for Ebay is good for Ebay and the rest is up to the other stocks. That said, it sure doesn't hurt

Question:

Jim, what do you think of the prospects for a Comcast/AOL bid for MediaOne?

TSCNYjjc:

I think that it is a possibility, but T has really said . that it will just pay more, so it becomes a losing proposition at a certain point. (By the way, I forgot to disclose that I own some EBAY)

Question:

What's your thoughts on MSPG. Do you think it will be bought by AOL, AT&T, or Microsoft in the near future?

TSCNYjjc:

Gee, I don't think so. I think that T wants to wipe out MSPG. I don¿t know why MSFT needs them. AOL? Give me a break.

Question:

What do you think of Intels new strategy of server and network chips as well as e-services and commerce?

TSCNYjjc:

I am long Intel and I think that Intel has learned how to embrace the net in a smart manner but that it is still a p.c. play and I don't want to make it more than that

Question:

After earnings season is over do you see a large dip in the internets

TSCNYjjc:

I don't think that these stocks trade off that kind of calendar. In fact, I see no correlation whatsoever along those lines and I wouldn't worry about the earnings calendar as much as I would worry about the IPO calendar, which, if it gets too heavy, will be bad for the existing Net stocks.

Question:

Jim I know from your comments you are down on drug stocks, how about the banks like C?

TSCNYjjc:

I own C and I think the banks are a great way to play the worldwide economic recovery. I like the business model i there too and I think they are in great shape!

Question:

Jim How long before Compaq can turn around?

TSCNYjjc:

That is the toughest question asked so far, but I can tell you that the personnel moves were certainly right and I think they are a start toward the turnaround, but I am focused on Dell

Question:

Which stocks are you short on and why?

TSCNYjjc:

I have a larger than normal cash position but I currently have no shorts. This is not an aberration. I tend to have shorts as a balance against longs and right now, with so much cash, I don't need the additional ballast, especially when I like the market.

Question:

With SGI changing their image, is their stock going to move to higher ground in the near future?

TSCNYjjc:

I have done a lot of break-up analysis of this stock and it sure is cheap, but this market doesn't like cheap, no, check that, it despises cheap. Therefore I don't own SGI

Question:

Now that techs seemed to have firmed... will money leave the cyclicals and go back into techs ?

TSCNYjjc:

I think that the cyclicals had a very big move and will now digest that move meaning that they will trade flat to down. That said, I think on the correction that is happening right now in the group I would be a buyer of these stocks as many of them are beginning to speak more positively about biz. Take HAL, which I am long, it just issued a statement that said that if oil stays up here, they will see a nice recovery earlier than expected. That's what I want to see. Does that mean that HAL has to be bought right now? No, it just means that earnings, improved earnings, may not be as far away as we thought.

Question:

Hi Jim. Do you think that the other big net companies will sell off after they release earnings like yahoo did?

TSCNYjjc:

I was concerned about this internally after what happened to me and Yahoo. (I wrote a story about buying it in after hours and how I got smoked, a few weeks ago in TSC) But I am encouraged by the action in EBAY right now--it is going up (I am long it) and I also think that last Monday we shook out a lot of weak holders in these stocks. Why then am I so concerned? Because a lot of these companies have lock-ups that expire after quarters freeing insiders to sell and a lot of companies have deals that start allowing people to sell stock (the acquired companies, in other words.) That scares me because I have no way of knowing who will sell and how much.

PF Trader:

The analyst call for eBay's results is going on as we speak.

Question:

Anything to rumors that Sears is going to market on the Internet?

TSCNYjjc:

I sure think they should. But let me say this about Sears. It is a very non-promotional company and it is highly unlikely that it will announce a web strategy without being able to put it into place. Sears hates promoting with no substance behind it. Unfortunately for people hoping otherwise, sears simply wont hype its stock.

Question:

Is there a sector or stocks that haven't participated in the rally as much as you would expect them to?

TSCNYjjc:

I still believe that there small cap stocks that have come public in the last two years that are not net stocks that represent value. But without analysts promoting them they will go nowhere.

Question:

Will the summer dip occur again in techs this year?

TSCNYjjc:

I am a huge believer that the summer is tough for tech and I don't see why it will be any different this year, especially with Y2K worries. That said, I expect that come the fall they will snap back and only the most nimble can go in and out. There are many more nimble players out there though, so I suspect the sell-off can be banked on.

