In The Money

Post-Millennium Tension in Techs, Blue Chips; The Gap and Wal- Mart, Under Review; Gadgets, Gizmos and Gates!

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

TERRY KEENAN, CNN ANCHOR: What's next for the market roller coaster? The techs and blue chips suddenly under pressure this week. Could investors see more nasty surprises down the road?

BILL TUCKER, CNN ANCHOR: Plus, can two big winners in the holiday sales marathon, The Gap and Wal-Mart, run the distance for IN THE MONEY? Cast your vote on whether we should keep their stock in our portfolio review.

KEENAN: Then, gadgets, gizmos and Gates! It's show and tell at the Consumer Electronics Show in Las Vegas. We'll have a live report.

TUCKER: And an investment club with more northern exposure than Wall Street frontage outshines the pros.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We did it without the dot.coms. We like stocks with earnings.

(END VIDEO CLIP)

TUCKER: We'll show you how these students in Alaska pulled off 100 percent gains. It's "Investment Club Thursday"

ANNOUNCER: From CNN and CNNfn, this is IN THE MONEY with Terry Keenan, Bill Tucker and Daryn Kagan.

KEENAN: And hello, everyone, and welcome to IN THE MONEY. I'm Terry Keenan.

TUCKER: And I'm Bill Tucker. We have a busy hour for you on what is shaping up to be another bad day if you own tech stocks. Day three of a nasty pullback in the Nasdaq. And we will have team coverage.

KEENAN: But first, let's bring you up-to-speed on all the action on Wall Street. And if you look at the Dow, things don't look so bad. We are having a nice rally in the Dow 30, up 72 points. Some of the stocks that moved with the strong economy of the standouts, including Procter & Gamble, also some of financials very strong, Dupont continues to be strong as it has been all week, and shares of Disney enjoying a nice bounce back. That is something we have been seeing all week as well.

But there you see the selling in the Nasdaq composite, it continues. We are off our worst levels of the session, but we are seeing selling in some of the PC-makers, the Internet index down about three percent, and the telecoms down about three percent as well.

TUCKER: And PC makers in particular under pressure today, that because Gateway came out after the close yesterday and said that fourth quarter revenues were slower than had been expected on Wall Street. They blamed Y2K and they blamed continuing supply problems. Now the company has talked about both those issues before, but yesterday was the first day they quantified that it is going to will hurt the bottom line.

Stock closed officially at $62 on the New York Stock Exchange.

KEENAN: Right, and then traded much lower. So even though it looks like it is higher, it is still down $2 from where it finished yesterday.

TUCKER: It is actually down $2 a share, which is one of those odd-looking things on the Street.

All right, off of Gateway though, we have got to talk about AMD for just one second because US Piper Jaffray came out today and upgraded AMD to an aggressive near-term trading buy because AMD, of course, supplies those chips that Intel in not able to deliver to Gateway.

KEENAN: Exactly, so if Intel is having a problem, it might help AMD. Now, of course, we are also seeing selling, as I mentioned, in some of those telecom stocks. And MCI WorldCom is the biggest loser right now. Salomon Smith Barney has been a big cheerleader for this stock, but it is trimming its earnings estimate for this year by just about 3 cents to $1.90, and that is weighing on that stock.

TUCKER: The other news after the close yesterday, of course, announced that Macworld, Steve Jobs, no longer going to be the interim CEO, he is in fact the real CEO. And Warburg Dillon Read coming out today, upping their price target for the stock. But it is kind of a bad day for the PC-makers, as you mentioned, in the market.

KEENAN: Exactly, so we are seeing kind of that halo effect from Gateway weighing on shares of Apple. Of course, Apple is in our IN THE MONEY portfolio. And we have been asking all of you to decide what stocks we might want to sell and lighten up on. We started this poll yesterday.

Here are the early results. As you can see, Coca-Cola Enterprises is the one that is getting the most votes in favor of being kicked out of this portfolio. More than 40 percent of you would like us to lighten up on those shares.

TUCKER: And that is funny, you know, Terry, because we just put some of these stocks up for review and nobody wanted to sell, when we put them under review, but right now Coca-Cola Enterprises is leading vote in terms of which stocks we should sell.

You can vote on that by going to CNNfn.com, go down to the bottom of home page there, go in and vote. Realize it takes a little bit more time than going yes or no on one single stock, but we do need to trim the portfolio. We got to practice some prudent management here. So get in there and tell us which ones of these stocks you think we ought to get rid of out of the portfolio.

KEENAN: And a little later we're going to look at two of the retailing stocks that we own, The Gap and Wal-Mart. We'll have a retailing analyst here to talk about those two stocks as well.

TUCKER: All right, let's head down to Wall Street now. Rhonda Schaffler is looking after things at the New York Stock Exchange for us and Sasha is holding court over at the Nasdaq, where we are seeing losses for the third day in a row.

Let's begin first with Rhonda.

And Rhonda, Caterpillar having a nice move in the market today.

RHONDA SCHAFFLER, CNN CORRESPONDENT: Yes, how about that? All of those Dow stocks that people were ignoring for weeks, suddenly they are so much back in vogue, and all of these brokerages have come out and said all kinds of nice things about some of these Dow stocks.

It has helped to keep the Dow up pretty strongly here, even as we are seeing weakness elsewhere in the market. One trader I talked to said, it has been wild and all over the place. And that could be the quote of the week here.

Let's take a look at some of the Dow stocks and you will see Caterpillar and a few others on this list we are going to show. Let's start first with J.P. Morgan, seeing a recovery in financial stocks. It is a little broader today than yesterday. J.P. Morgan is up four.

