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Christopher Edmonds and Ellen Braitman chatted on TheStreet.com, Wednesday, Nov. 1 at 3 p.m. EST.

Host:

Thanks for joining us this afternoon. We're chatting with Senior Markets Editor Ellen Braitman and RealMoney columnist Chris Edmonds. Feel free to keep your questions coming even after we start!

TSC_EllenB:

Good afternoon, everyone.

CSEonTSC:

Welcome all and welcome Ellen Braitman, Senior Markets Editor ... great to be here with you all. October is gone and November is here ... your questions please!

jpfct_aol_com-guest:

Does anyone else think the beaten-down net rally has legs? RNWK, YHOO, AOL?

CSEonTSC:

The Yahoo! move today is on the content agreement with Dow Jones. But, and I'm long AOL, I think the AOL-Time Warner merger has the potential to reestablish certain leaders in the space as real attractive investments over time.

TSC_EllenB:

I think that after some of these stocks have fallen so far that investors are looking for good news they can invest on.

CSEonTSC:

The merger has the potential -- if the combined companies handle it right and the early news is good. To move the Internet leaders much higher...

Stanley-guest:

TheStreet Recommends

Question for Ellen: How does this fissure among the big Telcos affect the market for the rest of the year? Any idea of the long-term ramifications?

TSC_EllenB:

In terms of AT&T, reaction has been specific to the company's woes. I think that the latest news today from WorldCom makes people realize that growth is really slowing in telecom for more than just AT&T. We saw a lot of down moves today on the WCOM news. It seems that the hope of many companies to sell consumers baskets of various telecom services hasn't been happening the way companies thought it would.

CSEonTSC:

I agree with Ellen on T -- and I don't look for that to get better until we see Armstrong in the rearview mirror. I do think there is value to be found in the original Baby Bells if they handle this transition period well. I agree with

JJC

on SBC being the stallion in the field. A great

piece he wrote earlier this week explains his rationale and I agree completely!

cjkirschner-guest:

Assuming you have a two-to-three year window, what are the stocks you feel would provide the greatest upside at their current price levels ?

TSC_EllenB:

I can't make specific company recommendations, but please keep your other questions firing.

CSEonTSC:

That's a big question. I think you have to know your investment style and discipline and stick to it. You obviously can find some great values in beaten-up sectors and that is a good place to start. If you believe the market will become much more selective in the next couple of years, you want to look for market leaders.

That's where companies like AOL and SBC fit the mold. I also think you want big names, with big brands that are somewhat insulated -- as much as possible -- from a slowing economy. That will get you a solid portfolio that should be all weather.

lolden-guest:

Hi folks. What's positive fundamentally about Nasdaq now? That it's cheap?

TSC_EllenB:

Certainly, investors seem to be reacting to valuations that have come down. And this earning season shows that while the pace of growth may be slowing, revenue and earnings for many companies still grow.

CSEonTSC:

I agree - but it's not exactly cheap. AT&T is cheap. The question is really relative value, and I don't think you can simply say the Nasdaq as a whole is a relative value. Stock selection and business fundamentals become much more important in here. You have to do your homework.

lolden-guest:

Do you believe the semis are basically dead until next summer?

CSEonTSC:

There are certainly pressures as growth is slowing and we appear to be in that so-called transition period for new products. I hate to sound like a broken record, but I like the market leaders here as well. So I own Intel. That's it.

danmellis-guest:

Chris -- Two big hypotheticals in this question, but here goes: If Bush wins on Tuesday, and if Mideast situation becomes real ugly, what are the chances of opening up the North Slope in Alaska. And realistically, how much oil is up there?

CSEonTSC:

Bush clearly has said Alaska is fair game in his administration. There is a lot of energy up there, probably as much potential gas as there is oil.

The real question is about balance. Can we extract without permanent damage? The Middle East remains a wild card. I think we have slowly let the impact of the Middle East slip from our sights on oil. That could present a big winter surprise to oil prices. That is bullish for the oil and oil service stocks, which rallied on inventory news today.

TSC_EllenB:

It's been fascinating to watch the oil stocks. Just when you think they can't go any higher, there they go.

lolden-guest:

Amazon.com. -- From what

Herb Greenberg

says, it's basically one sham after another accountingwise. Are they terminal?

CSEonTSC:

Bezos is a brilliant visionary. That has taken him this far. Now, he has to be a great businessman and prove the efficacy of the biz model. He is a long way from that, and the clock is ticking. Christmas this year is CRITICAL. End of story ... or beginning of the next chapter.

TSC_EllenB:

Our

retail reporter has been all over covering Amazon and other e-tailers, so be sure to check out our latest stories.

soakman-guest:

Has this market seen capitulation yet?

TSC_EllenB:

It certainly seems we hit some kind of lows mid-October. But the market's also been incredibly volatile. The swings up and the swings down have been fierce. But it does seem, at least short term and with the third-quarter earnings season just about done, that a lot of the real downside is out of the way.

