Eric Gillin and Chris Edmonds chatted on Yahoo!, Thursday, Dec. 13 at 5 p.m. EST. For an audio transcript of the event click here.

Eric Gillin:

It's Thursday, 5 p.m. on the East Coast, 2 p.m. on the West. Time once again for

TheStreet.com

Martini Chat.

Good afternoon, I'm your host Eric Gillin, coming to you live from the world headquarters of

TheStreet.com

on Wall Street, just across from the New York Stock Exchange. Joining me back on the ground at

TheStreet.com's

Atlanta bureau is contributing editor and

RealMoney

columnist Chris Edmonds.

So, Chris, did you win your new fortune in Vegas, or were you more like the market this week, just treading water and struggling to stay afloat?

Chris Edmonds:

All work and little play, Eric. But, what little play there was created little wealth. I was down a little on the dice, but I hit a huge slot jackpot! Okay, well it sounds huge when you say it was 2,000 coins, but then not so huge when you have to reveal it was only nickels. But, you know, it's the sound of the clanging and jingling that really makes it all worthwhile.

As for the market, pretty solid holds if you ask me, especially in the wake of not so good news from both Merck and American Express. We've come a long way since September 11, and the ability to hold those gains, especially the 10,000 level on the Dow and the 2,000 level on the NASDAQ, is key to the end of year psychology.

My good friend Tony Dwyer made a prescient point Wednesday. He said the technicals got us to these levels, and now the improving fundamental outlook may just hold us here. Absent more news like that from Amex, I think he may be right.

Eric Gillin:

Interesting. We'll talk more about that in our markets roundtable at 45 past the hour. Before that, however, we have another packed show.

We'll begin with a look at the oil patch and other energy stocks. With all that has happened in the last month, Enron's travails, Halliburton's asbestos woes and Calpine's recent slide, we thought we would step back and take a look at the sector and what it might hold for investors.

Then, we'll take a walk, or should I say fly, on the lighter side as we look at travel -- the state of the airline, lodging and hospitality industries -- and the deals you might find over the holidays and into the new year if you are looking to get away.

Finally, we'll have our weekly roundtable, where we discuss, and maybe even cuss, recent market action with our highly touted experts. And, of course, we'll have all the days' headlines and a look forward into the coming days.

But first, a toast.

Eric Gillin:

Three years ago, Henry Blodget was a 32-year-old phenomenon and CNBC regular, on the rise at CIBC Oppenheimer for his coverage of red-hot Internet stocks. In November 1998, Blodget said Amazon.com's stock price, then at $242.75, would hit $400 within the year due to its astounding revenue growth. In his mind, Amazon's non-traditional business model should be valued in a non-traditional way and given a whopping price target.

Merrill Lynch analyst Jonathan Cohen was outraged. Cohen reiterated his reduce rating on Amazon's stock and his $50.00 52-week price target. "We don't view them as a commerce platform," Cohen raged, "but as a book retailer that generates huge revenues at huge losses."

Within a month, Amazon's stock hit a split-adjusted $417. Blodget had been correct. Within three months, the CIBC analyst had Cohen's old job at Merrill Lynch.

Today, Henry Blodget is a 35-year-old unemployed millionaire with a book deal. Nearly three years after he made his prescient call, the Merrill analyst accepted a buyout offer estimated at $5 million in November. This Monday, the New York State Attorney General's office launched an investigation into some of Blodget's actions while at Merrill Lynch to determine whether he misled clients with his recommendations and whether those actions were criminal in nature.

Both Merrill and Blodget downplay the link between his departure and the state's probe, but that's not important. Who cares why he left -- The State of New York will have a tough time proving that Blodget and his company did anything criminally wrong.

Here's to Henry Blodget. I toast him for getting out while the getting was great.

Others weren't so lucky, like Paine Webber analyst Walter Piecyk. He set a $1,000 52-week price target for Qualcomm on December 29, 1999, only to watch the company's stock struggle below $200 for the past two years. Piecyk left Wall Street and hasn't been heard from since. Blodget, on the other hand, is a true one-hit wonder -- like Los Del Rio, the band behind the Macarena, a song so addictive that all of Yankee Stadium once stood up and did it in unison during the seventh inning stretch of a baseball game.

No one remembers Los Del Rio, but everyone remembers the Macarena. Unless the book is a success, that's going to be Blodget's fate. All told, he worked less than a 1,000 days at Merrill Lynch, and when he's gone, that $400 Amazon call is what people will remember most.

Blodget, at his core, was a self-fulfilling prophet, telling people that Amazon would hit $400, which spurred interest in the stock, helping it hit $400. What happened after dot com stocks peaked?

Like Los Del Rio, Blodget played his big hit until it got annoying. Even though dot com names were plummeting, Blodget kept high ratings on companies. He was not alone. Nearly all of Wall Street did the same. It was herd mentality at its finest. Even though he led the lambs to slaughter, Blodget himself dwelled in green pastures.

