Ghouls and goblins of Wall Street

I’m a horror movie fan and I am always on the prowl for a good slasher flick or ghost story during Halloween.

But this Halloween I can get all the frights and chills I need just by checking my stock quotes throughout the day.

It has been a wild ride lately.

The daily ups and downs are like Freddy Krueger’s knife fingers screeching down the wall.

News that other countries’ economies are also slowing and their banks are failing is like that creepy girl crawling out of the TV set in "The Ring." So with that in mind, I came up a few of my own ideas for scary movies:

• "The Day the Dow Hit 5,000": Don’t say it can’t happen. You probably would have thought the Dow at 8,000 was improbable a year ago when it was at 14,000. Some pundits have already theorized that it’s a possibility and at least one Web site, Dow5000.com, is devoted to the idea. It was only three weeks ago that Seth Glickenhaus, a 94-year-old trader who worked on Wall Street during the Great Depression, told the Wall Street Journal that he could easily see the Dow hitting 9,500, given all the volatility and turmoil. The Dow was at 10,325 then, and we closed Friday at 8,378. Getting scared yet?
• "When Nations Collide": There has been a lot of tension mounting lately between the United States and Russia. It started back with the invasion of Georgia, but it’s continued to simmer with Russia’s expanding its dialogue with Venezuela, an oil-rich country that’s not on the White House parties invitation list. Earlier this month Russia sent warships to Venezuela to conduct military exercises with its navy. If you think a bad unemployment report can massacre the market, wait till you see the bloodfest brought on by more global instability. Your computer screens will run red!
• "Attack of the Machines": You probably read last week how "circuit breakers" on the New York Stock Exchange caused morning futures trading to halt. The failsafe mechanism kicks in when an extreme shift in market value takes place in a short time — typically a panic selling moment. Computers are more and more ingrained in Wall Street and the exchanges of other countries. Back in September the London Stock Exchange shut down for seven hours because of a computer malfunction. What if several countries’ systems shut down simultaneously? Or what if the circuit breakers didn’t do what they were supposed to do and the selling grew out of control?

Freddy and his legions of ghouls don’t seem so scary any more, do they?

But for the truly brave who aren’t afraid to bottom-fish for stocks, the Wall Street Journal recently offered these suggestions:
Autoliv (ALV), an auto parts maker; Crane (CR), an industrial products manufacturer; Eaton (ETN), which makes aerospace parts; Manpower (MAN), staffing and outsourcing; Seagate Technology (STX), data storage devices; and Textron (TXT), aircraft and industrial businesses.
The article noted that all six companies have ample free cash, have been growing sales and pay respectable dividends.

The six stocks also have an average forward price-to-earnings ratio of 6.8 percent, far below the 15 or so widely considered as "cheap."

I still remain committed to the market, but I’m sleeping with the covers over my head.

Buffett's words wisdom or strategy?

Warren Buffett’s op-ed in the New York Times last week caused quite a buzz.

In it, he declared that now was the time to buy U.S. stocks and that was exactly what he was doing.

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful,” Buffett wrote. “And most certainly, fear is now widespread, gripping even seasoned investors.” For many pundits this effectively signaled an all-clear.

But at least one individual questioned putting too much stock in Buffett’s blessing.

David Weidner wrote on MarketWatch.com the following day that Buffett doesn’t buy stocks like you and I do.

We can’t, for instance, buy thousands of shares in General Electric (GE) and negotiate for $3 billion in special preferred stock that pays a 10 percent dividend for at least three years, Weidner wrote. Ditto for Buffett’s purchase of $5 billion in preferred stock in Goldman Sachs (GS), which also gives him a 10 percent dividend and warrants to buy future shares at discount prices.

However, even Buffett didn’t think shares in the companies were going to drop as far as they have, Weidner asserts.

“One cheap, easy way for Buffet to reverse his losses is by penning an editorial using his huge sway, folksy style and hints of patriotism to stir up some buying,” Weidner wrote.