CSEonTSC:

I think in a number of ways we have. People point to Vinik news as a symbol, but I think that is a bit misguided. But, I do think that October washed out a number of those on the margin, and the money in the market today is money that will stay. That is a real positive going forward.

cabman51-guest:

Why even try to pick individual stocks in this environment? Why not just index or do mutual funds?

CSEonTSC:

Warren Buffett

would say don't pick stocks, pick great businesses. If you can't or aren't willing to take the time to study, by all means, use funds. But if your time horizon is longer-term and you are willing to take the volatility, great companies will always be the best way to invest. Fundamentals (sorry

GBS

) will always win out!

arniebodner-guest:

With higher oil prices on the horizon, what sectors do you like to be in?

CSEonTSC:

Well, let's see, oil services and exploration and production companies come to mind.

I think you obviously stay away from sectors that rely on energy as a major input -- that would include transport companies like airlines, although they are somewhat hedged, and it would include heavy industrial users of power and gas ... costs rise, margins shrink.

TSC_EllenB:

We see so much sector rotation and giant price moves. Tech moves down, drugs move up. I think it's hard to predict until we see what the environment is after the election.

lolden-guest:

Are you seeing any signs of retail investor redemption from mutual funds accelerating with the Nasdaq meltdown?

CSEonTSC:

I don't know the numbers, but talking to brokers and fund companies, it is interesting to hear that individuals largely have stayed the course over the month. The volatility has been caused in large part by big institutional moves, not the little guys. Very telling, if that is indeed the case.

ellie-guest:

What do you think Reg FD will do to the market and when?

TSC_EllenB:

To remind everyone, we're talking about fair disclosure, which requires companies to give information to one and all at the same time. I think it's going to have a big impact on how earnings reports are perceived. Now investors react to how companies perform compared to analyst expectations, which is largely guided by companies with input they can no longer give. So the next earnings reporting period will be especially interesting.

CSEonTSC:

Good companies will use it as an opportunity to be upfront with more info and more data to all investors. After all they have really nothing to hide. Bad companies will use it as a shield to duck behind. See my

piece this morning on a REIT,

Spieker Properties

, that used Reg FD to provide more thorough disclosure this quarter.

Kudos to them and a big smack to those that use it as a tool to hide behind. That is not the intent!

aio222-guest:

Chris, do you think that the momentum players are going to come back into the OSX?

CSEonTSC:

Probably not in the way they did this summer. They are slowly leaving, taking gains. But, I do think you will see support. Although, remember, the rotation Ellen talked about earlier (especially into tech) has really hurt the oil stocks in the past week.

TSC_EllenB:

And so much movement is being driven by prices. And with instability in the Middle East and price swings that come unexpectedly, the index moves with big jumps and bumps.

mda12p-guest:

When will it be a good time to re-enter fiber-optic stocks or should we find a new sector to invest in?

TSC_EllenB:

This area has been the latest darling of the market. Many say opticals are the new leadership. And perhaps they were the last to fall in this tech correction -- or whatever you want to call it. Certainly, we've already seen some bounce backs after Nortel's news drove the sector down.

CSEonTSC:

Ellen knows her stuff -- next! I do think Nortel (also long) will have a good 4Q, although the whispers of cost cutting and containment coming from the company to shore up the fourth quarter concern me a bit.

TSC_EllenB:

I think with so many companies, whether in opticals or others, investors are asking themselves what valuations make a particular stock attractive.

alesha-guest:

Chris: Any more info on the Enron, Azurix buyout?

CSEonTSC:

It is what it is -- a rescue of a company that just didn't work out. And, the spinout came at $19 and the buy in is coming at $7, with interest to Enron from the note. Hmm ... I'd make that deal any day of the week if I'm

Ken Lay

and the gang at Enron.... Not sure I'm too excited about it if I'm an AZX shareholder, but it does protect my downside

rlspider-guest:

Is the fuel-cell industry a legitimate investment option?

CSEonTSC:

Fuel cells and all the new energy technologies -- ways to make energy without a lot of input -- are big talk now, especially as generation shortfalls hit California. None of the companies are making money, but the technology is very promising. For example, a small fuel-cell project was just installed at a La Quinta hotel in Dallas, and it is totally awesome. That said, until the big energy players begin to recognize the technology, it will remain speculative. But it will become a major component to energy policy in the coming years.

TSC_EllenB:

Wow, Chris really knows his fuel cells!

CSEonTSC:

My colleague

Jim Seymour

did a great piece on the players in the biz a while back. If I know it, he knows it better!

TSC_EllenB:

And his La Quintas!

louise-guest:

Any gift suggestions for the holidays, my son is getting an interest in the market.

CSEonTSC:

Obviously, a subscription to

RealMoney

for the whole family. Ellen, any thoughts on that?

TSC_EllenB:

Good news for you is that

TheStreet.com

is free -- so he can get two gifts for the price of one!