Blodget received a bonus of about $5 million in 2000, after the dot com bubble had popped and many of his picks, like eToys, were going under. Perhaps this is why Debases Kanjilal, a 46-year-old pediatrician, won a settlement with Merrill Lynch to help recoup a $500,000 loss in InfoSpace earlier in the year.

But being wrong about stocks has nothing to do with a research analyst's higher calling -- to get investment banking business. Blodget, as a high-profile Wall Street analyst, most likely helped attract his share of clients, especially after his headline stealing $400 on Amazon.com.

As it was defined, Blodget did his job well, perhaps better than anyone else. It's not his fault that the system was set up so that getting investment banking business was rewarded far greater than making correct calls on stocks. Blodget's real master was Merrill Lynch, not individual investors. He succeeded within that system. Now that investors are pissed, states are investigating and everyone's looking to change how the game is played, Blodget gracefully bowed out and took the money.

Cheers to Henry Blodget for being wrong. After all, has Jonathan Cohen been in the headlines lately -- Cohen was right to be wary of Amazon.com, which has massive revenues coming at the expense of even more massive losses.

But Cohen didn't win the game, Blodget did. A toast to Henry Blodget for winning the game and then leaving before all the rules change.

Eric Gillin:

So, Chris, what are your thoughts on Henry Blodget and the whole analyst game?

Chris Edmonds:

I have to disagree a bit, Eric. While I do agree that the system may have encouraged Blodget's thinking, it didn't force him to act the way he did. There is a reason analysts are called analysts, and that is they are supposed to analyze. One of two things is certain about Blodget: Either he was absolutely stupid and came up with horrible conclusions, or he was influenced and, some would say, corrupted by the system. I, for one, think Blodget is very bright.

Sure, the investment banks are culpable here as well, but in the end Blodget made his calls. He created new concepts of valuation to justify what he couldn't otherwise justify. Those were his decisions and are his responsibility. It reminds me a lesson all investors should learn: When someone says things are different this time, it usually means that tried, historically strong principals don't support outliers that someone is attempting to justify. While things can change, principles of valuation and analysis in the world of finance and investment rarely change. That is a constant.

Eric Gillin:

Speaking of different, Chris, things in the energy business are certainly shaken up. Enron is on the canvas, Calpine is staggering and Halliburton seems to have taken a barrage of punches that has dizzied the company. Is there any juice left in the energy world?

Chris Edmonds:

That's a good question, and one that investors are keenly focused on as a result of the rapid-fire news that has hit the oil, gas and power sectors in the last several weeks. First Enron, then Halliburton and now Calpine and El Paso. If that's not bad enough, crude oil and natural gas prices are near recent lows and power prices are trending lower.

I must add one thing for those following the Enron saga: As of ten minutes ago, Andrew Fastow is reportedly still in the country.

So, what is the future of the energy business? With us to discuss that subject are two energy pundits. Joining us from New York is Jay Dobson, the managing director and electric power analyst at Deutsche Bank, and from Houston, Bryan Dutt, principal and portfolio manager at Ironman Energy Capital.

Bryan, let me begin with you. The first news out of the chute this week was Halliburton's growing asbestos noose. I know you've worried about the asbestos exposure for some time. How bad is the current situation, and how much worse can it get?

Bryan Dutt:

Unfortunately, Halliburton will probably settle like other companies. It's bad. Unless we run out of lawyers, we won't run out of lawsuits or judgments against Halliburton. Halliburton is in a severe situation, and the company needs tort reform in order to get out.

Chris Edmonds:

Bryan, do you find it at all strange that the Bush administration, with its ties to the energy industry and with Cheney's ties to Halliburton, hasn't tried to push tort reform harder and faster?

Bryan Dutt:

It's going to be a politically delicate situation for the administration. The Bush administration was close to Enron, and that kind of helped that situation. I don't think Cheney can come out and help Halliburton. If anything, they would prefer to let other political forces try to alleviate the situation. I don't think this administration will go out and make a special effort for Halliburton. If anything, that kind of effort would probably hurt Halliburton.

Chris Edmonds:

Jay, the other news this week was heightened questions about Calpine and the challenges it faces, both on its balance sheet and in its growth projections. Two conference calls and ten points later, it looks like the stock may have stabilized. I know Calpine is one of your top picks. As a bull on the stock, what's your thesis, and have your nerves been tested over the past couple of weeks?

Jay Dobson:

Certainly my nerves have been tested. The thesis remains that you have a company with a solid model. I, along with other investors, was intoxicated on high commodity prices. The model basis is adding new generating capacity. When you think of the long run marginal cost that this company can produce, which is, by and large, lower than any other provider in the market place, it's a solid model. This is a commodity business, although we're short supply, and the growing economy next year will prove that. You're probably looking at a 10 to 15 times multiple for commodity type players. In near to intermediate terms, this company is probably trading at six times realistic numbers for next year, and that's far too cheap.

