John Edwards' Chat on AOL

Y2K, e-commerce, tech rally -- all the buzzwords in one cogent chat.
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John J. Edwards III chatted on AOL MarketTalk on April 5. AOL's MarketTalk is hosted by Sage Online (Keyword: Live).

Sage MikeM:

Please join Sage Online in welcoming John Edwards, markets editor for

TheStreet.com

!

J Edwards:

Hi, great to be here.

Question:

Mr. Edwards, do you foresee a pullback in the stock market in general, after the great run-up we've had over the past decade?

J Edwards:

The signs we are seeing now are not pointing toward a large-scale pullback that would see large amounts of the gains we've seen over recent years erased. What we might see is increasing difficulty in achieving the kind of large advances that we've seen in the last three or four years. As corporate profit growth becomes more and more difficult to come by.

Question:

Do you expect any earnings surprises this week, either positive or negative, in any sector?

J Edwards:

Well, one thing we can always be certain of is surprises of some sort in earnings, but as far as which particular surprises we are likely to see in this early part of the earning season, that's hard to say right now.

Question:

Could Kosovo have a negative impact on the market? Are there events that could frighten investors into selling?

J Edwards:

The events in Kosovo could definitely have a negative effect on the market, certainly much more of one than we are seeing today. It seems that investors now are expecting that this conflict will be perceived much like other conflicts have in recent months and years, such as the disputes in Iraq and Bosnia, but there is a danger of a drawn-out and destabilizing war near the center of Europe and investors would be wise not to ignore that possibility.

Question:

How should an investor evaluate e-commerce? You can see people walk into brick-and-mortar stores and buying, but not Internet sites?

J Edwards:

Well, even though it's difficult to do the kind of hands-on, walking-around research that you can do with brick-and-mortar stores, it's good to keep an eye out for any news reports on various studies of how Internet commerce is growing.

J Edwards:

Various research firms do try to keep track of trends in e-commerce, and those are usually widely reported.

Question:

Where do you see equity growth over the next year or so -- will small-caps catch up?

J Edwards:

I think even though small-caps have had such a difficult time in the last couple of years, the nature of a bull market as old as this one is that investors become increasingly worried about whether they will be able to invest in companies with almost guaranteed earning streams and high liquidity. And those companies are generally the larger cap companies, which means that market psychology is not getting any more favorable for smaller companies in this environment.

Question:

Where do you see the bond market heading in the coming months?

J Edwards:

It will definitely be interesting in the bond market in the next few months. It seems that for now a move in yields up through 6% is unlikely unless there's some major change in the economic landscape we are seeing; however, concerns about the length and extent of the current economic expansion are also probably going to keep the market from another sustained move down into the 4% area, so I see a range in the 5 to 5 3/4% area for some time ahead.

Question:

Mr. Edwards, how long will this tech rally last?

J Edwards:

While it's impossible to say how long the overall rally can extend, I think that if we see solid earnings reports from some key companies in the industry, we will be able to see some further upside in the tech area. But I think that this recent run has been so strong that I doubt the current pace can be sustained for very much longer.

Question:

Will Y2K cause the stock market to go down? and would that be a good time to buy stock?

J Edwards:

It looks at this point as though Y2K will probably not have too much effect on the stock market, although as we get closer to the end of the year, it's possible that worries will increase and people will want to raise cash just to be safe. I would think it's a good idea to really stay nimble if there are broad-based declines that seem to be attributed to Y2K and if -- based on fundamentals -- you see what you deem to be unusual bargains created solely out of Y2K panic, it might be worth doing a little dabbling there.

Question:

Generally speaking, should beginning investors concentrate much of their money on IPOs?

J Edwards:

I would say that can be pretty dangerous. Beginning investors should be wary of investing in IPOs for a variety of reasons. It's difficult to do sufficient research on IPOs because the companies don't have much of a track record that's easily accessible. If you do decide to invest in an IPO, it's important to avoid placing market orders that can be filled at a price that's far above what you really want to pay. So, you should place limit orders instead. And in general it's probably best to avoid investing in IPOs in their first couple of days of trading.

Sage MikeM:

Thank you, John Edwards, markets editor of

TheStreet.com

!