In the aftermath of the horrific events of Sept. 11, many investment gurus, commentators and securities officials promulgated the preposterous notion that investors ought to subscribe to a theory of patriotic buying of stocks.

Some even suggested that this would convey a message that Americans would not let the terrorists win.

Poppycock!

Thanks to commentators desperate for a fresh angle and e-mail campaigns, the patriotic theory of investing spread like wildfire before U.S. markets opened on Sept. 17.



Of course, the cold-hearted stock market, which has no use for noble causes and sentiment, promptly and harshly obliterated the flag-waving investors.

In the first week of trading after the terrorist attacks, the Dow Jones Industrial Average, a relatively safe haven until recently, was thrashed for a 14.2-per-cent decline to 8,235, a staggering loss of 1,369 points.

The patriotic angle didn’t work with the model companies. General Electric (GE-NYSE) was down 20 per cent for the week, American Express (AXP-NYSE) was down 27 per cent and, yes, even investing legend Warren Buffett was not immune to the dumping of blue chips.

Buffett’s Berkshire Hathaway (BKR.A-NYSE), bogged down by insurance stocks, dropped a mind-boggling 8.1 per cent. If you owned only a single share of Berkshire Hathaway at a share price of $68,000 US, you lost $5,500 in one week.

Once the rallying cry of patriotism was exhausted early in the week, the so-called smart money on Wall Street desperately tried to restore calm by carelessly calling market bottoms and then scolding investors for panic selling, citing historic cases of quick rebounds.

And the market crashed again, and again.

What they should have been saying is that there was no historic precedent to compare this situation to and, more importantly, too many pressing questions left unanswered.

* Would there by a military strike by the U.S.?

* Would consumer spending dry up?

* Was North America already in a recession?

& Was there any good news on the horizon to give the market a reason to rally? This was not rocket science. Simply, this was a stock market reeling from uncertainty.

And oh, how the market hates uncertainty.

PRO'S THREE STARS

Josef Schachter, president of Calgary-based Schachter Asset Management, is convinced the selloff has been orchestrated by the pros and not the retail investors.

“Institutions that are dumb are doing stupid things, it’s not the retail investor,” pipes Schachter.

“That’s what you hear in conference calls with senior money managers at some of the biggest mutual fund companies. They’re saying retail investors are calling them with buying inquiries. It’s the institutions that are doing the dumping. The retail investor is saying: ‘Hey, this is an opportunity, we’re not panicked by this.’

Schachter isn’t calling a bottom.

“When you have one of these total calamities, you don’t know if it’s another three days or five days or if there’s five per cent or 10 per cent (more in declines),” he says.

“If a client is nervous, they should sit down with their investment adviser. My view is that a year from now the Dow will be at 10,000 (recently 8,235) and at 12,000 a year later.”

Schachter’s picks are Nortel Networks (NT-TSE), Equatorial Energy (OZ-TSE) and Lehman Brothers Holdings (LEH-NYSE), three companies whose stocks have been pounded recently.

Nortel ranks as one of the greatest stock-market disasters in Canadian history, recently trading at $7.90 a year after trading in the $100 range.

The year range is $7.50-$105.75.

“The stock has been battered and with people now not wanting to travel, they’re going to want the latest cellphones and Nortel’s a leader in that area,” says Schachter. “We’ll all want web-based and photo phones and the rest of it which should push the demand for it. If you want to call it a terrorist benefit, they are one of the beneficiaries of that.”

Schachter believes investment dealers like Lehman Brothers (recent price $47.50, year range $46-$86.20) have been over-sold.

“When the market turns, there should be a significant recovery and, once we get through this shellacking, there should be a significant recovery for investment dealers that are down 40 to 50 per cent.”

Equatorial was one of Schachter’s picks in a previous column at $3.30. Its recent price is $2.71 (year range, $1.90-$4.20).

“I think there’s a $4 number there at some point,” says Schachter, whose six previous picks since January are down only slightly at 1.1 per cent.

Schachter’s record: -1.1% (Gulf Canada +62.1% on takeover price, Gulfstream +44.8% on takeover price, Elk Point Resources -5.6%, Equatorial -17.6%, Advanced Micro Devices -33.4%, CMGI -56.8%).

HOT ALBERTA STOCK: Wi-LAN Inc.

WIN-TSE $1.58

Up 28 cents (+21.5%) on 693,100 shares (for week ending Sept. 21).

One week, you’re chopped liver, the next you’re boeuf bourguignon. Last week, Wi-LAN was snipped 25.7 per cent with investors jittery over company president Bill Hews stepping down as part of a massive staff reduction. The past week, the Calgary wireless company is up 21.5 per cent as wireless communication becomes a hot topic in the aftermath of the U.S. terrorist attacks and fear of travel. Next week? We're not telling.

COLD ALBERTA STOCK: Oncolytics Biotech

ONC-TSE $5.30

Down $2.20 (-29.3%) on 221,000 shares (for week ending Sept. 21).

In a show-me-the-money market, most Canadian biotechs with drugs in trial phases and no earnings have been crashing to new year lows. Calgary-based Oncolytics peaked at $21.50 in the past year on excitement over its potential cancer therapeutics, but has plummeted by about 75 per cent to its year low in an impatient market environment.