Dave Kansas and Brett D. Fromson chatted on TheStreet.com Friday, Sept. 22 at 3:30 p.m. EDT.
Welcome everyone to the Market E.R.
"war room" for major market events. Intel dropped a bombshell on everyone yesterday and the market responded. Now it looks like the Dow and Nazz are bouncing back. Are we seeing some true to form equinox action here on the first day of autumn? Today we have
, editor in chief, and Chief Markets Writer
here to field your questions. Let's get this started.
Gents, just wondering if you think that INTC's warning was the "last shoe" or will there be other huge warnings? If there are more to come, what happens to the market?
Sure, there could be more warnings from INTC or others. We have to wait and see. If there are more, then the high p/e stocks with not so high revenue growth rates will get hit hard as those P/E's compress.
Brett, I don't mean to be unkind, but I am wondering, what is your source saying about Bradlee's at this point? Disastro!
BRAD just announced the CFO is out. Not good news that. My source says that too many value players have made same mistake on these doggy retailers like BRAD; they think that if only these guys could slightly improve margins, they would be fine. Problem is, they never improve margins.
To what extent is the new Fair Disclosure regulation affecting recent volatility?
FD may increase volatility; less info flow means more uncertainty but I'd say the volatility here more due to other factors like euro, oil, high P/E's etc.
Hi guys, is AWE in the toilet for good?
Great question, seems that everything touched by the big T these days doesn't do well. Still, I think over time it is not in the toilet for good. For the longer-termers, might be something there.
I actually like T as a value play.
Will the oil service stocks decline more on this Clinton decision to release oil from the strategic petroleum reserve, and if so, does it represent a buying opportunity?
In the short run the release of reserves may help, but that move is a very small move compared to the capacity constraints in the energy sector right now. I think you are going to see good strength in energy for some time, once the market sops up this announcement.
Why are AMAT and KLAC getting hammered? They seem fairly valued?
Look, in the wake of the INTC news, nobody has a real appetite for anything chip-related. Is some of that overdone? Perhaps. Days like this give long-term investors a chance to pick through the muck and look for interesting ideas.
When will these preannouncements end?
Should end by the end of this month.
Looks like other than INTC it's a good day. That being the case, what's it going to take to get the whoosh that will let the market go higher?
More warnings, more questions about oil staying high longer than expected.
Where does the market go for leadership IF tech falls apart? Drugs under attack by Gore. Oil has peaked. Financials are starting to show problems. What's left?
Seriously, sometimes you have to root around for leadership, especially in these times. Read
where he outlined some new-new techs that are doing well. In the meantime, I have to agree with you that a market led by oil, utilities and other boring stocks is hardly inspiring.
Do you believe that the cockroach theory will apply to IBM, DELL, CPQ, etc.?
Sure. Question is how much to pay for them? They are not the new tech companies, but certainly not steel either.
What tech sectors can move from here? B2B and storage look strong, agree?
I think it's hard to make big bets on tech ahead of this quarter's earnings reports. I anticipate more preannouncements and I think we're not going to know how rough the quarter was for tech until we're into October.
It seems the reaction overall today was bullish (i.e. no panic selling, etc.) What do you make of the psychology, given so many negatives?
Yes, no panic is that good for the market longer term? I'd say we need a bit more fear before going much higher. I see a lot of whipsaw action ahead. There was a lot of buy the dip today. That is how it has been for some time. Business as usual.
Brett, what gives? Bottoms are not made like this, or could it be that individual investors are getting smarter with the help of sites like this?
Oh man, good question. I'd expect to see more concern in the face of this degree of uncertainty before bottom formed. Can't say about smarts of folks.
Dave, anybody thinking about giving
James J. Cramer
the boot and making
head honcho of the TSC trading pits? His stuff is better and more entertaining.
I love 'em both -- they each have great things to say.
subscribers are blessed to have a double barrel in the Trading Diary.
Does Brett manage any money? Now or in the past?
Does this snapback rally today just reinforce the complacency there seems to exist?
Yeah, gotta say that this day felt pretty eerie. You had all kinds of reasons to think things would get uglier, but the whole thing was contained. Maybe too many people expected it to happen. Whatever the case, I didn't feel reassured by the action.
Lots of window-dressing next week ala Buzz/Batch, agree?
Sure -- I think Buzz and Batch will be working overtime. I think Cramer shot down to Florida to eavesdrop on their next moves. Should be interesting. Have to remember that ole' Buzz and Batch don't always succeed.
Todd-O makes a good point about hedges being unwound, shorts covered. comments?
Yeah, but the short covering was mainly this morning seems to me. Volitility too big on upside for all that to be just shorts.
So are you guys hearing that today's recovery is just short covering or are these real buyers?
Real buyers more than short covering. Though shorts surely have covered.
MSFT looks good?
Brett's view is that it's a little pricey but I think the main thing here is that the litigation needs to get resolved. Until that's done -- hard to say where this stock is headed.
Are worries about interest rates going to come back, or is that issue off the table?
Off the table. Fed unlikely to raise short rates with oil like this. Oil less inflationary than recessionary, so not necessarily looking for rate cuts but neither rate hikes.
The investing community has long preached to the individual investor that for the long term the stock market is the place to be. Every interview I saw on TV today the individual investor said they were just going to hang on -- me too. With individuals holding more stocks, is the panic dampened from what everyone expects?
