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Investing In An Irrational Market

Has panic or forced selling completely separated prices from fundamentals?

Consider this, just last week investors sucked a record $65 billion out of mutual funds, the largest redemption on record. And on Wednesday a new survey from Merrill Lynch showed that half of all mutual fund managers are now "overweight" cash.

Even some of the largest Wall Street whales are turning their backs on stocks including Steve Cohen, Israel Englander and John Paulson.

Amid the irrational selling the Fast Money traders are trying to separate the baby from the proverbial bath water and come up with some rational buying opportunities.

Jon Najarian

“When I see a big blow-up in volatility I use that to buy,” explains the Monster. “If I can step in and buy a MetLife , AK Steel or MGM Mirage at such depressed levels I buy and then sell a call against them which takes them through multi-year lows in terms of the protection that offers.”

Huh?

For example take Chesapeake Energy , the leading producer of natural gas in the company. At the close I bought that stock at $18 and sold the January 20 calls for $4 that means I’ve effectively paid $14. And I’m protected very far down low.”

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Guy Adami

I’d look at buying IBM, says the Negotitator. I think the company still has upside growth.

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Joe Terranova

General Mills looks attractive to me, says the Liquidator. The stock has great fundamentals and investors have just thrown it overboard out of fear.

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Pete Najarian

I like Charles Schwab under $20 a share adds the Pit Boss.

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Karen Finerman

Just a word of advice. When the volatility comes down the opportunities won’t be here anymore, says the Chairwoman.



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Trader disclosure: On Oct.16, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Pete Najarian Owns (AAPL), Is Short (AAPL) Calls, Owns (AAPL) Puts; Pete Najarian Owns (C) Put Spread; Pete Najarian Owns (GS) Call Spread; Pete Najarian Owns (MS), Is SHort (MS) Calls, Owns (MS) Puts; Pete Najarian Owns (YHOO) Call Spread; Pete Najarian Owns (SLB) And Is Short (SLB) Calls; Pete Najarian Owns (SCHW) And Is Short (SCHW) Calls; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (DEO), (MO); Finerman's Firm Owns (DNA) Call Spreads; Finerman's Firm Is Short (USO), (IYR), (IJR), (MDY), (SPY), (IWM); Terranova Owns (AAPL), (EXM), (FCX), (FTO), (MA), (NOV), (POT), (X), (VLO);

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW), (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE), (FSMXX); Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.

Jon Najarian Owns (AMP) And (AMP) Collar; Jon Najarian Owns (AKS) And (AKS) Collar; Jon Najarian Owns (MGM) And (MGM) Collar; Jon Najarian Owns (CHK) And (CHK) Collar; Jon Najarian Owns (MET) And (MET) Collar

GE Is The Parent Company Of CNBC; Charles Schwab Is A Sponsor Of "Fast Money"