Proctor & Gamble is up 4 11/16. Prudential upgraded its rating on P&G to "strong buy" from "accumulate."

3M is up nearly $3. Prudential raised its price target on the stock this week by $10 to $110.

Here is Caterpillar up 1 7/8. PaineWebber upgraded this stock to "attractive" from "neutral." The analyst saying the stock is depressed due to two years of underperformance.

Home Depot, though, bucks the trend. It is down more than $2. The stock has shed more than eight percent since the beginning of the year. Overall, retailing stocks mixed today.

Let's take a look at brokerage stocks. I mentioned the financial stocks are rebounding here, same for the brokerage stocks, which is different than what we saw yesterday. Lehman, though, is up better than $2, very strong earnings for this brokerage firm. Fourth quarter earnings coming in at $2.28 a share, much, much better than what the Street was looking for. Trading revenue for the quarter up a whopping 592 percent. Investment banking revenue also up sharply.

Merrill is up 1 13/16. Morgan Stanley is up 1 11/16. Goldman Sachs is up 3 1/8, and DLJ is up 1 1/2.

We did have a brokerage move against some of those stocks, a bank downgraded some of those yesterday, which is why some were under pressure.

Also under pressure, of course, those technology stocks, many of them, and a lot of them are traded on the Nasdaq/Amex marketsite, where Sasha Salama is gracing us with her presence today.

Hi, Sash.

SASHA SALAMA, CNN CORRESPONDENT: Hi there, Rhonda.

Technology stocks are under pressure, though they ate off their lows for the morning. Want to tell you about one bright spot in the market today. That is Cobalt Group. Look at this, up 134 percent. CBLT is the symbol here, over $24 a share.

This stock was a $10 stock yesterday. This company manages Web site for car dealers and the news is that at the end of this month they are going to be launching motorplace.com, which will provide information about used car parts, vehicles, and other information having do with that industry. The stock just taking off on that news. CBLT a big winner here.

Microsoft down one percent to 112 1/2. The world's software giant saying at the Consumer Electronics Show in Las Vegas that it is launching a new deal with BarnesandNoble.com. They are going to be starting an e-book store, in fact, together, which will feature Microsoft's software and will allow you to read a book if you so desire off a hand-held device. Not sure if you want to do that, but they are creating the technology. Microsoft down 1 percent.

BarnesandNoble, up though, nearly 14 percent on that news of the alliance, up at 16 1/8. BNBN also coming in with stronger-than- expected revenues for the fourth quarter, beating estimates. They did say they earned revenues, I should say, of $81.50 million.

VA Linux down nearly 5 percent to 184 and change. This stock was a $30 stock when it came public last month, the news here is the lead underwriter of this IPO CS First Boston initiated coverage with a buy. Does say the stock is expensive here, but that it could double, and it could double over the next 12 months -- Bill and Terry.

TUCKER: All right, thank you very much, Sasha. Sasha Salama reporting from the Nasdaq/Amex marketsite.

KEENAN: Well, "Smartmoney" recently named David Alger, of Fred Alger Management, the best fund manager of the decade. He has six funds under his wings, most notable Spectra, which is tech based, it is up 72 percent for 1999 and over the last decade up 900 percent.

TUCKER: Its holdings include Yahoo!, Exodus Communications, AOL, Microsoft and eBay. And David says he gets his inspiration from art galleries, in particular Rembrandt.

All right, not only....

KEENAN: Doesn't look like a Rembrandt today, though, David.

TUCKER: Exactly. If you were a Rembrandt with money that is for sure. What do you make of this sell-off on the tech stocks? Is this just something that is long overdue, and we all ought to close our eyes maybe and let it pass?

DAVID ALGER, FRED ALGER MANAGEMENT: Exactly. I think it's entirely predictable. I think a lot of people wanted to take profits at end of the year, last year, especially in December, when the stocks ran up so much. And then what happened was that, you know, they didn't want to do it for taxes. January came, interest rates ran up and they said, gee, we better do it now. But if you really look at it, the interesting thing is Yahoo! is trading at all most twice where it was in November, you know, just by contrast. In fact, it's basically down to where it was trading in the beginning of December. So really we haven't given up that much. It's so hard to believe, but some of the stocks are really not much off of where they were before the December run-up.

KEENAN: So what are you doing right now? You had a great year, last year. Are you taking some money off the table and waiting for prices to go down?

ALGER: We sold a lot of Amazon in December, actually sole into the rally, and we sold a few -- trimmed a few of the others, but other than that, we're just waiting. We think what's going to happen is that prices will pull back and then we'll have some great buying opportunities. Maybe we'll buy our Amazon back.

TUCKER: A lot's been made of interest rates and the interest- rate scenario, a scenario which we should not did -- hasn't changed since we started talking about interest rates in December. Do they concern you? If the Fed does in fact raise rates in February, you're going to reduce your exposure to the market even more?

ALGER: Well, they do concern me. I mean, you know, I would note that in October the market really had a little swoon when that was predicated on 6.4-percent long bond. Now, of course, it's much higher than that. I don't really understand it, because, I mean, yes, business is strong but there's still no evidence of inflation, but I do believe the Fed will raise rates. I think they're being forced into it by the bond market. So probably in February they'll raise rates, but I guess we'll have to just live through that period.

KEENAN: Don't have much choice, I guess. You know, it's hard to believe but this biotech sector has been hotter than the Internet in the last month or two. Do you play those stocks at all?