PF Trader:

Jim, what's your take on all the talk about extended trading hours? NASDAQ says they'll extend hours this summer!

TSCNYjjc:

I am very concerned about it as a matter of fact, but not for the reasons you would think. I will have to re-staff my firm for after hours and I cant believe I can get really good people to work from 5:30 p.m. to midnight.

Question:

Why would you have a big cash position, when you are so bullish; explain please.

TSCNYjjc:

I just came back from a week's vacation. I vowed to my wife and my kids that I would not call in and I would not take my p.c. I have not done this since 1986. I think it would be irresponsible to load the boat up with stocks and then desert the ship like that. It is not something that I would regard as prudent NO MATTER HOW BULLISH I am. Sometimes it comes down to profits versus family. Yes I think I could have made more money last week. But I also have two kids and a wife who were beginning to believe that all I cared about was business (this was my first vacation since the April 98 one that was destroyed by Cendant. )

TSCNYjjc:

As far as I am concerned I made the right decision because I had an unbelievable time. This is a big issue with me because I am 44 and I have not taken nearly as much vacation as I should with my family and I feel incredibly guilty about it. I don¿t feel as guilty after last week and I know my girls don't think that I am simply about winning at the market.

PF Trader:

I think that covers it -- what, you expected some market timing formula or something?

Question:

Jim, what are you top 3 tech stocks for the next 5 years?

TSCNYjjc:

So many people out there think that all that matters is the market. For 20 years I agreed. That's wrong! Top three techs: CSCO, AOL, WCOM, but you know that Intel is always close as is MSFT

Question:

They are saying that Priceline.com is going to be an Internet bell weather like AOL do you see this happening and is the stock worth getting into at these levels?

TSCNYjjc:

This is a tough tough call as the stock has just had a huge run. I would like to see if they can deliver more but I think it is a very well-run smart company

Question:

What do you think about trading on margin? Is it probable to hold stocks long term on margin and still make money?

TSCNYjjc:

I have used margin from time to time. I am quite simply against it after a very big run like this and like to use it when I t think the odds are much more in your favor (say after a big sell-off). I don¿t like to judge how other people do their business, but I have seen many many people be hurt by margin so I try to rail against it for all but the most meaty situations. It think that people who are perpetually on margin should rethink their strategies as they may be risking more than' they realize.

Question:

Do you think MSFT can make a new high near term, or is this a dead cat bounce?

TSCNYjjc:

I think MSFT is fine, but right now other stocks in the sector are better. Right now. Longer term this is still a great company, but I like others better and I don¿t like walking around with a gazillion tech names on my sheets. Right now I am more focused on Cisco and Dell.

Question:

I'm going to sell some drug stocks, what sectors should I research to replace them? Any insight would be helpful.

TSCNYjjc:

I think that you want to spend some time looking at telephone technology as you have a lot of companies doing well in that sector and lots of mergers. I still like entertainment. and, get this, I think a little diversion into emerging markets makes some sense here (see my piece today on Brazil.) I know it is not the absolute bottom of Brazil, but I think that market represents opportunity and I think that it will come in.

Question:

Is real value hard to determine due to day trading and volatility?

TSCNYjjc:

No, it just, right now, is not that important an attribute. Before you sneer at this,, you must remember that the market can be whimsical, it sees value at time in the books value of stocks, sometime in the price to earnings multiple, and sometimes it values pure growth. Right now it is valuing pure growth. I NEVER make, a judgment about what the market is valuing, as a trader I just try to figure out what it is valuing. The market short term can value things bizarrely , (meaning a few years) and I am not going to second guess it or be pejorative about it.

Question:

What do you say to the rising tide of "Talking heads" saying we will soon be overbought? Are you waiting for dips?

TSCNYjjc:

Talking heads have to say something, don't they, I mean that's why they call 'em talking heads!

Question:

JJC, do you see money to be made in old tech as well as new tech?

TSCNYjjc:

Yes, right now I am getting very comfortable again with old tech except the drives which act terribly.

PF Trader:

Thanks once again for joining us to discuss the markets today. Glad to hear the vacation went well! Until next time, trade well.

TSCNYjjc:

Thanks David (PF Trader) and thanks to everybody for some great questions. Great to be back. Just great. So long!

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