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Are You Ready for the Next Meltdown?

Dan Caplinger
November 25, 2011

With the fate of the European economy hanging in the balance, we may be on the verge of another extended downturn for the stock market. But instead of making the mistake that many investors made during the last financial crisis, you need to realize that with crisis comes opportunity -- and you don't want to miss out on what could actually be your best chance to make amazing profits.

Remembering 2008
Today's crisis of confidence in Europe brings back plenty of memories about what the U.S. went through just a few short years ago. With bank failures rocking the very foundations of the U.S. economy to the core, the market meltdown of 2008 and early 2009 challenged fundamental assumptions about the way the financial system worked and led to huge attempts at reform that we're all still struggling to complete today.

But along the way, the crisis gave investors some amazing opportunities for profit. Many of the financial stocks at the epicenter of the crisis lost nearly all their value, but most of them bounced back sharply, producing big gains for investors who were courageous enough to jump in when no one else would. Even today, JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) trade well above where they did in early 2009. Similarly, cash-strapped companies like Ford (NYSE: F  ) and Las Vegas Sands (NYSE: LVS  ) were priced for failure, but those who bet on their survival were richly rewarded.

This too shall pass
Europe's problems are of a different flavor, obviously. The prospect of national governments facing financial insolvency is another order of magnitude larger than the potential private bank failures that threatened the U.S. three years ago. Still, you have to ask yourself: Will even as huge a step as the abandonment of the euro currency cause so much chaos that business activity comes to a screeching halt entirely? Such huge consequences are unlikely. Rather, just as the U.S. went back to business after the financial crisis, so too will Europe likely emerge without huge disruptions to overall economic activity.

That doesn't mean that hard-hit companies like banking institutions National Bank of Greece (NYSE: NBG  ) or Bank of Ireland (NYSE: IRE  ) will magically return to their precrisis levels. But with investors punishing companies across the European continent as if businesses are going to stop functioning, there are already attractive bargains available -- and more