ALGER: Yes, we do. We, you know, made a lot of money in Amgen, actually, in the last month or so. Biogen has been another one of our stocks. But, you know, there are not many of them, and they certainly aren't -- it's not as big an industry. They don't have the prospects of the Internet because they've got to get all their drugs through the FDA, kind of slows down the process. So, we do play them but obviously not in the -- not in the same size.

KEENAN: Mostly the big names.

ALGER: Yes.

TUCKER: All right, David, thank you very much. David Alger of Fred Alger management, thanks very much.

ALGER: Delighted to be here.

KEENAN: Thanks and congratulations.

ALGER: Thank you.

KEENAN: And coming up next on IN THE MONEY: it's gadgets-a-go-go in Las Vegas. The International Consumer Electronics Show is up and running, and we're going to take you there for a live report.

TUCKER: Plus, high marks for some student stock pickers. Find out how their triple-digit gains are beating the pros and how you could do it too on "Investment Club" Thursday.

IN THE MONEY is back in a moment.

(COMMERCIAL BREAK)

KEENAN: A "Wake-up Call," this morning, for George Soros, one of the world's most famous billionaire investors. Recent market volatility hitting his hedge fund, The Quantum Fund, hard. The $10 billion fund reportedly lost $600 million in the last three days alone. Ouch for Mr. Soros. But of course they moved heavily into tech late last year, and it helped them out a lot in 1999.

TUCKER: I was going to say, and they probably made 600 million in the last part of December alone. So, they're probably still ahead of themselves.

Well, Attorney General Janet Reno is weighing in with comments about the INS decision on six-year-old Elian Gonzalez, and that's our top news story at this hour.

KEENAN: To get you caught up on that and the other business -- the other headlines, we check in with Daryn in Atlanta -- Daryn.

DARYN KAGAN, CNN ANCHOR: Hi, Bill and Terry.

Yes, we saw those comment earlier today live on CNN, Attorney General Janet Reno saying she sees no reason to reverse the decision by Immigration officials to send Elian Gonzalez back home to Cuba, at least based on what she knows now.

(BEGIN VIDEO CLIP)

JANET RENO, ATTORNEY GENERAL: What they took into consideration is who under the law can speak for this six-year-old boy, who really can't speak for himself. He has a father, and there is a bond between father and son that the law recognizes and tries to honor. We have no information that would indicate that that legal connection, that bond should not be honored.

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KAGAN: The Cuban boy's American relatives are asking Reno to reverse yesterday's INS ruling. Protests, meanwhile, against the decision continue in Miami. Two dump trucks and a pickup truck tied up downtown Miami traffic, today. Demonstrators plan to rally outside of the Federal building. They've also been having counter- demonstrations in Havana.

Tonight in New Hampshire, the Republican presidential candidates get their turn to debate the issues. Sparks could fly when the two front-runners in New Hampshire, Senator John McCain and Texas Governor George W. Bush, discuss their tax-cut plans. Also sharing the stage tonight, the four other Republican candidates, Gary Bauer, Steve Forbes, Senator Orrin Hatch and Alan Keyes.

Heated words marked the first presidential debate of the new year. That was between Vice President Al Gore and Democratic challenger Bill Bradley. They squared off last night in New Hampshire, which holds the nation's first presidential primary less than a month from now. Both men traded barbs over health care, leadership and other issues. Various polls showing Gore and Bradley are running neck-and-neck in that state.

Of course, CNN can help stay you up-to-date on the presidential race at our Web site on the Internet. The address: allpolitics.com.

CNN has learned there might have been some progress at the Mideast peace talks taking place right now in Shepherdstown, West Virginia. Those talks going on between Israel and Syria.

For the latest, let's bring in our Andrea Koppel -- Andria.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Daryn, it appears U.S. official have made the decision as of this hour that it didn't make sense for any of the four committees which were finally established, some of which got down to business yesterday, for them to meet today. Secretary of State Madeleine Albright is expected to meet with the Syrian foreign minister, Farouk al-Sharaa, to try to figure out how to get things moving again. President Clinton is expected to arrive here in West Virginia later this afternoon.

It appears the problem is the following: As of Wednesday, two of the four committees did sit down, that is Israelis and Syrians with American mediators present, did sit down to discuss two issues of most concern to the Israelis, that is establishing normal diplomatic relations with Syria between Israeli and Syria, and secondly, getting security guarantees. However, the other two committees, water, and of most concern to the Syrians, border, how much of the Golan Heights they'll get back from Israel, have not yet met. And so during this meeting with Secretary of State Albright and Farouk Sharaa, the Syrian foreign minister, U.S. officials will try to make some progress, but really, Daryn, the sense is that they won't be able to break what appears to be just essentially both sides digging in their heals until President Clinton arrives later this afternoon, perhaps able to inject some new ideas into this long-stalled peace process -- Daryn.

KAGAN: Andrea Koppel bringing us the latest from Shepherdstown. Thank you, Andrea.

Now we're going to talk stuff: Kitchen refrigerators with access to e-mail and the Internet, digital audio radio and countless portable gizmos for consumers on the go, and that barely scratches the surface of what's on display at the Consumer Electronics Show currently going on in Las Vegas.

Mary Kathleen Flynn is there. She's bringing us up to speed on the next wave of electronic wizardry -- Mary Kathleen.

MARY KATHLEEN FLYNN, CNN CORRESPONDENT: Daryn, it truly is a very exciting time in the consumer electronics industry. In fact, a lot of people are talking about how there's a revolution in consumer electronics, whole new product categories being introduced.

Microsoft's Bill Gates, last night, gave the keynote address, and he also talked about this revolution.