Well, perhaps. For the long term, investors are well suited to stay in the market, but the question is what's the long term. The way those yakkers on TV talk, you'd think long term was eight or nine minutes. I think a long-term investor should watch days like today for pure pleasure and leave the hyperventilating to the "pros."
Dave & Brett, thanks for jumping in for a chat on such an exciting day. The current rally makes the whole thing just seem like a media event. Your thoughts?
When INTC traded down after the close last night, that was less the media than the pros heading for the exits. As for the media today, not so much coverage in general media, so can't blame this one on us media folks. I say there is as much media tout on the long side. The worst thing for the financial media is a bear market.
Who could also preannounce this weekend, negatively?
This weekend? It's tough to anticipate who would do it on the weekend. But there's a chance that some stocks with significant exposure to Europe, like Just Don't Sell Us (JDS-Uniphase) might face problems. Now JDSU is one of the great stocks, so take that with a grain of salt. But it's a crapshoot out there -- there's no need to be a hero before we get through this preannouncement season.
Oil Up, euro down, economy slowing, chips at a top, European economy bad, etc. everything is just terrible it seems. Seems like it can only get better from here. Opinions?
It's not that bad. So does that mean it can get better? Sure. Or worse? Who knows? Maybe
, but basically I'd say that things are by no means terrible. The question is how much you want to pay for the long-term future in face of uncertainty.
What do you think the popularity/rise of convertibles says about the market?
I don't know if converts are necessarily overwhelmingly popular, but generally they are not a great sign. Companies, generally, are healthier when they are financing opportunities with fairly straight and simple balance sheets.
Re: JJC and Todd. I think they represent the two sides that most of us have -- emotional/rational. A great combination.
Why did soft goods companies - like KO - rally when in reality 1) they are going to be dramatically affected by the euro and 2) any intervention can't help any currency transactions that occurred during the slide. The numbers have already been booked!!!!
KO is already down from higher, reached earlier in the summer, and on days like this, people figure that decline accounts for the euro stuff and if everyone's worried about slow-moving economy, they look for stuff that people will do even on a thinner paycheck. In other words, have a Coke and a smile.
Also, I'll note ole' BUD is doing well. Not sure if that's related to what we're seeing in the markets or not.
Last time they released oil the price went down sharply. What about picking up some oil stocks at the bottom??
This ain't the bottom. Not that I think the oils are necessarily a bad bet. I think that oil will stay up here longer than most people think, could easily be here through the winter but longer term, there will be a bunch of new oil that can be pumped out profitably at the 20-25 dollar range.
What is your best guess as to the near-term direction of the Nasdaq and why?
If by near term you mean now, I'd say flat to down. It's been rallying up here, now stalled slightly down 25. In the short run they can do anything longer term, however, if earnings slow, then Nasdaq not going too much higher.
Nasdaq was down 200 this morning, QQQ was up 3/8 at the same time - does not make sense. How was that possible?
Only thought is short covering.
How well the high oil price affect a company like Boeing?
Well, there are basic things, like the energy used to produce big planes will get more expensive. There are knock-on effects. Airlines, for instance, will get squeezed on profits and therefore be less likely to ante up a few billions for some flashy 777s. So, it's just one more challenge for a company that has been battling several issues.
A final note: BA is one of two cos. that does what it does. I would always see value on weakness in that stock.
Also see that a Merrill Lynch analyst today raised target price on BA to 72, sees higher earnings from decent civilian aircraft production. This is not a screaming buy.
Any ideas what happens to the pound vs. the dollar from here?
Blimey! Let's see. I think the pound is starting to come off its amazing run as people wonder if it will get in with the euro. I think the dollar is due for a bit of a drop, and the pound's already been dropping. Edge: pound over buck. But it's close.
Clinton just released 30 million barrels over next 30 days, impact?
Psychology, mainly. Says president et al are serious about getting those oil prices under control. I'm certain that political/electoral concerns have absolutely nothing to do with it.
Anyhow, prices will edge lower but not by much and may start heading higher once people realize how small the reserves really are.
When will the new messages boards with Silicon Investor start?
We're working on implementation and I'm told it's going to be sometime in the next 45 days or less.
Scenario: oil stays up through winter, euro stays low, 'just OK Christmas, what happens to P/E of stocks generally, tech particularly?
They go down. Why? Still don't think that scenario built into investor expectations.
If you'd invest in tech stocks right now, what would you pick?
Well, Adam, I can't invest in stocks other than TSCM. But let's make believe, let's pretend we were in Alice in Wonderland. In that case. Yes. I'd buy hi-hi-tech stocks because I like the longer-term prospects for this group and am willing to ride out the ups and downs.
That's where my mutual fund money is right now.
I agree. I'd would look for small cap; newbies think that is where fundamental research might well pay off.
What do you think of the generic drug makers -- Teva, Watson, Barr?
Not my area of expertise, really, but I think if Al Gore is
a winner then you have to think that anyone producing drugs at lower costs, i.e., generic, will benefit.
Yeah but as far as TEVA is concnered, this baby is at a 77 P/E with a 10-11% average annual growth rate. So say that doubles to 20%, still seems a bit pricey here; the stock's had a nice run this year. You may be a bit late to the party.
Dave -- miss the weekly predictions on thestreet.com - what is yours for the next week?
Great question. I think we are going to see a few more prennouncements with the market bottoming next week toward Friday. I think October will be greeted by great fear, but ultimately prove a good month. Have a great WEEKEND!
Thanks for joining us this afternoon. Next week, check out
, IPO-meister Thursday, Sept. 28 at 5 p.m. EDT for an exclusive chat on