Participants on Nov. 6 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Dave Kansas, Adam Lashinsky, Gary B. Smith and guest John Neff. The transcript is unedited and phonetic spellings are indicated with a (ph).

BRENDA BUTTNER, HOST, THESTREET.COM:

Hi everyone. I'm Brenda Buttner and you are connected to "TheStreet.com." We're here to help you make your own investing decisions.

So, let's get going. What's the word on the Street about that big

Microsoft

(MSFT:Nasdaq) ruling?

Here from

TheStreet.com

, Jim Cramer who also runs a hedge fund, Editor-in-Chief Dave Kansas and Senior Columnist Herb Greenberg.

Also with us veteran money manager John Neff, who served for 31 years at the helm of Vanguard's popular Windsor fund. When he retired from that fund in 1995, he did so as one of the most respected and successful money managers of all time.

He's now an author, most recently of

John Neff on Investing

.

Welcome, gentlemen.

Well, the ruling is in and the judge says that Microsoft is -- has a monopoly. Jim you have long been long this stock. What are you doing? Are you buying or are you selling?

JIM CRAMER, THESTREET.COM:

Well, first I'm crying.

(LAUGHTER)

I was...

BUTTNER:

Don't get emotional.

CRAMER:

Look, this is like one of those games, you know, Florida State vs. East Carolina. We all knew that it was going to be won by the government. I mean this guy was -- the government had been running up the score for weeks on this. So therefore, I don't think this is a surprise. I had felt that this would happen. I did not sell my Microsoft in anticipation of this because I intend any weakness to buy more. I don't see disaster on the horizon here.

I think you will hear a lot of people saying disaster -- 85, 86 give me more.

HERB GREENBERG, THESTREET.COM:

People want to compare this with the old

AT&T

(T:NYSE) breakup. They want to think there's going to be a breakup here that's going to have...

BUTTNER:

That you can make money off of that.

CRAMER:

I think that's unrealistic. I don't think this is out there to make Microsoft shareholders rich. I just don't think it's that bad and I think Wall Street is addicted to reiterating their buy of Microsoft. I think there will be many appeals. I'm just telling you, short term, the worst is probably already in the stock.

BUTTNER:

Mr. Neff, you -- have you ever owned Microsoft? You're a value investor. So...

JOHN NEFF, FORMER MANAGER, VANGUARD'S WINDSOR FUND:

On

Intel

(INTC:Nasdaq)...

BUTTNER:

Intel...

NEFF:

...

Dell

(DELL:Nasdaq)...

BUTTNER:

Dell.

NEFF:

Microsoft was too high on the horizon. And those stocks were low P a couple of times, believe it or not. But I think that what is kind of interesting here is that Telephone was so easily divisible. You had geographic entities that were already in place. I just don't know enough about Microsoft to know whether those entities make sense, but I think Monday will be very interesting because this is kind of one of the last of the holies. In other words, the consumer nondurables have collapsed, the cold (ph)

Gillette

(G:NYSE), the

Avon

(AVP:NYSE),

Philip Morris

(MO:NYSE),

IBM

(IBM:NYSE) and

Xerox

(XRX:NYSE) have been found wanting. And you've got a lot of bodies around. A lot of carnage in this market. But the technology stocks with the exception maybe of

Compaq

(CPQ:NYSE), which is disastrous here. You know I've been kind of -- this will really test the strength of that resolve, particularly in that they sell at very high multiples.

BUTTNER:

Dave, as Microsoft goes, so goes the market?

DAVE KANSAS, THESTREET.COM:

I think as Microsoft goes, so goes a great deal of the market. It's just so big now and impacts so many indexes by its size. And I just think the time it's going to take to get to resolution here is going to be so long. I mean we have the decision that -- the finding that we've got, but we still have a long way to go before any kind of resolution will come about. They're saying a year, maybe two years.

BUTTNER:

Yes.

KANSAS:

It's hard for the market to react to that.