Whether that is true or not, many investors, including me, get lulled into Buffett’s sage grandfather schtick and become mesmerized by the financial media hanging on his every word.

It’s easy to forget that Buffett, like all the rest of us, is out to make a buck. He didn’t get to be a billionaire without a high degree of shrewdness.

But I do believe that now is a good time to be buying.

I remain in the market with about a 50 percent allocation to stocks and I’m keeping my eyes open for things that look intriguing.

Here are a couple I’m keeping my eyes on:

Thoratec (THOR). This medical company makes the HeartMate II ventricular assist device. It also makes blood pumps and various medical testing devices.

The company’s stock has risen from the $15 a share range to $27 since April, despite the carnage in the market lately.

Investor’s Business Daily gives the stock its highest composite rating, a 99, based on its profit growth, price strength and other factors. Thoratec carries an A+ rating from Investor’s Business Daily for its accumulation, meaning high-volume buying taking place in its shares.

Another thing that makes it attractive is its place among health care stocks, which have been showing a lot of strength lately.

Another stock in the same industry field that I’ve been watching is Emergent Biosolutions (EBS).

The company makes various vaccines, inluding ones that protect against weapons of bioterrorism.

Emergent Biosolutions announced this month that the U.S. government had committed to purchase 14.5 million doses of its BioThrax anthrax vaccine in a contract worth $404 million. That’s on top of an existing $448 million contract the company already has with the government.

Some analysts, however, predict soft earnings for the company when it reports Nov. 6.

As always, don’t take my mention of a stock as an endorsement to buy it. You can lose money doing so.

Brian.

Don't push yet, I'm checking the Dow

So there I was with my wife this past Friday, waiting for our new beloved addition, Cooper James Neill, to enter this world.

It was a tough day for my wife, who endured 18 hours of labor before our 7-pound, 13-ounce little boy was making his way to be weighed and swaddled.

It was a tough day for me, too, as I struggled to check stock quotes on my laptop infrequently enough to not draw ire from my wife and mother-in-law, but frequently enough to know whether I should throw up my arms and cash in my chips as the market continued its mounting loss — currently at more than 40 percent below October highs.

Fortunately, stronger labor came on for my wife right about the time the Dow was logging its worst gains for the day, otherwise I might have panicked and hit the “sell” button.

What kind of thoughtless, unfeeling lunatic is sitting there checking stock quotes while his wife is in labor?

Well, a lunatic who is scared to death of a complete unraveling of the financial system, but still has the intestinal fortitude and faith (stupidity?) to keep playing this game called the stock market.

I can’t tell you how many people I’ve heard say lately that they’re not even opening their 401(k) statements because they’re afraid of what they will see. To me, that doesn’t even make any sense.

But admittedly, I, too, am being a little hands-off at the moment.

At this point, it’s down to what our leaders and those of other nations have been able to craft this past weekend in the way of a fix to the current global economic crisis.

Understandably, some countries are resentful that they’re being asked to subsidize the financial errors committed in the United States through the rampant speculation in the subprime mortgage market.

But as of Sunday evening, most countries had acknowledged the magnitude of the financial crisis and were working to bolster banks and financial institutions.

It is certain that we are at a turning point — one that will take us ever deeper into the abyss, or one that will make the dedicated and patient investors a whole lot of money.

The Wall Street Journal carried an interesting piece this weekend that drew a comparison between today’s stock values and those during the bottom of the Great Depression.

Currently, nearly one in 10, or 876 stocks, are trading below the value of their per-share holdings of cash — bargain-basement cheap, according to the Journal.

I still remain in the game with Apple (AAPL), Mosaic (MOS), Southern Company (SO), U.S. Bancorp (USB), Procter & Gamble (PG), Perrigo (PRGO), International Business Machines (IBM) and FTI Consulting (FCN).

My stock allocation is about 50 percent. I’ve scaled into these over the past month or so from an all-cash position. As of now, I’m down about 7.5 percent.

Brian