John J. Edwards III Chats on AOL

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