John Edwards Chat on AOL

John Edwards chatted on AOL MarketTalk on Feb. 22. AOL's MarketTalk is hosted by Sage Online (Keyword: Live).

Sage MikeM: We're connecting now with New York City to speak to John Edwards of TheStreet.com. Welcome, John!

J Edwards: Thanks I'm glad to be here!

Sage MikeM: John, what do you feel is the cause of the rally today?

J Edwards: I think there are a lot of things contributing to it, certainly there has been some money on the sidelines that was waiting for a good opportunity to come back in. Also, people are heartened by some of the news in the market today, some major mergers and the market always like to see those.

Sage MikeM: What do you feel Greenspan will tell Congress tomorrow about I interest rates?

J Edwards: I think that Chairman Greenspan isn't likely to drop any major bombshells in his congressional testimony tomorrow. He's likely to tell Congress that the fed remains vigilant in watching for any signs of overheating in the economy. But I expect that he'll say the fed is not yet seeing sufficient signs of inflation that would warrant an increase in interest rates in the near term.

Sage MikeM: What is the outlook for bonds? Do you feel we will see 6% on the 30-year in 1999?

J Edwards: It's hard to say. I think most of the people we talk to are seeing 6% of the high end of any trading range for the bond. I get the sense that it would take seeing something else in the economy to send yields that high.

Sage MikeM: Kuwait announced it discovered what it believes may be the second-largest oil field in the world. If this is true, what is the impact on oil and the economy as a whole?

J Edwards: I can't say that an increase in supply in the oil market would be a good thing for the oil industry and it seems that with the problems in the commodity area in general a huge introduction of more supply would be a negative factor with prices already under a lot of pressure.

Sage MikeM: Which sectors of the market appear strongest over the remainder of the year?

J Edwards: I think you certainly can't count out technology at this point and from what I'm seeing, people remain somewhat nervous about the further course of the economy. When you get a situation like that it's likely that you'll see a continued focus on larger issues as opposed to smaller issues.

Sage MikeM: Tech can't lead the market forever. Which sectors are candidates for the next leader?

J Edwards: The leadership question is one that's in front of a lot of market pros minds at this point. Some are looking to financials to reassert themselves but overall the sense I get is that it's not clear at this point what sector is likely to move to the fore if technology continues to languish.

Question: Is today a sucker rally or will it probably hold?

J Edwards: The next couple of days will be crucial in answering that question for the market. Right now what we're seeing is the market at the high end of the trading range it's been in since the beginning of the year. While today's rally looks very impressive in terms of the numbers and in terms of the broad base of the rally, it's not clear whether this is a move out of the trading range or just a move to the top of the trading range.

Sage MikeM: Is the proliferation of IPO's and indication of a strong market or a penchant for individuals to speculate more rather than invest for the long term?

J Edwards: I think in some ways it is both. We're seeing a lot of IPO's come to market that certainly wouldn't At the same time, the increase in IPO activity is also a sign of strength in that solid companies that were discouraged from entering the market are finding it a good time to raise capital.

Sage MikeM: Are there ever times when you are a "gold bug" or a fan of precious metals?

J Edwards: There have not been such times lately. Again, the weakness in the entire commodity sector is really so severe at this point that I think investors would need to consider very carefully whether they would devote major funds to any commodities, precious metals included.

Question: Should I buy oil while cheap or watch it?

J Edwards: While I can't give direct investment advice, I would suggest doing some research beyond just seeing a cheap price in the oil area. You'd want to look at what experts in the field are saying about the likely course of this commodity slowdown.

Question: John the market one day a rally the next day a sell off?

J Edwards: A year or so and it's another reason why, if you're going to have a short term trading orientation, you need to be really very sophisticated and very nimble. You need to be able to respond quickly to changes that you see and you need to be liquid enough to really move in and out of the market swiftly. If you have a longer term orientation, you would do best to not really get too caught up in the large day to day swings and you might really want to just look at how the market does week to week. That taking a look at how the market does week by week can give you a better sense of the market really being in a range rather than seeming to move as dramatically as it seems to be moving today.

Question: Re IPO's I find that daytraders are driving up the prices

J Edwards: It certainly does seem that the increase in daytrading of IPO's has been a large factor in driving IPO prices up dramatically on the first day of trading. Which is a reason why investors should be very careful with investing in IPO's and should really pretty much never place a market order for an IPO before the market opens.

Sage MikeM: Without getting into specific stocks, what is the outlook for the tobacco sector, considering the uncertainly of litigation results?

J Edwards: I think it looks like the uncertainty in tobacco will continue to be a weight on top of the prices in the sector.

Sage MikeM: Retailers like Wal-Mart and Sears are joining the e-commerce. Do you believe this will have a significant negative impact on e-commerce firms?

J Edwards: It very well could. Much depends on how successfully offline retailers execute their online strategies. It will be a real test of whether being a pioneer in online retail gives retailers a significant advantage over brick and mortar retailers who get online later in the game.

Sage MikeM: Are the pioneers in e-commerce going to make big money any time soon?

J Edwards: If making big money means turning large profits, the answer there is probably no. The problem is that retail in general is a fairly low margin business and online retail is under an especially large amount of margin pressure because of the need to keep prices very low as a way of competing with other online retailers and retailers off line.

Sage MikeM: Is there a danger that e-commerce will take just enough away from the brick-and-mortar retailers that no one will make a profit?

J Edwards: I don't think there's much danger of that, largely because online retail at this point is still a very small percentage of the overall retail landscape and projections are for fast growth, but still not growth that would make online retail an extremely serious threat in the next 2 or 3 years.

Question: Do you think that today's internet rally will be sustained?

J Edwards: With the Internet stocks, it's almost impossible to say whether a given rally will be sustained or not. The fact that investors are concerned about the lack of prospects in the sector and the uncertain outlook for revenue growth in the sector means that it's just as likely that people will sell into a rally as that they will keep it going.

Sage MikeM: I have a question from a young 13-year-old gentleman who asks what he should do to prepare to become a stockbroker in a few years. Any suggestions?

J Edwards: I would urge him to begin by reading the Wall Street coverage on TheStreet.com and elsewhere. I'm sure he can find a great many resources on the web by looking at the websites of brokerages, as well as news sources. I'd advise him to start trying to take courses that would help to prepare him for a career in stocks, things like economics, finance, accounting and but also to remember that it's important to be well-rounded and keep up his studies in English, history, and social studies.

Sage MikeM:Thank you, John Edwards of TheStreet.com! Please join Market Insiders again soon.

J Edwards: Thanks very much for having me!