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BILL GATES, CEO, MICROSOFT: It is a very exciting time to be looking forward. The pace of innovation has never been more rapid. In fact, many of the promises about convergence and digital media that have been discussed over the last decade will become true just in the next few years.

(END VIDEO CLIP)

FLYNN: And a lot of these future products are going to be absolutely tiny. Miniaturization is in. Sony also held a press conference last night, and they were showing just tiny little products like this Sony Walkman that is the size of a pen. And it's tiny. There are also these memory cards that let you store all different kinds of media. For example, little video clips and audio clips, and all that's going to allow you to see more and more exciting innovations.

There were also lots of little gadgets from Panasonic; a tiny digital camera, for example, that could make a nice little necklace or a pendant for you, camcorders the size of match boxes, all kinds of Dick Tracy devices; for example, watches that let you listen to music. Of course you'll be able to get on the Internet with everything from your little wristwatch to your hand-held device; lots and lots of tiny products that are going to let you get on the Internet; and of course all kinds of smart home applications as well; refrigerators that order your milk for you and network your entire home, Daryn. KAGAN: Everything but brush your teeth, Mary Kathleen. Besides...

FLYNN: Well, not yet.

KAGAN: Not yet, but stay tuned. Maybe next year.

Besides tiny and cute, any other trend that you saw in a lot of these products?

FLYNN: Well, we're really seeing a lot of home networking products. And for example, I've got two devices here with me, one from Cisco and one from a new company called 2Wire, and both of these allow you to have one high-speed phone access, and then you can hook up all your devices onto one of these products, and then all your devices that can hook into the phone will get the advantage of that one high-speed phone line. Lots of home networking going on, lots of intelligent, smart homes. I'll being showing more throughout the day.

KAGAN: Our stuff correspondent Mary Kathleen Flynn in Las Vegas.

Just get right to it. Thank you, Mary Kathleen.

FLYNN: Thanks, Daryn.

KAGAN: Appreciate that report.

So it sounds like cute and tiny is in. Terry, that's good news for someone petite like you. Bill and I, we are so passe; bunch of big blubs (ph). Who knew you were it?

KEENAN: Well, I don't know if anyone's called Bill cute and tiny lately.

TUCKER: No, they haven't, as a matter of fact, but thank you very much, Daryn, because I think you're cute and tiny, too, as well.

KAGAN: Well, thank you. I think third grade was the last time I was cute and tiny, but thanks for that, Bill.

TUCKER: There you go. All right.

Well, we're talking about Sony and miniaturization and that fits really nicely with the stock, you guys, we want on the set here.

KEENAN: Yes, the stock's being miniaturized today because it's down $30 a share.

And we have Greg Clarkin and Andy Serwer of "Fortune" magazine with us.

And some comments from Sony's president. He said the stock is at a bubble price?

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE" MAGAZINE: Yes, I mean, I couldn't believe this, Greg. I kind of -- you know what it reminds me of, of course, is Steve Balmer from Microsoft saying that he thought Microsoft and technologies shares were a bubble a couple months ago. I think this is really irresponsible stuff. I don't think a CEO has any business really commenting on stock prices at all. It is what it is. Let the market decide; just do your job.

GREG CLARKIN, CNN CORRESPONDENT: I mean, that's what one analyst I spoke to said. He goes: This basically points to a fundamental different viewpoint that Japanese executives have versus the free markets. He says, basically, don't tell Mr. Market what to do. Mr. Market will figure it out on his own. And the stock -- they basically said -- he used the word bubble. He said anything above 20,000 yen -- which at the time was trading at about 25,000 yen -- he said constitutes a bubble in the stock. The stock sharply gave off, actually dragged the Nikkei down and some other electronics bellwethers.

TUCKER: Well, because it wasn't a comment -- correct me if I'm wrong, Terry, it wasn't a comment aimed directly at just Sony stock, was it? It was a comment aimed at stock prices in general.

KEENAN: No, no just -- I think just Sony stock...

SERWER: No, it was mostly their stock, Bill

TUCKER: OK.

KEENAN: ... and he put a price on it: 20,000 yen, which works out to $182 a share.

SERWER: Right, that is a different thing. And you know, the stock has been on a tear, of course, Greg. It's up. He's the CEO at -- Nobuyuki Idei -- since 1995, the stock's up five times, but mostly his last year, it was up 200 percent. And in December, it was up about 100 points.

CLARKIN: Yes, it was an incredible run in the ADRs of about 60 percent in December along, giving back a bunch of that today, down 22 last check, trading I think around 222 now.

KEENAN: Yes.

CLARKIN: And i think you have PeopleSoft, right, numbers better than expected.

SERWER: Yes, absolutely, PeopleSoft, which has been really under fire over the past couple years, was a $50 stock in 1998. It got down to the low and mid teens, and it's up 3 points today to about 21 bucks. The company said they're going to do about 2 to 4 cents versus 4 cents. This, of course, an enterprise software company, competes with SAP, and had really been dragged down by Y2K. Very controversial: Will it, can it come back? But it does have a big install base.

CLARKIN: Numbers better than expected there. Mandalay Bay, the gaming company -- the result company, the numbers are going to be worse than expected. Interesting story here: They basically, according to Jason Ader (ph) over at Bear Stearns, the analyst that follows them, jacked up prices so significantly in the holiday period in Vegas that nobody came. They depended heavily on South California traffic, they jacked up the prices anywhere from three to five times for their rooms, and, according to Ader, at least basically people in Southern California said, you know what, I go there a lot, I don't need to be there that holiday weekend.