BUTTNER:

It's a long time horizon for you, Jim.

(LAUGHTER)

CRAMER:

I'm candid. I'm long. I wish it went the other way, of course. I think that you've got to buy the stock into the gloom. It's always been right; it's going to be right again on Monday.

BUTTNER:

OK, next topic -- talk about milestones, huh. It blows past 3000 but doesn't stop there and closes the week at just above 3100. So what's next? Will the year 2000 see Nasdaq 4000? Sounds like a bit of a stretch, but it went up 1,000 points in just 16 months. What do you think, Herb?

GREENBERG:

I think we're going to see more of the same. I really do. I think that this market that we have this enthusiasm in here. I think the interest-rate problem is out of the way now and you're off to the races.

KANSAS:

This is Herb Greenberg?

(LAUGHTER)

GREENBERG:

Yes, it is Herb Greenberg.

KANSAS:

Off to the races. That's not a good sign.

GREENBERG:

Well, you know what...

BUTTNER:

Very...

GREENBERG:

Whenever I've had resistance, whenever I've resisted, I've been wrong, so why not change at this point?

BUTTNER:

But Jim, you've always been a bull, but you said this was one of the most amazing environments you've seen in 20 years of investing.

CRAMER:

You know, a lot of times I just want to -- and John, I'm in the presence of a value guy. I am not a value guy any longer because I'm afraid they will take the money away.

(LAUGHTER)

But I have to tell you that this market, like the Yankees, like the Michael Jordan Bulls, is a champ. I feel that to -- you have to get outside of the business world and discuss it in a sports-like analogy because it is so terrific.

It masks a lot of problems. Many stocks work in this environment. I know that there's been carnage in the consumer nondurables. You're absolutely right. But geez, there's been money made hand-over-fist in a lot of stocks -- 40, 50 points. It's giddy out there. And I don't know how long giddy can last.

But froth is making a lot of people a lot of money.

NEFF:

Well, that's the part that's disturbing, you know. Where do you hit the inflection point?

I've been through a lot of these markets actually in my book. I cover four inflection points and you had to prepare yourself before because after it happened -- in other words a Nifty Fifty, oils in 1980, '87 when things got too high. And of course the banks and all of the financial intermediaries were crushed in 1990 and '91 like they were not going to exist. I would get letters from shareholders saying, "You dummy, can't you read in the paper they're all going to go bust?" And that was the conventional wisdom.

Well, the conventional wisdom is out in technology now and...

BUTTNER:

Well, but so many of the people who actually look at P/Es such as you and care about them, have been saying that there's going to be an inflection point soon, and it hasn't come quite yet.

NEFF:

If you say the same thing long enough...

(LAUGHTER)

.... sooner or later you're going to be right in the investment world. Really, but seriously. Babson (ph) was right in '29. He'd been saying it since '24 or something.

BUTTNER:

All right, guys, we have to take a short break, but when we return, we put John on the spot. John Neff tells us which stocks he thinks you need to consider and Jim and Herb will ask him the questions that you want to ask. Stay with us.

BUTTNER:

It's time for Stock Drill.

John Neff beat the

S&P 500

22 out of 31 years as manager of Vanguard's Windsor fund. John invested in

Delta Air Lines

(DAL:NYSE) and homebuilder

D.R. Horton

(DHI:NYSE), two stocks he thinks that you should consider as well.

And back with us to put those choice to the Drill, from

TheStreet.com

, Jim Cramer and Herb Greenberg, and neither owns either of those stocks.

Gentlemen, welcome back. OK, first up, Delta Air Lines. You know there are so many variables in the airline industry right now. Fuel costs, union troubles, competition in the East Coast. Why go with Delta?

NEFF:

Well, the distinguishing characteristic of this market is despite it's 26, 27 times there is a fair number of good companies and decent industries selling at single-digit multiples. Delta would be one of those. I have it a little over 7 times earnings. It's mostly nonunion, although you're quite right they're having a little union pressure -- pardon me -- potential union pressure.

