The transcript is unedited and phonetic spellings are indicated with a (ph).Jim Cramer is guest on Wall Street Review twice per month. The show airs daily from 6:00 to 7:00 P.M. Monday though Friday on KSDO.com.
And now folks, for the man who made Wall Street as exciting as most Super Bowls, one of the founders and very frequent writers for
Well, I'll tell you that's a nice intro. Most of the Super Bowls have been pretty boring!
Well, I'd already worked too long on that intro to change it! You know, we saw a big bounce back in some of the big names today. What do you make of the market action in the past couple of weeks since we last had you on the show?
I think you pointed out something very important when you pointed out what Drew Peck --the big bad Drew Peck as you called him -- had to say. He's an analyst who's got a lot of cachet on Wall Street. You know there used to be guys who could move stocks up or down and most of them have pretty much drifted off to the buy side or mutual funds.
But there is, without a doubt, one guy who has stood out and said that Intel is no good. And that is this guy Drew Peck. And when he out went positive today, we saw a total mind change, a total psychology change. Because the psychology in the Nasdaq has just been awful since we spoke last. And I think that genuine leadership has been lacking. We haven't seen it from the Net.
We haven't seen it from Microsoft. We haven't really seen it from Worldcom or Cisco. Today was a day when Intel showed us that it could rally the way it used to rally, and I think it caused a lot of good feeling among traders and investors who said maybe we've got a leader again, and maybe it's Intel. And I'll tell you, you can't get a better leader than Intel if we do get it right.
Would you still call
"the ax" on Intel?
Yes. Absolutely. He approaches Intel not so much as a semiconductor company but as a bellwether for a whole industry. His signal that Intel is going to come back -- I haven't heard him be this bullish since the 486 cycle. You remember that was the transition from Intel as a computer company to Intel as a popular appliance brand name.
And Drew is saying now that we are about to have another level of interest in personal computers because of free personal computers and promotions which help Intel have another huge leg up. And when you get Intel right, you get a double or a triple! You don't just get four or five points. This really did hearten the market and I think what we saw today cued right off of Intel.
Now we are hearing more from
about higher rates, and from others about profit concerns related to Y2K. And of course we heard talk on
that today's rally was a bear trap. What do you think about all of this?
Talk about an overload of what we heard today -- I listened to that bear-trap nonsense and I also heard that
come on. You know, my Mom always told me you've got to at least try to be nice. You can't just be angry and agitated all the time.
One time, Barton Biggs criticized me because I said the stock market was kind of like a living, breathing organism in that it gets people excited and it has kind of an animal spirit to it. And he said well that's ridiculous and said that I was trying to make an inanimate object into something more than it is.
You know, I just think that what he doesn't understand, what people who talk about bear traps don't understand is that they're kind of an innate progress to the U.S. economy that is mirrored -- and sometimes exaggerated, sometimes sold short -- by the stock market. But the stock market correctly reflects the tremendous amount of good progress we've had in this country.
And I'm not waving the flag here, I'm just saying that there is an awful lot of good earnings out there. Periodically we get these selloffs. I think these selloffs are far more related to managers going to Martha's Vineyard or Hawaii than it is to the fundamentals. Business is quite good in the country. Sometimes it's almost too good, which is when you have Greenspan flapping his gums as you said, Jim. And I know that that is cause for worry.
This is one of those periods when I tell people that maybe they should pay less attention to it. There are guys that do nothing but make you worry about your money, but not worry about it in a way that makes you generate positive energy.
Maybe they should be more worried about politics or sports. Instead, they are worried about the bear trap. Oh, you mean because the market goes down six straight days and we go up one day and that's a trap. Maybe it's a buying opportunity.
Last time you were on, you talked about how you like AOL. What do you make of this tiff with Microsoft and Yahoo! over instant messaging? Isn't instant messaging something for the masses? I know
wasn't too keen on what he read on the front page of Saturday's
New York Times
about this. Is this something that hurts the stock?
Yes. I'm long AOL. But yes, I felt like
when he went to
and told him to please tear down this wall! Please tear down these instant messaging walls! It's a big mistake. Being long AOL reminded me of the
picture when they asked the
for his prediction about the fight and he said his prediction was PAIN! That's how I felt about AOL today. I think we in for some more pain here.
