James J. Cramer Chats on AOL, Oct. 26

The trader talks about drug stocks, the Dow, possible Fed moves and much more.
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James J. Cramer chatted on AOL Tuesday, Oct. 26 at 5 p.m. EDT. As with all chats, this transcript is unedited.

TSCNYjjc:

Hello--exciting day--new Dow stocks, new BETTER Dow stocks!! Lets go!

Comment:

Jim, you suggested shorting retail in your column today. Why do you not think we were presented with a buying opportunity today in WMT and especially DH?

TSCNYjjc:

I think this is not a buying opportunity because no one has downgraded the stocks yet. You can't get in ahead of those downgrades.

Question:

What do you make of Intel's deal with Aware? Do you see Aware returning to the 80's like in June?

TSCNYjjc:

No, I think that was a special time for Aware and those wild net stocks, that said Aware is a good holding. I defer to

Jim Seymour

on our site for information about it.

Question:

Where do you see the Dow and Nasdaq by November 30?

TSCNYjjc:

Holy cow--you are really being precise here: I think that November is going to be a very, very good month for equities-- let's leave it at that.

Question:

Jim- Do you still like INKT?

TSCNYjjc:

INKT has a powerful competitor about to come public. I think that the Merrill downgrade also hurt the stock. I would wait a bit before I bought any. I am not long the stock.

Question:

When can we expect a shakedown in Online brokerages stocks ???

TSCNYjjc:

I think it is more of a shakeout and I would expect it this year--maybe even by the end of the quarter.

Question:

Do you see the Fed raising interest rates next month ???

TSCNYjjc:

No, I think they are done for the year.

Question:

jjc: Last week you boldly called the bottom when drugs and banks were working -- do you still see that as the bottom??

TSCNYjjc:

I think the drug stocks are good; I still worry about the banks and I think that the banks will continue to sell-off but I like selected ones. Drugs I like a lot.

Question:

AOL -- a buy or hold at this point ???

TSCNYjjc:

Easy--I am long it so therefore I can't tell you anything but what I am doing. It remains one of my favorite stocks.

Question:

Ericsson had a good leap recently - any thoughts ??? Is NOK still going strong ??

TSCNYjjc:

I think Ericsson is getting its act together, but of all of the cell phones, I like Nokia the best.

Question:

What's your thought on Rubin joining Citigroup???

TSCNYjjc:

I wish he had joined a company that needed him more. The managers at C are excellent. That said, he will be value added and he is a great guy.

Question:

Have bonds bottomed or do we still see higher yields? What percentage in cash is your fund, and are you an aggressive buyer at this level?

TSCNYjjc:

I am about 40% in cash. I put money to work in the big drop a few weeks ago. I also bought some bonds. But I do not think we have seen the top in yields yet and I am not holding my breath. I would be a big buyer of bonds at the 6.75% level.

Question:

Do you think Europe has an advantage over the US in terms of valuation ???

TSCNYjjc:

No. Actually I think plenty of stocks are cheap in this country but because the Fed has a tight bias, they are just getting cheaper and cheaper, particularly the cyclicals.

Question:

Where do you see interest rates going, and why?

TSCNYjjc:

I think rates are heading toward the 6.65 level and they may get to 6.75, but that will be the top. I think that the Fed government's declining borrowing needs will make it so bonds don't go down too much. If I wanted to get a mortgage I don't think I will do much better than right here though for the foreseeable future.

Question:

Do you see INTC as a buy after the news about its inclusion in the DOW ???

TSCNYjjc:

Intel is a core holding of mine and I think should be a part of everybody's portfolio who wants quality growth stocks.

Question:

Are you still writing for GQ?

TSCNYjjc:

Great question. I wish I were but I have so many other writing commitments and I felt like I was giving GQ short shrift, I want to give my best stuff to thestreet.com.

Question:

What do you think of BRCM at these levels?

TSCNYjjc:

I own Broadcom, I thought that the deal with cisco today was a big deal but the stock didn't react that way.

Question:

Your views on Rubin's effect notwithstanding, what do you think of Citigroup's prospects the next two quarters?

TSCNYjjc:

I think Citi is a good holding. I prefer Goldman Sachs if I want to own a broker. I am long Goldman.

Question:

Do you like MSFT for long term ???

TSCNYjjc:

Oh, you are preaching to one of the true believers in MSFT, as I think the company is also a core holding.

Question:

What will you be hoping to hear from Amazon, if anything, when it reports tomorrow?

TSCNYjjc:

I just want to hear that they aren't losing more than a fortune. I think Amazon also has to tell us how the Z shoppes are doing and hopefully tell us it has many new listings under that supermall plan.

Question:

Is a 25 basis point hike priced into this market already?

TSCNYjjc:

I think it is. I think that people expect it sometime in the next few months. I just don't think it is going to happen in November because of Y2K worries.

Question:

Jim, how about worldcom going into earnings and beyond?

TSCNYjjc:

I think that as the consolidation of Sprint goes, this stock will work its way higher but that I am not long it now because it won't do much in the near term.

Question:

Which of the Red Hots are worthy of holding in through a downdraft?

TSCNYjjc:

I think that Redback and Conexant and Broadcom are all good. Exodus is excellent too. I am only long BRCM and RBAK right now. If a bunch of them were to come down then I would change my mind and buy them. They have moved up so much it is scary.

Question:

jjc: with banks, drugs and now retailers unstable -- what do you see as the next 'go to' rotation sector??

TSCNYjjc:

I think that the drugs will come back again. But predicting these rotations has been pretty harrowing. I do think that there are lots of aerospace stocks that seem cheap and I would look at those. And the insurers have gotten so cheap that you have to look at them too.

Question:

Are you still long E*Trade , cause many seem to only short it ???

TSCNYjjc:

I am long Etrade. Actually I bought it at the same time that I bought Schwab. I detailed that in the site. I sold the schwab today though. I just felt like it would be a good idea to take advantage of the weakness in the drug stocks and get more of those in.

Question:

Jim, any opinion on T, did you go over earnings?

TSCNYjjc:

Yes, we spent a ton of time on that. We put T in the category of going from bad to not so bad. I think that this is the best way to describe it. So we bought some. But I am not wild about it and I think it will not go much higher than the high 40s.

Question:

Have the autos hit bottom?

TSCNYjjc:

I sure hope so. I dipped my toe in and bought Daimler today.

TSCNYjjc:

You know that was a pretty good quarter and they are getting rid of that aersopace business which has been a drag. Ford is cheap too.

Question:

Dell, keep it for the next six months or boot it now?

TSCNYjjc:

I shorted a little Dell today. As I have said over and over again I think that hardware is too hard to own here.

Question:

ebay is looking at nice haircut as we speak...any thoughts on their earnings?

TSCNYjjc:

It is too early as the conference call is going on right now and I think that you have to listen closely on a stock like that before you make a decision.

Question:

Jim, do you get the sense that DIS might be turning the corner?

TSCNYjjc:

No

Question:

Do you Tyco will decline further due to the questions of accounting problems?

TSCNYjjc:

I am long Tyco and as I have said on the site, I think the accounting worries are overblown. That said it is not a cheap stock and it may not settle down for some time.

TSCNYjjc:

Wow what a successful bear raid on that one!!!