Stock Buying Opportunity of the Century?

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Years of harboring a gloom-and-doom outlook gave Jeremy Grantham, chairman of Boston-based asset manager GMO, the reputation of being a perma-bear. Talk to him now, though, and the 70-year-old is almost gleeful. Stocks, he says, are cheaper than they've been since 1987. Like another value investor, Warren Buffett, Grantham is buying, with a focus on high-quality U.S. blue chips and emerging markets. "This is what serious investors should look for," he says. "We make money by buying cheap assets."

It's not just the pros who see opportunity. Randy Levinson, an editor at Nature Medicine, a New York professional journal, came to a similar conclusion. Watching the wild stock market declines, Levinson says, he was reminded of 1987, when he was president of the student investment fund at California Institute of Technology and he and his cohorts made a bundle. "I remember saying to myself to keep that in mind if the market tanked again," says Levinson. So in mid-October, Levinson invested $4,200 in Diamonds (DIA), an exchange-traded fund that replicates the performance of the Dow Jones industrial average, and bought stock in AT&T (T) and Newell Rubbermaid (NWL). "To me," he says, "when you see these huge swings, it's a buying opportunity."

Across many asset classes, prices appear cheap, and in some cases dysfunctional markets have created long-term bargains. Many money managers see good value in beaten-down blue chip stocks. High-quality corporate and municipal bonds are yielding unprecedented premiums over Treasuries as investors flock to safety. Even in real estate, or specialty areas such as master limited partnerships and closed-end funds, there are opportunities for savvy investors...

The Buying Opportunity of a Century? - BusinessWeek