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Fast Money

Money Mail: The Guys Answer Your Questions

Time to pull out a few more letters from the Fast Money mail bag. That's right, the guys answer your questions. On Friday Pete writes “could you offer some insight as to what is causing the amazing volatility we're seeing..”

#1 Phil from Maine

Phil asks via webcam “With the volatility in financials, can I buy the Financial Select Sector SPDR (XLF) on a dip or should I wait for more of a shakeout?”

Guy Adami recommends Phil put 15-20% of his cash in financials, and then wait for a few weeks just in case “the other shoe drops.”

Karen Finerman agrees – don’t jump in with both feet here, she says.

Face 2 Face

Pete Najarian adds if Phil is going to jump in – then he likes the Financial Select Sector SPDR (XLF) best, because it’s a basket of stocks.

#2 Peter from Massachusetts

Pete writes, “Please, for the sanity of those of us who've never experienced trading days like this, could you offer some insight as to what is causing the amazing volatility we're seeing - aside from the fear in the market? 

Jeff Macke says professional investors were all crowded into the same stocks, "Think herd mentality," adds Dylan

Pete Najarian adds these investors stretched to make better gains. It’s not fear that’s driving the market, it’s the unwinding of these trades, he says.

Karen Finerman agrees and adds there was a flight to bad stocks (such as housing stocks) in this volatile market. She says investors had to buy back their shorts.

#3 Rick from North Carolina

Rick asks via webcam, “Are drug stocks like Johnson and Johnson (JNJ) a good haven for volatility?”

Guy Adami says JNJ has been one of the least volatile stocks over the past few years. He sees tremendous upside in this name.

Face 2 Face

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Trader disclosure: On Aug 17 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money; Macke Owns (EMC); Pete Najarian Owns S&P Puts; Pete Najarian Is Short (GS), Finerman's Firm Owns (AA), (DAI), (WMT), (COP), (GS); Finerman's Firm Owns S&P Puts