Chris Edmonds:

There are some balance sheet issues here. One that seems to weigh on the street and really took the stock for a wild ride yesterday is the zillion dollar and zero converts that are put-able to the company in April. The company bought back over $125 million worth on the market yesterday. Do you expect them to try to finalize the redemption of these before April?

Jay Dobson:

Yes, they'll try. It was a solid decision. It made solid sense for the company, but they have to alleviate this as a worry. People don't realize this is a capital-intensive industry like the railroads or the papers companies. It was designed to have access to the capital markets. If you don't have access to capital markets on a sustainable basis, you have a big problem. I don't believe that's the case, but I suspect these guys will act in the first quarter. They have to get this out of the way.

Chris Edmonds:

Bryan, conversely, you think that Calpine will continue to face challenges. Part of your concern relates to the growth projections of the company, but a significant part of your bearish stance relates to its natural gas assets. What is happening there, and why is it such a concern?

Bryan Dutt:

Addressing the natural gas issue, they purchased Encal Energy, a Canadian natural gas producer, earlier this year when Canadian gas prices were substantially higher, in the $7.50 to $8 price range. Right now it's roughly in the $3.90 to $4.00 price range in Canadian dollars. I don't understand how the company is not facing a write off this year, if not next. Furthermore, the top management at Encal recently left and joined a competing firm. I don't think Calpine has any expertise in managing a natural gas or oil company. You just don't buy those assets and let them manage themselves. You have to run them. They've clearly overpaid, and now they have a management issue.

Chris Edmonds:

Jay, there is a real concern about liquidity at Calpine in light of the skittishness banks are likely feeling now as a result of the Enron debacle. Will Calpine find it more difficult to meet its capital needs, both to redeem the converts coming due in April and to fund its development plan?

Jay Dobson:

Certainly the natural gas side would. The trading and the marketing are necessary in a commodity business. It's necessary to maximize the value of your assets. They paid a healthy price for the Encal purchase. The idea that they'll have to take some write- downs will certainly be resolved sooner rather than later. The number will not be as big, but it will be taken down. This company is using that gas in their own plants. It's a physical hedge to their raw commodity. They'll be the second or third largest natural gas purchaser in the nation, and this is a physical hedge to that exposure. In thirteen or fourteen years, I have only seen one or two companies be able to turn in a commodity business like oil or gas and be able to be successful. The trading business isn't a concern, but the natural gas side is.

Eric Gillin:

Jay, its Eric Gillin in New York. I want to back this Calpine story up to the beginning and focus on the whole Enron saga. It seems to me that part of Calpine's problem is the Enron hangover. For the non-power and energy insider, what exactly are the issues that led to Enron's demise, and how do they relate to Calpine and the other players in the merchant power space? Who are those players? Give me a 90 second primer on the independent power business. Go!

Jay Dobson:

That's actually the most interesting thing -- the size of rising costs and capital. Enron shouldn't have an implication for anyone else. They had a tremendous amount of off-balance sheet debt. Many of these trading and marketing players rely on an investment grade rating, which allows their counter-parties to take credit for granted. That's oversimplified, but when you lose that investment grade rating, your cost of capital increases tremendously, and all your counter-parties line out the door asking for collateral and real greenbacks to prove you'll repay when the trade comes up. What happened to Enron was they had a lot more debt than they thought. You had the perception of management's integrity go into the toilet. The real issue that ripped out the rug was when S&P took the company down to below investment grade. Counter-parties are lining out the door asking for collateral on trade exposure, which generated well over half of their cash flow. You have half the cash flow going out of the door, and you have new creditors lining up. They had way more debt than they should have. Who could be like Enron? Who has a lot of trading exposure and an investment grade rating they really rely on? When you think of Calpine, it is a split rated company. It has to post collateral on trades already. They live in a non-investment grade world as it is. It is less of an issue for them. I'd look at Dynegy and Mirant, some of those. It's not likely, but that's where people should be focused.

Eric Gillin:

The concern really is who is the next Enron, so the stocks of these merchant energy names have suffered as a result. In the wake of Enron's demise, which firms are likely to emerge as leaders among these new energy merchants?

Jay Dobson:

I think the most likely is El Paso. Duke would step up into that space. Dynegy and Mirant are likely to take market share. That's the beauty of Enron. If Microsoft went bankrupt tomorrow, their competitors wouldn't be upset. They'd be gunning for that market share, and it's the same here. There will be higher volumes and margins. This will be different now; you can see the business changing at the margin. The question will be, does Moody's or S&P raise the cost of capital so much, or do investors? Duke, El Paso, Dynegy and Mirant all stand to profit from the market share given up by Enron.

