Yes, It's Still Getting Worse

I knew this would happen.

Yes, things were starting to look a little better in late December as bargain-hunters stepped into the stock market, but I knew it wouldn't last. The S&P 500 started slipping back down shortly after the first of the year, and as I write this on Friday morning, it's back in territory it hasn't seen since the scariest moments of the November plunge.

Just as I guessed.

Pretty smart of me, eh? But I think I'll hold off on trying to get myself booked on CNBC as yet another one of those "told ya so" pseudo-experts for a bit. It didn't take much in the way of profound insight to see that another round of selling was likely to set in. If nothing else, the wave of optimism surrounding President Obama was sure to hit the cold reality of dismal earnings and economic numbers before winter turned to spring, and that seemed likely to drive markets right back down.

And so it has. Ouch.

Will it get even worse?
There are an awful lot of uncertainties, even in the near term. How much longer will Bank of America, Citibank, Chrysler, and General Motors twist in the wind before some sort of receivership or bankruptcy proceeding becomes inevitable? How would such actions play out? Will the new stimulus actually stimulate, or will the effects be too little too late?

And this housing plan -- not to mention people's expectations around it -- aren't helping. Subsidizing houses people could never afford in the first place? Trying to push home prices back up to bubble territory so that the paper wealth that people thought they had in 2006 magically reappears and can be realized? Imagine if, back in 2002 or thereabouts, some congressperson had proposed a bill designed to pump the prices of tech stocks back up to 1999 levels. "The Internet Entrepreneurial Recovery Act" or some such.

Think that congressperson might have gotten a new title in the next election? One starting with the word "Former"?

But I digress. It clearly doesn't look likely to get better any time soon. Even if the market bounces from here and gets a rally going, it may well go right back down again in a month or two. If it doesn't bounce, where does the S&P 500 hit bottom -- 600 … 500?

And more to the point, is there an investment strategy -- other than buying gold, ammo, and canned goods -- that makes sense right now?

One thing to do now
I think there is. I still like the idea of looking for worthwhile value stocks and accumulating them through these market drops. If the value case is sufficiently strong, you can effectively take the market's short-term gyrations out of the equation and buy as you go.

Along those lines, I head over to Motley Fool CAPS to play with the stock screener every now and then, and I look for interesting value ideas. I ran some screens this morning for the first time in a few weeks. Here are some of the names that popped up:

Stock

CAPS Rating
(Out of 5)

 P/E

Long-Term Debt/Equity

Return on Equity

Cal-Maine Foods (Nasdaq: CALM  )

****

4.3

0.35

43.4%

Garmin (Nasdaq: GRMN  )

****

3.9

0.0

41.2%

General Dynamics (NYSE: GD  )

****

8.4

0.17

20.3%

Logitech (Nasdaq: LOGI  )

*****

7.9

0.0

19.4%

Olin (NYSE: OLN  )

*****

6.1

0.32

20.2%

QLogic (Nasdaq: QLGC  )

*****

11.7

0.0

16.2%

WABCO Holdings (NYSE: WBC  )

*****

3.4

0.32

33.6%

Source: Motley Fool CAPS.

These aren't formal recommendations, of course -- just some of the names that looked intriguing at first glance. If you really like the ammo-and-canned-goods theme, Olin might be one way to play it, since Olin owns the Winchester ammunition company. Some CAPS players, however, seem to think that division is a spinoff candidate.

But it's egg giant Cal-Maine that I'll be taking a closer look at soon. Egg prices seem to have stabilized after a wild ride last year, and demand for eggs seems unlikely to fall during a recession. It might even go up if people are doing more cooking at home, as some are predicting. Such a trend would bode well for the company's 6%-plus dividend yield.

As always, though, you and I both should do further research before buying any of these companies. If you don't have the time or inclination to do that research yourself, but you'd like some carefully vetted value ideas to buy today, I invite you to give our Inside Value newsletter service a try. You can see the team's best ideas for new money in just a few seconds with a 30-day free trial.

Fool contributor John Rosevear has no position in any of the companies mentioned. Garmin is a Motley Fool Global Gains selection. Logitech is a Motley Fool Hidden Gems pick. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (34)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 20, 2009, at 4:07 PM, cydcyd wrote:

    Many - Many years ago...I said to my so very wise grandmother who lived thru the Great Depression.

    The Depression can not happen again ...& she said

    OH Yes it can...They will just call it something else.

