John J. Edwards III Chats on AOL, Nov. 8

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John J. Edwards III chatted on AOL MarketTalk Monday, Nov. 8. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.


Live from New York, N.Y., please welcome John Edwards, markets editor at John can answer your questions about the markets and investing. John does


offer individual stock commentaries or recommendations.


Thanks for having me. Great to be here!


If Microsoft is dismantled into separate companies, will shareholders get shares of the new companies or have to buy into each one?


If the company were dismantled, I believe Microsoft shareholders would receive shares in the new companies. But it's important to note that a breakup would be a very drastic result, and also to note that we're far from any such resolution.

We won't get the judge's ruling on the matters of law (as opposed to fact) until near the end of the year, and his ruling on remedies would come sometime next year. Then we're quite certain to see appeals.

This process has years to go, unless Microsoft is able to work out a settlement.


Why did Kevin English leave



It was a mutual agreement between Kevin and the board, and beyond that I can't comment about it.


Do you think



will go belly up next year?


I don't have an opinion on that, but joint newsroom has a story on Peapod available both on

and at



I want to buy some



stock -- I'm new at this -- should I wait till AOL splits? -- or do you think AOL will still go higher?


I don't have a view on whether AOL will go higher, but it's important to note that splits are mainly irrelevant to a stock. Split announcements do goose a stock's price sometimes in an irrational market reaction, but buying 100 shares at 10 is the same as buying 200 shares at 5, of course.

If you think AOL might split, it would be best to buy before the split rather than after, however.


What stocks do you think will benefit from Microsoft's demise?


While I can't make recommendations, the market clearly thinks stocks involved with the Linux operating system will do well. But you should remember that Microsoft is not going to disappear.

It may have some of its business activities curtailed, but it will remain a formidable competitor for any company in any of its businesses.


I saw the

Russell 2000

had a nice run last week, do you think now is the time for small-caps to rally?


I'm continuing to reserve judgment on small-caps. You may be able to play them as a group for a near-term trade, but the market continues to gravitate toward larger stocks at the first hint of instability or distress.

You wouldn't have done terribly well buying a basket of stocks matching the Russell 2000 at this time in 1997, and I see few reasons to think you would do terribly well buying such a basket today. That said, it's always wise to do research that turns up undervalued companies with real potential. Those exist in any market environment.


Have there been any signs of inflation in terms of increased prices on consumer goods?


We're seeing some signs of inflation on the producer side, the September

Producer Price Index

being a prime example of that. But inflation on the consumer level has been pretty tame so far. Even so, I continue to expect the


to hike interest rates by 25 basis points Nov. 16. The Fed wants to get ahead of inflation, not react to its arrival.


Is earnings season nearly over at this point, and if so what events will the market focus on over the next few weeks?


Yes, earnings season is drawing to a close, although this week brings announcements from


(DELL) - Get Report



(CSCO) - Get Report

, along with a slew of retailers. The market's next focus will be the Nov. 16 Fed meeting. Most observers see any result from that meeting as pretty well priced into the market, but you might expect a bit of rockiness if the Fed does indeed hike rates.

Beyond that, people will watch to see any Y2K problems that crop up in the U.S. and abroad. If the end of the year is pretty benign in that regard, we may see some buying as people try to get ahead of a new-year rally.


Thank you for joining us today John!