Under new management, doing a good job, actually have tied up with

priceline.com

(PCLN:Nasdaq).

GREENBERG:

John, let me ask you something. This was really known as a very well-run company at one point in its history and it lost it. Why should we think this new management can pull off this turnaround?

NEFF:

Well, they kind of already have. If you look at the characteristic yardsticks of performance: on time, with luggage to you and all those different characteristics, they bounced back. And they would be a little bit above average from being below average.

CRAMER:

But, John, when you're going against the

Fed

, when you're buying an airline stock, if the Fed continues to tighten, people sell these stocks, don't they?

NEFF:

Well, it's not been a very good performer despite the fact that earnings have come back neatly. Very good capital position. Great internal generation buying the stock...

GREENBERG:

There's been a lot of cost-cutting here and yields have been falling a little bit so you still have, you know, when they're done with the cost-cutting, what happens?

NEFF:

But that and an increase and a big one in kerosene and what they burn and so everybody has got put a price increase through and that's starting to creep through. And I think you will see enough room there.

Also, they've hooked up with priceline.com. They own a fair hunk of it. Matter of fact, it was worth $2 billion at one time, out of an $8 billion cap. But what it allows them -- and they have to -- part of the agreement is they have ante-up available flights to be bid upon. But when you bid on those, you get it for the day, but it's between 6 and 12 -- 6 in the morning and 12 at night. So what the Deltas of the world get to do is fill up those empty seats in those off hours.

BUTTNER:

OK, next on the list, home builder D.R. Horton. Now yes, this stock does have a low P/E -- 5 1/2, I believe you said. But isn't this just an expensive bet on interest rates?

NEFF:

Well, one, I think interest rates have gone up as far as they go. Two, if they up further, these at 4, 4 1/2, 5, 5 1/2 times earnings, have a lot less exposure than the 27 times market, which answers to the...

CRAMER:

But John, this just had a 40% move. I mean, you know, we have people watching this show at home, and they're thinking, well a $14 stock. But this was just at $10. Did we miss it?

NEFF:

Well, you missed the sweet spot. But it's been as high as 24, 25 four times in the last year-and-a-half, two years. And I've got them at 270 next year, 249 just reported. Great record. Good position. Good southeast, southwest part of...

GREENBERG:

Why this one and not the other homebuilders?

NEFF:

I would concede there's others that are attractive, too.

CRAMER:

I mean it's a beaten-up group.

NEFF:

I've been,

Beazer

(BZH:NYSE) is at four times...

GREENBERG:

And people tend to come in these things. They could have been in so much earlier and they wait until all the bad news is out.

NEFF:

Well, that's what's wrong with America. There's too much momentum each way.

CRAMER:

But John, people are making 40, 50 points in stocks in a week. I mean, how do you tell someone, if you're patient and you can make some money here.

BUTTNER:

You're not that patient, though. You've traded in those stuff.

NEFF:

But they don't want to lose their rear end either, Jim.

(LAUGHTER)

And you know there's a lot of risk in those stocks.

CRAMER:

There sure is.

NEFF:

And you know you're saying a lot of these IPOs are going to whip up, but then -- I never quite understood this. Why do people pay three, four, five times the initial price and inevitably, like Pavlov's dogs, they go down and get back pretty close to the entrance price.

BUTTNER:

OK, we've got to go. The Drill is done. John Neff, it's been a privilege having you with us. And we will keep track of those stocks and check in when you visit us again. We'll also look for your new book,

John Neff on Investing

.

Jim and Herb, I will see you in just a bit. But after this quick break, we look at two of the hottest new IPOs. If you didn't get in early, is it too late? The answer might surprise you. Find out what Chartman says right after this.

BUTTNER:

Welcome back.

Well, did you miss the boat on two hot stocks if you didn't get the IPO price? Let's find out right now with Chartman.

He's Gary B. Smith in Washington, D.C. Gary trades for a living from his home using the charting method. Also with us, someone who doesn't use charts. He picks up the phone and talks to CEOs and people with these companies.

