John J. Edwards III Chats on AOL

<I>TSC's</I> markets editor talks about Internet IPOs, online brokers and more.
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John J. Edwards III chatted on AOL MarketTalk on Monday, Aug. 9. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.

SageCrystl:

Live from New York, Sage is proud to introduce John Edwards, markets editor at

TheStreet.com.

John can answer your questions about the markets and investing.

Jedwards:

Thanks. Great to be here.

Question:

Will America Online

AOL be able to compete with Microsoft

MSFT if free access to Microsoft Networks (MSN) is offered to consumers?

Jedwards:

While I can't really offer opinions on individual stocks, I would think it's possible for both to coexist.

Question:

Do you expect further corrections to occur in the overall broad market?

Jedwards:

Yes, I do think we'll see further declines. The stock market has depended on low interest rates and a high pace of earnings growth to get to its current heights.

Jedwards:

While we continue to see fast earnings growth, it's not quite enough to justify even current valuations if interest rates are going higher. And they are.

Question:

Do you think we have seen the bottom of the Internet sector correction?

Jedwards:

I think some stocks in the sector may be putting in near-term bottoms, or close to it. But I do think we'll see further declines for the group overall.

Jedwards:

Few companies depend as much on low interest rates and ease of attracting capital as do Internet stocks, and the rate backdrop, coupled with a continuing flood of new Net IPOs, means trouble for the group.

Question:

Are protective puts worthwhile as a strategy to protect ones profits?

Jedwards:

Sure, that can be a smart course of action.

Question:

Who is

TheStreet.com

's

TSCM biggest competitor?

Jedwards:

As we compete with a variety of media outlets on a variety of levels, it's hard to pick one biggest competitor.

Jedwards:

Certainly

The Wall Street Journal

and its interactive edition are big competitors of ours. On the other end there's

CBS MarketWatch.

Question:

Has the quality of IPO's declined over the past few months?

Jedwards:

Yes, it certainly has. We're seeing a great many companies, particularly Internet companies, trying to squeeze their way in before the door to riches slams shut.

Jedwards:

That motivator can lead managements of companies with poor prospects to try their luck in the public market anyway.

Question:

Are there any sectors that you feel should clearly be avoided?

Jedwards:

Bear in mind that I'm a journalist, and not an investment adviser. That said, I think those who say gold remains an effective hedge are mistaken.

Question:

Has cash flow into stock mutual funds significantly declined as compared to last year?

Jedwards:

believe cash flow into stock funds is off somewhat. Money-market funds are seeing more lows lately as people park their cash in a safe place while waiting for a good time to get back into equities.

Question:

ATHM, why have they fallen so hard?

Jedwards:

That's because of a

New York Times

article saying AT&T and AOL might make a broadband access deal, to the detriment of Excite@Home, which AT&T owns a big piece of.

Jedwards:

AT&T has put out a release reaffirming its relationship with Excite@Home, however.

Question:

Do you think ISP's have any future in the internet market?

Jedwards:

Sure, some do. I think ISPs, especially large ones, will adapt to the new environment.

Jedwards:

Some, of course, will fail, as happens when any business matures.

Question:

What is your feelings regarding the future of the internet security industry?

Jedwards:

If you mean securities brokerages on the Net, I think they have a bright future ahead.

Jedwards:

However, their market caps already discount a blindingly bright future, so that's something to keep in mind.

Question:

What is a put-to-call ratio, and what does it indicate?

Jedwards:

That's the ratio of puts, which are options bought by people betting the underlying stock's price will fall, to calls, which are options bought by people betting the underlying stock will rise.

Jedwards:

The put-call ratio can give you a read on how optimistic or pessimistic the options market as a whole is at a given time.

SageCrystl:

Thank you for joining us today John! We appreciate your insights! We have been speaking with John Edwards, markets editor at

TheStreet.com.

.

Jedwards:

Thanks so much for having me. Great chatting with all of you. See you at

TheStreet.com

!