John J. Edwards III Chats on AOL, Dec. 20

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John J. Edwards III chatted on AOL MarketTalk Monday, Dec. 20. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.

OnlineHost:

Live from New York, NY, please welcome John Edwards, markets editor at

TheStreet.com

. John can answer your questions about the markets and investing. John does NOT offer individual stock commentaries or recommendations.

Jedwards:

Hi. Great to be here!

Question:

The market is going nuts over stock splits. Do you think this is a sign of speculation and possibly a market top?

Jedwards:

It's definitely a sign of speculation, but it's hard to say what signals a market top with the kind of index records and P/E expansion we've seen. The mania over stock splits is a perfect example of momentum-style investing, as stock splits create no value in and of themselves.

Jedwards:

Having 200 shares worth 50 is the same as having 100 shares worth 100. But people say a stock split signals management confidence and so on. Maybe, but it really just provides another excuse for people to chase momentum.

Question:

What is a block trade?

Jedwards:

A block trade is a single trade of 10,000 shares or more. As that usually amounts to quite a large sum of money, block trades are mainly the province of big institutional investors.

Question:

How do you think Juno's move to $9.95 Internet access with no ads will affect other ISPs?

Jedwards:

It's hard to say exactly, as the ISP market is pretty fluid right now. Clearly companies like Juno are battling to find some kind of advantage that will allow them to escape the shadow of their peers (and cast a little light into the giant, chilling shadow that is AOL). I'd say we're likely to see more MindSpring-EarthLink-style consolidation in the sector.

Question:

Can you explain how pooling works when a company acquires another?

Jedwards:

Pooling-of-interest accounting is a method that allows companies to avoid the large goodwill charges that accompany a merger accounted for as a purchase.

Question:

What is your outlook for the new millennium? Do you think people are freaking out too much with stocks and bonds?

Jedwards:

People could fairly be described as freaking out, yes. But it's hard not to in the face of gains as massive as those we've seen in the tech sector. The trend toward greater public participation in the markets won't be reversed in the next millennium, but many of the Wall Street players we talk to are saying we might see a resurgence of downtrodden value stocks.

Jedwards:

Growth stocks are the way to play a deflationary environment, goes the reasoning, and we're not in such an environment anymore.

Question:

Will the banks ever turn around?

Jedwards:

There's definitely a lot of value in the banking arena, but I don't think the stocks will have the kind of support from low interest rates that they enjoyed a year ago. That will probably mean more muted gains in the sector in the year ahead, but I do think there will be plenty of opportunities.

Jedwards:

It might be a time to play banks with a lot of international exposure, as many economies around the world are continuing to recover markedly from their lows.

Question:

What do you think about the biotechs for 2000?

Jedwards:

Biotech is an area in which you need to proceed with great caution. It's important to do considerable research before buying.

Jedwards:

Examine the company's trial data and the kind of expectations experts are offering on the drugs in a company's pipeline. Advances in genetic research will make 2000 a very interesting time in biotech, but you do need to choose with care.

SageMoola:

Thank you for joining us today, John!

Jedwards:

Thanks for having me. Great chatting with you, and I'll see you at

TheStreet.com

!