The Internet area has become increasingly choppy. I noticed
Internet index was up today, yet inside the sector there was a lot of choppiness and some big down moves from some of the bigger names including Yahoo, eBay and Amazon. What do you make of this? Are investors becoming more discerning these days?
The Net stocks, short term, have just been a terrible place to be, to be honest with you. When I look at the action in Yahoo! -- which I'm long -- I mean the stock is down like 100 straight points. Inktomi, another one of my favorites is down very badly. Amazon -- let's be honest.
The president of Amazon doesn't really care about the stock. What's happened is we've got into this bizarre period where internet companies can't do anything right. I mean none of these Net companies. AOL's quarter was beautiful and the stock is down 20 straight points. Yahoo! has an excellent quarter and the stock is down 20 straight points.
eBay had an OK quarter, but they made a few mistakes. We're in what Wall Street likes to call consolidation, which I think is nonsense. I'd use a stronger term but we're on the radio. These stocks are all headed down right now. What I'm trying to do is have a couple winners long term that I don't try to ride down -- that's a terrible term if you are a trader.
But I'm buying slowly and trading around a core position. So I continue to own Yahoo!, I continue to own AOL, but I wouldn't touch this Amazon. I think that they have contempt for their shareholder base. And I wouldn't touch eBay. I don't think they've spent nearly the money that it turns out they've needed to spend to make sure there are no outages. eBay and Amazon are pulling down the whole group.
So what's really going on here? Are people just finally getting tired of this "new accounting" and saying that they want to see some real earnings for a change?
I think that's part of it. Another part of it is that the capital markets were so benevolent that almost anyone with a dot-com was able to get a lot of money. That means if you were Amazon, at one time you were the only player in books. And there was one player in drugs. There was one player in CDs. Now everyone is going head-to-head against everybody.
And we know competition brings out low prices. And if you're not preparing your business model for low prices, then you are showing some pretty horrible losses. A lot of these companies are not ready to compete with each other yet.
What I see is disarray in the Net sector. I want to buy the companies that make the equipment for the Net sector because the sector is very heavily financed now. The equity markets have been very good to the Net and I think the competition is going to be so brutal -- especially in e-commerce -- that you aren't going to make any money in some of these stocks for a long time.
The DOT index is being more widely reported everyday as news organizations scramble for bellwether that allows them to report on how all of these net stocks are doing. With over 50% of IPOs this year related to the Internet, how will you adjust and manage the DOT index going forward. Will companies be added or subtracted and how is this determined?
Good question. I came up with the DOT initially working with some people from
, the dominant broker on the Philadelphia Exchange where a lot options are traded. I had seen a whole series of indices developed and they all had the same quality -- they all had Cisco in it, or Intel, or Microsoft -- even though they were claiming to be Net indices.
And I wanted a pure play, which is what the DOT is. It's just a pure play. It's all Net companies. When you're an entrepreneur, you can come up with something, but now -- you know how it is when something gets big -- now there's a big committee.
And what they are doing is polling every analyst on Wall Street and asking them what stocks should be added. because there have been so many that have been created in the last year we feel like we need to keep up with it. I'm no longer actively involved in the selection of those but I did set up the template.
The main reason I think the DOT has gained such credence over the course of the last six months is that all the other indices really reflect many other trends happening in computing, but the DOT represents pure play Net. It's kind of what people want.
I'm hoping to put together an index fund -- not for me, for my firm -- but something I'm hoping a partner of
will develop. A pure index fund. A lot of the mutual funds, which specialize in the Net, have very high fees and an index fund can make a big difference.
I read that E*Trade is setting up an Internet index fund using the Morgan Stanley index...
Well, that's a mistake if they are using the Morgan Stanley index. I'll have to talk with them about that.
It almost seems like a turning point. MP3.com, one of the most anticipated offerings in some time goes public. People go nuts over this thing, all the professionals flip out of it and now this thing can't find a bottom...
That's very typical. We've seen this over and over again. There is always one last incredibly hot deal that gets too hot. It was eToys a while ago. We saw it a few years ago with Iomega craze. My take is that the market will find equilibrium.
I don't know MP3 is going to be the winner, but I'll tell you this. I'm taking a longer-term perspective on the Net because I think the Net is a fabulous place to be. Short-term -- Clubber Lang, pain! If you can't take pain, then I think you should go buy Pepsi!
Alright, Jim. Never enough time. Thanks for joining us and we'll talk to you again soon.
Thanks a lot, guys.