CSEonTSC:

Seriously, get him interested in the market by buying him a few shares of a local company that he can learn about and follow. Get him to call the CEO, visit the company, etc. And, then tell me what you bought him, and we will do some research and write about it on

RealMoney

and

TSC

....

Oh, and look for Ellen's book on personal finance for the college-age kids ...

Dollars and Sense for College Students: Or How Not to Run out of Money by Mid-Terms

. Wish I could have had that when I was in school.

lolden-guest:

Hi folks. What, in your opinion, is it going to take for the Nasdaq mania mentality to evaporate so reasonable P/E's can return?

TSC_EllenB:

Well, investors have certainly been dampening the mania. The million-dollar question is how much further can it fall. I do think valuations are key. It seems we're past the time when investors will buy stocks that are priced for perfection.

arniebodner-guest:

What are the prospects for a positive turn around at JCP?

CSEonTSC:

It's happened before, but it wasn't this bad. I think there are too many major department stores that don't differentiate themselves. Moreover, the private-label biz without private-label prices hasn't helped in the past couple of years. They used to have a niche, now they have to find a new one. Don't know if they can do that. Not a bet I'd make in this market. Better places to be, for example, Kohl's eats their lunch in competitive markets.

kbloom3-guest:

Optical has fallen but what about storage and biotechs?

CSEonTSC:

I think storage becomes a bigger and bigger part of the new economy ... clearly entries by companies like Dell suggest the biz will grow. The question is when and by how much. As for biotech, all I will say is you find the R&D leaders and ignore the rest. The biz is risky. Find a good analyst and stick to her/him.

gary-guest:

The market isn't what it used to be. When I got in everything was on the up and up. Now I'll be lucky if I break even. What do you suggest I do to better prepare for next year?

TSC_EllenB:

If you're a buy and hold investor...

CSEonTSC:

you buy and hold ... next

TSC_EllenB:

These really are volatile times, so investors need to get used to seeing price swings.

mda12p-guest:

Chris, has EOG topped out or does their unhedged position in natural gas make them a great way to play its rise?

CSEonTSC:

EOG Resource -- the old Enron Oil and Gas -- is a very good natural gas E&P company. Obviously, it depends on the direction of gas prices. I think you will see gas hold at $4 or above, and that gives good visibility to earnings for EOG (and others) going forward. EOG has a solid management team. A company I don't own but like a lot.

cjshahh-guest:

Do you think another test for Nasdaq is coming since no follow-through rally today?

TSC_EllenB:

I don't know if a test would necessarily be tied to today's lack of building on yesterday's gains. But I do think the recent big gains and losses are a test of how the rest of the year will play out. That is to say, this period (not just today) seems to be about testing recent moves.

CSEonTSC:

Today seems like a normal breath to me. I think we may be close to done on the downside, absent any really bad news. The fact we didn't take the market down on the WCOM news today seems to be a positive to me.

view_thestreet-guest:

Why are Lucent and AT& T taking such a hard hit?

CSEonTSC:

Because management didn't do what they promised they would do -- over and over and over.

TSC_EllenB:

Investors seem to have little conviction that either company is close to getting its house in order.

jctorres-guest:

Mr. Edmonds: any thoughts on SLB and RIG?

CSEonTSC:

Schlumberger has problems outside the oil world -- heavy construction biz hurt a lot this past quarter. RIG's numbers are solid -- these stocks are really trading on the commodity price and rig counts with a little rotation with tech thrown in for flavor. I think you can find better names than SLB in the space though.

mda12p-guest:

Chris, How high do you think prices for natural gas will get to over the next six months?

CSEonTSC:

I think the mid $5 range is the limit at this point. Summer will prove to be interesting, however, as more and more power generation is dependent on gas. I think the range is probably $3.90-$5.30.

TSC_EllenB:

The Dow and Nasdaq are coming back as we chat. Think it's something we said?

jimseymour-guest:

Chris, no matter how much gas can be extracted from the North Slope, as a nation we're squandering gas -- a sensational, clean, high-efficiency fuel -- like crazy. Bad decision.

CSEonTSC:

Jim, I think you make a great point (you always do) ... Gas is a resource that can make a big difference in our energy policy. The Presidential race will be very important in setting energy policy....

Thestreet-guest:

Thanks for a great hour Ellen and Chris! Any final thoughts?

TSC_EllenB:

This has been fun. Let's chat again soon.

CSEonTSC:

Lots of fun as well. And, Ellen, enjoyed it a lot. Now that October is over, let's get back to business. The markets in the next two months are sure to be interesting and maybe even inspiring. And, if you need market inspiration, you will find all you need on

Real Money

and

TheStreet.com

. Your questions were awesome and thoughtful as always. See you back here soon and on

TheStreet.com

.

TSC_EllenB:

Chris, shall we meet here again soon?

CSEonTSC:

Gee, I'd love to! It's a date ... hope everyone else shows up to chaperone.