Cheap Keeps Getting Cheaper

Legislators are in an impossible position. Since they so clearly bailed out Wall Street at the expense of Main Street, how can they now deny these other industries?

Meanwhile, our most major problem remains the housing market, where prices continue to fall. According to the National Association of Realtors, home prices fell another 9% in October compared to 2007, and 120 of the 152 metropolitan areas surveyed showed year-over-year price declines. The declining prices are attracting buyers in some of the harder-hit areas (Nevada, California, Arizona, etc.), but overall sales declined 8%. And 40% of all sales were distressed foreclosure sales, making it very difficult for any homeowner who merely wishes to sell his house. Until the glut of foreclosures stops pushing down prices, we will not see stability in the economy or the markets.

The unemployment picture continues to worsen as well. The big news, of course, is the announced 50,000-plus layoffs at Citigroup (C - commentary - Cramer's Take), but Yahoo! (YHOO - commentary - Cramer's Take) and LeapFrog (LF - commentary - Cramer's Take) have also announced that both are cutting 10% of their workforce, and Sun Microsystems (JAVA - commentary - Cramer's Take) is laying off 6,000 people. To get an idea of how bad the employment situation is, simply type the word "layoffs" into any news browser; all sorts of organizations, from cities to schools to NASCAR teams, are shrinking their workforces. And this spells continued problems for the nation's retailers, as scared consumers tend not to spend money.

I almost wish I just kept my head down.

I hate being bearish on the stock market and the economy, and it is not a comfortable position for me. It is even more difficult in light of the ever-growing number of inexpensive stocks I see when I run my screens.

Ignoring the current backdrop could be expensive, however, given that the many stocks I have found that are cheap and that should do very well over the next five years keep going down as hedge funds and mutual funds continue to dump them into the market. Stocks simply are not behaving in the way to which we had grown accustomed.

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At the time of publication, Melvin had no positions in the stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.