On top of that, they had some very big name acts -- the Eagles, Bette Midler -- that they also had to pay big bucks to come and perform. So their numbers going to be well below expectations. The Street was looking for 25 cents; they'll get about 16.

TUCKER: You know, what of the things you expect in Las Vegas is a cheap hotel room because you're going to lose all that money down on the floor anyway.

SERWER: So we need you two guys to go out there. They need some business. Come on.

KEENAN: Yes, well, we have M.K. out there.

SERWER: All right. She should stay there then.

TUCKER: With the stuff. M.K.'s out there with the stuff.

SERWER: Right.

KEENAN: OK, thanks guys.

Coming up next on IN THE MONEY, we're going to talk live with a Wall Street strategist who's accurately called the market's direction before.

TUCKER: Yes, but is he signally now a sell signal? We'll ask him and check how that could affect your investments, next.

KEENAN: IN THE MONEY is right back.

(COMMERCIAL BREAK)

KAGAN: And we are live now in Chappaqua, New York, listening to President and Mrs. Clinton talk about their first night in their new home.

(JOINED IN PROGRESS)

HILLARY RODHAM CLINTON, FIRST LADY: ... that aren't done yet but are going to have to be tended to.

QUESTION: So you're going back to Washington today (inaudible) that?

RODHAM CLINTON: Yes. I'm going back today and we'll be packing up more things and moving more things in the next couple of weeks, so that it'll be a process. You know, we're not going to be totally moved in and everything in place for a while. But it's a lot of fun for us to be able to do this again for the first time in such a long time.

Because we of course worked very hard in the White House and spent an enormous amount of time and effort trying to keep the White House in good shape and do some additional work that needed to be done there, but it's different when you're doing it in your own home.

QUESTION: Have you thought any more about a schedule for how often you'll both be here?

QUESTION: (OFF-MIKE) days ago said that both of you, the Clintons, he said, have been egregious violators of soft money, both in how it's collected and how it's distributed. Your reaction?

RODHAM CLINTON: We're going to talk about our house this morning, which we are very happy about being in and being New Yorkers, and we'll leave that to another time.

QUESTION: Mr. President, are you going to Lazard Freres?

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: No. No, I keep reading all these things. I've not given very much thought to this. I'm going to work very hard on finishing my library and center, and I'm going to devote all my attention being president. I've got a lot -- a big agenda this year.

We're going back now, and I have to go back to Shepherdstown this afternoon. But I've had no discussions with anybody about that kind of move. And I was amazed to see that in the paper. No one's even suggested that.

QUESTION: Mr. President, last night the vice president debates said the Hill asked military commanders about their feelings on gays serving in the military before appointing people to the Joint Chiefs of Staff. Is this litmus test the way it should work?

CLINTON: Well, I think the real problem is -- let me go back to what happened, because as you know my view was, and I will restate my view, the Uniform Code of Military Justice prohibits homosexual contacts. So my view was if someone was willing to take the pledge to observe the Uniform Code of Military Justice, they shouldn't have to lie about being gay and being in the military.

Then let me remind you what happened. The Congress voted by a veto-proof majority against that position. So that's how we got to "don't ask, don't tell." My focus has been on trying to make the policy work the way the military commanders said it would work back in 1993, which it has not been doing. No one disputes that.

To Secretary Cohen's credit, back in August he announced some new guidelines which have now been implemented for training and for implementation, which I think will significantly improve the present situation over the next few months.

Now, the vice president and Senator Bradley say they want to go back to the position that I advocated in '92 and '93. In order to do that, the Congress will have to change the law, I believe. I don't think that the military and the president have the authority to do it. Now you could go back and look at the constitutional arguments...

KAGAN: We've been listening to comments from President and Mrs. Clinton. This turned into a kind of an impromptu news conference, making their comments from outside their new house in Chappaqua, New York.

IN THE MONEY takes a quick break. We'll be back after this.

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KEENAN: You're watching IN THE MONEY. Welcome back. I'm Terry Keenan.

TUCKER: And I'm Bill Tucker. Coming up in this half, we're going to go up north, up to Alaska, and introduce you to an investment club that has doubled its money in 1999. And they will share their stock picks and tell us how they are doing in the light of the recent tech trouncing, Terry.

KEENAN: We are also going to continue to review our IN THE MONEY portfolio. Today, we're going to look at two retail stocks that we own. We are going to debate whether we should hold on to them for the long haul.

TUCKER: But before we do all of that, let's check on the market action. And we do have something of a split market here. The Dow industrials looking strong today, consumer cyclical stocks, industrial stocks, Dupont and Caterpillar looking very strong in the market today, up better than $2 a share. Financial stocks also moving higher. That's helping the power the Dow, we are up 69 points.

The Nasdaq composite, well, techs are taking a trouncing here in the new millennium. And for the third day in a row we are seeing a sharp sell-off here at midday. The Nasdaq down 82 points.

KEENAN: We're below that 3800 mark, and of course forecasting when a market has hit its top is very tricky, but if you can do it right it could be profitable.

TUCKER: My next guest very publicly called the bottom of the bear market in 1974 when the Dow dropped to 575.

KEENAN: Remember that?

TUCKER: Exactly. Now he sees a market top. Joining us from San Diego is money manager Daniel Turov.

And Daniel, thanks for being here.

DANIEL TUROV, TUROV INVESTMENT GROUP: Pleasure to be here. Good morning.

TUCKER: Why are you calling a top here? You say a market is basically a pit of emotions and that we've hit some kind of greed climax here? Help me understand that one.