Chris Edmonds:

Bryan, Enron presented a plan to emerge from bankruptcy yesterday that my sources tell me was largely dismissed by its creditors. Do you see any way this company ever emerges from bankruptcy, and, if so, what will the re-energized Enron look like?

Bryan Dutt:

I don't have the answer, just wild speculation. Obviously, there's billions of dollars at stake, and financial players can get involved. Whether or not they can re-structure it in time to satisfy all the legal requirements is problematic. I have no idea as to what an Enron would look like. It would be substantially smaller if they ever emerge out of bankruptcy.

Chris Edmonds:

Jay, any thoughts there? Do you ultimately think they'll end up liquidating?

Jay Dobson:

I would imagine. I haven't looked at the reorganization plan. I'd go back to the point I made earlier. Their cash flow came from the trading business. People are finding new jobs. The trading business, when it doesn't have physical assets--and they didn't have a lot of those, is gray matter. It's the brain between your employee's ears that is your real assets, and those people are finding new jobs, so it has less and less value. It's hard to envision.

Chris Edmonds:

That's an incredibly prescient observation. Let's get predictions going forward. Bryan, gas has gone from a peak of nearly $10 to today's prices hovering around $2. Crude has gone from the mid $30s to the mid-teens. Where do we go from here? If you were to put money into this sector, where would it be?

Bryan Dutt:

If you had a long term horizon, say a year or more, you could buy any of the survivors. If they can survive another 6 months of depressed prices, a year from now you'll have substantially higher prices. We've had an unbelievably warm winter; we've had September 11 and natural gas prices that were abnormally high this year, which has killed industrial demand. I don't see the return of commodity prices on a short-term basis.

Chris Edmonds:

Who are the survivors on the energy, power and service spaces?

Bryan Dutt:

There are well run Houston based companies. Two are Apache and Anadarco Petroleum. On the oil service side, there are a host of companies, but Halliburton is not one of them. Banker-Hughes is going to be a survivor. Schlumberger will be a survivor. Those are long-term, and I stress long-term, investments. As far as our portfolio, we are virtually all cash.

Chris Edmonds:

Jay, in the power sector, in the utility sector and in the independent sector, what are you looking at in 2002?

Jay Dobson:

In the really near term you're going to see distributors continuing to work. Southern Company has done well. You have to be careful because you're making a play on how long the economy will stay depressed. At the first hint of an economic improvement, the market's going to go north and these stocks are going to go south. You have to be fleet-footed here. First Energy, you can get a pretty decent yield in that one. Public Service Enterprise Groups, same thing. Those are the kind of names I'd pick for the near term. Long-term, I'd look at generators. You do have to look out six to twelve months. You need to see economic improvement that drives demand for electricity. We have acute shortage in the near term. Potentially, the Calpines, the Mirants, and the El Pasos will open up as opportunities and survivors, but that'll take six to twelve months to dig out of.

Chris Edmonds:

Gentlemen, thank you. This is clearly a subject we'll revisit as events unfold. Our guests, Jay Dobson, managing director for electric power research at Deutsche Bank, and Bryan Dutt, principal and portfolio manager at Ironman Energy Capital.

Eric, clearly a story in progress. and one that we will keep our eye on. And, speaking of keeping our eyes open, some interesting pre-announcements and corporate news seemed to move the markets today. And, as only you can, rumor has it you have all the news. Any late breaking reports on Andrew Fastow's whereabouts?

Eric Gillin:

Will Andrew Fastow, the CFO of Enron, show up to a Congressional hearing about the company's activities? Maybe. A Congressional committee says he can't be found at the moment. An Enron spokesperson said he probably wasn't going to show. "We don't believe we would be able to adequately serve the interest of the committee while at the same time trying to serve the interest of our credit shareholders and our current and former employees."

Reports on his whereabouts have been pouring in to TheStreet.com. Some think he jumped out of an airplane somewhere over Seattle, Washington, with a parachute and a briefcase. Still others say he's in a cave complex outside Houston, attempting to cross over into Mexico with a cult of loyal Enron followers. But all the smart money says that Andrew Fastow's at eight-year-old Timothy Andrew's birthday party performing magic tricks to a delighted crowd. Fastow's best trick: pulling a rabbit from a hat and then convincing the kids that it brought in a billion dollars in revenue last year.

But seriously, folks, quite a week on Wall Street.

When we last left off, the Dow was still above 10,000, and the Nasdaq was above 2,000. Markets have retreated since then, sending the Dow below 9,800 and the Nasdaq around 1,950. Let's recap the week, shall we?

On Friday, a jury ordered Halliburton to pay $30 million in an asbestos suit, sending shares near a ten year low. At the same time, the University of Michigan's preliminary consumer sentiment index was more optimistic than economists expected, while unemployment data came in at 5.7%, also higher than expected. Clearly, the economic outlook is still mixed up.

