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John J. Edwards III Chats on AOL

<I>TSC's</I> markets editor talks about the Fed, inflation, oil stocks and more.

John J. Edwards III chatted on AOL MarketTalk on Monday, Aug. 16. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.

SageCrystl:

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

TheStreet.com.

John can answer your questions about the markets and investing.

Jedwards:

Thanks for having me. Great to be here!

Question:

What is your outlook for bonds?

Jedwards:

I think we may have seen the worst in bonds for the near term, and the long yield may be headed back toward 6%. Much depends on the CPI numbers tomorrow, of course.

Question:

Will the Internet stocks retest their old highs?

Jedwards:

I'm skeptical about that, although I think there might not be too much immediate downside.

Jedwards:

The April highs in TheStreet.com Internet Sector index represented extraordinary overvaluation -- and current levels do, too. In this environment, it's hard to imagine Net stocks rocketing back to their best levels ever.

Question:

To further diversify my stock portfolio, I'm considering buying an oil stock. Any recommendations? What economic factors affect oil stocks?

Jedwards:

I can't make recommendations, but in general economic expansion domestically and internationally does well for oil stocks.

Question:

Your thoughts on Fed raising the interest rate.

Jedwards:

The Fed will raise the fed funds target rate by 25 basis points at its Aug. 24 meeting. Beyond that, it's a wait-and-see situation.

Jedwards:

I don't think inflation is sufficiently present or threatened in the economy for the Fed to engage in a prolonged series of hikes. And anyone who tells you the Fed might hike rates by 50 basis points at the next meeting is flat wrong.

Question:

Hi, I just wanted to know what is your opinion on how the market and traders will react to tomorrows numbers? Do you think we will have negative news?

Jedwards:

The sense I get based on the benign PPI numbers from last week is that the CPI figures won't be terribly shocking on the upside, and could come in lighter than expected.

Jedwards:

I think the market is hoping to rally off the CPI, but a headline number larger than 0.3% will be seen as bad news.

Question:

Where do you see oil prices going?

Jedwards:

Looks like we're seeing some strengthening in oil prices, but I don't see them getting too far out of this $20/barrel range.

Question:

What is your opinion of the tobacco sector?

Jedwards:

I don't have much of one, but I do think it's a nasty business that's exposed to litigation risk.

Jedwards:

That said, you can trust the tobacco companies to aggressively exploit markets that are still cancer-stick-friendly, as in much of the developing world.

Question:

Opinion on health care services industry? ie; HRC, OCR etc.

Jedwards:

Health-care services is a sector that's been beaten down by regulatory and record keeping concerns, but it's promising long-term.

Jedwards:

Without making specific recommendations, I would suggest you do some homework on the sector and try to determine which companies are best positioned to take advantage of the nation's trend toward aging.

Question:

Is the market gonna Crash On dec.31,1999 ?

Jedwards:

No. I could go on, but that's the short answer.

SageCrystl:

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

TheStreet.com.