TUROV: Well, people buy things because it brings them emotional satisfaction. When it comes to a purchase at a checkout counter it's easy to see, but people buy stocks for the same reason. They feel like they're going get some benefit out of it, and these emotions that go into the buying and selling decisions cannot be measured directly, but they can be measured indirectly. And that's what I did, in essence, back in December of 1974 when everybody was extremely bearish and my data showed that that selling had just about run its course.

I've waited 24 you years for that degree of emotional excess to come to the present point where we have that equivalent at the top of the market.

KEENAN: But what makes you think that it's now? Because some of the traditional yardsticks that other people have used, you know, the shoe shine boy, the taxi driver talking about stocks, the "Newsweek" cover with the bull, that happened already years ago, and this market has continued to defy those bearish expectations and has continued to go up. Why now?

TUROV: Well, because as times change, indicators change. I rely strictly on data which I've developed over the years as markets change, the parameters change. We've had some tremendously positive things happen in America.

For the first time in the history of the world, we have one preeminent military power, the United States, which isn't trying to take over its neighbors. It's never happened before. We have an incredible technological revolution going on, we have a variety of other things which have made for very definite justification of this major bull market, and with that justification comes a justification for higher valuations than the bears have been saying, or some of the bears have been saying for some time. And we have not reached the level until this week for that degree of excess.

And that's why the data apparently is -- see, I don't try to figure out why the data is coming out the way it is, I just know that it's reliable statistically, not guaranteed, but within a fairly high probability, and that's why we have levels here that seem to be the top.

KEENAN: OK. You're on the record as calling the top. We'll bring you back if you're right. I hope you're not, though, for the rest of us.

TUROV: Thank you.

KEENAN: Daniel Turov joining us from San Diego.

TUROV: Thank you.

TUCKER: Let's bring him back even if he's wrong, too.

This week we're reviewing our IN THE MONEY portfolio. It is 33 stocks. Now we think it's time that we prune a few in order to raise some cash for the future. With December chain store sales just out, covering sales stores open a year or more, we thought we would reconsider a couple of retail stocks that we own.

Wal-Mart and Gap are in the portfolio and holiday shoppers helped boost Wal-Mart's December sales by 9.1 percent. At the same time sales at The Gap climbed five percent.

Back in October, we purchased 37 shares of Wal-Mart at 53 a piece. We've earned money on them. They're up 18 percent, and we scooped up on some Gap stock in November buying 29 shares at $34 a piece. That group up 25 percent.

Checking those shares right now. Both are moving sharply higher in the market, and since we're looking at pruning some stocks, it might be good to sell into a rally, Terry.

KEENAN: Yes, well, let's get some advice. Joining us now from PaineWebber's trading floor is the retail analyst there, Richard Jaffe.

Welcome to IN THE MONEY. Nice to have you with us.

RICHARD JAFFE, PAINEWEBBER: Nice to be here. Thank you.

KEENAN: Let's talk about the Gap, because it's getting a nice pop. Some of your colleagues are out recommending it today. What do you think of the Gap at these levels?

JAFFE: I'm a buyer. I believe in the stock very much. I think, long term, the Gap has several components for growth and that would give them much more consistent earnings growth long term. We've got the Old Navy business, the accelerating international business and the core strength in Gap stores and Gap Kids.

I think what happened this month was very positive as well, demonstrating their ability to manage both their inventories and their markdowns. We're anticipating improved gross margins as Gap was able to postpone markdowns, take markdowns later, generate more sales at regular price and become a more profitable retailer.

TUCKER: OK, there's Gap. We've got those nice, well known names like Old Navy. Then we've got Wal-Mart, which is, if you will -- pardon the analogy -- like the Amazon of the traditional retailers, selling anything and everything. What do you think of them?

JAFFE: I think they're brilliant retailers, excellent in executing the retail concept and providing excellent value to the consumers. I wouldn't want to step in their way as they roll their business out to a full-blown e-commerce site. I think they're going to be a very potent force both internationally as well.

KEENAN: Wal-Mart has the wind at its back in particular because of the incredible consumer spending gains that we've seen year-over- year. Do you see any sign that consumer spending is going to slow down in the new year? JAFFE: No. I think the consumer's going to remain very robust in the first half of the year, perhaps slowing somewhat should interest rates increase dramatically. I'm not prepared to predict interest rates, but I think the consumer is out there buying aggressively in January, and that's going to continue through spring.

KEENAN: OK, thanks, Richard. We appreciate it.

JAFFE: Thank you.

KEENAN: Richard Jaffe of PaineWebber

TUCKER: All right, if you think we should drop Gap, Wal-Mart or any other stock from our IN THE MONEY portfolio, we want you to vote. Head over to CNNfn.com's Web site and cast your vote down at the bottom of the home page. So far, many of you are telling us that Coca-Cola Enterprises, Lernout & Hauspie, Pixar, Amazon.com are the leading stocks that we should be cleaning out of our portfolio.

KEENAN: And I see the Gap's right under that, so we'll see whether Richard changed anybody's mind. He had a bullish outlook on that stock.

Coming up next on IN THE MONEY: a dirty dozen for Wall Street. We're going to show you how 12 students scored 100 percent returns on their investments. This is "Investment Club" Thursday.

TUCKER: Yes. As we head to the break, here's a quick check on some of the stocks on -- in our IN THE MONEY portfolio. Think about it. Which ones should we sell? We'll be right back.

(COMMERCIAL BREAK)

TUCKER: All right, there you are, looking at a picture of the New York Stock Exchange. Dow in favor, up 85. Techs out of favor, Nasdaq down 74.

KEENAN: And welcome back to IN THE MONEY.