That proposed merger between Compaq and Hewlett-Packard hit the skids when the David and Lucile Packard Foundation revealed plans to vote against the pairing. On Tuesday, in a widely anticipated move, the Federal Reserve lowered the federal funds rate by 25 basis points to 1.75%. A release from Merck spoiled all the fun, however, when the company announced 2002 earnings would be flat. The Dow sold off. Again.

Yesterday, the Dow finally posted a gain, but a gain of six measly points! Procter & Gamble's news that second-quarter sales and earnings would come in above estimates helped offset whatever ennui was caused by Merck's warning the day before. On the war front, the United States dropped a 15,000-pound bomb called a daisy cutter on the Tora Bora cave complex where Taliban forces are hiding.

Today, markets trended lower throughout the day, dragged down after a Commerce Department report showed retail sales fell 3.7% in November, led by an 11.9% fall in car sales. That's way lower than consensus estimates. Also, the Labor Dept. reported the number of persons filing first-time jobless claims fell to 394,000 from 480,000 the previous week. That's better than expected.

So, we're left with yet another set of mixed economic data.

Next week, some retailers will release earnings, with Best Buy, Circuit City and Pier 1 Imports on Tuesday, followed by FedEx, Morgan Stanley Dean Witter and Palm on Wednesday. On Thursday, look for Nike, Bed Bath & Beyond, Goldman Sachs, Lehman Brothers and Solectron.

And, if anyone knows where Andrew Fastow is, please call Congress.

Chris Edmonds:

Moving on, now it's time to sit back, relax and settle into that first class seat as we take a moment to fly around the world in about 15 minutes. Today, we talk travel -- the state of the industry after September 11 and the bargains now available to those in search of deals.

We are pleased to welcome Clara Bosonetto, a long-time travel consultant and travel columnist for the

Atlanta Journal Constitution

. In addition to penning the regular budget traveler column for the AJC, Clara also works closely with nationally syndicated consumer advocate Clark Howard. She joins us today from somewhere in Germany.

Clara, first thanks for staying up to be here with us. Tell us, exactly where are you?

Clara Bosonetto:

Hi Chris. Based on the weather I thought the North Pole, but actually, Southwest Germany.

Chris Edmonds:

We all know that life has changed in many ways since September 11, but nowhere has the impact been felt more than in the travel industry. What major changes have you seen since September 11, and do you get a sense that the industry and travelers are beginning to return to any sense of normalcy?

Clara Bosonetto:

We started to rely on air travel heavily as Americans. It won't change, but will take some time to return to normal. More important to the industry than the September 11 events are the state of our pocketbooks. Travel has gone to the bottom of the must have list. When people are secure with their income and jobs, we'll go back to the top. We were having too much fun for a long time.

Chris Edmonds:

Some would argue that September 11 was simply a spark in an already smoldering travel industry that was pushed to the brink by a slowing economy. If that's true, what companies will be the casualties in the airline and other travel sectors that won't make it through this economic downturn?

Clara Bosonetto:

Specifically looking at the airline industry, it's shocking. By 2002, when we look back on this year, the losses will be over $9 billion. What segments of an industry can survive that? There will be some failures, but I'm not sure who it will be. We could see the airlines resume with merger talks, trying to look at more broad-based routes and expand where they're not present right now.

Eric Gillin:

Clara, it's Eric Gillin, in New York. Enough business, lets talk fun. There have to be a whole host of deals out there if people know where to find them. I know you scour the world and the World Wide Web for such bargains. As a consumer, where should I be looking for the best deals on airfare, cruises and hotel rooms?

Clara Bosonetto:

We all know that the Internet is key right now in finding bargains, particularly airfares. Most airlines will have exclusive deals on their sites. It's very easy to receive email notifications. Consumers have forgotten an important place to find deals, and that's the neighborhood travel agents, the Europe specialists and cruise specialists. They have deals that will never be found on a website. They do charge fees, but look at the Internet. We are being charged $5.00 for Net tickets and various fees. You have to resort back to the real professionals, and those are the travel agencies. I look at the net first -- you have to look at various sites including individual airline sites, Expedia and Travelocity. Always, take notes and go to your travel agent, and it's likely he or she can beat those deals.

Eric Gillin:

When I was a kid, my dad used to drag me to the travel agency to check out flight times since SABRE wasn't available anywhere else. There was no Internet to speak of, but there is now, and it seems there is so much information available. Should the average traveler take charge of his or her own travel plans or can a travel agent still add value for the cost?

Clara Bosonetto:

Look at the broad based hotel industry. They will notify agents before posting onsite. For a Hawaiian vacation, an agent will have package deals that you couldn't put together in hours online. They can be your eyes. As rookies, we can get into trouble on the Internet, buying something we've never purchased before. It's important to run it through an expert, and they're hard to find on the Internet.

