There's been a lot of talk about how a financial apocalypse is just around the corner -- or already here. At the same time, value investors are saying that the market's amazingly cheap right now.

Confronted with these two opinions, it's hard to know what to do. On one hand, during an apocalypse, you'd be better off buying guns and canned food than stocks. On the other hand, you should buy when blood is in the streets, and apocalypses have a reputation for rivers of blood.

So what's an investor to do?

This apocalypse is brought to you by debt
The argument that we're facing an apocalypse is persuasive. This debt crisis is coming when America is least prepared for it. Consumer debt to disposable income has increased dramatically over the years, rising from 69% in 1980 to 128% in 2007. We've been spending 14.3% of our disposable income just servicing this debt -- a number that's close to the highest ever, despite interest rates near 40-year lows.

What's more, the housing bust, which brought on the credit crunch, doesn't seem to be getting any better. For the first time ever, homeowners' mortgage debt exceeds their equity -- and according to Moody's, more than 10% of mortgage holders had zero or negative equity at the end of March.

As house prices fall, these numbers will look even worse, and there's no sign that the free fall is slowing. The Case-Schiller housing index recently posted its biggest decline ever, falling 10.7% year over year in January.

A bear's picnic
What's more, falling real estate prices make it difficult to find a bottom in asset-backed securities (ABS). After all, the further house prices drop, the more people will be underwater on their mortgages, the greater the likelihood of them defaulting, and the less foreclosed houses will be worth.

Not only will banks have to keep writing down their ABS assets, they'll be reluctant to lend if they can't immediately sell the loans. Consumer credit -- already shrinking because it's harder to borrow against dwindling home equity -- could become even harder to obtain.

This crunch could affect all sorts of companies. If consumers are having trouble paying their mortgages, will they still buy gadgets from Apple (Nasdaq: AAPL)? iPhones are cool, but they cost at least $200 (plus monthly service) and they certainly aren't a necessity.

Similarly, if people are watching their budgets, will they be upgrading to new computers or sticking to older models for at least another year? That delayed (or even canceled spending) could hurt Hewlett-Packard (NYSE: HPQ), Intel (Nasdaq: INTC), Microsoft (NYSE: MSFT), and even obscure companies all the way down the supply chain.

How many cars will General Motors (NYSE: GM) sell if potential buyers can't get financing? Even the recession-resistant education sector may be affected. Apollo Group (Nasdaq: APOL) has already warned that more student loan applications are rejected by lenders now.

A 17-year low
And in the middle of all of this gloom and doom, the stock market just might be cheaper now than it has been in nearly 20 years.

The S&P 500 is trading at 13.7 times estimated forward operating earnings. That's very inexpensive -- less than half the 28.4 multiple it traded at in December 1999, immediately before the dot-com crash.

In fact, the last time the market was this cheap was, coincidentally, in 1990 -- during the last big credit blow-up, the savings and loan crisis. The subsequent returns were excellent. A $1,000 investment in the S&P 500 in December 1990 grew to $4,535 by the end of the century, an 18.3% compound annual return.

America 's a survivor
That's not to say that the stock market will duplicate those returns over the next nine years. Accurately predicting the stock market is next to impossible, after all -- and earnings estimates for 2008 could still be optimistic, meaning that the earnings multiple may end up higher than projections.

But it's never been wise to bet against America, and right now, the entire country is focused on pulling us out of this mess. The Fed is flooding the economy with liquidity and implementing novel solutions to deal with this crisis. Interest rates are falling. Our dollar is low, boosting our manufacturing and exports. Employment is slowing, but still strong.

The market will be volatile over the short term, but over the long term, America's success story is likely to continue. It's unclear whether the market will turn tomorrow or a year from now, but when the market is this cheap, it doesn't necessarily matter.

The Foolish bottom line
Instead of trying to predict the market, focus on individual stocks. The great thing about the market's low 13.7 forward multiple is that it's just an average. Some stocks are trading below even that level, and that's where the opportunity lies. If you can find excellent businesses trading even cheaper than an already-cheap market, your potential upside is huge.

These exceptional opportunities are out there right now -- our Motley Fool Inside Value team has found stocks trading at prices less than half of their fair value. You can read about them with a 30-day free trial.

Fool contributor Richard Gibbons finds it entertaining exactly how wrong Alan Greenspan was in this speech. Gibbons does not have a position in any of the stocks discussed in this article. Intel, Moody's, and Microsoft are Inside Value picks. Moody's and Apple are Stock Advisor recommendations. The Fool's disclosure policy is up for a Pulitzer.