And you know, it's a tough day if you're traveling here on the East Coast. We're having big delays right up and down the Eastern corridor.

TUCKER: Yes, exactly. For the details on what ails the northeast corridor and its airports, let's get the latest from Daryn down in Atlanta -- Daryn.

KAGAN: Bill and Terry, the good news is they've fixed the problem. The bad news is not soon enough before it caused more problems. If you are flying anywhere, today, especially up and down the East Coast, don't go in a big hurry. Federal aviation officials say that a so-called peripheral device at a Washington-area control center malfunctioned, earlier this morning, and that caused a problem.

The problem has caused flight delays and cancellations through the northeast corridor. Earlier in the morning at Regan International Airport in Washington, for instance, things are slowly getting back to normal, but operations at major airports from Raleigh, North Carolina, to Boston came to a near standstill for more than two hours. The FAA says the device, which was unable to transfer data to the main air traffic control computer, is now fixed. He says the problem was not believed to be Y2K-related. Little solace if you're stuck in an airport somewhere.

In world news, India is once again accusing arch foe Pakistan of masterminding last month's Indian Airlines hijacking. Indian officials say they've arrested four Kashmiri separatist militants in connection with the incident. India's home minister says that Pakistan is, as they say, "neck deep in this dirty game of hijacking" -- that's their words, not ours. Pakistan is firmly rejecting the charge, saying India could be fabricating evidence to show that Pakistanis were involved. Five hijackers held 155 captives for eight days before releasing them on New Year's Eve.

Science news now. Some NASA scientists reportedly have a new theory about what may have happened to the Mars Polar Lander. "The Denver Post" says the scientist think the vanished spacecraft descended into a steep canyon, tumbled down the walls and then broke apart. The paper says the scientists were surprised that the canyon was inside the projected landing zone. The Polar Lander was supposed to touch down on Mars on December 3rd. It hasn't been heard from since that day.

In Los Angeles, police are on the lookout for a thief with very expensive taste. Now, watch this tape, here. It's a surveillance tape from a Saks 5th Avenue showing the jewelry counter. Police say the man grabbed about $180,000 -- oops, there he goes -- $180,000 worth of jewelry from the display case as he was looking at it there. The sales clerk just kind of was taken by surprise. The thief ran out of the store. No word yet on the whereabouts of the thief or the jewelry.

And then there's this from our oops department. A suspected bank robber is in custody in Utah after leaving the feds a pretty easy clue. Agents arrested 32-year-old Johnny Lee Miller (ph) for a New Year's Eve bank heist. They say he hid the gun he used in an envelope and then left that envelope behind. Inside was Miller's graduation certificate from, get this, an anger-management course. It was issued by Utah's Department of Corrections.

Guess he did well on anger management. Not so well on the bank robbery department, though.

KEENAN: Not so well in the common sense department.

KAGAN: No. Back to you guys.

TUCKER: Daryn, thank you very much.

KEENAN: OK, well, you can't get farther from Wall Street than Fairbanks, Alaska, and that is where we found this week's "Investment Club." The University of Alaska at Fairbanks has some special students, and they have some spectacular returns.

(BEGIN VIDEOTAPE)

(voice-over): Daylight doesn't last long these days in Fairbanks, Alaska, but this group of investors outshines many on Wall Street.

UNIDENTIFIED MALE: Currently, our student investment fund is beating all other student investment funds that we're aware of.

KEENAN: And beating many professionals as well. The University of Alaska's student investment fund more than doubled in 1999. These 12 student managed the $600,000 university-endowed fund as part of a year-long course on investing. This day, the students are making a year-end presentation to the regents and alumni of the university. With the fund beating every major market index, they're bound to get high marks.

UNIDENTIFIED MALE: We did it without dot.coms. We like stocks with earnings. We have a lot of the expensive learning lessons this year also.

KEENAN: Other lessons learned: investing from Fairbanks presents some unique problems.

DR. MARY LINDAHL, FACULTY ADVISER: When we started, we were making decisions on yesterday's "Wall Street Journal" that contained the day before's news and sometimes came two or three days late to Fairbanks, because it didn't make the airplane.

KEENAN: Since they started in 1991, information is now much more available on the Internet, helping them pick some stellar stocks. Their top five holdings, Qualcomm, Dell, Cisco, Microsoft and Nokia, were all huge winners in 1999.

LINDAHL: But probably by Monday we'll have $40,000 of cash in the full-service account if we want to put that in other stocks.

KEENAN: But as the year came to a close, like many investors, the students worry about risking those returns.

UNIDENTIFIED MALE: ... want to keep what we have...

UNIDENTIFIED MALE: Right. Let's try to, you know, keep a juicy 70 percent.

UNIDENTIFIED MALE: But hey, if we get 100 percent, why not?

UNIDENTIFIED MALE: Well, if we get 100 percent, even the better -- even more, merry Christmas.

(END VIDEOTAPE)

KEENAN: Well, it was a merry Christmas for these University of Alaska student investors. Their fund finished the year with a gain of 107 percent, but it is down slightly, this year, like lots of our portfolios.

TUCKER: Of course.

KEENAN: A portion of the funds' gains pay for university scholarships, by the way, and that's a great reason to hope for a strong 2000 as well.

TUCKER: Well, we here at IN THE MONEY go to great lengths to bring you a story. Now, we originally had planned to interview the students from their investment from -- from their home base in Fairbanks, Alaska, but mother nature had another plan in mind. An avalanche knocked out our studio's ability to broadcast live in Fairbanks, so two students left last night and flew to the city with the closest studio, and that is Anchorage, Alaska, which is where they join us now live, Amber Cagwin and Jason Carroll of the University of Alaska's student investment fund, and they are our guests.