Chris Edmonds:

What about holiday travel? If you are just now trying to decide what to do and where to go for Christmas or New Years, what should you look for? Will airlines offer last minute sales, and how do they usually work?

Clara Bosonetto:

It might surprise everyone, but holiday travel by air is very popular this Christmas. Thanksgiving, on the other hand, had nearly a 30% downturn. We have to keep in mind the airlines have reduced their routes up to 20%. Putting all of that together, the airlines will see quite full flights. They will come out with holiday specials as they always have. You'll have to fly on unpopular dates like Christmas Eve, Christmas Day, New Years Eve and even New Years Day at off-peak hours. Most all of the Internet travel sites will provide recommendations. If you want to look for a real bargain at Priceline.com, they signal their key travel dates in green for flights with the most availability. Dates flagged in red will usually mean forget about it; it's already sold out.

The best deals will be Hotels, by far. You may not get there by air, but you will be able to travel to a city that's a few hours away and then enjoy resort luxury for half or even 75% off the normal price. Hotels are dying right now as a result of business travel being quite off.

Chris Edmonds:

I was in Las Vegas last week, and I have to tell you there's not a city that has suffered in the ways that Vegas has. I was in Disney at a conference a couple of weeks after September 11, and it was just amazing. I hear the Hotel occupancies are picking up, but not at the rate that they need them to.

Clara Bosonetto:

Think about it. After the holidays, the airlines and hotels will go through one of the most down periods of any year, January and February, before school spring breaks. It's a bad time. So, if you can postpone travel and gather in early 2002, there will be deals. I suspect the airlines will come out with companion fares where kids travel cheap.

Chris Edmonds:

Let's say I'm looking for a week-long getaway this winter. In this case, I want to head over the pond to Europe. What deals can I expect, and what should I look for?

Clara Bosonetto:

Since mid-September, we've been looking for rock bottom deals, and they're not really there, fares similar to what we saw two years ago. But come January, we should be able to land deals anywhere in the country to Europe for as little as $250. To go there in the winter with fewer crowds for $300, that's a deal. Another surprising area that's pulling back on prices for airfares and hotels is the Caribbean during the winter months. AmericanAirlines.com has some exclusive deals through May at excellent prices.

Chris Edmonds:

If I'm looking to Hawaii or the domestic 48 states? Or even Mexico?

Clara Bosonetto:

We should see Hawaii get a little more creative. Their tourism bureau is reporting down occupancies, but the airlift going over is not as great as going to Europe, so they can command a higher price. If you're considering Hawaii, it's best to book a package deal. Get your air and hotel and car rental all into one. That's where your values will be. As far as domestic U.S. travel, most airlines have a companion feature right now where both travelers pay the same low price, which is about 50% off the regular leisure rate. It's been an ongoing sale that hasn't gotten too much media coverage. It's a great value that can be booked now for the next eleven months. The travel agents will know about sales like these.

Chris Edmonds:

Is it better to book a package from your destination, say Atlanta or New York, or to buy the ticket to Los Angeles or San Francisco and then buy the package in San Francisco. Do you save at all that way?

Clara Bosonetto:

It depends on if there is a sale from your gateway city to the West coast. You want to compare package to package, doing it independently. There are discount airlines that leave from California and bundle together the hotel and land portion. If you add an average coast-to-coast fare, you might have a great deal. Ask yourself, what is the fare from my gateway? There might be a slight supplement to it. You have to comparison shop, particularly with a Hawaiian destination.

Eric Gillin:

All right, Clara, really help us vacation-challenged folks out here. If I gave you a budget of $1,000 for a vacation, what would your vacation look like?

Clara Bosonetto:

Can I just use the $1,000 to get there? I've had my eye on one of the best values, and I would jump on it. It's called the "All Asia Pass." Cathay Pacific offers it from Los Angeles or San Francisco, and it's $999 for unlimited air travel over all of Asia for a 21-day period. Then I would look for real bargains, but I think that's one of the deals for 2001, and it will be for next year as well.

Eric Gillin:

Vacations are highly personal, I know, but you're an expert. What would you say is the most overrated vacation destination, and, conversely, what was your all-time favorite destination?

Clara Bosonetto:

Overrated? I can only answer personally. In my opinion, I would consider a week on a beach or the same resort very useless. My preference is looking for what I call a "town and country" combination. Going to a medium city, maybe even in Europe, where you can take day trips and get some local culture, but with the option to go into town for museums and fine dining. Put me on the beach for a week, and I don't know what I would do.

Chris Edmonds:

A couple of final quickies about safety and security in the air. First, there are a number of low-cost carriers in the air that many people avoid because of perceived safety issues, such as AirTran, Vanguard, National, ATA and Frontier. Does the safety issue figure into your decision about what airline to fly?