In San Francisco, our Silicon Valley columnist Adam Lashinsky. Gary and Adam do not own any of the stocks in this segment.

Hey, guys.

GARY B. SMITH, CHARTMAN, THESTREET.COM:

Hello, Brenda.

ADAM LASHINSKY, THESTREET.COM:

Hi, Brenda.

BUTTNER:

We take a look at a couple of high-profile, highfliers today, not unlike the two of you. First,

Foundry Networks

(FDRY:Nasdaq), an Internet infrastructure company that is part of the

Red Hot index. Gary, the chart has you a little worried, doesn't it?

SMITH:

Yes, you know, Brenda, here's a case where you wonder how these stocks that are already risky from day one of their IPO could get any riskier. Foundry is a great example. I think you had one shot to buy this stock if you weren't friends and family, or an officer of the company. And that's when it -- it did form a little congestion. Hard to believe, but it moved sideways for a couple of days, probably in a 300-point range, but it did move sideways. And when it burst up on strong volume, that was your only signal.

But now like a lot of these stocks, the stock has gone almost straight up. That's not a problem. The problem has been volume has continued to decline. I will tell you what, if you tried to get into Foundry now, you would take the biggest risk I can imagine. I cannot in good conscience -- as much as I would love to ignore the fundamentals and everything else -- say to buy Foundry right now. Just too risky.

BUTTNER:

Well, Adam, talk about going straight up. This IPO had an astounding first day even in the context of a Net stock -- it was up, what, some 500%. I mean, how do you even look at fundamentals in that kind of stratosphere?

LASHINSKY:

Brenda, you don't. You simply can't look at fundamentals in a situation like this. All you can do is sort of try to learn about the company and then watch for an opportunity to buy it.

The valuation on Foundry is just sheer lunacy. It is an important company, but it's worth $11 billion right now. It closed at $200 at the end of the week. That's after being offered at $25 in late September. There is no fundamental basis for getting in there.

It's a young profitable company, going to earn $42 million next year, but that's -- it's trading at 300 times that right now.

Even with this company doubling, that's just too much. Finally, competition lurks for this company. It's playing in what analyst calls the land of the giants. That's up against companies like

Cisco

(CSCO:Nasdaq) and

Nortel

(NT:NYSE) and

3Com

(COMS:Nasdaq). Very risky. The chart tells us the right story here.

BUTTNER:

And Adam, you've got your eyes on the price tag of another Net stock, an IPO just days old,

Akamai

(AKAM:Nasdaq). Again, what a price tag.

LASHINSKY:

Yeah, right we've had a whole six days trading in Akamai, and it's only worth $16 billion. That's having had a million dollars of recorded sales so far.

It's a young company in a very hot field, and it's very exciting. It's selling a service that helps Web sites speed up and improve their service. That's very important. So, what we can say about them is that they are only merely a lunatic of evaluation, because the competition isn't quite so scary for Akamai. They're a clear leader. They're way out ahead.

A lot of people want the product. Again, can't say I think about it at $174 a share, but a very exciting company.

BUTTNER:

Well, Gary, if you want excitement, just track this stock. What does the chart say?

SMITH:

Yeah, look, Adam is right. You just got to put everything aside, and I know there's plenty of people out there saying, "Look I don't care about fundamentals or anything else; I want a part of Akamai." And so, if you want to get in on these IPOs early on and use technical analysis, about the only thing that you can do until you have enough daily bars is use what I did, and that's put together 30-minute bars.

(LAUGHTER)

It's kind of a cobbled-together technical analysis, but in a pinch, it can work. And I will tell you, the only way I'd buy Akamai is if it's formed a little congestion moving sideways in those 30-minute bars there, and what I would do is I would try to buy Akamai if it showed me some more strength. I know, hard to believe it could show more strength, but if it burst over $193, and believe me I know it's ludicrous, but that would be the safest ironic time that you can buy this stock.

