Keep Your Head Down and Buy, Experts Suggest; Sky Not Falling

SAN FRANCISCO -- To say the uncertainty over the results of the presidential election is a distraction to Wall Street would be an understatement akin to someone saying to Noah, "If I were you, I'd keep playin', I don't think the really heavy stuff's comin' down for quite a while."

Wall Street professionals may have chosen MSNBC over CNBC today, but their overriding message -- and that of the market itself -- is that you have to buy stocks despite the madness.

The market swooned shortly after 1 p.m. EST during Al Gore campaign chairman William Daley's news conference, in which he said the results of the election may be challenged in court. That suggests an even further protraction of the process despite the pending release of the final recount vote in Florida (and makes the 1876 scenario seem not so outrageous).

In a direct reaction to Daley's comments, the Dow Jones Industrial Average fell as low as 10,618.49, the S&P 500 visited 1369.41, and the Nasdaq Composite dived to 3087.06.

But as they have so many times before, investors big and small stepped into that breach. At day's end, the Dow was off 0.7% to 10,834.25, the S&P down 0.7% to 1400.14, and the Comp off 1% at 3200. Meanwhile, the Nasdaq 100 -- which had traded as low as 2923.10 and violated key support levels in the 2950-2965 range -- closed off just 0.1% to 3057.06.

"When you see this kind of emotional response -- not that's it wrong because of the [election] uncertainty -- it typically, in hindsight, turns out to be a buying opportunity," said Joseph Keating, chief investment officer at Kent Funds. "You have to keep your cool, keep a steady hand and look at some opportunities in world-class companies that have been beaten up."

Kent Funds put its approximately $6.5 billion in assets where its mouth is today, adding to positions in EMC (EMC), WorldCom (WCOM) and Dell (DELL), Keating said. He also recommended Intel (INTC) and Cisco (CSCO), which Kent Funds is long.

Kent had some company. EMC closed down 4.1% to $85 but above its intraday low of $80.125. WorldCom bounced off its 52-week low of $15.50 to close down 4.4% at $16.125. And Dell, which posted third-quarter earnings in line with expectations after the close, shed more than 6% to $28.375 but finished above its intraday nadir of $26.9375.

Keating broke his rationale for buying amid the political craziness into three main points:

• First, whichever candidate is eventually declared the winner, neither will have a mandate to enact the "full-blown" fiscal proposals they have campaigned on (my RealMoney.com colleague Dave Kurapka made a similar point on today's heated Columnist Conversation). That's a positive, he says, because the surplus will not be soaked up by tax cuts, or Social Security reform, or increased government spending.

• Second, a faith the Federal Reserve will successfully navigate a soft landing. (That's debatable, but I'm just summing up his points here.)

• Third, stocks are cheap. The average tech stock in the S&P is trading at roughly 33 times expected 2001 earnings vs. 47 times at their peak, Keating noted.

Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray, also finds tech-stock valuation compelling, recommending old guard tech names such as Dell, Intel, Microsoft (MSFT), Compaq (CPQ) and Micron (MU), as well as "higher-growth stuff" such as Siebel Systems (SEBL) and i2 Technologies (ITWO).

U.S. Bancorp Piper Jaffray has done no underwriting for the aforementioned, which all closed down today (save 'Soft), but each off session lows.

The election unease notwithstanding, what happened today was essentially a continuation of what's been transpiring in the market for weeks. As noted here on several occasions, buyers have emerged when the Nasdaq approaches the low end of its 3000 to 3500 trading range and sellers dominate when it nears the top end. Similar trends appear for the NDX at around 2950 and 4100.

The good news is that suggests some normalcy amid these extraordinary times. The bad news is the more times an index tests a given level, the more likely it is that level will not hold.

That's according to a variety of sources, including Scott Bleier, chief investment strategist at Prime Charter, and RealMoney.com's Gary B. Smith and Todd Harrison.

Bleier, who took pains to mention that he is bullish and would be a buyer on weakness, said there are two likely scenarios: One, a "marginal new low" will be reached that scares everybody but proves to be a great buying point. Two, the index "breaks down in a torrent of selling."

The strategist said the former is more likely, but seemed about as sure of that as the world is over who will be America's next president.

Give Peace a Chance

I touched of a bit of a firestorm in the Columnist Conversation today with an observation that American is heading toward (or already in) a "Civil Cold War."

First and foremost, I'm not trying to incite anyone or anything, and I certainly hope that "cold" war never turns "hot." Also, I have complete faith in our democratic process, the Republic itself and the Constitution (particularly the First Amendment).

The phrase was intended to describe the divisiveness and acrimony unleashed by the dispute over the election. I contend such emotions have been fermenting for years in the wake of the Republican "revolution," Monica Lewinsky and impeachment, as well as the O.J. trial, the tragedy in Waco, Texas, and Elian Gonzalez (and countless others), but have -- thus far -- been suppressed by an amazingly healthy economy.

Quibble with my choice of words, but I'm chagrined to report we're heading away from -- not toward -- the "kindler, gentler nation" the elder George Bush described.

If the economy's landing proves hard, I fear we're going to go even further away.

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