    Grandma was correct...This is a Mess

  • Report this Comment On February 20, 2009, at 6:08 PM, titanicdwn wrote:

    It's just more playing with numbers until the government runs out of numbers. I stand by my claim in prior articles that economy will suffer a deadly blow in 2010. Furthermore, states which this country can no longer afford to maintain will be invited to leave the Union. Civil war is totally unnecessary, unless a state attempts to remain in the USA in order to keep receiving aid. Maybe we should consider offering CA and others a lump sum payment to get out.

  • Report this Comment On February 20, 2009, at 7:15 PM, sgmorr wrote:

    I'm really getting depressed, no make that melancholy, now.

  • Report this Comment On February 20, 2009, at 9:50 PM, AtlasAynRand wrote:

    CydCyd's Grandmother was right.

    Same movie, same ending.

    Brace for a Dow 4,000 and we will never, never

    ever be at the all time highs of the last 30 years...

    unless Uncle Sam wins all the lotteries in the US

    and abroad.

    Time to build the bunker.

  • Report this Comment On February 21, 2009, at 6:12 AM, TMFMarlowe wrote:

    I actually disagree with all of you, and I wrote the above article. :-) I think we'll see a couple years of ugly (ugly like 1973, not ugly like Eddie Willers sobbing by the dead train, for you Randians) and then America will reassert herself and it'll be okay. The market will come back eventually, certainly before housing does.

    In fact, at least as far as the market's concerned, the point of maximum pessimism might not be far off. When Charlie Rose is seeing fit to interview Roubini... I sort of feel like that's getting close to the proverbial stock-tips-from-the-cabbie thing that the really observant people were talking about in early 2000. And are the people predicting S&P 350 now really a whole lot different from the people who were predicting Dow 20,000 back then?

  • Report this Comment On February 21, 2009, at 7:25 AM, titanicdwn wrote:

    TMFMarlowe, you are so totally far off the mark it's unreal. You must be still working with New Math!!! You know, like where 2+2=whateveryabelieveitequals. My math is more old style. Christmas 2009 will be a total header six feet under. Christmas 2010 will be a non-issue. And where do you think states will get all that tax revenue they so desperately need to stay alive and pay for all those services? China will pay for it!!! That must what you are thinking. What a joke.

  • Report this Comment On February 21, 2009, at 7:49 AM, PrestonCheek wrote:

    "I actually disagree with all of you, and I wrote the above article. :-)"

    Way to go, keep up the good work.

    Preston

  • Report this Comment On February 21, 2009, at 8:31 AM, TMFMarlowe wrote:

    titanicdwn, I'll bet you an ounce of silver (since I gather that dollars have no meaning in your vision) that no state will be "invited to leave the Union" any time in the next five years. Bet payable 2/21/2014. You in?

    John Rosevear

  • Report this Comment On February 21, 2009, at 11:54 AM, jesse2159 wrote:

    This time is not like the past recessions or depressions, it's worse. This time even the unlikely places that once escaped the financial nonsense of Wall Street, kept some of the world economy functioning. Not any more.

  • Report this Comment On February 21, 2009, at 3:38 PM, titanicdwn wrote:

    Actually, dolloars would have meaning if I had any. In fact, I would (If not illegal) bet you a gold US Dollar that by 2/21/2014 you will be looking for what I pray to God I have by then. A one way plane ticket to somewhere away from economic ground zero. I believe while some more primitive economies will never make me filthy rich, I will never drive an ATV, and no McD's across the street, they may have some cushion against the financial blast around the corner. Sad fact is, you will probably get out before I do. It's so unfair.

  • Report this Comment On February 22, 2009, at 2:41 PM, dividendgrowth wrote:

    Whoa, the shear number of pessimistic bashers tells me the market will bottom out this year.

  • Report this Comment On February 22, 2009, at 3:35 PM, Seano67 wrote:

    "Maybe we should consider offering CA and others a lump sum payment to get out."

    California, the eighth largest economy on earth, and we should just ask them to leave the Union?????

    Well alrighty then!

  • Report this Comment On February 22, 2009, at 4:40 PM, TMFMarlowe wrote:

    dividendgrowth: You're seein' what I'm seein'.

    John Rosevear

  • Report this Comment On February 22, 2009, at 4:47 PM, wuff3t wrote:

    "Whoa, the shear number of pessimistic bashers tells me the market will bottom out this year."

    I'm with you, dividendgrowth. I can't believe people are now even talking about civil war, breaking up the U.S.A. and the end of America as we know it. Some people watch far too much TV...

    Now is exactly the time investors should be steeling themselves, doing their research and looking for some real bargains. Those who do are the ones who will benefit from all this mess a few years down the line.

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