The debt market is a shambles. Bear Stearns (NYSE: BSC), despite its size, went belly-up in a matter of days, and its collapse triggered a buyout by JPMorgan Chase (NYSE: JPM) that was brokered by the Federal Reserve. But Bear Stearns is only the latest casualty.

Countrywide Financial (NYSE: CFC) had been the country's largest mortgage bank. Now it's preparing to be gobbled up by Bank of America (NYSE: BAC) after its own financing strategy failed. Who's next?

How bad can it get?
The Bear Stearns crisis is notable because its dealings are entwined with those of many types of companies. As a result, its complete failure could have caused a massive crisis that spread inside and outside the financial industry.

A company that hedges its commodities exposure may be associated with Bear Stearns. The financing mess that started when subprime mortgages went bad may infect the rest of the economy.

JPMorgan's bailout of Bear Stearns may have saved existing derivatives contracts, but it will do little to ensure an orderly market for future transactions.

What can you do about it?
There is a silver lining to this dark, dark cloud. Once you factor out the homebuilders and financial institutions that have been swamped by this particular storm, the rest of the economy has held up surprisingly well.

After all, even if they're not buying new homes, people still need to eat, buy their medications, put clothes on their backs, and heat their existing dwellings. Or in other words, no matter how bad it gets, there will still be industries and companies that survive -- and even thrive.

We may not know which companies will wind up on top when the rain clouds disappear, but they'll likely have these characteristics:

  • Products or services its customers need and depend on
  • Strong cash reserves and operating cash flows
  • A business model that doesn't rely on debt for ordinary operations.

After all, if cash keeps rolling in from strong sales, there's enough money to pay off any maturing debt, and there's no need to borrow additional money to keep doing business, does it really matter if a financial crisis means it's difficult to get a new loan?

Defense wins championships
What this means, of course, is that some very familiar companies are poised to survive, thrive, and take advantage of any opportunities thrown up by the chaos in the financial market. Perhaps you've heard of these household names:


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Wal-Mart (NYSE: WMT)




Johnson & Johnson (NYSE: JNJ)




Their strong balance sheets will help them weather this storm. Their tremendous cash flows will enable them to operate even without new debt. And the fact that people are not likely to live without the food, medicines, and everyday products they sell ensures they'll still have customers, no matter what the economy does.

The debt market may be a shambles. The contagion might be spreading. And things might still get worse before they get better. If there's one ray of sunshine in all this doom and gloom, it's that there are companies like these still worth owning during a crisis.

The time to buy is when everyone else is panicking; find the businesses with strong underlying financial strength to help survive the crisis. That's what we look for at Motley Fool Inside Value. To see our best buys in this down market, join us today with a no-obligation, 30-day free trial.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of Johnson & Johnson and Bank of America. Johnson & Johnson, Bank of America, and JPMorgan Chase are Motley Fool Income Investor selections. Wal-Mart is an Inside Value pick. The Fool has a disclosure policy.