Clara Bosonetto:

Never, and it never will. The FAA security acts, especially the ones just enacted, apply to every carrier, even private and corporate travel. It's almost impossible not to fear. People aren't staying away because of fear, but because of their own pocketbooks and travel being discretionary. The FAA and airlines have taken tremendous measures. It's an enormous process. By mid-January, all national carriers will have to start a bag match. They can only be checked into cargo when their passengers are checked into the flight. People hear about their neighbor traveling without many delays. I just traveled and it was a very good process. Carriers are all abiding by the new security measures.

Chris Edmonds:

Finally, you are overseas and travel a lot so you have faced the airport security issues firsthand. Some people are still concerned about safety in domestic airports, and some are unsettled by the sight of National Guard troops and AK-47s in the terminals. What are your thoughts on airline security here and abroad? Is it safe to fly?

Clara Bosonetto:

It's funny, anyone who's traveled internationally in the last ten years is familiar with armed guards. In Rome they have machine guns. Americans are looking at changes everywhere. It's going to be the look of the next decade. It won't change. It makes us uneasy, but they're there to provide us with safety. When you take a domestic trip, those fears will start to go away. It's to frighten anyone who wants to mess with us again, not to scare us.

Chris Edmonds:

Clara, thanks so much for being with us, especially as it is late in Germany. We look forward to talking again very soon.

Clara Bosonetto:

Very good, thank you Chris!

Chris Edmonds:

Our guest, Clara Bosonetto, travel columnist for the Atlanta Journal Constitution. She joined us live from Southern Germany.

Eric, makes me want to get on a plane and fly, fly, fly. And, it sounds like we can do it cheap, cheap, cheap.

Speaking of flying, the market was grounded today by pre-announcements and layoffs. Wonder what our roundtable thinks of that?

Eric Gillin:

Good question, and here to take a peek into the markets and their future, a regular group of our best pundits. From Kirlin Securities, Chief Market Strategist Tony Dwyer; Scott Preston of Toronto-based Research Capital; and our own Aaron Task. Scott and Aaron join us from San Francisco.

Tony, looks like a little breather after quite a run-up over the last month or so. Is the pullback this week anything to get excited about?

Tony Dwyer:

It's interesting. If you look at the last month there were big up days and drifting days. We're starting to see the beginning of the rotation. The factors moved the market off the low, the rush to get involved. The reality that earnings aren't going to turn on a dime is going to help create a pause in the environment.

Chris Edmonds:

Aaron, the Fed slashed rates yet again this week, and the market seemed to yawn. Has the ability of the Fed to prompt a market rally come to an end? After all, rates really can't go much lower, can they?

Aaron Task:

They have another 175 basis points to go.

Chris Edmonds:

Does that mean Oldsmobile will pay me to take one of their cars?

Aaron Task:

At some point, that's what it's going to mean. I think the Fed has refined its ability to move the market in September when they poured some liquidity into the market after the attack. Now people are saying, "what are you going to do for me?" The 11 rate cuts will bring about a rebound.

Eric Gillin:

Scott, what's your take here. We sure have had quite a run. Do we rally into the New Year or does the market go on holiday break over the next couple of weeks?

Scott Preston:

I think we're going to tread water, especially in tech. We've come really far in the software sector, where I'm the closest to evaluations, especially at the beginning of the week when we had kind of a sell-off. That's the cause of the liquidity in the market. There's still a lot out there, nearly $4 trillion in money market accounts. We have a recovery coming. We're going to have to consolidate. We'll have some rally days, but I'm not expecting anything too great. People will be disappointed in the numbers. We have merging threats similar to Enron with Calpine, and some of these power providers are question marks. It creates issues for those companies going forward. It's going to be an interesting environment at the start of the year.

Chris Edmonds:

Tony, you did some work this morning on relative valuation and came to some interesting conclusions. Given that work, where would you be focused right now?

Tony Dwyer:

I agree with what was just said. We have to be cautious about Tech, possibly even into 2003, because this performance anxiety has driven up these stocks. Towards the end of the year, you'll see a rotation into defensive stocks where there's consistent earnings predictability and that are trading low. Coca Cola, Philip Morris, even IBM, they trade at a multiple that's relative to the market, not growth rate. I'm talking about the beverage stocks like Coca Cola and Budweiser, the drug stocks, the tobacco stocks, the energy stocks -- they have attractive valuations relative to the market.

Aaron Task :

You mentioned Pfizer and Merck. Maybe people are thinking there aren't any places left to be defensive?

Tony Dwyer:

It makes sense. The drug companies are fighting off patent problems. It's an industry-specific issue. You don't have it in food stocks. That's not an issue in Hershey's. There are defensive areas, but it seems like nothing is safe right now.

Aaron Task:

It's a difficult time right now. The bond market got beat up today, and we've been hearing a lot of talk about how cash has become trash, but at this point, people are going to feel good about getting a little return instead of no return.

