Finance Space

“Panic” might be too weak a word for what’s going on out there. It’s not just that the stock market has been affected — the far larger lending market has seized up as well. Banks don’t want to lend to each other, much less those of us out here in the real world, and the bond markets remain off-limits to all but the strongest of borrowers.

And all of that is leaving everyone terrified. The long-term future simply doesn’t matter all that much to a company that risks oblivion in the next week if it can’t roll over its maturing debt or cover tomorrow’s margin call.

The companies hit hardest by this mess have been the ones that were built on the presumption of easy, cheap, and unlimited credit. Homebuilders like Centex (NYSE: CTX) are in a world of hurt, and even the strongest automobile titans like Toyota (NYSE: TM) are feeling the impact of the credit crunch. But it was investment banks and financial institutions — the largest and fiercest players on Wall Street — that were literally ground zero for this implosion.

The list of companies brought down by the implosion — Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac — includes some of the most notable names on Wall Street. The list of companies struggling to survive the economic downturn grows longer by the day. And that’s creating a once-in-a-lifetime investing opportunity — for you.

It’s your turn
There are unbelievable bargains available now, the likes of which we haven’t seen since the days of Benjamin Graham. Under less unusual circumstances, Wall Street’s financial wizards would be leveraging themselves to the hilt to take advantage of the market’s current conditions. But with their funds cut off, redeemed, or diverted into mere survival, they’re forced to sit on the sidelines, rendered completely unable to act.

That’s where you come in. As long as you have the patience to wait out the volatility, you can buy those very same bargains (without the leverage) and be richly rewarded when things return to normal.

The country, the stock market, and the strongest companies of the era survived the Great Depression. We’ll get through this mess, too. Much the way Benjamin Graham and his protege Warren Buffett did after past catastrophes, the superinvestors of this generation will make their fortunes buying on the heels of this one.

Where to play
Even if you don’t aspire to be the next Graham or Buffett (and don’t have $5 billion sitting around with which to invest in a struggling company), there are plenty of bargains available to you right now.

But be careful out there — not every company that has fallen is legitimately cheap. We’re in the throes of a global economic rout, after all, and many companies deserve their slashed share prices.

Those whose prices have dropped as a result of forced selling or general market malaise, on the other hand, are the most likely to reward their shareholders for holding on through this mess. They typically have

* Strong balance sheets,
* Reasonable or cheap valuations, and
* Moats protecting their core businesses.

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• Federal Reserve extends banks’ emergency finance
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• Think small when investing in banks
• Obama’s Remarks on Banks’ Size and Trading Limits

Tags: Investing