For those who want more excitement from investing in the stock markets, they should consider Ford. Buying this stock is probably right now the ultimate against the crowd play. Auto sales are sinking, the profitable truck segment has shrunked and competition is intensifying. The shares of Ford is currently around $2.22, not far from its 52 week low of $1.80. The positives for F is its new pick up truck, great new cars in the pipeline and significantly lower oil prices. A lot of bad news has been priced into the stock. The surprises could be more on the upside. 

Like Bear Stearns and Morgan Stanley, GM is likely too big to fail. If Detroit’s largest automaker fails, the ramifications for the US economy would be very negative. Millions of direct and indirect jobs are at stake. GM is reported talking to governments and other auto makers for help. Given its sizable debt load, any corporate restructuring will result in equity holders having massive dilution in their holdings of the company. Holders of senior debt are in a much better position to negotiate a better deal in any financial restructuring of the corporation.

Thanks to the Federal Reserve Board’s efforts in purchasing debt directly from issuers as part of its effort to attract money-market investors, corporate borrowing in the U.S. commercial paper market climbed considerably. The thaw in lending is finally occurring as governments are pumping liquidity into the credit markets. This is a much needed development in order to get the economy functioning again. The freeze up in the capital markets after Lehman Brothers collapsed has done considerable damage to the global economy. As more credit becomes available, confidence and economic growth will gradually come back.

With oil prices being less than half of its peak in July, XOM is very well positioned to benefit from the current economic situation. They have plenty of cash to make any opportunistic acquisition. Stock prices of energy shares have been decimated in the recent sell-off. At this point, it’s cheaper to buy out other energy companies than to drill in order to grow production and reserves. The stock has rebounded from its 52 week low of $56.51. Around $75, the stock is an attractive long term investment. Once demand recovers, the lack of significant new oil discoveries will become an issue again.

Despite the promise of greater productivity and lower costs, companies has shown they will curtail capital spending if the economic conditions warrant it. As seen in the latest earnings results, technology companies are not immune from the economic turmoil. Only when credit conditions begin to ease up and businesses are more willing to spend again, the orders for tech products and services will begin to flow again. Companies that are poised to benefit from the rebound include Hewlett Packard, EMC, Cisco and Oracle. 

Most prudent central bankers are worried about inflation going out of control. As prices for goods and services surge award, the value of the county’s currencies drop since there is an erosion in purchasing power. Confidence will also be lost in the country’s ability to manage their fiscal policy. In the current environment, deflation is more of a threat to a country’s economic well being. As prices for assets drop, people will have less wealth to spend on. Without any pricing power, companies’ profitability will suffer. Either way, governments’ tax revenue will decline. Given the weak economic outlook, expect interest rates to stay low for a while.

VLO, the oil refiner, at $16, is just a bit higher than its 52 week low of $14.59. At current prices, the stock is yielding close to 4%. The price to book is just at 0.42, Oil refiners make good margins when the price of oil is low. Given the current economic environment, oil prices could stay below $100 for some time. Furthermore, the costs of building new refineries are very expensive and takes a very long time. As a result, there is little new capacity being added. At the current prices, VLO is a very good value play.   

Stock valuations are at its cheapest in two decades in almost all the developed countries. Yes, the credit crisis is the worst since the Great Depression. Yes, there will be more volatility in the coming months. Yes, there is an economic slowdown. However, there are plenty of opportunities for the smart investor to pick up shares of high quality companies at bargain prices. The bottom fishers are gradually coming out of the woodwork.

Much of the publicity has been given to the financial services industry in the US. Just as critical to the economy is the US auto industry. They represent 20% of the nation’s retail sales. Failures within this sector will have huge negative ramifications for the overall economy. Since the Second World War, the economy was built on the car and cheap gasoline. To help the Big 3, the US government is providing $25 billion in loans. Never the less, the US auto industry will be much smaller to reflect the smaller market place. Once the dust settles, there will likely be just 2 manufacturers left. 

This week, the Fed will likely cut their key lending rate by 50 points to 1%. The reasons are obvious. The economy is in a major slump. The challenge for the Fed is to unlock the freeze up in the credit markets. Lowering rates is not the silver bullet. Consumers and businesses have trouble accessing credit. Unless banks start lending to each other again, the lack of credit will persist. Ultimately, confidence needs to come back to help tackle the problem. This will begin with the stabilization of asset prices.