Word: morgan
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Throughout the week, name-brand stocks like Citicorp and J.P. Morgan--stocks that usually trade in eighths and quarters--dropped in two- and three-point gulps. I tried to scoop up some Chase bank shares at $47, only to be told I had bought it at $45--seemingly good news, but the stock was at $44 by the time I got confirmation of the trade. Sure, some of the lack of liquidity might stem from the large number of traders still vacationing, but most of it came from fear--fear that if the sellers didn't act fast, someone would...
...stocks--especially blue chips that you can count on to thrive long-term. High yield today is anything over 3%, a level that may indicate the stock has been unfairly trashed and will do well in coming quarters. Among the highest-yielding Dow stocks are Philip Morris (4.1%), J.P. Morgan (4.4%) and General Motors (3.5%). Other stocks to own might include those of consumer-products companies, a group that lost far less ground than the market this summer. You could also look for value-oriented stock mutual funds, such as Oakmark Fund (which has some of my money) or Mutual...
...spreading ills. A quick scan of Wall Street illustrates the debate. At Paine Webber, chief strategist Ed Kerschner holds the rosy view that stocks "have not been this cheap since October 1990." Chief guru Abby Cohen at Goldman Sachs similarly says, "Stocks are trading at undervalued levels." But at Morgan Stanley Dean Witter, chief strategist Barton Biggs insists that "we are either in or on the verge of a bear market." And the wily investor Larry Tisch at Loews Corp. just reconfirmed a massive options bet on lower prices...
This doesn't mean there are no cheap stocks. Take out the 50 most popular stocks in the S&P 500, and the average P/E of the rest falls to a not-so-scary 18, according to Morgan Stanley. And there are hundreds of smaller stocks with P/Es below their expected rate of earnings growth--a classic sign of value. But the overall market will not be cheap by historic standards unless the S&P falls 40%--or its underlying companies earn far more than analysts project...
...week's drop in the stock market, which fostered a sense that slower growth lies ahead. And the wealth effect could greatly worsen matters if stocks really hit the skids. "We've got a market that's doubled in the last three years," says Stephen Roach, chief economist at Morgan Stanley Dean Witter. "If you lose 10% or 20% after doubling, that's not real pain. But if you take this correction into the 25% range, the market could hurt more going down than it helped going up." That's because people often feel worse about their losses than good...