Tony Dwyer:

I want to follow up one thing. It's happening like it's supposed to. The eleventh rate cut, eleven months after the first one. It's been dramatic. It's supposed to happen, and it's the mid-cycle stocks like consumer staples where money should rotate next. That's what the institutional guys were doing. Those are the stock's that will be up, Coke, Avon, stocks like that. Things in the consumer staple area.

Eric Gillin:

Scott, you are somewhat focused on tech and telecom. What are your thoughts on the news from Ciena and Lucent today? Sounds like there is still a plethora of issues facing the sector, and the tunnel may be longer than we thought even a quarter ago.

Scott Preston:

I agree, especially in telecom, the long haul market is over-saturated. That's Cieana's forte. They have been getting pricing pressure. That part of the sector will continue to suffer. Those guys won't recover until the carriers, the Qwests, the Worldcoms, the AT&Ts, all the big ones, start to spend again. The fourth quarter of 2002 is the soonest we'll probably see that.

On the Software side, Oracle made some upbeat comments last week. You have to clarify those. Larry Ellison was saying that when things get better they would achieve that growth. It's just not happening yet. That was evidenced today. Adobe had lower estimates due to weaknesses in Japan. We're going to bump along the bottom for a couple of quarters, and then we'll see a slow increase and a little more debt, especially in the telecom sector.

Chris Edmonds:

Aaron, the Producer Price Index number was surprisingly light this morning, even if you exclude energy. Does that further remove inflation from the picture, and does it suggest the Fed may not be done with monetary policy?

Aaron Task:

In my mind, they don't. In everyone else's mind, they do. Commodity prices are starting to pick up again. The gold index is starting to move. We were talking on the Columnist Conversation about the stagflationary environment. There may be a lot of problems in the system, but there is a lot of money splashing around out there. If you believe that inflation is a monetary problem, then at some point it starts to trade back in.

Tony Dwyer:

We had the economy growing at 5.7% before it started to go down. Inflation was tight, but there wasn't any economy inflation, so it's tough to make the case that money supply is going to do that. Labor force is the biggest component, and there's actually depression there. It could happen; I agree with Aaron that the economy can bounce around the bottom. People discount how much money evaporated with the stock market decline. With so many people who had no interest being in the market having become daytraders, that sapped the future buying power for goods.

Aaron Task:

To defeat my own argument, you look at what's happening in Japan and their currency. That's a recessionary force that can keep the dollar low. The European market is doing the same thing. There could be a deflationary cycle.

Tony Dwyer:

It's an interesting environment. It's unprecedented when we've had the money supply changes that we've had and not had the historically normal reaction in the market place.

Eric Gillin:

Scott, we'll give you the last word. What should we watch for between now and the end of the year?

Scott Preston:

Keep an eye on consumer spending. That's been the one bright point. They've been supporting the economy to some degree. It's the Christmas season, and people seem to be shopping online and in retail stores. Watching the situation in the market right now, the energy situation could be a lot more disastrous. These companies have real assets and are generating most of the energy. Economic data, most of that is backward looking. The retail sales and the current energy situation are the two points to watch for me.

Chris Edmonds:

As always, insightful and even potentially profitable. Thanks to our guests, Tony Dwyer, Chief Market Strategist at Kirlin Securities, Scott Dwyer of Research Capital, and senior columnist for

TheStreet.com

, Aaron "Golden-Boy" Task.

Eric, as always, an interesting and fast-paced hour. Before we go, I wanted to add a quick get well for one my favorite Roundtable pundits, and a dear friend, Ted Bridges. Ted had surgery to remove a benign tumor from his ear canal yesterday and is recovering in Omaha. He'll be out of pocket for about a month, but all reports are the procedure was successful and he'll be ready to talk shop again come the New Year.

Our thoughts and prayers are with Ted and his family. Get well soon my friend.

Eric Gillin:

Indeed, our thoughts are with Ted and his family.

Wow, hard to believe but only a little more than two weeks left in 2001, and what a year it has been.

Next week, we take a look back at the events that shaped 2001, both in the markets and around the world. And, we'll take a quick look ahead to the future, 2002 and beyond, and the challenges the markets, our economy and, indeed, our world will face in the coming years. All of that and more will be in a special year-end edition of

TheStreet.com

"Martini Chat".

Plenty of analysis and holiday cheer to go around, so join us next Thursday. We'll even have some very big news about the future of TheStreet.com Martini Chat as we spring into the New Year, so don't miss next week's show.

As always, thanks to all of our guests for a great hour, and, especially, Chris, thanks to you.

Chris Edmonds:

Thank you Eric. Next week will be chockfull of information that can save and make you money in the New Year ahead. Look forward to it. I'll be giving you my "can't miss" list of stocks for 2002 and my can't miss picks for the New Year's Day bowl line-up.

Eric Gillin:

Excellent. I can hardly wait. Until next week, cheers!