And welcome.

AMBER CAGWIN, UNIVERSITY OF ALASKA: Thanks.

They are joined in New York by our "Investment Club" coach Mike Holland here in New York.

KEENAN: And Mike, go ahead. How did they do?

MICHAEL HOLLAND, CHAIRMAN, HOLLAND & COMPANY: Well, they did a lot better than I did and most of the people I know. And I'm impressed with the fact that they eschewed the idea of not investing in dot.com companies, the fact that they said, we're going to buy real companies with real earnings.

TUCKER: How did you guys not get sucked into that, Amber and Jason? I've got to ask you: Those were very, very tempting stocks to be pulled into, especially since they were such high flyers.

JASON CARROLL, UNIVERSITY OF ALASKA: Well, I think that that's kind of how we manage our risk; that's how we can justify being in some of the more aggressive industries is by eliminating our risk, by only getting into those companies that have earnings.

HOLLAND: Amber, you guys just fled an avalanche of snow, but we've also had an avalanche of pressure on your stocks in the last few days they've been going down. What kind of reaction does your -- do your partners and you have when these stocks go down?

CAGWIN: Well, we know that we're in the market for the long term. We're not looking at short-term trading or anything like that, so we feel comfortable with where we are in our portfolio with the stocks that we're holding. We're always looking for new stocks to even purchase, especially when we have down days like today and the past few days. And we're just confident with the stocks that we hold, that they're leaders, they're gorillas with -- in the market, their industries that they're in, and we feel comfortable. HOLLAND: Is there anything any point at which -- let's say your top five holdings, Qualcomm and so on -- that the pressure would get to a point on the down side that you'd say -- we heard in the intro just a few second ago someone saying let's try to preserve the most of what we have. Is there a point at which you'd say the downward pressure is such that we don't want to hold them, or are you, honest to God, as you said, long-term investors?

CARROLL: Well, we -- especially those -- the Qualcomms and the stocks like that, we got in at such a low price that almost all of that is profit on Qualcomm. And so, at this point, we can't lose any money on Qualcomm, at least not our initial investment. And so we feel like that's a stock that has a lot of growth still left in it, and we got in at such a good price that -- and we've taken a lot of profits on it, too. We started out as it two percent of our portfolio, we trimmed a third of our position, and now it's still 20 percent of our portfolio. So that's a stock that we see leaving there for quite a while.

KEENAN: And, Amber, I'm interested in how you guys found Qualcomm early on, and also JDS Uniphase, some of these stocks that the rest of us were saying like, how come we didn't know about them sooner before they made the headlines? How do you do your research?

CAGWIN: Right. We actually use what our professor calls a stock finder research where we go in and we set up certain criteria to look for stocks and get kind of a feedback from -- we use Microsoft Investor, and they come up with a list of stocks that meet our qualifications and then we investigate further, and Qualcomm was one of those. And it had a low P/E -- forward PEG at the time, couldn't believe it was trading as low as it was last February considering the growth that was expected in the next year. And we took a small position in it and it's grown quite well for us, so...

KEENAN: Any other names like that that you've just found in the last couple weeks you could share with us?

CAGWIN: Cree was one of them that we found last -- I guess April, about. We've -- we're now into Rambus and JS -- or JDSU, like you had said. And other than that, Citrix -- there's a few others, but everything's there in our portfolio and our portfolio is available on-line on our Web site.

HOLLAND: Speaking of that, Amber, you and Jason, your partners, have a great Web site. I really enjoyed going there. But to follow up on Terry's question, when you identify things like Qualcomm and JDS Uniphase, and so on, you all have in your Web site the history which starts out that you are -- this fund is for long-term investors, and yet you all are only going to be there for a year, and then a new group comes in. And as the Web sit points out, you have a lot of turnover of the portfolio. How do you manage a portfolio like this going into the future? You've had such success in the past year, how do you instill in your successors not to just blow everything out and make mistakes in contrast to the success that you guys have had?

CARROLL: I Think the leadership of the officers is pretty important to that. Every semester, there are second-semester students and first-semester students in the class, and so there is always students that have been in the class for the previous semester and understand what discussions took place and what intentions the fund -- the group had for the -- for particular stocks. And so although sometimes discussions come up with new students about some of the holdings that are there, whether to sell them or not, the officers and some of the second-semester students do a good job of communicating to the first-semester students what the intention was when we bought the stock and why we should continue to hold it or why we should sell it. So that's one mechanism that helps. And also, Mary, the adviser, she is there all the time. So that helps too.

KEENAN: OK, thanks, you guys. Have a good trip back to Fairbanks.

CARROLL: Thank you.

KEENAN: And congratulations on your record.

CAGWIN: Thank you.

TUCKER: Straight ahead on IN THE MONEY, a final recap on how the markets are doing at this hour. We'll be right back.

(COMMERCIAL BREAK)

KEENAN: OK, we're about to wrap up things here. We are two and a half hours into the trading day and, you know, the selling just continues on the Nasdaq. We're down about 2 percent for that index.

TUCKER: Yes, what's interesting to me is the action in the Dow again today because we are seeing a return to the consumer cyclicals: Proctor & Gamble, Dupont, Caterpillar, all looking...

KEENAN: Yes, IBM has even had a great showing all week.

OK, that's going to do it for us. We'll see you back here tomorrow. I'm Terry Keenan.

TUCKER: And I'm Bill Tucker. On behalf of Daryn Kagan and myself, we'll see you tomorrow.

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