John J. Edwards III Chats on AOL

TSC's Man of the Markets talks about limit orders, derivative securities and the upcoming UPS IPO.
Author:
Publish date:

SageCrystl:

Sage is proud to introduce John Edwards, Markets Editor at

TheStreet.Com.

Thanks for joining us today John.

JEdwards:

Thanks for having me. Great to be here.

Question:

Would you buy T, AOL, YHOO, EGRP and QWST at these prices?

JEdwards:

Well, like all staffers at

TheStreet.com

, I can't buy any individual stocks except stock in

TheStreet.com

. And I can't really comment on individual stocks that way in this chat.

Question:

How should investors view the current volatility in the market?

JEdwards:

Investors should be watchful, as this is a pretty dicey time for the market.

JEdwards:

Things we're seeing in terms of technical signals and the inability of the market to rally on strong earnings suggests we could be in for more declines into August.

Question:

Do you think that we will revisit the type of market that we had last fall?

JEdwards:

We might not see as severe a retracement, but I do think we'll have some trouble moving to significant new highs.

JEdwards:

The fundamental underpinnings don't seem likely to get much better than they are now.

Question:

Should the average investor consider options for their portfolio?

JEdwards:

Only if that average investor is particularly sophisticated and has a pool of risk capital to employ.

JEdwards:

Options can seem deceptively simple, but they're often very volatile and difficult to get a handle on. You would do well to read

TheStreet.com's

Options Buzz daily to help you get a handle on it.

Question:

What do you think some of the best online investment resources are?

JEdwards:

Well, as you might guess, I think

TheStreet.com

is a great one. Also good are

Yahoo! Finance

and many of the online trading firms' Web sites, such as

E*Trade's

.

Question:

Why would an investor consider a limit order as opposed to a market order?

JEdwards:

A limit order sets a certain price beyond which you will not buy the stock, while a market order can be filled at a price much different than the one you think you're getting, depending on how quickly your order is executed.

JEdwards:

Market orders are particularly dangerous in first-day trading of IPOs, when the price can vary widely between the time you place the order and the time it's filled.

Question:

What are derivative securities?

JEdwards:

Derivative securities are financial instruments like options, which derive their value from the value of an underlying security. There are many, many kinds of complex derivatives, some understood by only a few people on Wall Street.

JEdwards:

And sometimes even so-called experts don't understand them well enough, as in the case of

Long Term Capital Management

.

Question:

Steve Case & other

AOL

execs are selling large blocks of AOL--should I sell mine now?

JEdwards:

Without addressing that directly, I would note that insider sales don't necessarily signal bad times for a company. They could just mean insiders are adjusting their portfolios.

JEdwards:

That said, it can be a warning sign that leads you to do other research. Overall, I don't think a mere report of insider sales is enough information to lead you to make a major portfolio decision by itself.

Question:

Do you think

UPS

will be a good buy?

JEdwards:

I can't give an up or down recommendation, but UPS will certainly be a formidable offering and will command a great deal of market attention.

JEdwards:

Try to sort through some of the inevitable hype and determine whether the fundamentals make sense to you. As with any IPO, make sure to read the prospectus carefully -- really carefully -- before proceeding.

SageCrystl:

Thanks for joining us today John. As always, we appreciate your insights.

JEdwards:

Thanks. As always, a pleasure. See you folks at

TheStreet.com!