Other than that, I would say, boy, take...

LASHINSKY:

Gary, can the chart -- will the chart show us one of John Neff's Pavlov's dogs here?

(LAUGHTER)

I mean is there any way to see when it's going to come hit my head...

BUTTNER:

Chomping at the bit, yes.

SMITH:

Yes, now as a matter of fact, if you start looking at the bars from the very first day, and you can start to see it coming back down to that IPO price, you could make an argument to say look, I won't -- I will put in a limit order to buy at the IPO price, but some of these you just never get a chance.

BUTTNER:

OK, Gary, Adam, thanks as always.

LASHINSKY:

Thank you, Brenda.

BUTTNER:

And we will see you both next week.

SMITH:

Thank you, Brenda.

BUTTNER:

But first, did you hear Jim Cramer's prediction last week about online brokers? It was what you call a home run for investors. What's he got for us this week? Find out, next on "TheStreet.com."

BUTTNER:

Welcome back.

Well, we're going to get predictions in just a second, but first let's check back on some past predictions and tally up the

TSC

scoreboard.

Back with us from

TheStreet

, Jim Cramer, Dave Kansas and Herb Greenberg.

OK, Jim, admit it. You're crowing about this one. You said that online brokers' stocks would come back strong. And what...

CRAMER:

It was a good hit.

BUTTNER:

What a call. Let's just take a look at how some of the big ones have -- look at them. I mean, they're up considerably. If people took your advice, they made some money, but what do they do now?

CRAMER:

You know, I think that this group stays -- stays hot. I think the market is very hot. This is a way to play it. These stocks are very compressed. And I feel about this call. I'm sticking with it.

BUTTNER:

OK, Herb, back at the end of July you said that

Just For Feet

(FEET:Nasdaq) wouldn't make it to the finish line. Well, this week they dropped out of the race, filing for bankruptcy. The stock, of course, hurt very badly. This stock is still trading, but is there any reason...

GREENBERG:

Don't get near it.

BUTTNER:

.... that somebody should get in?

GREENBERG:

Don't get near it.

This thing is dead money. And if you buy it, you're never going to end up with anything.

BUTTNER:

OK, Dave, fortune is not so good for you. You did have a great call on gold a while back, but in mid-September you said that oil stocks were heading higher. Well, since then it's gotten very cold for the oil index. Do you still stick with the prediction?

KANSAS:

I think so. I mean if I'm going to live in a cave, I got to stick to my guns. Gold, oil, the whole thing, canned goods -- tin coming up soon ... I think.

(LAUGHTER)

BUTTNER:

OK, ahead to next week. Jim, what have you got for us?

CRAMER:

People think it's going to be an e-tail Christmas. It's not. I see the revenge of the bricks-and-mortar crowd. The e-tailers, it's not going to be such a great time.

BUTTNER:

OK, Herb.

GREENBERG:

Action Performance

(ACTN:Nasdaq) makes replicas of NASCAR cars. Crash last week, this is going to look like a fender bender when we see what's ahead for this company.

BUTTNER:

Steer clear of that one too. OK, Dave.

KANSAS:

The Red Hot index, a creation of Jim Cramer, of all the hot crazy stocks out there, has gone from 200 to 281. It is going to go much higher before the end of the year.

CRAMER:

Yes.

(LAUGHTER)

BUTTNER:

All right. And you can see for yourself which stocks make up the Red Hot Index by going to our Web site's TV page at

thestreet.com/tv .

And that's also the site where you can chime in on these predictions. Leave us a question or comment as well. We read and respond to all of your e-mails -- we promise.

And at our site, there are dozens of writers like all of us here who post stories every day, to help you make the right decisions when investing your money.

You will want to check the Web site right now for in-depth coverage about the Microsoft antitrust ruling, who the winners and losers are, and what you need to do as an investor.

And that's it for this week's "TheStreet.com." We will see you here same time next weekend. Until then, we hope you invest wisely.

END

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